Cablegate: Goe Blinks On Endowment Proposal, Fails to Budge On North

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DE RUEHEG #0199/01 0421636
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O R 111636Z FEB 10
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0231
INFO RHEHNSC/WHITE HOUSE NATIONAL SECURITY COUNCIL WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHEG/AMEMBASSY CAIRO

C O N F I D E N T I A L CAIRO 000199

SIPDIS

E.O. 12958: DECL: 2020/02/11
TAGS: EAID PREL PGOV EG
SUBJECT: GOE Blinks on Endowment Proposal, Fails to Budge on North
Sinai Initiative

REF: STATE 8866

CLASSIFIED BY: Margaret Scobey, Ambassador; REASON: 1.4(B), (D)

1.(C) Key Points: -- The GOE for the first time has indicated some flexibility on the funding level and timing of its endowment proposal, but the suggested "middle way" still contains elements we have repeatedly identified as unworkable, including debt relief. -- The GOE continues to object emphatically to standard U.S. language in a draft bilateral assistance agreement for implementation of the FY 2009 Supplemental-funded and long-delayed North Sinai Initiative. The GOE's continued rejection of a basic and unobtrusive level of mandatory U.S. monitoring and evaluation threatens the program.

2.(C) The Ambassador met with Minister of International Cooperation(MIC) Fayza Aboulnaga February 3 and discussed the FY2011 assistance budget, the form and level of future U.S. assistance to Egypt, and the lack of movement on implementation of North Sinai-focused programs funded by a FY2009 $50 million supplemental. USAID Mission Director and Econ Counselor accompanied.

3.(C) The Ambassador began the meeting by mentioning her January 28 conversation with Aboulnaga in which, per reftel, she conveyed the FY 2011 budget request for Egypt. Aboulnaga bemoaned what she described as a lack of consultation in the assistance budget process in recent years, characterizing the announcement of the amounts requested as the latest "fait accompli." ---------------------------- Souk Haggling Over Endowment ----------------------------

4.(C) Aboulnaga advised that the GOE had recently decided to phase out all official development assistance (ODA) in 10 years. She briefly reviewed with the Ambassador the history of GOE attempts to secure U.S. support for a multi-billion dollar endowment to take the place of ESF and the more recent U.S. suggestion that a modest bi-national fund be considered initially. Aboulnaga then proposed that a preferred option would be to avoid "either extreme" and "strike a balance" by working out a "middle way." She specifically proposed that $250 million in ESF be deposited annually into an endowment over a five year period. Noting that even with the addition of a GOE contribution of 1 LE for every 1 USD an endowment of this size would generate only a small amount of funds for programming, she asked that the U.S. support her previously proposed debt reprogramming plan whereby GOE debt payments to the U.S. would be redirected to fund the endowment. ----------- Debt Again! -----------

5. (C) Citing briefly several of the previously and repeatedly stated U.S. concerns about the GOE endowment proposal, the Ambassador reiterated that debt relief remains off the table, adding that the GOE's own minister of finance has not expressed support for it. Aboulnaga countered that securing debt relief is the position of the GOE. In the context of diminished U.S. assistance in general, she said that "with shrinking U.S. assistance so goes shrinking U.S. influence. Is that what the U.S. wants?" The Ambassador responded that a $250 million program aimed at agreed human capacity goals could achieve a lot. The Ambassador added that the upcoming visit of Deputy Secretary of State Lew would provide further opportunity to discuss these issues. ---------------------- North Sinai Initiative ----------------------

6.(C) The Ambassador again raised with Aboulnaga the lack of progress on the FY 2009 Supplemental-funded economic development program for the Northern Sinai. The Ambassador noted that after many months of discussion and more recent reviews of multiple drafts, a bilateral agreement on program implementation has yet to be signed. The Ambassador reminded Aboulnaga that, in response to GOE sensitivities to work in the Sinai, the U.S. had gone to great lengths in preparing a program that would limit the U.S. profile while still fulfilling U.S. implementation, monitoring, and evaluation requirements.

7.(C) With a heavily annotated copy of the latest draft agreement in hand, Aboulnaga, along with her senior advisor Marwan Badr, proceeded to cite language they found objectionable in the document. Ambassador and USAID Mission Director pointed out that almost all the language in question has been standard in similar documents signed by the GOE over the past several decades. All agreed that MIC and USAID experts and lawyers should meet once more and review the latest draft agreement line-by-line. Ambassador and USAID Mission Director reiterated that some of the draft language remains "immovable" especially that governing financing of contracts. SCOBEY

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