Egyptians were electrified by the 18-day uprising, in which many donor-funded NGOs played crucial roles in overthrowing the Mubarak regime. For the first time in years, Egyptians speak with confidence about their ability to surmount the country’s social, developmental and governmental challenges. Early optimism has, however, been replaced by a growing recognition that constructing democracy and social justice will take years. While Egyptians are sobered by economic decline and rising crime in the aftermath of the uprising, many NGOs are working overtime to promote civic participation, address constitutional reform or respond to the emergency needs of the poor, hit hard by the economic downturn. In this context, the role of donors has taken on new importance.

What was the environment for donors like before what is popularly referred to as ‘the 25 January revolution’? Many recognized Egypt as a challenging environment, given the limited scope and absorptive capacity of the Egyptian NGO sector. Some foreign donors were deterred by the time it takes to get a government permit to open an office in Egypt. Many American donors were put off by the vague language of the US Patriot Act and the ‘OFAC’ regulations operated by the US Department of the Treasury’s Office of Foreign Assets Control.

A restrictive environment for NGOs

In fact, the biggest obstacle faced by donors – before the fall of the Mubarak regime and since – is the highly regulated environment in which NGOs operate. Registered Egyptian NGOs fall under one of the most restrictive NGO laws in the world (Law 84 of 2002), which mandates financial and managerial oversight by the state. Even if an NGO secures approval by the Ministry of Social Solidarity (MOSS) to receive foreign grants or transfer money abroad – a process that often takes months – some find their grant payments and field operations vetoed or delayed by the State Security Investigative Service (SSI) operating under the Ministry of Interior.

Prior to the uprising, the state announced an intention to amend Law 84. One ‘leaked’ version of the amendments would have limited NGO work to a few fields (excluding human rights) and required them and possibly their donors to operate under the government-controlled General Union of Associations. In the meantime, a growing number of Egyptian NGOs, particularly human rights organizations, either registered as civil companies (to avoid the jurisdiction of Law 84) or opened branches abroad (to which foreign donors channelled funds directly).

Philanthropy in the ‘new Egypt’

So what, if anything, has changed for donors since the fall of the Mubarak regime? The country is still in the midst of what promises to be a long and uncertain transition. Nevertheless, some preliminary conclusions are possible.

Initially the power of SSI was significantly weakened and NGOs reported that they operated in a freer atmosphere than before. Recently, however, NGOs and donors are reporting long delays in securing grant and payment approvals from MOSS. Project implementation has also been slowed by the unsettled nature of life in post-Mubarak Egypt, including widespread strikes and governmental delays.

Many foreign donors, both public and private, are eager to support Egypt’s transition, and some have expanded their grant portfolios or explored how to begin work in Egypt (see box for some examples). An early indicator of greater donor interest was a conference call organized in March 2011 by two US donor affinity groups (the Peace and Security Funders Group and the Human Rights Funders Group). Approximately 60 programme officers joined the call to discuss the grantmaking opportunities and challenges. But since then many foreign donors have held back from launching work in Egypt, in part because of the continuing operational challenges. Thus, the presence of private western foundations remains minimal.

Responses from Egyptian foundations have also been mixed. Some, founded by people or corporations close to the Mubarak regime, have reduced or suspended their operations; some have been affected by Egypt’s economic downturn and cut their spending; some have remained committed to priorities set before the uprising, while others have reset priorities to respond to emerging needs.

Foreign funding blowback

The full-throated announcements by USAID and other donors of their plans to support a democratic transition did not go unnoticed by the Egyptian authorities and press, and revived long-standing Egyptian sensitivity about foreign funding. In July 2011, the Supreme Council of the Armed Forces (SCAF) accused the April 6 Youth Movement, an activist group involved in the uprising, of receiving foreign funding and pursuing an agenda dictated by external interests. In August, the Minister of Social Solidarity asked the Egyptian Central Bank to investigate NGOs’ bank accounts – violating their legally guaranteed confidentiality. Some 130 NGOs and other organizations (including at least one American for-profit consulting firm carrying out a USAID contract) subsequently reported that their banks had requested information about the origins of their funds. On 14 September, the Egyptian cabinet announced that a Ministry of Justice investigation had ‘revealed’ that more than 30 NGOs had received foreign funding without requisite registration under Law 84. News accounts included a ‘leaked’ list of some of Egypt’s best-known human rights and development organizations.

The general view is that, once the report is published, the Egyptian government will crack down on these organizations and possibly their donors for violating the law. While SCAF seems to be targeting secular, progressive NGOs heavily dependent on foreign funding – especially groups critical of the former regime and of prolonged military rule – other press statements have made it clear that the Ministry of Justice is also worried about millions of dollars reportedly given by Gulf states in support of Islamist causes.

There are other signs of a growing crackdown on the donor and NGO communities. Foreign NGOs seeking to open offices in Cairo are finding it difficult. One reported that the government was demanding details of all their prospective activities and grantees for a three-year period before issuing an operating permit – a task that seems impossible without setting up an office in Egypt first. The organization has yet to obtain the permit, despite months of effort. A European donor with an established office in Cairo and a portfolio of grants to Egyptian NGOs was met with the same demand when they sought to renew their operating permit. The head of the USAID mission in Egypt, which set aside $65 million for democracy promotion, resigned under what appeared to be pressure after less than a year in the job, even though 85 per cent of those funds went to American organizations. In short, the environment within which donors seek to assist the efforts of Egyptian NGOs remains fraught with tension and uncertainty. Donors still thinking about expanding their work to Egypt may be deterred by the slow nature of the transition, governmental restrictions and xenophobic media coverage, but the opportunities for making a difference through donor funding are greater than ever.

Judy Barsalou is a visiting scholar at the American University in Cairo. Prior to that she was the Ford Foundation’s Representative for the Middle East and North Africa, based in Cairo. Email jmbarsalou@gmail.com

A selection of donor responses to the uprising

• The Drosos Foundation, a Swiss foundation focused on children at risk, HIV/AIDS prevention and socio-economic development for marginalized women, children and youth, remains committed to the programme areas established before the uprising and its plan to increase partnerships in Egypt.
• The EFG Hermes Foundation, based in Cairo, found its partnership scheme challenging in post-uprising Egypt and temporarily shifted its focus from development programmes to charity work.
• The Ford Foundation added $1.5 million to its FY 2011 Middle East and North Africa office grant budget, and directed more than $4 million to new grants focused on media/advocacy, civic awareness and engagement, and constitutional and legislative debates in Egypt.
• The Friedrich Naumann Foundation for Liberty solidified its partnerships with governmental institutes and NGOs focused on conflict prevention and management, coalition building, human rights and similar themes.
• Members of the international Development Partners Group, consisting of 27 western bilateral and 11 multilateral donor agencies and two foundations operating in Egypt, revisited its priorities. Many members increased funding for projects focused on governance, civic participation and related issues. The German government also pledged to redirect €240 million in Egyptian debt to development projects.
• The Open Society Foundations geared up to spend some $50 million in 18 months in the MENA region – a significant increase from their previous commitments over the same period of time – in support of transitional justice, civic participation, elections, constitutional reform and the media, primarily in Tunisia and Egypt.
• The Waqfeyat al Maadi Community Foundation expanded its focus on grassroots community development to provide assistance to victims and survivors injured or killed during the uprising. New activities included a community-wide funeral to honour the dead, income-generating activities for those who lost their breadwinners, and hosting newly formed victims/survivors family groups.