Situation and Cooperation

Egypt is currently undergoing a transition from a largely state-controlled to an open market econ­o­my. Struc­tur­al reforms and restrictive mon­e­tary and fiscal policies stabilised the econ­o­my in the early 1990s. In the years that followed, banks and state-owned enterprises were privatised. The social costs of structural reform, however, have been high, and until now only benefited a privileged minority. Price rises caused by slashing subsidies and the introduction of new taxes have hit the poor the hardest.

Population growth is high. In the past 30 years the population of Egypt has doubled, and has now reached just under 83 million. One third of the population is under the age of 15.

Around twenty per cent of Egyptians live below the national poverty line. On the Human Development Index Egypt ranks just 101st out of 169 countries (HDI 2010). One reason for this is widespread unemployment, which also affects many school-leavers and university graduates. Every year another 600,000 or so young people flood onto the labour market, and only about 250,000 of them manage to find a job. More than three million university graduates are unemployed. Women are dis­pro­por­tion­ately affected by poverty and unemployment.

About 95 per cent of the Egyptian population lives crowded along the Nile Valley and in the Nile Delta on about four per cent of the country's land. These regions are among the most densely pop­u­lated in the world. The Nile is used to irrigate fields, for water to keep the wheels of industry turning and to supply the people with drinking water. In the major urbanised areas, agriculture, industry and the inhabitants compete for water and land.

In the cities, worsening air and water pollution is affecting peo­ple's living conditions. The pollution is the result of continuing industrialisation and the extremely high population density. There is a lack of affordable accommodation for the poor in the cities and illegal settlements are mushrooming without control and with no proper social and technical infrastructure. Waste disposal is not regulated. There is little awareness of the hazards of en­vi­ron­ment­al pollution. The existing environmental laws are not adequately enforced.

Hope for a political new beginning

Up until the po­lit­i­cal upheaval in February 2011, public life was permeated by strict state con­trol. Emer­gen­cy law had been continuously in force in Egypt since 1981. Power was in the hands of the president, his party and the army, with only limited tolerance of political opposition.

The work of non-governmental organisations was also subject to strict regulation. The founding of trade unions outside the state-controlled business associations was prohibited. The human rights situation was unsatisfactory; arbitrary arrests and torture were widespread.

In January and February 2011, encouraged by the successful mass protests in Tunisia, millions of Egyptians took to the streets to demonstrate against oppression, arbitrary rule and corruption. On 11 February 2011, after 30 years in office, President Hosni Mubarak found himself forced to step down. A military council made up of high-ranking officers took charge of the country initially, promising to hold free and democratic elections and lift emergency law.

In order to support the transformation process taking place in the North Africa and Middle East region, the German government has set up three funds:

• Fund for Democracy and Structural and Regulatory Policy Advice
  Endowed with 5.25 million euros, it is mainly to be used to support political foundations and church aid organisations which already have good links with reformers. These resources are to be used for example to provide advice on founding new independent political parties, to advise state institutions and to strengthen political participation. The Fund will also be used to strengthen civil society or­ga­ni­sa­tions and for training journalists.

• Regional project for Youth Training and Employment
  The aim of this project, which is endowed with 8 million euros (2011-2014), is to offer young people better social and economic prospects. It will be used, for example, to support the development of services providing advice, careers guidance and help with finding a job, and of business start-up programmes.

• Regional Microfinance Fund
  A financing mechanism is being set up at KfW Ent­wick­lungs­bank to support the economic development of the North Africa and Middle East region. This Fund will provide re­fi­nancing for national microfinance institutes so that they can grant loans to micro, small and medium-sized enterprises. It is endowed with 20 million euros.

Development potential

Egypt's main potential for economic development is to be found in foreign trade. Recently, large gas deposits were discovered. Natural gas is a very promising sector. Export capacities are being expanded with a pipeline to Jordan, Syria and Lebanon. To supply the European market, the country is building liquefaction plants on the Mediterranean coast. This is also generating new jobs. Tourism is another sector that is important for the Egyptian economy; it is very labour-intensive and accounts for just under 20 per cent of Egypt's foreign exchange revenues. The Suez Canal is also a significant source of revenue.

Membership of the World Trade Organization (WTO) and the conclusion of numerous economic agreements – including the Association Agreement with the European Union in 2004 – offer Egypt access to attractive international markets.

The political reforms that have now been launched have the potential to significantly improve the investment climate in Egypt. If Egypt's legislation is modernised and its economy is steered towards a social market system, that would make the country more competitive and foster economic growth. For this to happen, the political situation needs to become more stable and dem­o­crat­ic, rule-of-law structures must be developed.

Immediate measures under German development cooperation following the popular uprising in Egypt

Directly after the popular uprising Germany launched immediate measures under its development cooperation programme to support the transformation in the sectors of youth, employment, promoting democracy and the media. Ac­tiv­i­ties that are being supported include the re-opening of the ombudsman's office in Cairo. This institution, established under the National Council for Human Rights, is a public complaints office that is open to all the country's citizens. Support is also being given to short-term measures concerned with youth employment, such as setting up a job centre and a media campaign to provide careers guidance for unemployed young people. Other measures include promoting an independent media and supporting the introduction of a code of practice for the press.

Priority areas of German cooperation with Egypt

German development cooperation activities enjoy an excellent reputation in Egypt. The population is very aware of these acti­vitie­­s and they are effective. The volume of German com­mit­ments and the quality of German project implementation are highly esteemed by our Egyptian partners. The relationship of trust existing between the two sides facilitates close and open co­op­eration – including with regard to politically sensitive issues.

Egypt's importance in terms of foreign and security policy plays an important role in Germany's development cooperation with Egypt. Stability in the region is in the interests of both Egypt and Germa­­ny. The political changes taking place are a great opportunity for a democratic state based on the rule of law to emerge in Egypt, with the potential for a ripple effect across the entire region. The most important task for the new government that is to be formed and also for Egyptian-German development cooperation will be to combat poverty in Egypt, because the newly won freedom must also bring with it economic advantages. Otherwise there is a danger that impoverished and disappointed segments of the population will turn to political fundamentalists.

At the Egyptian-German government negotiations in June 2010, Germany pledged 190 million euros to Egypt for a two-year period. A large portion of this commitment is made up of loans. Cooperation is concentrated in the following areas:

• The use and management of water resources

• Environmental and climate protection

In addition, there are also ongoing projects concerned with vocational training/promoting employment, urban development, primary education and promoting women's rights. In order to support the political change set in motion by the mass protests, in future Germany will step up its involvement in the areas of good governance and promoting democracy.

Water

Egypt is one of the most arid countries in the world. It rarely rains, and there are very limited groundwater reserves. Ninety-five per cent of the country is desert. Agriculture, industry and the population are thus dependent on the Nile. The river is the country's largest source of water. About 80 per cent of the available water is used for irrigation purposes; ten per cent is used by industry and only three per cent is used as drinking water. It is estimated that the demand for drinking water and for water for industry will double within the next 20 years. Water must therefore be used more economically than it has been to date.

The Federal Republic of Germany is supporting Egypt in its efforts to reform the water sector with the following goals in mind:

• Fostering efficient use of water

• Providing poor people with access to drinking water

• Improving health through proper sanitation

• Improving efficiency levels in the agricultural use of water

• Modernising the infrastructure for water supply and sanitation

• Promoting the financial viability of the sector and strengthening public and private institutions

• Decentralising the sector and building up local water user communities

• Training experts and educating the population with regard to water issues

The approach adopted under German development cooperation in pursuit of these goals is a holistic one, taking account of both social conditions and environmental aspects: integrated water resource management (IWRM) means higher benefits with a lower use of resources. The different needs of various users are weighed against each other and the greatest possible consensus is sought with the participation of all users.

Measures being supported include financing the modernisation of irrigation infrastructure and developing strategies in cooperation with small farmers to achieve more efficient use of water in ag­ri­culture. Along with other donors, the Federal Republic of Germany is helping family farms get together to form water user com­mu­ni­ties, within which irrigation cycles can be optimised. The avail­able water can thus be used more productively, minimising water losses and conflicts.

Environmental and climate protection

Environmental and climate pro­tec­tion are central to Egyptian-German de­vel­op­ment co­op­er­a­tion. The priority is the promotion of renewables such as wind energy and hydropower. Nowhere in the world is there a more constant wind than on the Red Sea. The electricity produced by its wind farms has clear cost advantages, given the high price of oil. The Federal Republic of Germany is financing investments in wind power stations and advising Egypt on necessary reforms in the energy sector, and is helping the country to feed energy from alternative sources into the grid and to set tariffs.

Support is also being provided for a Cairo-based Regional Centre for Renewable Energy and Energy Efficiency (RCREEE), in which ten Arab countries are involved. The Egyptian-German Joint Com­mit­tee on Renewable Energy, Energy Efficiency and En­vi­ron­mental Protection (JCEE), established at the start of 2008, is promoting knowledge transfer and improving legal frameworks in this area.

Germany is also an important partner for Egypt in the area of industrial pollution control. As a result of progressive in­dus­tri­al­i­sa­tion and ur­ban­i­sa­tion, Egypt's towns and cities are polluted by emissions from factories using obsolete production plants, and by unpurified wastewater, and domestic and factory waste. The poor are the worst affected. Germany is therefore supporting programmes to ensure clean air and safe drinking water. One aim is to involve the private sector in such schemes. For example, there is potential to create incentives for investment in en­vi­ron­mental protection by supporting conversion to more modern production plants.

Other areas for action

One important area of Egyptian-German cooperation is vocational training and youth employment. From 1993 to 2007, Germany worked with the Egyptian business sector and Egypt's education ministry to introduce the dual vocational training system (theory taught in vocational schools combined with practical on-the-job training). This programme is seen today as a model for both Egypt and other countries in the Arab world. It is managed through private-public cooperation and has now been completely integrated into the Egyptian education system: each year be­tween 1,800 and 2,000 companies provide training for young peo­ple in 32 different occupations. Between 8,000 and 10,000 young people start training each year; 85 per cent of those who complete their training are offered a job by the companies that train them.

Since 2007, the focus has shifted to the topic of youth em­ploy­ment. For example, Germany is providing support for setting up decentralised job centres, and young people are being offered training in communication skills and in applying for jobs to pre­pare them for the job market. The private sector is receiving sup­port with regard to human resources management and de­vel­op­ing employment services.

Germany is providing financial support for the primary education sector: support for the development of school infrastructure has been provided since 1996. Apart from that, help is being given to improve the quality of teaching in schools through building projects and training in educational methods.

Moreover, Germany is increasingly supporting good governance and participation by civil society, for example through urban development projects. The main focus here is on urban slums in Cairo: about 60 per cent of the population in Egypt's capital city live in heavily built-up slums that are poorly supplied with mu­nic­i­pal services. In these unofficial settlements there is a lack of open areas, social services, access to drinking water, san­it­a­tion and waste collection.

Working with the public services and the local people, efforts have already been made to improve the drinking water, san­i­ta­tion and transport infra­structure. Ger­ma­ny has recently begun to focus – with the support of the Bill and Melinda Gates Foundation – on climate change adaptation measures. The urban inhabitants and municipal authorities need to become more aware of the challenges of global warming. The project is contributing to local civil participation and good governance and is an international model.

Strengthening women's rights is another priority area of German development cooperation in Egypt. Thus the German government is encouraging Egypt to enforce effectively the ban on genital mutilation that came into force in June 2008. In Egypt the pro­por­tion of women affected by this practice is still over 90 per cent. In cooperation with an Egyptian women's rights network, the Ger­man government is supporting an intensive campaign of in­for­ma­tion and lobbying. The economic integration of women is being supported in a supra-regional project covering Egypt, Jordan, Tunisia and Morocco.