Here's the Egyptian government's, through its foreign policy blog – clearly highlighting that the NGO law, about domestic regulation of society, is perceived as a foreign policy issues (indeed, I would say bargaining chips) by the Morsi administration because it makes Americans and Europeans (and so many Egyptians too of course) so anxious: 

The NGO draft law proposed by the Presidency affirms the basic concepts of access, empowerment, and supporting various forms of civil work upon which the law is based, while taking into account the principles of transparency, respect for the constitution and law, and openness to different experiences around the world in the field of civil society work.  The bill also activates the role of Egyptians abroad and aims to restore Egypt’s soft powers internally and externally.

. . .

The Presidency believes that the new NGO bill will encourage civil society work, facilitate its procedures and expand its sphere, away from any bureaucratic and monitoring constraints other than the general follow-up of the responsible body to ensure transparency and protect the rights of all Egyptians in conformance with the constitution and law.

See the whole thing, but the article elicited this response from Brooking's Tamara Wittes, who was in charge of US democracy promotion programs during the 2011-12 NGO crisis:

Black is white, down is up, & #Egypt govt's draft NGO law supports indep civil society & freedom of assoc. Orwellian. egyptforeignpolicy.org/2013/05/08/on-…

— Tamara Cofman Wittes (@tcwittes) May 8, 2013

Read on below for the UN Commissioner on Human Rights' take:

GENEVA (8 May 2013) – The UN High Commissioner for Human Rights Navi Pillay on Thursday urged the Egyptian Government to take steps to ensure that the current version of a draft law on civil society organizations is laid open to careful examination by Egyptian and international human rights experts, and, based on their advice, is brought into line with international standards, before it is adopted by the Shura Council.

“If a law is passed that severely constrains the activities of civil society organizations, whose constructive contributions will be crucial to the country’s future direction as an inclusive democracy, it will mark a further blow to the hopes and aspirations that were raised during the 2011 ‘Egyptian Revolution,’” she said. “This is a critical moment, with mounting concerns about a range of issues. These include the new Constitution and the manner in which it was adopted, the apparent efforts to limit the authority of the judiciary, and this current draft law which risks placing civil society under the thumb of security ministries which have a history of abusing human rights and an interest in minimizing scrutiny.” 

The High Commissioner noted that the new Constitution risks giving the Executive excessive power over the judiciary by providing for the direct appointment of judges to the Supreme Constitutional Court by the President. “This concentration of power risks undermining the independence of the judiciary,” she said.

Pillay said her Office has been following recent developments closely, including legal action targeting protesters, journalists and other activists, including the prominent political satirist, Bassem Youssef. “At the same time as these proceedings are underway, people – including members of the security forces – responsible for very serious human rights abuses, such as the killing, torture, rape and other forms of sexual attacks on protesters, and ill-treatment of detainees, have in many cases not been properly investigated by the General Prosecutors, let alone brought to justice,” she said. 

She said her Office had submitted detailed comments and proposals regarding the draft law on civil society.  

“The proposed law has gone through various drafts. There remains some confusion – and much concern that the latest draft, like previous ones, largely ignores inputs from local and international human rights organizations, and, if adopted, will impose a series of draconian restrictions on civil society organizations, especially those focused on human rights,” Pillay said. “It seems that there is a real risk that the current draft will not only make it difficult for civil society to operate freely and effectively, but may also conflict with Egypt’s obligations under international law to uphold the right to freedom of association.”

“Transparency has also been an issue,” she said. “But to date, all those drafts to which we have had access have fallen far short of Egypt's human rights obligations, including those contained in the International Covenant on Civil and Political Rights, which Egypt has ratified. I sincerely hope that international standards will be fully reflected in the final version, and – as I have informed the Government on a number of occasions -- my Office stands ready to offer assistance towards this goal.”

“The rights to freedoms of association and assembly are fundamental to the enjoyment of many other civil, political, economic, social and cultural rights - and these are the very rights which Egyptian women and men came together to claim in January 2011,” the High Commissioner said. “A clear framework is required in order to create an environment that allows civil society to organize and carry out its work for the benefit of the population at large.”

“Governments that seek to constrain these types of activities, for example by controlling access to funds, giving sweeping oversight powers to security agencies, and placing undue constraints on international human rights organizations – all elements contained in the various drafts of this law -- risk slipping quickly into authoritarianism, even if that is not their initial intention,” the High Commissioner warned. 

“Tolerance of criticism, debate, and external monitoring of abuses and failings of the country’s laws and institutions are essential to a properly functioning democracy,” she said. “Despite the authoritarian nature of the previous Egyptian Government, local civil society organizations were still feisty and effective operators. I am very concerned that the new law, if adopted in its current form, may leave them in a worse situation than they were prior to the fall of the Mubarak Government in 2011. And -- after all the country has been through in the past two years -- that would be a truly tragic development.”

US democracy aid went to favored groups in Egypt:

Interviews and documents obtained by The Associated Press show that the workers' protest and the broader government crackdown with the raids helped expose what U.S. officials do not want to admit publicly: The U.S. government spent tens of millions of dollars financing and training liberal groups in Egypt, the backbone of the Egyptian uprising. This was done to build opposition to Islamic and pro-military parties in power, all in the name of developing democracy and all while U.S. diplomats were assuring Egyptian leaders that Washington was not taking sides.

"We were picking sides," said a senior U.S. official involved in discussions with Egyptian leaders after last year's revolution swept President Hosni Mubarak from power after three decades. The official requested anonymity to discuss sensitive diplomatic matters.

Since the December raids, U.S. officials have scrambled to repair their once close relationship with Egypt. But the damage wasn't done overnight or as a result of the raids.

Documents and interviews with U.S. and Egyptian officials show:

— U.S. diplomats knew as far back as March 2008 that Egyptian leaders might close democracy programs and arrest workers, and last year some even discussed the possibility of a stern Egyptian response to dumping $65 million into democracy training after the Arab Spring uprisings, a sharp increase from past spending.

— Democracy training programs with strong ties to the U.S. political parties received the biggest share, $31.8 million, and spent it with few strings attached. IRI refused to work with members of the Muslim Brotherhood's Freedom and Justice Party, an Islamic group that holds more seats in the elected parliament than any other party in the country. IRI's Democratic counterpart, the National Democratic Institute, offered training and support to Brotherhood members.

— Nearly six years before the Egyptian government filed charges against the U.S. democracy workers, its leaders severely restricted the American democracy programs after a controversy over public comments by IRI's director.

A few reactions:

✪ Can we please defund IRI? And fire Sam Lahood?

✪ AP here is overstating the 2008 threat to close these programs by Egypt. In 2008, the US Embassy in Cairo moved to repair the relationship with the Egyptians and actually accepted Egyptian veto power over some of the money spent. After the revolution it moved back to the 2002-2008 position which was not to give the Egyptian government a veto.

✪ This particular bit has to be illegal under US law and should be subject to a Freedom of Information request:

Despite a U.S. commitment to make public the details of its democracy aid program in Egypt, USAID has refused to identify all the groups that received money and the grant amounts. The official said the agency disclosed the list to Egyptian leaders, but will not release information publicly about grant recipients that don't want to be identified. That has surprised some State Department officials.

"All I remember is, there were weekly meetings this time last year about how this all had to be posted publicly," said a senior State Department official, who requested anonymity because he was not authorized to speak publicly about sensitive diplomatic matters. More than a year after citizens rallied in Tahrir Square for new leadership, the U.S.-Egypt relationship remains fragile.

✪ The article quotes Frank Wisner — whom I consider too close to the Egyptian military. Wisner is a lobbyist for the US defense industry and was the Obama administration's conduit to the military during the 2011 uprising. He's hardly an impartial man.

✪ The article perpetuates the myth that it's all about Fayza Aboul Naga — the real question is, who egged her on and backed her and coordinated the campaign of anti-Americanism in the Egyptian state media? US officials focus on Fayza because the real target — the military and the intelligence services — they don't want to confront. (She's a handy scapegoat for Congress, too.)

Overall this uncovers one important element — contrary to its mission and its statements IRI was engaged in biased political activity, and in doing so has damaged any similar efforts by other organizations. In the overall take of the story, however, apart from the over-funding of IRI and NDI, the article gives the impression of US conspiracy against SCAF and the MB. This is hardly true, since the US has collaborated closely with the military and engaged vigorously with the MB. The money and efforts spent trying to support the "liberal" parties is minimal and not very effective.

There is no conspiracy to empower liberals in Egypt, there is only a focus on retaining core interest — military cooperation, Israel — no matter who is in power. Beyond that, democracy promotion through things like party training does very little except make US politicians who fund it feel good and give officials a talking point. I don't know whether the US can encourage more democracy in Egypt, but it can certainly encourage less autocracy — by stopping the military aid to the country.

Here is a statement by a group of Egyptian NGOs about a bill circulating to overhaul legislation governing how civil society operates — in part in reaction to the recent US-Egypt NGO crisis.

The undersigned human rights organizations declare their utter rejection of the new draft law on non-governmental organizations (NGOs), prepared by the Ministry of Insurance and Social Affairs and which aims to nationalize civil society. Under this law civil society would be considered an institution of the government, and NGO staff would be regarded as civil servants. Furthermore, the new law would impose several new arbitrary restrictions aiming to terrorize civil society activists.

Read the rest here. Of course the bill prohibits receiving funding from abroad without government approval, as previous legislation did, forcing many NGOs to register as legal corporations. It also bars membership in international NGO networks without government approval — meaning that, say, an Egyptian anti-torture group might not be able to join an anti-torture network.

The bill was prepared by the Ministry of Social Insurance, where clearly the same mindset and mentality as the old regime thrives. It's about time MPs start drafting their own laws rather than let Mubarak-era technocrats do it. The only question is whether the Islamist dominated parliament might actually approve of this new text.

A few minutes ago the plane carrying NGO workers out of Egypt took off, ending the diplomatic spat between Washington and Cairo. Concerns naturally remain about the other nationals, most notably the Egyptians involved who risk the most. And as predicted outrage over what appears to be a clear case of executive pressure being put on the judges is mounting, including from NGOs that have been targeted themselves and have denounced the case as a political fabrication from the beginning. For instance this press release from the Arab Center for the Independence of the Judiciary and Legal Profession:

The ACIJLP raises many concerns regarding the decision of judges' step-down in view of the reasons that have been announced by the judges which have been represented in "Feeling of Embarrassment", as well as the time of such decision which came before the judges' consideration in the complaint submitted by 8 foreigners regarding the decision to prevent them from traveling, a matter which make the ACIJLP believes that there is an inappropriate interventions which may be practiced against the Department of the Cairo Criminal Court with respect to this case.

Whether such interventions, about which ACIJLP is concerned, are practiced by members who belong to the judicial authority like the Head of the Court of Appeal in Cairo, or by executive bodies which led the judged to step down, this is considered the first event of its kind. It is considered an intervention in and breach of the independence of judges and the judicial authority in Egypt. The Egyptian judiciary has long been suffering from the practices which violate its independence like exploiting it in political disputes; starting from tracing opponents and political activists, imposing guard on syndicates, and at last banning civil NGOs work.

In support of the independence of the Egyptian judiciary, the ACIJLP calls upon the president of the Supreme Judicial Council to open an independent and urgent investigation to uncover the circumstances of the decision of the judges' step-down and to detect any pressure has been practiced whether by the government or those engaged in such pressure and to use fair trial, if necessary.

If I were an Egyptian politician, I'd be calling for the heads of a lot of the officials involved to roll.

But let us sidestep this issue and discuss the future of the aid relationship. Why should the US continue to provide aid for a country that accuses it of trying to split it up and, specifically, to a military establishment that is neither democratic nor that particularly friendly? There may be strategic reasons, but the core reason is one of political corruption — not in Egypt, but in the US. Shana Marshall makes this point well in Why the U.S. won’t cut military aid to Egypt:

The recent crackdown on foreign-funded non-governmental organizations (NGOs) in Egypt has sparked a new round of diplomatic hand wringing over Washington's long-standing military aid program. Despite tepid threats from the White House and Congress, the United States is unlikely to end official military assistance -- not because of concerns over Egypt's peace treaty with Israel or Washington's desire to maintain influence over Cairo -- but because the aid benefits a small and influential coterie of elites in both capitals. In the United States, the aid program provides a large and predictable source of demand for weapons exporters, while in Cairo, collaborative military production with U.S. firms help subsidize the army's commercial economic ventures.

Although domestic interest groups are rarely invoked in the debate over military aid to Egypt, the $1.3 billion in annual assistance represents a significant subsidy to U.S. weapons manufacturers. For instance, the General Dynamics manufacturing facility in Lima, Ohio where the M1A1 Abrams tank is built will not have more work orders from the U.S. Army until 2017 when the current M1 tank fleet is up for refurbishing. Egypt's latest $1.3 billion order of 125 M1A1s (Cairo's 11th order since the late 1980s) will keep those production lines open until 2014 building knock down kits that are then shipped and assembled in Egypt. Although shipping fully assembled tanks to Egypt would employ more U.S. workers, without the contract the Lima plant (in a crucial electoral swing state) would shutter its doors and General Dynamics's bottom line would take a serious hit. Looming reductions in the U.S. defense budget have made General Dynamics and other defense producers even more concerned with keeping such funding channels open.

That's why Washington does not want aid cut: it's, among other things, a subsidy for the US defense industry. No doubt there's also senior Pentagon and DoD officials who want to back it in the hope of landing plush jobs at Raytheon and elsewhere when they retire (in this respect the US is not unlike Egypt) and Congresspeople like pleasing donors and creating jobs for constituents.

Yet the aid to Egypt is worth reviewing, both sides, now more than ever before — and that conversation should start with the new president of Egypt, who hopefully will not be a front for the Egyptian military.

This is what Reuters is reporting:

(Reuters) - Egypt has decided to lift a travel ban preventing American pro-democracy activists from leaving the country, judicial sources said on Wednesday, a move that is likely to defuse a standoff that has plunged U.S.-Egyptian ties into a crisis.

It was not immediately clear when any of the activists involved in the case would leave the country. Sixteen of the 43 people facing charges are Americans. Some of them are not in Egypt and some others have sought refuge in the U.S. embassy.

Since late this morning I've been getting rumors that the Americans had in fact already left, or that a deal had been brokered by Jeffrey Feltman in DC, or somesuch. I did not know what to believe, but there were already signs earlier today by Hillary Clinton's statements when she said "we will resolve this issue concerning our NGOs in the very near future." She was speaking to lawmakers in the US.

I suppose my first reaction is good for them — they'll be able to leave the country, won't have to face the risk of jail. Good for US-Egypt relations too, I suppose, with no images of Americans in a court cage or facing trials. The stupid descriptions of this situation as a "hostage crisis" and hyperbole on both sides threatened to turn this into a political issue and, in an election year, into an electoral issue.

But as I sit watching Mona Shazli, one of Egypt's top political talk-show hosts, appear rather flummoxed by the whole thing, there are signs that Egyptians' reaction will be to think (no matter what they think of the merits of the case) that all the talk about their judicial system being above political influence being total bullshit. Especially after the cryptic way the judges involved in the case recused themselves earlier today. No doubt some Egyptians will not be happy about the way this unfolded, in the way it makes their country look. (Perhaps though that's a hidden plus if it further discredits SCAF!)

Of course, Egypt deserves to look ridiculous in this case. The government media raised anti-Americanism to hysterical levels. The officials and judges involved painted a ludicrous picture of a foreign conspiracy to divide the country. Politicians rushed to jump on the we-don't-need-the-khawagas'-fluss-anyway bandwagon, and the prime minister gave credence to an ill-thought-out campaign to "replace" foreign aid by asking cash-strapped citizens to donate.

You know what it all reminded me of? Mubarak-era Egypt, with its weird hysterical petulance.

Of course, there are many unanswered questions. What will happen to the others indicted in the case? What will happen to the NGOs involved?What will happen to the manner in which the law, officials and state media treat NGOs more generally? And what was the price paid by the United States — particularly as the Obama administration is still supposed to confirm to Congress that Egypt is making progress in its democratic transition?