VZCZCXYZ0000
PP RUEHWEB
DE RUEHEG #0399/01 0591048
ZNY CCCCC ZZH
P 281048Z FEB 08
FM AMEMBASSY CAIRO
TO SECSTATE WASHDC PRIORITY 8310
C O N F I D E N T I A L CAIRO 000399
SIPDIS
SIPDIS
STATE PASS F, USAID
E.O. 12958: DECL: 02/25/2018
TAGS: EAID PGOV PREL KDEM EG
SUBJECT: ADDRESSING MIC´S OBJECTIONS TO D FUNDING FOR "UNREGISTERED" NGOS
Classified by Ambassador Francis Ricciardone for reasons 1.4 (b) and (d).
1. (C) SUMMARY: On February 17, we received a letter from Minister of International Cooperation Fayza Aboulnaga
directing USAID to cease funding four American and six Egyptian organizations. These groups received democracy and
governance (D) grants under USAID´s direct grants program in the last six months. One organization cited in the letter, which has
been distributing children´s books on human rights, had the books seized by state security services on February 20. All
of the organizations fall outside the letter of our 2004 agreement which stipulated that any U.S. NGO receiving direct
USAID grants have an agreement with the MFA, and that any Egyptian NGO must be registered by the Ministry of Social
Solidarity. END SUMMARY.
2. (C) On February 17, Minister of International Cooperation Fayza Aboulnaga wrote the Ambassador asking USAID to stop
funding four U.S. and six Egyptian organizations under the D direct grants program on the grounds that those organizations have not been properly registered as NGOs. The Ambassador
intends to meet with Aboulnaga to work out a way forward that will allow funding to these and similar organizations.
3. (SBU) In the case of the four U.S.-based institutes cited in Aboulnaga´s letter - MidAmr Group, Search for Common
Ground Productions, Counterpart International Inc. and Transparency International - the organizations have "not as yet
concluded the required standing agreement with the Ministry of Foreign Affairs" as required under the November 10, 2004
exchange of letters by then-Ambassador Welch and Aboulnaga. The MIC letter further states that the six Egyptian groups
on the list have not been properly registered by the Ministry of Social Solidarity.
4. (C) It appears that MIC is attempting to close a loophole in the civil companies law that we have used to fund civil
society organizations which have either not been able to obtain Ministry of Social Solidarity registration (under Law 84
governing NGOs), or have not been able to obtain permission from that ministry to receive foreign funding. Organizations
that have not been able to obtain MSS registration have registered as civil companies in order to have some legal
status. But since these "civil companies" fall outside of Law 84, they do not require MSS permission to receive foreign
funds. We have been granting funds only to Egyptian NGOs that are registered with MSS or which are "civil companies." In
some cases, when existing NGOs have not had permission to receive foreign funds from MSS, they have created civil
companies, and received USAID funds via those entities. In the case of the U.S. groups, we are not aware of any that
have obtained agreements with the MFA.
5. (C) This is not the first time MIC has raised this issue, though it is the first time that it has specifically
directed us to cease funding groups falling outside the terms of the November 2004 agreement. In an exchange of letters
with the Ambassador in 2006, Aboulnaga complained that USAID was funding organizations that "have not completed the
required registration procedures" but did not specifically mention any civil companies. The Ambassador´s response
finessed the "civil companies" issue by stating USAID had not and would not "transfer funds to Egyptian non-governmental
organizations which have not been legally registered." Minister of Social Solidarity, Ali Moselhy, did complain to the
acting USAID director this past summer about U.S. use of the civil company "loophole."
The direct D grant process
----------------------------
6. (SBU) Under the 2004 agreement, USAID informs MIC in writing of approved D grants on a quarterly basis. The names of the groups noted in Aboulnaga´s letter appear to have been taken from USAID
notifications of new grants through letters submitted to MIC in October 2007 and January 2008. Since the start of Direct
Grant program, USAID has given 42 grants to Egyptian organizations. Twenty-five are registered as NGOs. The other
seventeen are civil companies, law firms, or limited liability partnerships. The February 17 letter mentioned only six
of the seventeen non-NGO organizations. A total of 38% of our direct assistance grants go to "civil companies" that are
not registered with MSS.
Books seized
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7. (SBU) On February 24, [TEXT REMOVED BY AFTENPOSTEN], called USAID asserting that State Security had confiscated
thousands of copies of [TEXT REMOVED BY AFTENPOSTEN] a children´s book distributed by [TEXT REMOVED BY AFTENPOSTEN] to
public schools and libraries. In addition, some [TEXT REMOVED BY AFTENPOSTEN] lawyers were detained in Sharqiya, and
were released after they agreed to halt the book distribution and not to speak to the press. Books were confiscated in
Beni Suef and Sharqiya; in Sohag the Governor himself blocked the confiscation. Two independent Egyptian newspapers
reported the confiscation. An MFA cabinet advisor told DCM categorically that the seizure and the Aboulnaga letter were
not "orchestrated."
The Way Ahead
-------------
8. (C) The Ambassador will approach MIC´s Aboulnaga in the coming days to seek to resolve our differences over NGOs. We
suspect that Aboulnaga is armed with a GOE interagency decision, coordinated with MFA and MSS, to close the loophole
allowing "civil companies" to receive foreign funds. Our response will be that MSS has serially failed to register NGOs
and that anticipated registration was the basis for our original agreement. Likewise, our agreement was reached based on
the mutual expectation that U.S. and international NGOs would be registered by MFA. Three years later, the MFA has not
reached an agreement with a single international NGO that we are funding or would like to fund. Meanwhile, we can point
to conversations in which MIC and MFA have assured us that the U.S. NGOs could operate without formal status. Many of
the civil companies have NGO "sister" institutions that qualify for U.S. assistance under our agreement with MIC, but
have encountered difficulty in obtaining permission to receive funds, due to MSS inaction. We have no room to argue
either the fact at issue or Aboulnaga´s interpretation of the 2004 agreement. Therefore, we intend to cease funding the
civil companies listed in her letter until we can reach an understanding on a new way forward. We will continue to fund
the American and international NGOs, regardless of her letter, on the grounds that these organizations do not have
offices in Egypt; we will contend that therefore they do not require agreements with the MFA. But we will also work
towards a more workable understanding on this point.
RICCIARDONE