#Egypt: Investing in Infrastructure Isn’t a “Fool/Full Proof” Plan

From March 13th to 15th , Egypt hosted a two-day economic summit to present its business case as THE emerging economy in the Mediterranean and African region.  Meanwhile, the U.S. Government Accountability Office reported on the status of the U.S.-Egypt military assistance to the U.S. Congress: U.S. Government Should Examine Options for Using Unobligated Funds and Evaluating Security Assistance Programs (GAO-15-259). The U.S. watchdog agency made its February report on U.S. assistance to Egypt publicly available a day before Egypt’s March summit, which invited global multi-national companies, like General Electric and Siemens, among others.

Held at a luxurious Red Sea resort, current Egyptian President Abdel Fattah Al-Sisi wants the world to know that Egypt is not just a transitional nation since its 2011 ouster of its ex president, Hosni Mubarak (followed by its 2012 ouster of another ex-president, Mohammed Morsi) and other security and budgetary hiccups.

According to the Wall Street Journal:

Egypt signed investment deals worth more than $138 billion on the first two days of the conference, while its Arab Gulf neighbors—Saudi Arabia, Kuwait and the United Arab Emirates—pledged another $12 billion to help stabilize its economy. The total amount of investments it sealed at the conference is expected to rise after Sunday’s numbers are added, officials said.

Also, Egypt secured deals from dozens of European companies, like Siemens.

Investment Targets: Military or Non-Military

Which sectors will these investment funds target: military or housing or miscellaneous infrastructure (e.g. water)?  Infrastructure encompasses the military too… so it is not enough to say that investing in Egypt’s infrastructure is a “fool/full proof” plan.  On one end of the spectrum, political satirist, Karl Remarks, characterized Egypt’s economic summit with his sharp humor, tweeting that “[President] Sisi is crowd-sourcing funding for his military start-up.”  This sharp view is not without evidence given that Egypt’s military controls between 25 to 40 percent of Egypt’s economy — the second largest in Africa.

On the other end of the spectrum, non-military development plans for Egypt may benefit from this $12 billion pledge.  Already, Egypt’s housing ministry is expected to sign a deal with Dubai’s Arabtec company to build one million homes in Egypt. This infrastructure project requires investment of $40 billion, which is estimated to produce homes between 2017 to 2020.

Egypt’s housing crisis remains among Egypt’s top infrastructural problems — as difficult it may be to glean if focused on BBC and CNN headlines describing Egypt’s internal security issues, which Sisi emphatically refers to as “terrorism”.

Arab Investment Plus U.S. Assistance

Investment in Egypt will take time.  As Gulf Arab countries continue to invest based on conditions, so does the U.S. continue to provide heavy military assistance based on conditions.  Up until 2013, the U.S. assistance relationship with Egypt (a source of comfort and discomfort since the 1979 Camp David Accords) viewed Egypt’s assistance based on external, rather than internal, conditions: Egypt’s peace with Israel.  For example, some U.S. assistance halted in 2013 due to the Obama administration decision to suspend funds:

This included $260 million in prior year funding allocated for a cash transfer to Egypt that the administration announced in October 2013 that it would not carry out. According to U.S. officials, these funds have not been reprogrammed for other purposes.~GAO Report

GAO’s full report may be found here.  GAO made two recommendations to the U.S. Subcommittee on Middle East & North African Affairs, which is chaired by the Honorable Ileana Ros-Lehtinen.  Here are the recommendations:

GAO recommends that (1) State and USAID develop a plan for other uses for $260 million previously allocated for a cash transfer and (2) State establish specific time frames for completing a required evaluation of security assistance. State and USAID generally agreed with these recommendations.~GAO report

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Filed under Analysis, Interests, PIDE (Policy, International Development & Economics), Politics

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