EGYPT

CHALLENGES AND VIEWPOINTS

The Government of Egypt places great importance into the agricultural sector, recognizing its significant role in the national economy. It accounts for about 20 % of both GDP and total exports and about 34% of total employment. The agricultural sector contributes to the overall food requirements of the country and provides the domestic industry with agricultural raw materials. It promotes industrial development through expanding the market for industrial goods such as pesticides, chemical fertilizers, equipment and machines. Also, agriculture helps in financing economic and social development through the capital outflow from agriculture to other sectors of the economy.

The policy framework under which the agricultural sector operated up to the end of the 1970s was characterized by heavy government interventions in production, trade and prices. Also the agricultural sector was highly taxed in favour of other sectors of the economy. This had several negative impacts on agricultural development and food security.

In the 1980s, Egypt started a national economic conference shared by all political parties, drastic reforms of the past agricultural policies began to be introduced within the framework of an agricultural sector strategy in Egypt for the 1980s. Since then, the agricultural sector has clearly been at the forefront of other sectors of the national economy in initiating liberalization and privatization reforms.

The agricultural economic policy reform program has included a wide variety of measures. It has included:

1. Gradually removing governmental controls on farm output prices (this does not preclude government voluntary guarantee prices for some strategic crops); crops’ areas; and procurement quotas.
2. Increasing farm gate prices to cope with international prices.
3. Removal of farm input subsidies.
4. Removal of governmental constraints on private in importing, exporting and distribution of farm inputs to compete with the Principle Bank for Development and Agricultural Credit ( PBDAC ).
5. Removing governmental constraints on the private sector in importing and exporting agricultural crops.
6. Gradually diverting the role of the PBDAC to financing agricultural development projects.
7. Limitation on state ownership of land and sale of new land to private sector.
8. Confining the role of the Ministry of Agriculture (MOA) to Agricultural Research, Extension and Economic Policies.
9. Adjusting the land tenancy system.
10. Adjusting the interest rate to reflect the commercial rate.
11. Adjusting the foreign exchange rate to reflect the real value of local currency.

The Ministry of Agriculture also developed a strategy for agricultural development in Egypt in the 1990s. This further deepened the agricultural economic policy reform program which was already initiated by the sector, to take into consideration local, regional and international economic, social and political changes and to outline a sector development program for this decade within the context of the national development plan. Within this context, the main objectives of the strategy are :

1. Ensuring the optimum allocation and utilization of agricultural resources (particularly land and water) together with conserving, improving and developing these resources to achieve sustainable agricultural development, i.e., increasing production and incomes (efficiency or growth) together with attaining equity and combined with environmental aspects.
2. Better utilization of comparative advantages to increase exports and to contribute to the over all food security of the country.
3. Creating new opportunities for gainful employment in rural areas.

In outlining and formulating this strategy, the Ministry of Agriculture was guided by the discussions with political parties and the consultations with several international organizations, i.e., IBRD, UNDP, FAO, WFP and UNEP. The strategy was also discussed by the Shourah Council. This strategy was presented in the meetings of the World Bank Consultative Group for Egypt in Paris in January 1994 and it was submitted to 30 donors attending the meetings. The donors appreciated and endorsed the strategy and expressed their willingness to participate in financing the investment program and projects identified in the strategy particularly the following projects which are of high priority in this regard:

• Irrigation improvement and on-farm soil and water management programs;
• National agricultural research, extension, marketing and export promotion programs;
• Agricultural intensification program in the new and old new lands;
• Grant financed technical assistance programs for strengthening policy analysis capabilities of both the Ministry of Agriculture and the Ministry of Public Works and Water resources, for enhancing the involvement of rural women in the rural economy and for restructuring and strengthening the agricultural co-operative system.

It is worth mentioning that this is the first time that the agricultural sector is to be included in the agenda of the meetings of the World Bank Consultative Group for Egypt and that collaboration with donors and international organizations has enabled the sector to gain access to grants, training, capacity building and advanced technology.

A Conference on the impacts of the Agricultural Economic policy reform program on Food and Aagricultural Development in Egypt was jointly conducted by the Economic Affairs Sector of MOA and IFPRI in Cairo in November 1993, where the preliminary positive and side impacts of the program were discussed. Following that, a comprehensive quantitative study on that subject was jointly completed by the two Institutions. Also, an Agricultural Policy Conference (Taking Stock - Eight Years of Egyptian Agricultural Policy Reforms) was jointly conducted by PBDAC, MOA and USAID in Cairo in March 1995.

Studies on the impacts of the   agricultural economic policy reform program on agricultural development in Egypt have shown that Egyptian farmers have been highly responsive  to agricultural research findings, agricultural extension, technology transfer and price incentives and that the agricultural economic policy reform program has significant positive impacts on the  agricultural sector performance.

Such impacts are :

1- The cultivated area increased from 6.2 million feddans in 1982 to 7.8 million feddans in 1995 and the cropped area increased from 11.2 million feddans in 1982 to 14.4 million feddans in 1995. It is targeted to reclaim about 150 thousand feddans yearly.

2- The total value of agricultural production increased from L.E. 5.8 billion in 1982 to L.E. 50 billion in 1995 and the agricultural income increased from L.E. 4.1 billion in 1982 to L.E. 37.6 billion in 1995.

3- The value of plant production increased from L.E. 3.5 billion in 1982 to L.E. 33.7 billion in 1995.

4- The value of livestock production increased from  L.E. 2.3 million in 1982 to L.E. 14.2 billion in 1995.

5- The total production of the main strategic food crops has tangibly increased. The total production of cereals increased from 8 million tons in 1982 to 17.5 million tons in 1995. Wheat production increased from 2 million tons in 1982 to 6 million tons in 1996. Maize production increased from 3.3 million tons in 1982 to 5.8 million tons in 1996. Rice production increased from 2.4 million tons in 1982 to 5 million tons in 1996.

6- The total production of vegetables increased from 8 million tons in 1982 to 14.5 million tons in 1996 and the total production of fruits increased from 2.6 million tons in 1982 to 6.6 million tons in 1996.

7- The total production of sugar increased from 649 thousand tons in 1982 to 1.1 million tons in 1996. Sugar imports decreased to about 450 thousand tons in 1996.

8- The fish production increased from 200 thousand tons in 1982 to 432 thousand tons in 1996.

9- Yields of strategic food crops have increased. The yield of wheat increased from 9 ardabs per feddan in 1982 to 17 ardabs per feddan in 1996. The Yield of maize increased from 11 ardabs per feddan to 21 ardabs per feddan. The Yield of rice increased from 2.4 tons per feddan to 3.5 tons per feddans. The Yield of sugar cane increased from 34 tons per feddan to 47 tons per feddan. Egypt occupies the first rank in the world with regard to the yield of rice and sugar cane.

10- The yield of cotton in 1993 was the highest since 60 years i,e, about 8 kantars per feddan.

11- The value of agricultural exports increased from L.E. 471 million in 1982 to L.E 2.0 billion in 1996.

12- Credit facilities available to the agricultural sector increased from L.E. 1.2 billion in 1982 to L.E. 6.7 billion in 1996.

13- State investments in the agricultural sector increased from L.E. 370 million in 1982 to L.E. 3.2 billion in 1995/1996.

14- Self sufficiency ratios of food crops have increased. There is self sufficiency of rice, vegetables, fruits, dairy products, poultry, eggs and fish and there is also a surplus for export of these crops. In 1995 the exports of potatoes amounted to around 450 thousand tons ,i.e., three times that of potatoes exports in 1994. Exports of oranges in 1995 amounted to about 200 thousand tons The self sufficiency ratio of wheat increased from 25% in 1982 to 55% in 1996 and the wheat imports decreased from 6 million tons in 1982 to 5.3 million tons in 1995 in spite of the increase of population and increase of wheat total consumption from 8 million tons in 1982 to 11 million tons in 1995. As a result, Egypt was elected for the first time to Chair the International Wheat Council during the 1994/ 1995 session.

15- The food gap in Egypt is narrowing. Projections to the year 2000 now show a potential food gap that is only 17 percent (4.5 million tons) of the food gap projected in the early 1980's (26 million tons).

16- Net incomes of the farmers have improved by about 25%.

17- The average annual rate of growth of agricultural production increased from 2.6% in the 1980's to 3.4% in 1990's.

However, there are some side effects which usually accompany the agricultural economic policy reform programs particularly in the short run. Some effects are related to the increase in cost of agricultural production as a result of cancelling input subsidies, increasing input prices and increasing rents. Others are related to some marketing bottlenecks and the decrease in farm gate prices of some horticulture crops in the new reclaimed areas. The Ministry of Agriculture is seeking financial support for the Agricultural Prices Stabilization Fund and is initiating a Voluntary Agricultural Insurance System to protect and stabilize farmers incomes.

Also The Ministry of Agriculture is also concerned about the impacts of the New GATT (World Trade Organization) on our production, exports and imports of main agricultural products and particularly on our exports of cotton, rice, vegetables and fruits and our imports of wheat, sugar, oil seeds and red meat. The Ministry is trying to maximize the benefits and minimize the burden of this agreement by means of increasing our agricultural production through vertical and horizontal expansion for import substitution and export promotion, reducing the cost per unit of production, improving the quality and increasing our competitiveness in the international markets. Also, the Ministry is concerned about increasing our agricultural exports through Egypt - Europe and United States Partnerships. We are aiming at increasing our agricultural exports to reach at about U$ 1.5 billion annually.

Future Prospects of Agricultural Development in Egypt