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Cablegate: Reform Fatigue at the Housing Ministry

VZCZCXYZ0011
PP RUEHWEB

DE RUEHEG #2153/01 2811440
ZNY CCCCC ZZH
P 071440Z OCT 08
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 0604
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

C O N F I D E N T I A L CAIRO 002153

SIPDIS

DEPT FOR NEA/ELA
TREASURY FOR BEN DENNIS AND CHARLES MORAVEC
COMMERCE FOR TOM SAMS AND NATE MASON

E.O. 12958: DECL: 09/02/2018
TAGS: ECON EAID EFIN EG PGOV KDEM PREL
SUBJECT: REFORM FATIGUE AT THE HOUSING MINISTRY Classified By: Ambassador Margaret Scobey for reasons 1.4 (b) and (d) ------- Summary -------
1.(SBU) In a recent meeting, Egypt's Housing Minister Ahmed El-Maghraby told the Ambassador that Egypt needed to maintain a "certain balance" between the government and civil society and suggested that the recent pace of government reform may have been too rapid for the country to absorb. A committed reformer, El-Magraby appeared somewhat frustrated by the challenges of actually implementing reform. He told the Ambassador that he appreciated the technical assistance provided by both the US and the EU and that the high rate of growth in the Egyptian economy over the past few years had greatly increased his Ministry's budget. He remained optimistic that economic reform, albeit at a more moderate pace, would continue. ---------------------------------------- Civil Planning, Permits and Rent Control ----------------------------------------

2.(SBU) On September 2, the Ambassador met with Ahmed Amin El-Maghraby, Egyptian Minister of Housing, Utilities, and Urban Development. El-Maghraby lamented Egypt's deficiencies in civil planning and talked of the challenges of absorbing an annual population increase of 1.3 million people. The minister expressed his frustration with the rent control system. He told the Ambassador that the Egyptian parliament had passed legislation that would have increased rents on rent controlled apartments, but complaints by renters prompted the parliament to roll back the increases to a mere 1% per annum. (Note: About one-third of Egypt's rental housing stock is rent controlled, and most units rent for a mere fraction of market rates. As a result landlords perform virtually no maintenance on run down common spaces and building facades. End note.)

3.(SBU) El-Maghraby said that he intended to introduce new legislation to address the rent control issue next year--focusing his efforts on rent-controlled units used for stores and offices rather than as living spaces. This strategy, he felt, would be less controversial and would avoid what he referred to as the "social argument" for rent control.

4.(U) The minister also discussed the new building law which went into effect in 2007. This law, he said would, if fully implemented, eliminate the fairly common practice of building without a permit and seeking the permit after the fact. According to the minister, this practice is now strictly forbidden, and any building built without a permit would have to be removed. (Note: Illegal housing is a huge problem in Cairo, and tenants in such buildings cannot obtain mortgages since they do not hold legal title to their homes. While preventing new illegal units will help the situation, the government has been unable to grapple with how to administratively handle the existing stock of illegal units. End note.) ----------------- Agricultural Land -----------------

5.(U) With regards to agricultural land, the minister pointed out that the first-ever building permit on rural land was issued in 2008. In response to a question by the Ambassador regarding protection of agricultural lands, he stated that this was not a priority for him. He suggested that the central issue for Egyptian agriculture is water rather than land and said that the "obsession" with protecting the lands of the Nile delta was not rooted in economics. Al Maghraby claimed that properly irrigated desert lands can yield more production per acre while using less water than traditional agriculture. ------------------ Foreign Assistance ------------------

6.(SBU) When the discussion moved to foreign assistance, El-Maghraby said that, in his view, policy reform and technical assistance are just as important as infrastructure. He claimed that the growing economy has been helpful in generating additional fiscal resources for his ministry claiming that his budget has grown from LE 3 billion ($566 million) to LE 12 billion ($2.3 billion) over the last few years. Also, according to El Maghraby, it is easier for him to get money from the Parliament for construction than for what he calls "soft areas" of services and training. Technical assistance from the US and the EU is therefore very important.

7.(C) The Ambassador talked about how some elements of the GOE have voiced the possibility that Egypt is no longer interested in US assistance. El-Maghraby said that he was surprised by this and did not share this opinion. US programs are essential to his work and he credited US assistance for many of his successes over the past several years. -------------------------- The Bilateral Relationship --------------------------

8.(C) El-Maghraby told the Ambassador that she had assumed her post at a "most intriguing time." In his opinion, liberalization had created a lot of challenges. The Ambassador noted the difficulty of finding political leaders willing to discuss many of the evolutionary political and economic changes taking place in Egypt. Maghraby replied that "we can't deny" that there are issues in the relationship. The group of reformers of the last few years have been very "liberally oriented." He added that having now seen the realities of governance, they might have been too aggressive.

9.(C) El-Maghraby told the Ambassador that Egyptian society has three pillars: government, the people, and the press. He worried that liberalization of the three pillars had been uneven and that the pillar of the "people" needed a chance to catch up to the other two. When the Ambassador brought up the role of civil society and its importance as another pillar of a free society, the minister responded defensively, saying the US focuses on a few key incidents (such as the arrest of Ayman Nour) and must look at the greater context of the progress made in Egypt. The GOE, he said, must maintain "a certain balance." El-Maghraby pointed to unprecedented press freedoms as evidence of political liberalization; however, he later complained about the media suggesting that Egyptians are not used to being critical of the media and tend to believe what they hear. He claimed that the GOE has a need to protect Egyptians from "harmful influences." -------- Comment: --------

10.(C) El-Maghraby remains firmly in the camp of Egypt's economic reformers and is considered an ally of Gamal Mubarak. Though well-respected, the wealthy and western-educated Minister has been accused by the press of being out of touch with the reality of the life of the average Egyptian. The nearly three years he has served as housing minister appear to have tempered some of his optimism about prospects for reform. SCOBEY

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