The Arabist

The Arabist

By Issandr El Amrani and friends.

How USAID underwrote Egyptian corruption

This is an important story in the Washington Post about the USAID underwriting of Egyptian crony capitalism in the 1990s and 2000s:

Formed with a $10 million endowment from the U.S. Agency for International Development, the Egyptian Center for Economic Studies gathered captains of industry in a small circle — with the president’s son Gamal Mubarak at the center. Over time, members of the group would assume top roles in Egypt’s ruling party and government.

Today, Gamal Mubarak and four of those think tank members are in jail, charged with squandering public funds in the sale of public resources, lands and government-run companies as part of a dramatic restructuring. Some have fled the country, pilloried amid the public outrage over insider deals and corruption that toppled President Hosni Mubarak.

“It became a crony capitalism,” Magda Kandil, the think tank’s new executive director, said of the privatization program advocated by its founders. Because of the corruption, the center now estimates, the assets that Egypt has sold off since 1991 have netted only about $10 billion, $90 billion less than their estimated worth.

For years I’ve singled out, in various places, the innapropriateness of putting economic liberalization in the same basket as democracy promotion and development, which the US systematically did in its aid and foreign policy since the 1980s. Egypt is an egregious example. Economic assistance to Egypt by USAID for much of the 1990s and early 2000s was largely in terms of the Commodity Import Program which provided guarantees to banks that gave Egyptian importers of American goods letters of credit. It was not, as no doubt many Americans imagined, developmental work on health, education or infrastructure.

Moreover, the US — the embassy in Cairo, the State Department, Congress and successive administrations — also gave full political and financial backing to organizations such as the American Chamber of Commerce and ECES (they have a huge overlap). The accounts of these organizations should be investigated — many are known to be run with very superficial oversight. They are also a nexus of political influence, reminding us that in many respects the US was part and parcel of the Mubarak regime — or wings within it.