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On the evening of Feb. 11, thousands gathered and rejoiced in Cairo’s Tahrir Square as Egyptian President Hosni Mubarak relinquished power. Today, not far from that now-iconic square, soldiers stand guard outside offices of democracy promotion groups, including the National Democratic Institute and International Republican Institute, accused by Cairo of illegally using foreign funds and operating without registration.

Just last week, Egyptian authorities announced indictments against 43 democracy-promotion activists, among them the son of President Barack Obama’s transportation secretary. These developments have reinforced doubts over the Egyptian interim regime’s dedication to and stewardship of the country’s transition to civilian rule, while also casting a spotlight on the challenges faced by groups working to advance democracy in the Middle East and beyond.

All but two of the 43 individuals indicted were employees of organizations financed by the Washington-based National Endowment for Democracy, which has emerged as a leading supporter of democracy-promotion groups since its inception in 1983. While almost entirely (99 percent) funded by the U.S. government, the NED was established by Congress as a private foundation in order to finance democracy promotion even in countries inhospitable to direct U.S. foreign assistance. NED’s most recent strategy from 2007 outlines the following priorities for the endowment: (1) opening political space in authoritarian countries, (2) aiding democrats and democratic processes in semi-authoritarian countries, (3) helping new democracies succeed, (4) building democracy after conflict, and (5) aiding democracy in the Muslim world.

Congress enacted a $118 million budget for NED in fiscal 2012, 13 percent above President Barack Obama’s proposed budget of $104 million. In recent years, Congress granted NED more funding than requested. While NED’s budget more than tripled under President George W. Bush, Obama’s fiscal 2012 request for the foundation would have represented a 10 percent decrease from fiscal 2010 levels. Some analysts say this is not too surprising given the current administration’s declining emphasis on democracy promotion as part of its foreign policy. While congressional support for NED funding is a bright spot amidst budgetary pressures on U.S. foreign aid programs, others caution that the NED budget has failed to keep pace with demand for democracy-promoting institutions. This dynamic has become all the more apparent in the aftermath of the Arab Spring.

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Nearly half (48 percent) of NED grants – totaling $114 million in fiscal 2010, when data is most recently available – supported its four core institutes based in the United States: the National Democratic Institute, the International Republican Institute, the Center for International Private Enterprise, and the American Center for International Labor Solidarity. These groups, which also count on funding from the U.S. Agency for International Development and the State Department, each received about $14 million in grants from NED. The remainder of NED grants supported nongovernmental organizations based overseas (44 percent) as well as in the United States (8 percent).

NED says it supports activities designed to foster requisite elements of democracy development such as competitive elections, the rule of law, open markets and a thriving civil society. NDI and IRI activities focus on strengthening political and civic organizations as well as safeguarding elections. For example, NED grants included $250,000 for NDI to assist civil society partners in carrying out parallel vote tabulations for Kenya’s 2010 constitutional referendum and $802,122 for IRI to prepare political parties in Malaysia for legislative elections.

Meanwhile, CIPE aims to leverage the private sector to build open markets underpinned by good governance. NED grants for CIPE included $189,839 to increase awareness of corporate governance among family-owned businesses in Turkey and $185,578 to improve access to information about entrepreneurial and civic leadership skills among youth in Lebanon.

Finally, the American Center for International Solidarity’s programs focus on building and supporting trade unions. NED grants for the center included $650,000 to build the organizing capacity of unions in Mexico’s communications industry and $485,000 to modernize regional trade union structures in Kuwait, Bahrain and Oman.

NED’s grants to non-core organizations included: $89,000 for Freedom House to increase transparency in Egypt’s electoral process, $60,000 for Russia’s Center for Social and Labor Rights to maintain and expand its interactive online portal, and $38,000 for the Philippine Center of Investigative Journalism to promote press freedom. Freedom House and the International Center for Journalists, U.S.-based advocacy groups which each received grants from NED totaling less than $300,000 in fiscal 2010, are among those organizations currently targeted by Egyptian authorities.

Europe- and Eurasia-based groups were awarded 14 percent of NED’s total grants in fiscal 2010, significantly ahead of any other region outside of the United States. A Devex analysis finds, however, that with the exception of the American Center for International Labor Solidarity, the Middle East and North Africa region is garnering a large portion of the resources from the major NED-funded institutes, including NDI and IRI. This falls in line with the strategic imperatives of both the U.S. government and NED to aide and sustain democracy in the Muslim world.

According to NED, though its core institutes receive allocations planned in advance to implement critical worldwide programs each year, the endowment primarily gives grants on a project-by-project basis contingent on need and alignment with global interests. There have been some issues with this process. Critics have challenged the extent to which NED adheres to its own grantmaking criteria, as about half of NED’s grants are routinely awarded to its core institutes. Others argue that, in view of longstanding accusations that these groups attempt to influence elections and operate covertly, any level of preferential treatment for the core institutes runs contrary to the very mandate of NED to support democracy promotion free from the perception of American influence. Raising more questions about NED’s support for the core institutes is a 2007 U.S. government audit of the endowment’s grants in Iraq which found that the four pro-democracy groups did not always return expired funds.

Unlike the vast majority of democracy promotion programming by the U.S. government, NED provides assistance through grants rather than contracts. Prospective grantees draft their own proposals for NED approval, arguably giving them greater opportunity to align programs with local needs. And should unexpected developments arise, NED’s grantees can much more easily adjust their programming, free of the constricting budgetary and programmatic restrictions often associated with contracts. For instance, thanks to NED funding, NDI was on the ground in Benghazi, Libya, just two months after the city fell to opposition forces last year.

NED’s operations fall in stark contrast with the rest of the U.S. democracy promotion regime because the organization channels funds to NGOs rather than directly to governments. USAID and State Department democracy, human rights and governance programming – which received a substantial $3.2 billion budget in fiscal 2012 – still largely revolves around providing technical and financial assistance to public institutions through bilateral or government-to-government agreements. One example is a current tender for technical assistance to Armenia’s finance ministry to improve tax administration. As a 2009 study published in Foreign Policy Analysis explains, these efforts aim to induce democratization from the inside, with the hope that strengthening legislatures or professionalizing judiciaries will eventually foster democratic norms and the rule of law. The same study points out that a consensus has emerged among analysts that such forms of aid do little to change incentives for actors who already have access to the levers of powers.

From the labor unions of Poland in the 1980s to the youth movements of the Arab Spring, both of which received training and financing from NED and its core institutes, civil society groups and NGOs on the other hand have shown that they can effectively mobilize societies against authoritarian regimes. And once democracy begins to take root, these groups are similarly well-positioned to hold governments accountable even as they serve as breeding grounds for future leaders. Of course, in countries such as Iran and North Korea, where either statutory prohibitions or an inhospitable political environment might hinder U.S. government programming, NED is often the only means to channel democracy promotion assistance.

On a less positive note, the increasingly hostile environment for NGOs worldwide poses a significant challenge to many of NED’s grantees. Egypt is only one of a series of countries that have tightened their grip on NGOs, part of what the International Center for Not-for-Profit Law has called a “a wave of constraint.” Just last month, the Afghan government shut down nearly 800 NGOs for failing to send their biannual reports to the country’s economy ministry. According to the ICNL, principal measures being implemented by governments to restrict NGO activities include restrictions on registration, foreign funding, rights to associate and the establishment of parallel organizations.

NED has acknowledged the right of governments to impose commonsense regulations designed to improve NGO practices. In Egypt, at least, there is no indication that this is the case. As mentioned earlier, both NDI and IRI have been accused by the powers that be in Cairo of operating without proper registration, among other charges. NDI claims to have applied for registration back in 2005, followed by IRI in 2006. But given that the Egyptian Ministry of Social Solidarity can reject a registration on vague grounds of “threatening national unity” or “violating public order,” it is easy to see how these regulations can serve as tools for authorities to arbitrarily stifle the activities of NGOs. In 2011, the Obama administration reversed a 2009 decision to restrict USAID funding to registered Egyptian NGOs, which likely helped precipitate Cairo’s crackdown on democracy promotion groups.

In Washington, congressional leaders on both sides of the aisle have already come to the defense of groups targeted by Cairo, warning that withholding $1.3 billion in U.S. military aid to Egypt is “on the table.” A 2010 working paper by the Spanish think tank FRIDE found that many NGOs now consider international pressure on regimes to loosen civil society laws to be much more valuable than increased funding. Hardly strangers to political repression, many democracy promotion groups will likely press ahead, albeit with a much lower profile. In 2006, following a similar backlash against NGOs, NED reported that many of its grantees had asked program officers not to visit their offices for fear of drawing attention.

Originally inspired by German-assisted democracy movements in Spain and Portugal in the 1960s and ’70s, nearly 30 years after its founding in the backdrop of the Cold War, NED and its beneficiary institutions are now operating in a new environment, shaped largely by Arab Spring frontiers. In the 1990s, the number of democratic governments doubled, but for much of the beginning of the 21st century, the spread of democracy essentially ground to a halt. According to Freedom House, there has been no increase in the number of democracies since 2003. In some cases, rather than build on democratic gains, regimes have reversed them. The Arab Spring, which is being characterized by some as the fourth wave of democratization, introduces an entirely new dimension to the democracy movement, as do glimmers of change in long-oppressed nations such as Cuba and Myanmar. The United Nations argues that “advancing human development requires governance that is democratic.” If this link is valid, there is much at stake for the global development community.

Lorenzo Piccio contributed to this report.

About the author

  • Pete Troilo

    Former director of global advisory and analysis, Pete managed all Devex research and analysis operations worldwide and monitors key trends in the global development business. Prior to joining Devex, Pete was a political and security risk consultant with a focus on Southeast Asia. He has also advised the U.S. government on foreign policy and led projects for the Asian Development Bank and International Finance Corp. He still consults for Devex on a project basis.

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