CIP's new and easy terms

More Egyptian entrepreneurs are reaping the benefits of USAID's Commodity Import Programme, reports Gamal Essam El-Din from Alexandria

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One of the bright spots on the map of USAID-funded activities in Egypt is the private sector- oriented Commodity Import Programme (CIP).

Stressing the importance of stimulating private investment in Egypt, USAID officials told Al- Ahram Weekly that the agency's CIP -- which is implemented through 31 Egyptian banks -- has provided $3.2 billion in short-to- medium-term trade and investment financing to Egyptian businesses since 1986.

In a recent visit to Alexandria, which receives more USAID funding than any other governorate, USAID officials revealed to the Weekly that the agency has decided to make CIP financing available to a broader range of entrepreneurs and investors. Special loan financing terms, said CIP's Chief Robert A Van Horn, will be available for transactions worth as little as $10,000, thereby encouraging small or emerging private sector businesses to participate in CIP activities. Van Horn also indicated that preferential terms will also be available for investment in Upper Egypt and for projects that benefit the environment. Normal end-users located in Upper Egypt, Van Horn added, will have a maximum interest-free period of 12 months, compared to nine months for end-users in non-Upper Egypt areas.

"These new easy terms," Van Horn told the Weekly, "dispel the claims that CIP financing is confined to a handful of business tycoons." Van Horn also argued that the new concessions are primarily aimed at stimulating economic growth in Upper Egypt.

According to Van Horn, the sectors benefiting from CIP investments include industry, agriculture, tourism and health. In its early years (1975-1992), Van Horn said, CIP focussed on financing public sector companies ($3.8 billion), especially those affiliated to the Supply Ministry and those in charge of importing American wheat.

In the governorate of Alexandria, 271 private businesses have used CIP financing to import over $454 million worth of equipment and materials through 1,500 individual transactions.

One of the leading private businessmen benefiting from CIP funding in Alexandria is Ali Ghali. Ghali, whose company produces modern paints and coatings, receives interest-free CIP financing of $2 million per year. As a result, Ghali said his business grew from a lone factory employing 300 workers in the satellite city of Borg Al-Arab to several modern factories now employing more than 2,000 and earning more than $200 million a year in revenue. Ghali credited CIP financing with boosting the company's exports from $22 million in 1999 to over $120 million in 2004.

Another Alexandria-area business enjoying abundant financing from CIP is the Medical Centre in Semouha district. CIP financing enabled the centre to import some of the most sophisticated medical equipment, improve its services and create new job opportunities. "CIP financing relieved us of tapping the black market for foreign exchange necessary to import equipment and made us into the best medical centre in Alexandria," said the centre's manager Alaa Abdel-Hamid. The centre, which received $650,000 financing from CIP, now attracts patients from across North Africa for medical treatment.

USAID has a partnership with Alexandria reaching back more than 25 years, providing funds and technical assistance to projects that have dramatically improved the city's quality of life. Since 1978, according to USAID's director for environment and infrastructure Anthony N Vance, USAID has provided $538 million for improvements to Alexandria's wastewater system. These improvements -- which took place over two phases from 1978 to 1996 and from 1997 to 2004 -- have not only rid Alexandria of its chronic sewage problems, but also finally put an end to the discharge of untreated wastewater into the Mediterranean Sea. USAID is also giving $97 million to Alexandria Water Project under the Egypt Utilities Management (1997- 2006) scheme for rehabilitating the historical city's antiquated water systems. According to Nadia Abdu, board director of Alexandria Water General Authority (AWGA), USAID financed 80 per cent of the cost of rehabilitating water supply systems in its impoverished urban areas. "Alexandria, with a population of 1.1 million, has 150 squatter districts that are in desperate need of water supplies," said Abdu. On 31 March, USAID officials reviewed the rehabilitation works of water supplies in the two squatter districts of Mohsen Al- Kobra (west of Alexandria). These works, which started in September 2001 and were completed in February 2003, are now supplying potable water to a population of 55,000, 39 per cent of whom are living below the poverty line.

According to a USAID report, the agency's funding for Alexandria projects covers nine separate sectors, each of them receiving around $1.4 billion over the last 25 years.