In mid-October 1993, the New York Times ran a series exploring in detail how influential agribusiness firms have managed to reap huge profits from Agriculture Department programs designed to promote US exports. One case in point was Comet Rice, a subsidiary of Los Angeles-based Erly Industries, whose chairman, Gerald D. Murphy, is a conservative Republican with many friends among Reagan-Bush administration officials.
In 1987-1988, Murphy orchestrated a successful bid by a group of well-connected Jordanians, operating as Amman Resources, to secure a $4 million loan from the US Agency for International Development to build an automated rice processing plant in ‘Aqaba. USAID apparently believed it was dealing with a Jordanian firm and that US rice processors would have equal access to the new plant. In fact, Amman Resources refused to process rice from other US companies, and the ‘Aqaba plant, subsidized by US taxpayers, allowed Comet to secure 80 percent of the huge Iraqi rice import market. By 1990, Comet’s sales to Iraq accounted for almost one third of Erly’s total revenues.
This kind of symbiotic relationship between government and big business is, of course, nothing new, but this shady episode merits close attention for another reason. Among Erly Industries’ other subsidiaries is Chemonics, which readers of this column will remember as the consulting firm which won USAID’s multimillion-dollar contract to run its Governance and Democracy Program for the Middle East. As those columns showed, the thrust behind this USAID initiative is not so much to foster popular participation in government as it is to ward off popular opposition to the socially painful “structural adjustment” programs which the International Monetary Fund and others are imposing on several Arab countries.
According to the Times, Chemonics has in recent years been one of Erly Industries’ few profitable subsidiaries, perhaps because it had such good access to the public trough for so long: 98 percent of its revenues come from USAID contracts. Erly chairman Murphy acknowledged to the Times that Chemonics’ excellent connections with US and foreign officials and its long-standing links with USAID had helped his other subsidiaries (like Comet Rice) find effective ways of profiting from government programs. And Chemonics itself seems to have been pretty confident about its ability to secure USAID business: Inside sources report that even before it had actually been awarded the USAID democratization contract, Chemonics was signing up people to head the project, at very comfortable salaries.
Now lean times may be ahead for Chemonics. USAID itself has come under fire from critics who argue that it is a wasteful and inefficient relic of the Cold War. In the future, public money may not flow to consulting firms quite so liberally. Some Clinton appointees at the agency are said to have it in for Chemonics, which they regard as having waxed too fat during the years of Republican rule, and perhaps as too close to Arab governments as well. Among these is Thomas Dine, former director of the America-Israel Public Affairs Committee (AIPAC), the most powerful pro-Israel lobbying organization in the US. Dine is now special adviser to USAID’s Bureau for Europe and the Newly Independent States. When the latest round of USAID contract awards was announced in late September, Chemonics had won almost none of the contracts it had bid on from this bureau, in sharp contrast to its usual high success rate. Panic is said to have set in at Chemonics, and Erly Industries’ efforts to sell the consulting firm have run into trouble as potential buyers have suddenly lost interest.
Meanwhile, one of the Chemonics Middle East democratization teams has come under fire for the worst of reasons. Robert Springborg, whose work on Egypt and Iraq has appeared in these pages, is now a senior political analyst with USAID’s Democratic Institutions Support Project. Springborg was attacked in the August 20, 1993 Forward, a New York-based Jewish newspaper, on spurious charges of being anti-Israel and pro-Iraq. An official of Australia’s equivalent of AIPAC charged that Springborg was “nothing more than an apologist for Saddam Hussein” during the Gulf crisis. Others denounced Springborg for being pro-PLO, anti-American, a Vietnam war-era draft dodger and an opponent of Holocaust education. Springborg had been attacked along similar lines in a short item which appeared in the April 26, 1993 issue of National Review.
Springborg has rejected the allegations as ridiculous, but his bosses at USAID have apparently been feeling the heat. Though an agency representative insisted that no action would be taken against Springborg, he also sought to reassure critics by declaring that Springborg is “not in any way making policy for the US government.” Springborg reportedly has been under pressure from USAID officials to remove himself from the team working on plans to support the development of political institutions in the West Bank and Gaza.