New North Sinai Governor Mowafi told poloff his top priority was
to increase economic opportunities. He plans to increase the size
of the El Arish port to facilitate an export economy, expand
agricultural production in the coastal areas, and build heavy
industries in central Sinai and the industrial zone in El Arish to
keep a higher percentage of the value chain in Sinai.

Full Document

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Content
S E C R E T SECTION 01 OF 05 CAIRO 000249

NOFORN
SIPDIS
DEPARTMENT FOR NEA/ELA

E.O. 12958: DECL: 2020/02/25
TAGS: PGOV, PREL, KPAL, KWBG, IS, EG
SUBJECT: Development and Peace Key to Resolving North Sinai Problems

REF: 10 CAIRO 177

CLASSIFIED BY: Margaret Scobey, Ambassador; REASON: 1.4(B), (D)

1. (S) Key Points:

-- New North Sinai Governor Mowafi told poloff his top priority was
to increase economic opportunities. He plans to increase the size
of the El Arish port to facilitate an export economy, expand
agricultural production in the coastal areas, and build heavy
industries in central Sinai and the industrial zone in El Arish to
keep a higher percentage of the value chain in Sinai.

-- Sinai MPs told us that comprehensive economic development is the
solution to resolving Sinai's problems including providing
security, eliminating smuggling and controlling terrorism. They
stressed that the provision of water was needed to facilitate
development.

-- Local Sinai leaders questioned the Government of Egypt's (GoE)
commitment to Sinai's economic development because Cairo's approach
is oriented toward military control not attracting investment.
They said Cairo's policies discourage local and foreign involvement
in favor of "Nile Valley" investors.

-- Egyptian and Bedouin leaders agreed that problems in Sinai are
closely linked to problems in Gaza and Israel. The Governor and
MPs said that Egypt is unlikely to exercise control over the
smuggling problem until it has a "partner" on the other side of the
border.

-- Islamic NGOs responded quickly to provide assistance to those
whose homes and property were damaged by recent heavy rains. The
GoE has promised compensation, but government assistance was
"taking time."

-- MPs and local leaders expressed frustration USAID's Life Sinai
project had been ineffective. Some leaders believe that the delay
is damaging the reputation of the USG in Sinai.

2. (S/NF) Comment: Mowafi was cerebral about Sinai's problems and
appears willing to listen to and engage with Bedouin leaders. He
is focused on creating sustainable economic opportunities for the
people in North Sinai. However, mutual distrust between Sinai
Bedouin and GoE officials will make cooperation difficult and
Mowafi will have to deal with various GoE agencies and historical
cooperation and commercial problems. The GoE remains anxious about
our Sinai contacts; we learned halfway through our meeting with
local council members that the discussion was being recorded by
Egyptian State Security (SSIS). Our contacts from central Sinai
were met by SSIS prior to our meeting. However, unlike past
meetings, SSIS gave them permission to meet with us, but they were
instructed "not talk about any of their problems." During our
February 9-11 trip El Arish residents were excited that President
Mubarak would visit the city for the first time in his 28-year
presidency during the week of February 13. However, Mubarak did
not make the visit and we have heard of no plans to reschedule.

New Governor Respected, Represents Hope for Change

3. (C) New North Sinai Governor Mourad Mohamed Ahmed Mowafi told
poloff during a recent three-day trip to northern Sinai that his
top priority for North Sinai is to increase economic opportunities.
He plans to increase the size of the El Arish port to facilitate an
export economy, expand agricultural production in the coastal
areas, build heavy (sand glass, marble and limestone) industries in
central Sinai and the industrial zone in El Arish to process the
raw materials and keep a higher percentage of the value chain in

CAIRO 00000249 002 OF 005

Sinai. (names and titles removed) , Nekhl local council member and leader of the
Bedouin Desert Association, said Governor Mowafi is educated on the
Sinai Bedouin and wants to engage with them unlike the previous
Governor, whom they described as fixated on military control.

Local Leaders Question Cairo's Commitment

4. (S/NF) (names and titles removed), told us Cairo is "ignorant
of Bedouin culture" and its use of the Egyptian police and military
to "control the population" rather than engaging in dialogue with
the Bedouin sheikhs is counterproductive. (name removed) said the
extreme security measures used to control Sinai makes people feel
like they are "under siege." He said the people in Sinai want
security, but the tactics of Egyptian security only make them angry
and dissatisfied.

Economic Development to Resolve Sinai's Problems

5. C) (names and titles removed) told us that comprehensive economic
development is the solution to resolving Sinai's problems including
providing security, eliminating smuggling and controlling
terrorism. (names removed) said the inability to attract
capital to the Sinai/Gaza/Israel border area limits growth in
Sheikh Zoweid and Rafah. (Note: Sheikh Zoweid and Rafah have
predominately Bedouin and Palestinian populations and are the
location for many of the tunnels that supply Gaza. End Note). (names and titles removed)
economic development efforts should target the youth because they
are the most affected by unemployment and the most prone to anger
and violence. El Kassas believes "economic investment will bring
security."

6. (C) (name removed) told us the northern coastal areas of
Bir El Abd, El Arish, Shaykh Zoweid and Rafah produce olives,
tomatoes and fruits, but need processing plants to convert these
products into higher end oils, sauces and juices for export.
(name and title removed) supports the idea of an industrial zone and expanded seaport
because central Sinai's mineral resources are currently either sent
to Cairo for processing or exported as raw materials so much of
their potential value to Sinai is lost.

Water Needed to Sustain Agriculture Development

7. (C) (name removed) told us that that sustainable development should
focus on a "community and family approach" to agriculture and
animal husbandry since most Sinai Bedouin are either farmers or
herders. He said water is needed for both industries to succeed. Al
Roqei also encouraged the development of the handicraft industry as
a way for Sinai Bedouin women to contribute to the family income.
(names and titles removed) said projects in animal husbandry such as raising
rabbits to sell in Egyptian markets could create livelihoods for
central Sinai Bedouin women and youth.

8. said the(C) (name and title removed)
youth in Rafah know how to farm, and we confirmed that he presented
a plan to USAID's Life Sinai program for the digging and pumping of
wells to create livelihoods. (Note: Life Sinai is a USD 9 million
project to help develop Central Sinai. El Alayan's proposed wells
are in the northern coastal area and are of medium depth (between
60-90 meters) unlike wells in central Sinai, which are around 1,000
meters deep. End Note). (name removed) suggested the creation of a
"youth villages" where 1,000 young, poor families would be given a

CAIRO 00000249 003 OF 005

house and 6 feddans to farm. The three Bedouin MPs also support the
extension of the Salam canal from Bir El Abd because it could
provide 300,000 more feddans for farming, but (name and title removed) said Egypt and its development partners
should consider the desalination of Mediterranean Sea water coupled
with drip irrigation as an alternative to extending the Salam
Canal. (Note: USAID believes that extending the canal would
actually cost a multiple of USD 50 million and yield questionable
economic value. End Note).

Unfavorable Investment Climate

9. (S/NF) (name removed) told us that three local Bedouin investors,
some of whom are MPs, recently had their proposal to construct a
cement factory denied by Cairo because "there was no supporting
infrastructure for the plant." However, according to (name removed),
the two existing cement plants, owned by Nile Valley businessman
(name removed), are allowed to bring in 2000 cubic meters of water a
day from a desalination facility in Rafah to aid in operations, and
the Egyptian military was granted permission to build a similar
cement factory. (name and title removed) told us he believed that the Bedouin cement factory proposal
was rejected after pressure from (name removed) who is a friend of President
Mubarak. He said this decision had a "discouraging effect" on the
local population because even MPs are not allowed to "participate"
in economic growth areas. (name and title removed) added that Cairo always has
good words on economic development, but there are never any
commensurate actions. As an example, (name and title removed) told us that
the Ministry of Tourism has a long-standing plan to establish
tourist resorts along the 200 kilometers of shoreline in North
Sinai, but has yet to open an official tourism promotion office in
the Governorate.

10. (C) (names removed) Egyptian laws prohibiting foreign
ownership of land and requiring foreigners to have an Egyptian
partner are a deterrent to investors. (name removed) stated that the
inability to own land is a significant factor dissuading foreign
investment because investors fear the land can be expropriated at
any time as a result of the GoE's imminent domain. (Note: Foreign
ownership of agricultural land is prohibited, but Egyptian law does
allow 100 percent ownership of investment projects, with limited
exceptions. Given Sinai's status as a military zone, the the
foreign ownership law may not apply. End Note).

11. (C) (name and title removed) stated that investors are afraid to put money
into North Sinai because of its close proximity to Gaza. He stated
that internal Palestinian issues need to be solved before North
Sinai can "begin to grow its economy and provide real security for
the people." (name removed) believes that if there were a solution to
Gaza and borders were opened for trade that the area would
experience an "economic renaissance."

Gaza Solution Vital to North Sinai's Security and Development

12. (S) (names removed) were happy about Egypt's construction of
the underground steel barrier along the border because it is needed
to "protect the Egyptian homeland." Despite (name removed) support, he told
us that the North Sinai local council believes it will increase
tensions on both sides of the border and could lead to violence in
North Sinai as displaced smugglers look for other ways to make
money. He said the international community needs to consider
opening the borders to allow for the legal supply of food and
medicine into Gaza and help with security in North Sinai.

13. (C) Governor Mowafi said smuggling in Sinai is a "national
security issue" because weapons from Israel are making their way
into North Sinai. He stated that smuggling will not stop until
Egypt "has a partner on the other side of the border in Gaza."
Mowafi said HAMAS has "an anti-Egypt agenda", which has put
regional and local pressure on the GoE and exacerbated problems

CAIRO 00000249 004 OF 005

with the North Sinai population and the Muslim Brotherhood. He
believes that Israel should either support the reconciliation of
HAMAS and the Palestinian Authority, or return to the Philadelphi
corridor to help control smuggling. He noted that Sinai tribes
such as the Suwarka, Tayaha and Tarabeen have members living in
Gaza and Israel and this renders Egypt's unilateral attempts to
control illegal activities nearly impossible.

14. (S/NF) (name and title removed) agree that the smugglers are
filling a void created by Israel's policy of denying basic
shipments to Gaza. (name removed) said Bedouin do not think in terms of
nationalist identity, but are only focused on making money. (name removed) stated that Israel should act responsibly and allow food and
medical supplies in to Gaza, which would greatly reduce the demand
for smuggling, but noted that Egyptian soldiers aid smugglers in
exchange for cash payments. Additionally, Egyptian subsidies make
smuggling of oil products profitable. (name removed) told us that low
octane fuels and diesel can be purchased in Egypt for around 2 New
Israeli Shekels (NIS)/liter (USD 0.53) and sold in Gaza for 7.5
NIS/liter (USD 2).

Rains Flood El Arish; Benefit Central Sinai

15. (SBU) Mowafi told us that North Sinai received four times its
average rainfall during January and the first half of February.
This water coupled with run off from Israel created havoc in El
Arish's wadi (riverbed) and surrounding neighborhoods (reftel). He
said "construction violations" in the wadi were all destroyed by
January floods as were the roads linking West and East El Arish.
(Note: The North Sinai Governorate allowed people to build houses
in the wadi, facilitated the construction of a bus terminal and the
open market in the area, and the Egyptian Ministry of Youth built
its Olympic Village there. All were destroyed during the floods.
End Note). However, Mowafi and central Sinai Bedouin leaders said
the rains had benefitted central Sinai by increasing the
groundwater and creating agricultural opportunities. However, (name removed)
said the lack of tractors will mean that 60 percent of the land
will still go uncultivated. (Note: USAID's Life Sinai project is to
provide five tractors for central Sinai agricultural sector
development, but they will not be delivered until sometime between
April-June 2010. End Note).

Islamic Organizations Provide Assistance, GoE Slow to Respond

16. (SBU) (name removed)told us that local NGOs played the biggest role in
helping people in El Arish that were affected by the floods. He
said the Shabbat Muslimat (Young Muslim Women's Association) was
the most organized NGO and the first to respond to flood victims by
providing emergency assistance. (name removed) told us that the Muslim
Brotherhood also provided immediate medical care for those injured
in the floods. Soheir Gelbana, President of Shabbat Muslimat, told
us the organization organized NGO volunteer efforts to assist those
displaced by the flood. Local volunteers packaged and delivered
emergency kits that included blankets and clothing for men, women
and children as well as basic food kits with oil, sugar, rice,
beans and lentils.

17. (SBU) (name removed) praised the efforts of the local NGOs and
Sinai University for providing cash, emergency aid and medical
services for those who were injured or lost their homes in the
floods. He said the GoE promised restitution for lost homes, but
this was "taking time." (Note: President Mubarak promised LE 50,000
(USD 9,090) for families that lost homes during the flood. End
Note). (name removed) stated that the GoE-NGO cooperation was needed,
but was not taking place due to government mistrust of the NGOs.

Growing Frustration with U.S. Assistance

CAIRO 00000249 005 OF 005

18. (C) All the MPs and local councilmen praised USAID's past
efforts in working with the North Sinai Businessmen's Association
(NSBA) to build a microcredit industry, but they expressed
frustration USAID's current Life Sinai project had "not implemented
any projects in two years." (Note: USAID and its contractor lack
unfettered access to many of the project sites in central Sinai.
End Note). The MPs and central Sinai councilmen asked why buses
purchased to take Sinai children to school have sat in the
Governorate parking lot since September. (name and title removed) said the
locals were keenly aware that the USAID-purchased buses were used
during the recent visits of PM Nazif and First Lady Suzanne
Mubarak, but were not being used to take children to school as
intended. NSBA Chairman Mahmoud Al Refai acknowledged his
organization had great success in working with USAID on the
microcredit project, but said the decision to turn Life Sinai's
implementation over to "an Egyptian liaison" was damaging the
reputation of the USG in Sinai. (Note: NSBA was involved the Life
Sinai bus transportation project for which it spent 35,000 Egyptian
pounds (USD 6,400). However, a dispute between NSBA, the North
Sinai Governorate and USAID's contractor over financing has left
the buses sitting in the Governorate's parking lot for the past 5
months. End Note). (Comment: USAID is working with the North Sinai
Governorate to resolve project implementation and access problems.
End Comment).
SCOBEY