ICNL logo

The International Journal
of Not-for-Profit Law

Volume 12, Issue 3, May 2010

A publication of the International Center for Not-for-Profit Law

Table of Contents

Letter from the Editor

Restrictions on Foreign Funding of Civil Society

Special Section

Introductory Overview
International Center for Not-for-Profit Law

Mohamed ElAgati

Debebe Hailegebriel

Aleksej Bogoroditskii

Sri Lanka
Rohan Edrisinha

Marcos Carrillo


Maintaining Control: Recent Developments in Nonprofit Law and Regulation in Vietnam
Mark Sidel

The NGO Law: Azerbaijan Loses Another Case in the European Court
Mahammad Guluzade and Natalia Bourjaily

The Origin of the Species: Why Charity Regulations in Canada and England Continue to Reflect Their Origins
Peter Elson

Legal Forms of Civil Society Organizations as a Governance Problem: The Case of Switzerland
Georg von Schnurbein and Daniela Schonenberg

- - - - - - - - - -

PDF Download this issue (PDF)

Editorial Board


Mohamed ElAgati1

Since the beginning of the 1990s, the issue of foreign funding of civil society organizations (CSOs) has been controversial in the Arab region. Some are supportive; others are critical. Hypocrisy is not uncommon in the debate; for example, some of those who seek to discredit rights-based groups because of their use of foreign funding are the same people who welcome foreign financing in other areas, including sensitive areas such as political parties and the media.

Governments in the Arab world generally do not welcome the existence of rights-based organizations or advocacy-based pressure groups, especially where these CSOs seek to criticize government policies and actions and to raise awareness among the public and international community of government shortcomings or violations of international agreements. Moreover, many of the human rights principles promoted by rights-based CSOs – such as gender equality and freedom of speech and belief – face strong opposition from some active political forces in Arab countries.

The regulatory principles relating to foreign funding are not well established in the Arab world. In examining the issue of foreign funding, questions abound: What is the purpose of the funding? Why do other people (or organizations or governments) finance projects aimed to improve the situation of the Arab citizen? Why do they spend their own funds to support our basic rights?

In considering the issue, it is important to keep in mind the following facts. First, CSOs must be creative in using foreign funds, avoid wasting funds, and work toward greater financial independence in the long run. Second, although Arab governments depend heavily on foreign aid, it is impossible to challenge the hypocrisy of these governments for receiving foreign aid while simultaneously criticizing or burdening the receipt of foreign aid by CSOs. Third, the development and stability of society in the Southern Mediterranean region and the Arab world is directly connected with stability in Europe. Improving the political and economic environment will lower the rate of illegal immigration to the United States and Europe, will assist in countering the danger of extremism, and will open new markets.2

A. Types of Restrictions on Foreign Funding

1) Law No. 84 on NGOs (2002)

The current governing law, Law No. 84 (on Non-Governmental Organizations or NGOs) (2002), allows NGOs to receive foreign funds, superseding Law No. 32 (on Civil and Voluntary Associations) (1964), which forbade organizations from receiving any foreign funding and prohibited participation in the activities of any foreign organization.3 Nonetheless, Law No. 84 contains several obstacles and restrictions to foreign funding, at both the legal and practical level. Law No. 84 on NGOs (2002) is predicated on control.4 It is based on the desire of the Government to keep the issue of foreign funding under its complete control.

Article 17 grants NGOs the right to receive funding from legal entities or individuals, but conditions this right on obtaining the approval of the Ministry of Social Solidarity. The Law grants the Ministry wide discretion in reviewing requests for approval. Moreover, there are no application procedures defined in the Law, and no criteria upon which to guide Ministerial decision-making. The Law does require the Ministry to respond to requests for approval within 60 days, but there is no clear recourse where the Ministry fails to act in a timely fashion, as is often the case.5 The implementing regulations to Law No. 84 do not clarify these questions.

Significantly, Law No. 84 distinguishes between (1) funds sent from abroad (including from Egyptians living abroad) and identified as “foreign funding,” which requires advance approval, and (2) funds sent from within Egypt (including from foreign organizations registered in Egypt) and identified in the law as “local funding.” The latter category – “local funding” – is not subject to advance approval; instead, NGOs must simply notify the Government of the funding received. In practice, however, the Ministry of Social Solidarity also requires that NGOs apply for approval to receive this category of “local funding” – that is, funding from foreign organizations registered in Egypt.6 This practice contravenes Article 65 of the Law, which guarantees the right of NGOs to receive funds from foreign agencies that have obtained permission to operate in Egypt.

In addition, the Law also states that an NGO’s budget, if it exceeds 1000 EGP ($180), must be approved by the Ministry of Social Solidarity, further complicating the procedure for obtaining foreign funding. Because the threshold is so low, virtually all NGOs are subject to this requirement, which was highly criticized by the United Nations Committee on Economic, Social and Cultural Rights in 2002.7 The rule is even more disturbing when considered alongside the penalty for non-compliance, which includes imprisonment of up to six months and/or a fine of 2000 EGP (Article 76).

2) Proposed Amendments to Law No. 84

After nearly two years of work on three draft laws, the Ministry of Social Solidarity announced that no new law will be produced, but that instead a committee will work on modifying the existing law. The members of the committee were appointed by the Ministry, and include two experts, two Ministry officials, two from the General Union of Associations, and an NGO representative (reportedly a representative of a service delivery NGO formed by the Government, and therefore more truly a GONGO representative).8 The General Union of Associations is an entity that organizations are free to join and is run by a board of members appointed wholly by the Minister. It is well known that the Union does not include independent organizations.

The Government's declared efforts to revise Law No. 84 come at a time when the Government is suppressing civic organizations and stifling the freedoms of association and speech as well as other forms of social and political activity.9 Efforts to amend the Law go hand in hand with attempts to abolish all forms of social and political activity. The clear power imbalance between the State and citizens facilitates the Government's attempts to suppress the movements seeking to promote freedom and democracy. A contributing factor is the decline in external pressure exerted on the Arab and Muslim world due to the fight against terrorism. Most tellingly, for the first time since the establishment of human rights organizations in Egypt, the Government closed down two major organizations, the Center of Trade Unions and Workers Services (established in 1992), and the Association of Human Rights Legal Support (established in 1994), based on an amendment made to Article 97 of the Law’s implementing regulations issued by the Ministry of Social Solidarity in 2005. According to this amendment, instructions carried out by the Ministry to dissolve any association could take effect immediately.10

To date, the Government has refrained from officially announcing the proposed changes to the current Law. Egyptian NGOs and a “freedom of association coalition” have demanded several times that the Ministry of Social Solidarity publish the proposed amendments to the NGO law, but to no avail – a clear violation of the principle of transparency and accountability. Some members of the committee, especially Mr. Abdul-Aziz Hegazi, former Prime Minister and current Chair of the General Union of Associations, have attended seminars and workshops, where suggested modifications to the Law were discussed. Moreover, there have been leaks about the planned restrictions that the Government plans to impose on ability of Egyptian NGOs to raise funds.

In addition, several modifications to the rules governing the General Union of Associations,11 which are contained in the Law No. 84, have been proposed, which would:

It is not clear if the nomination would be considered obligatory or merely a suggestion that the donor agency could ignore. Practical experience indicates, however, that even if the nomination were not obligatory, it would be difficult to ignore. This policy approach would place the needs of funding organizations over and above those of general society since all projects would in this case originate from the donors themselves. This also runs counter to the accepted wisdom that organizations should apply for projects based on their own principles and agendas. Moreover, this approach would further jeopardize the independence of civil society. Although these amendments have not been formally announced, they reveal the Government's intentions to restrict the limited freedoms now available to CSOs.

3) Implementation Practices

Barriers to foreign funding arise not only from legal requirements, but also from regressive implementation practices.

A significant extra-legal implementation practice relates to the involvement of security services in the foreign funding determinations. The Law clearly does not require the approval of the security services. NGO representatives, however, report that the Ministry of Social Solidarity does not approve foreign funding applications without their approval. Some also added that the process often involves coordination between the chiefs of security departments in different governorates. Many believe that the approval of security departments is a green light for the Ministry to officially approve the funding. Reportedly, reservations made by security departments in some ministries make obtaining the approval of the security department in the Ministry of Social Solidarity impossible.12 One NGO representative commented as follows:

The administrative authority sends it [the request for approval of foreign funding] to the Directorate of Social Solidarity, Financing Section to investigate the foundation requesting the funding. It also writes a report for the Ministry. The Ministry sends the report in turn to the Security Department in the Ministry to obtain its approval (National Security Department - State Security) and after 60 days – that's the law – a decision is made, although usually months pass before securing approval. Of course these practices are not based on the law.13

A second key area of manipulation is the time period for reviewing and deciding on foreign funding approval requests. As previously mentioned, there is no recourse for NGOs whose requests have not been answered within the 60-day time period. In practice, the Ministry may delay issuing a response for up to one year. Such delays not only impact on the implementation of a specific project, but may also threaten the NGO’s existence, where it undermines the NGO’s ability to pay wages and fulfill its obligations.

NGO representatives have also noted that the delays in securing approval for funding can render project implementation untimely and inappropriate, and even lead to the termination of a project. For example, an NGO was scheduled to launch a project in January 2009, but only secured approval at the end of July, seven months after the beginning of the implementation period. Other project contracts signed in May 2009 were approved only at the end of January 2010, more than seven months after the beginning of the implementation period.14

A third implementation barrier relates to inspections. The Law vests the Ministry with full authority over financial auditing. Based on this authority, the Ministry has increased the number of inspection committees; these committees spend long periods of time reviewing the records of the NGO, especially in the governorates. For example, in Al Menia governorate, an NGO was subject to a very detailed inspection for six months, through various overlapping committees. In addition, the Law on Local Governance gives authority to governors to conduct inspections of NGOs, which increases the burden on NGOs, and hinders NGOs in conducting their work efficiently and implementing their programs effectively. As one NGO noted:

For example, we launched the campaign of "freedom of association." We used to conduct seminars and organize protests in front of the Ministry of Social Solidarity; then afterwards, or even during the protests, we received a phone call, informing us of an inspection by the Ministry and the Central Auditing Organization (CAO), though the CAO is not authorized to do so. Furthermore, there was security interference and threats of suspending the activities of the campaign.15

Similarly, frequent government requests for documents, data, and reports may also amount to a constraint against NGOs. The practice can overwhelm the NGO and drain its resources every time it undergoes the process of applying for foreign funds. The requested documentation includes items that are not supported by the law. According to one NGO:

We face many problems as a result of the multiple bodies overseeing foreign funding. As an organization, our activities are known and specific. I should not need to introduce the organization every time I apply for funding to the Ministry of Social Solidarity. Moreover, there are multiple steps to the process; every time I am compelled to secure new approval from the security department, which takes so much time. A few years ago, during our participation in the Coalition of NGOs organized to change the previous NGO Law, I began to face many problems from the Ministry of Social Solidarity, which rejected a number of applications submitted to get approval for funding.16

4) The Impact of Foreign Funding Restrictions

In recent years, with the increase in the number of CSOs and the range of their activities, the issue of funding has emerged as one of the most controversial issues within civil society. The limited possibilities for local funding, whether from governmental or private sources, have forced human rights organizations in Egypt to seek foreign funding. The receipt of foreign funding, however, has subjected CSOs to accusations from the Government and from independent media agencies that the funding was granted in order to implement hidden foreign agendas. As a result, Egyptian CSOs are facing serious challenges relating to financial sustainability and the continuity of their activities.17
To provide illustrative examples of how foreign funding restrictions and financial auditing can be used to strike at the very existence of human rights CSOs in Egypt, here are three brief case studies:

B. Justifications

1) Declared Justifications

The Egyptian Government promotes false information regarding the funding received by civil society. According to the Government, civil society groups exist to harm national security, with the financing of millions of dollars from European and American institutions.22 This accusation greatly influenced the votes of Members of Parliament in favor of new legislation imposing more restrictions on NGOs, especially relating to the acceptance of foreign funding or joining networks and international institutions.23 Indeed, Parliamentary discussion of the draft legislation was based on the principle that foreign funding has negative effects on national security.

The Egyptian Security Department views the NGO sector as a threat to be dealt with rather than as a partner to be supported. From the Security Department perspective, NGOs working in the rights field are a threat to national security, NGOs active in the economic and social fields are a threat to social stability and cohesion, and those operating in the cultural field represent a threat to public morality; confronting these dangers is therefore critical to preserve and promote national security.

Most recently, and perhaps most disturbingly, Mr. Abdel-Aziz El-Hegazi, former Prime Minister and current Chair of the General Union of Associations, accused CSOs – and particularly those working in the field of human rights – of threatening national security and fostering increased corruption. He stated that he does not believe that human rights activities have any value, and demanded that security services tighten their grip over the NGO sector. NGOs signed a statement expressing strong disapproval of these statements, especially as they came from the lips of the Chairman of the General Union of Associations, a body which is currently leading efforts to draft expected amendments to the Law on NGOs. Moreover, the statements come alongside new leaks about the planned restrictions that the Government plans to impose on the work and ability to raise funds of Egyptian NGOs.

2) Underlying Motivations

The NGO sector, through its involvement in all manner of social, economic, and cultural rights issues, upsets the powers that benefit from the status quo. The oppression of civil society, especially private organizations and institutions, is an integral part of the state system, which includes the oppression of political parties, unions, and social movements. Just as the system restricts pluralism in the political party domain, it has restricted NGOs. Restrictions that include advance governmental approval for activities and financing tend to reveal the bureaucracy and security concerns dominating the mentality of legislators.24 In the view of some, the Egyptian Government is seeking to reduce the role of NGOs in Egypt and to paralyze the human rights movements. Some NGOs have a well-developed structure inside and outside Cairo and the different governorates, and are able to engage the people in addressing their problems. Such activity is suspect in the eyes of the Government and a reason to curb the role and work of these organizations.25

C. Responses and Lessons Learned

Navigating the existing legal framework. NGOs and private organizations seek to overcome the legal obstacles and constraints by various means. One option is to avoid registering as an NGO under Law No. 84 (2002) with the Ministry of Social Solidarity and instead to register as a branch of a foreign institution, as did the Cairo Center for Human Rights Studies, or as a law firm or company, as did the Hisham Mubarak Law Center. A second option is to conclude contracts for projects in the form of civil service contracts, under the supervision of the Ministry of Investment and Taxation Agency, as is the practice for the Ibn Khaldoun Center. Third, where organizations are registered as NGOs, they often scrutinize the names of projects and expense items in their records to mask anything that may indicate involvement in pressure campaigns or anything else that may give rise to governmental concern. Most NGOs also seek to maintain positive links with governmental contacts and involve them personally in some of the NGO’s activities.

In addition, NGOs have also sought foreign assistance to overcome the conflicts with administrative bodies. Funding agencies sometimes become involved in the matter whether they want to or not, especially in cases involving the seizure of funds they have released or when they are forced to defend their reputation.26

Improving the legal framework.
A key strategic response must be to develop and improve the legal framework, so that it enables political participation, the devolution of power, and the creation of a secure environment for the promotion of democracy, freedom of association, freedom of expression, etc. In the absence of such a legal framework, it will be difficult to achieve positive changes to the NGO Law in particular or for civil society more broadly.

In part, the goal of legislative reform must be to motivate the private sector to support and fund independent civil society directly. The need to request approval for foreign funding must be replaced with a requirement simply to provide reports on funding. Mandatory public disclosure of funding information (making budgetary information available on websites or in official newspapers) could also strengthen public trust.27

NGO Transparency.
NGOs should seek to comply with high standards of transparency and accountability. It is their duty to declare resources and exchanged items and make the information available to all.

The Role of Funding Institutions. The role of funding institutions must be to support local CSOs in their struggle and to deal realistically with the Government, while refraining from imposing further obstacles against CSOs, such as requiring complex accounting systems or registration under repressive laws.

Funding institutions should not bow to pressure from the State. Interference from all parties should be resisted. In other words, funding institutions should remain independent and certainly not collude with “governmental nongovernmental organizations” established as competitors to independent civil society.

Donors should recognize the importance of an enabling legal framework, which should not only guarantee fundamental freedoms, but also build the basis for greater trust between the sectors and meaningful NGO/government cooperation in addressing development needs. In addition, donors should be cognizant of the capacity weaknesses within governmental departments and ministries, and prioritize programs that seek to increase the capacity of governmental staff to deal effectively with NGOs.28


1Mohamed ElAgati is Executive Director, Arab Forum for Alternatives, www.Afaegypt.org.

This paper is made possible with the generous support of the American people through the United States Agency for International Development (USAID). The contents are the responsibility of the authors and do not necessarily reflect the views of USAID or the United States Government.

2 Negad Elboraie, A Manual for Funding, United Group, Cairo, w.d., p.3.

3 Abdel Mawla Ismail, Tyranny of the Law, and the Retraction of the Egyptian Civil Society, Land Center for Human Rights, Cairo, 2002, p.6.

4 Press release issued by the Cairo Center for Human Rights Studies, 1 May 2009.

5 Mohamed ELAGATI, Undermining Standards of Good Governance: Egypt ’s NGO Law and Its Impact on the Transparency and Accountability of CSOs, ICNL, 2006.

6 Press release, ibid.

8 Interview with NGO activist.

9 Press release, ibid.

10 Essam Eldin Sharaf, Towards a democratic law to the liberalization of civil work in Egypt, by the Cairo Center for Human Rights Studies, Ibid, p.23.

11 The Union rules are contained in part 3, chapter 2 of the Law No. 84 on NGOs (2002).

12 Essam Eldin Sharaf, ibid, p.23.

13 Quotation from interviews with CSOs.

14 Quotation from interviews with donor organizations.

15 Quotation from interviews with CSOs.

16 Quotation from interviews with CSOs.

17 Abdallah Kahalil & Vivian Mourad, Human Rights Organizations and Society Development, paper presented to the National Council for Human Rights, Cairo, 2007, p.1.

19 The MEDA program is the principal financial instrument of the European Union for the implementation of the Euro-Mediterranean Partnership.

22 Despite the propaganda surrounding foreign funding, the Minister of Social Solidarity urged the U.S. Ambassador and the Head of the European Commission delegation in Egypt to increase their funding!

23 Negad Elboraei, After 25 years did the foreign funding help in the democratic change, United Group, 2004, p.2.

24 Editor: Medhat ELZAHED, Future of Civil Society in Egypt, Development Support Center and Elfostat Center, Cairo, 2003, p.58

25 Quotation from Interviews with CSOs.

26 Mohamed ELAGATI, ibid.

27 Mohamed ELAGATI, ibid.

28 Quotation from interviews with donor organizations.

Copyright © 2012 The International Center for Not-for-Profit Law (ICNL)
ISSN: 1556-5157