EP/EXPO/B/AFET/FWC/2009-01/Lot4/05 22/January/ 2010 PE 433.734 EN

DIRECTORATE-GENERAL FOR EXTERNAL POLICIES OF THE UNION

DIRECTORATE B

POLICY DEPARTMENT

BRIEFING NOTE

ANALYSIS OF THE NATIONAL INDICATIVE PROGRAMME (2011 – 2013) OF EGYPT

Analysis of the National Indicative Programme (2011-2013) of Egypt

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This briefing note was requested by the European Parliament's Committee on Foreign Affairs.

AUTHOR(S):

SOFRECO PARIS, FRANCE

ADMINISTRATOR RESPONSIBLE:

KRAUSS, Stefan Directorate-General for External Policies of the Union Policy Department WIB 06 M 051 rue Wiertz 60 B-1047 Brussels

LINGUISTIC VERSIONS

Original: EN

ABOUT THE EDITOR

Manuscript completed on 22 January 2010. © European Parliament, 2010

Printed in Belgium

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DISCLAIMER

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TABLE OF CONTENTS

EXECUTIVE SUMMARY 3

1. KEY PRIORITIES IN RELATIONS WITH THE EU 3

2. GENDER EQUALITY AND JUSTICE 4

3. CORRUPTION AND POLITICAL DEVELOPMENT 4

4. EDUCATION AND PUBLIC HEALTH 5

5. ENVIRONMENTAL CHALLENGES AND OPPORTUNITIES 5

ANNEX I – SUMMARY OF RECOMMENDATIONS 7

SPECIFIC RECOMMENDATIONS 7

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EXECUTIVE SUMMARY

Egypt has long been a key strategic partner of the EU in the Southern Mediterranean and the Middle East, with significant role in the Middle East Peace Process and increasing trade flows. More recently, Egypt has taken the role of co-presidency in the Union for the Mediterranean. The relationship is expected to mature into an enhanced partnership in the upcoming years.

The new National Indicator Programme (NIP) for the years 2011-2013 broadly continues its broad support of the three priority areas specified in the 2007 Country Strategy Paper (CSP) and covered in the 2007-2010 NIP. Among these three areas, the most notable and welcome change is in the new programme’s enhanced support in the energy market integration and renewable energy production. The new programme also pays due attention to achieve other environmental objectives set out in the European Neighbourhood Policy (ENP) Action Plan, such as taking steps to improve water quality and waste management.

As for other modifications, discontinued support to public health is a potential shortcoming of the new NIP. Moreover, further focus is needed in female economic empowerment, by allowing easier access to financing for women entrepreneurs. Continued support is also needed for higher education and continuing adult education. Lastly, support in some key areas, such as political development, is essential for achieving success in other areas, including the enhancement of the business environment. More generally, the new NIP should better account of similar complementarities, extending its support by using the ENP incentives rather than the demand-driven funding instruments, whenever necessary.

1. KEY PRIORITIES IN RELATIONS WITH THE EU

Egypt is an important strategic and trading partner for the EU, notably due to its vast economic potential and its willingness to promote peace and security in the region. Further highlighting its role in the region, Egypt took the co-presidency of the Union for the Mediterranean (UfM) along with France in 2008. In the same year, the government requested to commence a process of enhanced partnership by deepening political dialogue and enhancing cooperation in security and economic areas. The gradual process of intensifying relations between the two sides was officially endorsed by the EU-Egypt Association Council in April 2009.

The 2007 Country Strategy Paper (CSP) identified three priority areas, consistent with the national reform agenda and the strategic interests of the EU.

1. Supporting democracy, human rights, good governance and justice. A key funding item is the promotion and protection of human rights, mainly through support to national and civil society organisations. The priority area also covers support to political development, good governance and access to justice.

2. Developing competitiveness and productivity. The bulk of the funding supports sectoral reforms envisioned under the ENP Action Plan. The new NIP continues its support to the transport and energy sectors as well as trade facilitation, but removes capacity building support from other areas initially covered, such as the modernisation of business environment and the statistical system as well as the development of organisational and productive capacity of the agriculture sector.

3. Ensuring sustainability of development process. For the 2007-2010 NIP, the two key components were support for reform of education and public health. The original programme

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also included support to transport, energy and environment sectors. Under the new NIP, the support for the public health system is replaced with environmental priorities.

Under the 2007-2010, Egypt received a total assistance of €558 million or €140 million per annum. This is approximately equivalent to a per capita assistance of €7, which is close to the amount (€10 per capita) provisioned under the ENP Country Programmes. The assistance provisioned under the 2011-2013 NIP will be €449 million or €150 million per annum.

The key areas where further attention is needed are discussed next.

2. GENDER EQUALITY AND JUSTICE

Egypt faces serious impediments in women’s participation in political, economic and social life. The 2007-2010 and 2011-2013 NIPs have addressed this issue by funding the establishment of national and civil society organisations and the improvement of access to education. In turn, the Egyptian government has introduced programs to enhance female’s role, promote gender equality, and reinforce fight against gender-based violence.

The policy actions appear to have achieved some results. The gender gap in elementary education appears to be narrowing. Nevertheless, there is continued concern that the same cultural attitudes that prevent women from participating in normal civic life also curtail the full effectiveness of the policies. Women’s employment rates remain persistently low ever since the 1990s. Recent reports show that the number of adult women successfully completing literacy classes has not improved much over the past decade while a radical progress has been achieved for males. Moreover, female genital mutilation has only been addressed in 2008 by a law banning and penalizing (notably by health professionals). The practice is expected to be wide-spread even today due to the late implementation of the law and the NIP support could help non-governmental organisations to address this problem for monitoring and raising public awareness.

The current efforts need to be supplemented by helping women gain their economic freedom themselves. A selective use of the EIB instruments to give women easier access to micro-credits or loan guarantees could be of use here. The ENP instruments could also be broadened to include an access to finance element as one of the objectives. Such initiatives have been instrumental in empowering women in developing countries, helping create role models and changing cultural perceptions from bottom-up.

3. CORRUPTION AND POLITICAL DEVELOPMENT

Measures have been in place under the initial NIP to fight corruption in public financial management. Nevertheless, Egypt ranks persistently low in international comparisons. Anecdotal evidence from various studies suggests that corruption is troubling not only in the public services sectors but also in the judicial system. It is highly questionable that participation in civic life can take place without an enhanced perception of corruption. The continued provision of technical assistance for increased accountability and transparency under the new NIP is therefore appropriate. However, the effort should be furthered by making the assistance available to all arms of the state, including the legal institutions. Additional support to civil society organisations to monitor and assess the evolution of corruption would also be a welcome step, not only for ameliorating corruption but also enhancing democracy and political involvement in the country.

Supporting voter participation directly through ENP instruments, via support for voter listings, are unlikely to be useful in a country that has been under a single party rule since 1981. Historically, the participation rates have been low (less than one-third of eligible voters); however, perceptions

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regarding the democratic system, i.e. voter apathy, is probably the main reason of this low outcome. Participation into civic life is meaningful only if citizens trust their government and see the election system as a legitimate means of eliciting their wants and needs. Aside from pushing for democratic reforms, fight against corruption is also crucial here. In addition to the demand-driven funding instruments covered under the NIP, the use of ENP’s incentive instruments, i.e. by making deeper trade and economic cooperation with the EU contingent on progress in political development and fight against corruption, could be highly productive for achieving progress in this area.

4. EDUCATION AND PUBLIC HEALTH

Despite efforts, educational attainment remains persistently low in Egypt. As elsewhere, modest improvements have been observed in the enrolment rates in primary education but the dropout rates remain high, especially among girls and other vulnerable groups. Particularly worrisome is the low quality in education, prompted by a lack of resources, particularly well-qualified teachers and resources to equip schools. According to UNESCO statistics, Egypt’s public expenditures on education accounted for only 3.7% of GDP in 2007, which are lower than most countries in the region.

In response to these challenges, the Egyptian government is undertaking a vast reform under the National Strategic Plan for Education Reform, devoting new budgetary resources and improving efficiency in public administration, especially for primary and secondary education. In line with these national plans, the new NIP reiterates its focus on pre-university and technical and vocational education training (TVET) programs, collectively drawing nearly a quarter of the total NIP budgets. Unlike the 2007-2010 NIP, however, explicit support to the development of higher education institutions is omitted.

The new NIP program could be broadened to include cooperation initiatives in this area, much like the bilateral agreements between Egypt and some Member States, allowing Egyptian students a wider access to EU institutions.

Support for enhancing diploma recognition and integrating the Egyptian higher education system through conformity with international standards (i.e. the Bologna process) could also be useful. Further attention should be paid to support for adult education and training programmes (other than adult literacy courses), which could be chief contributors to economic development in vulnerable areas.

In public health policy, infant mortality and life expectancy rates remain below the standards of comparable countries. Despite these observations, it is surprising to see that the support to health sector is discontinued under the 2011-2013 NIP for the stated reason that the funds “received in 2009 are going to be disbursed over the same period.” It is not clear if this omission will lead to a weakened support to this sector in the years to come. If so, this would certainly contradict with the principle of long-term support laid out in the 2007-2010 NIP. Public health is an area where external funds, especially in the form of direct budget support (as provided under the 2007-2009 NIP), capacity building and technical assistance information exchanges (TAIEX), could play a crucial role.

5. ENVIRONMENTAL CHALLENGES AND OPPORTUNITIES

Although Egypt is among the countries least responsible for the rise of greenhouse gases in the atmosphere, climate change could deliver a heavy blow to the country. In particular, global

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warming and rising sea levels could potentially hasten desertification, devastate the arable land of the Nile Delta and lead to a massive wave of migration of up to 6 million refugees.1 The new NIP could be broadened to support monitoring and research on the impact of climate change in order to aid the country understand and cope with future challenges.

The scarcity and the pollution of water resources, the degradation of coastal areas and improper waste management are also key environmental concerns. According to the World Bank, Egypt’s renewable freshwater resources per inhabitant are among the lowest in the region. Water sector reform and solid waste management appear as two sub-priority areas in the 2011-2013 NIP. The new funds supplement the Water Sector Reform Programme, established in 2005 outside the scope of the 2007-2010 NIP. The new NIP also supports the national waste management plans though modernisation and capacity building. The introduction of these areas is appropriate given the increasing concerns regarding environmental degradation. However, the priority area fails to adequately cover environmental hazards from touristic development projects, one of the main contributors to the pollution of coastal areas. The ENP’s funding could be useful for the development of environmentally friendly touristic development projects.

Egypt’s vast solar energy potential is an important opportunity for the country and its partners. As the technology for converting solar energy to electricity improves over the next decade, this source will become increasingly economical and thereby aid the country’s competitiveness, development and energy independence goals. As the production capacity increases, the development of a “regional green energy” market could become increasingly feasible, allowing Egypt to reap the benefits of its comparative advantages. In turn, the country’s regional partners, including the EU, could also benefit from access to diversified forms of energy. The refined focus on renewable energy potential and increased interconnectivity envisioned under the 2011-2013 NIP is therefore steps in the right direction.

1 UNDP (2009), Arab Human Development Report: Challenges to Human Security in the Arab Countries, United Nations Development Programme, Regional Bureau for Arab States (UNDP/RBAS), New York, NY.

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ANNEX I – SUMMARY OF RECOMMENDATIONS General recommendations and remarks

1. ENP funding covered under the NIPs are demand-driven, in that the partner country may pick and choose among different assistance programmes. This could weaken the full effectiveness of the overall programme due to uneven progress in some areas. In Egypt’s case, the slow progress in political development and the fight against corruption could be explained by these factors. Incentive instruments available under the ENP could be used to supplement the current NIP programmes.

2. The NIP packages have to account for complementarities that exist between different packages. For Egypt, much like other developing countries, there are clear parallels between the fight against corruption and business environment as well as gender equality, political development and education. While the latter links are aptly considered in the NIP packages, the inherent relationships that exist between other packages are not fully treated.

SPECIFIC RECOMMENDATIONS Priority Area 1 – Supporting democracy, human rights, good governance and justice

1. On gender equality, the current NIP funding should be supplemented with EIB support in the form of micro-credits and loan guarantees to empower women more directly.

2. A public awareness campaign against female genital mutilation, although now outlawed, through CSOs and NGOs is necessary to decrease its prevalence.

3. The continued support to fight corruption is an essential element for enhancing citizens’ participation in democracy and political development. In addition to enhancing transparency and accountability of select public institutions, the assistance should also cover other arms of the state, including the legal institutions.

Priority Area 2 – Developing competitiveness and productivity

4. The new focus on sector-specific support is timely and appropriate.

5. Support to energy sector for increasing regional inter-connectivity and harnessing renewable energy sources could be a key growth-factor in the development of a “regional green energy” market. The focus on energy sector under the NIP is therefore highly appropriate and should be long-term priority.

Priority Area 3 – Ensuring sustainability of development process

6. Explicit support to higher education is omitted in the 2011-2013 NIP. The new programme could be broadened to incorporate cooperation initiatives, including taking steps for enhancing mutual diploma recognition and conformity of Egyptian higher education with international and European standards.

7. Support for public health is discontinued under the new programme. This could challenge the principle of sustaining long-term support to the sector.

8. The new programme could be broadened to support monitoring and research on the impact of climate change in order to help Egypt cope with future challenges.

9. Assistance for preventing environmental degradation in coastal areas is not prioritised in the programme. The 2011-2013 NIP could assist Egypt in developing environmentally-friendly touristic development projects.