NEXT STEPS ON D&G AND FUNDING FOR CIVIL COMPANIES

S E C R E T CAIRO 001138 SIPDIS USAID FOR ME/MEA/MCCLOUD STATE FOR DRL, NEA E.O. 12958: DECL: 06/06/2018 TAGS: EAID PHUM KDEM EG SUBJECT: NEXT STEPS ON D&G AND FUNDING FOR CIVIL COMPANIES REF: CAIRO 399 Classified by Ambassador Margaret Scobey for reason 1.4 (D). ¶1. (S) SUMMARY: In a May 29 letter, MIC Minister Aboulnaga has complained a second time about USAID direct funding for civil companies under its D&G program (see para 7 for full text). In response, we propose canceling the 2004 agreement governing the D&G Direct Grants program on the grounds that it is more restrictive than Egyptian law and common practice by other donors. At the same time, we would inform MIC that we will continue to fund civil companies.To respond to Aboulnaga's earlier assertion that the GOE has security concerns about some of the civil companies, we believe that we should invite her to provide us, via intel liaison channels, precise, credible evidence to demonstrate ties to violent extremism, and to commit to stop funding any party clearly associated with violent extremism. We expect the GOE will react badly to cancellation of the agreement, and to our continued funding for civil companies. The civil companies may be targeted for harassment, and the GOE may refuse to sign pending agreements for ongoing bilaterally-agreed D&G programs. END SUMMARY. ¶2. (C) We have received a second letter from Minister of International Cooperation Fayza Aboulnaga, dated May 29, asking that no funds be "allocated or disbursed" to "Egyptian NGOs and civil firms that are not registered by the Ministry of Social Solidarity" (see para 7 for a full text). The letter specifically notes that USAID had informed MIC of grant agreements signed with the Ibn Khaldoun Center and the Development and Institutionalization Support Center in March. These grants were signed after receipt of the February 17 letter from Aboulnaga, in which she complained about USAID funding for civil companies. ¶3. (C) USAID direct grants to civil companies are a useful element of our D&G program. The recent D&G assessment found civil companies have engaged in effective activities under the USAID Direct Grants program. Other donors, including Canada and the European Commission, have also funded civil companies, although with smaller grants to fewer organizations. MIC has complained to the Canadians about this, and tried to initiate negotiations on a bilateral agreement, but the Canadians have refused. The EU has also received complaints, but from the MFA. Based on the results of the recent D&G assessment, we plan a review of our direct grants, including those to civil companies, to ensure that we are not providing more funding to individual organizations than they can handle. This we hope will improve our ability to monitor implementation and allow us to expand funding to new organizations and activities as recommended by the D&G assessment team. ¶4. (C) Given the differing interpretations of the 2004 agreement on the Direct Grants program, and the fact that it has not worked as envisaged, we propose canceling the agreement on the grounds that it is more restrictive than Egyptian law and common practice by other donors. At the same time, we would inform MIC that we will continue to fund civil companies because we are required to do so under the Brownback Amendment, and because we believe them to be engaged in constructive work. In response to repeated MIC requests for information about the impact of the D&G grants program, we would also inform MIC that we will brief them on the results of the indepth USAID technical review of the program planned for August. Depending on the results of the review of grant size that USAID plans to undertake, we may also inform MIC that we are planning to give smaller grants, but to a broader range of groups. ¶5. (S) To respond to Aboulnaga's earlier assertion that the GOE has security concerns about some of the civil companies, we believe that we should invite her to provide us, via intel liaison channels, precise, credible evidence to demonstrate ties to violent extremism, and to commit to stop funding any party clearly associated with violent extremism. We doubt very much that MIC could effectively engage EGIS in vetting these companies. And, of course, if they should, in fact, provide credible information linking USG grantees to violent extremism, it would be in USG interest to cut funding. GOE Reaction -------------- ¶6. (C) We expect the GOE will react badly to this move, and to our continued funding for civil companies. The civil companies themselves may be targeted for harassment; we will continue to brief grantees about the situation so they are aware of the risks. MIC may also refuse to sign several pending bilateral agreements before the end of the fiscal year, jeopardizing funding for our bilateral Media Development Program, Criminal and Family Justice programs, the Egyptian Decentralization Initiative, and Human Rights and Violence project. All of these fall under our bilaterally-agreed D&G program. If the agreements aren't signed, activities will start shutting down in October 2008 although the money would not be lost immediately, and the contracts could be signed later in FY 2009. ¶7. (U) The text of Aboulnaga's May 29 letter follows. Begin text: May 29, 2008 Dear Ambassador Scobey, Reference to the letter received from the USAID dated 8th April 2008 concerning the approval to provide direct funds for additional activities under the Democracy and Governance Program, despite the fact that the following Egyptian NGOs and entities are not registered by the Ministry of Social Solidarity as required by law no. 84 of year 2002: Ibn Khaldoun Center for Development Studies (ICDS) and Development and Institutionalization Support Center (DISC). You may recall that the agreement between the GOE and USG according to the exchange of letters between me and Ambassador Welch dates October 20th 2004 and November 11 2004 stipulates the following "To be eligible to submit a proposal all Egyptian non governmental organizations must be legally registered by the Ministry of Social Solidarity." Therefore I duly request that no funds are allocated or disbursed to the Egyptian NGOs and Civil firms that are not registered by the Ministry of Social Solidarity. I am confident that USAID will strictly abide by the provisions stated in the exchange of letters between our two Governments. Complimentary close. End text. SCOBEY