VZCZCXRO9682
PP RUEHROV
DE RUEHEG #2224/01 2941540
ZNY CCCCC ZZH
P 201540Z OCT 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 0681
INFO RUEHXK/ARAB ISRAELI COLLECTIVE PRIORITY
C O N F I D E N T I A L SECTION 01 OF 02 CAIRO 002224
SIPDIS
NSC FOR PASCUAL
E.O. 12958: DECL: 10/20/2028
TAGS: PREL PGOV ECON EFIN EG
SUBJECT: GAMAL MUBARAK ON ECONOMIC ISSUES AND THE BILATERAL
RELATIONSHIP
Classified By: Ambassador Margaret Scobey, for reasons 1.4 (b) and (d).
1.(C) Summary: In an October 19 meeting with the Ambassador, presidential son and National Democratic Party (NDP)
assistant secretary-general Gamal Mubarak highlighted the GOE's plans to move forward with economic reforms, despite the
global financial crisis, and argued that the benefits of economic reforms to date have succeeded in trickling down. He
noted that "social justice" will be the main focus of the NDP's November 1-3 annual party conference. While Gamal agreed
that the USG and the GOE must find a more constructive means of discussing sensitive internal political issues, he
remained irritable about direct U.S. democracy and governance funding of Egyptian NGO's and USG "posturing," and was
broadly critical of U.S. policy writ large, commenting that, "our job has become much more difficult because of you."
End summary. ------------------------------ ECONOMIC REFORMS WILL CONTINUE ------------------------------
2.(C) Demonstrating an obvious comfort level when discussing economic topics, Gamal spoke at length about the ongoing
global financial crisis, and the possible ramifications for Egypt. He noted that the "silver lining" of the crisis would
likely be reduced inflation rates: "Inflation has been the major challenge for us in the past 12 months. Now analysts
expect deflation, which will give us relief on budgetary pressures, and will help ordinary consumers to afford
foodstuffs." Gamal noted that, despite worldwide financial troubles, Egypt still hopes to meet its financial growth
targets over the coming year. He asserted that, "we need to send a forceful message that we will continue to move
forward with economic reforms."
3.(C) Gamal highlighted that "social justice" will be the main focus of the NDP's November 1-3 annual party conference.
"Our critics say that the benefits of economic reforms are not trickling down. But there has been trickle-down, in terms
of job creation, and investment in public services nationwide!" Gamal also noted that the real incomes of Egypt's civil
servants have "increased handsomely" over the past 3-4 years, so "they are benefiting from the success of economic
reforms." Gamal opined that there will be more government spending and private sector investment on infrastructure and
job creation in the coming year. ----------------- ASSISTANCE ISSUES -----------------
4.(C) The Ambassador discussed the GOE's views of the FY09 funding level of $200 million in ESF, and emphasized that,
despite Egyptian unhappiness, the FY09 levels are not going to change. She noted the complexities of this year's budget
cycle, and the possibility of a Continuing Resolution being in effect for the entire fiscal year. She urged that the GOE
work through FY09 in a way that preserves the relationship, and that we reinvigorate the dialogue regarding FY10 funding
in a constructive manner. Other than inquiring as to possible timelines for approving the FY09 budget, Gamal was
unresponsive on this topic. -------------------------- THE BILATERAL RELATIONSHIP --------------------------
5.(C) The Ambassador emphasized the need to re-energize the bilateral relationship, and to find opportunities to discuss
the strength of the relationship, as well as the areas of disagreement, because these issues are not going away. Gamal
agreed that disagreements will continue, and that the challenge is to have constructive discussions on sensitive topics,
and to find the appropriate framework to discuss issues "helpfully and usefully." The Ambassador suggested that
consideration be given to augmenting the government-to-government channel, perhaps with NGO's and exchanges, as ways to
foster more constructive engagement on these issues. She flagged the positive efforts of the National Democratic
Institute (NDI) and the International Republican Institute (IRI). The Ambassador also noted that senior USG visitors
will be coming to Egypt over the next few months, as we look towards re-engergizing the US-Egyptian relationship on all
fronts.
6.(C) Gamal responded by emphasizing "skeptical" and negative Egyptian public opinion towards the U.S., noting that
"such negativity and skepticism necessarily impacts our CAIRO 00002224 002 OF 002 relationship with you. Our job has
become much more difficult because of your decisions. I hope that the next president and administration reviews the past
eight years, and draws some lessons." Gamal also asserted that in 2003, he had urged then-Ambassador to Egypt David
Welch to "tread carefully" when beginning to directly support Egyptian NGO's with USAID democracy and governance funds,
"as you might be setting in a motion a process that might be self-destructive, hurting you and us, and stigmatizing the
NGO's that deal with you." The Ambassador responded that the U.S. has trodden carefully, and has been fully transparent
with the GOE regarding our funding of all NGO's. Gamal mused that the issue is not transparency, or whether or not the
USG appropriately scrutinizes grantees ("I am sure you do"), but that the USG's "posture" is damaging. "All of your
public posturing and your approach of taking on the government, it back-fires. The public is too skeptical and hostile
towards you." SCOBEY