Capital projects : Egypt case study

In regard to the first aspect, the study found that few A.I.D.-funded projects or studies generated either participation by other donors or follow-on sales for U.S. companies; none generated participation by a private investor. The report places much of the blame for this on U.S. firms' failure to take advantage of a clear opportunity to develop the Egyptian commercial market; in short, U.S. firms were "out-marketed" by their European and Japanese competitors. Findings regarding the developmental benefits of the projects are mixed. (1) The projects helped support strong private sector growth in Egypt through the 1980's. They increased electric power, introduced a modern telephone system in Cairo and Alexandria, and rehabilitated water and sewage systems, significantly improving the quality of life of many poor Egyptians. Nonetheless, their economic and financial rates of return were generally disappointing. (2) The projects were built to a high technical standard, but their sustainability is in doubt due to insufficient financial resources, uneven operations and maintenance practices, and inadequate employee training and compensation. (3) The pursuit of commercial advantage for U.S. firms did not distort the developmental goals of the projects. Overall, the report attributes the disappointing economic results of A.I.D.'s capital assistance program to a poor policy environment, which the reforms pursued in connection with the program did little to change. In Egypt, A.I.D.'s leverage in promoting reforms has historically been hampered by the precedence given to U.S. political concerns. However the USAID Mission in Egypt believes that a changing political climate, especially since 1989, has increased the effectiveness of economic incentives and improved the climate for policy change. Companion reports provide (1) a detailed look at the nine projects' economic and financial rates of return (PN-AAX-282); and (2) a macro-level analysis of the relationship between U.S. aid and exports to Egypt (PN-AAX-265).