Following is a Web version of a document from USAID's 1997 Congressional Presentation. Please note that some formatting may have been lost in the automated conversion of the original file. This document is also available for download in its original WordPerfect 5.1 format.

FY 1997 Economic Support Funds: $815,000,000

Introduction

Beginning with the Camp David Accords in 1979 and continuing today, Egypt has used its political leadership to foster a broader peace between Israel, the Palestinians, and neighboring Arab states. Egypt has not reached its true potential as a national or regional economic power, however, due to the slow growth of its economy and persistent structural imbalances. Slow growth has also led to growing unemployment which threatens Egypt's long-term stability. Both the United States and Egypt recognize that for regional stability to continue, Egypt must be both prosperous and stable.

The U.S.-Egyptian Partnership for Economic Growth and Development launched by Vice President Gore and Egypt's President Mubarak in September 1994 was created to deal more effectively with problems hindering rapid and sustainable economic growth in Egypt. The Partnership initiative has brought about two fundamental changes in the policy dialogue environment: it has been elevated to the highest levels of decision-making and it embodies vital private sector participation.

The visit of Vice President Gore in January 1996 for the Partnership initiative, provided timely, positive reinforcement at a difficult juncture in Egypt's development. President Mubarak announced a new vision of Egypt's economic future: a vibrant private sector led open market fully integrated into the global economy. To reinforce this vision, he has appointed a new economic cabinet and a new Prime Minister who shares his vision. The new cabinet is committed to liberalizing the economy by deregulating the trade sector, increasing competition in the financial sector and accelerating the pace of the privatization of the public sector. The Partnership initiative will help facilitate Egypt's transition to a private sector led market economy.

The Development Challenge

Egypt's path to a market-oriented economy following 40 years of heavy state intervention in resource allocation has yielded significant macroeconomic results. The program began to take meaningful shape in March 1991 with the signing of an IMF Agreement. This was followed in July 1991 by debt forgiveness by members of the Paris Club, who agreed to forgive 50% of their holdings of Egyptian debt. The program was reinforced by a World Bank structural adjustment loan in November 1991 and by a USAID sector policy reform program in August 1992. Thus far, the program has led to a reduction in the budget deficit from 21% to 1.6% of GDP, a drop in inflation from 25% to approximately 9%, the unification of three different exchange rates to a market-determined rate, a shift in the current account deficit from an unsustainable $3 billion equivalent per year to a slightly positive level, and an increase in foreign exchange holdings from $1 billion to $18 billion. Substantial improvements were also made in the foreign trade sector both in the reduction of tariff and non-tariff barriers and in facilitating exports. Both competition and efficiency in the banking and capital markets have improved substantially with liberalization of interest rates at market clearing levels and the rebirth of the stock exchange and the bond market.

The Government of Egypt (GOE) has successfully carried out a difficult first phase agenda of economic stabilization. Today the focus is on accelerating growth to generate jobs for Egypt's large, 60-million strong population.

Even with a declining population growth rate (2.4% to 2.2% over the 1990-94 period), Egypt's ability to create jobs and expand basic human services will be sorely challenged and sustainability questionable without greater private sector involvement. The government sector, which dominates the economy, has been unable to provide sufficient jobs for Egypt's work force and the private sector is as yet too small and constrained to meet the growing demand. As a result, Egypt has experienced a gradually rising unemployment rate for years. With an economy growing at 2.5% per year, per capita GNP stagnant at $660, and weak domestic purchasing power, Egypt must look to the export market for much of its growth.

The primary challenge is to accelerate reforms that will encourage private sector-led, export-oriented economic growth. Reliable infrastructure, such as telecommunications and power, to support new private sector investmentswill also be essential. Agriculture's potential contribution to export growth, particularly for horticultural crops, is considerable but constraints remain in areas of agricultural policy, technology, institutions and sustainable water use. Agriculture will also have to play a greater role in meeting the country's job needs.

At the same time, other quality of life concerns must continue to be addressed. Infant and under-five child mortality rates have progressively improved, but remain too high. Excellent progress in child spacing has contributed to decreases in maternal mortality, but more effort is required in this area. Treated water has greatly increased over the past decade but demand continues to outpace supply. Serious environmental degradation constrains the country's development and endangers the health and livelihood of its people. Finally, strengthened political, civil, and government institutions are important for the country's evolution to a sustainable democracy.

Other Donors

USAID works closely with the donor community whose individual contributions to Egypt are substantial and vital to Egypt's development needs. Together, USAID and the donor community disbursed $2.3 billion in 1993 for development activities in Egypt. Complementary support for structural reforms comes from the IMF, the World Bank and the European Union. Other major donors include the African Development Bank, Germany, the Islamic Development Bank, the European Investment Bank, France, Japan and Denmark.

FY 1997 Program

The FY 1997 request, which maintains the traditional level of U.S. economic assistance for Egypt, supports USAID's country-specific goal of broad-based sustainable development with improved quality of life and 16 strategic objectives (SOs) programmed in accordance with the four Agency goals.

Agency Goal: Broad-based Economic Growth Achieved

The objective of USAID/Egypt in meeting this Agency goal is to increase private sector-led, export-oriented economic growth. Accelerated economic growth requires a definitive shift from Egypt's inward-looking, protected, centrally-planned, public sector dominated economy towards a competitive, outward-looking, market-based one in which the private sector plays the leading role in business and trade decisions. This shift is now being spurred by the Partnership initiative and guided by the President's Council created under it. The Council, composed of major business leaders from the United States and Egypt, has recommended three areas for immediate examination and improvement: trade promotion, privatization and regulatory reform. These areas figure prominently in support being provided by USAID.

USAID promotes export development through trade liberalization measures under its sector policy reform program (SPRP); through the Trade Development Center, a non-governmental organization (NGO) established by the U.S./Egypt Joint Business Council with USAID support to promote exports by networking (trade shows, visits, etc.) and technical assistance at the company level; through agricultural research focused on horticultural crops for the export market; through the development of a modern telecommunications system that facilitates international business contacts; and through a new activity starting in FY 1996 to assist Egypt to enter the global market.

USAID's SPRP makes available $200 million annually for cash transfers linked to the achievement of policy reform measures. This program is complemented by technical assistance to help the GOE develop, carry out, monitor and evaluate select elements of its reform program. In 1995, for example, USAID helped the GOE bring about increases in sales tax revenues which rose from the equivalent of about $90 million to $3 billion. Other progress in meeting reform targets in 1995 included the removal of price controls for the tourism industry and the privatization of some enterprises. Over the next year, USAID will work with the GOE on key reforms for trade liberalization such as the continuing reduction in tariffs and the establishment of simplified procedures at major ports where final export/import approvals are processed. USAID in FY 1997 will provide the GOE with timely and effective support for those financial, fiscal, trade, enterprise and environmental reforms within USAID's focus so that greater achievements on a scale envisioned by the U.S.-Egyptian Partnership for Economic Growth and Development can be realized.

USAID has tackled privatization using a number of approaches including SPRP-promoted reforms and technical assistance activities that analyze policy options, introduce advisory and merchant banking services to evaluate the marketability of properties and assist in their sale, and develop an outreach campaign to encourage greater understanding of privatization issues, among others. With donor support, privatization has gone from a forbidden word to official government policy. By 1995, the GOE completed the sale of 26 companies and the partial sale of another group, but these achievements remain modest relative to the magnitude of government holdings. The Presidents' Council believes that the acceleration of privatization will be the signal to the international business community of Egypt's real commitment to the establishment of a free market economy. With the Counci's support, FY 1997 could well be a banner year for progress in this area.

Much of the country's legal, regulatory, judicial, institutional, and tax structures remain linked to the past. Because so many of the elements that make up a conducive business environment still need to be established, the private investment response to Egypt's progress in macroeconomic reform and liberalization has not been substantial. Again, using SPRP and technical assistance, USAID is helping overcome these rigidities. USAID is also providing assistance to help Egyptian firms increase their access to market information and technology, improve their competitiveness, strengthen advocacy groups, and support an active securities market. USAID's private sector commodity import program helps Egyptian private firms establish linkages with U.S. suppliers for expanding production needs. The Partnership initiative, working with USAID, has added a number of important new dimensions such as encouraging private firms to introduce international quality standards into their operations which will lead to international certification known as ISO 9000. In 1995, 30 Egyptian companies signed up for ISO 9000 assessments, of which 6 are now complete. By FY 1997, business technology centers will be added to support increased productivity through the upgrading of technologies and the operation of a business information highway linking the major business associations in Egypt with businesses around the world, using the International Business Exchange and the U.S. Chambers of Commerce.

USAID provides U.S. expertise to Egyptian businesses as a catalyst for change. Firms transitioning from state to private ownership, as well as existing private sector firms, are able to tap the experience of the USAID-supported International Executive Service Corps (IESC) to improve their technical and managerial performance. IESC has already finished over 1,000 technical consultancies to Egyptian firms, helping them introduce modern business practices, increase productivity, sales, investment and trade. Small and micro-enterprises also receive support through USAID's small and emerging business (SEB) sector program. USAID is working through NGOs to meet SEB needs for credit and related non-financial services. The Partnership initiative has been instrumental in expanding the SEB support network to under-served areas in Upper Egypt to ensure that economic incentives for the private sector are regionally widespread. Since USAID began helping Egyptian small and micro-enterprises in 1988, about 50,000 jobs have been created through 180,000 loans valued at about $120 million equivalent made to more than 75,000 borrowers who collectively have less than a 3% default rate.

Egypt's economy is largely dependent on agriculture which accounts for approximately 40% of the country's GDP (including agricultural production, marketing and processing), 50% of overall employment, and 22% of commodity exports. Due to state intervention, agricultural growth during the early to mid-1980s was very poor with the value of production growing at less than 1% per year. During the decade 1980-90, the real value of crop production (measured for 23 major crops) increased by 89%, or by 6.6% annually, leading to a significant increase in real farm income of approximately 24%. Agricultural production slowed in the early 1990s, and grew at an estimated 2.7% in 1995. If agriculture is to realize its potential to add significantly more impetus to Egypt's overall economic growth, the sector must overcome the slow growth of net value added. In Egypt, purchased inputs such as fertilizer and pesticides are used at high levels by the standards of even developed countries. The productivity of those inputs has been declining which is a major reason why value added has not grown significantly since 1986, while gross value of output has grown modestly.

USAID's agricultural assistance strategy is an integrated approach aimed at technology and policy reform. It is working to overcome constraints to greater agricultural growth, including those impacting on net value added. With USAID support, further improvements in irrigation structures and systems are giving farmers greater control over water delivery and increased water-use efficiency. Horticultural technology has demonstrated that with improved water-use efficiency, yields can be increased from 1.6 kilograms of fruit per cubic meter to over 15.7 kilograms, almost a tenfold increase. Agricultural policy reforms have been extraordinarily successful. All major markets except sugarcane and fertilizer are completely open to private competition and have generated prices equal to world prices. There is nolonger a bias against farmers, as there was in the period of heavy government intervention (1960-92) when agriculture suffered net taxation of over 44%. In FY 1997, technical assistance will further the adoption of technologies for the development of high value horticultural crop exports and address critical constraints to efficient production of Egypt's staple food crops. Reforms will target pricing, marketing and trade, water resources, private sector participation in agribusiness and the GOE's sector resource allocations.

Industry and business have benefitted from USAID's large investments in power, over $1.6 billion to date. To ensure the long-term sustainability of the power systems, reforms are an important part of the program. In 1995 reforms included steps taken to improve management efficiency and employee productivity measured in kilowatts per hour generated per employee. In 1997 this sector will face serious policy decisions. The economic pricing of power and the reduction of overdue arrears by public sector companies are among the hardest to be implemented. On the positive side, the Cabinet has reportedly approved the establishment of a vital regulatory board that will be assigned responsibility for pricing and collections. In addition, Egypt's new Prime Minister openly discusses the government's new receptiveness to proposals from private sector enterprises to build, operate and transfer (known as the "BOT" approach) power to the marketplace to supplement public sector generation.

The Presidents' Council has urged the "BOT" approach for both telecommunications and power to give the private sector a more prominent role in infrastructure. Modern, reliable, sustainable telecommunications services were an early target of USAID assistance, with assistance totalling about $360 million to date. Increasing emphasis has been placed on the sustainability of the systems. The GOE has made substantial progress on telecommunications reforms. The utility has complied with all financial benchmarks (increased revenues, improved services and efficiency, and adopted business and marketing plans). In 1997 the most notable reform will be opening the telecommunications sector for private business participation while continuing to improve the utility and transform it into an autonomous, self-sufficient entity. Management training will continue to be provided to help the utility deal more efficiently with burgeoning telecommunications demands expected in the next decade.

Finally, "investing in people" through education is the latest addition to USAID efforts to promote economic growth. These investments are also essential for improvements under other goals, e.g., those promoting family planning, health and the environment. Support beginning in FY 1996 will be targeted to the most disadvantaged areas of the country and the most neglected members of society, women and girls. To compete in the 21st century, Egypt must do a better job of ensuring universal primary education, a prerequisite to national economic take-off as experienced by the "tiger" nations of Asia. Egypt has one of the highest literacy gender gaps in the world and unacceptably low literacy rates for both males and females (63% and 34%, respectively). The GOE has acknowledged the problem, has allocated significant budget increases for education in recent years, and has sought assistance from its development partners, including USAID and others (the EU, World Bank, UNICEF, Canada and Germany). As USAID assistance tackles these problems in 1997, the operational watchword will be participation, working primarily through partnerships with local communities and non-governmental organizations. Nine activities in USAID/Egypt's portfolio support these outcomes.

Strategic Objective 1: Accelerated Private Sector-led, Export-oriented Economic Growth

Strategic Objective 2: Increased Female Participation in Quality Basic Education in Targeted Areas

Agency Goal: Building Democracy

The subgoal improved environment for the growth of democracy builds on Egypt's strengths -- the rule of law, the relative freedom of the print media, the existence of representative groups, such as the People's Assembly and the Shura Council, and the proliferation of special interest groups. With GOE support, USAID is working with the legislature, civil society organizations (CSOs) and the judiciary at a pace that takes into account political sensitivities that exist in these areas. While there is a long history of formal democratic institutions in Egypt dating back to its first parliament in the 1860s, the two bodies of legislature that exist today, the People's Assembly and the Shura Council, a consultative body, suffer from inadequate information services. To overcome this serious constraint, in 1995, to build their capacity for in-depth analyses and briefing resources, USAID sent 144 legislative staffers to the Congressional Research Service of the U.S. Library of Congress. There they participated in workshops on the role of parliamentary information services in decision making and the methodology of objective, non-partisan research and analysis. Staff from the Library of Congress also provided in-country training in Egypt for legislative staff. In FY1997, USAID will continue to work with the legislative staff to strengthen automation technology, improve the management of human resources made available to support information services and help build up library systems.

The pace of democratic changes may be gradual, but promising signs exist for forward movement. Over the past two years, with the support of USAID and other donors, the number of local civil society organizations has grown and become increasingly active. The ability of CSOs, including advocacy groups, to identify their problems and voice them in the public arena is an important focus of USAID assistance. The GOE recently initiated a nationwide participatory rural development program that focuses on locally-based decision making and citizen empowerment. This initiative to strengthen local government is important and should improve the enabling environment for CSOs. USAID assistance plans to support these positive trends. Major challenges to be faced in FY 1997 are the fragmentation of the CSO community which makes it difficult to reach them through conventional activities, Egyptians' general frustrations with continuing economic hardships and their perceived link to structural adjustment, and the continued challenge of Law 32 which restricts freedom of association and activity of the CSO community.

The judicial system is unable to be fully supportive of the growing private sector because delivery of justice is slow and judicial personnel are not fully briefed on new laws and regulations affecting the private sector. USAID support for the justice sector, launched in FY 1996, will help improve the operation and performance of Egyptian civil courts as well as the quality of judicial and legal services with respect to commercial and other aspects of modern law. These improvements in the legal system will continue in FY 1997 to serve the emerging private sector more effectively. Three activities support this program outcome.

Strategic Objective 3: Increased Use of Information Services by the Legislature in Decision Making

Strategic Objective 4: Increased Civil Society Organization Participation in Public Decision Making

Strategic Objective 5: Improved Civil Legal System

Agency Goal: Stabilizing World Population Growth and Protecting Human Health

Tackling family planning and the interrelated problems of maternal and child health requires an integrated approach to the provision of related services along with improvements in the quality of care at both the household and facility levels. This strategic objective focuses on mutually reinforcing objectives that are building on strong records of success.

After two decades of work strengthening the Egyptian family planning program, the long-term accomplishments are dramatic. Contraceptive prevalence (the percentage of married women of reproductive age currently using contraception) reached 47% in 1992, almost double the 1980 rate. The total fertility rate (a measure of the average number of live births per woman during her lifetime) fell from 5.2 in 1980 to 3.9 in 1992. USAID support in FY 1997 will continue to work towards Egypt's long-term objective of achieving a contraceptive prevalence rate of around 74% by the year 2015 at which point fertility is expected to reach the "replacement" level of 2.1 children per family.

During the late 1970s and early 1980s, USAID assistance in the health sector resulted in greatly expanded access to heath services by the rural and urban poor. Substantial investments were made in training health personnel, upgrading the physical infrastructure, and improving the service delivery system. Since 1983, the focus of the program has been to reduce mortality and illness of infants and children. The Egypt child survival program has been a phenomenal success. The infant mortality rate was reduced 43% between 1980 and 1990; the child mortality rate declined 55% in the same period. However, in 1990, infant and under five child mortality rates remained unacceptably high at 61.5 and 84.8 per 1,000 live births, respectively. When regional and rural disparities are taken into account, a striking gap appears. In Upper Egypt, infant and under five child death rates for 1990 were 105.8 and 146.7 per 1,000 live births, respectively. Maternal mortality, which is also declining, is at 174 deaths per 100,000 live births nationwide, but regional disparities are even more striking. In one Upper Egyptian governorate, Assiut, the maternal mortality ratio is 544. An urgent need exists to target resources to narrow these regional gaps and to improve the health status of the poorest Egyptians throughout the country. In FY 1997, USAID will work to cut mortality rates further, expand and target maternal/child health services and improve their sustainability, building on a range of mechanisms including policy reforms, decentralization and increased private sector and community participation.

Strategic Objective 6: Reduced Fertility

Strategic Objective 7: Sustainable Improvements in the Health of Women and Children

Agency Goal: Protecting the Environment

USAID's country-specific objective is environment managed for long-term sustainability in Egypt provides resources for activities focused in the areas of water/wastewater, air pollution and eco-tourism. Since 1975, USAID has invested over $2 billion in urban water and wastewater infrastructure benefitting about 22 million Egyptians. Population density, together with long-postponed infrastructure investments, had severely overwhelmed the water and wastewater services of urban areas throughout Egypt, creating numerous environmental health hazards. In 1995, several of the more recent investments were completed with the following results: 700,000 residents in the poor Cairo neighborhoods of Pyramids and Embaba received sewer hook-ups; more than 500,000 residents of Suez were connected to the new wastewater treatment plant funded by USAID and, in Cairo, the three major potable water reservoirs serving the heart of the city at Darassa were put into service providing improved water supplies to 3 million people.

Institutional reforms in public water/wastewater utilities in 1995 included presidential decrees granting institutional autonomy to the utilities in seven governorates allowing them to operate as economic entities on a cost recovery basis. Tariff collection rates have increased in Cairo and Alexandria and separate bank accounts were established which give these utilities a degree of flexibility in planning their operations. Utilities in both Cairo and Alexandria will be encouraged in FY 1997 to make more progress in increasing the level of tariffs towards cost recovery. In smaller urban areas, tariff reform for water/wastewater is already well advanced.

Urban air pollution is another major environmental problem which jeopardizes Egypt's economic development and its citizens' health. Urban air quality is seriously degraded as a result of industrial emissions, vehicles, construction, garbage burning, and natural dust from surrounding deserts. Levels of suspended particulate and lead pollution in Cairo are the highest among the world's megacities and cause an estimated 10,000 to 25,000 additional deaths per year. Children reared in Cairo are particularly vulnerable to the higher than average lead pollution which lowers IQ by four to five points. USAID industrial energy and environment activities are helping reduce the discharge of industrial pollutants and promote energy conservation. Energy efficiency activities have eliminated the following accumulated pollutants from urban air expressed in metric tons (M/T): 25,200 M/T of sulfur oxide; 4,000 M/T of nitrogen oxide, and 7,800 M/T of carbon monoxide. A new Cairo air quality activity initiated in FY 1995 will be working with the GOE in a number of areas: reducing lead emissions from local smelters and in gasoline; instituting a vehicle emissions testing and certification program; and introducing natural gas-fueled buses to reduce diesel emission particulate pollution using support from the U.S. private sector.

The protection of the environment is also vital to sustaining Egypt's tourism industry, which is the second highest foreign exchange earner. A new activity in sustainable tourism, which grew out of the Partnership, focuses on the preservation of both natural (e.g., coral reefs) and cultural (e.g., antiquities) national treasures that are two keys to the continued health of the tourism sector.

Strategic Objective 8: Increased Access to and Sustainability of Water and Wastewater Services

Strategic Objective 9: Reduced Generation of Air Pollution

Cross Cutting Issues.
In addition to the strategic objectives above, USAID supports cross-cutting assistance through several special objectives and mission support objectives which provide resources to foster university linkages, improve English language skills, encourage capacity building through development training, and some limited technical and financial assistance to support development problems related to the overall
program.

PROGRAM: Egypt
TITLE AND NUMBER: Accelerated Private Sector-led, Export-oriented Economic Growth, 263-SOO1
(1.a. Improved Economic Policy Framework)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $210,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To improve the economic policy environment with particular focus on trade, fiscal, monetary, financial and environmental policies within which the economy operates to encourage accelerated, private sector-led, export oriented economic growth.

Background: The economic policy framework in Egypt is inadequate for facilitating rapid, job-creating export oriented economic growth where the private sector is responsible for the major investment decisions. Despite improvements in the macroeconomy since 1991, annual economic growth has not exceeded 2.5%. Numerous studies and surveys have identified the economic policy framework as the major constraint to increased investment and growth. This program subsumes ongoing activities from the Sector Policy Reform Program (SPR), the Technical Support for Sector Policy Reform Project (TSSPR), and the Public Finance Administration Project (PFA).

USAID Role and Achievements to Date: USAID, through its cash transfer program, has supported the elimination of all but two tariff preferences and all special conditions for imports. It has also eliminated all import bans except for poultry and textiles. In coordination with the World Bank and the International Monetary Fund, reductions were brought about in tariff rates from a maximum of 150% to a maximum of 60% in early 1996. Further reduction is expected, probably by the end of the year. Other improvements include greater efficiency and competition in banking and the securities market, implementation of a privatization program, improved tax laws and administrative procedures, and reduced regulation of the private sector. The PFA project introduced a new sales tax and personal income tax, greatly increasing tax revenues and helping to reduce the budget deficit from about 20% to 1.5% of GDP. Numerous USAID-funded studies have facilitated policy reform by laying out the rationale for reforms and plans for accomplishing them.

Description: The activities within this strategic objective include the following:

- SPR is a policy-based cash transfer program with an annual budget of $200 million. Disbursements are based on substantive progress against a predetermined list of policy reforms. The average list contains some 20 required reforms, setting the stage for a stronger more open economy. Broadly, SPR is focused on reform in the areas of trade, regulation and privatization, the fiscal and financial sectors, and the environment. Many of the measures require specific reforms such as a stipulated number of firms privatized, increased access for foreign banks, etc. In other cases, a multi-year process of studies, plans and implementation of reforms is required when the desirable improvements are not known with certainty. A process is underway to reform the quality control system on imports and to reduce lead emissions from smelters, vehicles and other sources.

- TSSPR provides technical assistance to support and complement SPR activities. It has provided assistance to the Ministry of Economy and International Cooperation to promote trade and regulatory reform; the Ministry of Science and Technology to improve intellectual property rights; training to upgrade the regulatory capacity of the Central Bank of Egypt; support to the Capital Market Authority to improve its functioning; and assistance to the Central Agency for Public Mobilization and Statistics to produce and disseminate accurate economic data. It is also helping the Ministry of Finance to reformulate tax policy and implement tax reforms. In addition, it is supporting the Egyptian Environmental Affairs Agency in developing a lead pollution reduction action plan and helping improve air quality regulations.

- PFA provides long-term technical assistance to the Ministry of Finance to reform and modernize elements of its tax system. The project is currently modernizing the computer and communications networks of two tax divisions and setting up three economic analysis units in the MOF as well as assisting in the implementation of the new sales and personal income taxes.

Host Country and Other Donors: The GOE's strong commitment to policy reform is essential to achieve results under this strategic objective. Policy reform negotiations are linked to a large extent with the SPR policy-based cash transfer program. TSSPR provides technical assistance to GOE entities for studies to determine which reforms are required, how they should be designed as well as assistance in their implementation. One example is intellectual property rights (IPR) where successive SPR policymeasures are pushing the GOE to revise its IPR system and laws while technical assistance is facilitating the adoption and extension of new procedures and their promotion. USAID coordinates its efforts closely with the IMF and World Bank to maximize our collective policy impact. The IMF and World Bank, after consultation with USAID over several years, negotiated the Economic Reform and Structural Adjustment Program with the GOE in 1991, which the GOE adopted and then upgraded in 1993. In addition, depending on policy performance and resulting dollar disbursements, the GOE deposits, in a special account, the local currency equivalent of between $100 and $200 million for joint programming with USAID. Local currency is used for general or sector budget support, project activities or USAID trust fund expenses. The GOE also provides staff, commodity and facility support for developing and coordinating reform actions.

Beneficiaries: A number of policy reforms such as reduced tariffs, more competitive banking conditions and environmental regulations have or will benefit the entire population directly in terms of lower prices, higher quality and more varied goods and cleaner air and wider choices. For other measures the private sector is the intermediate beneficiary as it would benefit most by the proposed reforms. The ultimate beneficiaries will be the Egyptians who are employed by the growing private sector and the consumers who will benefit from a more competitive market place.

Principal Contractors, Grantees or Agencies: USAID is implementing long and short-term activities through a number of U.S. firms, several GOE entities and the other U.S. agencies. Nathan Associates is working on trade and regulatory reform. We are planning to employ other long term contractor during FY 97 to provide specialists in a variety of areas. The U.S. Bureau of the Census is currently working with USAID in Egypt to assist the GOE in developing accurate economic data. The Environmental Protection Agency is assisting us in our lead reduction activities and the Federal Reserve Board may provide a team to improve the Central Bank's monetary policy and strengthen the government securities market.

Major Results Indicators:
Baseline Target
Index of Economic FreedomA 37 (1994) 45 (2000)
Commercial Policy IndexB 41 (1994) 55 (2000)
Amun OracleC 61 (1994) 73 (2000)

A The Index of Economic Freedom is published by the Heritage Foundation. It grades 10 aspects of a country's economic policy for 101 countries. The index has been rebased so it extends from 0 to 100. On the rescaled basis, Cuba and North Korea have an index of zero, and Hong Kong, 94.
B The Commercial Policy Index measures commercial policies among different countries. The Egyptian component is prepared annually by the Egyptian Center for Economic Studies in Cairo.
C The Amun Oracle is a survey of 10-20 knowledgeable Egyptian professionals who rank eight areas of economic policy progress in Egypt. Scores range from 0 to 100, with scores above 50 representing positive progress in economic reforms.

PROGRAM: EGYPT
TITLE AND NUMBER: Accelerated Private Sector-led, Export-oriented Economic Growth, 263-S001
(1.b. Strengthened Private Market Institutions)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $244,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To establish and strengthen private market institutions, thereby enhancing the competitiveness of Egyptian firms worldwide, mobilizing and transforming savings into productive investment, and expanding private sector participation and dialogue in decision-making.

Background: For nearly 40 years, Egypt has had an inward-oriented, import substitution-based command economy, with limited voice for the private sector and state-dominated shallow financial markets. Additionally, Egypt's overly centralized system for policy formulation and implementation and a cumbersome legal system have discouraged private investment and other business dealings, further depressing the functioning of markets. USAID has been substantially involved in this sector for many years. The ongoing Export Enterprise Project and Commodity Import Program will be incorporated in this effort. Also included are ongoing grants that provide assistance to advocacy or assistance groups groups supporting private sector development.

USAID Role and Achievements to Date: For many years, USAID has supported activities that provide technical assistance on export promotion, financial and capital market expansion and to business and advocacy groups. USAID resources have been instrumental in achieving technical improvements as well as in helping formulate policies and procedures appropriate for a liberalizing economy. Impact includes the expansion of total private non-petroleum exports from a baseline figure of $760 million in FY 1992 to $1.34 billion in FY 1995; the expansion and deepening of financial services, including the increased value of shares traded on the stock exchange from $180 million in FY 1992 to $412 million in FY 1994; the increased number of shares traded from 22 million in FY 1994 to 95 million in FY 1994; and the increased number and quality of private advocacy groups resulting from USAID assistance to at least three major research and business organizations.

Description: USAID provides funding for activities to strengthen three main groups of private market institutions: (1) globalization of private commerce; (2) increased participation in economic dialogue; and (3) expanded and deepened financial services. These activities enhance the competitiveness of Egyptian firms worldwide, help mobilize and transform savings into productive investment, and permit private sector participation and dialogue in decision-making, all of which should strengthen markets, spur economic growth and generate employment. Specifically, USAID resources will be directed to increasing access to market information and technology, facilitating and strengthening private policy research and effective advocacy groups, and supporting an active securities market. USAID also makes commercial credit available to Egyptian businesses that want to establish linkages with U.S. suppliers for expanding production needs.

Host Country and Other Donors: The Government of Egypt and participating private firms together contribute approximately $10 million in local currency, staff and operation costs to the total costs of this program. USAID provides substantial resources in this sector. Other principal donors include the IMF, IBRD, European Union (EU), and UNDP. Both the IMF and the IBRD have encouraged policy, legal and regulatory environment reform. The EU is negotiating a "partnership" with Egypt to provide substantial resources for private sector development. Since 1992 assistance to private sector organizations has been a principal component of the UNDP program in Egypt.

Beneficiaries: All Egyptian business associations, totaling some 20 organizations and the Presidents' Council under the U.S. - Egypt Partnership for Economic Growth and Development, are key beneficiaries. Other beneficiaries include the private market institutions that are strengthened to provide better services.

Principal Contractors, Grantees or Agencies: USAID implements activities through U.S. institutional and technical assistance contractors, PVOs and non-governmental organizations. These include Chemonics International, Center for International Private Enterprise and International Executive Service Corps.

Major Results Indicators :
Baseline Target

Private sector % of non-petroleum exports $760 million (1992) $1.8 billion (1997)
Value of shares traded $180 million (1992) $0.6 billion (1997)
Number of shares traded 22 million (1992) 600 million (1997)

Background: The Government of Egypt (GOE) has declared that privatization of SOEs is an integral part of its Economic Reform Structural Adjustment Program (ERSA), but the pace has been disappointingly slow to date. However, following a recent Cabinet change, GOE officials and the state-controlled media have been aggressively promoting privatization and giving it extensive public attention.

The Egyptian public sector accounts for approximately 40% of domestic value added, 50% of manufacturing output, and 50% of exports (mainly petroleum). SOEs not only retain a large share of the total productive assets of the economy, but also hold monopolistic control and absorb a vast proportion of Egyptian financial resources. Their pervasiveness and inefficiencies continue to inhibit the expansion of private production, investment and exports. USAID has been supporting GOE privatization efforts since FY 1993 through its ongoing Privatization Support Project and Sector Reform Program policy agenda. USAID is hopeful that the latest policy shift being pursued by the new government will significantly accelerate the pace of privatization.

USAID Role and Achievements to Date: USAID will continue to provide technical assistance in SOE valuation and sale, merchant banking, promotion and awareness campaigns, policy formulation and performance monitoring and evaluation. USAID's future role will be to help build a wider and more solid base of support for privatization. To date, 46 SOEs have been brought to the point of sale, of which 26 have been sold with USAID assistance.

Description: USAID resources finance specific activities critical to creating a policy environment supportive of privatization and completing sales of SOEs. These activities support improvements in privatization policies, plans and processes; effective communications with key stakeholder groups to build political and technical support for privatization; and broadening of the scope of privatization to include other non-manufacturing businesses and service SOEs. In addition, the services of sales agents will be used to prepare the documentation required to offer companies for sale, and new financial instruments will be introduced to facilitate the participation of additional investors.

Host Country and Other Donors: The GOE contributes approximately $10 million for staffing and operational expenses of the entity responsible for overseeing privatization. Planned contributions also include resources from the GOE Social Fund for Development, which supports training and the relocation of displaced workers. USAID is the lead donor in assisting with privatization in Egypt. Other donors include: the World Bank, which encourages privatization through the ERSA Program and has provided $7 million in IDA funding for technical assistance for organizational and financial restructuring; the European Union, which is initiating a $30 million technical assistance program directed at both restructuring and privatization; and other bilateral donors such as the British, Canadians and Germans which provide technical and financial support on a smaller scale.

Beneficiaries: Three groups benefit from USAID-funded activities: the sellers of the companies/properties (holding and affiliated companies, state banks, ministries); the buyers of those companies/properties (business, financial and individual investors, employees and/or management); and other parties to these transactions (businesses, non- governmental organizations, the media and parliament and political parties). A reduced level of SOEs benefits private firms by improving the competition and opportunities for viable investments in many sectors of the economy where SOEs are involved.

Principal Contractors, Grantees or Agencies: Arthur Anderson is the prime institutional contractor and International Business and Technology Consultants, Inc. is the monitoring and evaluation contractor.

Major Results Indicators:
Baseline Target
Economically important new sectors
open for privatization 0 (1996) 3 (1997)
Sales in each new sector 0 (1996) 2 (1997)
USAID-assisted sales completed
(sales per year) 0 (1996) 15 (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Accelerated Private Sector-led, Export-oriented Econ. Growth, 263-S001 (1.d. Improved Capacity of Non-Governmental Organizations (NGOs) to Promote Small and Emerging Business Growth)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $15,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To strengthen the capacity of NGOs to promote the growth of Egyptian small and emerging businesses.

Background: Dramatic improvement in small and emerging business (SEB) performance is essential to expand private sector-led, export-oriented economic growth in Egypt. SEBs already constitute the bulk of the private sector productive capacity. Among Egypt's SEB population exists a large unmet demand for credit and related non-financial services. This SEB group includes approximately 3 million non-agricultural micro-entrepreneurs, or 98.5% of Egypt's private sector non-farm firms who do not usually have access to credit, competitive savings opportunities and other essential business services. To address SEB needs, USAID plans to build on its successful experience in developing self-sustaining SEB services from two ongoing projects, Small and Micro Enterprises and Small Enterprise Credit.

USAID Role and Achievements to Date: In 1988 and 1989, USAID designed and implemented two innovative SEB activities that used an existing bank and an existing businessmen's association to establish NGO spin-offs supporting SEB needs. Despite an environment that was not conducive towards private sector support at that time, these activities achieved impressive results in reaching a large number of SEB borrowers on a cost recovery basis and bringing NGOs to operational break-even status ahead of schedule. USAID has been providing technical and financial assistance to NGOs. Its future support will help to broaden outreach to NGOs through an intermediary organization and resolve policy and systemic constraints to SEB sector growth.

Over the 1990 - 1995 period 55,000 SEBs have received credit under the current program, with 20,000 of those receiving credit over the past year. The volume of SEB credit (in the form of loans) increased from $5 million in 1990 to almost $30 million in 1994, reaching approximately $46 million in 1995. The number of NGO service units established to deliver financial and non-financial services to SEBs rose from two in 1991 to 28 in 1995; by 1995, 27 units reached break-even status.

Description: This program will support activities to expand access and opportunities for SEBs by building on and broadening the successful experience and NGO models developed under ongoing USAID-financed projects. It will support the development and eventual sustainability of an institutional mechanism capable of effectively providing assistance to SEBs, using various NGO intermediary organizations that combine financial, technical assistance, training and other services needed by the SEBs. Sustainability will be addressed on two levels: on the policy level, in the form of permanent improvements in the legal, fiscal, regulatory and financial environment within which Egypt's private sector must operate; and on the operational level, in the form of break-even, or cost coverage, which should occur during the life of the activities supported. Other USAID-financed activities will facilitate the reduction of the systemic and structural obstacles to SEB growth -- e.g, the improved economic policy framework program and private market institutional, eco-tourism and civil society efforts.

Host Country and Other Donors: SEB initiatives are being funded and implemented by a wide range of donors, including CIDA, DANIDA, UNICEF, the Ford Foundation and the Egyptian Social Fund for Development. These donors have provided an estimated $250 million for SEB development activities that cover a broad range of program sizes and approaches. As a principal donor in Egypt, USAID is in an important leadership position with NGOs and other donors to help shape the direction of SEB growth in Egypt. USAID is coordinating closely with other donors to achieve expanded outreach and increased services to SEBs. The Government of Egypt is contributing approximately $25 million for capitalization of the loan fund, staff and operating expenses for the activities.

Beneficiaries: The ultimate beneficiaries are a broad range of low-income people who earn their living through self employment and business ownership. These small entrepreneurs include street vendors selling food and consumergoods, small service providers, and owners of workshops. By 2001, the program will reach 200,000 small and emerging businesses. The intermediate beneficiaries are the NGOs that benefit from USAID-provided technical assistance in order to provide sustainable SEB services. These organizations include formal financial institutions, business associations, community development associations, foundations, and PVOs.

Principal Contractors, Grantees or Agencies: National Cooperative Business Association, Agricultural Cooperative Development International and Environmental Quality International.

Major Results Indicators:
Baseline Target

Number of participating NGO units reaching break-even 27 (1995) 45 (1997)
Number of NGO units established 28 (1995) 65 (1997)
Number of SEBs assisted 55,500 (1995) 80,000 (1997)
Volume of SEB credit ($millions) 46 (1995) 66 (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Accelerated Private Sector-led, Export-oriented Economic Growth, 263-S001
(1.e. Accelerated Adoption of Agricultural Technologies)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $14,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To improve technologies developed and adopted for the production, processing, and marketing of selected agricultural commodities, leading to increased production, productivity and income.

Background: Agricultural production, marketing and processing in Egypt accounts for approximately 40% of Egypt's Gross Domestic Product, nearly 50% of employment and 22% of total commodity exports. If Egypt is to succeed in increasing the value of agricultural production, research must be applied to both domestic and export markets and increased emphasis must be placed on commodities of economic importance. Because expanded agricultural output will have to be obtained almost entirely from more intensive cultivation in areas already under production, continuous advances in agricultural technology will be required, and these technologies must be environmentally sustainable to safeguard the resource base. This effort builds on USAID's National Agricultural Research Project which ended September 1995 and other predecessor agricultural research projects under which a broad agricultural technology development and transfer foundation was established, as well as the Agriculture Technology Utilization and Transfer Project started in FY 1995.

USAID Role and Achievements to Date: USAID has provided about $300 million to support Egyptian agricultural research since program inception. Today the capacity and capability of public sector research is solid as a result of that long-term support. Through research, Egypt has developed a comparative advantage in the production of cereal and food crops and has made important gains in yields. Total wheat production more than doubled from 1986 to 1992 as a result of a 38% increase in yields as well as an increase in acreage devoted to that crop. Rice production increased from 5,830 kilograms per hectare (kg/ha) in 1988 to 7,710 kg/ha in 1993, the highest rate of growth in the world for that period. These remarkable annual yield increases can only be sustained through a continuation of agricultural research support in basic crops.

Description: Research capacity is no longer a major issue in Egypt but the government's ability to maintain high levels of broad-based research is. As a first step in creating a more sustainable research agenda, USAID will limit its support for broad-based agricultural research to four staple food crops (wheat, rice, maize, and fababeans) whose production must increase to meet the demands of the growing population. This research is essential to keep ahead of serious pests, to create adaptations to poor growing conditions such as saline soils and to reduce farmers' previous uneconomical dependence on subsidized agricultural inputs. In addition, USAID will also support research focused on select horticultural export crops which require rapid adoption of technologies designed to enhance production and improve post-harvest handling, packing and processing. For example, at present, horticultural crops occupy only 16% of agricultural land while accounting for some 40% of value added. As horticultural exports are destined for an increasingly competitive European market, there must be a corresponding emphasis on market quality rather than on the highest possible yield per hectare, the traditional emphasis. In addition, a greater emphasis on the active participation of customers (producers and exporters) in setting the research and technology transfer agenda is planned. Greater public/private sector collaboration is seen as a key to greater results in the sector.

Host Country and Other Donors: The agricultural research and extension personnel of the Ministry of Agriculture and faculty from the agricultural universities will play a critical role in the development, implementation and overall success of these activities. The Government of Egypt (GOE) will contribute an equivalent of $4.6 million for cash support (e.g., air fare tickets for participants) and in-kind contributions including facilities, commodities and staff salaries. Key donors include the Germans, Dutch (especially in horticulture) and Great Britain. The World Bank is the largest other contributor to Egypt's irrigation development.

Beneficiaries: Egypt's 4 million small farm households, with 7-8 people per household, and all poor food consumers whether they are in rural or urban areas are USAID's target beneficiaries or ultimate customers for the agricultural sector. A broad-based effect is expected since approximately 70% of Egyptian farmers grow wheat, 65% cultivatemaize, 34% produce vegetables and 40% grow fruits. Large and medium-sized farmers and agri-businesses may be the first to benefit because they are often more able to adapt or change in response to new technologies. New technologies will ultimately enhance the viability of the sector to the benefit of nearly all private sector participants.

Principal Contractors, Grantees, or Agencies: To be determined.

Major Results Indicators:

Production yield per hectare for targeted crops: wheat, maize, and rice:

Baseline Target
Wheat 1989=4.9 Metric Tons/Hectare 5.8 MT/H (1997)
Maize 1989=5.4 Metric Tons/Hectare 6.6 MT/H (1997)
Rice 1989=6.5 Metric Tons/Hectare 8.1 MT/H (1997)

10% average increase in value-added of fresh fruits and vegetables due to new technologies introduced over the period 1996-2001. Baseline TBD.

5% average increase in the volume of select horticulture exports due to new inputs over the period 1996-2001. Baseline TBD.

Purpose: To remove remaining policy barriers to private enterprise in agriculture, thereby creating a liberal, competitive marketing system and stimulating sustainable agricultural growth.

Background: In the early 1990s, disappointing growth in agricultural production constrained the overall economy, which grew at about 2.5%. The slow pace of growth in agricultural output and the much slower growth of net value added in agriculture also contributed to Egypt's gradually rising unemployment problem. By 1995, agricultural output was growing at 2.7%. To spur overall economic growth and employment, agriculture must grow much more rapidly to exceed Egypt's 2.2% population growth rate by at least two percentage points. While the Government of Egypt (GOE) is committed to policy reform, greater growth requires, inter alia, difficult deregulation and privatization decisions which in a scarcity economy will occur only erratically and with less efficiency without external support. USAID's program builds on the policy component of the Agricultural Production and Credit Project launched in FY 1986 which ends this year and the continuing Agricultural Policy Reform Program launched in FY 1995 and the project assistance which accompanies it.

USAID Role and Achievements to Date: USAID has provided about $1.26 billion to support Egyptian agriculture since the inception of the program, of which about 20% has been directed towards improving the policy environment. Some significant changes have occurred since 1986 when USAID support for agricultural reforms began: markets and prices for 13 major crops, including cotton, rice, wheat, and maize, have been liberalized; input subsidies and government marketing monopolies have been almost eliminated for most farm inputs; and exchange rates are now determined by market forces.
Description: Government control in the agricultural sector is still pervasive. Sugarcane production remains completely dominated by the government. Virtually all textile spinning capacity remains under government control. The GOE manufactures 100% of domestically-produced fertilizer and owns 50% of wheat and rice milling capacity. Overall, the policy climate is still inimical to private investment. USAID-supported agricultural reforms will focus on five categories: pricing, marketing and trade; private investment and privatization; efficiency of public investment and sustainable agriculture; and water policies, as well as food security concerns. USAID plans to disburse cash transfers funds of $50 million annually upon the GOE achievement of agreed-to reforms. Technical assistance will be provided to study, develop, and monitor the impact of policy reforms. In addition, research grants will be provided for special topics, e.g., food security.

Host Country and Other Donors: The GOE will contribute the local currency equivalent of each cash transfer, depositing it in a special account for joint programming with USAID for general budget support, general sector support, specific sector support for projects and activities, or Trust Fund expenses. The GOE will also provide staff, commodity and facility support for developing and coordinating reform actions. USAID's agricultural sector reform program, along with the Sector Policy Reform Program focusing on the broader economic policy framework, complement the efforts of the IMF and the World Bank, both of which have helped restore macroeconomic balance and reduce inflation to provide a stable basis for resumed growth. Key donor activities in agriculture include those supported by the World Bank (irrigation, technology transfer and agricultural credit); Great Britain (privatization); Germany (credit, liberalization of the seed sector, small farm machinery); Italy (dam reconstruction); and Japan (retrofitting irrigation pumps, small farm machinery), and the European Union (privatization, irrigation management).

Beneficiaries: Egypt's four million small farm households, with 7-8 people per household, and all poor food consumers whether they are in rural or urban areas, are USAID's target beneficiaries or ultimate customers for the agricultural sector. Large and medium-sized farms and agri-businesses may be the first to benefit because they are often more able to adapt or change in response to modified policies. However, reforms will ultimately enhance sector viability for the benefit of most private sector participants.

Principal Contractors, Grantees, or Agencies: To be determined.

Major Results Indicators:

Relative share of the private sector in the marketing of agricultural production inputs: fertilizer and machinery:

Baseline Target
Fertilizer 1990=0% 100% (1997)
Machinery 1987=20% 95% (1997)

Relative share of private sector firms' involvement in the commercial processing and marketing of selected principal agricultural products: cotton, rice and wheat:

Cotton-ginning 1992=0% 50% (1997)
Cotton-spinning 1992=0% 30% (1997)
Cotton-weaving 1992=50% 80% (1997)
Rice-milling 1987=54% 95% (1997)
Wheat-milling 1990=30% 90% (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Accelerated Private Sector-led, Export-oriented Economic Growth, 263-S001
(1.g. Increased Capacity, Improved Efficiency and Enhanced Sustainability of
Power Services)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $50,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To accelerate and enhance the transformation of the Egyptian Electricity Authority (EEA) into an autonomous electric utility capable of operating on a commercially sound, self-sustaining basis.

Background: To accelerate economic growth in Egypt, adequate, reliable and efficient electric power services must be available to the private sector. Without adequate and efficient power, the private sector will be reluctant to make major investments to generate needed jobs and spur economic growth. Power generation capacity has increased substantially over the last 20 years but as the economy expands, even greater expansion and better system reliability are needed to meet demand effectively. Improved cost recovery of existing facilities is important to ensure future operational sustainability. Further, the Government of Egypt (GOE) will need to look increasingly to the private sector to develop and operate power plants . Ongoing projects included in this program are Alexandria Electric Network Modernization, Power Sector Support and Power Sector Support II.

USAID Role and Achievements to Date: Since 1975, USAID and the GOE have jointly funded and implemented a total of 24 major activities in the electric power sector totaling more than $1.6 billion in project and commodity assistance. This assistance has supported the construction and upgrading of generation and transmission facilities, distribution networks, and control centers. USAID assistance has contributed to the installation of nearly 3,000 megawatts (MWs) of new generating capacity currently in operation, the installation of an additional 1,200 MWs to be placed in operation over the next two years, and the rehabilitation of an additional 2,700 MWs of Egypt's generating capacity. These improvements in physical plant and equipment have been supplemented with training of technical and managerial staff as well as assistance in expanding and modernizing the managerial capacity of EEA. These efforts have led to a substantial efficiency improvements in the operation of the electrical power supply. The system has grown from a disconnected, unreliable operation to a modern, well-connected system with central control operated by a competent work force. Overall, USAID funds have contributed to the development of this vital sector of the Egyptian economy, enabling it to close the gap between demand and supply.

Description: This program includes two categories of outputs -- namely, policy/institutional reforms and infrastructure development. USAID encourages reform by conditioning disbursement of funds upon GOE implementation of policy and institutional reforms. Although program funds are disbursed primarily for engineering services, equipment and construction for expanding capacity, policy implementation and EEA management improvements are primary outcomes. USAID supports reforms to improve EEA's financial viability, increase autonomy, establish regulatory reform and improve planning and efficiency across the sector. EEA receives technical assistance and training support to help implement many of the agreed-to policy reforms. Once the reforms are met, USAID supports equipment and construction services to finance discrete, stand alone infrastructure development activities.

Host Country and Other Donors: The GOE has been financing local currency costs associated with this program or approximately 25% of the USAID annual funding. The formulation and implementation of a power sector reform program has been a central topic of the policy reform agendas of the IMF and the World Bank. The African Development Bank (AFDB) and the European Investment Bank have also linked financing to policy reform of the sector. IBRD, AFDB and other multilateral donors have provided financing valued at $1.1 billion in the past. The Arab Fund for Economic and Social Development and a number of bilateral donors have provided a total of approximately $1 billion for power sector development, but without conditioning major policy reform. Though a number of donors are involved in the sector, USAID remains the key donor.

Beneficiaries: The benefits and the beneficiaries of this activity are many. A reliable, more efficient, and sustainable power sector means increased quality of life, security, health services, and education for all Egyptians. Provision ofa reliable source of electrical power will enhance the possibility of increased private investment leading to increased economic growth. Growth will provide additional jobs and increased prosperity. Further, the activity is providing substantive environmental (air quality) benefits by encouraging the shift in fuel use from heavy oil to natural gas and increasing efficiency in power generation and transmission. The activities address policy and institutional constraints that negatively impact on economic growth, thereby benefitting Egyptian society as a whole.

Principal Contractors, Grantees, or Agencies: General Electric, Westinghouse Electric, International Resource Group, and Babcock and Wilcox.

Major Results Indicators:
Baseline Target
Electricity rates as a % of long-
run marginal cost 73% (1993) 100% (1997)
Electrical energy losses 14.5% (1993) 13.2% (1997)
System capacity (MW) 12,046 (1993) 14,308 (1997)
Fuel consumption (grams/KWH) 229 (1993) 223 (1997)
Accounts receivable (days) 221 (1995) 75 (1997)
Self financing ratio 15% (1993) 30 (1997)
Debt service ratio 1.0 (1993) 1.5 (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Accelerated Private Sector-led, Export-oriented Economic Growth, 263-S001
(1.h. Increased Access, Improved Efficiency and Enhanced Sustainability of Telecommunication Services)
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: No funding until FY 1998
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To accelerate the evolution of the Arab Republic of Egypt National Telecommunication Organization (ARENTO) to an autonomous telecommunications utility capable of self-financing necessary expansion, thereby improving the efficiency, access and scope of telecommunications services in Egypt.

Background: Increased economic activity by the private sector in Egypt requires a reliable, updated and expanded telecommunications system. The demand for telecommunication services outstrips the supply. The country's current investments to improve and expand telecommunication services is not sufficient to meet demand. ARENTO was organized in 1980 under a law that provided for autonomous operation. Portions of the law have been implemented, leading to substantial improvement in ARENTO's management structure and financial condition. To operate more effectively, ARENTO must be privatized or, at a minimum, operate as an autonomous commercial public utility. It must be allowed to maintain control over daily costs, adjust tariffs for services, improve cash flow, retain operating surpluses, and acquire private investment for network expansion and modernization to meet the increasing demand for services in a sustainable way. Ongoing projects incorporated in this program include Telecommunications IV and Telecommunications Sector Support.

USAID Role and Achievements to Date: Since 1978, USAID and the Government of Egypt (GOE) have jointly implemented a substantial program in the telecommunications sector, valued at approximately $405 million to date. The earlier implemented activities financed primarily necessary improvements and expansion of the system. Current USAID-financed activities are installing state-of-the-art digital switching systems to serve new exchanges, expanding existing exchanges, replacing obsolete exchanges, rehabilitating and expanding associated outside plant cable networks, and training operations and maintenance staff.

Description: The program targets two broad areas: (1) policy and institutional reforms and (2) infrastructure development. Studies and assessments undertaken in the program have helped define the specific reforms required. These reforms include, inter alia, the modernization of ARENTO's operating procedures and management policies (as they relate to autonomy of operation), retention of net income, employee retention, and staff development. Other reforms include pricing strategies to insure an adequate return on ARENTO's investment and adequate cash generation to provide appropriate levels of maintenance. ARENTO receives technical assistance from the USAID program to implement some of the policy reforms agreed-to under the program. The achievement of the policy and institutional reforms are critical for future sustainability of the telecommunications sector. Future investments in infrastructure will finance system expansion, replacement of inefficient equipment, and training for improvements in financial and administrative management of ARENTO. The disbursement of USAID funds for infrastructure investment in the sector is based on the GOE's achievement of these agreed-to policy and institutional reforms.

Host Country and Other Donors: GOE contributions for the improvement and expansion of the telecommunication system approximate $33 million. In addition to GOE and USAID resources ($323 million), ARENTO has received nearly $1 billion in financial assistance from several other donors over the past ten years for the procurement of switching systems, outside plants facilities, transmission equipment, etc. Much of this financial assistance has been in the form of soft loans and/or supplier credits by other countries (e.g. France, Germany, Austria, Japan, Italy and Greece) which produce telecommunication equipment. Their assistance is generally provided without policy conditionality and can be considered as a commercial transaction. Other donor efforts complement USAID assistance by providing needed infrastructure in other geographic areas.

Beneficiaries: The major benefits of the telecommunications improvements and expansion are received by the individuals and firms who use the telecommunications system for work or convenience in their daily lives (at least 10 million people have access to telecommunication services). Indirectly the entire population benefits over time by the expanded growth of the economy and increased employment in the private sector which a modern well-run telecommunications sector supports. The activity will also directly benefit ARENTO and its employees.

Principal Contractors, Grantees, or Agencies: ARENTO, General Telephone and Electrical, AT&T, and Booz, Allen and Hamilton.

Major Results Indicators:
Baseline Target

Cairo telephone density (lines per 100 people) 10.2 (1992) 14.4 (1997)
Alexandria telephone density (lines per 100) 10.7 (1992) 15.0 (1997)
Telephone lines installed 2,022,597 (1992) 4,390,000 (1997)
Percent of telephone exchanges served by
preventive maintenance program 100% (1995) 100% (1997)
Faults/100 lines/year 45.8 (1993) 23.7 (1997)
Days to install new services 60 (1994) 40 (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Female Education, 263-S002
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $10,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To increase female participation in quality basic education in targeted areas of Egypt, where the gender gap in enrollment is greater than 60 girls per 100 boys.

Background: Investments in basic education will reap returns not only in a more skilled and productive labor force prepared to compete in the 21st century, but in improved health and nutritional status, reduced population growth rates, and enhanced skills for participation in the democratic process. Most development experts agree that investments in female education have the highest return of all educational dollars spent, whether females receiving that education eventually work in or outside the home. No developing nation has graduated to sustainable economic growth without educating its women, while universal primary education is a prerequisite to national economic take-off. With female illiteracy at 66% and with an estimated 1.6 million of its girls at the basic education age range out of school, the Government of Egypt (GOE) has declared female education to be one of its highest investment priorities.

USAID Role and Achievements to Date: This program begins in FY 1996. A previous project in this area, Basic Education, financed the construction of almost 2,000 schools, which enroll 900,000 students per year (360,00 of whom are girls), and provided extensive technical assistance to the Ministry of Education.

Description: USAID has defined three objectives which include the necessary conditions for increasing female participation in basic education: an appropriate supply of facilities, curriculum and teaching methodologies; an increased demand (awareness of the import and appreciation of its quality) for female educational services; and a broader policy environment supporting quality, flexibility and other incentives to female attendance. USAID will assist grassroots community organizations in targeted areas to mobilize local communities in the design and realization of the most appropriate solutions to local constraints to female education.

An umbrella activity will be designed to offer a range of interventions to communities for use in their local strategies. Included will be such tools as: multi-channel or distance learning systems (e.g. interactive radio instruction) or gender- sensitive learning materials to supplement and enhance school curricula; training for teachers and other personnel in interactive, child-centered teaching methods; technical assistance for the design and organization of skills-based literacy programs and other appropriate training for young women; life skills activities and other supplementary educational enhancement programs for females to be provided through local schools; mass media campaigns to highlight the advantages of female education; scholarships designed to test the impact of financial constraints; and technical assistance to the Ministry of Education for appropriate and relevant policy reforms.

Host Country and Other Donors: The GOE will contribute a minimum of 20% of total activity costs in cash and in kind. The current five year plan of the MOE (1992-97) increased the share of total government expenditures on education from about 10% to about 14.5%, and allocates $2.06 billion annually for education, of which approximately $760 million is for basic education.

Donor coordination in education is very strong, with donors meeting monthly to discuss programs and priorities. The World Bank and the European Community are currently negotiating with the GOE over a joint loan of $200 million for teacher training, educational technology and increasing access to primary schools. After these two, USAID will be the largest donor in basic education. The World Bank, the German Bank for Reconstruction and Development (KfW) and the multi-donor Social Fund are currently financing school construction. UNICEF and Canada (CIDA) are collaborating on an innovative and promising community school project.

Beneficiaries: The direct beneficiaries will be girls in targeted (high risk) communities between the ages of 6 and 13 who are currently out-of-school or at risk of dropping-out. Additional beneficiaries will be the other primary school students in the targeted areas. The community-based activities should reach about 16% of all children out of primary school nationally. Other additional beneficiaries will be illiterate young women and mothers in these communities between the ages of 14 and 35.

Principal Contractors, Grantees or Agencies: To be determined.

Major Results Indicators: Baseline Target (1999)

Increased female primary school enrollment TBD 5% over base
in targeted areas
Reduced primary school enrollment gender gap TBD 2% below base
in targeted areas

Baselines are being collected for the targeted areas in 1996. The first results are expected in 1999 and will be a 5% increase in female primary school enrollment and a 2% reduction in the primary school enrollment gender gap from the baselines.

Purpose: To enhance the quality and impact of the legislative, advisory and oversight functions carried out by the legislature by providing relevant and reliable information services and expanding the use of information.

Background: Among the critical factors impeding the effectiveness of Egypt's legislative branch is the inadequacy of available information. This limits members and staff ability to comment productively on government bills, analyze the budget and propose legislation. This program consists of the final four years of the six-year Decision Support Services project.

USAID Role and Achievement to Date: USAID's support includes increasing the legislative staff's capabilities to conduct in-depth analyses and provide briefing resources, increasing members demand for information, and improving legislative administration. Over the past year, 144 legislative staffers participated in workshops and observational study tours conducted by the Library of Congress' Congressional Research Service on the role of parliamentary information services in decision making and the methodology of objective, non-partisan research and analysis. Specific measures of impact are being developed.

Description: USAID activities will improve the technical capacity and institutional development of the legislature. Through technical assistance and training, three activities are being implemented: developing a demand for and understanding of the use of information in the legislative process; developing services to adequately meet the information needs of the members; and increasing the efficiency and effectiveness of the institution so it contributes to a stronger, more sustained legislature. Local universities and training centers will be the main training resources, which will ensure their availability over the long term. Also, in-house trainers will be created within the legislature.

Host Country and Other Donors: USAID is the major donor currently working with the legislature. In the late 1980s, the GOE conducted a series of studies to assess the legislature's information needs, resulting in a comprehensive plan to establish a legislative information system and modernize the legislative procedures. The UNDP subsequently assisted the legislature to set up a computer center. UNICEF is providing consultation workshops on gender issues to parliamentarians. The GOE contributes approximately $450,000 in airfares for training participants.

Beneficiaries: USAID-supported programs direclty benefit about 356 members of the two legislative assemblies and 650 staffers.

Principal Contractors, Grantees, or Agencies: USAID implements activities through Associates for Rural Development, a U.S. firm. The Congressional Research Service provided first year training before the contractor's arrival.

Major Results Indicators:
Baseline Target
Legislative actions indicate more information is TBD TBD
used in the decision-making process.

Purpose: To increase civil society participation in the formal decision making process by increasing the effectiveness of CSOs and reducing restrictions on civil society organizations.

Background: CSOs are not playing a dynamic role in the public decision-making arena in Egypt. Restrictive government regulations limit the freedom of association of professional and special interest non-profit groups. Also, the effectiveness of CSOs is limited by their lack of vision and organizational skills. This effort includes the PVO Development project.

USAID Role and Achievement to Date: While the pace of democratic changes has been gradual, promising signs exist for forward movement. Over the past two years, local civil society organizations have grown and become increasingly vocal in their challenges to the Egyptian Government's restrictions on their activities. The ability of CS0s to identify their problems and voice them in the public arena is an important focus of USAID assistance. Specific measurements of progress are being developed.

Description: Currently, USAID support focuses on increasing the effectiveness of selected CSOs through training and technical assistance to develop leadership, planning, management and team building skills. In addition, U.S. PVOs are provided grants for implementation of development activities in collaboration with partner Egyptian PVOs. The program will be expanded to include: improving the capacity of Egyptian nongovernmental organizations (NGO) to network between one another and with government agencies at the local, regional and central levels; supporting a fund to provide operational support and possibly to provide small loans to Egyptian NGOs on a matching basis for economic development and to grant seed money for feasibility studies and technical assistance; setting up a training fund and mechanisms to survey Egyptian NGO training needs and establish an appropriate organization to provide training and continued research and development in this field; and training NGOs in communication skills to allow them to express opinions effectively in the public arena. USAID will also initiate a policy dialogue with the Egyptian Government to increase local participation in the rural development process and to encourage policy reforms that prevent or deter the formation and function of independent CSOs.

Host Country and Other Donors: USAID is the lead donor in the field of CSO participation. Multilateral donors include UNICEF, UNFPA, the European Commission and the Arab Council for Childhood Development. An Egyptian/Swiss Development Fund supports employment generation and environmental and social services projects. The World Bank will become a major supporter in one governorate of decentralized participation. Other donors working in rural participation activities include UNDP, WHO, Denmark and Switzerland. The GOE has budgeted approximately $40 million since 1994 in rural participation and development activities and is committed to substantially increase this amount over the next five years.

Beneficiaries: USAID-supported programs will reach several million villagers who will increase their participation in the democratic and developmental process. Also, local NGOs representing millions of citizens will receive training in effective management skills will benefit from improved operation.

Principal Contractors, Grantees, or Agencies: USAID implements activities through the National Council of Negro Women, a U.S. PVO.

Major Results Indicators:
Baseline Target
Percent of CSOs whose members perceive that their CSO TBD TBD
participated more in public decision making.
Increase in number of documented CSO attempts to TBD TBD
influence public decision-making.

PROGRAM: EGYPT
TITLE AND NUMBER: Improved Civil Legal System, 263-SOO5
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $5,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To improve the operation and performance of Egyptian civil courts as well as the quality of judicial and legal services with respect to commercial and other aspects of modern law in order for the legal system to serve the emerging private sector more effectively.

Background: The judicial system is unable to be fully supportive of the growing private sector because delivery of justice is slow and judicial personnel are not fully briefed on new laws and regulations affecting the private sector. These constraints negatively impact on the newer and smaller Egyptian private investors and the foreign trade and investment community who cannot trust that contracts entered into will be enforced or that justice will be delivered in a timely fashion. This program includes the five-year Administration of Justice project.

USAID Role and Achievement to Date: USAID's support for the justice sector launched in FY 1996 will improve the efficiency of two pilot court systems, improve judges' knowledge of Egyptian civil law and undertake other judicial strengthening programs. These newly initiated activities to improve the legal system are expected to serve the emerging private sector as they are implemented and expanded.

Description: USAID focuses on two activity areas: 1) automation of streamlined court procedures along with the requisite training; and, 2) transfer of knowledge on legal trends in the fields of Egyptian commercial and contracting law for judges. To ensure sustainability, a permanent small staff of trainers will be created at the National Center for Judicial Studies. Professors at the center will be drawn from practicing judges to assure full knowledge of procedures and practices. Training will be provided in teaching methodology to the rotating staff of judges.

Host Country and Other Donors: USAID is the major donor currently working with the judiciary. The World Bank has conducted a thorough assessment of the commercial judicial system in Egypt. The Konrad Adenauer Foundation (German) has conducted a series of seminars on international arbitration and international contract drafting. The GOE contributes approximately $250,000 in training, technical assistance and commodities.

Beneficiaries: USAID-supported programs will reach private firms and individuals who use the pilot civil courts located in Cairo and one to be selected in a provincial capital. Eventually, citizens, businesses and nongovernmental organizations throughout Egypt using the services of better trained judges will benefit.

Principal Contractors, Grantees, or Agencies: USAID implements activities through a U.S. PVO and USIA.

Major Results Indicators:
Baseline Target
Model courts accepted by the Ministry of Justice for replication. 0 0 (1997)
Increased percentage of rulings that accurately TBD TBD (1997)
follow Egyptian civil law.

PROGRAM: EGYPT
TITLE AND NUMBER: Reduced Fertility, 263-S006
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $10,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To reduce Egypt's total fertility rate from 3.9 in 1992 to 2.92 in 2004 and to support the Government of Egypt's goal of reaching replacement fertility by the year 2015.

Background: Despite encouraging signs that the pace of growth of the Egyptian population is slowing, the level is still high. Population growth continues to surpass economic growth and have important negative consequences for maternal and child health. While there is consensus among the highest level political and religious leaders that current population growth rates are unsustainable, the Egyptian Government does not yet have the resources needed to implement its family planning strategy at the required levels. Egypt is one of 15 USAID-assisted countries through which USAID expects to have a measurable impact on stabilizing global population. The on-going Population/Family Planning III Project is subsumed under this strategic objective.

USAID Role and Achievements to Date: USAID has been assisting the Government of Egypt (GOE) in the family planning sector since 1975. Total fertility rates have declined from 5.3 births per woman in the late 1970s to 3.9 births per woman in 1990-92, and contraceptive prevalence (the percentage of married women of reproductive age currently using contraception) reached 47% in 1992 from approximately 24% in 1980. Institutional capacity for management and service provision in both the public and not-for-profit sectors has grown significantly through USAID assistance, establishing the foundation for the program's sustainability. Current USAID activities are successfully meeting, and in some cases exceeding, projections for increased couple years' protection (CYPs), an indicator of increased demand.

Description: On-going population/family planning activities directed at increasing the level and effectiveness of contraceptive use among married couples are expected to raise contraceptive prevalence to 53% by 1997. Work is concentrated in eight areas: further strengthening management capacity and quality of care in Ministry of Health family planning clinics; buidling the planning, monitoring and research capacities of the National Population Council, the central policy-formulating institution; enhancing the quality of clinical training offered by two key institutions; expanding the very effective information, education and communication (IEC) campaign led by the Ministry of Information; assisting family planning organizations to become more self-sufficient; and enhancing the quality and acceptablility of private sector services.

The next stage of the program will build on accomplishments to date, but give greater emphasis to increasing the use of family planning services and strengthening the sustainability of family planning systems. To increase use, an enhanced supply of high quality services and contraceptive commodities must be ensured. In addition, new demand must be created, particularly in areas of high unmet need. The program will continue to strengthen implementing agencies' institutional capacity for cost-recovery and revenue generation; efficiencies in service provision; and reducing dependence on donor subsidies. It will do so through human resource development, improved management systems and by building strategic planning systems. Finally, the program will support an enabling policy environment to reduce restrictive regulations and increase budget allocations for the family planning sector.

Host Country and Other Donors: The GOE contributes approximately 24% of the total project cost for the current Population/Family Planning III project in cash and in-kind, including salaries and benefits, travel and other costs for participant training, and air time on television and radio.

USAID is the lead donor in family planning. Among other donors, UNFPA has also been an important supporter of the Egyptian program, followed by the International Planned Parenthood Federation (IPPF) and the Japanese. The European Union and the Dutch and German governments provide limited assistance. The donors meet regularly in a working group on population and effectively coordinate their activities.

Beneficiaries: At the macro level, the entire Egyptian population will benefit from a rate of population growth more commensurate with national development goals and from increased choice in planning their families. More specifically, however, the strategy targets Egyptian married women of reproductive age (15-49) to receive more accessible and high-quality care. The program gives maximum priority to areas of greatest need in Upper Egypt, thusreaching women at most risk from high fertility. Intermediate beneficiaries are the family planning managers and workers in USAID-assisted organizations whose employment options and practices are improved.

Principal Contractors, Grantees or Agencies: Currently one contractor, Pathfinder International, provides a range of technical and management assistance to GOE implementing agencies involved in USAID's population/family planning activities in support of GOE national fertility goals.

Major Results Indicators: Baseline Target

Reduced total fertility rate 3.9 3.51 (1997)
Reduced crude birth rate (proxy) 29.2 26.0 (1997)
Increased contraceptive prevalence 47 52.9 (1997)
Decreased extended use failure rate 10% 6% (2004)

PROGRAM: Egypt
TITLE AND NUMBER: Sustainable Improvements in the Health of Women and Children, 263-S007
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $37,500,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To improve the quality and availability of child and reproductive health services as well as to ensure the sustainability of improved systems through cost recovery and policy reform.

Background: Although infant and child mortality have declined rapidly in the past years, deaths among young children remain unacceptably high for a country with good access to care and a moderate amount of spending on health (4.7% of GNP). Within Egypt there is great variation in health indicators: infant and under five mortality rates are about twice as high in Upper Egypt (105.8 and 146.7, respectively) as in urban governorates (55 and 68, respectively), and are more than three times higher among mothers with no education. The maternal mortality ratio (MMR, women dying of causes related to pregnancy and childbirth per 100,000 births) is also unnecessarily high at 174 per 100,000 births given the access to medical care. This, too, varies greatly within Egypt: the MMR is 217 for Upper Egypt, and within that region, the MMR is 544 in the governorate of Assiut and 386 in Qena. USAID is targeting more resources to these high risk areas of Upper Egypt in an attempt to narrow the gap in regional disparities and improve the health status of the poorest Egyptians. This program includes the on-going Child Survival Project, the Healthy Mother/Healthy Child Project, the Cost Recovery for Health Project, the Schistosomiasis Research Project, along with a Hepatitis C Research Activity and a new Health Policy Support Program being added in FY 1996.

USAID Role and Achievements to Date: Since 1983, the focus of USAID's support has been to reduce mortality and illness of infants and children principally through three key interventions: oral rehydration therapy, an expanded program of immunizations (EPI), and the acute respiratory control program. The infant mortality rate has been reduced 43% between 1980 and 1990 and the child mortality rate has declined 55 % in the same period. A goal to eradicate polio by 1996 has been set. Reported confirmed cases of polio dropped from 584 cases in 1992 to 60 in 1995. Similarly, elimination of neonatal tetanus has been targeted for 1996. Reported cases of tetanus among newborns dropped from 1,823 in 1992 to 851 in 1995. A national study was carried out to document the causes of maternal mortality and determine avoidable factors which could guide reproductive care program improvements. At the same time as services are improved and extended for mothers and their children, efforts to improve the sustainability of the systems are underway. Intensive dialogue between the Ministry of Health and Population and the donors resulted in the GOE's paying for all routine vaccines for the EPI. Experiments in financing of services in pilot cost recovery facilities are being done in a way that will improve the quality of care people receive and the efficiency of the facilities offering care. The management information system of the Health Insurance Organization, which covers 30% of the population with health insurance, has been partially automated and is providing data with which to improve management of this strategically important organization. New tools and approaches are being developed under the schistosomiasis research program; these have been effectively used to reduce the prevalence of schistosomiasis from 40% to 10% in rural areas of Egypt.

Description: Sustainable improvements in the health of women and children in Egypt are being realized through the achievement of four interrelated objectives: increased knowledge and improved health behavior in households, improved quality and utilization of care provided to women, infants, and children; new tools and approaches to combat selected endemic and emerging diseases; and improved environment to plan, manage and finance sustained health systems.

The Healthy Mother/Healthy Child activities are targeted to high risk areas of Upper Egypt. This program is developing a basic package of essential reproductive care and child health services to be available in all public and private facilities in selected districts. Non-governmental organizations (NGOs), including US PVOs, are increasingly involved in community health promotion efforts. Mothers, as the primary providers of health for themselves and their families, are the focus of efforts to increase knowledge and improve health behavior in vulnerable households. Strengthening the curricula in medical and nursing schools as well as practical pre-service training are also important interventions supported by USAID to improve the quality of the basic package of essential reproductive health and child care services.

Testing is underway on several candidates for a vaccine to prevent schistosomiasis, the most significant cause of long term morbidity and curative care expenditures in Egypt. USAID is also supporting urgently needed efforts to determine the causes of transmission of Hepatitis C which is emerging as the greatest public health threat in the country. An assessment of the HIV/AIDS situation in Egypt will guide work with national organizations to keep the prevalence of this disease low throughout Egypt.

Improving the country environment to plan, manage and finance sustainable health systems is a critical element of our program. USAID/Cairo shares the worldwide experience that child survival gains cannot be sustained without a national policy environment that puts a priority on resources for these programs. The Cost Recovery for Health Program and the Health Policy Support initiative are working to enhance the capacity to plan, manage, finance and monitor health services. A broad-based dialogue on health policy is developing which involves public and private sector representatives working to resolve health sector problems. USAID is assisting the intensive efforts underway within the Health Insurance Organization to restructure and reengineer the agency.

Host Country and Other Donors: GOE contribution to these activities approximates $119.2 million, including cash, salaries and operational expenses. Fourteen other donors are supporting health activities in Egypt, together averaging $22 million annually. UNICEF is the most active donor in the sector after USAID. USAID has recently awarded an $8 million grant to UNICEF to work with us in high risk areas of Upper Egypt to reduce child and maternal mortality.

Beneficiaries: Egyptian women of child-bearing age and children under five are the primary focus of our activities. In addition, doctors and nurses and health sector managers are the recipients of improved and extended short term training as well as some long term public health and administration training designed to increase national capacity to manage public health programs. USAID is promoting the use of indigenous NGOs in health activities and works with US PVOs to strengthen NGO capacity.

Principal Contractors, Grantees, or Agencies: USAID is implementing the program through a number of U.S. firms and universities. Clark Atlanta University, (an Historically Black College and University), the University Research Corporation, Maximus, and Medical Services Corporation International are the primary U.S. contractors currently working on health programs. USAID is also about to award an umbrella grant to a U.S. PVO to promote more NGO activity in the health sector.

Major Results Indicators:
Baseline Target
Under five mortality rate 130.1 (1985) 71 (1996)
Maternal mortality ratio 174 (1992) 130 (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Increased Access to and Sustainability of Water and Wastewater Services,
263-S008
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $53,217,000 ESF
INITIAL OBLIGATION:FY1996; ESTIMATED COMPLETION DATE: FY2001.

Purpose: To increase access to improved and sustainable potable water and wastewater services in selected urban areas.

Background: A doubling of Egypt's population over the past 30 years and the influx of people from the rural areas to the cities have put a severe strain on Egypt's ailing urban infrastructure, especially water and wastewater facilities. Outmoded and poorly maintained, the inadequate number of operational wastewater facilities poses a significant health hazard. Lack of capital to invest in the rehabilitation and expansion of the systems, as well as inadequate institutional capabilities to plan, construct, operate, and maintain them further, exacerbate the problem. This program includes work in Alexandria, Cairo, Suez, Ismailia, Port Said, Minya, Beni Suef, and the Fayoum.

USAID Role and Achievements to Date: In 1975, USAID began to address the urgent issue of raw sewage in the streets of Cairo, Alexandria and the canal cities of Ismailia, Suez and Port Said, and later in the provincial cities of Minya, Fayoum, and Beni Suef. Given the poor condition of the water and wastewater systems, rehabilitation preceded expansion. Over the past several years, several of the completed activities have impacted 4 million customers: 700,000 residents in the poor Cairo areas of Pyramids and Embaba who received sewer hook-ups; more than 500,000 residents of Suez who were connected to the new wastewater treatment plant funded by USAID; and more than 3 million people now have improved potable water service from reservoirs built in the heart of urban Cairo.

Description: USAID assistance in the water and wastewater sector is focused on urban centers of production and commercial growth where water and wastewater problems are the most critical and where the maximum number of people can benefit from the interventions. Basic institutional reforms are now required as prerequisites to new infrastructure developments to ensure sustainability of these public utilities. The institutional reforms and USAID assistance to the water and wastewater utilities are designed to ensure financial viability and institutional autonomy. Once conditionality has been met in the structure and fees of the utility organizations, USAID provides funds for additional infrastructure construction. Assistance will continue in Alexandria, Cairo, Suez, Ismailia, Port Said, Minya, Beni Suef, and the Fayoum and will begin in cities like Mansoura, Nuweiba, Sharm el Sheikh, Luxor and a group of cities in the Aswan Governorate.

Host Country and Other Donors: The Egyptian Government is heavily involved as a major partner in the large urban areas of Alexandria and Cairo and is contributing approximately $514 these activities. While USAID is by far the major donor in the sector, there are other foreign donors, including Denmark in the Aswan Governorate and Britain and Italy on Cairo's east bank. Cooperation with other donors is excellent; examples include a joint British-American consortium of construction companies working on both sides of the Nile as part of the greater Cairo Wastewater Project and a close working relationship with the Danes in the Aswan Governorate.

Beneficiaries: Beneficiaries include some 22 million Egyptians, or one out of every three individuals in the country. Among the beneficiaries, the health impact has been noteworthy, especially among the children.

Principal Contractors, Grantees, or Agencies: USAID is currently implementing its water and wastewater program through 13 major U.S. firms, such as ABB SUSA, Inc.; Black & Veatch Int'l.; Camp Dresser & McKee; CH2M-Hill; Harbert Jones Construction; Harza Engineering Co.; Metcalf & Eddy Int'l.; Morrison-Knudsen Co.; and Stanley Consultants. In addition, these U.S. firms have subcontracts with numerous private-sector Egyptian firms which have strengthened domestic design and construction capabilities in the sector.

Major Results Indicators:

	Baseline	Target
Estimated population connected to improved sewerage systems (in millions of people)	0 (1992)	1 .6 (1997)
Estimated population connected to improved sewerage collection and treatment (in millions of people)	2.4 (1992)	8.0 (1997)
Estimated population with access to improved water supply (in millions of people)	0 ( 1992)	4.4 (1997)

PROGRAM: EGYPT
TITLE AND NUMBER: Reduced Generation of Air Pollution, 263-S009
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 1997: $20,000,000 ESF
INITIAL OBLIGATION: FY 1996; ESTIMATED COMPLETION DATE: FY 2001

Purpose: To achieve a sustainable reduction in the generation of air pollution (including total suspended particulates, carbon monoxide, nitrogen oxide, sulfur oxide, and hydrocarbons) through the demonstration of successful pilot activities and new technology applications. Technologically and economically viable demonstrations lead to replication, thereby laying the foundation for sustainability.
Background: In Egypt, poorly managed urbanization and weakly regulated industrial growth have resulted in enormous generation of pollution which poses serious human health and environmental risks. For air pollution, many factors contribute to this continued deterioration: excessive and inefficient use of energy in industry; ineffective standards for industry, commerce and transportation; and a lack of a sustainable institutional framework to reduce the rate of environmental deterioration. If not effectively managed, serious environmental degradation will constrain Egypt's long- term economic development. This program includes two projects: the final two years of the ten-year Energy Conservation and Environment Project (ECEP) and the recently initiated Cairo Air Improvement Project (CAIP).

USAID Role and Achievements to Date: Collaborating with the Government of Egypt (GOE), USAID has conceived and implemented activities related to air pollution reduction since 1988. Thus far, USAID assistance has helped improve the conservation and efficient use of energy and encouraged the widespread application of pollution prevention applications. Achievements include: (1) the installation of dozens of energy efficiency technology demonstrations which amount to $14 million in annual energy savings, (2) the aversion of accumulated air pollution emissions amounting to 7,800 metric tons of carbon monoxide and 25,000 metric tons of sulfur oxide, and (3) the installation of low cost/no cost gas analyzers for monitoring boilers and furnaces demonstrating $26 million in fuel cost savings. CAIP is in initial stages of implementation, with results expected in future years.

Description: ECEP finances primarily energy conservation and pollution prevention activities. It funds technical assistance, the installation of low cost/no cost applications and energy efficiency technology/practices, and training through numerous subactivities. CAIP represents the first donor assisted effort that directly addresses air pollution. Results are structured to have immediate and longer term impacts through the demonstration of technologically and economically viable environmental solutions.

For CAIP, illustrative activities to reduce particulate air emissions include: the introduction of compressed natural gas (CNG) fuel technology on approximately 100 public sector buses, lead and cement plant control technology installation, vehicle tune-up and inspection programs, air quality monitoring/analysis, public awareness campaigns, and policy dialogue which supports increasing the use of unleaded gas. Illustrative activities to reduce carbon monoxide, sulfur oxide, nitrogen oxide, and hydrocarbon air emissions include: the establishment of a Cairo-wide vehicle emissions testing system, vehicle tune-up and inspection programs, public awareness campaigns, air quality monitoring and analysis, and a broad range of pollution prevention technology demonstrations.

An appropriate lead smelter action plan will also be developed and implemented. This plan will identify the supporting institutional, policy, regulatory and financial framework necessary to support long term sustainability for lead smelter reduction. If CNG becomes a demonstrably viable substitute, then its use and replication will become self sustaining. Establishment of a vehicle emissions testing system for Cairo will ultimately lead to a decentralized network of private sector testing and tune-up stations across Cairo. Public awareness campaigns will reinforce public knowledge and go a long way in ensuring public participation in the achievement of results. Installation of pollution prevention technologies is already being replicated by the public and private sectors and has demonstrated significant fuel and energy savings.

Host Country and Other Donors: Within the donor community, USAID is the largest donor that focuses on the reduction of air pollution. USAID gives very high priority to coordinating its environmental program with those of other donors. Quarterly meetings are held with the Environmental Donor Subcommittee to discuss current and planned activities, common approaches to perceived environmental problems, and coordination with the Egyptian Environmental AffairsAgency. The environmental coordinating subgroup includes: Denmark, Canada, EU, France, Germany, Japan, UNDP, World Bank, and ODA. USAID is currently assisting the World Bank with the design of its Environmental Pollution Abatement Project, coordinating with the EU's new energy demand side management program, and consulting closely with ODA, DANIDA and CIDA on pollution prevention and air quality monitoring. A major USAID- funded activity will develop an air quality monitoring system to complement the system initiated by DANIDA. The GOE is contributing $12.7 million in cash, salaries, operational expenses and facilities for these activities.

Beneficiaries: The health of all 14 million inhabitants of Cairo will continuously benefit from the cleaner air resulting from activities funded under this strategic objective. The public and private sectors of Egypt as a whole stand to gain long term economic, social, and health benefits from the reduced generation of air pollution.

Principal Contractors, Grantees, or Agencies: USAID presently implements activities with these US contractors: Hagler-Bailly and Overseas Bechtel, Inc.

Major Results Indicators Baseline Target

No. of pollution prevention
technologies replicated 0 (1993) 36 (1997)

Accumulated pollution reduction in:
( metric tons)
Sulfur Oxide 0 21,435 (1997)
Nitrogen Oxide 0 4,010 (1997)
Carbon Monoxide 0 21,585 (1997)