Military Aid to Egypt

As part of the 1979 Camp David Accords, the United States has channeled billions of dollars in military assistance to Egypt; the flow of annual grants to Egypt has remained steady at $1.3 billion per year since 1987. In the early 1980s, Egypt decided to modernize its Army by procuring a new main battle tank. Egypt sought and received U.S. financial support for building a tank factory near Cairo, and later, for coproducing M1A1 tanks there. This report (1) discusses the rationale behind the U.S. decision to coproduce the tanks with Egypt, (2) compares the cost of coproduction with the cost of providing complete tanks, and (3) provides information on future plans for the Egyptian tank factory.

GAO found that: (1) the Defense Security Assistance Agency's (DSAA) decision to support U.S.-Egyptian coproduction of the M1A1 tank instead of supplying them directly was made for political reasons, raised Egyptian expectations for further U.S. support, and increased program costs by $1.9 billion; (2) although Egyptian officials believe that the additional costs of coproduction are justifiable and will foster economic development, modernization of the Egyptian tank fleet, self-sufficiency in tank production, manufacture of light armored vehicles, expansion of arms exports, and maintenance of M60 tanks, many of these expected benefits have not been realized and could further increase program costs; and (3) in anticipation of the end of the program in 1998, Egypt is seeking to convert the M1A1 factory for civilian production of heavy equipment that could directly compete with U.S.-made heavy equipment.