Egyptian Market
Egyptian Market
Post NARP Activities | Back to Index

Strengthening agricultural development is a critical element of economic development. USAID’s strategy in Egypt aims at increasing the competitiveness of the agriculture sector by investing in systems that will support the production of goods that contribute to increased market share in both domestic and international markets. USAID/Egypt works with numerous participants in agricultural development in Egypt with the following goals:

• to promote policies that support the ability of farmers and other rural producers to improve their production;

• to provide sound legal framework within which businesses can operate; • to integrate small and medium farmers into the export sector;

• to enable scientific development of new and more productive varieties;

• to improve agribusiness responsible for processing products and assuring timely flow of agriculture inputs to develop new and profitable markets; and

• to provide schools and universities that prepare students for the skills needed in real life.

Agriculture-Led Export Businesses (ALEB)

One of the recommendations of the NARP review committee was to develop activities in market research and development for both export and domestic markets. In recent years, the demand for processed foods in major markets has increased the demand for convenience foods. Egyptian processed foods have been far from a major beneficiary of this trend; processed foods make up a tiny proportion of Egypt’s exports. ALEB was designed to provide technical assistance and support to Egyptian food processing companies, ancillary service firms, and trade associations. (8,14, 15, 33, 64)

Its objective was to enhance global competitiveness and increase exports of processed foods in the following ways: • by collecting, analyzing and disseminating market information;

• integrating new food processing technologies;

• improving adherence to international food quality and safety standards; • enhancing marketing in line with consumer business skills;

• strengthening associations;

• and forming strategic alliances

How Did They Proceed

Industry and manufacturing is one of the key sectors to the Egyptian economy. In the last decade, manufacturing was transformed by the privatization of state-owned enterprises and reforms that encourage the private sector. USAID Egypt worked hand in hand with the Egyptian government to help clusters of specific industries improve their opportunities to compete in global markets. This is conducted through the collaborative efforts of the private sector and policy makers to strengthen the business environment, raise production standards, create buyer-seller market linkages and reduce or remove impediments to investments.

Industry specific assistance was provided for the food processing industry and ancillary industries (e.g., packaging, pest control, etc.) and associations to improve their competitiveness and help achieve sustainable export growth. USAID/Egypt through the Agriculture Led Export Businesses (ALEB) activity worked to help food processors and service firms to improve and optimize their current processing, management, operation, quality, personnel and other systems, with an eye on improving product quality, production efficiency and, hence, exports of processed food products. USAID assistance was focused on five primary target product clusters: dehydrated fruits and vegetables, frozen fruits and vegetables, herbs and spices, juices and concentrates and pickled products. Assistance to the processed food industry included services to assist:

• Companies operating in the food processing industry improve their marketing, production, and management systems and to access financial services. These included providing sources of market information, tailored technical assistance in the areas of marketing and production economics, and packaging, labeling, and product development. USAID also sponsored study tours to trade fairs worldwide to introduce Egyptian exporters to new markets and form strategic linkages with importers and suppliers.

• Market Pulse Egypt (MPE), annual Situation and Outlook Reports in five commodity clusters, and Special Opportunity Focus Reports. These sources of market 159 information assisted companies operating in the food processing industry to better orient their planning and marketing strategies to meet the demands of target markets. Technical assistance for the processed food companies was provided in the areas of marketing and production economics. In production economics, for example, USAID/Egypt provided assistance in all issues that influence a company's profitability and ultimate success In the world market place, which includes marketing, food input supply, process operations, quality assurance, organizational structure, management, and business and strategic planning. Among the programs that were offered: ISO 9000, Hazard Analysis and Critical Control Points (HACCP)(64) and other programs that focus on HACCP prerequisites, such as pest control and sanitation.

• Technical assistance and training were also provided to service companies (pest control, packaging, cold storage, etc.), in order to enhance their ability to serve the processed food Industry, as well as to strengthen cross linkages between food processors and service companies.

• Further support to the processed food industry included developing resources for trade associations, assisting associations with developing strategic alliances, organizing study tours, training in policy advocacy and following up on market linkage and strategic alliance opportunities and helping ALEB’s client companies to pursue these opportunities.

What Did They Accomplish?

By the year 2004, ALEB had delivered technical assistance to 36 food processor and service firms. Technical assistance has been delivered on a variety of topics, including, new product development, organic certification, cold chain technology, and US food labeling regulations. 160 ALEB have been working with six companies as a "pilot" group to receive technical assistance in implementing a quality program in their plants. As the original six companies complete their plans, emphasis and effort were shifted to other companies. It is worth mentioning that Hazard Analysis and Critical Point Program (HACCP) certification is an integral step to entering European and American markets. From March 2004 -June 30, 2004, ALEB conducted seventeen workshops on various technical subjects such as Internal Auditing and Environmental Regulations for Export. As of end of June 2004, ALEB conducted a study tour, bringing twelve participants to training in quality management, to Italy to give several Egyptian tomato processors the opportunity to see Italian tomato processing facilities, farms and tomato variety trials.

ALEB has also conducted study tour to the post harvest course at the University of California in Davis, field trips to packing houses, cooling and storage facilities, produce distribution centers, modified atmosphere facilities for transit and storage, and transportation terminals in California.

Via ALEB's website, the project also delivered key technical information. This includes a series of "toolboxes" on export standards; on HACCP implementation; on US nutritional labeling which it presented on a workshop on Package Labeling and Design and to the Chamber for Food Industries. ALEB also conducted a workshop at HEIA on Crop Varieties for the Food Processing Industry.

In addition, ALEB assisted four processors to procure commercial quantities of vegetables. The Seeds and Varieties program has brought several new products to the market, and other new products to the stage of advanced development. These include Pickled Gherkins (Hi Tadi company), Frozen Sweet Com (Givrex, Farm Fresh and Farm Frites co.), Baby Artichokes (EgySpan; not new but 161 lower cost of materials since the field yield is about double) and Whole Peeled Tomatoes (Harvest). ALEB has also worked with HEIA, on post-harvest issues. Thus far in 2004, ALEB has worked with ten local short term technical experts in areas such as HACCP, process measurement and personal hygiene for workers.

ALEB attempted to capitalize on Egypt’s unexploited export marketing potential, particularly in the European Union and the Gulf and Middle East. It addressed many of the competitiveness challenges that will affect Egyptian agriculture over the next decade. Moreover, as the skills ALEB helped to develop in processed food exports move backward along the supply chain, they will more easily be transferred to producers who sell only domestically. High quality processed foods manufactured locally will help enable Egyptian processors to meet the growing demand from the domestic market and compete more successfully with imports, which are certain to increase with the advent of the World Trade Organization. Marsh (64) (FAO 33)(FAO 34)

Food Export Council

A more complete story on the new Food Export Council can be found in chapter 9, but the following excerpt sets the tone for its efforts:

"The FTC will be run as a demand-driven private business in every sense of the word," Berzi says, "with the overall objective of helping the Egyptian food industry develop into world-class exporters. We will tackle issues like accreditation, hygiene, food safety, technical assistance, testing and professional training."

Agricultural Technology Utilization and Transfer (ATUT)

With the conclusion of NARP, it was clearly recognized that much of what had been done in this program needed to be continued and expanded. Research had to be expanded in the areas of horticulture and field crops. Extension and technology transfer capability was still immature and needed improvement. New varieties were needed with improved resistance to pests; tolerance to environmental stress efficient use of water. Further it was clear that improved and expanded research in the basic sciences of genetics and biotechnology would be essential factors for such accomplishments. The project which was developed with USAID for this mission was Agricultural Technology Utilization and Transfer (ATUT). It was active from 1995 to 2002. (10,14,15, 32, 45, 48, 55, 85, 91, 99)

Specifically, ATUT aimed to: improve agricultural technologies in Egypt by identifying and transferring to the private sector improved horticultural production, post harvest handling and marketing technologies, by developing a carefully focused, improved collaborative strategic research program aimed at resolving the major constraints to increased productivity of selected staple crops such as rice, corn, wheat and fava bean, and by supporting the expansion of research and use of biotechnology.

Accomplishment In field Crops

From the records the authors have found, it appears that improvements in the horticulture area were the main focus, but ATUT was successful in improving yields in the field crop area. Income per feddan at LE 790 for rice, LE 686 for wheat, LE 499 for maize, and LE 1,197 for cotton. The Agricultural Policy Review Program has estimated gross 163 operating margins per kilogram for fine green beans a LE 1.46 (higher than ATUT’s later projection because of a higher farm-gate price) compared with LE 1.12 for cotton; LE 0.94 for fava bean; LE 0.66 for New Land potato; LE 0.40–LE 0.490 for Valley potato, bobby bean, rice, and wheat; and LE 0.24 for maize.

Accomplishments in Horticulture

Selected crops which have a competitive advantage in export markets were identified and moved to commercial scale.

A product/market development system that provides a foundation for further growth has been established, but is not yet self-sustaining.

An effective mix of production, post-harvest, transportation, and marketing support were delivered to selected growers/shippers.

A reasonably effective association of growers, exporters, and export support organizations known as the Horticultural Export Improvement Association (HEIA) has been established, but is not yet self-sustaining.

Production and sales results for horticultural crops

Table grape exports grew from 1,200 tons in 1998, to 6,600 tons worth $22.2 million in 2001. Exports for 2002 are projected at 8,200 metric tons;

Fine green bean exports increased from virtually none prior to ATUT to an estimated 19,700 tons valued at more than $23 million in 2001-2002;

strawberry exports increased from a little more than 2,000 tons at $10.6 million in 1998-1999 to 5,600 tons worth $22.7 million in 2001 and to 6,300 metric tons in 2002;

Cut flower exports in 1999, the year ATUT started the cut flower promotion program, were only 4.5 million stems valued at about $500,000. By 2001-2002 the country was exporting 33.2 million stems worth $5.7 million;

Increasing area cultivated for melon export from the trial one-feddan with Africare in Wadi El-Said in Upper Egypt in 1997 to some 250 feddans. Around 70 percent of melons planted for export in 2002 were of the Galia varieties that were introduced by ATUT project. Two additional varieties: Charantais and Italian cantaloupe; Piel de Sapo were also successfully cultivated for export. –

New varieties of mango were introduced in Egypt for export in the European Union (EU) market. These include: Tommy Atkins, Kent, Keitt, Sensation, Van Dike, Austin, Sell and other red blush or red color selections that are well accepted in the EU market.

Total exportable yields of horticultural crops were estimated to be about 50 percent of total yields with some 2,300 jobs created from this increased export production. It is expected that continued technical improvements will raise product quality to EU. standards, and that production of EU and Persian Gulf export quality table grape and strawberry will increase significantly over the next 10 years—to:

• 67,500 metric tons of strawberry,

• 45,600 metric tons of table grape, and

• 960 million stems of cut flower.

However, there is a question about whether the target markets for these products will be of sufficient size to purchase these quantities. Egypt may reach its maximum market share of the identified cut flowers by 2006, of strawberries by 2007, and of table grapes and fine green beans by 2012. Of these, only table grapes appear to have domestic demand of sufficient size to absorb second grade fruit from excess export-grade production. The magnitude of these implications for Egyptian producers is such that the export market projections for Egypt developed using the unmet-demand model should be thoroughly reviewed as soon as possible.

Critique of ATUT

Marketing While the production focus was valid and succeeded in significantly increasing exports. It was known that the primary constraint to expanding exports of the key horticultural commodities was their failure to meet export quality standards. The ATUT approach was to focus the project on upgrading production and on export sales, rather than marketing. Hence it became clear that this approach was short sited and did not adequately address the development of systems for gathering and disseminating market intelligence and for strategic market analysis and planning. In addition program coordination was lacking between ATUT and other organizations concerned with exports, such as the relevant units within the Ministry of Foreign Trade.

On the other hand, the project team assisted growers and exporters to identify and negotiate with buyers. These skills have been important in the growth of fresh commodity export sales. Because of the emphasis on sales rather than marketing, however, most of the larger growers and exporters did not have access to an adequate market intelligence system nor have they gained the capability for developing effective medium and long term strategic marketing planning capabilities.

Extension (Technology transfer) & Working groups

One of the most important deficiencies, however, was the failure to recruit and train local associates for the Ronco technical team. It was reportedly the original intention of the RONCO/ATUT subcomponent to employ local technical assistants to assist and be trained by the Ronco technical experts, in order to leave behind a trained cadre of local horticulture consultants .

The intensive, one-on-one service delivery approach pursued by the Ronco consultants has been largely responsible for the excellent progress made by their producer clients. This strategy, however, had the effect of limiting the scope of Ronco direct technical assistance and technology transfer to a very small portion of the total horticulture sector. The Working Groups were able to transfer technology to more industry participants, but their coverage was limited by the relatively small number of people involved in the groups and their part-time participation.

There were no explicit provisions in the project for a human resource development/training subcomponent. While producer responses indicate that the on-farm training approach utilized by the Ronco team and the Working Groups was quite effective, the project, and the industry, would have benefited from the application of a planned and organized human resource development effort.

The improvements in productivity and export capability engendered through project-supported technology transfers have been institutionalized by the project beneficiaries and are thus sustainable. Beyond this aspect, the primary vehicle for the sustainability of project initiatives is represented by HEIA, which has been nurtured and 167 supported by ATUT. The fact that HEIA has progressively improved its industry service capabilities and reduced its dependence on ATUT is an encouraging sign in terms of the continued sustainability of project initiatives. (RONCO- 83)

The Agricultural Policy Reform Program (APRP)

Governments must work with agriculture-based industry to minimize the difficulties of adjusting to increased competition when liberalization occurs. Globalization of the world economy is an established fact. Removal of trade barriers, increased foreign investment, and enhanced competition should be accepted with purpose, care and with ample safeguards, but accepted just the same. Since the 1980’s, the Egyptian government has moved toward trade liberalization and a market economy especially through the agricultural economy. Agricultural reform began in 1986 with the Agricultural Production Credit Project followed by the Agricultural Policy Reform Program in 1996. (1,14, 15, 17, 18, 21, 26, 27, 30, 35, 37, 40, 50, 51, 59, 72, 80, 81, 86, 92)

The Agricultural Policy Reform Program has helped the Government maintain progress on liberalizing agricultural markets and remove policy barriers to private sector participation in agriculture. The government has moved from being the major actor in all realms of economic activity to a role of providing the legal and regulatory framework necessary for the private sector and to the support of market driven trade and investment.

This study documents the fact that policy reform is more than issuing decrees, passing laws, and promulgating 168 regulations. Appropriate technical content is critical, but the process of change cannot be ignored. In support of the changes in roles and in achieving the benchmarks, APRP has contributed to results in the following ways:

• APRP provided technical expertise in analysis, international best practices, data collection methodologies, and training course design. Particularly important was assistance to the process side of reform in work shop design and facilitation, implementation planning / monitoring, awareness and dissemination.

• APRP served as a neutral broker between the Government and the private sector, and between government agencies. The various sets of actors remained confident that APRP was not taking sides, and thus were willing to listen to and follow APRP experts' recommendations.

• As a policy interlocutor with the Government throughout the elaboration of the benchmarks for the program's tranches, APRP helped to design implementation roadmaps, and facilitated legitimization of the benchmarks as targets.

• APRP's implementation reform support strategy, by working simultaneously at multiple levels (central to local) with many partners (public and private) and by building in some early successes, maneuvered around implementation roadblocks, showed stakeholders that change was possible.

• APRP successfully leveraged its resources and impacts. This contribution is exemplified by the collaboration with the German GTZ's Cotton Sector Promotion Program.

Results From APRP Horticulture

An overall picture emerges of positive and significant impacts of APRP technical and process assistance on all of the, benchmarks reviewed. The Government has taken steps to allow the private sector to play a larger role in pest management and extension services for horticultural exports. Through pilot efforts, public and private-sector actors are building new capacities to work together and to take on new functions in pest management, and research and extension for horticulture. Construction is underway of a cold storage facility under private-sector management at the Cairo airport. The ministries of agriculture and of foreign trade are providing more and better information to the private sector and are engaging trade associations in policy discussions and decisions.

The ministries of agriculture and of water resources and irrigation are cooperating in a new real-time irrigation information system that is improving the efficiency and effectiveness of Nile water use by Egyptian farmers. Trade associations and cooperatives have become more adept at mobilizing their interests, expressing their needs, and influencing agency behaviors.

Steps Toward Privatization Cotton

The GOE took several steps towards liberalizing and privatizing the cotton sub sector; however, a more comprehensive approach to 1iberalization is still needed. Despite the government’s efforts to liberalize the cotton sub sector, public sector textile companies are still struggling with high prices for cotton, which is the main input of production, amounting to 60% of the production costs. In addition, public textile companies are bound by the government wage and bonus system that entitles workers to' an annual raise of 15% regardless of the company's sales and revenues. Thus public sector companies are heavily burdened by rising costs and decreasing revenues. It is very difficult to privatize the public textile companies under such operating conditions. Encouraging imports of cheaper shorter -staple lint is one way to reduce spinners' input costs in Egypt. To this point, public spinning companies have obtained imported lint only through the Holding Company. If the Holding Company is concerned about burgeoning lint stocks and excessive carryover from one year to' the next, it will not import shorter -staple lint even if it is priced far lower than the cheapest Egyptian varieties, Gizas 80/83.

The stagnation in the privatization program in the textile industry is in part due to the over all unfavorable market conditions; however, it is mostly due to the chronic problems that are plaguing the public sector textile companies. These include excess labor, large accumulated losses, large bank debts, and most of all unmarketable output. High prices for Egyptian lint are a major handicap for public sector textile companies in the domestic market. After the devaluation, public sector companies have been able to capture greater domestic market share; however, they are still facing stiff competition in the export market. High raw material costs for Egyptian lint, redundant labor, and poor quality yarn hurt the international competitiveness of domestic spinners, particularly public ones.

Improving the quality of yarn products is key if public sector spinning and textile companies were to succeed in reducing their large inventories and improving their financial situation. Some observers argue that many public sector spinners spin too wide and too low a range yarn counts and should narrow the range and, if possible, increase the average count. Other observer’s feel that most public spinners. should concentrate on spinning low counts of yarn using cheaper, shorter-staple imported lint. Whatever strategy is chosen, it appears unlikely that significant funding will be made available for technical restructuring, particularly upgrading plant and machinery. Without such upgrades, the long-run validity of many public spinners can be called into serious question.

A comprehensive plan is needed to restructure the cotton and textile sub sector. Without dealing with the root of the problem, it will be difficult to privatize public textile companies. Note that CSPP and the High Cotton Council are leading a cotton sub sector strategy exercise that may attempt to define, more accurately, public spinning industry requirements. This strategy exercise is not, however, intended to address privatization issues. Nevertheless, developing a comprehensive strategy to deal with the sub sector’s problems and the underlying issues that hinder privatization would have a positive impact on encouraging private participation in the cotton and textile sub sector, which can boost the privatization program of public textile companies.

To facilitate the sale of ginning capacity, a necessary first step is to deal with the excess capacity in the industry. The GOE should start by implemen1ing the unpublished Holding Company plan to close 13 public gins to reduce capacity to a more optimum level. This would likely allow ginners to charge higher rates, which could make ginning more profitable. Once made more profitable, public ginning companies would become more attractive privatization prospects. Higher returns would also allow ginners to invest more in improved ginning cleaning and baling techniques.

Finally the GOE moved in the right direction when it adopted the new strategy to privatize the loss-making companies. However, more aggressive unbundling of public companies may be required to encourage their sale in the near future until a more comprehensive plan to restructure the sub sector is adopted.

In terms of APRP benchmarks, these results have produced clearly visible benefits regarding: a) state withdrawal from cotton pest management, b) promotion of trade associations, c) effective use of real-time irrigation system information, and d) improvement in agricultural statistics.Benchmarks where some initial benefits have emerged or where there is high potential for future benefits include: a) reorientation of agricultural research and extension services, b) establishment of the private-sector operated cold storage facility at the Cairo airport, c) promotion of cooperatives, autonomy and functioning (including cotton marketing), and d) promotion of private-sector participation in policymaking.

Performance of Public Textile Companies

The overall performance of public sector companies has been deteriorating over time. In addition, the financial performance has been worsening at an increasing rate over the past five years between 1997 and 2001. In 1997 net revenues of the HC were more than LE6.3 million but fell by almost 54% to reach LE 2.9 million in 2001. Earnings before taxes for the profit-making companies declined by 54% as well while loss-making incurred an increase in losses by 30.7% over the same period.

In the annual report presented to the board of the SWRMCHC at the close of FY 2000/01 the HC identified interest pa and wages for redundant labor to be the main reasons behind the continued poor financial performance. Excluding the non-textile companies, the HC burdened by LE 1 billion of accumulated interest payments in June 2001, up from slightly less than LE 900 million in 2000. In addition, the burden of redundant labor wages was up 4.4% from LE 226 million in 2000 to LE 236 million in 2001, with higher salaries off setting the lower number of workers. It is worth noting, however, that most of the burden and drain on the HCs resources can be attributed to the textile companies and their worsening performance over the past five years.

Management Contracts

In an attempt to prepare public companies for privatization, the S\\'RMC -HC sought the expertise of specialized management firms. Through the newly established Egyptian Company for Development of the Textile Industry, the HC is in the process of implementing and monitoring four management contracts in Misr-Helwan S&W, Nasr-Mehalla S&W, Shourbagui, and and Cairo Artificial Silk. Unfortunately, the overall performance of these management contacts has not been satisfactory.

Privatization of Cotton

Ginning Industry Ginning industry privatization started in 1996/97 with the sale of Arabia Ginning and Nile Ginning. Both were majority privatized through the stock market, through small groups of investors quickly controlled a majority of the shares. The sale of other public ginning companies has stalled due to the high value of the land on 'which the gins are located. In addition, a large excess capacity exists in the industry and, thus, the private sector is reluctant to invest when ginning revenues and net returns remain low. At this point, the prospects of privatizing the remaining public ginning companies seem rather slim.

Both public and privatized ginning companies have implemented ERPs. through which a total of 540 workers were released from the industry at a total cost of LE 12.5 mil1ion and an average cost per worker of LE 23.190.

Post-Privatization Performance

The privatized companies, particu1ady Arabia Ginning have witnessed considerable technical and managerial improvements after the transfer of ownership to the private sector. Arabia's new management has improved seed-cotton cleaning and introduced full and partial mechanized feeding which resulted in a 35% increase in output per unit of time. In addition. a new quality control department was established to review ginning operations and ensure quality for exports. Arabia has also imported new ginning stands from India and replaced the equipment in a number of its gins. The new stands have the advantage of saving energy, as their power consumption is 15% less than traditional stands and their post-devaluation cost was 66% of that of the traditional English ones, including custom duties. Also, both Arabia and Nile Ginning have introduced new UD bale presses. Exporters can export lint cotton directly from the gins avoiding costly Farfarra (blending) and repressing in Alexandria.. According to the limited data available on the financial performance of privatized companies, Arabia Ginning witnessed a significant improvement in its financial performance with an increase in profits of 25.6% immediately after- privatization. Arabia maintained the same level of profits into 1998/99. Nile Ginning, on the other band, recorded a decline in profits for the year immediately following privatization.

Privatization of Spinning and Weaving Companies

So far the GOE succeeded in privatizing four companies (Unirab, Alexandria Spinning & Weaving, KABO. and Bolivara), in addition to liquidating one company (Cairo Silk). Production units in four other public companies have been 1eased long-tenn (5-10 years) to private operators. Most of the privatization achievements took place between 1996 and 1998, and the progress in privatizing textile companies has been halted since 1999.

Privatization in the Rice Milling Industry

The privatization of the rice milling companies was completed in 1998/99, by which time the private sector had already invested heavily in new mills. Therefore, the privatization of public mills was of little interest to the 175 private sector at that point which resulted in selling all 7 rice mills to Employee Shareholder Associations (ESAs). The rice milling companies were majority privatized with the ESAs having 90% of the shares and the HC keeping 9.9% of the shares. The remaining 0.1% was sold to individuals to ensure that the company qualifies as a shareholder's company under the Egyptian Law.

Since privatization, employment in ESA rice milling companies dropped by almost 57% by early 2002. This drastic reduction in labor vas achieved through both early retirement and regular retirement programs. At an average cost of LE 22.592 and a total cost of LE 70 million., the HC released 3.107 workers of the rice milling companies through the early retirement program (ERP).

Conclusions from the review conference held in July 2002

In a number of areas, reform progress has been steady but is still incomplete. There is a need for more work in cotton, cooperatives, pesticide licensing, registration of dealers, and field supervision and research and extension, There is serious danger of back-sliding on fertilizer use and supply. The wheat sub sector, particularly the milling industry, has significant GOE intervention, a set of policies that seem to work at cross-purposes, and an overcapacity problem that has gotten worse since APRP began. The immediate danger in rice appears to be past but there seems to be no real GOE support for a paddy buying system dominated by the cooperatives or forced through PBDAC sales rings, so little is likely to change in 2002/03. Greater paddy supplies, with a larger crop, should lead to lower paddy prices, easing criticism of private traders.

There are many critical issues associated with the production and marketing of cotton. Private sector market shares in cotton trading, ginning, spinning, and exporting increased during APRP, but future gains will be difficult to realize without a renewed GOE commitment to liberalization and more active efforts to privatize pubic trading, ginning and spinning companies.

There were several comments about building local capacity to do applied policy research and extension. APRP is not generally perceived as having left much capacity in place, though it provided expertise in policy reform design, implementation, monitoring and evaluation. Such work continues to be heavily dependent upon expatriate-led technical assistance teams. At the height of APRP (mid- 1998 through September 2000), there were ten expatriate advisors working in MALR and seven in MWRI.

Despite the acknowledged dependence on expatriate TA, no consensus emerged on how to lessen this dependence and develop sustainable institutional capacity. Different discussants preferred strengthening capacity in different types of institutions: GOE ministries, trade and industry associations, and local universities. Barring any radical departure from past practice, the current technical assistance model, where local consultants are hired from universities, a thin layer of consulting firms, agricultural research institutes, and among a pool of retired civil servants and holding company officials, is likely to prevail.

One way to strengthen the capacity of Egyptian universities would be to award competitive research grants to specific departments, under the leadership of strong individual academics. Rather than merely hiring professors as consultants, USAID and other donors could encourage interested academics to work in teams of professors (senior and junior) and graduate students, developing coherent proposals and work plans for doing a particular contracted piece of research. While this would place more burdens on USAID contractors to select grantees, competition would be introduced into academic consulting. A premium would be placed on the quality, feasibility and cost of particular proposals, rather than on seniority or academic prestige.

Another way to develop capacity to do market research and improve market information is for advocacy organizations to fund or co-fund such work. The stronger industry and trade associations need to develop their own capacity (and use their own funds) to gather, interpret and publish market information. Their willingness to pay competitive salaries (or consulting fees) to qualified professionals who can perform these services remains uncertain, however.

Lessons learned

A number of lessons emerge from the study:

• The public and private sectors need to work together as partners to take advantage of each one's distinctive competencies/ capacities.

• Policy projects can serve as an important impetus for initiating change, and their budget support is a motivator for pursuing reform.

• The Government of Egypt's gradualist implementation strategy has led to series of short-run successes, but some interpret it as ambivalence and weak commitment. For long-term benefits, reformers and donors need to "stay the course."

• The demand side of policy reform is critical. Government commitment and ability to supply reform is enhanced by pressure from the private sector and civil society. Private-sector demand making capacity is not always used in support of intended agendas of reforms, but this is not a reason to abandon reform. Some degree of deviation from the ideal is to be expected.

• When using pilots as an implementation strategy, scaling up is critical to generating intended program impacts. Key challenges include: 178 1. Marshalling the resources to facilitate the expansion 2. Coping with insufficient existing capacity to support scaling up 3. Confronting interest group politics, whose effects can to some extent be mitigated in pilots, which emerge more forcefully with scaling up.

Agricultural Business Linkages (AGLink) (3, 14, 15)

Started in 1996, agribusiness linkages for Egypt (Aglink) was a 7 year initiative which made an impressive contribution to transforming and strenghtening the Egyptian livestock sector. It increased the quality and availibilty of milk and meat for local consumption, created a substantial rural employment base and stimulated trade linkages with the US. Aglink was awarded first place ranking for three consecutive years by Price, Waterhouse 179 Cooper based on the number of recomendations adopted, services delivered and trade linkages facilitated.

What Did AgLink Do

Aglink increased the productivity, efficiency and sustainability of large commercial, medium and smallholder clients by providing technical assistance and training in basic technologies such as animal nutrition, health and farm management, trade development, association development and facilitating access to credit. By the end of year one, Aglink had successfully improved the efficiency and productivity of target farms and processors through the application of recommendations of US and local consultants coupled with seminars and training sessions that helped to raise awareness among targeted clientele and key stakeholders about the livestock industry as a whole.

The Egyptian meat and farm technologies association secured a bulk contract with feed supplier ROBY in Egypt for grain which it retailed to its members at reduced prices saving them 38 Egyptian pounds per ton. 2000 metric tonnes were purchased during phase one of the project. The Egyptian milk producers association reduced their feed costs by 15%, increasing the feed conversion rates by 22% and raised the overall firm capacity by 50% as a result of adopting four new practices and three new technologies. By implementing new silage technolgies, the animal health cooperative, a diary produciton cooperative, computerized its record keeping and total mixed ration practices and increased its milk production by 30% from 6 to 7.8 tonnes per day.

Initial Conditions of the Industry

Animal husbandry and milk handling practices at the farm level were often inadequate or improper. For example, AgLink found such elementary production-inhibiting 180 practices as feeding berseem before it was sufficiently dry and milking to the very last drop of milk. The project also found sanitation could be improved by raising the roof of animal sheds to permit drying of muck and by eliminating a practice of putting wet muck on the cow’s teats. In addition, feed rations are less than optimal; however, this is probably as much a question of affordability as it is lack of knowledge. This situation provides opportunities for significant low-technology, low-cost technology transfer, such as the AgLink examples. These improvements will improve the quality of milk and red meat production, increase productivity, and reduce costs. Cattle and buffalo milk issues requires an integrated approach to improve the entire sector—animal husbandry, on-farm quality, assembly transportation, and processing.

The livestock and poultry sector is traditionally highly integrated with the crop sub-sector. It was estimated that 40 percent of the total value of farm livestock production, in the form of animal power and manure, is a direct input to crop production and that 22 percent of crop products (mainly winter berseem clover) are direct inputs to livestock production. Therefore, the livestock sub-sector should be a main consideration in cropping decisions, and vice versa.

Not only is the livestock and poultry sector an important source of cash income to family farms, but of equal importance is the fact that the sector offers relatively higher opportunities for family employment. It was estimated, in the only available farm budget survey data, that the livestock sector utilized 40 percent of the total agricultural labor supply and 71 percent of female labor in agriculture (Fitch & Soliman, Livestock Economy in Egypt, 1982). Thirdly, it also benefits crop production by providing manure and draft power.

Accomplishments

A commercial livestock and poultry supply industry and a national marketing system are emerging for new products such as cheese, ice cream, processed meat, and packaged eggs. However, this industry is characterized by inefficiencies that are reflected in high product losses in milk, meat, and egg assembly and transportation; hatching chicks; and the handling of live birds. Such losses reduce volumes and lead to a reduction in quality and in producer prices. It is hoped that the Food Export Council of the Ministry of Trade and Industry (chapter 9) will be a help in improving the quality and market acceptance of these products. info@feceg.com

As a result, the Egyptian farmers benefited from:

• Increasing the importation of US Agricultural equipment for a total of $26 million dollars.

• Dramatic increases in sales among Egyptian agribusiness firms resulted in 24.5 million increased revenues and 66.15 million increased revenues among noncore clients.

• Long-term business relationships were established between Egyptian and US agribusiness firms and farmers as well.

Visits that Egyptian business people made to the US agribusiness firms resulted in new contracts signed between US and Egyptian firms valued at an averge of $70,000 dollars for each.

The Egyptian milk producers association EMPA which was formed in 1997 had a mandate defined by the founders and members based on immediate needs particularly related to advocacy, input supply services and technical assistance for the members. In its first year of operation, EMPA succesfully negotatied favorable prices for feed inputs such as cotton seed and molasses and actively lobbied for lower 182 tariffs on grain. Aglink’s association and development activities focused on building capacity through the provision of training for management, the board of directors and general membership.

Problems still facing the industry

Livestock

Beyond the farm gate, there are constraints in assembly, transportation, and processing. The most serious are in milk assembly, where inadequate facilities reduce the incentive for farmers to increase production. This is true not only of GOE assembly facilities but also of private sector facilities. There has been some improvement in private sector facilities serving or operated by modern private sector processors that produce quality products. There are also losses in quality because of lack of refrigerated transportation.

The lack of standards in livestock trading is a disincentive to production of better livestock. Standards pertaining to weight classifications and meat quality and health (as gauged by appearance) would create a direct connection in the farmer’s mind between animal husbandry practices and income received for the farmer.

The slaughtering industry is in need of major improvements. There is major overcapacity, thus increasing per-unit costs of all in processing operations. Few plants employ modern techniques. These deficiencies are directly attributable to GOE investment in slaughterhouse facilities in the past. They overbuilt and do not have the money to modernize. The entire industry, and consumers, would benefit from a rationalization of the industry that would increase capacity utilization, thereby decreasing costs that could result in reduced prices to consumers and facilities modernization (which would also lead to reduced costs).

The GOE used to subsidize feed and feed ingredients and enforce low prices for manufactured feeds. This was 183 accompanied by full governmental control on imports of ingredients and by quotas to feed mills. This promoted an inefficient industry in terms of productivity and profitability. With the removal of subsidies, a more efficient feed industry has emerged. In addition, the feed industry has received technical assistance in producing lower-cost feeds from foreign aid projects.

The E.U.-sponsored the Animal Feed Quality Improvement Project developed the technology for treating straw and crop residues with ammonia and supplementation with molasses to increase feeding value. MALR extension staff disseminated these technologies and established eight centers for ammonia feed distribution in the Delta. The GTZ has supported the Non-Traditional Fodder Project in three villages. Its objective is to integrate crop residues and by-products in animal feeds at the farm level. Accordingly, MALR has implemented some extension packages. USAID’s AgLink, Africare, and CARE projects have provided direct delivery of technical assistance to livestock farmers.

Poultry

Commercial, industrialized, high-technology poultry systems produced 73 percent of all broilers and table eggs in 2000. The industry suffers from numerous problems, most of which are related to overcapacity in all areas— production, hatcheries, feed milling, and slaughter houses. Production, feed milling, hatching, and veterinary services are largely owned by large commercial operations. Questions were raised regarding the rationalization of the slaughterhouse industry regarding the privatization of GOE-owned slaughterhouses and feed mills.

Livestock Health and Reproduction

Livestock technical and veterinary extension services are provided through MALR’s livestock production departments and veterinary departments in the governorates. Critical disease control campaigns are ongoing. However, budgets are insufficient to provide adequate services. The European Union initiated a program in 1994 to support the privatization of veterinary services by strengthening institutions, providing training, pricing of services to farmers, and identifying public roles.

Artificial insemination services are also monopolized by the same MALR departments. These services are very limited. The total number of artificially inseminated cattle cows in 1999 was only 7.9 percent of total elder female cows and just 1.9 percent of total elder female buffaloes with positive results of 65-70 percent. The Canadian Animal Production Technology Project provides technical services in embryo transfer, artificial insemination, and animal health.

The Food Sector Development Program of the European Union has allocated LE 200 million to provide technical services, artificial insemination service, a dairy board, marketing-system development, data collection and market information, dairy quality improvement, and a credit line of LE 150 million for dairy farmers as a revolving fund to develop modernize and expand their operations. Another LE 50 million has been allocated for training purposes on all levels. The program is limited in scope—20 villages in each of five targeted areas have been selected to date to receive these services. The International Development Research Centre (IDRC) of Canada has initiated a pilot project for developing a milk-recording system. The project has established a data-processing laboratory within the College of Agriculture at Cairo University that can handle data of 100,000 lactating cows. The FAO has provided a technical cooperation project for extending this center’s services into a full-scale national dairy herd improvement system, including executing genetic improvement programs, improving management practices of dairy herds, and developing a friendly-farmer-use information system.

Common issues that need to be addressed

Finance

Credit for small livestock farmers is offered through PBDAC. However, such credit is not available for those who do not own land or buildings to use as collateral. Loans for establishing commercial farms and importing stocks, equipment, and feedstuffs are also available. Producers are asking PBDAC to accept cattle as collateral and suggesting that this change can be accompanied by a special livestock insurance system to guarantee loans repayment. PBDAC interest rates are 11-15 percent, lower than commercial banks (12.5-14 percent) but higher than E.U. program loans (6.5-8.5 percent) and social fund loans (7-9 percent).

Policy

The meat and dairy-processing industries need to be rationalized, closing inefficient plants and encouraging complete privatization of Dairy and slaughterhouses and feed mills for poultry feed and livestock

Credit

Smallholders need credit to upgrade herd quality and size and to purchase milk-holding equipment that preserves milk quality. Assembly operations, existing and new, need credit to upgrade/establish their facilities and to acquire refrigerated trucks to transport milk to processing plants. Processors may also wish to use credit to purchase refrigerated trucks. Such a credit program would provide a significant market for sale of U.S. manufactured equipment.

Animal Health and Reproduction

A two-pronged approach is needed here. MALR capabilities should be upgraded and a private sector capability should be fostered. Both would be assisted by changing MALR’s policy of no- or low-cost provision of animal health products and artificial insemination to one of at least covering the full cost of materials used. Industry suppliers and veterinarians should be used to train other veterinarians as industry trainers in disease prevention and treatment. Financial support and commodity credits could be used to fund herd upgrading through artificial insemination and importation of pregnant Holstein cattle and dual-purpose breeding bulls.

Feed

The feed industry needs technical assistance to increase operating efficiency and feed quality. Concentrate feed grades and standards should be strengthened and enforced. The feasibility of providing commodity credits for feed ingredient imports from the United States should be explored.

Industry Groups

Producer associations, cooperatives, and industry associations have the potential to provide members collective services. Many, however, need assistance in the basics of association management and in coming together as associations to procure products and services, lobby the GOE for needed changes in policies and regulations, and develop new services their members will use.

Market Information

Deficiencies in the system of collecting and disseminating market information to farmers should be identified and the existing system strengthened using governorate MALR offices, producer associations, cooperatives, and other means to better disseminate information to farmers.

Agricultural Exports and Rural Income (AERI)

AERI began in the last quarter of 2003. It builds on USAID/Egypt’s previous efforts and focuses on:

• increasing agricultural incomes to stimulate rural off-farm employment, especially in Upper Egypt;

• improving the productivity and competitiveness of smallholders to achieve increased incomes; • broadening horticultural development efforts to diversify crops and markets,

• enhancing the role of small growers as suppliers to exporters,

• integrating the fresh and processed segments of the industry,

• expanding the use of good agricultural practices in horticulture;

• improving the smallholder livestock sector as a means to increase agricultural incomes, especially for women who dominate this sector; and

• bringing about world class research and training that is more responsive to private sector needs.

As of March 2005, AERI through the small horticultural activity trained about 6,119 small and medium growers, in 88 training events, to increase their capacity to respond to market opportunities. Training and workshops programs included preparing farmers for production, harvest and post-harvest handling of green beans, melons, medicinal and aromatic plants and drying and oil extraction of both essential and aromatic oils. AERI is also working through the small dairy and livestock activity on improving smallholder product quality and volume. Current efforts include providing technical assistance to Small Farmers Groups includes training sessions, seminars, video presentations, direct consultations and business linkages. Training is provided in: (1) animal herd management, (2) animal nutrition, (3) animal health care and (4) dairy processing. (138)

As of March 2005, a total of 4,806 participants attended 191 training-days. Further, AERI through ‘Support to Trade Associations and Smallholder Groups activity’ works to strengthen the capacity of smallholders in Upper Egypt to expand into new markets for horticultural and livestock products through improved linkages with agricultural trade associations, and improved market development support by those associations. Thus, AERI works to provide flexible and appropriate technical assistance and grants to support agriculture trade associations that are of critical importance for expanding volumes of high quality agriculture products (dairy and fresh/ processed horticulture) for export and the domestic market.

As of April 2005, USAID/Egypt evaluated and approved fourteen grant applications for the following:

• two feasibility studies related to grants for the construction of the Luxor post harvest facility and microbiological laboratory;

• grant to HEIA’s Cairo Air Terminal expansion facility;

• technical assistance for implementing a "Total Quality Management" system for the branding of cut flowers;

• feasibility study for re-organizing the HEIA training department; and

• two grants to the Food Processors Export Association. In addition, AERI through the ‘Institutional Linkages Activities (ILA)’ works with research biotechnology institutions in order to strengthen Egypt’s capacity in biotechnology research and its application. Efforts to promote market relevant research resulted in approving six proposals for applied biotechnology research. The proposals were selected by the Biotechnology Advisory Committee.(138, 139)

Growth Through Globalization project (GTG)

The main purpose of Growth through Globalization project (GTG) (1996 - 2004) was to promote the competitive 189 efficiency and exports of the private sector entities working in labor intensive products (US$ 133.5 million).(140))

GTG efforts included strengthening trade linkages between Egyptian and oversees businesses and connecting Egyptian firms with international trading partners. This was achieved through various services such as trade fairs, trade missions, study tours, the marketing correspondents’ network and the business matchmaking service.

Technical assistance to farmers was carried out by implementing a capacity building strategy that focused on building the marketing, technical, and financial capacities of farmer associations within a sustainable farming environment. Office equipment such as computers and fax machines were provided to the farmer nongovernmental organizations (FNGOs) depending on their needs, capacity and level of export activity. Additional support included the provision of packaging materials in order to improve the quality of their products for the export market. The FNGOs utilized this equipment, especially computers and printers, in producing promotional materials – brochures- which included information on their mission, vision, activities, and contact information. In addition, farmer associations learned how to use computer technology to analyze their production and marketing problems. Some of them worked to develop their own websites.

In order to optimize the marketing and technical assistance, USAID/Egypt emphasized the importance of investing in human resources. Training was provided through the ‘Agriculture Reform’ activity for board members of FNGOs’ on conducting Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. Training was also provided for top management of member farms and companies on Good Agricultural Practices (GAP) specifications.

There was also an effort to bridge knowledge through adaptive research by collaborative research on four food crops (rice, maize, wheat, and fava beans) among U.S., Egyptian, and international research institutes. That resulted in the introduction of biotechnology techniques in breeding programs, the development of DNA markers for bread wheat and a molecular marker map for durum wheat. (AGERI--7)

The AgReform Project—CARE

AgReform is designed to increase incomes among economically marginal farm households in Upper Egypt by improving their access to new markets and appropriate new agricultural production technologies. AgReform, initiated in the governorates of Fayoum, Sohag and Qena, in March 1996, continues to use the FarmLink Project strategy (1990-95) that directly links community-selected innovative farmers to sources of agricultural information. AgReform is based on the FarmLink experience, and has adopted most of its concepts, terminology, approaches, and data collection instruments. FarmLink successfully pioneered a participatory linking approach to agricultural extension in the horticultural sector.

As of September 30, 2001, AgReform has worked with 6,320 community-selected innovative farmers to create linkages that improve agricultural practices, 7,928 small farmers through the strengthening of 111 local agricultural and marketing groups, and the enhancement of local livestock services for 4,250 small livestock producers. In addition, the project collaborated with local government agencies in each governorate to enhance and strengthen the extension services’ capacity to better meet the small farm household’s needs and to manage and replicate AgReform activities beyond the life of the project. 292 Government Extension Workers have been involved in the project. In 191 2001, the AgReform grant was amended to add the farmer NGO component. To date, twelve farmer NGOs have been created and training is being provided to strengthen their capacity to coordinate the dissemination of marketing information for exports.

Center for Business Support—(IESC)

In June 2000, IESC was awarded a three-year USAID grant of $7.7 million to manage the Center for Business Support (CBS) in Egypt. The CBS program works with companies in three sectors: Information Technology, Tourism and Agribusiness. It has been working with companies in the food-processing sector since the program’s inception. Client companies receive subgrants to acquire technical consultants, attend trade shows, participate in trade missions, and develop websites. In the agribusiness sector, it has completed one major food processing trade mission event in cooperation with the USAID-funded Agriculture Led Export Business (ALEB) program. (8, 141)

Egyptian Exporters Association (EEA)

The EEA, and its operating arm, ExpoLink, is the successor to a long line of private sector general export promotion organizations funded by USAID. In previous incarnations it was known as the US Export Promotion Organization (USEPO) and the Trade Development Center (TDC). It provides services to firms in most of Egypt’s exportoriented sectors including IT, apparel and textile, furniture, fresh and processed foods, footwear and tanned leather, and marble. ExpoLink prepares firms to exhibit at international trade shows, provides technical assistance consultants, disseminates market information, prepares company literature and, latterly, advocates for policy reforms. The organization reported the following achievements in the agricultural sector during the period from 1997 to 2001:

• The total number of agriculture-sector clients served since the inception of EEA in October 1997 to June 2001 was 522.

• The total number of fresh and processed foods clients served since 1997 was 142 (27.2%).

• The total number of clients served in the fourth year was 64.

• The total number of fresh and processed foods clients served in year 4 was 14 (21.9%).

The type of information disseminated to fresh and processed food clients included new regulations for importing meat into Saudi Arabia, markets for herbs and spices in Malaysia and Indonesia, honey and honey wax in Holland; dairy and meat products, beverages, soups and dry mixes in Poland and Romania, herbs and spices in Japan, and the organic market in Europe. (142)

While EEA is an association in the legal sense, it did not begin to operate as an association until relatively recently. Now it is actively working to build membership, though there is no evidence of members voting for the Board of Directors. CRITICISMS of EEA: In a 2000 evaluation, the organization was criticized for: • lack of transparency, and for deploying a disproportionate amount of its funds on trade fair participation, while not taking advantage of other marketing tools; • quality of its market information and delivery mechanisms; • lack of either sector-specific or general hands-on export experience among many of its staff;

• clients found EEA services too expensive and of questionable value.

• While policy advocacy was part of its Grant Agreement, it did little in this area

• The organization has in the past concentrated on larger companies over medium and smaller companies.

IMPROVEMENTS of EEA:

However, there are now positive signs that EEA is gradually correcting a number of these shortcomings. This is reflected in the most recent Client Satisfaction Review, where a preponderance of EEA clients expressed satisfaction with the services they received. Further, EEA is now becoming more positive—and transparent—in its policy advocacy activities. An example is a recent seminar on Customs Service Reforms attended by Customs Service officials, and senior USAID representatives. EEA has also begun to set up a network of representatives in major export markets; their task is to feed market-level information to EEA, which, in turn, makes it available to their clients.

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