U.S. House Foreign Affairs committee hearing. Photo by: House Committee on Foreign Affairs / CC BY-NC

The U.S. House Foreign Affairs Subcommittee on the Middle East and North Africa met on Wednesday to discuss how both the State Department and U.S. Agency for International Development are scaling back their budgets, but insist on pushing through with a $580 million regional funding mechanism for countries in transition to democracy, among other issues.

Here are our seven main takeaways from the hearing, attended by Assistant Secretary of State Beth Jones and USAID Assistant Administrator Alina Romanowski:

1. Despite USAID Forward, private sector engagement remains peripheral in MENA, aside from brief mentions of the U.S.-Egypt Enterprise Fund and cyberpartnerships.

Whether it is due to the region’s generally “tepid” economic growth forecasts or the uncertainty and risk associated with the “Arab awakening,” the hearing didn’t focus on public-private partnerships to drive development. Discussions focused more on recent strategic announcements under the USAID Forward framework, which spotlights private sector engagement in developing countries. One exception was the Egyptian-American Enterprise Fund, which released $60 million in initial capital in April to spur small and medium business development in Egypt. Another was Internet access, a topic on which Romanowski said USAID is working with Internet companies to circumvent repressive access policies in Iran.

2. Egypt’s opposition “understands” and “agrees” that reforms for the International Monetary Fund loan package are “the key to future investment” by the private sector, USAID and the State Department, but Jones said the new Cabinet might derail the reforms anyway.

The $4.8 billion IMF loan package, which includes austerity measures and other structural reforms, is highly controversial in Egypt, where some say it could raise the cost of living and incite civil unrest. Judging by Wednesday’s hearing, the plan however is not controversial at all on Capitol Hill, where State and USAID officials agreed with ranking committee member Ted Deutch that while “politically difficult” the reforms and loan are “so much in the long-term interest” of the Morsi administration and the Egyptian people, and represent “the key to future investment” by the U.S. government and the private sector in Egypt’s floundering economy. Jones nevertheless admitted she is not yet certain the loan package will push through.

3. Competing human rights arguments for aid to Egypt: Does assistance funding give the United States a “bully-pulpit” to champion human rights programs, or should USAID and State withhold funding until Egypt acts on its own?

Egypt’s human rights abuses, including a new law that cracks down on nongovernmental organizations, brought two arguments to the floor over when and if the United States should deliver aid to the country. The first version, championed by Jones, favors engagement with Egypt through nonmilitary funding as a channel to call for human rights reforms. The second strategy, suggested by subcommittee chair Doug Collins, argues that Egypt has to demonstrate its commitment to securing human rights first, with funding conditional on doing so.

4. Congressional Democrat calls for “broader discussion” on Syria and a possible humanitarian corridor for aid.

Deutch raised the possibility of working with allies, and even Russia, to create a “humanitarian corridor” for more effective delivery of humanitarian services to victims of the conflict in Syria. According to Jones, the U.S. government and State Department are looking for ways to provide “communication supplies” to the Syrian opposition, in hopes that such supplies might aid in their ability to coordinate humanitarian efforts from within the country.

5. Lawmakers are concerned that the MENA IF will become a “slush fund” unless benchmarks and guidelines are clearly spelled out and explained in advance of any funding approval.

The Middle East North Africa Incentive Fund, a $580 million addition to the MENA foreign assistance portfolio and the keystone of future development and humanitarian engagement with the region, is built on a model of benchmarks and incentives for foreign governments, similar to the Millennium Challenge Corp. House Republicans fear the MENA IF is prone to lack of oversight and lack of clarity on what those benchmarks will be and what guidelines will determine the selection of countries and projects. They fear it could be an unchecked “slush fund” for regional foreign assistance spending.

6. MENA IF: Another Administration initiative held hostage by Benghazi questioning.

Clarity aside, information about the MENA IF at the center of State and USAID engagement with the Middle East took a back seat to continued questioning, especially of Jones, concerning the events in Benghazi, which led to the death of four American diplomats in September 2012.

7. USAID is banking on offsets from drawdown, requesting no money for Iraq.

USAID’s budget requests assume a “major recalibration of assistance in Iraq,” according to Romanowski. USAID plans to use “existing funds” for a variety of programs under the U.S.-Iraq Strategic Framework Agreement, but savings here are what allows for a budget request that is $340 million below fiscal 2012 levels, and yet still includes appropriations for the new $580 million MENA Incentive Fund.

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About the author

  • Michael Igoe

    Michael Igoe is a Senior Reporter with Devex, based in Washington, D.C. He covers U.S. foreign aid, global health, climate change, and development finance. Prior to joining Devex, Michael researched water management and climate change adaptation in post-Soviet Central Asia, where he also wrote for EurasiaNet. Michael earned his bachelor's degree from Bowdoin College, where he majored in Russian, and his master’s degree from the University of Montana, where he studied international conservation and development.