April 25, 2011

ONE OF THE OBAMA administration’s explanations for its reluctance to act in Libya, Syria and other Middle East crisis zones is the need to focus attention on what it sees as the pivotal country in the region — Egypt. “The question is: where should our resources be?” Vice President Biden said in an interview with the Financial Times published last week. “Should we be spending more time knowing everything there is to know about the make-up of the opposition in Libya, or should we be having all the intelligence . . . [about] what’s going on in Egypt?”

We’d like to think the United States has adequate resources to investigate both the Libyan opposition and Egypt. But if Mr. Biden meant to say that helping Egypt during a critical time of political transition ought to be the top U.S. priority in the region, we agree. The question is what form that help can take, other than the rhetorical.

The administration has already announced $150 million in emergency aid to bolster the interim military regime, in addition to the $1.2 billion in already-programmed military and economic aid. Congressionally funded pro-
democracy groups, such as the National Democratic Institute and the International Republican Institute, are already working in Cairo to help new political forces prepare for planned elections later this year. But while the United States has a strong interest in the success of secular liberals in competition with the Islamist Muslim Brotherhood, aid that is too conspicuous or heavy-handed risks triggering a damaging backlash.

That’s why the main U.S. effort should be centered on helping Egypt revive its fragile economy. The revolution shattered the country’s tourist trade, which accounts for 10 percent of gross domestic product and 20 percent of hard currency revenue; growth in 2011 is now expected to be 2 percent at best, a third of the pre-revolution rate. In a recent visit to Washington, finance minister Samir Radwan said the government would need $10 billion to $12 billion in loans and grants to balance its budget this year and next. He came away with $2.2 billion from the World Bank.

Granting or lending billions more to Egypt would be a hard sell to a Congress that is slashing foreign aid. But the United States does have another option in the form of the $3.5 billion Egypt owes to Washington. A debt forgiveness program for Egypt could be prepared in cooperation with the European Union and Japan, to which Cairo owes another $14 billion. Relief could be linked to Egypt’s implementation of sensible free-market economic policies — which might check a worrying trend toward populism and statism by the post-Mubarak regime.

The administration is working on longer-term plans for an Egypt “enterprise fund” to support small and medium-size businesses, and it may seek to expand special investment zones that allow Egyptian companies to export goods to the United States duty-free. It should also consider shifting existing aid, most of which is earmarked for military purchasing, to economic development, in partnership with an elected government. While aid cannot determine the outcome of Egypt’s political transition, it can provide incentives for the policies most likely to produce a secular democracy.