14 - 20 February 2002
Issue No.573
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Al-Ahram Weekly Online 14 - 20 February 2002 Issue No.573 |
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Two-way street
European Commission Ambassador Ian Boaga says Egypt's friends are willing to help it overcome the effects of 11 September. But in an interview with Khaled Dawoud and Soha Abdelaty on the fringes of the Consultative Group meeting in Sharm El-Sheikh last week he noted that Egypt's economic problems did not start with 11 September
What is the significance of the Consultative Group meeting at this particular time, and do you think such meetings are useful?
EC Ambassador Jan Boaga
I think these conferences are always useful and this one falls at a particularly important moment. Obviously, the events of 11 September and their effects on the economy of Egypt make this an extremely important conference.
I think, however, that one must not forget that the world did not start on 11 September. There are matters that go back before then which need to be addressed. Beforehand, the Egyptian economy was performing less well than it had in previous years; these are obviously matters that need to be looked at.
There has been a debate among those taking part in the conference on how much "new money" is being pledged by donor nations and organisations. What is your view on this issue?
It depends how you define new money, of course. It is true that there are lots of projects which we have committed to and that there remain substantial amounts of funds that have not yet been disbursed. And this is a source of potential funding for Egypt. I think that donors are keen to speed up disbursement.
But apart from that, there may be other money pledged to address the problem of the $2.5 billion shortfall in foreign exchange. I think that the Egyptian government has made it very clear that it is looking for new money, but we would also say: yes, but there is existing money which needs to be used as rapidly and as well as possible, from existing commitments. However, we will not re- announce money that we pledged before. That's an old trick, but not what we intend to do as the European Commission. We will stress that there is existing money which still needs to be used.
Can you give us an example of "existing money" which still needs to be used?
The classic example is the Industrial Modernisation Programme (signed between Egypt and EU). It's the biggest programme the European Union has funded outside the EU (250 million Euros). Until very recently, virtually nothing had come of it. But we are now beginning to move forward. Nevertheless, we have three [stagnant] years to catch up on. In the years 2002 to 2004, there will be substantial amounts of funds in that project.
Otherwise, we are now going to sign a memorandum of understanding which will effectively agree to the government's programme for those three years. Now there are various things foreseen in that programme, but nothing assumes [funds as big as] 250 million.
I think we are conscious that when you have a project that big, and for some reason it does not work well, you have a huge amount of money that is blocked. This is not good for Egypt, because it does not benefit from the money; nor is it good for the European Commission because we committed money and can't spend it. So I think you will find that we won't finance projects with such huge amounts of money.
As for this particular project [the industrial modernisation programme], what I think might happen is that over time we will find projects in various sectors where the private sector is particularly successful in achieving its goals. Then we will pursue other projects in the same sector to carry things forward.
What are the pledges the European Commission is making at Sharm El-Sheikh?
We are looking at something in the range of a little over $300 million to be dispensed over three years.
But we have read official reports that the Commission alone will pledge a figure of around $1 billion to the Social Fund for Development (SFD)...
That is not true. We are at present the largest donors to the SFD. I think in Social Funds I and II we provided over 300 million Euros. I discussed the figure you mentioned and the figures cited are hypotheses. They are all ideas of what the Social Fund would like to get, but I have to tell you that the entire funding for Egypt under MEDAII will not come to $1 billion.
We have yet to identify and prepare the projects that will receive funding. But the money is likely to go to things like technical, vocational and educational training, and a trade enhancement programme that facilitates trade -- all important steps if Egypt wishes to develop its exports. Otherwise, there will be a small programme to promote cooperation between higher educational institutions and Egyptian and European universities. We will also do something to promote civil society and help NGOs.
There's also a possibility of a programme in south Sinai; we have already done some environmental projects in south Sinai which have been working extremely successfully. We may also do something in the spinning and weaving industry.
Generally, do you think the SFD has been effective?
The Social Fund was originally set up as a safety net to counter the inevitable difficulties created by structural adjustment back in the early 1990s. The SFD has shown itself very capable of rapid disbursement of funds. It has done a lot of good work. It has been constantly audited and monitored by donors who have not identified any major problems.
I think that now, though, the SFD is no longer simply a safety net. As a result, a lot of donors have questions about the SFD: how it will be structured; how it will relate to relevant ministries; what its priorities will be; what its mission will be; how it will target the institutions that it helps; and to what extent the Egyptian government will participate in its funding.
A lot of these questions were posed in the multi-donor review that took place in the year 2000, and some of the answers have not yet satisfied donors completely.
Is your list of proposed projects and programmes similar to that sought by the government?
That is something we negotiate and discuss with the Egyptian authorities over a period of months. What I have said to many Egyptians is that we cannot force Egyptians to accept a project they don't want. Equally, they cannot force us to finance a project that we don't want to finance. Therefore, we must come to an agreement.
But our priorities for Egypt under the framework of the association agreement (signed but not yet ratified) are absolutely the same as the Egyptian government's. We support the Egyptian government's policy of mobilising its economy and its social policies and health and education policies.
How do you monitor spending on agreed projects?
Every donor has their regulations and their auditing and monitoring systems, because it's their taxpayers' money that is being spent. In 2000, the Commission decided to devolve much of the management of projects from Brussels to the delegations in concerned countries; they felt that everything that could be done better on the spot should not be done in Brussels. This way, we will be much closer to the monitoring process and to the Egyptian authorities. This will make project management easier, quicker and more responsive to local conditions.
But I have to stress that the rules and regulations remain the same.
Still, we think that over a period of months and years, along with our Egyptian partners, we will be able to ensure faster project management. On the other hand, there are blockages on both sides. We are responsible for some, the Egyptian authorities for others. Our job is to try and eliminate these and speed things up.
Do you think that the volatile situation in the Middle East since the outbreak of Al-Aqsa Intifada has delayed many regional development plans?
Our relation with Egypt is part of the Barcelona process that was set up in 1995. As you imply, this was set up as a way to assist the peace process. But [despite the failures of the peace process], the Barcelona process continues. There are meetings at all sorts of levels. It is a forum where all governments in the region, including the Palestinians and the Israelis, get together and talk.
Under present circumstances, that is quite a notable result. There is an awful lot happening in the Barcelona process which is low-level, technical, unexciting. But obviously the European Commission, like everyone else, wishes the peace process had continued, not reaching this situation. But that is an extra reason for going on and trying to keep going on.
We know that the problems in the West Bank, Gaza and Israel have economic effects. For example, Egypt's tourism before 11 September was suffering the consequences of the Intifada. But Egypt is a major participant in the peace process, and it is an extremely important partner for the European Union. So we will continue in Egypt, as we do in other countries, to try to help them realise the policies that they themselves have set.
Yes, it would have been much better if we were doing all this while the peace process was going along, or even being completed. But the fact that we can't do that doesn't mean it is a waste of time and a waste of money.
Do you think that Egypt can overcome the current crisis?
Egypt is a great country. It's a large country with a long history. It has the means and human resources to deal with this crisis, and it also has friends willing to help. But the essential thing is that while these friends can help Egypt, the principal effort must come from Egypt itself.
I think that the important thing is to continue the process of reform which has slowed a bit. We need to bring the numbers back up again. It's not reform just for the sake of reform,; it's reform to create the conditions to attract more investments which will gain foreign currency.
But even when the economy was in better shape, we did not see enough investors coming to Egypt...
That is true, but we must ask ourselves why. Every country in the world is after investment. As the prime minister (Atef Ebeid) himself said in a speech last year at the Euromoney conference: you must create the positive environment that encourages investment. And there are difficulties in the way investments function, the way the administration functions.
Investors, for example, want to get quick judgments in court disputes. When you are importing and exporting you want to be able to do it quickly and transparently. You need a skilled workforce adapted to modern technology; you need skilled managers; you need good marketing; market research. All these things we need to tackle in cooperation with the Egyptian government; this is what we mean by reform.
It is true that perhaps some people might be discouraged because the area is unstable, but I suspect this does not discourage half as much as the problems they have to deal with in importing and exporting, the day-to-day things.
Businesses will go where they can make money. They will not go somewhere to make a political gesture.
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