Report No. 11083-EGT
Arab Republic of Egypt
An Agricultural Strategy for the 1 990s
December 11, 1992
Agriculture Operations Division
Country Department II
Middle East and North Africa Region
FOR OFFICIAL USE ONLY
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contents matherwise
XURRENCY EOUIVALENTS
(As of November 1992)
US$1.00 - 3.30 Egyptian Pounds (L.E.)
L.E. 1.00 - US$ 0.3
WEIGHTS AND MEASURES
1 centimeter (cm) - 0.394 inches
1 meter (m) - 39.370 inches
1 kilometer (km) - 0.620 miles
1 square kilometer (kM2) - 0.386 square miles
1 feddan (fed) - 0.420 hectares, 1.037 acres
1 hectare (ha) - 2.470 acres
1 cubic meter (m3) - 35.310 cubic feet
1 cubic meter per second (m3/s) - 35.310 cubic feet per second
1 liter (1) - 1.057 quarts
1 liter per second (l/s) - 0.035 cubic feet per second
1 kilogram (kg) - 2.205 pounds
1 metric ton (t) - 2,205 pounds
1 kilowatt (kw) - 1.360 horse power
PRINCIPAL ABBREVIATIONS AND ACRONYMS USED
ARC Agricultural Research Centre
BCM Billion Cubic Meters
CAS Central Administration for Seeds
ELS Extra Long Staple
EPADP Egyptian Public Authority for Drainage Projects
FAO Food and Agriculture Organization
GARPAD General Authority for Rehabilitation Projects and
Agricultural Development
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
MALR Ministry of Agriculture and Land Reclamation
MPWWR Ministry of Public Works and Water Resources
O&M Operation and Maintenance
PBDAC Principal Bank for Development and Agriculture Credit
SMS Subject Mater Specialist
UNDP United National Development Program
UNEP United Nations Environment Program
GOVERNMENT OF THE ARAB REPUBLIC OF EGYPT
FISCAL YEAR
July 1 - June 30
FOR OFFICIAL USE ONLY
ARAB REPUBLIC OF EGYPT
An Agricultural Strategy for the 1990s
Table of Contents
ChaRter Page No.
Foreword
Executive Summary .... . . . . . . . . . . . . . . . . . . . . . . . i
I. EGYPTIAN ECONOMY IN TRANSITION ... . . . . . . . . . . . . . . . 1
II. MACRO ECONOMIC CONTEXT OF EGYPTIAN AGRICULTURE . . . . . . . . . . 4
A. Agriculture in the Egyptian Economy . . . . . . . . . . . . . 4
- Resource Base . . . . . . . . . . . . . . . . . . . . . . . 6
B. Structural Adjustment and the Rural Economy . . . . . . . . . 7
III. PROSPECTS FOR AGRICULTURAL GROWTH . . . . . . . . . . . . . . . . 10
A. Underlying Objectives for the Coming Decade . . . . . . . . . 1Q
B. Potential Sources for Growth . . . . . . . . . . . . . . . . . 12
C. Obstacles to Growth . . . . . . . . . . . . . . . . . . . . 14
D. Key Policy Issues . . . . . . . . . . . . . . . . . . . . . . 16
- Food Security .... . . . . . . . . . . . . . . . . . . . 17
- Poverty and Human Resources . . . . . . . . . . . . . . . . 19
- Employment .... i . . . . . . . . . . . . . . . . . . . . 20
- Taxation of the Agriculture Sector . . . . . . . . . . . . . 21
IV. WATER AND LAND RESOURCES . . . . . . . . . . . . . . . . . . . . 22
A. Water Resources .... . . . . . . . . . . . . . . . . . . . 22
- On-Farm Water Management . . . . . . . . . . . . . . . . . 25
- Irrigation and Drainage Service Fee . . . . . . . . . . . . 26
B. Land Resources .... . . . . . . . . . . . . . . . . . . . 29
- Land Tenure Arrangements . . . . . . . . . . . . . . . . . 32
C. Environmental Sustainability . . . . . . . . . . . . . . . . 33
V. PRODUCTION AND MARKET PROSPECTS . . . . . . . . . . . . . . . . . 35
A. Crop and Livestock Development . . . . . . . . . . . . . . . 35
- Crop Production Aspects . . . . . . . . . . . . . . . . . . 35
- Livestock Production Aspects . . . . . . . . . . . . . . . 41
B. Market Prospects for Agricultural Products . . . . . . . . . 43
- Trade Prospects .... . . . . . . . . . . . . . . . . . . 43
- Marketing Infrastructure . . . . . . . . . . . . . . . . . 46
C. Agro-Industry Development . . . . . . . . . . . . . . . . . . 48
- Transforming the Rural Economy . . . . . . . . . . . . . . 48
This document has a restricted distribution and may be used by recipients only in the performance
of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Page No.
VI. ENABLING ENVIRONHENT FOR GROWTH ..50
A. Changing the Role of the Government .50
- Regulatory Aspects .50
- Agricultural Research .51
- Agricultural Extension .55
- Agricultural Administration .57
B. Private Sector Development .59
- Agricultural Inputs .62
C. Developing Rural Institutions .64
- Rural Financial System .64
- Voluntary Farmer Organizations .67
D. Rural Women in Agriculture .68
VII. KEY ELEMENTS OF A STRATEGY .70
A. Policy .... . . . . . . . . . . . . . . . . . . . ..... . 71
B. Institutional .72
C. Investment Program .73
TABLES IN THE TEXT
Table 2.1 - Share of Agriculture in Economy ..5
Table 2.2 - Distribution of Land Ownership ..8
Table 2.3 - Summary of Area, Yield and Production Changes 1980-90 10
Table 4.1 - Historical Nile Water Balance ..23
Table 4.2 - Return to Water for Main Crops ..28
Table 5.1 - Major Field Crops and their Economic Contribution . .36
Table 5.2 - Competitiveness of Major Crops ..38
Table 5.3 - Competitiveness of Major Rotations ..38
Table 5.4 - Share of Public Sector in Key Industries ..49
FIGURES IN THE TEXT
Figure 3.1 - Self Sufficiency Ratios .17
Figure 3.2 - Real Agriculture Wages (1985 Prices) .20
Figure 3.3 - Taxed (-) and Subsidized (+) Crops .21
Figure 5.1 - Contribution of Major Crops .37
APPENDIX I - Potential Projects in the Agriculture Sector .79
APPENDIX II - The Economics of Crop and Livestock Production .83
APPENDIX III - TABLES
Table 1 - National Accounts Summary at Constant 1987 Prics .104
Table 2 - Public Sector Investments in the Second Plan and Proposed
Investments for the Third Plan in Agriculture Sector . . 105
Table 3 - Sources of Third Five-Year Plan Financing: Agriculture
Sector .106
Page No.
Table 4 - Share of (a) Agricultural Exports in Total Exports and
(b) Agricultural Imports in Total Imports: 1981-89 . . . . 107
Table 5 - Exports of Major Agriculture Commodities . . . . . . . . . . 108
Table 6 - Trends of Agricultural Commodity Exports 1980-1990 . . . . . 110
Table 7 - Recent Trends in Imports of Agricultural Commodities:
1980-1990 . . . . . . . . . . . . . . . . . . . . . . . . . 111
Table 8 - Import Regulations for Agricultural Products . . . . . . . . 112
Table 9 - EC's Tariffs and Quotas on Egypt's Major Horticultural
Commodities . . . . . . . . . . . . . . . . . . . . . . . . 115
Table 10 - Total Cultivated Areas and Main Crops . . . . . . . . . . . 116
Table 11 - Average Yields of Main Crops ... . . . . . . . . . . . . . 117
Table 12 - Production of Main Crops ... . . . . . . . . . . . . . . . 118
Table 13 - Comparative Average Yields of Major Crops in Egypt . . . . . 119
Table 14 - Animal Population in Different Agro-zones . . . . . . . . . 122
Table 15 - Seasonal Availability of Roughages and By-Products . . . . . 123
Table 16 - Summary of Economic Analysis of Crops . . . . . . . . . . . 124
IBRD 23981: Arab Republic of Egypt - Bank/IDA Assisted Projects in
Agriculture Sector
ARAB REPUBLIC OF EGYPT
An Agricultural Strategy for the l990s
FOREWORD
This is the report of a government and interagency mission which
took place in Cairo during February 1992 to develop a strategy for the
agricultural sector for the 1990s. It sets out key issues, strategic
directions and recommendations intended to serve as a framework for
guiding the Government in undertaking measures for the development of the
agriculture sector during the 1990s; it is set within the overall
framework of the structural adjustment program on which the Government has
embarked. The mission wishes to thank their excellencies Dr. Youssef
Wally, Deputy Prime Minister and Minister of Agriculture and Land
Reclamation and Engineer Essam Rady, Minister of Public Works and Water
Resources for their support during all stages of the mission's work.
The mission worked under the overall leadership of a governDment
team (Ministry of Agriculture and Land Reclamation) led by Prof. Adel
El-Beltagy and Prof. Saad Nassar and comprising Prof. Osman El Kholei,
Prof. Ahmed F. El-Sahrigi, Dr. A. M. Aboul Naga, Dr. Kamla Kansour, Dr.
Abdel Salam Gomaa, Eng. Mahmoud Nour, Dr. Ahmed Taher Moustafa, Dr. Abdel
Ghani El-Gendi, Dr. Mohammed El-Eraky and Dr. Nadia Atif. Papers prepared
by members of this team as well as comments on earlier drafts of this
report have contributed in crystalising and better articulating the
overall strategy set out in this report. Other MALR Staff, in particular
Eng. Adel H. Ezzy of PBDAC, Dr. Hassan Khedr of the Economics Sector and
Dr. Yasin Osman of the Services Sector were most helpful in discussing key
issues related to the sector. Within the Ministry of Public Works and
Water Resources (MPWWR), the mission received guidance from Eng. Gamil
Mahmoud El Syed, Eng. Gamal El Fadl, and Dr. Mohamed Abdel Hady Rady in
articulating key issues related to the water resources sector of the
country. During various meetings, H.E. Dr. Wally had extensive
discussions and exchange of views with the mission, which guided the
overall deliberations and provided a basis for outlining the strategy for
the sector. Similar meetings were held with H.E. Eng. Rady, for issues
dealing with the irrigation sector. As part of the Strategy exercise, the
government organized two workshops on agricultural strategy, the first
from January 12-15, 1992 supported by the FAO and the second from February
16-18 sponsored by MALR.
The UNDP coordinated the mission with the FAO, World Bank, UNEP
and World Food Program as other multilateral agency participants. At the
Government's request, the World Bank provided the technical leadership of
the mission. Mission members were as follows:
- (ii) -
World Bank Staff
Ngozi Okonjo-Iweala, Division Chief, MN2AG, Mission Leader
Rahul Raturi, Senior Agricultural Economist, Deputy Mission Leader
Takamasa Akiyama, Principal Trade Economist
Hamdy M. Eisa, Principal Agriculturalist
Ihab Gamaleldin, Privatization Specialist
Orlando Sacay, Senior Agricultural Credit Specialist
Willem Van Tuijl, Principal Irrigation Engineer
World Bank Consultants
Jim Brown, Agro-Industry Specialist
Sheikh A. Rehman, Irrigation Engineer
Svend Steengard, Livestock Specialist
Joachim von Amsberg, Economist
Food and Agriculture Organization of the United Nations
Zohair Abdalla, Marketing and Credit Officer
Dyaa K. Abdou, Senior Economist
T. Abu Khaled, On-Farm Water Management Specialist
Nadia Makram Ebeid, Women in Development Specialist
United Nations Environmental Programme
Asit K. Biswas, Environment Consultant
In addition to the above mission members, other staff of the
World Bank have contributed in the preparation of the report. Mr. Youssef
Fuleihan, Senior Agricl7tural Economist, MN2AG, wrote the working paper on
Agriculture in the Macroeconomy and provided support in the preparation of
the report; support in reviewing the report and making recommendations for
improving the technical content was provided at various stages by Mr. Prem
Garg, Division Chief, EKTAG, Mr. K. S. Venkatraman, Senior Operations
Officer, MN2AG and Ms. Joanne Salop, Economic Adviser, Central Operations
Department. Mr. Rahul Raturi took the lead in drafting the report, which
was prepared under the supervision of Mrs. Ngozi Okonjo-Iweala (Division
Chief, MN2AG) and approved by Mr. Ram K. Chopra, Director (MN2) and Mr.
Caio Koch-Weser, Vice President, Middle East and North Africa Region.
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
EXECUTIVE SUMMARY
Introduction
1. In March 1990, the Government of Egypt launched a comprehensive
economic and social reform program, to strengthen Egypt's ongoing adjustment
program; it constitutes a major break from the policies pursued in the past, and
is aimed at modernizing the country and significantly improving living standards.
Underlying the program measures, which are being backed by unprecedented support
from the international comounity, is the Government's intention to make the
transition from a highly interventionist centrally planned economy to one that
is decentralized and market oriented. The foundations for growth being put into
place would inevitably rely on the three main pillars of the economy -the
agriculture, industry and tourism sectors - to provide the engine for growth.
The agriculture sector of the country, which has been at the forefront of the
reform process, provides a potentially important vehicle for contributing towards
reaching the Government's objectives of achieving balanced growth in the rural
economy of the country.
2. In outlining an agricultural strategy for the 1990s, the underlying
focus is to build on the momentum created by the reforms initiated by Government-
In a period of worldwide change, measures are increasingly being adopted in
numerous countries, including Egypt, which emphasize the need for revisiting
earlier held views on the role of the Government in managing economic decision
making, without compromising the underlying tenets of Government responsibility
for ensuring growth and the basic needs of the people. While clearly the
Government has an important role to play in national economic management, what
is necessary is a clear definition of this role, and implementation of measures
necessary for it to fulfil this role without undermining incentives for the other
participants of the economy who would ensure growth.
Sectoral Performance and Potential
3. The Egyptian economy has traditionally relied heavily on the
agriculture sector as a source for growth. This central role was reinforced by
the strong performance of the sector in the 1960s and 1970s. While this
dominance has declined in recent years, the agriculture sector still accounts for
about 20 parcent of both GDP and total exports, and about 36 percent of
employment. The relative decline in the role of agriculture partly reflects the
strong growth in other sectors, particularly oil (and to a smaller extent
services and construction). In addition, prior to the initiation of the sector
policy reforms in the 1980s, the agriculture sector was subject to various
distortions which impacted negatively on the development of the sector; it also
received a declining share of the total public sector investment during the last
25 years, which in turn was not always optimally allocated between the different
subsectors. While the challenges facing the sector are significant, Egypt's
agriculture possesses many positive characteristics and potentials.
4. The policy framework within which the agriculture sector operated until
the mid-1980s, was heavily influenced by Government, and was closed and inward
looking. Significant reforms of these past agricultural policies began to be
introduced in the 1980s, within the framework of an agriculture sector strategy
- ii -
for the 1980s outlined by Dr. Youssef Wally; since then agriculture has clearly
been at the forefront of other sectors in initiating reforms, as evidenced by,
among others, the process of liberalizing input and output prices and eliminating
crop area controls. While the recorded average growth rates for the sector have
been modest during the last decade, more recent indicators point towards progress
in certain areas. For example, the production of wheat, maize, beans, fruits and
vegetables has recorded significant increases; cotton production has, however,
significantly declined. Most important, however, the reforms of 1986 have
sensitized the farmers to taking market induced decisions and there are signs of
increasing competition in the agricultural markets; consequently, given the
correct policy environment, farmers should respond to the opportunities which are
available for growth. However, the sector faces important resource constraints
and needs the satisfactory resolution of remaining key issues in order to tap
this potential.
5. On a per caput basis, Egypt's present area of cultivable land, at 0.13
feddan per head, is among the lowest in the world. At the same time, Egypt has
only one main source of water supply, the Nile river, which represents the
ultimate limiting factor on the country's ability to expand agriculture
horizontally. Consequently, future growth in agricultural production will need
to come from a more efficient utilization of the country's limited water and land
resources. Potentials do exist for better using these resources, in particular:
- While the overall efficiency of water use from the river Nile is quite
high, there is potential for better managing this very valuable
resource, thereby increasing overall water availability;
- There is considerable potential for increasing yields in the old lands,
through the wider adoption of improved technologies and cultural
practices;
- The reclaimed lands (1.9 million fed), including those presently
managed by the public sector, are producing at levels far below
potential; representing nearly 25 percent of total agricultural lands,
they present an important growth point for the agricultural sector in
the coming decade;
- With liberalization, farmers have shown a propensity to select cropping
patterns which use the limited land resource of the country better than
when these decisions were directed by the Government; further gains can
be expected from farmer's response to the completion of price
liberalization;
6. While the sector reforms introduced considerable changes to the policy
environment within which the agriculture sector operates, there remain a few
issues which militate against the sector's ability to meet the targets set for
its future growth. The key remaining ones include the following:
- Measures are necessary for ensuring the efficient use of the sector's
single most important limiting factor of production - water, and to
enable financially sustainable programs for maintaining the irrigation
and drainage network of the country.
- Cotton and sugarcane remain the two most important crops on which price
controls and area allotments remain, which militate against more
- iii -
efficient use of water and land resources and impose limitations on
farmer's choice of cropping patterns.
- In order to complete the ongoing process of agricultural price
liberalization, farm input subsidies dealing with fertilizers and
pesticides should be removed, which should go hand-in-hand with the
process of Government divestiture and liberalization of marketing.
Measures for addressing the above policy issues need to be complemented by steps
aimed at streamlining the agricultural institutions, including those presently
involved in agricultural research and extension.
Obiectives and Broad Strategy for the 1990s
7. The overarching objective of the agricultural strategy for the 1990s is
to complete the policy reform program which has already been initiated for the
sector, to increase agricultural production and incomes, taking into
consideration the overall changes taking place within both the Egyptian and
international economy and the linkages between the agricultural sector and the
other sectors of the economy. Within this context, the objectives are to
increase agricultural productivity per unit of land and water, through more
efficient use of these limited resources, reduce unit costs of production, and
thereby increase national output and farmers' incomes. This drive for efficiency
should move forward in the context of equity and take into account issues of
poverty alleviation, as well as ecological sustainability of the overall
agricultural development process. Growth in the agriculture sector, combined
with programs for targeting particularly women and the landless, would positively
contribute towards the overall poverty alleviation strategy of the Government.
In addition, growth in production and increased exports within a strongly
liberalized environment is expected to contribute to the overall food security
of the country. The targeted growth for agriculture is projected at an average
of around 3.0 percent per annum for the 1990s. This would allow for realizing
national GDP growth targets of between 4 - 5 percent by the end of the decade,
and for positive per capita agricultural growth given a population growth rate
of around 2.5 percent. The underlying focus of the strategy is to build on the
momentum already created by the reforms initiated by HALR for the agriculture
sector, and by the comprehensive economic reform program adopted by the
Government. This would need to be complemented by strong national population
policies aimed at reducing the overall rate of population growth.
8. A process of change has been initiated over the last few years, which
needs to be fostered and reinforced through a combination of policy and
institutional reforms. Certain key themes underlie the strategy articulated in
this report; the principal ones include the following:
- need for measures aimed at ensuring efficiency and environmental
sustainability in the management of the most important natural
resources of the country, i.e. water and arable land;
- emphasis on using free market considerations, in particular the
promotion of the private sector, in resource allocations;
- the need for implementing an agriculture sector strategy within the
context of overall rural development, which should encompass within
it better involvement of rural women in the development process,
- iv -
diversification of rural activities and provision of essential social
programs for health and education;
- recognition of the social and political issues, and the need for
social safety nets to assist in absorbing some of the potential
dislocations which will inevitably accrue through the implementation
of the comprehensive reform program; and
- initiating a program of institutional reforms, so as to streamline
the array of institutions presently serving the agriculture sector,
and make them more responsive to its needs.
Subsectoral Strategies
9. Water and Land Resources. Significant benefits are to be had from a
variety of improvements in land and water use. The underlying need is to
safeguard the capabilities of the existing infrastructure and improve overall
system efficiency. While the overall efficiency of water use from the Nile river
is quite high, location specific problems do exist. Consequently, it is
necessary to undertake a review of the overall systeom efficiency, as well as of
irrigation water use efficiency on the basis of the major canal coand.,
expanding the work on irrigation improvement already initiated by the Government.
The installation of improved water saving irrigation technologies needs to be
pursued, within the limits of technical and economic feasibility. In addition,
the promotion of a farmer level institutional framework for improving the system
for better sharing of water and for improving on-farm water management, including
the introduction of a system for providing to farmers an efficient irrigation
advisory service, is particularly important. Within the context of its
responsibility for extension/transfer of technology and for improving on-farm
water management, the Ministry of Agriculture and Land Reclamation (MALR) has to
take the lead in initiating programs and in strengthening its own technical
capabilities in this regard, particularly in irrigation agronomy and related
skills. This recommendation takes on greater urgency in the context of
complementing the measures already approved by the Government which enable
farmers to independently decide their respective cropping patterns.
10. The increased capital intensity of the irrigation and drainage system
requires higher real levels of maintenance funding as well as appropriate
techniques in order to avoid system deterioration. There is, thus, a need to
ensure that maintenance funding is given high priority. Given the limitations
on the Government's ability to meet fully the O&M costs, it is important that the
farmers contribute more towards meeting these costs, particularly since the
implicit taxation of agriculture has been significantly reduced. It is worth
noting that the scale, of fees needed to recover O&M costs would not have a
significant impact on net farm incomes. For example, analysis done shows that
a fee covering present O&M costs only would imply an annual payment, for
representative farms of 3. 5 fed and 2.2 fed in the Delta and Upper Egypt
respectively, equivalent to only 1-2 percent of gross farm revenue and 3-4
percent of total costs. A fee covering present 0&M and capital costs (as defined
in the ongoing cost recovery study) imposed as a flat charge would imply a
Davment equivalent to 3 percent of gross revenues or 6-7 percent of total costs.
While such cost increases are not insignificant, they appear to lie within a
bearable range from the perspective of farmers' ability to pay, especially
considering that real net farm incomes have risen by about 40 percent since 1984.
The concept of cost recovery is accepted for the new lands; its wider application
. v -
continues to attract social and political opposition due to a variety of cultural
factors. However, recognizing that Government will have to proceed bearing in
mind the social and political ramifications of the program, it is clear that for
the future viability of the system, Government will need to consider options
whereby farmers can contribute towards the irrigation and drainage costs
presently borne by it.
- Consequently, for improving overall water resources management, there
is need for a two pronged approach: firstly, water saving irrigation
technologies which are technically and economically feasible need to
be encouraged, complemented by a strengthened program of on-farm water
management; and secondly, cost recovery of the O&M costs of the
irrigation network, leading eventually to .price incentives for more
efficient use of water, also have to be introduced.
The Government is presently conducting a comprehensive study on the issue of cost
recovery for the irrigation and drainage system; the study would-identify options
for implementing a phased medium to long term program for levying irrigation
fees, and should provide the basis for Government decisions on introducing a
system for recovering irrigation and drainage costs. Specific options would be
reviewed on the basis of the study's findings and conclusions.
11. The old lands have good soils with potential for further increasing
productivity. However, more intensive research and extension efforts and
measures relating to better land and soil management in order to sustain the
productivity of the soils need to be emphasized. In the context of horizontal
expansion, the new lands are viewed as an opportunity for increasing production.
Given limitations on water availability, and in the context of the reform program
which calls for an early supply response from agriculture, the first priority
must be given to maximizing returns from the already reclaimed lands on which
major investments have already been completed. The principal focus of the
strategy should be on providing improved support services to the newly settled
farmers, the lack of which has been one of the most important contributory
factors for realized benefits not matching expectations, and better selection
criteria for settlers, particularly graduates. Programs for additional land
reclamation need to be seriously examined both from a financial and economic
perspective (first undertaking investments which yield higher and quicker
returns), and from a technical perspective (looking at long range water
availability issues).
12. Underlying the above strategy, concerns of environmental sustainability
must underpin the use of land and water resources; key among these from the
perspective of sustainable agricultural development is the need for taking all
possible measures to ipduce a more economic use of water. A related aspect is
that of water quality; in this context, the inpact of pollution on water
availability cannot be over emphasized. Reliable data on the quality of surface
and ground water are limited. Options for cleaning up of polluted drainage water
should be examined, as should the introduction of such practices in agriculture
as integrated pest management to reduce pesticide use, and the use of crop
byproducts and improved cultural practices to reduce fertilizer use. In the case
of land resources, measures aimed at maintaining soil fertility, reducing
salinity and waterlogging and better soil conservation measures need to be
emphasized. In the context of water related and land reclamation projects, there
is need to adopt a mandatory policy of requiring environmental assessments to be
- vi -
carried out, to ensure the overall environmental sustainability of such
investments.
13. CroR and Livestock Strategy. There remains considerable potential for
both increasing agricultural value added and saving irrigation water by means of
further changes in the cropping patterns. While market signals provide the
required incentives to increase production of the competitive products,
incentives also remain high to produce non-competitive crops, such as sugar cane
in particular, due to the absence of mechanisms for taking account of the
financial and economic cost of water used. Analysis done shows that Egypt has
a strong comparative advantage for horticulture products (fruits and vegetables),
cotton and wheat, is moderately competitive in several relatively low water
consuming crops (maize, beans, potatoes, long berseem and oil seeds), and has
a disadvantage in producing the water intensive crops rice and sugar cane. A
comparison of national value added from each crop with their respective use of
the key natural resources (water and land) of the country shows that wheat,
cotton and maize produce most of the value added in agriculture; most land is
occupied by wheat, berseem and maize; most water, on the other hand, is consumed
by rice, maize and sugar cane. The comparison shows the relatively high demand
on water of sugar cane and rice and the high demand on land of berseem. Cotton,
wheat and vegetables make an economic contribution relatively high compared to
their resource use. In order to ensure an optimal allocation of resources for
increasing agricultural production and incomes, the focus of the strategy should
consequently be on removal of the remaining distortions. For promoting desirable
production shifts, there are essentially three crops for which removal of
remaining distortions or additional policy measures to alleviate distortions are
required.
- The present procurement price for cotton is still insufficient to
provide the necessary incentives for farmers to increase the area
planted to cotton; therefore, the complete liberalization of the
cotton subsector is crucial for Egypt to be able to exploit its
significant cost advantage.
- In economic terms, rice production using existing technology is
competitive only under special circumstances, i.e. when it is
produced in the context of a reclamation crop in areas near the
coast where the average water quality is generally much poorer, and
the potential for diverting it to other areas is limited. In other
areas, where greater potential for crop substitution exists and the
possible environmental benefits from growing rice are not
forthcoming, the price liberalization of rice leads to high
financial attractiveness of rice to farmers, well in excess of its
economic value, due to the absence of water charges.
- Sugar cane is financially attractive to farmers even though its
production is uncompetitive due to high water consumption. Since
there are large Government investments in industrial infrastructure
to process the sugar, an action plan needs to be drawn up of
measures needed to: (a) look at the possibility of substitutability
of other crops such as sugarbeet, and (b) achieve the Government's
objective to eliminate all controls on sugarcane within a three-year
time frame. In the interim, the sugarcane price should be brought
in line with its estimated border price.
- vii -
14. For the livestock subsector, the emphasis should be on measures for
improving livestock productivity on small farms and more efficient use of fodder
crops as well as crop residues produced on the farm, as livestock compete
directly with food crops for the use of the scarce land and water resources of
the country. Improvements in animal production can be achieved if some of the
major constraints on the sub-sector are removed, such as low yield of fodder
crops, low genetic potential of the existing animal population, insufficiencies
in nutrition, shortcomings in the control and treatment of diseases and
infertility, and a weak livestock extension service. There should be better use
of crop byproducts, and yields of fodder crops should be optimized through new
high-yielding berseem varieties, use of berseem mixed with legumes and
nontraditional feed. Overall Government priorities are to meet the increased
protein demand through the supply of white meat, such as fish and poultry; these
priorities should be supported in the nineties.
15. Trade. Marketing and Agroindustrial DeveloRment. The projected
increase in domestic demand has the capacity to absorb the expected increase in
domestic production; however, the strategic requirements of the economy need a
thrust for larger export markets. As Egypt has a history of inward looking
policies, numerous impediments to trade remain, and it will take concerted effort
to ensure that the export potential is realized. A number of actions can b.
taken to increase exports and improve market efficiency.
- The complete liberalization of the production, export and marketing
of cotton is a priority. Cotton imports from pest free countries
should be liberalized, subject to quarantine regulations; similarly,
the imports of agricultural equipment and other inputs should also
be liberalized.
- With increasingly competitive commodity markets, it is critical that
adequate and timely information on trade is available to existing
and potential exporters.
- Research and extension activities in the past have concentrated on
domestically consumed commodities and cotton; there is need to
strengthen their focus on other potential exportable commodities.
In terms of export markets, while Egypt has advantages in terms of locations and
climate, virtually all of the country's agricultural exports must compete with
other suppliers for a share of the most likely markets -the EC, Eastern Europe
and the Gulf States. The European Community is the most important export market
for Egypt; however, its trade restrictions render most of Egypt's beyond-quota
outside-period exports to the EC unprofitable. It is consequently, particularly
important to initiate, negotiations aimed at getting better access to the
Community market for Egyptian products, and to take measures which would
facilitate investor response to the policy changes being put into effect in
Egypt. One would also expect that the successful conclusion of the presently
ongoing GATT Uruguay round talks, will favorably impact on Egypt's ability to
exploit the world markets.
- An a comolement to the international trade negotiations presently
ongoing, it is important for the Government to negotiate with major
importing nations, such as the European Community, to reduce tariffs
and increase access to markets; in return, privileged access to the
Egyptian economy may need to be granted to EC products.
viii -
It is necessary that Egyptian suppliers also monitor market developments in
Eastern Europe, and establish relations on which future sales would be based.
During this period of change in Europe, new systems are being formed, and a new
generation of clients is emerging which will need sources of supply in the
future.
16. With regard to marketing, key impediments at the rural level have
included: the absence of adequate infrastructure; a marked lack of storage
facilities, as well as collection/grading centers; a severe shortage of
refrigerated storage for perishable products; poor quality of packaging materials
and containers; and inadequacies in the transport system. A major effort to
reduce the inefficiencies and losses in the marketing chain provide a significant
source for increasing marketed production and overall food availability in the
country. While there is considerable need for additional investment, the
underlying requirement is to develop effective farm level organizations, which
would have available to them the necessary market information to which they are
able to react. Regulatory and institutional impediments to active private sector
involvement in post harvest enterprises need to be aggressively removed.
17. For sustainable rural transformation to take place, it is important
that the linkages between agriculture and the overall rural economy are further
strengthened. In order to respond to the reforms, the private sector, which is
crucial for agro-industry development, must see that the reforms introduced have
effectively been translated into reduced regulation at the operational level.
The lag in policy implementation at the working level means that many growers and
entrepreneurs continue to face the same regulations and restrictions that
prevailed before the change in policy.
18. Agricultural Research Straterv. Research efforts are presently
dispersed across a number of institutes and agencies, some of which are doing
excellent work. However, the work of the institutes in different ministries is
not adequately integrated within the framework of a national research program,
leading to overlapping efforts. As long as most research is funded by the public
sector, there is need to establish a more focussed institutional mechanism for
preparing and reviewing agricultural research programs of the various agencies,
supported by a core group of eminent international scientists and strengthened
links with the international research network in carrying out this function.
These constraints can be addressed through the formation of an Agricultural
Research Council, with the primary responsibility to prepare a comprehensive
national agricultural research policy, with a view to enhancing the planning and
coordination of research activities of the different agencies involved. In
addition, it is necessary to establish monitoring and evaluation units for
coordinating the implementation of the research programs, as well as to liaise
with the private sector with a view to contracting out relevant research work.
For this the design and implementation of an accurate and a widely accessible
database is a prerequisite. Finally, in line with liberalization, the research
system has to adjust in order to better serve the needs of the private sector,
and of potential export oriented activities. This can be best achieved by the
active participation of the private sector in the development and implementation
of research programs; for this purpose, there is need for incentives to be
provided to the private sector to undertake research. In articulating a long
term research strategy, it is therefore important to recognize that, while the
public sector all over the world is involved in research, many agencies extend
their research activities into areas where private research organizations could
be expected to work well if given a chance (and do work well in some developed
- ix -
countries), since the resulting products could be patented and privately marketed
(such as hybrid seeds). There is a need in the medium to long term to explore
such possibilities in the Egyptian context.
19. Agricultural Extension Strategy. The extension function of MALR is
presently weak. The principal issue which needs to be addressed is that of a
clear division of responsibilities at the different levels of national
administration. Set out below is a proposed approach in this regard.
- At the central level, the responsibility within HALR for planning
and outlining strategies for extension, developing extension
methodologies, providing training and ensuring linkages between
research and extension, should be clearly designated. Part of the
terms of reference of this Ministry service should be to vigorously
pursue more private sector approaches for extension.
- Integration of all field level extension services at the Governorate
level. Staffing levels and training programs should be drawn up for
each governorate in accordance with its needs and agricultural
plans; emphasis should be given to recruiting skilled female
extension agents and to foster programs relevant for the development
of rural women.
- The cadre of subject matter specialists should be strengthened, who
should be stationed at the different levels (central, governorate
and district) of the system. An intensive training program for SMSs
in fields other than just production oriented technologies is
necessary, to ensure downstream linkages aimed at increasing value
added from processing and exports.
The development of private extension services by consultants to medium and large
scale growers is already taking place; these developments should be further
encouraged. This can be done in various ways, including the promotion of
advisory services, encouraging contract extension services, and by devising cost
sharing arrangements within local communities. The above framework is intended
as a broad institutional framework, within the context of which more work is
necessary in order to articulate more detailed arrangements for defining the
overall structure and approach for org4nizing extension.
20. Privatization. The HALR had adopted a progressive approach on
privatization, even prior to the enactment of Law 203 of 1991. More recently,
and in line with Law 203, holding companies have been transferred to the
jurisdiction of the new Public Enterprise Office (PEO); the steps for the
implementation of this law are currently underway. As is the case for the
overall privatization efforts in Egypt, privatization in agriculture is also
facing important generic problems. Concerted efforts are needed to remove the
bottlenecks to competition and transparency of the privatization efforts, and
establishment of a level playing field between the public and private sectors,
with a view to expediting the program of privatization. There also remain
various commercial activities which are within MALR; their privatization needs
to be pursued under a specific HALR managed program.
21. Strategv for Rural Finance. The Principal Bank for Development and
Agricultural Credit has played a dominant role in providing credit to the
agricultural sector; in 1991 it provided 75 percent of total lending to
- x -
agriculture. However, PBDAC's lending operations as well as its deposit
mobilization is primarily concentrated on the farming community; lending to agro-
based businesses is limited, and to non-agricultural rural based enterprises
insignificant; it also needs to improve its coverage of disadvantaged groups such
as women and the landless. Consequently, in the context of promoting broad based
rural development, there is scope to improve the financial services provided by
the bank to the rural population.
- PBDAC's long term objective is to divest itself of its non-banking
activities. A phased program for redeploying existing staff should
be undertaken, through appropriate incentive schemes.
- The capital base of PBDAC needs to be strengthened, combined with
measures aimed at increasing deposit mobilization from the entire
rural community and rationalizing the interest rate structure, so as
to put the bank on a sound financial footing.
- Activities should be diversified from largely agricultural lending
to overall rural lending; lending terms and conditions should be
reviewed, so as not to inhibit lending for long term purposes.
While there are no restrictions on other banks to operate in rural areas, their
involvement in providing agricultural credit has so far been minimal. The
establishment of new banks, however, is curtailed in the present regulatory
environment. Within the context of the reform program, particularly the proposed
financial sector and regulatory reforms, it is anticipated, and hoped, that
private sector banks will increase their involvement in the rural areas, thereby
creating a more competitive environment in rural financial markets.
22. Voluntary Farmer Organizations. The cooperative system presently in
place was largely organized and controlled by the government; membership was
mandatory. Consequently, the existing cooperative law is restrictive, with
little flexibility for cooperatives to develop self-reliance and pursue
initiatives. Furthermore, savings cooperatives were not encouraged. Within the
context of rural development, cooperatives could play a very significant role in
providing services to farmers in the areas of input distribution and marketing,
and in promoting initiatives for rural diversification. For revitalizing the
cooperative system on the basis of efficiency and truly private initiatives, the
following actions are proposed:
- The introduction of new cooperative legislation which will permit
flexibility for cooperatives to react to market forces and take
advantage of business opportunities.
- Based on a detailed review, a program for restructuring and
strengthening the overall cooperative system, supported by education
and training programs, should be initiated.
- While cooperatives should have free access to financing, this must
be made available within the context of financially viable ventures
combined with an effective auditing system. The organization of
savings cooperatives should be encouraged.
23. The Agricultural Administration. Without a significant restructuring
of the agricultural administration, i.e. those public agencies presently working
- xi -
in the agricultural sector, agricultural reform is very likely to be only
partially successful. The problems of the agricultural administration are well
known. There is need to streamline the multiplicity of organizations, reduce
staffing, further decentralize the administrative structure, and reform
legislative regulations which limit flexibility to make significant changes.
Given the magnitude of the problem, and the fact that various socio-political
considerations will have to be taken into account, it is recognized that this is
a difficult area. Some internal reorganization within both MALR and MPWWR has
been initiated; however, bold visions are required to address the key issues and
various options need to be considered for streamlining the structure. In the
context of the reform program, the need for and the terms of reference of the
various agencies should be reexamined; new regulatory functions have to be
accommodated, while some former administrative or implementation functions may
have to be dropped. To enable decision making, a detailed study should be
undertaken as soon as possible to identify options.
Investment Program
24. To support the program of policy reforms and institutional upgrading,
a well defined public investment program is essential to ensure that the expected
supply response from the sector is generated. At the same time it is important
to recognize that although the level of public investment directly affects
economic activity, it is the subsectoral distribution of investments and the
quality of the project implementation within each subsector, that influences the
rate of growth of the sector; in addition, there is need to promote private
sector investment. The World Bank has recently carried out a detailed review of
the Government's proposed Public Sector Investment Program for the Third Five
Year Plan, which provides a detailed assessment of priorities in the context of
specific projects as proposed by the Government. Allocations for public sector
investment during the Third Plan indicate an allocation of about 13.5 percent of
the total proposed outlays for the agriculture sector; this compares with an
allocation of only 6.9 percent during the Second Plan. To complement the
findings of this review, and going beyond the proposals and the time frame of the
Third Plan, broad themes are discussed for public investment programming in the
medium term future, with a view to providing a framework for Government decisions
in this regard; this is set within the context of the role foreseen for the
Government in the future.
25. Proaram for Imnroved Water Resources Utilization/On Farm Water
Management. The major limiting factor to agricultural growth is water;
consequently, the most important investments should be those that r__-se the rate
of return to water use. Briefly, the program should include the following
elements:
- Investments for improved O&M of the irrigation and drainage system;
- The case for rehabilitating in-channel structures and pumping
stations is compelling to keep the system operating efficiently;
- There is clear priority for continuing, and to the extent feasible,
accelerating the drainage program:
- There is sufficient evidence to indicate that irrigation
improvements in the old lands enhance system efficiency and increase
crop production; studies are needed to identify priority areas and
- xii -
to justify the technical and economic viability of an enlarged
irrigation improvement program;
- There is a pressing need for undertaking a phased program for
supporting developments aimed at improving on-farm water management.
26. Program for the New and Old-New Lands. While land reclamation Is a
priority from the Government's perspective, the basic issues are of ensuring
balance between investments in creating new agricultural lands and as opposed to
those for agricultural intensification in the already cultivated areas, and
ensuring the investments undertaken are technically feasible and economically
viable. Given the need for quick yielding investments at this time of reform,
the medium term investment program should adopt the following approach:
- Priority should be given to intensifying agriculture on the already
reclaimed areas, through a series of area specific investments
projects targeted in the already reclaimed new lands;
- In the old-new lands there is need for investment in drainage,
rehabilitation of water control structures, and for improvements to
on-farm irrigation systems, through which high returns can be
expected in a relatively short time and at low unit costs;
- Within the above context, a more modest new lands reclamation
program should be undertaken, within the limits of assured water
supplies, selectively based on identified high potential schemes
which are technically feasible and economically viable.
27. Agricultural Research and Extension. The ongoing externally financed
national program to strengthen agricultural research and extension is expected
to come to an end in 1994. Improved agricultural research is a critical input
to increased agricultural productivity; successes in Egypt and elsewhere have
already borne out this fact. This needs to be complemented by a strengthened
extension service that Egypt needs to face the technological challenges of the
1990s. The implementation of a well defined follow on program is consequently
of high priority.
28. Africultural Marketing and Exoort Promotion. Initiatives to improve
the marketing system are a clear priority, if the benefits from increased
agricultural production are to be fully realized. However, the long term program
for marketing development should be centered around promoting private sector
initiatives and strengthening cooperatives and farmer groups. Other than further
liberalizing the regulatory environment within which the private sector has been
operating, there is nqed for the financial system to be strengthened in order
that it can be more responsive to specific private sector needs. The public
sector should refrain from direct intervention in marketing; emphasis on public
investments should be in areas where the Governoent can perform a catalytic role
in encouraging private sector participation.
29. Potential Studies. The agriculture sector is going through a period
of change, which is accompanied by a re-evaluation of the future role of the
Government. In order to provide the Government with meaningful options and
alternatives for taking investment programming decisions, there are various
potential areas which lend themselves to detailed studies or grant financed
- xiii -
technical assistance operations. Set out below are certain areas which merit
priority attention in this context:
In view of the present lack of knowledge and data on rural financial
markets, a rural financial market study should be undertaken to
assess the presently available sources of credit in rural areas,
prospective demand for credit and investment opportunities,
including for rural based enterprises, and of sources of savings.
In this context, the rural land markets should also be reviewed to
assess the linkage of land issues with rural credit markets;
- Steps for improving the overall water resources management in Egypt
is a critical part of the development strategy for the sector.
Consequently, a technical assistance program is needed for preparing
a 10 year program for nationwide irrigation improvement;
- A detailed fisheries sub-sector study, with a view-to outlining the
potentials and constraints, as well as a strategy for the
development of the subsector;
- Formulation of an action plan for implementing measures aimed at
liberalizing the sugar subsector, based on past and ongoing studies;
- A study of the public agencies involved in agriculture and food
related issues, in order to draw up a phased program for
restructuring and strengthening them. Given the magnitude of the
issues involved, and that various socio-political considerations
will need to be taken into account, it is recognized that this is a
difficult area; consequently, a long term program needs to be
articulated, which should provide the basis for a phased program for
change;
- A technical assistance program for strengthening the planning,
policy analysis and monitoring capabilities of both MALR and MPWWR;
- Technical assistance for strengthening the environmental assessment
capabilities of agencies involved in preparing and implementing
investment projects, including a program of training;
- Rural women are involved in numerous agricultural activities,
employment in which may be influenced in the future by the secondary
effects of agricultural modernization; there is a need for a study
to identify innovative approaches for addressing potential negative
effects frqm such changes in the rural economy;
- A technical assistance program to strengthen policy analysis and
planning related to the integration of women's issues into the
mainstream activities at the Ministry and Governorate level;
- A technical assistance program to review in detail the existing
cooperative system, with a view to outlining a phased program aimed
at restructuring and strengthening it.
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
I. EGYPTIAN ECONOMY IN TRANSITION
1.01 This report defines an agricultural strategy for the 1990s, which is
formulated in the context of the new economic environment brought about by the
introduction of wide ranging economic reforms by the Government of Egypt. As a
result, it differs from the strategy of the 1980s. The strategy is articulated
around the basic theme of ensuring the most efficient use, in an environmentally
sustainable manner, of the two most important limiting factors for the country
as a whole, and for agriculture in particular -- water and land resources.
1.02 Initiatives launched by the Government of Egypt during the last two
years have embarked the Egyptian economy into a period of fundamental change.
In March 1990, the Government of Egypt launched a comprehensive economic and
social reform program, to strengthen Egypt's ongoing adjustment program; it
constitutes a major break from the policies pursued in the past, and has the
underlying objective of modernizing the country and significantly improving
living standards. The reform program addresses the key structural weaknesses
underlying the Egyptian economy within the context of an overall stabilization
effort; it is aimed at ensuring a steady recovery of economic growth and reducing
the inequities among the population. The program represents a systematic and
comprehensive effort to accelerate, strengthen and broaden the pace of change
within the context of a coherent macroeconomic framework. With a view to
completely restructuring the economic activities in Egypt in line with free
market principles, the program has three main objectives:
- achieve rapidly, a sustainable macroeconomic equilibrium;
- lay the foundation for renewed economic growth in the medium and
long term through a fundamental restructuring of the economy;
- minimize the negative effects of economic reforms on the poor,
through improvements in social policies.
1.03 Underlying the program measures is the Government's intention to make
the transition from a highly interventionist centrally planned economy with
significant price distortions to one that is decentralized, market based, and
more outward oriented. These efforts of the Government are being backed by
unprecedented support from the international community, including exceptional
debt relief from the Paris Club (May 1991) and other creditors. With the reform
process presently in progress, the Egyptian economy is going through a period of
transition; the foundations for growth being put into place, supported by
essential developments in the social sectors, would inevitably rely on the three
main pillars of the economy - the agriculture, industry and tourism sectors - to
provide the engine for growth. The challenges are enormous; they will call upon
a continuous commitment of the Government to the process of change, which has
Rignificant political and social ramifications. At the same time. the
international donor community has committed itself to support the Government in
its endeavors in this period of transition.
1.04 Past Policies in Perspective. Historically, Egypt pursued a public-
sector-led and inward-looking development strategy stressing social velfare
objectives. As a result, state-owned enterprLses played an important role in the
economy, accounting for one of the largest shares of gross national output and
employment among the developing countries. Over one half of total GDP and about
two thirds of nonagricultural GDP are still produced by the public sector; in
manufacturing, the public sector's production share is 75 percent. The Open-Door
Policy initiated in 1974 by President Sadat brought about a partial
liberalization of Egypt's economy. The underlying development strategy, however,
remained one of import substitution financed by large inflows of foreign exchange
from foreign assistance and borrowing, oil-related exports, workers' remittances,
tourism, Suez canal revenue and direct foreign investment. Egypt's economy grew
at unusually high rates during 1974-85, averaging about 8.5 percent a year, and
accompanied by significant social progress. However, despite its rapid growth,
the economy provided insufficient employment opportunities as two of the most
important activities (oil production and the Suez Canal), representing about 16
percent of GDP, employed less than 1 percent of the labor force. Over half of
the additional labor force was hired by the Governoent, contributing heavily to
the increasing budget deficit.
1.05 When oil-related foreign exchange revenues began to decline in 1982,.
the Government was still able to maintain its public-sector-led growth strategy,
but with a growing participation of foreign borrowing to finance it. At 6-7
percent per annum through the mid-1980s, the growth performance was stili
impressive. Worsening credit-worthiness brought this growth strategy to a halt
in the late 1980s, when imports and investments were further cut, and growth
slowed down sharply to about 2.5 percent per annum. However, public sector
expenditures increased faster than revenues and the economy was not adjusting
adequately to the negative external shocks. The resulting massive fiscal and
current account deficits were in turn financed through the large inflows of
foreign assistance, foreign debt accumulation, surplus from the social insurance
system, and domestic borrowing. Egypt became unable to service its debts,
triggering a substantial reduction in gross capital inflows causing negative net
transfers of capital and an accumulation of arrears resulting in a heavy external
debt overhang.
1.06 Potential for Growth. Egypt has the potential to renew sustainable
economic growth because it has a good size domestic market, a diversified
industrial base, favorable agro-climatic conditions and geographical location,
a rich cultural heritage, good tourism potential, and a large and relatively
cheap skilled labor force. In response to the deteriorating economic conditions,
the Government of President Mubarak began implementing a bold and comprehensive
economic reform and structural adjustment program in the Spring of 1990. In
support of the program, the Government is receiving substantial financial support
from the international community, including generous debt relief, and has
succeeded in introducing a large number of reform measures in a relatively short
period of time. The first stage of the Government's program aims at: (i)
curtailing inflation, the current account and budget deficits, and restoring
creditworthiness; (ii) strengthening banks' solvency and prudential regulations,
and liberalizing interest rates; (iii) privatizing and restructuring public
entA-nrpries; and reforming their financial relationships with banks and the
Government; (iv) liberalizing most prices in agriculture and manufacturing, while
prices in transport and energy would be raised to long-term marginal cost or
international levels; (v) phasing out most non-tariff barriers to imports and
-3-
exports, and reducing import tariffs dispersion; (vi) encouraging private
enterprise development through abolishing investment and production controls,
dismantling government monopolies, and phasing out private sector discrimination;
and (vii) minimizing the effects of these reforms on the poor thiough
implementing safety net mechanisms.
1.07 Significant measures have been taken to initiate implementation of the
reform program. These include starting the decontrol of industrial prices,
increasing energy, transport and cotton prices, abolishing investment licensing
requirements, except for a short negative list, dismantling of quantity
restrictions on international trade, reducing tariff dispersion, approval of a
new public enterprise law, establishment of the Public Enterprise Office,
initiation of a program of privatization, liberalization and unification of the
foreign exchange market, introduction of a new sales tax, recapitalization of
public sector banks, removal of interest rate ceilings and credit controls, and
organization of a treasury bill market. In addition, the earlier policy of
guaranteeing Government employment to graduates has been largely effectively
halted. While the pace of public enterprise and privatization reforms has been
slow, the implementation of the overall program has been brisk and is already
beginning to bear results. In the agriculture sector, significant changes have
already taken place under a sectoral reform program initiated towards the end of
1986, which were set within the context of Minister Wally's strategy for the
1980s.
1.08 Egypt's macroeconomic situation is better than what was earlier
envisaged, with real GDP growth of about 0.5 percent achieved in FY92, as opposed
to the decline of about 3 percent which had been earlier projected. This is
largely on account of the increase in construction activity, tourism, Suez Canal
receipts and worker's remmittances; in addition, there has been a delay in the
implementation of the public enterprise reforms, which were expected to initially
impact negatively on short term growth. At the same time, actual inflation at
around 17-18 percent is lower than was expected (and reported to be falling
further), and the balance of payments performance has been significantly
stronger. The current account balance has moved from a deficit of about US$2.6
billion in FY90 to a surplus of US$2.4 billion in FY91 and US$2.6 billion in
FY92. The level of gross international reserves, which was about US$2.5 billion
in FY90, has increased to around US$10.0 billion in FY92 (about ten months
imports). On the fiscal side, preliminary data for FY91 indicate that current
expenditures were kept under tight control, except for food subsidies, and a
decisive effort was made to raise tax revenues; the fiscal deficit has come down
from around 20 percent of GDP in FY91 to about 7.5 percent in FY92. Assuming
that the pace of reforms is continued, and in the absence of major adverse
shocks, growth is expected to accelerate to 4-4.5 percent with consumption per
capita growing between 1-2 percent through the end of the decade.
1.09 As a result of the Paris Club and other debt agreements during FY91,
Egypt's external debt, outstanding and disbursed, dropped from US$51.1 billion
in FY90 to US$39.0 billion in FY92, or from almost 400 to about 240 percent of
exports, and from 144 to 112 percent of GDP. Egypt's debt service dropped to 21
percent of exports (from 40 percent in FY91) and to under 10 percent of GDP;
interest payments dropped to 11 percent of exports (from 21 percent) and about
5 percent of GDP (from about 9 percent). The creditworthiness picture is thus
vastly improved. However, a large element of this improvement has come from a
one-shot benefit from the debt reliefs; furthermore, with the intense
-4-
international competition for access to the industrial countries' limited
official financial assistance, Egypt may find it difficult to maintain the high
level of financial support it has been receiving over the past decade.
1.10 It is clear that significant changes are taking place in the economy,
and a historic opportunity is available to the Government to reverse a period of
declining growth into a future of higher and sustainable growth, brought about
by engendering confidence in the private sector, and by a progressive dismantling
of the system of controls which have accumulated during decades of heavy
Government involvement in economic decision making. While performance so far in
implementing the stabilization program has been good, much remains to be done to
improve macro-management and to deepen implementation of the structural reform
program, in order to attain sustainable growth and to bring inflation under
control. Egypt now enjoys a balance of payments/reserves cushion which offers
the Government an unprecedented opportunity to deepen and accelerate the pace of
reforms. The agriculture sector of the country, already significantly
regenerated from the substantial reforms initiated in 1986, provides a
potentially important vehicle for contributing towards reaching the Government's
objectives of achieving balanced growth in the rural economy of the country.
1.11 However, for realizing this potential growth in the agriculture sector,
the more efficient use of the limited water and land resources is most critical;
this objective provides the central theme for the proposed strategy for the
agricultural sector. In outlining the strategy for the sector, which is also set
within the context of promoting overall rural development, Chapter II of the
report initially provides a brief overview of the macroeconomic context of
Egyptian agriculture and highlights the reforms which have already taken place
in the sector and their initial impact, which have clearly put the sector at the
forefront of the overall reform process. Recognizing the underlying objective
of achieving more efficient utilization of Egypt's land and water resources, and
of generating and sustaining a supply response from the sector, Chapter III
assesses the potential sources for growth and outlines the key obstacles and
policy issues which need to be addressed to realize this potential. Set against
the framework outlined earlier, Chapter IV focusses on the water and land
resources available, and reviews measures and policies needed for their more
efficient utilization in an environmentally sound manner, while Chapter V reviews
the production and market prospects for crop and livestock products and
identifies measures for maximizing sectoral value added. Chapter VI reviews the
underlying enabling environment which' needs to be assured, in the form of a
responsive institutional and regulatory framework, in order that the targeted
growth for the sector can be achieved. Finally, Chapter VII summarizes salient
features of a strategy for the sector, based on the recommendations made through
the entire report.
II. MACROECONOMIC CONTEXT OF EGYPTIAN AGRICULTURE
A. Agriculture in the EgyRtian Economy
2.01 The Egyptian economy has traditionally relied heavily on the
agriculture sector as a source for growth, both in terms of contribution to GDP
as well as a source of employment for a significant part of the Egyptian labor
-5-
force. This central role was reinforced by the strong performance of the sector
initiated by the reforms following the 1952 revolution, and further supported by
the completion of the High Aswan Dam in 1968, which allowed for a significant
increase in the cultivated area and provided assured perennial irrigation to the
entire Nile Valley and Delta areas. In 1974, agriculture accounted for 30
percent of GDP, 25 percent of export earnings and 47 percent of employment.
However, this dominance has declined over the years as shown below.
There are conflicting data on Table 2.1: Share of Agriculture in Economy
number of households directly
supported by the sector; the _
1990 agriculture census
estimates that there are around Shr....iclu, i~ ... 2 I. 19.3 .
Share of Aar..i I' ~ot. I/ 22 7 0.3
3 .0 million land holdings, which Sha:e -f Ag. jr 3 3
if each is held by one family,
suggests direct support to an A 197t Cm ji, &tgt I t-
estimated 17 million b aarltst 91 95mlP *pci(
individuals. In addition, the
sector provides employment to
landless labor in the rural areas. Despite the decline in the share of the
sector's contribution to national GDP, which to a large extent also reflects the
relatively stronger growth in other sectors (particularly, oil, and also services
and construction), the agriculture sector nevertheless remains important for the
future growth of the economy. With the cotton subsector beginning to show signs
of revival, and horticultural production having increased significantly over the
last few years, the sector will continue to support industrial/agro-industrial
growth in the country; in addition, developments in the agricultural sector are
expected to lead the Government's efforts to achieve equitable and balanced
growth in the rural economy.
2.02 Agricultural GDP grew in real terms at average annual rates of 2.7
percent in the 1960s, 3.5 percent in the 1970s (reflecting the beneficial
xxeffects from the High Aswan Dam) and 2.5 percent in the 1980s. Overall, these
data indicate that if the contributions from the High Dam are excluded,
agricultural growth rates have been modest. However, while recorded growth rates
have been modest during the last decade, more recent indicators point towards
progress in certain areas. For example, the production of wheat, maize, beans,
fruits and vegetables has recorded significant increases over the past decade;
cotton production has, however, declined. The modest overall performance during
the last decade can be attributed to the disincentive effects on farmer decisions
of the remaining policy distortions, and the effects of the declining share of
agriculture in total public investments during the last 25 years. After
separating out the cost of the High Dam, agriculture's share of public investment
declined from 14 percept in 1962-66, to only 7 percent during the second plan
period (1988-92). Furthermore, the Government emphasized land reclamation
programs within the agriculture sector, with a concomitant bias towards it in the
allocation of investment funds (40 percent of the total funds earmarked for the
agriculture sector were allocated to horizontal expansion); however, these
investments have so far failed to generate returns on the scale expected from it.
An estimated 1.9 million feddans have been reclaimed, representing about 25
percent of the cultivable land: however, their contribution to the total gross
value of agricultural production is estimated to be only about 7 percent.
-6-
Resource Base
2.03 On a per caput basis, Egypt's area of cultivable land at 0.13 feddan
per head is among the lowest in the world. At the same time, Egypt has only one
main source of water supply, the Nile river. The availability of reliable water
supply from the High Aswan Dam is governed by the existing water sharing
agreement with Sudan, under which 55.5 BCH are allocated to Egypt; this
represents the ultimate limiting factor on the country's ability to expand
agriculture horizontally. Given the increasing demands on this secure source of
water supply from other sectors, the pressing need for the country Is to maximize
the returns to this valuable resource in an environmentally sound manner. Recent
work carried out to assess the land resources of the country show that
potentially suitable soils for further development outside of the already
cultivated areas do exist; however, the ability of the nation to tap this
potential is wholly governed by the limitations on the water resources available
for undertaking such development.
2.04 Agriculture in Egypt is almost entirely dependent on irrigation; the
country has no effective rainfall except in a narrow band along the northern
coastal areas. Consequently, agricultural development is closely linked to the
Nile River and its management. Its flows are dependent entirely on river systems
outside Egypt, largely influenced by the climate and terrain in the Central
African Plateau and the Ethiopian highlands. Appropriate strategies for overall
water resources management, including attention to regional dimensions and
cooperation, therefore assume significant importance for sustainable agricultural
development in Egypt. To ensure greater reliability and better overall
efficiency, there is potential for regional projects, which would attract donor
interest in financing.
2.05 The agricultural land base of Egypt totalling about 7.5 million
feddans, consists of some 7. 3 million feddans (about 3. 0 million ha) lying within
the Nile basin and delta, and about 200,000 feddans (80,000 ha) of agricultural
land elsewhere (rainfed and in oases). Of the total area in the Nile basin and
delta, some 5.4 million fed are "old" lands, and the remaining 1.9 million fed
are "new" lands, reclaimed since 1952. With the continuing loss of agricultural
lands to village/urban encroachment, and given the limitation of water
availability for irrigated agriculture, the potential for significantly
increasing the available agricultura4 land base from its present level is
limited. Consequently, the future growth in agricultural production will need
to come from more efficient utilization of the existing land and water resources
of the country.
2.06 Egypt's agricultural land is on average highly productive and ideally
suited to intensive agriculture. With good climatic conditions, including
maximum sunlight and a perennial source of irrigation water, agriculture is
provided with excellent growing conditions, resulting in high crop yields. The
total cropped area in 1990 was estimated at about 12.1 million fed, giving a
cropping intensity of around 180 percent for the country as a whole, after taking
into account perennial crops. The major crops are wheat, maize, rice, berseem,
cotton, broad beans, sugarcane, vegetables and fruits. Most crops are grown in
both the Delta and thn Va11ev wit-h the exception of rice (Delta) and sugarcane
(Valley). In the "new lands", groundnuts, fruits and vegetables are particularly
important.
2.07 It is presently estimated that cotton, wheat, rice, maize and berseem
together account for 80 percent of the cropped area. Wheat and berseem are the
principal winter crops; in summer, cotton and rice are important cash crops,
while maize and sorghum are major subsistence crops. Livestock is an important
and integral part of the agricultural production system, as 85 percent of all
livestock are found on small farms. Since natural pastures are only confined to
the northern coastal areas, livestock is seldom raised in herds, and animals
compete directly through their demand for fodder crops with the other field crops
for scarce irrigated land. Generally, each farmer owns several animals. These
are usually confined and fed green berseen clover during the winter months; a
variety of other feeds are used during the rest of the year, including wheat
straw, green corn, sorghum, barley, wheat, feed concentrates, and other agro-
industrial byproducts such as cotton meal cake and sugarcane bagasse.
B. Structural Adiustment and the Rural Econogy
2.08 The rural population of Egypt in 1990 was estimated to represent 53
percent of the country's total population; it has declined from about 59 percent
in 1965. Recent years have seen a trend towards increasing urbanization; most
recent estimates show urban population growing at about 3.1 percent per annum,
as compared to the national population growth rate of around 2.6 percent per
annum. The inability of the rural economy to meet the increasing demands for
employment is an important determinant of the migration which has occurred.
Given the social effects of increasing population pressure and congestion in the
urban areas, it is clear that the rural economy of the country, including
agriculture, has to be revitalized in order to ensure social and economic
equilibrium; such a program has to be part of the overall reform process
presently ongoing. In this context, various characteristics of the rural economy
need to be taken into account. Firstly, while agriculture dominates the rural
economy, a large number of farning households derive a significant part of their
annual incomes from non-farming activities; most recent estimates show that on
average, 38 percent of the average rural household income is derived from
activities outside of agriculture. This high level of non-farming activities
within an agricultural household represents an important structural
characteristic of the rural population; with the right environment, this offers
the possibility of more rapid development of private initiatives and investments,
both in terms of upstream sectors that sell to or service agriculture and in
downstream sectors that buy from it. Secondly, it is necessary to recognize that
Egyptian women are prominent in the agricultural development process; close to
47 percent of the active female population in Egypt is engaged in agricultural
work. Due to male out-migration to seek urban or regional job opportunities,
many women are head of,households, who have to make the daily farming decisions.
Women participate in all facets of agricultural activities, from planting to
weeding, irrigating and harvesting. They are also involved heavily in other
activities in the rural areas, in particular livestock. Consequently, they are
extremely important for bringing about change in the rural areas of the country.
2.09 Another characteristic which is important in the context of designing
an sgrmi'lltural strategy for Em"t. is the average size of farms. Under the
various land reforms since the 1950s, about 900,000 fed were redistributed to
those having little or no land, and farm sizes were limited to 50 fed per
individual and 100 fed per family. However, these limits are seldom reached and
- 8 -
farm sizes in Egypt are generally Table 2.2: Distribution of Land
small, averaging less than 2 fed. It Ownership
ii estimated that nearly 50 percent of
the farms are less than one fed each, ~.
and 84 percent of small farmers hold ash~I.&ndmr Aeenu
only 50 percent of the total area;
fragmentation is common, though : w $ R', ''4
leasing does play an important role in 10
consolidating fragmented holdings. 10
Agricultural land is generally ~7
privately owned, though an estimated V: 0 d 0 6
250,000 fed of the reclaimed 'new'
lands are owned and operated by public 5ta;.tWcaI Y.aRbaog , .
sector companies; the Government is
presently in the process of selling
the publicly owned lands to private
farmers and investors.
2. 10 The policy framework within which the agriculture sector operated until
the mid-1980s, was heavily influenced by Government, and was closed and inward
looking. It was characterized by heavy government intervention in production,
pricing, and marketing of major crops and inputs. The objective of this
intervention was to attain a high level of self sufficiency in basic food
products, provision of basic food-stuffs to consumers at low prices, provision
of a basic source of employment for the fast expanding labor force in the
country and the implicit taxation of agriculture to finance industrial growth and
generate government revenue. To achieve these objectives, prices were
manipulated, subsidies were given, crop area targets were established and
enforced, and imports and exports were controlled with little consideration to
economic efficiency; in addition, the farmers were almost entirely dependent on
Government agencies and the public sector supported cooperative structure for
input purchases and for the sale of their products. Since prices were not
allowed to reflect scarcity, central allocation had to be used, resulting in
large distortions and waste; at the same time, overall institutional performance
was weak, Consequently, with growth in agricultural production failing to keep
pace with the increasing population of the country, overall food production in
Egypt has failed to keep pace with consumption and the country has become
increasingly dependent on imports of foodgrains, pulses, edible oils, sugar, meat
and milk products to moeet its needs; in 1989, food items represented 29 percent
of total merchandise imports.
2.11 Significant reforms of these past agricultural policies began to be
introduced in the 1980s, within the framework of an agriculture sector strategy
for the 1980s; since then agriculture has clearly been at the forefront of other
sectors in initiating reforms, as evidenced by the process of liberalizing input
and output prices and eliminating crop area controls. The key measures which
have been implemented within the context of the reform process initiated in the
agriculture sector since 1986, include the following:
- Crop area allotments, with delivery quotas at fixed procurement
prices. have been removed for all major crops with the exception of
cotton and sugarcane;
-9 -
- Agricultural producer prices for all products, except cotton and
sugarcane, have been completely liberalized; cotton prices paid to
farmers have been raised to 66 percent of their border price
equivalents for the 1992/93 growing season; subsidies on fertilizers
and pesticides have been significantly reduced and are expected to
be completely phased out over the next two years;
- Private sector processing and marketing of agricultural products, as
well as in the delivery of agricultural inputs, is being encouraged;
restrictions on private sector rice processing and on inter-
governorate transportation of milled rice have been liberalized; a
program for divesting lands held by public sector companies has been
initiated, albeit progress in implementation has so far been slow;
- Import/export constraints are being reduced, and the foreign trade
of agricultural goods was shifted to the free foreign exchange
market.
The sector is now in a period of transition with action on some policy measures
having been completed, some initiated recently, and some on which there is a
debate ongoing with the approach to be adopted not yet fully articulated.
2.12 Price liberalization was introduced during a period of declining world
market prices for the major grain crops. As a result of liberalization, the gap
between domestic and world market prices for these commodities has been closed.
However, due to the concurrent sharp decline in world market prices for most
commodities during this period, real domestic prices remained largely stable.
Technological progress has led to significantly increasing yields for grains
during the 1980s. So far, the main benefit from liberalization has been that
farmers could flexibly respond to such yield increases by changing cropping
patterns quite drastically as evidenced in area increases of 65 percent, 12
percent and 11 percent for wheat, rice and maize respectively from 1985-90. As
a result, production increased by 128 percent for wheat and 30 percent for rice
as well as maize over the same five year period. As a result of the sharp
increase in domestic production, imports of wheat and wheat flour have declined
in recent years, and maize imports remained largely unchanged since the mid 1980s
in spite of a growing population. At the same time, the berseem area declined
by 13 percent resulting from the relatively reduced profitability of livestock
activities due to liberalization. Policy changes with respect to the exchange
rate and foreign exchange transactions, and the liberalized marketing and export
of most agricultural commodities have encouraged exports and increased production
of horticulture products.
2.13 Table 2.3 shows the cropping pattern changes as a result of the
partially completed reforms. It also shows the significant yield increase
achieved particularly from 1985-90. Analysis of potential yields under Egyptian
conditions, as presented in various reports, demonstrates a considerable
potential for further raising agricultural production. On the negative side,
there has been a steep decline in both the area planted to cotton and the average
cotton yields obtained. From 1980-85, the cotton area declined by 12 percent and
,ields fell by 6 percent? the still incomplete reforms have not been able to
prevent a further decline in areas by 8 percent and yields by a significant 23
percent between 1985-90. Profitability of cotton remains low and a reversal in
the area decline has not yet occurred in aggregate cropping patterns.
- 10
Table 2.3: Summary of Area, Yield and Production Changes 1980-90
.'''.'.'''.''".' '.'.''. '"9*0 ' ' ' . W. ,,. 1990 9WX ,NS 19...........
,.,'',.' '-,' '' ' ,,'--' WX''''~~~~~io ........... .,-
C;:otat g - - tii
C l)jje<$tBilt'1tg 4t.<:ig
2.14 Clearly the changes introduced over the past few years to thep
agriculture sector mark a fundamental departure from the policies of the past.
The Goverrsent is co$itted to take this process further, and consolidate on the
gains made. With broad based reforms underway , this is an opportune moment to
implement additional measures necessary for achieving further growth in the rural
economy of the country. While Egypt faces a limited natural resource bass, which
will eventually set the limits to future agricultural growth, it nevertheless has
at present potentials which have not been fully tapped, which present significant
prospects for growth in the medium term future. Set against clearly defined
objectives, and given a comoitment to address the remaining key obstacles to
growth, the agriculture sector has the potential for being the engine for rural
economic growth. In this context, developments in the international economy, in
particular, the eventual prospects of new markets in Eastern Europe and the new
Commonwealth of Independent States, as well as a hoped for successful conclusions
of the Uruguay Round Talks also offer new opportunities.
III2 PROSECTS FOR AGRICULTURAL GROWTH
A. Underlying Obiectives for the Coming Decad
3 01 The overarching objective of the 1gricultural strategy for the 1990s
is to increase agricultural productivity per unit of land and water, through a
mor ise e of these liited resources, reduce unit costs of production,
and thereby increase national output and farmers' incomes. Within this context,
the underlying objectives of the agricultural strategy for the l990a follow very
2uch the nrineipl^y thechaned bv Dr Yousedf Wally for the 1980p s which ea phasized
the importance of correcting the prevailr ng fmcroeconomic and tectoral
inefficiencies in order to taxikize the returnt fro, the country's lioited
resource based Thia drive for efficiency should rove forward in the context of
- 11 -
equity, take into account issues of poverty alleviation, development of a social
safety net and human resource development, and ensure ecological and inter-
generational sustainability of the overall agricultural development process.
Within these broad objectives, there are several specific objectives:
- Given the underlying natural resource constraints facing Egypt, the
conservation of water and land resources remains the most important
objective for the country;
- Along with conservation, an important objective is the need for
measures which are technically feasible, economically viable and
environmentally sustainable, to expand land and water resources
availability;
- Ensuring food security for a rapidly growing population is an
objective of major concern to the Government;
- The agriculture sector has been the biggest source of rural
employment, and is viewed by Government as important for generating
increased rural employment;
- Through improvements in trade, the sector is expected to contribute
towards improving the country's foreign exchange balance.
The underpinnings for achieving these objectives would be support for
accelerating technological developments and their wide adoption, the further
liberalization of the economy and strengthening measures for promoting increased
private sector involvement; these measures would need to be supported by actions
which would streamline the overall institutional framework supporting the
agriculture sector, making it more responsive to the sector's needs.
3.02 It is recognized that for the agricultural sector to achieve
productivity gains, increase output and incomes, and serve as an engine for
increased rural employment and growth, sectoral performance will have to improve
over the average 2.5 percent per annum growth rate achieved through most of the
1980s, a rate that was somewhat below the average yearly population growth rate
of about 2.6 percent. The targeted growth for agriculture is projected at an
average of around 3.0 percent per annum for the 1990s. This would allow for
realizing national GDP growth targets of between 4 - 5 percent by the end of the
decade. Furthermore, given the high growth in population, a growth of 3.0
percent in agriculture would allow for positive per capita agricultural growth.
While this is a realizable target, it will clearly pose a challenge for the
sector; however, in the context of realizable annual growth rates in the medium
term, there remain significant untapped potentials, which should contribute
towards increasing the growth of the sector. In this context it is important to
emphasize that while in the immediate future there needs to be continued focus
on production related issues, it is also necessary that post-harvest issues
related to marketing and processing get the attention they deserve to ensure that
post harvest losses are reduced and the potential growth in value added from the
sector can be realized.
3.03 The strategy for the agricultural sector must take a broad view,
recognizing that to a large measure, agriculture presently dominates the rural
sector. Given the close linkage bltween agriculture and the rural economy, it
- 12 -
is necessary to develop close linkages with similar strategies proposed for other
sectors in the context of overall rural development. For success, the rural
sector needs to be dynamic, providing diverse sources of income by creating
further employment outside of the farming sector; holistic rural development
should thus be a priority goal to help create employment in the rural areas,
outside of but connected to agriculture. An increase in rural incomes and
employment cannot come from primary agricultural activities alone; there will be
a need to push for diversification in the rural areas into small scale
industries, services and other activities, many based on agriculture. These need
to be complemented by intensifying the required social programs, in order to
better provide education, health and other social services which are essential
for sustaining growth in the rural economy.
3.04 At the same time, the ongoing economy-wide adjustment process will
necessarily imply economic dislocations normally associated with periods of
transition. Consequently, there is also an immediate objective of seeking out
short to medium term productivity increases which will generate the needed supply
response. Given the advanced stage of policy reforms already initiated in Egypt,
the sector is well placed to respond quickly as long as the process of change is
consolidated. This is already evidenced by the increasing wheat and corn
production, expansion in horticultural production, and a generally more buoyant
market environment for agricultural products. Nevertheless, there is the danger
of the supply response exhausting itself on account of institutional bottlenecks
and the remaining policy distortions. Consequently, in a period in which the
economy is undergoing structural change, it is important that two broad areas are
given particular consideration by the Government in order to consolidate and
further expedite the supply response.
- Persevering with policy changes with a view to introducing an
efficient environment for overall sector development; to achieve
the above objectives, there must be a clear and continuing
commitment of government to push through the ongoing price, trade,
and other policy reforms, and a willingness to address institutional
issues and constraints which may be restricting the sector's ability
to fully respond to the changed policy environment.
- An effective allocation of public sector expenditure funds, which
should emphasize measures which would generate an early supply
response; such an approach'implies the initial targeting of programs
on areas with the maximum potential externalities, i.e. where
significant increase in production can be generated reasonably
quickly, and which require minimum further investments.
B. Potential Sources for Growth
3.05 While the challenges facing the agriculture sector are significant,
Egypt's agriculture possesses many positive characteristics and potentials not
yet fully tapped. Most important, the reforms of 1986 have sensitized the
farmers to takirg mArket induced decisions and there are signs of increasing
competition in the agricultural markets; consequently, given the correct policy
environment, farmers should respond to the opportunities which are available for
growth. For the sector to increase its average annual growth rate to 3 percent
- 13 -
in the 1990s, there are certain key areas which offer potential, and on which
Government action should be focussed.
- While the overall efficiency of water use from the river Nile is
quite high, there is potential for better managing this very
valuable resource, through appropriate conservation and water
management measures, thereby increasing overall water resource
availability;
- There is considerable potential for increasing agricultural value
added from increasing yields in the old lands through the wider
adoption of improved technologies and cultural practices; this needs
more focussed research efforts and improved extension and other
support services;
- The 1.9 million fed of reclaimed lands (including those presently
managed by the public sector) are presently producing at levels far
below potential; representing nearly 25 percent of total
agricultural lands, they present an important potential growth point
for the agricultural sector in the coming decade;
- With liberalization, farmers have shown a propensity to select
cropping patterns which from an economic perspective, use the
limited land resource of the country better than when these
decisions were directed by the Government; further gains can be
expected from farmer's response to the completion of price
liberalization;
- with a reliable marketing infrastructure and a favorable policy
environment, farmers can be further encouraged to successfully grow
high value horticultural crops;
- finally, possible agro-industry (particularly food processing) and
trade developments provide potential for increasing the value added
from the agricultural sector.
Results from preliminary analysis carried out indicate that upto 40 percent of
the projected average annual growth rate can be realised from tapping the
potential for increasing crop yields in the old lands; the other principal
sources of sector growth would be from intensification of agriculture in the new
and old-new lands and from shifts in cropping patterns. What the analysis
indicates is that the focus of attention during the 1990s will need to be on
undertaking measures and investments which will facilitate realization of these
these growth rates, i.e. on completing the process of liberalization to encourage
the needed farmer response, strengthening the research and extension capabilities
in both the old and new lands, emphasizing programs for irrigation improvement,
and streamlining the institutions supporting agriculture in Egypt to enhance
efficiency in the use of public resources. Unlike many developing countries,
Egypt has the basic resources, both in terms of good technological capabilities
for economic development as well as the necessary human resources in the rural
economy, tha needed rural infrastructure and the political commitment necessary
for meeting the challenge. The underlying requirement for tapping the above
potential sources of growth would be concerted Government action for removing the
- 14 -
remaining obstacles for promoting incentives and opportunity, by creating the
necessary enabling environment for accelerated growth to take place.
C. Obstacle. to Growth
3.06 olicy. While there have been considerable changes made over the last
few years in the policy environment within which the agriculture sector operates,
there remain a few lingering issues linked to the reforms which militate against
the sector's ability to meet the objectives articulated above. Overall, the
strategy of the Government to fully liberalize the agricultural sector, and to
remove all controls and Government interference in commodity pricing within the
next two to three years needs to be re-emphasized. The key remaining areas on
which Government action needs to be taken within this subset of issues include
the following:
- Fundamental to the overall strategy is the need to take all measures
necessary for ensuring the efficient use of the sector's single most
important limiting factor of production - water. This requires both
the wider application of improved water saving technologies fo*
irrigation, as well as measures aimed at increasing farmer
contribution towards the cost of delivering water for irrigation.
- In the case of cotton, there is need to completely liberalize the
production, export and marketing of the crop. Government
procurement should be discontinued, public sector cotton export
companies should be required to operate in a competitive environment
alongside private sector companies and competition in marketing
introduced, including the setting up of a *cotton exchange. With
regard to the latter, consideration should be given to adopting new
technologies, using an electronic tender system. In the interim,
i.e., beforo a satisfactory cotton exchange is functioning,
farmgate prices should go beyond the 66 percent of border prices
presently being paid to farmers.l
- For sugarcane, the Government intends to eliminate all controls
within a three year time frame. The issues revolving around the
sugarcane subsector are complex, including pricing, efficiency and
institutional issues, as well as the issue of how to deal with the
significant investment which has been made by Government in
industrial infrastructure, and which is totally dependent on locally
produced sugarcane. The findings of earlier studies, as well as the
one presently underway need to be consolidated, with a view to
identifying options including substitutes for sugarcane and the
costs of procossing these substitutes, on the basis of which an
action plan be drawn up. At the same time the subsidy provided by
the Government to the sugar industry and farmers needs to be
identified and made transparent. It is important to recognize that
sugarcane is a very high water consuoing crop (around 12,000 m3/
J/ For a more detaled anlysis of the lskum related to the cotton stu-sector, se WorLd ank,
"Arab Eepubilc Egypt - Cotton nd Textile Sector Study, Noveber, 1991
- 15 -
fed); clearly, from an efficient resource use perspective, the long-
term strategy must aim to move away from sugarcane production. If
an imputed value of water is taken into consideration, efficiency
measures clearly show that the growing of sugarcane is a most
inefficient use of domestic resources, and that farmers continue to
grow the crop on account of high subsidies (including free provision
of water) and the protection provided to the sugar industry.
- In order to complete the ongoing process of agricultural price
liberalization, farm input subsidies dealing with fertilizers and
pesticides should be removed, which should go hand-in-hand with the
process of Government divestiture and liberalization of marketing.
3.07 Technology Issues. The generation of appropriate technology and its
effective dissemination among the potential users is essential if the objectives
for the 1990s are to be met. There is a pressing need for streamlining the
institutions presently involved in agricultural research and extension, as well
as the manner in which their work proo-ams are formulated and monitored;
presently, the responsibilities are dispersed among many institutions, and not
effectively coordinated, leading to duplication of efforts. The more important
technology constraints which need to be addressed include the need for: improved
water quality monitoring, combined with measures for better managing the natural
resources from an environmental perspective; on-site adaptation and dissemination
of relevant technologies for the new lands, as well as those specially relevant
for small farmers; strengthening work on seed technology, particularly with a
view developing high yielding and short duration varieties. Given the importance
attached to exports, and the need for appropriate technology in this context,
there is also a need for a strong linkage between research and an analysis of
future market prospects for potential crops; present research on the export
crops is limited. While much research work has been done in Egypt, the absence
of a widely accessible and reliable data base is an important constraint.
3.08 ImDlementation Caacity. To derive the benefits from the Government's
investment programs, there is need for strong planning and implementation
capacities in both MALR and MPWWR; particular emphasis is necessary on ensuring
timely execution and on the monitoring and evaluation of public investment
activities. While project preparation capacity does exist in MPWWR and for land
reclamation, the economic aspects are not sufficiently emphasized, particularly
for the non-donor supported activities; for agriculture, there is virtually no
project preparation capability. Implementation experience shows that projects
invariably take longer to implement than originally anticipated, resulting in
increased costs and reduced net benefits; a strong monitoring function is
virtually absent. Special attention needs to be given to setting up a well
defined monitoring and e,valuation structure which reports regularly on the actual
experience of implementation.
3.09 Institutional Issues. To achieve the objectives set for the sector,
an efficient agricultural administration and better focussed support services are
needed, with improved coordination between the agencies dealing with agriculture;
these should emphasize decentralization in decision making and implementation
responsibility, which should go hand in hand with the related aspects of
authority and accountability. There is now recognition of the importance of
these issues. Yet, due to existing restrictive civil service and other
legislation, to inertia in the system and to social and political implications,
- 16 -
it is difficult to move forward on a clear definition of roles and on
restructuring the agricultural administration to perform these roles. MALR has
begun the process by defining what the government foresees as the future role of
the Ministry, principally in the areas of research, extension, regulation, and
agricultural economics/policy. In addition, various other Ministries are
involved in the rural sector. These include, among others, the Ministry of
Housing and New Communities in the context of land reclamation; and the Hinistry
of Supplies in the context of procuring, importing and retailing food
commodities. There is clearly a need for closely reviewing their present
activities, both on the context of ensuring better coordination, and assessing
whether some of their present functions are expected to continue in the future,
for example import and retailing of food commodities.
3.10 At the same time, the rural sector has in the past been heavily
dependent on the state, including the Government supported cooperative sector,
for the procurement of all inputs and services and for marketing of products.
Particularly for the latter, significant changes have been introduced, and other
than for cotton and sugarcane, the marketing system has been liberalized; there
are weaknesses, nevertheless, in the agribusiness subsector, the development of
which is presently constrained by inhibiting administrative and legislative
requirements. Also, liberalization of the input supply system is only just
beginning - presently, an estimated 25 percent of fertilizers are being marketed
by the private sector. It is important that this period of transition is
carefully managed, to ensure that the timely and efficient provision of services
to the farmers is not disrupted.
D. Key Policy Issues
3.11 In addition to the underlying objectives and the prevailing potentials
and obstacles to growth outlined above, there are certain key issues on which
there must be policy consensus, in order that a long term sector strategy can be
clearly articulated. These are briefly discussed below.
- 17 -
Food Security
3.12 The issue of
food security is Self Sufficiency Ratios
important both from a o,r . tln AQ.ICuItWrI CAM.ftdltIm, "90
strategic perspective,
as well as in the 1.1
context of poverty.
While there is emerging 0.3
consensus on the
definition of food
security as aiming to 0. -
assure the country 0.� m
adequate access to food, 0.5 X
both internally and 0.4 -
externally generated, {/4
there is still reference 0.2
to the need to grow 0.1 _ I _ _
certain strategic crops. _
Furthermore, there is a
desire to achieve a
measure of stabilization
in producer and consumer Figure 3.1
prices through the
development of buffer stocks. In the strategic context, there are various
options available to the Government, each of which have costs and benefits
related to them.
- If policies were to emphasize a high level of national risk aversion
(self insurance by growing all crops), the cropping patterns would
tend towards subsistence crops. While such an approach may generate
greater production of crops viewed as strategic by the Government,
it is likely to result in poor economic returns to the main limiting
factors of production and to the economy as a whole.
- Alternatively, policies which pursue efficiency pricing based on
free market operations, would result in crops being grown in which
Egypt has a comparative advantage and whose cultivation will
therefore not result in a misallocation of resources. For example,
through expansion of wheat production it was possible to increase
self-sufficiency for wheat from 31 to 40 percent during the 1980s in
an efficient manner. On the other hand, the domestic production of
rice and sugar cane leads to the misallocation of resources.
3.13 The present concern for food security stems from the risks which the
Government perceives, vis-a-vis the agriculture sector's ability to protect both
producers and consumers from the income/consumption effects arising from price
variations. Price stabilization programs often include an array of objectives,
including policies aimed at raising price levels for producers, lowering price
levels for consumers, or reducing nominal price variability. Given the varying
nhiertiva?t of suceh progranms, three isaiiue need to ha be0e%calt g*vm4inAd. F'irstl'
the negative effects on welfare from policies targeting absolute price levels
usually outweigh the gains from reducing price variability. If both absolute
price levels and price stability are policy goals, policy instruments need to be
- 18 -
flexible enough to target both levels and variability independently. Also, the
sustainability of the policy must be considered; otherwise, uncertainty over
government policies substitutes for price uncertainty with no welfare gatns.
Secondly, regarding the risks related to price variability, the underlying issue
is the trade off between the gains from trade using efficiency criteria and the
uncertainty arising from possible changes in the terms of trade. It must be
recognized that within the context of a diversified agriculture sector such as
Egypt has, and the fact that farmers have significant sources of non-farm income,
one would expect such risks to be low. Generally, within such diversity and in
the absence of absolute poverty, both producers and consumers are good at
managing risks themselves without Government intervention, through effective
substitution in crops grown or in the basket of commodities consumed. Finally,
a related risk from the Government's perspective is the potential variability in
the foreign exchange outlays which the country may need to make as a result of
changing terms of trade. Various options are available to the Government in this
regard.
- The use of buffer stocks operated by governments is often viewed as
a means of minimizing risks. However, efforts to manage buffer
stocks, such as in Bangladesh with jute, in Australia with wool,
among others, as well as in international agreements such as that
for cocoa, have shown that they are extremely complex to handle from
an institutional perspective and are an expensive and inadequate
mechanism for reaching stated objectives. The experiences
elsewhere, as well as theoretical work carried out, indicate that
one of the main difficulties in managing a buffer stock is the
extreme difficulty of projecting the mean price which the buffer
stock program should aim for in the context of price stabilization.2
- Within the context of free trade, several studies undertaken,
including those by the World Bank, suggest that the short term risks
which exist can be better managed through use of such mechanisms as
futures, options and forward contracts, rather than through use of
buffer stocks.3 Longer term price variability can also be managed
with flexible tariffs without the need for government intervention
in domestic marketing. In this context, strengthening the
Government's analytical capabilities for better risk management
could be considered.
In designing a program to stabilize the prices of food commodities there are a
number of factors to be examined, which include: (a) the main objective of the
program, as the appropriate mechanism critically depends on it; (b) the market-
conditions under which the program will operate, as an effective program cannot
be designed unless it is, clear whether or not it is to operate under free-market
conditions; (c) the role of the private sector - under liberalized market
/ See, for exajple, C.L. Gilbert, Departmnt of Ecornmics, aui Nary and Westfeltd Collage, London,
Paper No. 231 'Domestic Price Stabilization Policies for Developing Countries,* April 1991.
^f J.R. Colemen and D.F. Larson, World Sank, PiE Working Papers Series, No. 611 OTariff-bsed
Comodity Prico Stabilization Schemes In Venezuelt," Narch 1991, and D.F. Larson and
J.R. Colesmn, World lank PRE Working Papers Seoles No. 653 *The Effects of Option-Nodging
on tho Costs of Domestic Price Stabilization Schemes", April 1991.
-19 -
conditions and no government intervention, recent studies4 suggest that the
private sector will hold adequate stocks to stabilize prices in the most
efficient manner, when it is allowed to operate them in a profit-maximizing way;
(d) degree of stabilization intended - the most appropriate mechanism and
concomitant cost depend critically on the degree of price stabilization a program
is designed to achieve; if run by the governtmnt, then the narrower the price
band, the higher the cost; (e) own and cross price elasticities and price
variations of food commodities; these should be estimated in order to identify
the food commodities or combinations to be stabilized. Clearly, Government
managed price stabilization which can be sustained is a complex operation; costs
are likely to be high, without an assurance that the desired objectives would be
met in the end.
3.14 Finally, food security issues are also a matter of concern in the
context of poverty and within that of ensuring basic food availability. This is
clearly important for ensuring equity and an effective safety net during the
transition period following the reforms, and can be best addressed through a
program of targetted subsidies. There is a case for looking at possibilities of
better targeting support programs, so that the most needy among the population
derive the maximum benefits. In this context, there is need for better focussing-
on poverty and food security issues while designing potential investment
projects, and ensuring that service oriented projects address the interests of
the poor, including developing strong links between extension and research for
the poor farmers. These should be complemented by appropriately designed food-
for-work programs which would target those in the population who are in need of
work.
Poverty and Human Resources
3.15 In the context of the overall reform program, issues relating to
poverty and their impact on the human resources of the country are of particular
significance. The potential impact of growing poverty on social progress and
equity poses a major challenge for the Governmont, in its resolve to sustain the
program of reforms and consolidate the process of growth. Recent analysis
indicates that poor households still represent between 20 to 25 percent of the
Egyptian population, with women and children among the most vulnerable groups. 5
In the rural areas, the poor are either farmers with little or no land and
agricultural laborers, while in the cities, poverty is associated with the
unemployed and fixed income groups.
3.16 Available data indicate that both nominal and real wages in agriculture
increased significantly between 1970 and 1985, primarily through labor
outmigration following the oil price increase and the subsequent economic boom,
as well as through increased labor absorption by the Government, leading to a
decrease in labor supply to agriculture. However, since 1985, a combination of
declining oil prices and diminishing Government employment, resulted in nominal
agricultural wages remaining largely unchanged. The high inflation since 1985,
consequently resulted in an estimated 60 percent drop in real wages between 1985
/ See for exaipt., S.D. Wright and J.C. William, *Storage and Comodity Narketan, 1991.
21 World Bank Country Study, OEgypt - Alleviating Poverty Ournfg Structurat Adjustentw, July 1991.
- 20 -
and 1991, as shown in the figure below8.
The decline in real wages must have Rel A0lc w C196 R1cS)
impacted on rural income distribution.
While the increasing real wage from 4'
1970-85 allocated an increasing share of u..
income to wage laborers, a redistri- .4 .
bution of income from landless laborers ::
to land holders is taking place since Co.
1985 through decreasing real wages and
relatively increasing returns to the
land holder. Consequently, land owning
families have gained at the expense of
the landless families during the last .
six years.
3.17 While the past policies of the Figure 3.2
Government have contributed to marked improvements in standards of living and
welfare enjoyed by the bulk of the population, they have been unsuccessful in
eliminating poverty. Available evidence7 suggests that sustainable progress on
poverty in other parts of the world has been achieved by pursuing a strategy that
has two equally important objectives: (a) broad based economic growth to generate
efficient income earning opportunities for the poor, and (b) improved access to
education, nutrition, health care and other social services - to ensure human
capital formation, improve welfare directly and to enhance the ability of the
poor to take advantage of the opportunities which become available. The burden
of poverty most often falls disproportionately on women, and in the rural
environment, on the landless. Growth in the agriculture sector, combined with
programs for targeting particularly women and the landless, would positively
contribute towards the overall poverty alleviation strategy of the Government.
At the same time, there are many complementarities between poverty reduction and
the other aspects of the reform program being pursued by the Government. Private
sector development, for example, promotes growth and income-earning opportunities
for the poor. Maintaining the environment is critical if gains in poverty
reduction are to be sustained and if future increases in poverty are to be
avoided. Given that the agriculture sector forms the backbone of the rural
economy, steps to enhance equitable and rapid development of this sector would
directly contribute to overall poverty alleviation.
Emplovment
3.18 Employment promotion is necessary to reduce the social costs of
economic reforms. However, this needs to be pursued in the broader context of
the economy as a whole, through appropriate reforms to the financial and labor
markets, emphasis on technology and productivity, support for small and medium
sized enterprises, and direct expenditures on transitional employment for
specific groups of the work force which are the hardest hit by the reforms. In
certain quarters, the agriculture sector is still viewed as an important area
for absorbing the increasing labor force. While there is scope to provide
W Based on MALR data, and also sea Richards, Alan, "The Behaviour of LDC Farm Labor Markets:
The Case of Egypt", January 1992 (Draft).
v See World Bank, "World Development Report 1990", World Bank.
- 21 -
employment for graduates and others through efficient land reclamation policies,
agriculture should not be viewed as a final repository for the excess labor
force. As is witnessed in many countries which are at a similar stage of
development as Egypt, the share of agriculture in total employment should be
expected to decline. However, while primary agricultural employment declines,
employment in downstream activities in processing and increasing value added
increase.
- Through appropriate Government policies, and within the context of
overall rural development, measures are needed to encourage the
diversification of rural activities, so as to provide increasing
employment in rural industry, processing activities, construction,
services, etc., and away from employment in primary agricultural
production; in agriculture itself, more emphasis needs to be given
to encouraging the various post production/harvest activities, which
are expected to contribute towards increasing value added from the
sector and creating further employment.
The process of liberalization, and more efficient and better structured
Government services in key areas, should create an environment for resources to
flow into inherently profitable areas. These areas may also be outside
agriculture, in services and manufacturing.
Taxation of the Taxed C-) and Subsidized C+) Crops
Agriculture Sector In lu Ado n nsuo
3.19 The government 0 Elm
has been moving away
from the implicit , l
taxation of agriculture
through the price 1 -
mechanism, which was not j
only distortionary but -
also extremely expensive
in terms of maintaining
a public sector
enforcement system. As ,
Figure 3.3 shows, the
implicit taxation of
major agricultural crops "_ ', a, Gnwn awr X_ AI Iws
has been reduced from
above LE 5.5 billion in
19858 to about LE 1 Figure 3.3
billion in 1991 with
cotton remaining as the principal taxed crop. With price liberalization
progressing, the implicit taxation is expected to be lower in 1992. The
remaining implicit taxation will disappear shortly with the completion of price
liberalization, and most crops will become net recipients of subsidies through
the provision of irrigation and drainage services free of charge. The issue is
J/ Dethier, J.J., 1989, "Trade, Exchange Rate and Agricultural Pricing Poticins in Egypt".
The calcuLations of Dethier are based on value-added, nd have ben inftated to 1991
Prices using the IMF Consumer Price Index for Egypt.
- 22 -
to develop more direct, efficient, equitable and administratively simple means
of taxing agriculture that do not result in a net capital outflow from the sector
to support others as was the case in the past. This is particularly important
in the context of a declining share of the agriculture sector in total public
investment. Regarding taxation mechanisms, there is scope for improving the
present land tax and exploring other options. Similarly, the approach towards
subsidies needs to be clearly articulated. Essentially, subsidies that are
distortionary should be removed, and direct subsidies provided on a selective
basis. What is essential is that such subsidies should be transparent, with the
actual fiscal burden on the treasury identified.
3.20 From a macroeconomic perspective, the reforms already undertaken for
the agricultural sector as well as those proposed in this report, will reduce the
fiscal burden on account of the progressive removal of input and feed subsidies
and the revision of sugarcane prices to bring them in line with economic prices.
A revision of the interest rate structure of PBDAC's financial services would
reduce credit subsidies. In addition, the reduction in the size of the public
sector in managing the sector as well as in undertaking production activities,
through privatization, would also have a favorable fiscal effect. On the other
hand, tne implicit taxation of agricultural crops through distorted pricing will
disappear. Finally, the wider implementation of a cost recovery mechanism
whereby farmers would increase their contribution towards the irrigation and
drainage investment and O&M costs will ease the fiscal burden. With regard td
potential balance of payments effects, the reforms supported by the application
of improved technologies should yield higher production with consequent
beneficial effects on the balance of payments.
IV. WATER AND LAND RESOURCES
4.01 As mentioned earlier, the key elements of the strategy for increasing
total value added from agriculture need to be aimed at efficiency enhancement to
ensure better water resource use, and increasing the value of crop production per
unit of water consumed; this would be complemented by measures needed to ensure
the efficient utilization and improvement of the already developed land
resources. Given the limitations on the Government's ability to continue to
finance fully the improvement of the irrigation and drainage system of the
country, and recognizing the critical importance of the investments made by the
nation in these assets, the strategy also needs to emphasize mechanisms for
reducing Government budgetary outlays towards meeting the operation and
maintenance costs of the system, with a corresponding increase in private sector
responsibility for bearing these costs.
A. Water Resources
4.02 The construction of the High Aswan Dam in 1968 allowed for storing the
Nile's average annual inflow of 84 BCM; after allowing for average annual
evaporation and nther losses in Lake Nazser, it loft an annual not utilizable
f low of 74 BCM. The Nile Waters Agreement between Egypt and Sudan in 1959
allocated this resource in proportion of their respective populations, giving
Egypt 55.5 BCM; these represent more than 95 percent of the total developed water
- 23 -
resources of the country. There is modest potential for increasing the resources
available at Aswan by canalization of the White Nile in the Sudd region, thereby
reducing losses occurring in marshes. However, work on the Jonglei Phase I eanal
has been discontinued on account of security problems in southern Sudan, and it
is uncertain when work will be resumed; completion of this work could make an
additional 2 BCM available to Egypt.
4.03 The characteristics of the Nile system are determined by the High Dam,
which captures the source flow and regulates flow patterns to serve specific
demands. The Nile system has a single input from the dam and only two outputs:
drainage to the sea and evapotranspiration. The only true losses from the
system, of any significance, are discharges to the sea or terminal lakes through
the drainage system, or through the Edfina barrage at the tail of the Rosetta
Branch of the Nile. The total net effective rainfall is insignificant to be
taken into account; and in the context of the Nile basin, groundwater is not an
additional resource since it is recharged from the Nile water. Outside the Nile
basin, the few oases in the western desert and some other areis are capable of
economically providing only limited supplies of usable water (mostly non-
renewable groundwater); though not significant in total volume terms, they are
important from a local standpoint.
4.04 Given the significance of water from the point of view of planning for
overall national development, several attempts have been made in recent years tp
prepare water balances of the Nile basin below Aswan. Based on the most recent
available data, Table 4.1 shows the Nile water balance for the period 1980 to
1990/91.
Table 4.1: Historical Nile Water Balance
(in BM3/annum)
r . ... . . . . . . . .. . ............................
..'-'I At-E ' M'i'-.':'.." "" , '.'' ' ''
2. reLs. : A::--:-
1.'.' At Edt - ..... .t .-.. ..
Vapor& on" fr :st 2 2. 0:
5.I . - iIo - c0sii .*' %' 8 33.' 14 ;6 341 34.21
-.Al 57.67.4 S2. 533t5.7v58
Water balances have been prepared for the future; however, these should be
considered tentative, as several key inputs such as present outflows at canal
tails, minimum drainage outflows required to maintain the salt balance and
projections for municipal and industrial water demand are still under study. The
UNDP financed Water Security Project is designed to develop realistic projections
- 24 -
of water availability and demands for the next 20 years, and program developments
in a manner which will optimize resource allocations. The review of the land
reclamation sub-sector carried out by the World Bank in 1989/909 concluded
tentatively that sufficient water may be available to reclaim between 800,000 to
1.0 million feddan of land, which included lands for which water was already
committed, provided that outflows to the sea could be significantly reduced
through improved system operations (probably requiring additional investments)
and additional drainage reuse.
4.05 Projections for three possible climate cycles of typical, drought and
extreme drought conditions, indicate that during periods of normal flow (the
"typical' scenario), there would be shortages in the range of 2 to 6 percent of
total water requirements if the proposed land reclamation program were to be
implemented at the presently proposed scale of about 1.4 million feddan; the
shortages would be far more severe under drought (14 to 18 percent) and extreme
drought (22 to 27 percent) conditions. In periods of adequate water
availability, the system works well; however, in periods of water shortages, the
problem would be concentrated at the tail ends of canals. A program of land
reclamation which is not consistent with future water scenarios, would ultimately
be at the expense of production in the old lands. While there are uncertainties
in estimating water availability scenarios for the future, it is clear that there
are limitations on the ability of the Government to base its strategy for
increasing agriculture production principally on horizontal expansion; presently,_
a disproportionate share of investment resources are allocated for new land
reclamation (about 55 percent of planned third plan outlays for the agriculture
sector). It also highlights the need for a concerted strategy for conserving
this valuable national resource.
4.06 Additional water resources could become available from the completion
of the Jonglei canal, more effective on-farm irrigation practices, changes in
cropping patterns toward less water consuming crops and the introduction of
improved irrigation systems in the old lands. Corresponding reductions in water
availability could result from continuing industrial pollution and possibly
increased cropping in the old lands. The more widespread use of modern
irrigation technologies in the Delta is often viewed as an important potential
water saver. Given the fairly extensive reuse of drainage water, the average
basin efficiency is already quite high; the introduction of localized irrigation
on-farm would most likely save about 15.percent. At the same time, given soil
conditions and cropping pattern constraints, there are limitations on how much
area can be converted. In order to justify the allocation of larger investments
for this purpose, and to confirm the financial and economic viability of such
investments, it is necessary to undertake a study to prepare a long term
development program, to complement the work already ongoing.
4.07 Based on recorded data on total releases from the High Dam and the
volume of water discharged into the sea, the overall efficiency of water use from
the Nile river is quite high; however, problems exist within the system, to
varying degrees, depending on location, which lead to location specific
inefficiencies in water use.
2/ WorLd Bank, "Arab RoxbLic of Egypt: Land Reclamtion Sub-Sector Review", February 1990.
- 25 -
Consequently, it is necessary to undertake a review of the overall
system efficiency, as well as of irrigation water use efficiency on
the basis of the major canal commands, expanding on the work already
initiated by the Ministry of Public Works and Water Resources. This
would enable the identification of actions necessary for addressing
existing problems.
Important canals which lend themselves for initiating work on a command basis
include the Nubariya canal (commanding an area of about 500,000 fed at present),
Ismailia canal (300,000 fed) and the Riyah Tawfiki (over 600,000 fed). Such
studies should lead to a program of investments aimed at improving irrigation
water management, both at the farm level (which, among others, would include the
conversion of flood irrigated areas to piped/improved irrigation systems,
wherever it is feasible) as well as for the water delivery systems (both
branch/secondary canals and pumping stations).
4.08 Significant benefits are to be had from the old and old-new lands,
where a variety of improvements in land and water use are possible. While
drainage, rehabilitation of pumping stations, renovation of water control
structures and improvements in irrigation techniques offer the highest returns,
safeguarding the capabilities of the existing infrastructure (through timely
maintenance activities) or its renewal and improving system efficiency must be
given high priority. The increased capital intensity of the system required
higher real levels of maintenance funding as well as appropriate techniques and
scheduling in order to avoid system deterioration. Inadequate maintenance not
only lowers the system's water use efficiency, but also eventually ends up
requiring much higher rehabilitation expenditures. There is, thus, a need to
ensure that maintenance funding is given high priority and that maintenance is
carried out in accordance with acceptable technical standards.
On-Farm Water Management
4.09 Promotion of a farmer level institutional framework (either through
establishing water user associations, or through farmer organized cooperatives)
for improving the system for better sharing of water (with a view to reducing the
tail-end problems and water wastage) and for improving on-farm water management
is particularly important. This would include aspects relating to both ensuring
better operation and maintenance of the tertiary level irrigation systems by the
farmers, as well as the introduction of new technologies for improved water use
at the farm level. Initiatives to achieve these objectives require both
institutional development and investments at the tertiary level. This
recommendation takes on greater urgency in the context of complementing the
measures already approved by the Government which enable farmers to independently
decide their respective cropping patterns, taking into account the need to
harmonize farmer decisions with the inherent rigidities in the physical
capabilities of the irrigation system to deliver varying amounts of irrigation
water.
- The introduction of an institutional system for providing to farmers
an efficient irrigation advisory service is of high priority; in
tb4 acravthis e, -1 A als- bc- gi:cr to cr._urags pr'v
sector initiatives in this area.
- 26
Presently, the MPWWR is implementing an irrigation improvement project with
external assistance which is reviewing alternative means of addressing water
management issues. MALR has also been working to address weaknesses in on farm
water management, and in this context is also taking steps to build up its
capacity in irrigation agronomy. However, much more needs to be done; the work
involved and the amount of coverage necessary is extremely large, and the issues
need to be addressed urgently.
4.10 In the context of a long term strategy, responsibility for addressing
issues of on-farm management lies with MALR, since it fits in naturally within
the context of its extension and transfer of technology functions. However, it
is important that MALR's technical capabilities in irrigation agronomy and
related skills are strengthened, and steps taken to develop a viable
institutional framework which is strongly integrated within its field extension
activities. Complementary initiatives which emphasize irrigation agronomy in
agricultural college's curricula, and to develop and strengthen local farmer
groupings, which would provide the vehicle for ensuring that cropping decisions
by farmers and measures for more efficient on-farm water use are in line with the
capabilities of the system, are essential to ensure a self sustaining framework.
Irrigation and Drainage Service Fee
4.11 Given the pre-eminence of water as a limiting factor in the agriculture
sector, it is necessary that the above steps be complemented by measures which
ensure that farmer decisions on water use are primarily governed by economic
considerations regarding both its real value and the cost of delivering this
valuable resource to enable agricultural production. While there is a consensus
emerging on the economic need to levy some sort of charge on the use of water in
agriculture, its political, cultural and social acceptability remains critical.
The concept of irrigation cost recovery in the new lands is fully accepted by the
Government where all tertiary level O0M costs would be recovered from the
farmers; in addition, farmers also make a contribution towards the capital costs
of on-farm works, with the real level of contribution varying between
smallholders, graduates and private investors. Farmers are 41so contributing
towards meeting the capital costs of installing tile drainage; however, since the
costs are recovered over 20 years with no interest, in real terms the recovery
of costs is nominal. The difficulty is with irrigation systems in the old lands,
where the introduction of a cost recovery mechanism is regarded as both socially
and politically difficult. In these areas the Government would like to give pre-
eminence to introducing water saving techniques, improving approaches to on-farm
water management, and substituting high water use crops and varieties with those
that are water saving. While taking the above into account, it is nevertheless
important that the following two issues are taken into consideration while
further deliberating on this issue.
4.12 Firstly, the irrigation and drainage infrastructure financed by the
Government is a national asset of significant importance that needs to be
properly maintained. The system provides an important service to the farmer, for
which a service fee is in order. Based on the preliminary findings of the
ongoing cost recovery study, the budgetary allocations for the irrigation and
drainage svsten O& costa ars "learly inadequate to ensure optimm maintenance
standards, as evidenced by the significant deferred maintenance costs which need
to be incurred periodically; the latter are in many instances being processed as
investment projects. The increasing capital intensity of the system requires
- 27 -
higher real levels of maintenance funding as well as appropriate techniques and
scheduling in order to avoid system deterioration. Inadequate maintenance not
only lowers the system efficiency, but also eventually leads to excessive
rehabilitation expenditures. At the same time, while maintenance funding needs
to be given high priority, the Government is seriously constrained in its ability
to significantly increase its budgetary allocations for this purpose. Until
recently, it could be argued that the high level of indirect taxation levied on
the agriculture sector contributed towards recovering these costs; this, however,
is no longer true. For the future sustainability of the irrigation and drainage
system of the country, and given the limitations on the Government's ability to
meet fully the O& costs, it is critical that the farmers contribute more towards
meeting these costs, particularly since the implicit taxation of agriculture
through low procurement prices has been largely removed, with the principal
exception of cotton. In the context of a long term strategy, it is clearly not
sustainable to plan on meeting these costs through continued external support;
instead, there is need to develop viable approaches which would enable a
judicious sharing of these costs with farmers. The Government has adopted this
principle for the new lands, where the farmers are already contributing towards
meeting these costs; the applicability of this principle now needs to be
broadened. A comprehensive study on the issue of cost recovery for the irrigation
and drainage system is presently ongoing, which should provide the basis for
introducing water charges. While the recovery of O&M costs is vital,
consideration should also be given to the issue of recovering a contribution
towards investment costs.
4.13 Secondly, in the new liberalized environment, where farmers can
independently take decisions on cropping patterns, the absence of a proper
valuation of water creates a distortion in the decision making process, leading
to decisions which in the long term would reduce national welfare. Based on
preliminary estimates, about 35 percent of the total water is used by sugarcane
and rice which together account for roughly 12 percent of the total cropped area
and 13 percent of agricultural value added. While there are technical
limitations on the extent to which the existing pattern of water use can be
significantly changed in the short term, it is necessary that in the new
environment farmers recognize the value and cost of water, and take these into
consideration while making cropping decisions. Therefore, while the initial
focus of policy changes needs to be on devising an acceptable cost recovery
mechanism, it is also desirable to consider the efficiency aspects of on-farm
water use, so that the real value of water is taken into account in making
cropping decisions. As Table 4.2 shows, there are significant differences in the
net returns per m3 of water (excluding the cost of water) from rice and sugarcane
as compared with returns per m3 for the other crops. As analyzed in the next
Chapter, the allocation of the key water and land resources of the country when
the real value of water is not taken into account in making cropping pattern
choices, results in the suboptimal allocation of these resources; it results in
the full potential economic contribution from the use of these resources not
being realised. Various scenarios of changes in cropping patterns can be
reviewed, keeping in mind the technical limitations of the system, leading to
significant water savings combine. with a net increase in agricultural value
added.
4.14 It is no doubt a major challenge for the Government to devise a phased
program which is both politically and socially acceptable, and at the same time
meets the above objectives. Several constraints have inhibited the government
- 28 -
in the past from implementing Table 4.2: Return to Water for Main Crops
an irrigation service charge.
These constraints need to be
considered in subsequent .. .........LUA~
attempts to design and LtfdA gmV.
introduce such charges. The ......... ............_..
dominant constraint on any .. i.s-s -
service charge scheme is . . 0.1
socio-political resistance, 0
due to a variety of cultural '*U 8*t: 'R R M4
factors. Free water is Pot t,ioo 1-y
generally considered to be an t.I i 1 849. 05
inherited right of farmers. .. O. ... 0..
Therefore, political , - . '-7
resistance runs high against WW :.. - s i 2 0.8
any attempt of the government :-T.Q.t,
to charge for water itself. _____ _____ _____ ____ _____ _____ _____ ____
Major political resistance is
rooted in concerns about changes in wealth distribution resulting from the
levying of such a charge. However, it is also important to recognize that the
scale of charges needed to recover O&H costs would not have a significant impacv
on net farm incomes. For example, analysis done shows that a fee covering
present O&M costs only (estimated at about LE 0.007/m3 water, based on
preliminary data) would imply an annual payment of LE 172 and 89 for
representative farms of 3.5 fed and 2.2 fed in the Delta and Upper Egypt
respectively. This is equivalent to 1-2 percent of gross farm revenue, 3 percent
of net farm revenue (including return to family labor) and 3-4 percent of total
costs. A fee covering present O&M and capital costs, as defined in the cost
recovery study, imposed as a flat charge of LE 76 per feddan annually or LE
0.013/M3, would imply a payment equivalent to 3 percent of gross revenues, 5-6
percent of net revenues or 6-7 percent of total costs. While such cost increases
are not insignificant, they appear to lie within a bearable range from the
perspective of farmers' ability to pay, especially considering that real net farm
incomes have risen by about 40X since 1984.
4.15 The issue is how to initiate the service fee scheme in a manner which
would be acceptable from a socio-political perspective.
- A two pronged approach needs to be pursued. Firstly, water saving
irrigation technologies which are technically and economically
feasible need to be encouraged. Secondly, cost recovery of the O&H
costs of the irrigation network, leading eventually to price
incentives for more efficient use of water, also have to be
introduced.
A comprehensive study on the issue of cost recovery for the irrigation and
drainage system is presently ongoing, which should provide the basis for
Government decisions on introducing a system for recovering costs, within the
context of a medium to long term program. Specific options, which would need to
be reviewed on the basis of the study's findings and conclusions, could include
the introduction of a phased program based on firstly, tha rAnovAry nf usntmning
costs of pumped irrigation schemes in the old lands; followed by an average water
charge levied on all crops (or flat fee per feddan), based on the average
consumption of water per feddan, with a surcharge on the rice and sugarcane areas
- 29 -
(fee per cropped feddan), in view of their relatively higher level of water
consumption per feddan. The underlying consideration while instituting a cost
recovery mechanism would have to be simplicity in establishing charges per farm,
collection and enforcement, with the overriding consideration being one of equity
(and transparency). Consideration could be given to depositing the funds
recovered from farmers in a special fund to be utilized for the express purpose
of financing O&M costs of the system as well as the cost of rehabilitation and
upgrading of the system.
B. Land Resources
4.16 Egypt has a total area of about one million square kilometers, or 238
million feddans, of which only a small portion is agriculturally productive.
Based on preliminary data from the 1990 agricultural census on which compilation
work is still ongoing, agricultural holdings are estimated to total 7.5 million
feddan, or only 3 percent of the total. However, the process for estimating
actual cultivated areas is imprecise; while the plantings of some crops are
judiciously surveyed (e.g. cotton), the actual irrigated area is an uncertain
parameter. Two factors make the estimation process imprecise. First, land
reclamation statistics refer to gross areas and net irrigable areas need to be
estimated; furthermore, no estimates are made of unproductive, not fully
reclaimed areas and/or land taken away from agricultural use. Secondly, there
is no statistical series on land losses due to urbanization; various reports
suggest land losses averaging 15,000 -30,000 feddans annually. Consequently, the
estimates of the country's agriculturally productive areas are not precise. Data
from the Ministry of Public Works and Water Resources estimates total cultivated
areas at 5.4 m feddan of old lands and 1.9 m feddan of new lands, i.e. totalling
7.3 m feddan, based on water volumes released annually for agriculture; an
additional 0.2 m feddan are reported to lie outside of the Nile basin. These
estimates too have limitations, as water releases for the new lands are not based
on clear estimates of water demand from these lands. While there is need for
more precise data, it is nevertheless clear that, after water, the availability
of land is the next most important constraint for agricultural growth in Egypt.
4.17 The old lands have good soils, with generally sustainable crop
rotations which have evolved as a result of several generations of cropping.
Nevertheless, there remains considerable potential for increasing agricultural
productivity from the old lands. From the perspective of future sustainability
of programs for further intensifying agricultural activities in the old lands,
measures relating to better land and soil management in order to maintain and
even enrich the fertility of the soils need to be emphasized in the old lands.
Particularly important aspects which need to be assessed and investigated in this
regard are issues relating to land degradation (especially from waterlogging and
soil salinity), redesertification especially of the new lands and the overall
aspects of soil amelioration. Various agencies of Government are presently
working on these issues, including the Soil and Water Research Institute and the
Executive Authority for Land Improvement Projects in MALR, and the Egyptian
Public Authority for Drainage Projects and the Drainage Research Institute in
HPWWR. The preventinn nf nel-i.rAl or man made deterioration of this vallable
resource should be a national priority, which requires effective coordination
between MALR and MPWWR. Implementation of the ongoing programs for national
- 30 -
drainage as well an for gypsum application with subsoiling to saline soils need
to be complemented by other measures.
- To ensure a consistent overall program, without duplication between
agencies, there is need for an inter-ministerial panel/council,
which should be responsible for outlining a rolling five year
program of work for the respective institutions involved, and for
assessing the work done and approving recomtendations. Equally
important is the linkage with extension, so that the relevant soils
amelioration and land improvement measures can be demonstrated to
the farmers through the extension system.
- To protect agricultural lands from the potential threat of
desertification, a program for establishing shelterbelts and
windbreaks is a priority.
- To study the effect of the relatively low quality mixed drainage
water on crop and soils environment, and to identify improvement
measures, a research program should be undertaken jointly by the
concerned institutions of MALR and MPWWR.
4.18 In the context of horizontal expansion, the new lands are viewed as an
opportunity for increasing farm production, as well as for providing an
opportunity for increasing the cultivable area for absorbing the increasing
population of the country. In view of the intense pressure on Egypt's cultivable
land resources, new lands development is justified as long as it is technically
and economically viable, with the total program for such new land reclamation
being consistent with estimates of total water availability. However, in the
context of the reform program on which the Governoent has embarked, and the need
for an early response through increased agricultural production, the first
priority must be given to maximizing returns from the already reclaimed lands.
The distribution of land reclamation activities over a large number of project
sites inhibits timely completion and optimization of returns. Thus far, returns
from the new lands have been low relative to investment.
4.19 The area already reclaimed represents an important resource of the
country, on which major investments have already been completed, but which is
presently not producing to its full potential; a better use of this resource
represents a major growth point for agriculture during the coming decade.
Consequently, a program for agricultural fntensification, supported by a focussed
and well designed agricultural support service structure, would be an important
element of the Government's strategy for the 1990s.
4.20 There are various reasons for the relatively poor overall performance;
nevertheless, there is clear potential for increasing productivity significantly.
For successful land reclamation, it is essential that an effective institutional
approach be adopted for implementing land reclamation programs, which must meet
the different requiroemnts of two distinct but closely interrelated phases:
- coordination during the phase of infrastructure construction, which
ahnuld ineltude initiatives aimed at settler 5clcztlon to ensure that
settlement follows soon after land reclamation to generate timely
realization of expected benefits;
- 31-
- the second phase of settlement and agricultural production should be
effectively dovetailed into the above phase; this second phase
requires both intensive and focussed arrangements for providing
support services, to meet the special requirements of the newly
settled farmers.
The institutional arrangements adopted for the new lands must recognize the above
distinction. Presently, the MPWWR is responsible for constructing the main
irrigation and drainage infrastructure (with other agencies involved in
completing other infrastructure, such as electricity), while the General
Authority for Reclamation Projects and Agricultural Development (GARPAD) in MALR
is responsible for completing tertiary level and on-farm works. Due to poor
institutional coordination, the dovetailing of the various activities to ensure
timely generation of benefits is not effectively done. Furthermore, GARPAD is
heavily involved in planning for and completing the on-farm investments for
horizontal expansion, an activity which takes precedence in its allocation of
staff and other resources over its other responsibility of providing post
settlement support services. Consequently, the latter functions do not always
get the importance they deserve. Clearly, there is a need to discontinue the
historic separation of institutional responsibilities for providing support
services in the old lands and the new lands, and develop a uniform extension and
support services structure for the country as a whole based at the Governorate
level. With regard to the disposal of reclaimed lands, the Government's present
policy is to allocate 50 percent of the annually reclaimed areas for smallholders
and graduates, with the remaining 50 percent earmarked for auction to private
investors.
- Consequently, a further prerequisite for success in land reclamation
is the need for careful selection of new settlers, taking into
account social and other considerations, with a view to establishing
new communities in a manner which maximizes the social harmony
within the villages established.
A related issue in this context are the implications of the Government's policy
to allocate lands to graduates, without fully taking into account their
suitability to take up a livelihood in agriculture. With graduates having no
agriculture background or expertise being pressed into agricultural activities,
production levels achieved are low and land resource utilization sub-optimal.
While there is no reason why graduates should not receive reclaimed lands, it is
clearly necessary that selection criteria emphasize the selection of graduates
who have an agriculture background.
4.21 Resettlement of any nature brings with it unique requirements; to
ensure success, there is need particularly during the early years of the
development process for'the newly settled farmers to be efficiently supported.
Consequently, a focussed program for intensifying agricultural production in the
new lands must include the following elements, which should be packaged within
the context of a focused institutional framework, which has clearly defined lines
of authority and responsibility.
- an agricultural research program, which both undertakes AdAntivA
research work within the areas reclaimed in order to adapt relevant
technologies to local conditions, and is closely linked to and
provides support to the extension system;
- 32 -
- given the weaknesses in the traditional extension function, there is
need for a clear approach which focusses on the specific needs of
the new lands, recognizing the modern production systems in these
areas and the need for improved management practices; training for
settlers should be an important element of the program;
- agricultural credit and input supply arrangements for the new lands
are poorly developed and generally do not take into account the
special requirements of farmers in these areas as opposed to those
in the old lands. With no title to property, little resources to
plough in as seed capital, and almost complete dependence on the
banks for their credit requirements, the newest settlers are the
most handicapped. Consequently, there is a strong case for devising
specially focussed agricultural credit and input supply schemes
which serve the specific needs of farmers in these ares;
- adequate supporting infrastructure, particularly electricity supply
and a good farm to market roads network, and efficient social
services such as schools and health services, are critical to ensure
permanency of settlement and sustainable growth in agriculture.
Land Tenure Arrangements
4.22 In order to maximize returns from land, land tenure issues assume
importance. The key issues related to the prescribed tenancy arrangements,
whereby, until recent changes to the law: the rent was fixed at seven times the
land tax; and the heirs of the tenant had the de facto automatic right to inherit
the tenancy contract, with the contract virtually having validity in perpetuity.
The past policy has now been changed, with revisions to the old law having been
approved by Parliament under Law 96 of 1992. With the new law there is a
transition period of five years upto 1996/97, during which time land rent will
be fixed at 22 times the land tax and owners will be able to buy back the
contract from the tenant under terms defined under the revised law; at the end
of the transition period, land rents will be free to be determined by the market,
and owners will be able to terminate prevailing tenancy contracts. The changes
are clearly a step in the right direction; however, the value of the land tax
continues to remain extremely low, at an average of around LE 20 per feddan (and
which is revised only once every ten years). Historically, the linkage between
land tax and land rents, when combined with legislation (Law 116) which makes the
leaving of land fallow for more than one year illegal, militated against the
efficient use of the scarce water and land resources of the country. Since there
were disincentives to rent out land, given the low rental values, land-owners
preferred to crop it in a manner which generates sub-optimal returns from the
land; however, by doing so, they complied with the law requiring them to crop the
land (Law 116) and were able to protect their ownership rights over the land.
4.23 With regard to the land tax, certain key steps need to be taken.
- A reassessment of the present level of land tax should be
undertaken, and future valuations and assessments of the land tax
need to be undertaken more frequentlv;
- With the marked reduction in the implicit taxation of agriculture
through the price mechanism, consideration should be given to
- 33 -
bringing farmers owning less than 3 feddan within the purview of the
land tax system;
- Other measures necessary include steps for improving land tax
collections, as well as upgrade land registry records in the rural
areas.
C. Environmental Sustainability
4.24 As has been repeatedly emphasized through this document, the most
critical natural resource constraint is water. Demand for water from various
sectors will continue to increase in the next decade and beyond. With limited
quantities of water, this implies that the agriculture sector will have to adjust
to lower percentage of available water than previously. Even with increased use
of available ground water and the reuse of drainage water, it is most likely
that in percentage terms the agriculture sector will have less water available
to it than at present. The implications of this for sustainable agriculture
development are that measures should be introduced to induce a more economic use
of water. These measures would span the whole spectrum of various alternatives'
already discussed above; implementation of these measures should begin and be
accelerated.
4.25 A related aspect is that of water quality; in this context, the impact
of pollution on water availability cannot be over emphasized. This is of
importance particularly in the context of ongoing and future reuse of drainage
water. Agricultural activities affect water quality through fertilizer,
pesticide and other agricultural residues. Other major sources of pollution are
the industrial and urban sectors. Consequently, it is clear, that the extent to
which polluted drainage water can be reused through the present mechanism of
mixing with canal water will have to be carefully monitored to avoid health
hazards or risks. Options for cleaning up of this water including inducing
industries to remove heavy metals should be examined, as should the introduction
of such practices in agriculture as integrated pest management to reduce
pesticide use and green manuring to reduce fertilizer use. Dedication of the
drainage water for purely agricultural purposes should also be considered for the
future. Efforts should be stepped up to improve the monitoring of water quality;
for this purpose, the presently dispersed institutional responsibilities should
be rationalized and coordinated, and clear institutional responsibility assigned
for water quality management. In addition, a national water quality program
should be established, with a unified management structure for enforcement of
effluent standards. In the context of water related and land reclamation
projects, there is need to adopt a mandatory policy of requiring environmental
assessments to be carried out, in order to ensure the overall environmental
sustainability of such investments. Given the limited expertise available within
the country in this field, there is need for a training program to strengthen the
technical capabilities within both MALR and MPWWR to undertake this task.
4.26 Given the limitations on land resources, maintaining soil fertility and
indprtAking anil con.senation. measures are imp^rtar.t iSSUC3. LI.a-.-y areas 'ir buoth
the Delta and the reclaimed lands are ill drained and suffer from high salinity
levels and waterlogging. This has resulted in substantial drops in yields in
certain areas. To tackle some of these problems, a National Drainage Program is
- 34 -
being implemented with World Bank assistance. There is a need for better
coordination with the Soil Amelioration Authorlty in NALR in order to ensure a
sustained effort in the area of soil management; soil testing site. should be
established, particularly in the higher risk areas, to evaluate changes in
fertility and/or contamination levels, especially in the old lands. In addition,
consideration needs to be given to establishing shelterbelts and undertaking sand
dune stabilization works as part of the overall soil conservation program, in the
context of sand encroachments and the potential threat of desertification to
agricultural lands. Given the concerns on whether this provides the best use for
the scarce water resources, consideration should be given to establishing pilot
scale activities to demonstrate viability, as well as to the use of urban waste
water. A related issue that engages the attention of many Egyptians is the loss
of agricultural land to urban development. A law presently exists that makes
this transfer an offence. Given that land is a natural resource, and that
conversion to urban/industrial uses carries with it a form of irreversibility
when viewed in an inter-generational context, an argument can be made for
retaining present controls.
- However, there are potential costs attached in pursuing this
approach, arising from the restrictions on investment decisions
which could potentially generate higher returns than those available;
from existing land use, which should be recognized. Furthermore, it
is clear that difficulties exist in its enforcement; also, as with
any form of control without clearly defined criteria, rents ensue,
leading to inequities.
With the liberalization program, and the proposed revision of the land tenure
law, the value of land in agricultural uses should increase and should improve
this trend. At the same time, this should be complemented by better land use
planning and zoning of agricultural and urban lands, with improved monitoring and
sanctions for violation of agreed land use plans. This is particularly relevant
in the context of the increasing importance which needs to be given to expanding
rural industries and other employment creating opportunities in the rural areas.
4.27 The success of Egypt's agricultural sector strategy and the husbandry
of resources for future generations depends critically on how the natural
resources and environmental issues are managed. These issues are closely linked
to the issue of population, and how it affects environmental degradation. There
is no doubt that population growth in the rural areas will pose major challenges
for overall environmental management particularly in the area of water use and
water quality. This is a long term issue which necessitates the development of
programs on environmental issues and family planning targeted at rural women in
particular and rural families in general. Such programs will require the
cooperation of the various agencies charged with social welfare issues; it
could also be integrated into the work of the agricultural extension system.
4.28 Finally, many institutions are presently engaged in addressing
environmental issues, including MPWWR and MAL. There is considerable scope for
improved coordination between these, and the Egyptian Environmental Affairs
Agency, which is the Government's central environmental agency, The agency has
coordinAted the drafting of an Environmental Actiuu Plun for Egypt, which is
supported by several donors. This plan provides a framework for dealing with
many of the problems mentioned above, including appropriate legislation and
- 35
measures for their enforcement, institutional responsibilities and economic
aspects of environmental degradation.
V. PRODUCTION AND MARKET PROSPECTS
A. Crop and Livestock DeveloRment
5.01 Within the context of the available natural resource base of Egypt,
increased agricultural growth can be derived from increasing cropped areas,
increasing the yield for individual crops, improving the efficiency of cropping
patterns and increasing productivity in livestock activities. In order to
achieve the targeted increase in sectoral growth, the crop and livestock
production aspects of the strategy are clearly very important. The steps taken
in liberalizing prices in the agricultural sector are important for increasing
productivity and ensuring optimal choice of cropping and production patterns.
The Government needs to consolidate this process of change, and should further
support these developments by creating the required enabling environment for
promoting growth.
CroR Production Aspects
5.02 The total cropped area has increased by about 8 percent during the five
year period 1985-90, at the end of which it totalled about 12.1 million feddans.
Most of the increase came in the winter cropped area (primarily wheat and winter
vegetables), and orchards. Moderate area increases also occurred for maize and
rice. At the same time, there was a significant decline in the cotton and
berseem areas. In terms of total output, there were significant increases in the
production of cereal, beans and sugarcane, while there was an estimated 29
percent decline in cotton production reflecting the continuing price control
exercised by the Government for this crop. Overall, horticulture production
increased significantly during the 1980s, as farmers moved to these uncontrolled
crops prior to the wider program of liberalization initiated at the end of 1986.
5.03 Crop productivity levels in Egypt are relatively high when compared to
yields by world standards and in countries with similar agroclizatic conditions.
However, based on available evidence, including yields obtained on the fields of
progressive farmers, the average yields could be increased by between 20-25
percent for the self pollinated crops such as wheat and rice, and by more than
35 percent for cross pollinated crops by using hybrid seed, for example for
maize. There is also potential for further increasing vegetable production from
an expansion in the greenhouse and plastic cover technology. However, in order
to sustain high yield levels, it is crucial that aspects of disease and insect
resistance are continuously emphasized; in addition, there is considerable room
for improvement in the various aspects of crop agronomy. An important ingredient
for realizing these higher yields is the need to re-focus and restructure the
institutional support services which are so essential to ensure that the growth
potential of the sector is realized. These institutional issues are discussed
in the next chapter.
5.04 In order to appreciate the demand on the resource base and the economic
contribution of the main crops, Table 5.1 shows the different crops' shares of
- 36 -
Table 5.1: Major Field Crops and their Economic Contribution
ArE Kof f C- : ...................VedsW' X . .......
;~~~~~001) Id'V Tfime 'r mf(*s S40 fpra Ita0 pew'0 Id,, ''''- '.L-''''" Vi A
t000i0000;0P i l0:Cr 00-000000-00:04 t;0.0- ;-4;-0- ; .......................... .. . . X-
Perenwfntal Crops
Lo 11 *1 274 4K 100.0 S2*6 ft . i 0- i
Toes toet311 1 C$K" .......10 ....8..... 7
Plai IWinter crop-1
Lt;;;;0;-Beruee : if0yt:-- ;:1743- 8 - 13X 160 29 U 69 18 0
Mh-Cot se- m M87 2$6 : -K 10. .0 .* $31 .9 ...
aifOth er Cr: 1112.
-Maize 0 1); j1975-0074 968: 015 2706 -33 15- 103 2041 1
Other Cropv.p1112 556 8%ot It14 K 0 00 6
i'00'2)000;000S0 Including''' eaora"tion toes..; 'th di "euC '@ :11 1 i.f0t.wae .I
6... r gto rgol Atveran of cro water U5--
Sources: CAPMAS (Cropping attern). WUtIIt (Cro Wt U. sI Laluo I Ialue
Added)
total area, total water consumption and total value added. The share of land for
a crop is arrived at by multiplying the cropped area with the fraction of the
year occupied by that crop. In order to compare resource consumption and
economic contribution of the individual crops, key values from the table have
been depicted in Figure 5.1. This figure shows for each crop its share of total
consumption of the scarce water and land resources, and contrasts it with the
economic contribution as measured by its share of total value added for all
crops. Wheat, cotton and maize produce most of the value added in agriculture.
Most land is occupied by wheat, berseem and maize. Most water, on the other
hand, is consumed by rice, maize and sugar cane. The comparison shows the
relatively high demand on water of sugar cane and rice and the high demand on
land of berseem. Cotton, wheat and vegetables make an economic contribution
relatively high compared to their resource use.
5.05 With respect to competitiveness, the main agricultural field crops
presently grown in the old lands can be divided into three groups10. As shown
12/ Crapetitiveness has been analyzed through the calculation of dome tic resource costs (DRCs).
DRCs were calculated wing the siople Calassa approach, dividing the *economc valu of domestic
resource irputs by the economic value added through production. Domestic resources are land,
labor, capital (where included) and water. The economlc value added Is the shadow priced return
- 37 -
Figure 5.1: Contribution-of Major Crops
0.28
0.28 -
0.24-
0.22-
0.2-
0. 19
0.1is
A 0.14
0.12
0.1
0.09
0.06e
O.D4
0.02
0
R ce SuarCn Whlet Gadrm TOaePots oem
M. ze Cotton L-Berse*m Veetabl. Sh-Eer 9an
Water Cons unpt Ton Land LUmgo M Va I us Added
in the Table 5.2, Egypt has a strong comparative advantage for horticulture
products (fruits and vegetables), cotton and wheat. Especially, if the cotton
yields of the early 80s could be re-established, the advantage for cotton would
be even more pronounced. Egypt is moderately competitive in several relatively
low water consuming crops (maize, beans, potatoes, long berseem and oil seeds)
and has a disadvantage in producing the water intensive crops rice and sugar
cane. In addition, the development of improved short maturity wheat varieties
and the increased adoption of hybrid corn can be expected to further shift
comparative advantages toward these crops, thereby further enhancing food
security. In the new lands, there is a strong advantage for vegetables and
fruits and a clear disadvantage for traditional crops such as berseem, wheat,
maize and beans.
5.06 The analysis of individual crops has to be put into perspective of
feasible crop rotations and their competitiveness. For example, the extended
period required for growing cotton makes it feasible in rotation with short
berseem. While cropping patterns are in general becoming more diverse, including
the practice of inter-cropping and growing of vegetables, Table 5.3 compares the
returns to the main traditional crop rotations. Returns to horticulture products
to these domestic resources including residual returns. A DRC below I Indicates the existence of
a cost advantage in the production of the specific commodity.
- 38 -
Table 5.2 Competitiveness of Major Crops
;~~~~~~~~~~~
....... ... . .. ..-i
;ore hige r,b tingenrl Tand 5s.tv-.3': Copttvns f ao oain
culdwih geateric roaioskwt ;-0;-SXL{-;-
an gRCo08Hweater, need fort@_z
main rotations duerovidee
financial rseturnvely th
farer etwen E 6029 0~ 77 4
and LE 1293 per fedd n.
This5 is consesten wih otet. w
rTionabl chie 3f Nomna 0.0 or
farmers and imult 6.4u -T6362 12 140
prievalene largest fourptpiedsot ,rfetti oia aeo
have a DRC73 o4f9 143* 74 and0
protectinte of et sinus n 0 n 4 .1 re ad*d for cotto (base on191pics,hlesn
appear previtousel seoiayte gi th na e l r co t
aore heighr,bin geanerl Ttlh.:Cmettens fMao oain
whain-rotationsaprovs ideathw' tw e
financial returnst theo ~ 4 ~ *44*#4*44.4.*4.. 4.~:.~
farmern favour the.latter
farmerobetwens due 102 then730 109 7
This0i cwonmesistent wit proecton or also calculate an.shwni
ratinle52 chomicesrir of notctor eacug h ditri on of1t031. 0.8 u
proaions. Th lre sh ortpu rc distortion relced.0 nmnlaeo
berseotect on afmnds0. themais or oto bae 1on9.19914 prices,9 0.8eom
wtheat-maievrtaionsl boulth.gan tl av aienmnl rtcinrts
- 39 -
A possible reason for negative protection, despite the reforms, is that
liberalization of trade and marketing requires more time before markets become
competitive. In wholesale markets which are not yet fully competitive, farmers
may not obtain the full economic value of their products. At current world
market prices, there is positive protection of sugar. Effective rates of
protection measure distortions of output prices relative to distortions in inputs
prices. Remaining input subsidies (including free irrigation services) lead to
effective rates of protection above nominal rates of protection for all
commodities; yet, effective rates of protection are still negative for the
important crops and prominently cotton. Both measures of protection do not
reflect the distortions in non-traded inputs such as water and land.
5.08 In carrying out the above analysis, water is treated as a homogeneous
commodity, and its value based on average country wide costs; for the base case
analysis, it is valued at its long term opportunity cost, as reflected by the
maximum marginal benefits from potential cropping pattern changes and land
reclamation projects. In the case of rice, this approach has certain
limitations, since rice is mainly grown in the six Delta Governorates close to
the coast, where the potential for diverting it to other areas is limited. Also
in these areas, the average quality of water is generally much poorer, and its
opportunity cost consequently much lower than the average value assumed for the
base case analysis. In addition, certain externalities accrue from the technical
considerations underlying the choice of including rice in the cropping patterns
for the lower Delta Governorates. In these areas, rice is grown mostly as a
reclamation crop; furthermore, it contributes towards controlling sea water
intrusion and the resulting salinity which comes from it. In view of the above
considerations, the average country wide opportunity cost of water probably
overestimates the real value of water which is used for rice. If the value of
water is restated in terms of marginal benefits from potential cropping pattern
changes, then the production of rice within these coastal Governorates for
domestic markets can be justified; it however remains uncompetitive at present
technology levels for exports.
5.09 In the new liberalized environment, farmers are expected to follow
market signals that would lead them toward production of those crops in which
Egypt has a comparative advantage. Certain desirable shifts in production
patterns are already occurring as a result of price liberalization. Most
dramatically, farmers have increased the area planted to wheat by 65 percent
since 1985 while reducing the berseem area by 13 percent over the same period.
Production of vegetables and fruits has risen by 54 percent and 86 percent
respectively over the 80s with most of the increase occurring during 1980-85,
before net returns to the competing and previously regulated grain crops picked
up. An increase in high-value horticultural products has the potential to
increase value added in, the sector. However, this depends critically on the
availability of the necessary transport, processing and marketing infrastructure
as well as development of additional export markets. Some shifts can be expected
toward increases in the area planted to cotton and the yield obtained from it.
Furthermore, hybrid cotton varieties, already developed in China and India, could
lead to further increased yields. Increased cotton production would also be
beneficial through increased production of cotton seed oil and cake, reducing the
imported quantities of vepatnhl^ nil *nd feed ingredients.
5.10 Potentially, there remain possibilities for both increasing
agricultural value added and saving irrigation water use from further changes in
- 40 -
the cropping patterns; this could be achieved by shifting cropping patterns away
from rice and sugar cane, towards cotton, sugar beet and vegetables, as well as
reductions in the area planted to berseem in favor of wheat. While market
signals provide the required incentives to increase production of the competitive
products, incentives also remain high to produce non-competitive crops since the
real value of water is not taken into account in making cropping decisions. As
long as distortions remain in the allocation of primarily land and water, further
desirable shifts in production patterns would, therefore, not be brought about
by market forces. The focus of the strategy ought to be on removal of the
remaining distortions to promote desirable production shifts, with a view to
increasing the total value-added from the sector. There are primarily three
crops for which removal of remaining distortions or additional policy measures
to alleviate distortions are required.
- The present procurement price for cotton is still insufficient to
provide the necessary incentives for farmers to increase the area
planted to cotton and obtain higher yields through improved input
application; the cotton rotation remains the least profitable among
the major field crop rotations. Therefore, the complete
liberalization of the cotton sub-sector is crucial for Egypt to be
able to exploit its significant cost advantage in producing this
crop.
- In economic terms, rice production using existing technology is
competitive only under special circumstances, i.e. when it is
produced in the context of a reclamation crop in areas near the
coast where the average water quality is generally much poorer. In
other areas, where greater potential for crop substitution exists
and the possible environmental benefits from growing rice are not
forthcoming, the price liberalization of rice leads to high
financial attractiveness of rice to farmers, well in excess of its
economic value, due to the absence of water charges.
- For the same reasons, sugar cane is financially attractive to
farmers even though its production is uncompetitive due to high
water consumption. This will lead to farmers' desire to expand
their sugarcane area. The domestic production of sugar is desired
partially in view of world market distortions and extremely high
world market price volatility of sugar; at the same time,
substantial investments have been made by the Government in
industrial infrastructure which are dependent on locally produced
sugarcane. As a first step, sugarcane prices, which in 1991 were in
excess of the estimated border price, should be brought in line with
the latter., Simultaneously, an action plan needs to be drawn up to
identify measures needed to achieve the Government's objective to
eliminate all controls within a three year time frame.
5.11 Through the demand for feed crops, the livestock sector competes
directly with food crops for the use of the scarce land and water resources of
the country. Presently, over 20 percent of the cropped area is planted to
berseem. In assessine th^ allocation of land resources to bcrzcem, the beha-ior
patterns of large and small farmers need to be distinguished. Livestock
activities are traditionally an integral part of the farming system of the
latter, and consequently berseem will remain in their cropping pattern. However,
- 41 -
the amount of berseem produced, which is in excess of farmers' own requirements,
and the amount produced by large farmers, is influenced by additional factors
that were distorted in the past. While output prices of field crops were kept at
a low level, livestock products (primarily red meat) prices were not only lea.
constrained but also protected at a level above economic prices through a policy
of import restrictions on livestock products. Growing berseem and raising
livestock allowed farmers to circumvent price controls on food crops, generating
excess demand for berseem. Prevailing land tenure laws may also have encouraged
the growing of berseem by absentee land owners who did not wish to rent their
land. With the removal of import restrictions, and shifts in relative prices of
red meat vis-a-vis other products, the attractiveness of berseem, particularly
for the larger farmers and those not producing it for their immediate needs,
should be reduced. The area planted to berseem has already declined by 13
percent since 1985 as a result of these factors. Its further reduction depends
on other factors which influence the area planted to berseem, including the need
to address the summer feeding problems faced by farmers, and the fact that the
area planted to short berseem is connected to the cotton area through the
feasibility of crop rotations.
5.12 While recognizing the nitrogen fixing capacity of berseem in the
context of overall soil management, it would be desirable from a perspective of
resource use efficiency to take measures aimed at encouraging the use of
alternative feed mixes involving more non-traditional feeds. While there areL
some constraints, efforts should nevertheless be made to increase the yield of
fodder crops and to substitute some of the present demand for berseem by non-
traditional feeds; both research and the agriculture extension services would
need to play an important role in bringing about these changes. By growing food
crops, such as wheat, in areas previously cropped with fodder crops, such as long
berseem, food security could be enhanced and value added in agriculture increased
at the expense of animal feed self-sufficiency.
Livestock Production AsRects
5.13 Livestock is an important and integral part of the agricultural
production system, as 85 percent of all livestock is found on small farms. In
outlining a strategy for the livestock sector, it needs to be taken into
consideration that livestock production, in which rural women are heavily
involved reportedly accounts for one-third of Egypt's gross agricultural
production, and is important for the incomes of a large part of the rural
economy. It provides an opportunity to maintain soil fertility through the
manure produced, better utilization of family labor, and provision of proteins
in the local diet. Within this context, however, the strategy must be consistent
with the underlying requirements of the overall agricultural strategy of ensuring
optimum returns to the limited water and land resources of the country.
5.14 The Government has stated its intention to encourage the production of
fish and poultry products as a more efficient and healthy source of protein, as
compared to red meat. Since both fish and poultry make relatively less demand
on the water and land resources of the country, such developments would certainly
contribute towards better overall resource utilization. In this context, the
importance of tha finharies sub-sector as a source of protein in the rkatioza'l
diet is without doubt. Given the special subsectoral characteristics of
fisheries, it merits a separate and more detailed review. Overall though, the
liberalization of prices and the removal of import controls should result in
- 42 -
appropriate relative price signals among these products, thus encouraging
producers and consumers to make the correct choices; public education supported
by relevant extension advice in this regard would be important in promoting such
development. At the same time buffaloes (which represent 55 percent of the
national dairy herd and produce 70 percent of the milk) and cattle are of
overwhelming importance for the average small farmer in the country; buffalo milk
is preferred due to its higher butterfat content and its taste. While analyzing
the efficiency of using the nation's resources for growing berseen, it is clear
that its competitiveness is based on the use to which it is put. While highly
productive exotic cattle are competitive and buffaloes provide services that
cannot be substituted for, the measures of efficiency show that the local Baladi
cow causes both a financial and social loss. Therefore, it would be expected that
the number of Baladi cows will decrease through up-grading.
5.15 The first priority for a livestock strategy should include measures for
improving livestock productivity on small farms in order to increase farm income
and make efficient use of fodder crops as well as crop residues produced on the
farm; both research and extension would play an important role in this. At
present, livestock management practices are poor and productivity is low; despite
a significant increase in gross productivity, the value added from livestock
increased by an average of only 1. 2 percent per annum during the last few years
However, improvements in animal production can be achieved if some of the major
constraints on the sub-sector are removed, such as low yield of fodder crops, lov
genetic potential of the existing animal population, insufficiencies in
nutrition, shortcomings in the control and treatment of diseases and infertility,
and a weak livestock extension service. Yields in the old lands of fodder crops
should be optimized through new high-yielding berseem and sorghum varieties, use
of berseem mixed with legumes, improving by product utilization and greater use
of non-traditional feed and encouragement of fodder beets. Livestock production
should be intensified, for example, through continued upgrading and crossing the
native Baladi cow, previously appreciated for its draft power. This will
increase milk production and require corresponding improvements in the milk
collecting, processing and marketing systems.
5.16 In the new lands, intensive and large scale livestock activities would
need to be promoted, which guarantee benefits commensurate with the investments
in order to make it a viable proposition; the traditional small scale livestock
activities are not consistent with the cropping patterns in the new lands which
emphasize high value crops. To ensure feed availability, focus in the new lands
would need to be on improving green fodder productivity using HYVs of perennial
forages, such as alfalfa and salt tolerant grasses, improving the nutritive value
of crop by-products, intercropping fodder and barley with tree crops and
encouraging hybrid saize. However, a note of caution needs to be built into this
approach; firstly, small,farmers coming from the old lands will inevitably pursue
the scale of operations they are familiar with, and secondly, preconditions for
success of this approach is a very strong extension system, an effective
veterinary service as well as an efficient marketing and processing
infrastructure.
5.17 In the traditional poultry sector, where productivity is low, locally
adapted strains of dual-ptnrpose birds should bc encouraged. Thy uummerciai
poultry sector is presently in difficulties due to over-investment in production
capacity. Demand is stagnant and the market for poultry products appears to be
saturated. Further investments in the commercial poultry subsector are therefore
- 43 -
unlikely and undesirable at present. On the other hand, the role of the rural
poultry sector is increasing, using locally established strains of dual purpose
birds. Poultry is an important source of efficiently produced protein and shtould
form an integral part of this subsector's future strategy.
5.18 The livestock extension, animal health and artificial insemination
services need to be intensified in order to assist farmers in providing better
nutrition and, through balanced rations, making maximum use of farm-grown fodder
and crop by-products. Women play an important role in carrying out livestock
activities on the farm. Hence it is important that they be targeted by the
extension services in order to improve productivity of large and small ruminants.
The privatization of veterinary services should be emphasized, particularly with
a view to promoting veterinary services at the village level for ensuring better
disease prevention/curative measures, and to undertake an effective artificial
insemination program.
B. MHarket Prospects for Agricultural Products
5.19 Real incomes often decline, with a corresponding effect on domestic
consumption, during a period of reform. While this phenomenon has no doubt
occurred in Egypt, the extent of decline appears to have been arrested.~
Available data suggest an expected average annual growth in real per capita
income of around 2 percent in the remainder of the 1990s. At the same time, the
transition to a market based economy will, in the short term, induce a worsening
income distribution. From a market perspective, these developments have various
implications. First, the domestic demand for basic food commodities will
continue to be strong, driven principally by population growth. However, once
real per capita incomes begin to rise, domestic demand for the various
coiodities is expected to provide an important source for absorbing the
projected increase in domestic production. As incomes go up, and the share of
the poor in total income declines, demand for meat, horticultural products and
the more processed items of food will increase faster, at the cost of a
corresponding decline in the growth in demand for basic primary commodities. For
example, work done on Egypt by the FAO shows that demand for cereals is expected
to go up by about 35 percent between 1988-2000, and by only 20 percent between
2000-2010; in comparison, the demand for meat and fish during these two periods
is expected to grow by around 40 percent and 65 percent respectively. The
projected real growth in overall annual real per caput consumption is expected
to average in excess of 1.2 percent; growth in per caput food consumption can be
expected at similar levels of magnitude at least in the medium term.
Consequently, the projected increase in domestic demand has the capacity to
absorb the expected increase in domestic production; however, the strategic
requirements of the economy require a thrust for larger export markets.
Trade Prospects
5.20 Within the context of achieving overall food security from a national
perspective, there is a recognizable need to pursue policies and actions needed
for prnioting agricultural cxports. Major steps linve been taken in trade and
marketing for encouraging exports and import substitution through: a liberalized
exchange rate policy; elimination or reduction of export and import regulations
and taxes on most agricultural commodities; and liberalization of marketing
- 44 -
activities in order to promote the participation of the private sector in trade
and domestic marketing. As a result of these policies, the production of a
number of previously controlled commodities has increased substantially. Both,
the promotion of exports of crops (with increased domestic value added through
processing) in which Egypt has a comparative advantage and a clearly identified
export potential and import substitution, will continue to be important
Government objectives. However, these should be pursued in a manner which does
not contravene the underlying guiding principles of economic efficiency. In this
context, Egypt's comparative advantage should be viewed in a dynamic sense, as
new technologies and lower costs of production may lead to new opportunities.
5.21 The ability of the sector to meet the above objectives need to be
explored within the context of the following observations on recent trends in
agricultural commodity trade.
- Presently, agricultural exports are heavily concentrated in three
commodities - cotton, oranges and potatoes, which together account
for 90 percent of total agricultural commodity exports;
- Cotton exports, which make up 60 percent of the total, have been,.
declining at about 13.6 percent p.a. in volume terms during the last
decade, resulting in a real decline in total export revenues of 7.2
percent p.a. Given the increasing substitutability of Egyptian'
cotton with the advent of new technologies, its demand on the world
markets is heavily influenced by prices. Egyptian cotton may no
longer be a price setter, as was the case in the past; this needs to
be taken into account in the bid to increase exports. Increased
private sector participation, and liberalization of cotton imports
to meet domestic needs will also be important;
- While exports of oranges increased by 1.8 percent in the 1980s,
around 60 percent of the total went to the former USSR.
Consequently, Egypt's orange exports could decline sharply due to
the disappearance" of the former USSR market. To protect against
such a decline, there is a need for an aggressive search for new
markets, and more importantly, significant improvements in quality;
- The exports of several commQdities, including rice, onions, dates,
tomatoes, lemon, artichokes, which form part of the remaining 10
percent of exports, have increased significantly in volume terms.
- The European Community is the most important export market for
Egypt; it imports 35 percent of Egypt's cotton, 50 percent of its
rice, 45 percent of vegetable exports and 2.5 percent of its fruits;
however, its trade restrictions render most of Egypt's beyond-quota
outside-period exports to the EC unprofitable.
5.22 While the export base of agricultural commodities is presently not
wide, it is nevertheless clear that Egyptian exporters have successfully competed
in the regional and wider export markets, in traditional products such as
potatoes and citrus, as wnll as in the newer horticultural produc.ta which have
entered Egyptian trade more recently. While competition is strong, and the total
potential volume of horticultural exports does not as yet absorb a large share
of Egyptian farm production, there are interesting prospects to be pursued that
- 45 -
will add noticeably to total earnings of the sector. However, as Egypt has a
long history of inward looking policies, numerous impediments to trade remain;
and it will take concerted effort to ensure that the export potential is
realized. Egypt has advantages in terms of locations and climate that have value
in foreign markets; but it has no unique claim to any export markets. Virtually
all of the country's agricultural exports must compete with other suppliers for
a share of the most likely markets -the EC, Eastern Europe and the Gulf States.
It is consequently, particularly important to take measures which would
facilitate investor response to the policy changes being put into effect. One
would also expect that the conclusions of the presently ongoing GATT Uruguay
round talks, will favorably impact on Egypt's ability to exploit the world
markets. A number of actions can be taken to increase exports and market
efficiency.
- The complete liberalization of the production, export and marketing
of cotton is a priority. Otherwise, in the context of the dynamic
world cotton market, Egypt's share of the non-ELS world market may
decline. Cotton imports from pest free countries should be
liberalized, subject of course to strict enforcement of quarantine
regulations; similarly, the imports of all types of agricultural,
equipment should also be liberalized.
- With increasingly competitive commodity markets, it is critical thati
adequate and timely information on trade is available to existing
and potential exporters. In Egypt today, such information is
difficult to obtain. Existing public and private sector
organizations could fulfil this important role with better focus of
efforts. At the same time, an atmosphere of competition needs to be
fostered, since the development of private sector monopolies would
be as inhibiting to growth as is the case with public sector owned
operations.
- Given the past inward looking policies, research and extension
activities have so far concentrated mainly on domestically consumed
commodities; strengthening their focus on exportable commodities
should lead to increased exports. In addition, horticulture
exporters should be encouraged to establish export quality-control
systems, particularly as they face stiff competition especially in
the European Community. Other than quality issues, the terms of
sale and the timing of shipments would need to be improved.
Cooperatives need to be strengthened and their activities better
focussed for undertaking export and marketing activities.
- As a compleipent to the international trade negotiations presently
ongoing, it is important for the Government to negotiate with major
importing nations, such as the European Community, to reduce tariffs
and increase access to markets. Since the EEC is not self
sufficient in horticultural products, it must import from countries
outside the Community. Negotiations should be pursued, whereby
Egypt can obtain reductions in tariffs to the levels of, for example
Turkpy which enjoys frc a-ourab le tevr,is, whiich would increase
Egypt's horticultural commodity exports significantly; in return,
privileged access to the Egyptian economy may need to be granted to
EC products.
- 46 -
5.23 In addition to the above ueasure*, there is need to complete the
process of trade liberalization, which has been shown to bring about favorable
results. Other than for cotton, restrictions on trade and marketing remain for
a number of other coiodities, including imports of vegetable oil, poultry and
other meats, and some agricultural machinery and equipment. These restrictions
were adopted for the purpose of protecting domestic industry; but they raise
costs to consumers and to other industries, thereby undermining efficiency. The
removal of the prevailing food subsidies, which are presently not targeted and
consequently available to virtually the entire population, would facilitate the
process of liberalizing trade and marketing of commodities which are still
restricted. Finally, it is important that Egyptian suppliers begin to monitor
developments in Eastern European markets, and establish relations on which future
sales would be based. During this period of change in Eastern Europe, new
systems are being formed, and a new generation of clients is emerging which will
need sources of supply in the future.
Marketing Infrastructure
5.24 Historically, priority was given to investment aimed at increasing
agricultural production, with a corresponding neglect of post production
requirements, in particular for marketing. Consequently, the marketing of
agricultural products is typified by significant post harvest losses, which for
certain horticultural products is reported to be as high as 35 percent of output;"
for grain, post harvest losses are reported to go up to 15 percent. Key
marketing impediments at the rural level have included: the absence of adequate
infrastructure (produce is often displayed under the sun and on the ground
without the basic supporting amenities such as concrete floors, water,
sanitation, parking, etc.); a marked lack of storage facilities, as well as
collection/grading centers; a severe shortage of refrigerated storage for
perishable products; poor quality of packaging materials and containers; and
inadequacies in the transport system. In addition, significant losses take place
on-farm, as a result of poor harvesting methods.
5.25 A key factor which has contributed to the above situation has been the
fact that the agricultural marketing system has been for a long time under
government control through direct intervention in trade and prices. At the same
time, the private sector has been reluctant to undertake major investment, in
view of perceived uncertainties about the future. In addition, with most
production going to domestic markets where quality issues were less important as
compared to price, the incentives for improving post harvest handling and grading
of products has generally been missing. The structure of the agriculture sector,
which is characterized by a large number of very small holdings, has also
contributed to the problem; in the new lands, the low productivity without
effective cooperative ua;keting, has inhibited active private sector involvement
in marketing due to the difficulties in deriving the needed economies of scale.
The prevailing structure adds to unit collection costs, prevents effective
supervision, and limits the share of production that can be stabilized and
managed through farming contracts.
5.26 A major effort to reduce the inefficiencies and losses in the marketing
chain provide a sienifieant source for incrceaing marketed produitiuu ltld overall
food availability in the country. While there is considerable need for
additional investment, the underlying requirement is to develop effective farm
level organizations, which would have available to them the necessary market
- 47 -
information on which they are able to react. The following actions are needed
to reinforce the role of the private sector in this activity.
- While reforms have been initiated, these need to be effectively
implemented at the lowest levels; with the public sector marketing
institutions still occupying strategic positions in the marketing
system, the private sector needs to be reassured and encouraged to
undertake investments;
- Regulatory and institutional impediments to active private sector
involvoment in post harvest enterprises need to be aggressively
removed;
- Promotion of, as well as provision of training to independent farmer
cooperatives of local producers, middlemen and exporters, with a
view to improving efficiency and reducing marketing costs;
- During the interim phase, the primary role of the public sector
should be to provide supporting and facilitating services, till a
competitive market begins to function independently. In this, two.
functions are particularly important: first, the establishment of an
effective market information system, which collects and disseminates
relevant market information at the farm level in a timely manner;,
and an efficient marketing extension system to support the farmers;
- There is need to strengthen the extension efforts, supported by the
provision of appropriate technology/mechanization, with a view to
reducing on-farm losses of agricultural production;
The above program for developing responsive farm level institutions and active
private sector involvement in marketing needs to be supported by an investment
program to alleviate the present infrastructural weaknesses.
5.27 Underlying the GovernDent's efforts to promote exports, is the need to
ensure exporters are provided the necessary support and infrastructure in order
to respond to market conditions. There is evidence from the pattern of Egyptian
shipments to Europe that these efforts may not be generating the best benefit for
exporters. Market information and the knowledge and facilities to take advantage
of that information are critical; presently, the information base and its easy
availability is weak. In particular, surface transportation systems for
horticultural exports and other agricultural products is a binding constraint on
producers and traders at the present time and, without concerted action, will
worsen rapidly over the next five years. The role of the Government is to
identify and remove regulatory impediments and pricing distortions which
discourage the establishment of efficient transport systems by private
*ntrepreneurs. Except for the most delicate products, the majority of
horticultural trade takes place through surface freight, with reefer ships giving
way to the more efficient refrigerated container system. Both the lack of
containers as well as present regulations effectively prohibit this type of
operation.
5.28 In the first instance, a detailed review needs to be conducted of the
services available, and of the regulatory and competitive factors which govern
the pattern of service. Based on the findings, the customs, labor and
- 48 -
transportation regulations which restrict the use of containers would need to be
reviewed and revised. For example, at present, a deposit in the value of the
container itself must be made with Customs before a container will be permittted
to leave Egypt. This effectively precludes the use of the transport system to
which general cargo has switched in most of the world. While there does not
appear to be a shortage of transport capacity to handle agricultural products
domestically, the system review should include an examination of waiting times
for loading and unloading, and regulatory impediments to more effective use of
the existing fleet of trucks.
C. Agro-Industry Development
Transforming the Rural Economy
5.29 Agro-industrial and rural industrial enterprise development will form
an important element in the strategy for achieving broad based rural development.
Population growth and the reduction of public sector enterprises will generate
a need to create viable employment opportunities; the process of liberalization
will provide opportunities for the private sector to contribute to growth and
employment. However, if the rural sector is to achieve its development
potential, then off-farm and non-agricultural activities will need to bo
encouraged; also these enterprises must be linked by information, technology and
infrastructure to the domestic and international markets they serve.
5.30 Agroindustrial activities (encompassing the various aspects of
manufacturing, storage and marketing) are presently dominated by the public
sector, both in terms of the ownership/operation of productive enterprises, and
the regulation of all aspects of the sector. Their domination in terms of their
share in value added and employment is summarized in Table 5.3 below. However,
with the liberalization of production and trade activities that is now underway,
two trends are becoming evident:
- With reduced restrictions to entry by private entrepreneurs and
declining advantages for public competitors, private enterprises
have moved rapidly into such diverse former public domains as
horticultural exports and land development;
- With reduced controls on production activity, growers are
redeploying resources towards crops that offer the prospect for
greater return or greater flexibility in production or marketing.
5.31 Nevertheless, various issues and constraints need to be addressed to
ensure that these developments are further reinforced. For example, in many
agroindustrial activities, the concentration of production in the hands of public
enterprises is so high, and raw material supply and distribution so regulated
that private investors have not been able to enter and compete in the sector.
The lag in policy implementation at the working level, particularly with respect
to the ongoing liberalization measures, means that many growers and entrepreneurs
continue to face the same regulatinn aend restrictions that preva"led before the
change in policy. The benefits from liberalization will depend on the response
of the private sector, from shifts in cropping pattern to investment in new post-
harvest activities. However, in order to respond, the private sector must first
- 49 -
know what the changes have been, Table 5.4: Share of Public Sector in Key
and then must see that they have Industries (percent)
effectively been translated into
reduced regulation at the
operational level; for example, 1 hui l a
there are still large private
traders in horticultural products FOdlr *ttI" 60.9 6.3
who believe that it is forbidden i 92.3.
for them to import potato seed. - sfa 4wn a in4-6` -. 6 -
While this i s clearly a 96.8-4T
transitional problem, it is tr trl 8 -2.2
necessary that steps are taken to Sure.: Ocitd ; Arab RepibIfc'& of ipc rho
remedy this. Specific measures Private Sector Regutatory Environoment 199-2
could include, among others: --_-_ -_ ---_-
develop specific operating
instructions for intermediate and working level public agencies, produce written
information for producers and investors; remove the discretionary elements in any
remaining approval procedures; and reduce the role of public officials in the
management of nominally private sector organizations. Overall, the program of
privatization of public enterprises which the Government has initiated under the
reform program, albeit slowly so far, is an important prerequisite for efficient~
agro-industry development in the country, and needs to be pursued vigorously.
5.32 For sustainable rural transformation to take place, it is important
that the linkages between agriculture and the overall rural economy are further
strengthened. Rural industry must be seen as a set of activities which not only
uses labor and raw material supplies in the rural areas, but also responds to
rural demand. This is the basis for successful employment and production
generation such as has occurred in China and other countries less advanced in
their rural areas. Farm non-farm linkages in terms of economic activity are
presently high in Egypt, and derive in part from the many interdependencies in
the rural community.
5.33 From the perspective of a future strategy, the underlying objective is
the removal of regulatory and institutional impediments to private investment in
support and post-harvest enterprises. Investment activities need to be
encouraged which respond best to market requirements while at the same time
offering good employment opportunities. To be most effective in these respects,
emphasis should be placed on activities which can be viable on a relatively small
scale, for ease of management, adaptability to the fragmented supply pattern of
small growers, and the local demand of communities. Examples include feedmills
which produce basic feed formulae from prepared concentrates and locally
available grains and meals; packing houses; bakeries and specialty food
producers; farm supply and service depots; transport and machinery services; and
machine shops. The other important feature of these activities is that they have
either low capital/labor ratios or their capital equipment can be used for
different purposes. This keeps down the investment cost of employment, eases
access by new entrepreneurs, and ensures that capital investment can be kept busy
during longer periods in the year and during shifts in market conditions.
5.34 Finally, the strategy should not- dirscourege larger s-alc private sector
investment in agroindustries which take advantage of advanced technologies and
economies of scale. There are many areas, such as fruit and vegetable processing
where these factors are essential to long term viability. However, the investors
- 50 -
in such enterprises have access to the technology and resources they need to
develop and operate these facilities, and their technical support requiremnts
are limited. The strategy in the public sector should be to assist suhller
investors to take advantage of opportunities to provid, support services to these
larger firms, and to ensure that the regulatory environmnt doeos not distort
their investment decisions or unduly impede their operations.
VI. ENABLING ENVIRONMENT FOR GROVIH
A. Changing the Role of the Government
6.01 For several years the Government of Egypt has been closely involved in
both participation and regulation of economic activity in the country. In the
context of the reform program, there is a need to review the role of the
Government in this changed environment to ensure success. Essentially, the role
of the government is to create the enabling environment and perform the necessary
regulatory and coordinating functions which are essential for ensuring private
sector incentives and opportunities to flourish unhindered and in an efficient
manner; at the same time, and in a broader context, an important role of the
Government is to provide a program for the poor, including a social safety not
for those adversely affected by economic adjustment. The key pillars for this
approach would include support to the farming community from the research and
extension system, easy availability of key inputs, an efficient marketing and
processing infrastructure, removal of bottlenecks for expanding exports, and
efficient credit channels to meet the financing needs for the sector's
development; at the same time, there is need to closely review the prezsnt
structure of the overall agricultural administration, with a view to
rationalizing it in a manner which makes it more responsive to the sector's
needs.
Regulatory AsRects
6.02 Within the new economic environment, changes are needed to the overall
regulatory framework which has been in place for many years, and which defined
the manner in which economic activities were undertaken in the past. In
reviewing the regulatory role of the Government, two key issues need to be
emphasized:
- The Government has certain regulatory functions, which it should
undertake; however, these need to bo clearly defined; among others,
these would include aspects relating to controlling seed quality and
certification, quality control over food and foed items, regulating
agrochnmical use, overall environmental management, enforcement of
related legislation, etc.;
- At the sme time, the private sector noods to be able to function
efficiently, with minimum impediments to its responsiveness; at the
moment, raLplEAtions provide an opportunity for discretiouiaay
enforcement by Government agencies, over private soctor operations,
in a manner which is not consistent with efficient operations.
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Egypt is presently going through a period of transition. However, this is also
a period during which. the confidence of the private sector needs to built up, as
many potential investors are still waiting to ascertain the permanency and
comitment of the Government to this change. Consequently, it is obligatory on
the part of the Government to take the measures necessary for instilling and
strengthening this confidence. Key examples regarding this include the
following:
- Even though crop area allotments have been removed for most crops,
some forms of control and influence continue to be exercised on
farmers by officials at the rural level;
- Regulations governing the establishment or expansion of agro-
industrial enterprises require approval from the Ministry of
Industry, for which a committee process exists; such an arrangement
often creates inefficiencies and possibly rents; based on clearly
defined criteria, such activities should follow an approach of
registration rather than approval;
- Labor laws have tended to grant more job security and greater
expectations to workers than is often justified by the economic
conditions surrounding the activity or the employer. These factors
have contributed to poor labor mobility, and an inflationary impact
on the cost of employment, with consequent negative effects on the
profitability of productive ventures;
- Separate regulations are in force for defining Government
responsibilities for supporting farmers in the agrarian reform
areas, other old lands and in the new lands.
6.03 Over the years, a number of laws have been passed, which either
directly or indirectly influence the production related aspects of the sector.
Steps are already being taken to closely review the prevailing legal framework;
new laws governing land tenure arrangements and for the operations of the
cooperatives have already been prepared and are being discussed within the
Government. Among the more important areas where changes in the regulatory
environment are needed include those related to seeds, land markets, regulations
affecting the cotton and sugarcane subsectors, and the regulations controlling
the manufacture of and trade in certain categories of agricultural equipment; the
underlying objective of the changes required is to reduce public sector presence
in commercial operations. There remains much to be done in this field, starting
with a detailed review of all existing legislation with a view to simplifying and
reducing their number (as well as introducing new legislation where it is
needed), in order that the role of the Government is better defined to support
the reform process, and to ensure that the private sector is able to play the
role assigned to it in an effective manner.
Agricultural Research
6.04 A strengthened research-extension system is crucial for achieving
increased agricultural productivity and prndolit diversification at thc farm
level. While the research agencies supporting agriculture in Egypt have
independently made significant contributions, the work of the extension and
research system is presently dispersed among various agencies, and largely
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focussed on the delta and old lands; support services in the new lands are weak.
In addressing the priorities of the 1990s, it is clear that both the
institutional and technical aspects of research and extension would need to be
focussed upon and strengthened; extension and research depend on each other and
should benefit each other; institutional links between both services require
strengthening in order to better coordinate activities. Underlying such
developments is the basic requirement of a close linkage between the agricultural
research organizations and the scientists within the system and their clients,
the farmers; for the research system to be relevant and responsive to the
latters' needs, it is clearly necessary that farmers and the private sector have
a say in setting the research agenda.
6.05 In the MALR, the Agricultural Research Center is the primary agency
responsible for technology generation, with 16 research institutes, 6 central
laboratories, and 37 research stations affiliated to it. The Desert Research
Centre (also under MALR), which has 5 stations, is responsible for conducting
research relevant to rainfed areas. Within MPWWR, there is the Water Research
Centre with its 11 institutes and a training centre, which is undertaking
research in water resources/irrigation and the drainage aspects related to
agriculture. The research network draws heavily on the Universities under the
Ministry of Education, which provide 50 percent of the human resources in the
agricultural sciences. In addition, the National Academy of Scientific Research
and Technology and the National Research Centre, under the Ministry of Scientific:
Research and Technology are also involved in agricultural research through their
specialized irrigation, food and agriculture divisions. Finally, the private
sector is increasingly getting involved in agricultural research, particularly
dealing with seeds, tissue culture and agrochemicals. Most of the research and
development programs are undertaken by the parent companies in developed
countries; however, an increasing share of the adaptive research is being carried
out within Egypt. Private sector efforts in research should be further
encouraged and integrated into the overall agricultural research program of the
country. While the public sector all over the world is involved in research,
many agencies extend their research activities into areas where private research
organizations could be expected to work well if given a chance (and do work well
in some developed countries), since the resulting products could be patented and
privately marketed (such as hybrid seeds). There is a need in the medium to long
term to explore such possibilities in the Egyptian context.
6.06 While overall efforts are dispersed, some of the institutes are doing
excellent work. The development and introduction of high yielding varieties in
various vegetables, cereals, oil crops and sugar beet, has resulted in increased
production. Similarly, the introduction of improved on-farm irrigation and
protected cultivation coupled with improved cultural practices in use of
fertilizers and agricultural practices has generated significant water savings
and boosted yields for many crops; the mechanization of primary activities such
as land preparation, threshing, and water lifting is now well established.
Overall, the agricultural research network has pursued the development of modern
techniques of agricultural production. The next phase of agricultural growth
will depend very much on a wider adoption of improved farming technology,
including appropriate mechanization and investments to improve post harvest
technology and primary processing activities. Thcre is potential for
mechanization of operations, such as laser land levelling, which would promote
more efficient water use and increase crop yields; crop maintenance practices,
such as seeding, fertilizing and harvesting, also lend themselves to effective
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secondary mechanization to overcome shortages of labor at peak season and reduce
turn around time between crops. While research and adaptation of new machinery
is ongoing, this needs to be reinforced with a strengthened program for
technology dissemination. At the same time, there is scope for better
integrating the work of the institutes in the different ministries, which
presently have overlapping of efforts, within the framework of a national
agricultural research program. There is scope for merger of activities and for
better coordination with the Universities and National Research Center, through
an effective research review mechanism. The adoption of a comprehensive
agricultural research policy and establishing a core central research management
system encompassing the efforts of the various agencies involved, would improve
coordination and avoid some of the duplication in research efforts which
presently prevails. These constraints can be addressed through:
- the formation of an Agricultural Research Council, with the primary
responsibility to prepare a comprehensive national agricultural
research policy, with a view to enhancing the coordination and
monitoring of research activities of the different agencies
involved.
Improved management of research programs requires transparency of decision making
and accountability of staff; to be effective, the formulation of revolving short,
medium and long term national research plans is essential. For this the design
and implementation of an accurate and a widely accessible database is a
prerequisite. In line with liberalization, the research system has to adjust in
order to better serve the needs of the private sector, both as at present and
through the generation or adaptation of new technologies for the future in the
context of potentially emerging new markets. This can be best achieved by the
active participation of the private sector and farmers in the development of
research programs.
6.07 There are major challenges facing the research system in the future.
These all derive from the need to develop new technologies which are consistent
with the arable land and water constraints facing Egyptian agriculture, which fit
into the socio-economic fabric of the agricultural sector, and which generate
measurably significant financial benefits for the farmers to ensure rapid
adoption. Some of these challenges include the following:
- need for research work (such as on developing new varieties and
better crop rotations) which is aimed at maximizing returns to first
water, and then land, is targeted at improved overall natural
resource management, and fosters new developments such as in
biotechnology;
- technology generation, and more important, the on-site adaptation of
existing technologies to the needs of the new lands, in a manner
which recognizes the socio-economic background of the settlers
(smallholders and graduates);
- need for adaptive research in improved irrigation technologies for
both the old and new lands; with A view tn Identifv the most
appropriate technologies for the different categories of farmers, as
well as the wide range of local conditions;
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- the need for research efforts aimed at varietal improvement (in
particular,
development of short duration varieties to enable more intensive land
utilization), increased coverage of high yielding varieties, improved varieties
of fodder crops, crop and animal by-product utilization, improved on-farm
irrigation systems, post-harvest activities and agroindustries, addressing the
concerns of producers, as well as consumers' preferences in domestic and export
markets;
- while rainfed areas are a small part of the cultivated land
resources of the country, there is nevertheless need for developing
water saving technologies as well as drought tolerant varieties for
these areas;
- research work on farm mechanization should be fostered, with a view
to addressing the concerns of small and medium farmers; there is the
need for developing appropriate capital intensive technologies for
a smallholder dominated agriculture sector, recognizing at the same
time the availability of a large labor force;
- there is need for research in relevant food processing technologies,
anticipating the likely emergence of new consumer preferences;
- the need to strengthen analytical capabilities for assessing the
economic and financial viability of research findings, and of the
implications of public policies for the sector's development;
- the need for socio-economic research to address issues of relevance
for bringing women, who are an important part of the available human
resource, into the mainstream of the agricultural development
process (women are also an important group to target in research on
reduction of post-harvest losses), to identify measures to avoid
land fragmentation, and to support research work aimed at developing
technologies suitable for small-scale farming.
In order to better focus research programs, these should be made specific to
Egypt's agroclimatic zones. Efforts in this direction have already been
initiated by the Agricultural Research Center, which has drawn up a five year
research plan, which is aimed at better integrating the work of its 16
institutes. The plan would be implemented through five regional committees for
research, extension and training, based on agro-ecological zones, and would cover
all commodities (including fisheries) and involve universities, other research
institutes and local farmers and institutions. It is proposed that the program
be implemented in a flexible manner, taking into account local conditions; the
Agricultural Research Center would be the national coordinator for implementing
the program. From an overall technological perspective, there is need for
emphasis on the adaptation of new technologies, keeping in mind the projected
needs of the domestic and international markets in the future, and to support the
achievement of the above mentioned overall objectives. In this context, the need
for a strong linkage between research and an analysis of future markets prospects
needs to be emphasized, for crops in which Egyptian agriculture could be expected
to have a comparative advantage in the future.
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Aericultural Extension
6.08 The extension function of MALR is presently weak and fragmented,
partially due to inadequately trained staff, but mainly due to an uncoordinated
approach towards providing extension services to particularly the smaller farmers
of Egypt. Prior to the reforms, the extension system performed regulatory
functions on behalf of the Government, in addition to their technology transfer
duties; implementation of the MALR's annual cotton pests protection campaigns and
enforcing the Government's regulations to ensure supply of cotton and other crops
were central functions, some of which are still being exercised. While the
extension system has contributed to increasing agricultural productivity, their
structure, responsibilities and staffing need close scrutiny in order to ensure
the development of a vibrant system capable of meeting the needs of the new
economic environment. Presently, extension services are being provided through
three channels:
- By the Governorate extension services, under the Director of
Extension, for non-agrarian reform areas;
- By the Agrarian Reform Organization, for farmers within their area
of responsibility, under the Director Agrarian Reform Extension,
within each Governorate; and
- In a limited manner, by staff working within GARPAD, for the newly
reclaimed areas.
Superimposed on all this are occasional campaigns for particular crops or new
practices for which everyone's attention is diverted for a period of time. In
order to rationalize the above structure, the Agricultural Research Centre was
given responsibility for extension; ARC's activities are based on the triangle
of research, extension and training. However, ARC will need considerable
strengthening and assistance to adequately perform this task. In addition, the
Central Administration for Agricultural Extension Services supervises general
extension administration through offices at Tanta (for the northern delta), El
Minya (for Upper Egypt) and at Giza (for the southern delta). Specialized
extension administrations also exist for horticultural crops, veterinary
services, fisheries, animal production, mechanization and pest control.
6.09 Support services for the new lands merit special consideration. These
areas represent nearly 20 percent of the cultivable area of the country, but are
poorly serviced by extension staff. The ability of GARPAD to fully carry out
this function, with the necessary linkages with research, are inevitably weak,
given the greater emphasis to physical land reclamation activities in their
overall program. The responsibility for the new lands has not yet been fully
integrated into the mainstream Governorate services. If the new lands are to be
expected to contribute in line with the investments made, to the overall growth
of the sector, it is clear that the extension and research activities need to be
restructured, both from the perspective of strengthened capabilities, as well as
to bring it into the mainstream agricultural organization of the Ministry.
6.10 Management problems plague the organization of extension activities,
particularly the relationship bt.w6ot SuVOILiuaiLtv aund lamadquaiLLwL, as w"wl an
the multiplicity of organizations. The MALR objective is to have an extension
agent at the basin level of about 200 feddan. This approach based on
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administrative boundaries, i.e. governorate, district, village and basin levels,
should be examined in view of the liberalization of agriculture and streamlining
of its functions. In this context, the first issue which needs to be addressed
is that of a clear division of responsibilities at the different lev6ls of
national administration. Set out below is a proposed approach in this regard.
- At the central level, MAIR and more specifically the ARC should be
responsible for planning and outlining strategies for extension,
developing extension methodologies, providing training and ensuring
linkages between research and extension. Training programs should
emphasize new areas, such as water management, integrated pest
management, post harvest and marketing aspects, use of modern inputs
and farm machinery.
- Integrate all field level extension services, including those for
the new lands and the agrarian reform areas, into uniform
Governorate based services under the respective Directors of
Extension, and being technically and administratively responsible to
the Governorate Undersecretary for agriculture and the Governor.
Staffing levels and training programs should be drawn up for each
governorate in accordance with its needs and agricultural plans and
agreed with MALR and ARC; particular emphasis should be given to
recruiting female extension agents and to foster development
programs for women among the rural families.
- If improved technology packages are to be adopted, the development
of a highly motivated cadre of subject matter specialists
particularly at the Governorate level is required. A national cadre
of experienced SMSs should be established, who should be stationed
at the different levels (central, governorate and district) of the
system. An intensive training program for SMSs in fields other than
just production oriented technologies is necessary, to ensure
downstream linkages aimed at increasing value added from processing
and exports.
- At the same time, there is clearly a need to encourage the emerging
private sector initiatives at providing extension services. This
can be done in various ways, including the promotion of advisory
services, encouraging contract extension services, and devising cost
sharing arrangements within local communities.
6.11 The above is intended as a broad institutional framework, within the
context of which more work is necessary in order to articulate Iore detailed
arrangements for defining the overall structure and approach for organizing
extension, identifying categories, number and location of staff, developeng a
framework of training programs for the different staff levels and for providing
then mobility which needs to be fostered and planned for. A key requirement
which needs to be built in is a clearly defined monitoring and evaluation system,
the findings of which should guide the activities of both the research and
extension network. At the same time, linkages with credit institutions, input
distribution and marketing staff should be strengthened, and improved and more
rrfecLive extension approaches towards women need to be adopted. Special focus
needs to be built into the structure for meeting the needs of the new lands as
well as key programs; also, MAIR has to separate the advisory and regulatory
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functions of extension staff. The development of private extension services by
consultants to medium and large scale growers is already taking place.
Availability of soil, water and animal and plant diagnostic laboratories,
licensed through MALR, should complement the consultants advisory functions.
Extension methodology should make use of television and other mass media.
Finally, the prevailing high rate of farmers' illiteracy presents difficulties
in ensuring the rapid adoption of new technologies and improved cultural
practices. Consequently, within the context of overall rural development,
programs aimed at adult education and literacy need to be encouraged, in order
to enhance receptivity to innovations.
Agricultural Administration
6.13 In this period of change, where the agriculture sector has moved away
from the earlier system of heavy Government involvement in implementing sector
programs, there have been few substantial reforms made to the agricultural
administration. Beyond the need to limit the role of the public sector in direct
production, the economic reform process has thrown into relief the need for
accompanying institutional reforms as the role of ministries and agencies
involved in the agriculture sector undergo rapid change. Without a significant
restructuring of the agricultural administration, i.e. those public agencies
working in the agricultural sector , agricultural reform is very likely to be
only partially successful. In addition, other ministries touching upon
activities related to the agriculture sector include the Ministry of Supply,
through its food imports and distribution system; the Ministry of Industries,
through control over certain agriculture related industries, such as cotton and
sugar processing; and the Ministry of Housing and New Communities, which is
engaged in infrastructure construction in newly reclaimed lands.
6.14 The problems of the agricultural administration are well known, and are
becoming increasingly debated as the reform process proceeds. The different
roles for the public and private sector are fully recognized by the Government;
however, the changes need to be operationalized principally through reorientation
of institutional objectives and accordingly, streamlining of the overall
structure. Presently, the MAIR is organized into five sectors at the centre
(extension, services and monitoring, economic affairs, administration and
finance, and the Minister's Office); at the Governorate level, MALR is
represented by a substantial administrative structure, which is administratively
responsible to the Governor, but for technical matters, reports to the centre.
In addition, the various semi-autonomous agencies affiliated to MALR have
representation at the Governorate or regional level, often reporting to their
parent agencies. The MPWWR, also with five main departments at the centre
(planning, irrigation, mechanical and electrical, finance and administration, and
budget and accounts), functions in a centralized manner, with Governorate and
regional offices reporting directly to the centre. The process of streamlining
the MALR has already begun through the clear articulation that the ministry's
main functions will be in research, extension, and regulation, with economics and
policy seen as an essential function embracing all the ministry's activities.
With some internal reorganization ongoing, MAIR is in essence, presently in a
L/ PrincipalLy MALR, NPWWR, their 12 affiliated authorities or orgenizationr, the three major research
centers, and various production projects or activities now organized in three holding companies in
HALR and one in MPWR.
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period of transition. In the case of NPWR, although it does not foresee much
change in its functions in the context of reform, as in MALR, some modification
is occuring as a result of the reform process. With momentum provided by the
Government initiated reform process, this presents a unique opportunity to take
into account the issues outlined below so that ultimatoly the new agricultural
administration can be a strong administration capable of leading the agriculture
sector in the 1990s.
6.15 The multinlicity of organizations presently involved in agriculture,
often have overlapping functions and activities, and poor coordination within and
between organizations; in addition, some public agenctes remain whose functions
are now obsolete in the context of the reforms. These issues of overlap and lack
of coordination are magnified at the governorate level where actual
implementation takes place. Rationalization at the center should lead to
rationalization at local levels, which will make the task of implementation much
easier.
- In order to benefit from the momentum which presently exists, a
detailed study should be undertaken to examine the terms of
reference of each affiliated organization or authority in the two
ministries and to determine where streamlining can be achieved, and
how it should be undertaken.
A preliminary look at these organizations suggests three options:
- complete but gradual phasing down of organizations whose functions
are obsolete;
- partial phasing down of some organizations and integration within
the main ministry of their regulatory aspects with other activities
being privatized;
- merger of some organizations with others whose activities are
similar or complementary.
6.16 In the reform context where efficiency and effectiveness are key, the
two ministries should seriously consider options for improving communications and
coordination. Bold visions are required and, based on a careful public
administration study, no options should be left unconsidered including partial
steps such as:
- merging authorities or activities in the two ministries that are
similar;
- establishing joint technical committees around issues that concern
the two ministries, for example, implementation of on-farm water
management activities;
Ultimately consideration should be given to adopting a more unified approach to
the management of water resources (irrigation and drainage aspects) and
agriculture.
6.17 There is a problem of overstaffing coexisting with 2oorly trained staff
and inadeguate salaries and incentives. Close to half a million people work in
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the agricultural administration. This is close to 12 percent of the formal
agricultural labor force as well as 12 percent of total Government employees.
Only a fraction of the workers are highly skilled staff. The large numbers of
ill-trained and poorly paid workers constitute, at present, a drag on the
agricultural administration. The staffing problem is well known and is a direct
result of the Government's guaranteed employment policies for secondary school
and university graduates. As part of the reform process, some constructive means
have to be found to make proper use of this human resource while relieving the
administration of excess staff. While considerable potential exists for
downsizing the agricultural administration, it is a very sensitive social and
political issue which needs t be tackled with care. Options have to be
developed which are humane and which take into account the social consequences
of any actions. The donor supported Social Fund developed under the Structural
Adjustment Program is a beginning in this direction. Reductions of staff require
a detailed study of functions and skills, including proper phasing for such
reductions.
6.18 The present administration structure needs to be further decentralized
leaving much more responsibilities and decision making to the governorates and
local areas. At present multiple reporting requirements are common for staff at
Governorate level, many of whom like those in the Authorities and MPWWR, report
directly to Head Offices in Cairo. Others, such as the Directors General for
Agriculture, while reporting administratively to the Governor are technically
responsible to their ministries in Cairo. Such centralization slows decision
making and implementation and makes for complex management arrangements at the
Governorate level. The situation is difficult and requires the immediate
attention of top level ministry and Governorate management to devise means to
decentralize decision making increasingly to local levels while maintaining the
technical integrity of the staff.
6.19 Finally, there are several pieces of legislation relating mainly to
civil service rules for employment, termination and promotion which will need to
be revisited if streamlining of the agricultural administration with increased
efficiency is to be achieved. Again, this is a sensitive issue which cannot be
tackled without reference to other parts of the civil service. However, it is
an area which ultimately, cannot be ignored.
B. Private Sector DeveloDment
6.20 The HALR had adopted a progressive approach on privatization, even
prior to the enactment of Law 203 of 1990 governing the Public Business Sector;
it has accomplished much through the sale of reclaimed lands, publicly owned
agricultural and desert' lands, the lease of fish ponds, and the sale of projects
belonging to the Holding Companies responsible for some of the agricultural
activities. More recently, and in line with Law 203, holding companies have been
transferred to the jurisdiction of the new Public Enterprise Office (PEO) which
reports to the Prime Minister. The steps for the implementation of this law are
currently underway. The Executive Regulations have been issued, and the
nomination of the General Assemblies has been announced; this will be followed
up by the formmLioti of the Board of DirecLors.
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6.21 As is the case for the overall privatization efforts in Egypt,
privatization in agriculture is also facing important generic problems. These
include: competition for limited private sector savings; with limited knowledge
of share trading and securities markets, the public is generally risk averse,
preferring to invest in high interest bearing bank deposits and bills; companies
need to be audited in accordance with international accounting standards so as
to allow proper valuation; issues of debt and labor redundancy need to be
addressed; and management capabilities of companies not to be privatized in the
short term need to be upgraded, providing them with autonomy and accountability.
6.22 It is important to recognize that privatization in the agricultural
sector goes beyond the simple sale of ongoing activities to encompass private
sector development. Concerted efforts are needed to remove the bottlenecks to
competition and transparency of the privatization efforts, and establishment of
a level playing field between the public and private sectors. Since the market
is unlikely to absorb a large number of companies in a short period, there is
need for careful programming and sequencing of the privatization process. It is
therefore recommended that a two pronged approach be followed.
- The first would be demand driven 'spontaneous' privatization in
response to private sector expression of interest; the smaller.
agricultural enterprises would most likely fit in this category.
- The second would be the privatization of selected groups of-
enterprises in consecutive batches. The careful selection of the
first privatization candidates is critical; these should be
profitable, visible and with the highest chances of success in
attracting private venture capital.
Underlying the program is the need to guarantee transparency at all stages of
privatization. While the program of privatization must remain a focal point of
Government's new policies, the social implications of the program of
privatization arising from the significant overstaffing which prevails in many
public sector companies need to be recognized. In the context of ensuring a
social safety net, the linkage with the Social Fund or some other similar
mechanism would need to be emphasized.
6.23 The underlying focus of the strategy in the context of privatization
would re-emphasize Government's commitment to proceed with this on an accelerated
basis; in the agricultural sector, privatization involves four types of
operations:
- the land and livestock based operations which come directly within
the purview of the sixteen affiliated companies belonging to the
Holding Company for Agricultural Development, and the two companies
within the Poultry and Animal Wealth Holding Company;
- companies involved in civil works and related operations, such as
the six Land Reclamation Companies in MALR, and the Public
Excavation Companies in MPWWR;
- activities undertaken within the framework of the Egyptian
Agriculture Organization, which include, among others, equipment and
machinery sales, seed sales, horse breeding, etc.; and
- 61 -
- sale of fully or partially reclaimed lands, which is the
responsibility of GARPAD.
6.24 Companies within the first two categories of operations come within the
purview of the PEO and will be subject to its rules and regulations. For the
first category, the PEO may wish to avail itself of MALR contributions in
expediting the privatization of these activities. There is also need for
assistance and specialized expertise to help the different holding companies to
analyze the different markets in which companies operate, review options for
privatization, and assist in the privatization of key enterprises. The companies
belonging to the Holding Company for Agricultural Development, have been
subdivided into 83 projects in order to facilitate and expedite their
privatization; a portion of the company lands were sold to employees under long
repayment periods. For the remainder which has been sold, the experience has
been that an average of four buyers at most expressed interest in the projects.
The current approach has led so far to the sale of only thirteen projects with
a value of LE 200 Million. This approach needs to be reconsidered. All methods
of privatization need to be considered, including management contracts, leases,
joint ventures, divestiture of marginal lands and activities, as well as sales
to large national or international companies who are willing to make substantial
investments in the lands, with a view to expediting sales.
6.25 In the context of activities falling within the third category of
operations, it is proposed that the current institutional set-up be reviewed in
detail. For example, the Egyptian Agricultural Authority, while being subject
to the civil service law is nevertheless performing commercial activities.
Specifically, there is a need for MAIR to examine all the activities, determine
those that would remain in public hands and those that could be effectively
transferred to the private sector based on clearly defined criteria; in this
context, there is also a need to separate the regulatory and research activities
from the commercial activities whenever they are being performed in the same
institution, as is the case for example with the Marriut Fish Company and the
Egyptian Company for Fishing. These criteria should then be applied consistently
to all MALR activities to come up with a strategy, action plan and timetable.
In addition, public sector cotton companies should be required to operate in a
competitive environment alongside private sector companies.
6.26 Finally, the present approach followed by GARPAD in selling fully or
partially reclaimed lands needs to be revisited. Under present Government
policy, a substantial portion of the lands presently being reclaimed or to be
reclaimed by GARPAD are earmarked for sale to graduates under subsidized terms.
This approach forms an integral part of the Government's employment policy.
However, since there are no directives aimed at selecting only agricultural
graduates for such sales, graduates with no agricultural background (including
those holding arts, law or accounting degrees) are pressed into agricultural
activities in which they have little expertise or interest. Consequently,
production levels achieved by many graduates have been low, leading to the sub-
optimal utilization of the valuable land resources of the country. Clearly,
better selection criteria have to be developed to ensure that the productivity
of the land is maximized.
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Agricultural Inputs
6.27 Concurrent with efforts to improve the overall environment for ensuring
agricultural growth, is the need to assure both timely and good quality itiputs
to the farmers; without these, there is little justification for creating the
incentives for their use. Consequently, special attention should be devoted to
seeds, agrochemicals, particularly fertilizers, and aspects of agricultural
mechanization, because of their major influence on agricultural productivity.
Presently, the Government is involved in the supply to farmers, as well as in
regulatory functions, of farm inputs. The privatization of the input
distribution activities is proceeding in tandem with the phasing out of subsidies
for these inputs; however, the transition needs to be carefully managed, and the
risks of creating private monopolies guarded against, in order to ensure that
supplies to farmers are not disrupted with corresponding implications on
productivity.
6.28 Seeds. Farmers are fully aware of the important contribution of
quality seeds to high agricultural productivity. Presently, the following
agencies are involved in the production and regulatory aspects of seed
production: the Agricultural Research Centre is involved in breeding of improved
HYVs, including production of breeder and foundation seed, as well as in the
testing of new varieties; the Central Administration of Seeds (CAS), MALR is
responsible for the multiplication, conditioning, and distribution of seed, as
well as for fulfilling regulatory functions with regard to seed; the Egyptian
Agriculture Organization imports foreign seed, and also owns seed cleaning and
conditioning facilities which it makes available to the private sector; the
Organization for Improvement of Egyptian Cotton, which supervises cotton seed
multiplication, roguing and laboratory testing, with CAS maintaining supervisory
functions to ensure varietal purity; and six private sector seed companies, which
are involved in corn, vegetable and forage crops seed production.
6.29 Clearly, there is significant potential for increased private sector
involvement in seed production and distribution (with hybrids, the private sector
is already heavily involved in seed production), as well as rationalizing the
structure for regulating seed related activities. This should occur, taking into
account the following considerations:
- The long term objective should be one of progressive diminution in
the Government's role in seed production, with the underlying policy
being one of encouraging greater private sector involvement. In the
interim, since seeds are a critical input (and since some types of
seed, such as the high volume/low value open pollinated crops, may
not be so attractive to the private sector), there will be need for
continued Government involvement; however, such involvement should
be as equal partners/competitors with the private sector;
- Production of breeder and foundation seed should remain the
responsibility of ARC until such time that the private sector shows
interest in this activity;
however, commercial multiplication and conditioning should be entrusted to the-
private sector, farmers' groups and cooperatives;
- Given the importance of horticultural crops, and the increasing use
of imported seed to ensure that export quality standards are met,
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the procedures for evaluating such varieties should be reviewed to
ensure that it is done expeditiously;
The seed sector is already being subjected to reform, and a new seed law is being
prepared. The underlying objective is to enlist increased entry and
participation of the private sector in seed production and supply. The CAS is
also being reorganized, with a view to terminating its seed production,
processing and distribution activities, and transferring them to an
Undersecretariat for the Production of Seed as a transitional measure prior to
privatization.
6.30 Agrochemicals. Egyptian soils are poor in organic matter content and
available nitrogen, but contain average amounts of phosphorous and potassium; the
sandy and calcareous soils, particularly of the new lands, are deficient in macro
and micro nutrients. Some of these problems have been compounded by the
discontinuation of silt deposits after the construction of the high dam.
Therefore, there is need for relatively high fertilizer application under
intensive agriculture. Present fertilizer use in the country is very high, and
rivals average consumption levels in some developed countries; for example,
Egyptian farmers apply an average of 319 kg/ha of basic nutrients (N, P, and K),
as compared to 346 kg/ha in Holland and 377 kg/ha in Japan (world average is
estimated at 28 kg/ha). There is a need to undertake a closer assessment of
fertilizer needs for the different crops (including that for microelements such
as iron, zinc, copper, etc.), and developing recomendations which meet the
specific needs of the different agro-climatic regions of the country. In the
case of pesticides, these are mostly used for the cotton crop, where the
Government continues to play a central role. To address the environmental
concerns regarding this, there is need to actively pursue a program of integrated
pest management (IPM), where the focus needs to be on interrupting the pest life
cycle, use of modern biological pest control, adoption of improved cultural
practices and judicious use of pesticides.
6.31 In terms of private sector involvement in the inputs trade, a decree
passed in 1991 nullified earlier legislation which made the participation of
private dealers in fertilizer trade illegal. Presently, an estimated 20-25
percent of fertilizer sales are handled by the private sector, with the remainder
going through PBDAC and cooperatives; in this process, private dealers have also
imported fertilizers and distributed them to farmers at non-subsidized prices.
6.32 Agricultural Mechanization: Primary farm mechanization is already well
established for land preparation, threshing, water lifting and transport. Custom
hire services are provided mostly by small private operators. There are other
mechanized services offered by public sector companies, but their activities are
being phased out as the useful life of their equipment fleet diminishes.
Therefore, it is expectqd that the private sector will increasingly assume a
larger role in providing, as well as in the operation and maintenance of farm
machinery. Given the strong demand for such services, particularly in newly
reclaimed lands, provision of long term credit and promotion of private custom
hire services should be encouraged to stimulate intensive production. The
Agricultural Engineering Research Institute is actively involved in research,
adoption, training of SMSs and farmers in aspects of farm mechanization,
provision of machinery services for demonstration purposes in farmers fields, and
in the design of on-farm irrigation and drainage schemes. The Institute is also
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involved in articulating agricultural modernization packages, and is responsible
for ensuring that engineering standards are maintained. In this respect, the
strategy for agricultural mechanization should be designed for: (i) solving
constraints which have hampered the mechanization of Egyptian agriculture in the
past and achieve maximum utilization efficiency of the limited available
resources; (ii) improving water use efficiency through modern irrigation and
drainage management and water conservation measures; and (iii) adapting modern
mechanization systems for improving the efficiency of land and labor utilization,
which may also provide opportunities for upgrading skills and employment. If the
envisaged benefits from agricultural machinery are to be achieved, serious
efforts should be taken to balance the roles of the public sector with those of
the private sector in importation, testing, certification, etc., and in
commercial production. This needs to be combined with strengthened extension
activities, with suitable training programs for extension personnel and farmers.
Private sector involvement in these activities would clearly be important, and
should be actively encouraged.
C. DeveloRing Rural Institutions
Rural Financial System
6.33 The rural financial system in Egypt is dominated by the Principal Banz
for Development and Agricultural Credit (PBDAC), along with its 17 affiliated
Banks for Development and Agricultural Credit, which have played a particularly
dominant role in the agricultural sector. While there are 44 commercial banks,
33 investment and business banks and 4 specialized banks in the country, they
have been minimally involved in rural finance so far. With its network of about
800 village banks and 4300 agencies, PBDAC has an extensive outreach of credit
servicing centres in the rural areas. Of the total loans granted by the banking
sector in 1991, only about nine percent were for agriculture; of these, about 75
percent were extended by PBDAC (totalling LE4.3 billion). While there are no
firm data on the relative contribution of informal sources in meeting credit
needs in the rural areas, it is not believed to be large; this is partially
explained by the fact that input supply has historically been a monopoly of
PBDAC. With deposit mobilization in the rural areas being extremely low,
agricultural credit has been financed primarily from external sources; it is
estimated that deposits from the rural areas represented only one percent of
total deposits in the banking sector.
6.34 While PBDAC has an excellent record in recovering loans (averaging 99
percent over the past five years, which has declined to 94 percent in 1991),
there are indications that it will face increasing difficulty in meeting the
future credit demand of the agriculture sector. The dependence on deposits to
finance lending has declined over the last five years, with a corresponding
increase in commercial borrowings which come at a higher cost. While interest
rates have been deregulated, an estimated 28 percent of PBDAC's loans in 1991
were lent at interest rates (11 to 14 percent) which were negative in real terms,
for which it receives a subsidy reimbursement from the Government. In addition,
long term external loans have helped PBDAC to keep its average cost of funds low;
however, the present average interest yield of 14. i percent on its loan portfolio
is inadequate to cover the cost of commercial borrowing (about 16 percent at
present) and administrative costs. Furthermore, with the ongoing program of
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divestiture of trading activities, PBDAC's gross income from trading operations
has declined from 37 percent of total gross income in 1990 to 27 percent in 1991;
this has not yet been accompanied by a corresponding decrease in total staff.
Finally, the capitalization of PBDAC is presently insufficient for the higher
risks associated with its lending in the new economic environment. With subsidy
incomes to be phased out soon and the likely need to increase loan provisioning,
PBDAC needs to develop a strategy for realigning its interest rate structure,
reducing its dependence on commercial bank borrowing, increase deposit
mobilization and reduce its overhead costs.
6.35 PBDAC's lending operations as well as its deposit mobilization is
primarily concentrated on the farming community; lending to agro-based businesses
is limited, and to non-agricultural rural based enterprises insignificant; it
also needs to improve its coverage of disadvantaged groups such as women and the
landless. Consequently, in the context of promoting broad based rural
development, there is scope to improve the financial services provided by the
bank to the rural population. In addition, access to credit in the new lands is
extremely limited, both on account of strict collateral requirements, as well as
the absence of an adequate branch network in these areas.
6.36 Under an ongoing program, donor assistance is being provided to PBDAC
to strengthen its credit operations, and to divest and privatize its non-banking
activities. PBDAC is therefore in a transition phase. This transition must be
carefully managed to ensure that the divestiture and privatization program takes
place in an orderly and phased manner, that does not cause serious disruptions
in services provided to farmers, which could in turn have important repercussions
on agricultural output and incomes. In the context of the strategy, the bank is
expected to play an important role, not only in providing credit to farmers and
mobilizing savings, but also to act as a catalyst in promoting broad based rural
development. While there are no restrictions on other banks to operate in rural
areas, PBDAC is best placed at least in the immediate future, to perform this
important role in the rural economy. Nevertheless, the bank is presently faced
with a situation where it is attempting to reduce administrative and other
burdens so as not to undermine its financial integrity. Consequently, there is
merit in continuing to provide PBDAC with financial support during this
transition phase, in the context of a clearly defined time bound program with
specific performance targets, until it effects the transition and until
competition in providing farmers services fully develops in the rural areas. At
the same time, the regulatory environment within which the overall financial
sector operates is being subjected to review and change12. In defining a phased
program for PBDAC for the future, it is necessary to recognize that even if there
is a role for Government intervention in the rural credit market, the
intervention should not crowd out the participation of the private sector; there
should not be general interest rate subsidies for the sector, even though there
may be a case for subsidizing lending costs to small farmers. In this event,
subsidies should be transparent, as a budgetary item. PBDAC should be allowed
the autonomy to establish its interest rate policy with due regard to its
financial viability and the prevailing trends in the banking sector. Furthermore,
within the context of the reform program, particularly the proposed financial
sector and regulatory reforms, it is hoped that the involvement of other banks
1U/ See World Bank, "Financial Policy for Adjustment and Growth", Juw 1992 (Unpublished Draft).
- 66 -
in the rural areas will increase, thereby creating a more competitive environment
in rural financial markets.
6.37 Based on the above framework, and the underlying objective that PBDAC
should further develop into an efficient and viable rural financial intermediary
to respond to the needs of a liberalized rural sector, the following
recommendations are made:
- The long term objective should be to divest PBDAC of its non-banking
activities. Options to be considered include transferring the non-
banking activities to a subsidiary to be managed separately.
Studies on how this could be best undertaken in a phased manner are
presently ongoing with donor support.
- A phased program for redeploying existing staff should be
undertaken, through incentives for voluntary retirement,
encouragement for staff to take over divested operations, such as in
input trading, retraining schemes, etc.
- The capital base of PBDAC needs to be strengthened, combined with
measures (including, improved village bank facilities, introduction
of mobile banks, and training of staff) aimed at increasing deposit
mobilization not only among farmers, but from the entire rural
community. The interest rate structure should be rationalized so at
to put the bank on a sound financial footing; deposit rates should
be set at competitive levels, while lending rates should be
sufficient to provide an adequate spread for fully recovering costs
and providing a reasonable profit.
- Activities should be diversified from largely agricultural lending
to overall rural lending; lending policies should be reviewed, so as
not to inhibit lending for long term purposes (loans for periods in
excess of 3 years represented only 1 percent of loans in 1991).
This would expand access to credit by groups such as women and
landless workers. In addition, a cooperative financing program
should be formulated to provide necessary financing to strengthen
and restructure existing cooperatives into market oriented
enterprises.
6.38 In order to address the issue of credit availability in the new lands,
there are various alternatives which could be considered with the underlying
objective of spreading the initial risks of lending to small farmers in these
areas between the bank, farmers and the Government. The specific risks (such as
are normal in the early stages of the process of land reclamation) attached to
special programs emphasized by the Government as part of the overall development
strategy, should not be wholly borne by the financing agency. Options include:
revision of the terms and conditions of lending to incorporate, among others,
longer repayment periods, innovative collateral requirements; the setting up of
a loan guarantee scheme (with the scheme underwritten from contributions from the
bank, Government and farmers), which would not cover the general risks of PBDAC's
lending, but would be targeted at clearly defined activities, such as in the new
lands, where the initial risks of Lending are recognised to be high. in
addition, the branch network of PBDAC in the new lands needs to be enlarged.
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Voluntarv Farmer Organizations
6.39 The cooperative system presently in place was largely organized and
controlled by the government, to support the earlier system of input distribution
and the marketing of the controlled crops. Membership was mandatory. There was
a proliferation of cooperatives, with three national unions organized along
geographical lines and 11 national unions along commodity lines, with a combined
total of over 6400 cooperatives. Since the system was largely aimed at
supporting the old Government functions now being transferred to the private
sector, the existing cooperative law is restrictive, with little flexibility for
cooperatives to develop self-reliance and pursue initiatives. Furthermore,
savings cooperatives were not encouraged; hence, there are no cooperatives which
mobilize savings in the rural areas.
6.40 With liberalization, cooperatives are technically free from Government
control. However there are two issues relevant in the context of the transition
period. Firstly, while steps are being taken to liberalize the cooperative
sector, effective implementation requires both new legislation and awareness of
the changes at the lowest levels of the system. Secondly, the ability of the
cooperatives to fully take over some of the previous Government responsibilities
need to be reviewed to enable a trouble free process of change. Cooperatives are
now allowed to engage in any business but farmers have the option of selling to
any outlet. Consequently, cooperatives must now compete on the basis of price
and efficiency of their service.
6.41 Within the context of rural development, cooperatives could play a
significant role in providing services to farmers in the areas of input
distribution and marketing, and in promoting initiatives for rural
diversification. Initial indications are that the volume of business of
cooperatives has significantly declined. The future success of the cooperative
system will depend on how well the system will be restructured, financed and
managed. Presently, there are too many cooperative organizations to permit an
efficient operation of the whole system; in addition, they are still structured
along the old lines. For revitalizing the cooperative system on the basis of
efficiency and truly private initiatives, the following actions are proposed:
- The introduction of new cooperative legislation which will permit
flexibility for cooperatives to react to market forces and take
advantage of business opportunities. Underlying it would be the
need to free the cooperative system of Government involvement, with
membership on a voluntary basis, and the importance of ensuring that
cooperatives generate their own financing;
- A detailed review of existing cooperatives should be undertaken,
with a view to developing a program for restructuring and
strengthening the overall system. The underlying objective should
be to reduce the number of cooperatives, possibly through
encouraging mergers, and to wean them away from Government control.
The formation of special farmer groupings, such as water user
associations should be encouraged.
- An aggressive and susrained cooperative education and training
program should be undertaken, combined with efforts aimed at
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learning from the experience of cooperative movements in other
countries.
- While cooperatives should have free access to financing, this must
be made available within the context of financially viable ventures
combined with an effective auditing system. The organization of
savings cooperatives should be encouraged.
Within the above context, it is necessary to recognize that experience in other
countries has shown that success with cooperative movements is not easily
assured; among other factors, key elements of success include total participation
of all members, transparency and complete openness in all cooperative activities
and financial transactions, and a dedicated and well trained management system.
In addition, input supply and marketing cooperatives have generally been far more
successful in establishing themselves on a sustainable basis, as compared to
production based cooperatives.
D. Rural Women in Agriculture
6.42 Egyptian women represent an important human resource for promoting the
agriculture development process; yet very little systematic attention is paid
to their needs. Close to 47 percent of the total active female population in
Egypt is engaged in agricultural work. Due to male out-migration to seek urban
or regional job opportunities, many are effectively Head of Households who have
to make the daily decisions. Women participate in virtually all facets of
agricultural activities, including planting, weeding, irrigating, harvesting and
marketing. Studies have shown that in lower Egypt 62 percent of the women plant
crops, 62 percent irrigate, while 50 percent plough; in Upper Egypt, comparable
figures for these activities are 34, 35 and 11 percent. Livestock and animal
husbandry is an area in which women are particularly prominent with one study
estimating about 70 percent of women's annual working time devoted to animal
husbandry. Their participation in processing and marketing presents an
opportunity to deal with issues related to post-harvest losses which are
significant in Egypt. Targeting women with new techniques and methods could lead
to substantial reductions in these losses. In addition women are also engaged
in handicraft activities linked to agricultural by products such as basket and
carpet weaving.
6.43 Positive developments in improving the status of women has taken place
in a number of areas. However, various constraints remain, mainly arising from
cultural and social factors. The more severe constraints include high fertility,
high maternal and child mortality, illiteracy, and lack of access to resources
(such as, agricultural services related to extension and credit, and thereby to
input supplies and marketing outlets) for increasing productivity and return in
agricultural and other rural enterprises. With regard to extension, the existing
extension service is geared to serve male farmers; in many Governorates, there
are only a handful of skilled female extension agents. In the case of credit,
problems of collateral requirements, and illiteracy constrain women's access to
credit. Furthermore, women's access to governmental decision making processes is
limited and tnere are few institurional mechanisms that can ensure chat their
concerns are integrated into the planning and implementation process.
69 -
6.44 In view of the above constraints, rural women's opportunities for
raising their productivity and thereby increasing both household and national
income remains very limited. In order to remedy this situation, the following
recommendations are made:
- An information and data-base on women's activities, contributions
and constraints needs to be developed; to be used as a tool by
policy makers in better planning for improving the contribution by
women in on-farm and off-farm activities in the rural areas;
- Improve access to information and training for women, supported by
SMSs and local women leaders as disseminators of information; while
it may be inappropriate to suggest development of a parallel female
extension service, it is clear that present numbers of female
extension staff need to be increased, and more importantly, relevant
training similar to that of the male extension agents be provided;
- Reexamine research programs to ensure that research relevant to
women's concerns in agriculture is undertaken, for example in labor
saving food processing technologies, techniques to reduce post
harvest losses, improvement of small scale dairy processing
techniques, etc.;
- Improve access of women to credit through innovative credit
programs, reviewing collateral requirements and introducing options
such as group guarantee schemes, and introducing training of bank
staff in this regard;
- Develop, test and evaluate approaches for assisting women to
organize themselves into groups or cooperatives for small scale
rural enterprises;
- Complement the above with improved access to health and relevant
adult education.
6.45 With regard to institutional aspects, MALR has established the position
of an adviser to the Minister on Women's issues. This is a commendable
development. The main task of the adviser is to ensure the integration of
women's concerns in the policy, planning and implementation activities of the
Ministry. In particular, these concerns should pervade the formulation and
implementation of programs and projects emanating from the agricultural strategy
for the 1990s and beyond. The adviser should also ensure coordination with other
ministries and agencies working with women in rural areas. In the medium term,
a broader institutional coverage of WID issues should be developed, perhaps
through a unit in the Minister's Office and strengthening of present units at the
Governorate level.
6.46 In the medium to long term, efforts must be intensified to develop
training programs for adult women that are relevant to their cultural and rural
environment, as well as to improve the access to basic resources such as safe
drinking water and health services. Increasing the primary and secondary school
enrollment of young girls and developing curriculum relevant to tneir rural
environment is a further important aspect so as to ensure that the disadvantages
of present adult rural women do not get repeated in the future and to further
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ensure that the next generation of rural women can fully benefit from the new
technological developments in agriculture.
VII. KEY ELEMENTS OF A STRATEGY
7.01 Following on from the review of the sector, including present
constraints and potentials for future growth, this chapter suumarizes the key
elements of a proposed strategy for the agricultural sector for the 1990s. In
outlining this strategy, the underlying focus is to build on the momentum already
created by the reforms initiated by MALR in 1986 for the agriculture sector, and
by the comprehensive economic reform program adopted by the Government of
President Mubarak in 1990. In a period of worldwide change, measures are
increasingly being adopted in numerous countries, including Egypt, which
emphasize the need for revisiting earlier held views on the role of the
Government in managing economic decision making, without compromising on the
underlying tenets of Government responsibility for ensuring growth and the basic
needs of the people. While clearly the Government has an important role to play
in national economic management, what is necessary is a clear definition of this
role, and implementation of measures necessary for it to fulfil this role without
undermining incentives for the other participants of the economy who would ensure
growth.
7.02 Progress has been made over the last few years in implementing reforms
which are expected to revitalize the agriculture sector. To contribute towards
achieving the key objectives of the economic reform program - achieve sustainable
macroeconomic reform, renew economic growth and minimize negative impacts on the
poor - it is now necessary to complete the reform process in the agriculture
sector. While the growth rates in agriculture have been modest over the last
decade, there are signs of a turnaround; this change needs to be fostered and
reinforced through a combination of policy and institutional reforms, to which
the Government is already committed, complemented by a program of investments
which will ensure a vigorous supply response from the sector.
7.03 Certain key themes underlie the strategy articulated in this report;
the principal ones include the following:
- need for implementing meatures aimed at ensuring efficiency and
environmental sustainability in the management and utilization of
the most important natural resources of the country, i.e. water and
productive land;
- emphasis on using free market considerations, in particular the
promotion of the private sector, in resource allocations. In this
regard, it is recognized that at present world markets for certain
key commodities are distorted; however, the ongoing Uruguay round
discussions offer possibilities for new opportunities;
- the need for implementing measures for the agriculture sector within
the context of an overall rural development strategy, which should
encompass within it aspects related to diversifying rural activities
and to providing key services, in particular, the intensification of
essential social programs for health and education;
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- recognition of the social and political issues, and the need for
social safety nets to assist in absorbing some of the potential
dislocations which will inevitably accrue through the implementation
of the comprehensive reform program; and
- initiating a program of institutional reforms, so as to streamline
the array of institutions presently serving the agriculture sector,
and make them more responsive to its needs.
Based on the above broad themes, various recommendations have been made within
the different sections of this report; set out below is the outline of a program
for implementation within a medium term framework in order to achieve the
objectives set for the sector. Essentially, the proposed program is aimed at
eliminating policy distortions and strengthening the institutional framework, for
meeting the key objective of increasing agricultural production and reducing unit
costs of production. Technology generation and its effective dissemination among
the potential users would form a key element of the strategy.
A. Policy
7.04 The proposed program of policy reforms is principally aimed at ensuring
efficiency in resource allocation, and would encompass the following key areas:
- Based on the findings of the ongoing cost recovery study, outlining
a program for the setting uo of irrigation and drainage service
fees. The issue confronting the Government is how to initiate
measures whereby farmers would contribute more towards the costs of
the irrigation and drainage system, which would be acceptable from
a socio-political perspective. Clearly, a two pronged approach
needs to be pursued. Firstly, water saving irrigation technologies
which are technically and economically feasible need to be
encouraged. Secondly, cost recovery of the O&M costs of the
irrigation network, leading eventually to price incentives for more
efficient use of water, also have to be introduced.
- Completing the process of liberalizing the cotton subsector, since
prevailing distortions are inhibiting the sector's ability to
maximize potential benefits from this important crop., The program
should include the elimination of area allotments, the removal of
Government monopsony procurement and the related restrictions on
private sector trading, freeing of cotton prices and the
establishment of a cotton exchange, and removing restrictions on
cotton impo,rts.
- Complete the process of eliminating all input subsidies, and
liberalize restrictions on the imRort of aaricultural eauiRment.
- Through a detailed subsector study of the sugar sector, identify a
phased program for the liberalization of the sugar subsector; as a
first step, set the sugarcane procurement price at levels equal to
its economic price;
- 72 -
- Take steps to formulate/revise the rural land tax policy,
particularly with a view to reassessing the present level of land
tax and bringing farmers owning between 2 to 3 feddan within the
purview of the land tax system, as well as eliminating the' rent
control aspects of the agrarian reform laws which impact on
agricultural land;
- Review the present criteria for selecting graduates to whom
allocations of newly reclaimed land is made, with a view to
targeting mainly those who hold agriculture related qualifications,
or have a background or expressed interest in agriculture; in
addition, revise the presently restrictive terms of lending to
smallholder farmers who are newly resettled in the new lands, backed
by appropriate guarantee mechanisms;
- The above measures should be complemented by concerted efforts to
expedite the program of privatization, on which the Government has
already embarked. While for the newly created holding companies
this is being undertaken through the recently established Public
Enterprise Office, there remain various MALR activities which are
outside these holding companies. The grivatization of commercial
activities which remain within MALR needs to be pursued under a
specific MALR managed program.
B. Institutional
7.05 While the elimination of the remaining policy distortions is clearly
a prerequisite for generating growth from the agriculture sector, the removal of
institutional constraints which prevent the full effects of policy changes from
being realized is an objective of equal importance. The many years of public
sector control over the economy has led to a situation where there remains in the
private sector a lack of confidence in the Government's commitment to reform,
leading to its reluctance to participate and invest. The following program of
actions is proposed to address prevailing constraints, and to make the
agricultural institutions more responsive to the needs of the sector.
- Within the framework of the new role seen for MALR in the future,
undertake a detailed study of the sector institutions, with a view
to outlining a phased program for streamlining, restructuring and
strengthening them; in this regard, measures for bringing about
timely and closer coordination between MALR and MPWWR should be
identified;
- the above should be complemented by a detailed review of all
existing legislation related to the agriculture sector with a view
to simplifying/reducing their numbers, and to better define the
Government's regulatory functions;
- Both from the perspective of human resources and poverty, there is
need tor develooRng broader institutional coverage and more
innovative actions at both the Central and Governorate levels, for
dealing with issues related to better utilizing the female resources
- 73 -
presently involved in the rural sector, with a view to integrating
these concerns in the policy, planning and implementation stages of
Government programs;
- Given the importance of research there is need to establish a more
focussed research institutional mechanism for preparing and
reviewing agricultural research programs of the various agencies,
supported by a core grouo of eminent international scientists, and
strengthened links with the international research network;
- To better able to disseminate the findings of the agricultural
research system, restructure the agricultural extension system,
particularly with a view to unifying dispersed efforts as at
present, strengthen the on-farm water management aspects of
agricultural extension (in particular for providing an efficient
irrigation advisory service to farmers) and to bring all field
services under the authority of the respecti-*e Governor; in
addition, support private sector initiatives in extension;
- Within the framework for an improved agricultural support services
structure nationwide, imglement a comprehensive targeted supRorZ
service program for the new lands, which would need to be sore
intensive and include aspects related to research, extension,
training, credit, input supply and produce marketing;
- In order to better focus PBDAC's activities on its primary rural
finance objectives, accelerate the program of divestiture of PBDAC's
trading activities, including a phased program of redeploying excess
staff; to support such a program strengthen PBDAC's capital base and
rationalize its interest rate structure; strengthen the bank's
capabilities specially with regard to denosit mobilization and
diversified lending; establish a loan guarantee Mechanism for new
lands lending as well as for other viable operations for which
borrowers may have inadequate security.
C. Investment Program
7.06 To support the program of policy reforms and institutional upgrading,
a clearly defined public investment program is essential to ensure that the
expected supply response from the sector is generated. At the same time it is
important to recognize that although the level of public investment directly
affects economic activity, it is the subsectoral distribution of investments and
the quality of the project implementation within each subsector, that influences
the rate of growth of the sector; in addition, there is need to promote private
sector investment. As outlined in the Bank's review of the Public Sector
Investment Program, project selection for public sector involvement should
emphasize the following:
- areas that present large externalities, where the private sector
would normally underinvest;
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- where such investment is necessary to attract private investment,
i.e. where the Government's investment would act as a catalyst ;
- where Government is needed to address equity and long term or
broader development issues that are not normally tackled by the
private sector.
The other key considerations in outlining an investment program for the
agricultural sector should be to undertake investments aimed at the more
efficient utilization of the country's limited water resources, and at better
managing and utilizing the scarce agricultural land resources available to Egypt.
7.07 The World Bank has recently carried out a detailed review of the
Government's proposed Public Sector Investment Program for the Third Five Year
Plan. Allocations of public sector investment during the Third Plan indicate an
allocation of about 13.5 percent of total proposed outlays (of about LE70
billion) for the agriculture sector; this compares with an allocation (actual)
of only 6.9 percent during the Second Plan. To complement the findings of this
review'3, and going beyond the proposals and the time frame of the Third Plan,
this section briefly presents broad themes for public investment programming in
the medium term future, with a view to providing a framework for Government
decisions in this regard; this is set within the context of the role foreseen for
the Government in the future. It is worth emphasizing at the outset that in
terms of outlining an approach for public sector investments, different
strategies are needed for the old lands as opposed to the new lands, which should
be incorporated into the design of specific projects.
- For the old lands, the emphasis needs to be on measures aimed at
increasing crop yield levels. At the same time, initiatives are
needed for promoting the diversification of the rural economy, and
to strengthening the respective Governorate institutional
capabilities for providing key support services;
- For the new and old-new lands, the focus has got to be on tackling
on an urgent basis the problem of continuing low average yields,
which are much below the technical potential of the areas reclaimed.
This needs to be combined with measures aimed at Government
divestment of reclaimed lands still owned and managed by the public
sector.
Furthermore, in the context of setting priorities and for allocating resources
between different activities, economic rates of return estimated either by the
Government or by international agencies, while undertaking feasibility studies
or project preparation/appraisals for the different types of investments, provide
a good initial measure on which to base future decisions. These show higher
returns on investments for vertical expansion in agriculture, in particular
dealing with better water resource management (24 percent for investments in
drainage for the old lands and for rehabilitating pumping stations, 21 percent
for improvement of the old new lands, around 20 percent for rehabilitation of
control structures, and between 15-24 percent for the irrigation improvement
J./ World Bank, "Arab Republic of Egypt, Public Sector invetmmnt Review, 19920
(UrpKlished draft).
- 75 -
program in the old lands); in comparison, estimates of economic rates of return
for investments in new lands reclamation range from less than 11 percent to 14
percent.
7.08 Program for Improved Water Resources Utilization/On Farm Water
Management. The major limiting factor to agricultural growth is water;
consequently, the most important investments should be those that raise the rate
of return to water use. The highest priority in this regard would go to
investments that improve the irrigation and drainage system management;
rehabilitate or renew deteriorated infrastructure; remove drainage constraints;
and improve the efficiency of on farm water use and management. The developments
should be supported by an improved agro-meteorological data network. Briefly,
the program should include the following elements:
- Investments for improved O&H of the irrigation and drainage system,
given the reportedly substantial scope for further improvement in
system management;
- The case for rehabilitating in-channel structures and pumping
stations is compelling to keep the system operating efficiently;
there are opportunities for improving the selection and design of
canal structures, allowing possibilities for innovation;
- There is clear priority for continuing, and to the extent feasible,
accelerating the drainage program; there should be emphasis on
assisting local contractors to improve their management skills, and
to assist private contractors to participate in the drainage
program;
- There is sufficient evidence to indicate that irrigation
improvements in the old lands enhance system efficiency and increase
crop production; studies are needed to identify priority areas and
to justify the technical and economic viability of an enlarged
irrigation improvement program;
- Finally, there is pressing need for undertaking a phased program for
supporting developments, including investments for improving and
rehabilitating tertiary level irrigation infrastructure, training
and the establishment of teritiary level farmer organizations, aimed
at improving on-farm water management.
7.09 Program for the New and Old-New Lands. From the Government's
perspective, horizontal expansion through increased land reclamation is a
priority. While various non-economic considerations give the expansion of the
agricultural land base a high national profile, it is important that investments
in land reclamation should be technically feasible and economically viable. At
the same time there is the basic issue of ensuring balance between investments
in creating new agricultural lands, as opposed to those for agricultural
intensification in the already cultivated areas. Given the large externalities
which can be tapped from intensifying agriculture on lands on which significant
investments have already been made, and the need for quick yielding investments
at this time of reform, the medium term investment program shouid adopt the
following approach:
- 76 -
- Priority should be given to intensifying agriculture on the already
reclaimed areas, through a series of area specific investments
projects targeted in the new lands lying in the West Delta (i.e.
along the Nubariya and El Nasr canals) and the East Delta (i.e.
along the Ismailia and El Salaam canals), as well as specific areas
lying in Upper Egypt;
- Underlying the program should be a clearly defined and focussed
institutional framework for managing the program and for supporting
newly settled farmers in the new lands, the lack of which has been
one of the most important factors responsible for the realized
benefits from these investments not matching expectations;
- In the old-new lands (totalling about 900,000 feddan), there is need
for investment in drainage, rehabilitation of water control
structures, and for making improvements to on-farm irrigation
systems, through which high returns can be expected in a relatively
short time and at low unit costs;
- Within the above context, a more modest new lands reclamation
program should be undertaken, within the limits of assured water
supplies, selectively based on identified high potential areas which
are expected to yield higher than the average returns to land
reclamation.
7.10 Agricultural Research and Extension. The ongoing externally financed
national program to strengthen agricultural research and extension is expected
to come to an end in 1994. Improved agricultural research is a critical input
to increased agricultural productivity; this needs to be complemented by a
strengthened extension service that Egypt will badly need to face the
technological challenges of the 1990s. In this context, the importance of
improved fodder production and its utilization on-farm needs to be emphasized in
the strengthened research and extension program, to better use the water and land
resources of the country. The implementation of a well defined follow on program
is consequently of high priority, with its design based on the recommendations
made in this report.
7.11 Agricultural Marketing and Exoort Promotion. Initiatives to improve
the marketing system is a clear pri6rity, if the benefits from increased
agricultural production are to be fully realized. However, the long term program
for marketing development should be centered around promoting private sector
initiatives and strengthening the cooperatives. Other than further liberalizing
the regulatory environment within which the private sector has been operating in
the past, there is need for the financial system to be strengthened in order that
it can be more responsive to specific private sector needs. The public sector
should refrain from direct intervention in marketing; emphasis on public
investments should be in areas where the Government can perform a catalytic role
in encouraging private sector participation. This can be done by creating
essential infrastructure, such as rural roads and market centers, restructuring
and strengthening a privately managed cooperative system, and creating a market
promotion and information disseminating service in the public sector particularly
to support the new agricultural areas where private sector investment may
initially be slow in emerging.
- 77 -
7.12 Potential Studies. The agriculture sector is going through a period
of change, which is accompanied by a re-evaluation of the future role of the
Government. In order to support the Government in managing this change better,
provide it with meaningful options for consideration in taking decisions, aind to
review alternatives for taking investment programming decisions, there are
various potential areas which lend themselves to detailed studies or grant
financed technical assistance operations. Set out below are certain areas which
merit priority attention in this context:
- In view of the present lack of knowledge and data on rural financial
markets, a rural financial market study should be undertaken to
assess the presently available sources of credit in rural areas,
prospective demand for credit and investment opportunities,
including for rural based enterprises, and of sources of savings.
In this context, the rural land markets should also be reviewed to
assess the linkage of land issues with rural credit markets;
- Steps for improving the overall water resources management in Egypt
is a critical part of the development strategy for the sector.
Consequently, a technical assistance program is needed for preparing
a 10 year program for nationwide irrigation improvement;
- A detailed fisheries sub-sector study, with a view to outlining the
potentials and constraints, as well as a strategy for the
development of the subsector;
- Formulation of an action plan for implementing measures aimed at
liberalizing the sugar subsector, based on past and ongoing studies;
- A study of the public agencies involved in agriculture and food
related issues, in order to draw up a phased program for
restructuring and strengthening them. Given the magnitude of the
issues involved, and that various socio-political considerations
will need to be taken into account, it is recognized that this is a
difficult area; consequently, a long term program needs to be
articulated, which should provide the basis for a phased program for
change;
- A technical assistance program for strengthening the planning,
policy analysis and monitoring capabilities of both MALR and MPWWR;
- Technical assistance for strengthening the environmental assesstent
capabilities of agencies involved in preparing and implementing
investment projects, including a program of training;
- Rural women are involved in numerous agricultural activities,
employment in which may be influenced in the future by the secondary
effects of agricultural modernization; there is a need for a study
to identify innovative approaches for addressing potential negative
effects from such changes in the rural economy;
- A technical assistance program to strengthen policy analysis and
planning related to the integration of women's issues into the
mainstream activities at the Ministry and Governorate level;
- 78 -
- A technical assistance program to review in detail the existing
cooperative system, with a view to outlining a phased program aimed
at restructuring and strengthening it.
- 79 -
APPENDIX I
Page 1 of 4
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
POTENTIAL PROJECTS IN THE AGRICULTURE SECTOR
1. Arriculture Sector Investment Loan. Following on from the work done
by the Government and the international agencies for preparing the Agriculture
Sector Strategy for the 1990s, and to take advantage of the momentum presently
in place, it is proposed that an Agriculture Sector Investment Loan jointly
financed by the World Bank and other interested donors should be considered, with
its primary objective being to provide assistance to the Government in completing
its program of policy and institutional reforms for the agriculture sector, with
a view to increasing sectoral efficiency and achieving sustainable agricultural
growth and an expansion in exports. Among others, the proposed sector operation
would address the following objectives: initiate implementation of a phased
program for introducing water charges, investments for irrigation improvement,
tertiary level institutional strengthening for improved on-farm water management,
phased program for privatizing the commercial operations of HALR which remain
outside the holding companies, and initiate a program for restructuring and
strengthening the overall institutional framework for supporting the agriculture
sector.
2. Potential Proiects for Improved Water Resources Utilisation. The majoi
limiting factor to agricultural growth is water; consequently, the most important
investments should be those that raise the rate of return to water use. The
highest priority in this regard would go to investments that improve the
irrigation and drainage system management; rehabilitate or renew deteriorated
infrastructure; remove drainage constraints; and improve the efficiency of water
use. Briefly set out below are potential projects which should be considered
while developing an investment program:
- Irrigation ImDrovement Program There is sufficient evidence to
indicate that irrigation improvements in the old lands enhance
system efficiency and increase crop production; studies are needed
to identify priority areas and to justify the technical and economic
viability of an enlarged irrigation improvement program. Consulting
engineers could be recruited to formulate a ten-year plus program
for a phased program of nationwide irrigation improvement. Based on
their findings, the first time slice could be financed under the
proposed Agriculture Sector Investment Loan.
- On-farm Water Management Program. Given its importance, a program
to support developments aimed at improving on-farm water management
is a pressing need, and should be undertaken in a manner which is
complementary to the above mentioned irrigation improvement program.
System Oneration and Maior Infrastructure Rehabilitation. The case
for rehabilitating in-channel structures and constructing new
control structures is essentially compelling to keep the system
operating. The HPWWR is implementing an emergency rehabilitation
program under the USAID financed Irrigation Management Systems
Project which is expected to end in FY 95; a supplementary program
is needed to accelerate work markedly over the next decade based on
- 80 -
APPENDIX I
Page 2 of 4
careful ordering of priorities. This could also include investments
for improved system operation, given the reportedly substantial
scope for further improvement in system management. There are
opportunities for improving the selection and design of canal
structures, allowing possibilities for innovation. For pumping,
efforts should made to bring about improvements in operating
reliability and automation. For the longer term, given that Nag
Hammadi is presently being studied, the condition of the remaining
barrages, especially those at Assiut and Zifta, should be examined
and plans for any needed rehabilitation and renewal developed.
Second time slice of the National Drainaze Program. After
completion of the first time slice of this program, additional areas
totalling about 1.0 million feddan will require field drainage.
There is need to consider measures needed to assist local
contractors to improve their potential and management skills, and to
encourage more private sector contractors to participate in the
drainage program.
- Renlacement of Nat Hammadi Barrage. A feasibility for this project
is presently ongoing. The project will be costly, and require
commitment of substantial resources by the Government. Further
processing of this proposal should be based on the outcome of the
feasibility study, which is reportedly reviewing options for
improving the existing structure with or without power, and a new
dam.
- PumDing Stations Rehabilitation III. The ongoing project for
rehabilitating pumping stations is scheduled to end in 1996. The
program for rehabilitating pumping stations will need to be
continued with a follow up project.
3. Potential Prolects for the New and Old-New Lands. Given the large
externalities which can be tapped from intensifying agriculture on lands on which
significant investments have already been made, and the need for quick yielding
investments at this time of reform, the medium term investment program should
consider the following potential projects:
- Program for Agricultural Intensification in the Now Lands. The
program could be based on a series of area specific investments
projects targeted in the already or substantially reclaimed new
lands lying in:
- the West Delta (i.e. along the Nubariya and El Nasr canals),
including the West Nubaria Agricultural Intensification Proiect and
the New Lands Agricultural Services Proiect;
- the East Delta (i.e. along the Ismailia and El Salaam canals);
- specific areas lying in Upper Egypt;
- Program for completing ongoing land reclamation projects on an
accelerated basis, to ensure early commencement of benetits;
These projects would possibly take a "rural development" type of approach to
provide any missing infrastructure, as well as ensure access to credit,
technology package, processing, marketing, etc.; the program would support the
- 81 -
APPENDIX I
Page 3 of 4
Government's efforts at divesting the lands presently held by the public sector.
Underlying the program should be a clearly defined and focussed institutional
framework for managing the program and for supporting newly settled farmers in
the new lands, the lack of which has been one of the most important factors
responsible for the realised benefits from these investments not matching
expectations.
4. Cotton and Sugarcane Subsector O0erations. In order to support the
Government in implementing a program of reforms for these subsectors, operations
will be needed to address the policy, technical, infrastuctural and institutional
issues, to ensure sustainability and efficiency in implementation of the proposed
reforms.
5. National Agricultural Research and Extension Project. The ongoing
externally financed national program to strengthen agricultural research and
extension is expected to come to an end in 1994. Improved agricultural research
is a critical input to increased agricultural productivity; this needs to be
complemented by a strengthened extension service that Egypt will badly need to
face the technological challenges of the 1990s. The implementation of a well
defined follow on program is consequently of high priority, and which should
include aspects dealing with on-farm water management, improved and innovative
methods for the transfer of technology, training and human resource development,.
and improved improved information and documentation systems. The program could
be complemented with area specific agricultural intensification subprojects, with
particular focus on strengthening the full complement of agricultural support
services specially targeted on the old lands.
6. Aericultural Modernization Project. The project would support the
program for intensifying agricultural production, encourage the more widespread
adoption of improved technologies and promote rural enterprises, and initiate a
program for the restructuring and strengthening PBDAC's rural banking activities.
7. Marsah Matruah Resource Management Project. The project would
initiate measures for improved natural resource management on a sustainable
basis, and improve the living conditions of communities located in identified
rainfed based agricultural areas. It would also aim at developing replicable
approaches for addressing the development needs for such communities.
8. Agricultural Marketing and Export Promotion. Initiatives to improve
the marketing system is a clear priority, if the benefits from increased
agricultural production are to be fully realised. However, the long term program
for marketing development should be centered around promoting private sector
initiatives. Other than further liberalizing the regulatory environment within
which the private sector has been operating in the past, there is need for the
financial system to be'strengthened in order that it can be more responsive to
specific private sector needs. The public sector should refrain from direct
intervention in marketing; emphasis on public investments should be in areas
where the Goverrment can perform a catalytic role in encouraging private sector
participation. This can be done by creating essential infrastructure, such as
rural roads and market centres, restructuring and strengthening a privately
managed cooperative system, and creating a market promotion and information
disseminating service in the public sector particulariy to support the new
agricultural areas where private sector investment may initially be slow in
emerging.
- 82 -
APPENDIX I
Page 4 of 4
9 Cooperatives Development. The cooperatives system in Egypt is
presently going through a period of transition, and considerable changes are
foreseen to take place in the medium term; a new cooperatives law is also being
drafted. There is need for undertaking a program to assist in guiding the
process of change, and to develop a strengthened and privately maftaged
cooperative system.
10. Inland Fisheries Project. With its vast coastline and inland water
resources, Egypt is well positioned to develop its marine, inland fisheries
resources. Based on the findings of the proposed fisheries subsector review, a
project for developing the potential in inland fisheries could emerge as a
priority.
11. Potential Studies. The agriculture sector is going through a period
of change, which is accompanied by a re-evaluation of the future role of the
Government. In order to support the Government in managing this change better,
provide it with meaningful options for consideration in taking decisions, and to
review alternatives for taking investment programming decisions, there are
various potential areas which lend theomselves to detailed studies or grant
financed technical assistance operations. Set out below are certain areas which
merit priority attention in this context:
The earlier proposed study of the MALR institutions, in order to
draw up a phased program for restructuring and strengthening them;
- A technical assistance program for strengthening the planning and
policy analysis capabilities of both MALR and KPWWR, with particular
emphasis on establishing a well defined monitoring and evaluation
structure for ensuring effective implementation of the investment
program;
- A technical assistance program to recruit consulting engineers who
would prepare a 10 year program for nationwide irrigation
improvement;
Technical assistance for strengthening the environmental assessment
capabilities of agencies involved in preparing and implementing
investment projects, including a program of training.
Rural women are involved' in numerous agricultural activities,
employment in which may be influenced in the future by the secondary
effects of agricultural modernization; there is a need for a study
to identify innovative approaches for creating new gainful
employment for women in the rural economy;
A technical assistance program to review in detail the existing
cooperative system, with a view to outlining a phased program aimed
at restructuring and strengthening it;
A study to identify measures for increasing rural savings, and to
identify steps necessary for promoting rural enterprises and other
employment creating ventures, including the acceleration of field
level implementation of policy changes already carried out.
- 83 -
APPENDIX II
Page 1 of 12
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990.
THE ECONOMICS OF CROP AND LIVESTOCK PRODUCTION
1. The competitiveness of the various crops and livestock products has
been analyzed through the calculation of domestic resource costs (DRCs). DRCs
were calculated using the simple Balassa approach, dividing the economic value
of domestic resource inputs by the economic value added through the production.
Domestic resources are land, labour, capital (where included in the budgets) and
water. The economic value added is the shadow priced return to these domestic
resources including residual returns. A DRC below 1 indicates the existence of
a cost advantage in production of the specific comodity.
2. For the purpose of the analysis, a serious effort has been made to
gather reliable price data and compile comparable crop budgets. These efforts
were inhibited by the difficulty of studying the situation in the midst of the
implementation of a comprehensive program of economic reform. Therefore, it
could not always be secured that all data is completely consistent. Furthermore;
while a large volume of relevant data as well as sufficient computer hardware are
available, data is often fragmented, access to data and exchange of data is
sometimes restricted, and information management and analysis skills are lacking.
Nevertheless, data has been compiled for the analysis with the assistance of the
Government, and while differences may exist between different data sets, they
would not affect the qualitative conclusions in this report.
3. Crop budgets on a per-feddan basis were compiled for the major field
crops; these are shown in Attachment A1. All prices in the budgets refer to
price levels at the end of 1991, which were obtained from MALR. Family labour
was included as a cost item in all budgets; the net return calculated is
consequently a residual return to management, risk and capital. Export or import
parity prices were calculated, based on World Bank Comodity Price projections,
to arrive at economic prices of tradable input and output commodities. Even
though Egypt is rice exporter, the economic analysis using export parity prices
shows clearly that Egypt is not cost competitive in production of rice for export
markets. Assuming that rice production would subsequently be reduced below the
level of domestic consumption, it was assessed whether Egypt is at least
competitive on the domestic import market. Therefore, import parity prices were
calculated as well. Beans were assumed to be non-tradable; however, some import
has taken place recently and an import parity price is calculated for
supplementary analysis. Berseen itself is not traded; it has been evaluated at
the economic price of a substitution package of tradable feed components.
Domestically produced feed is evaluated at the economic price of traded inputs.
1/ The technical coefficients for the crop budgets were obtained from the Chmonics survey for the 1989
surmer crop and the 1989-1990 winter crop. Mistion estimtes of technicat coefficelnts for sgar
beet are based on the "Sugar Study for Egypt in 2010" by the National Cotictl for Production ond
EconomIc Affairs, Indurtry Division. 1967, Calro. Estimates for mftLower are based on the IFC
report "Pioneer Eogpt Edible Oil Coepany, SAEN.
- 84 -
APPENDIX II
Page 2 of 12
4. While the DRC analysis provides important information for assessing the
competitiveness of products in the current situation, it is important to consider
the dynamic aspects that may change inherently static measures such as DRCs. The
dynamic factors are addressed through sensitivity analysis and are particularly
important in the current state of transition since farmers' response to changing
price signals (for example changes in yield due to changing allocation of labour)
could impact considerably on the assessment of competitiveness of individual
commodities. Also, analysis of competitiveness is based on partial analysis
taking prices as given. Therefore, recommendations can be made only for marginal
changes in production patterns. The benefits of any potential large-scale
substitution would have to be verified in a general equilibrium context which is
beyond the scope of this report.
5. The analysis of DRCs focuses on the major field crops and selected
livestock products. For the analysis of commodities for which special expertise
is required in production, or for which processing and export channels are not
developed yet, cost and benefit estimates depend on the availability of such
expertise and marketing channels. Low DRCs for such products may, therefore, be
misleading if specialized inputs cannot be obtained or markets prove to be very
narrow. Also, due to this report's focus on the economics of crop and livestock
production, analysis of the processing and marketing channels has not been of
sufficient depth to present DRC calculations with sufficient confidence for
products involving major industrial processing. Correspondingly, the analysis
of citrus and vegetable products should be interpreted with caution.
Table 1: Competitiveness of Major Crops
Finncial Economic Domestic Nominal Effective
Nat Net Value Resource Rate of Rate of
Crop Return Return Added Cost Protection Protection
~~~. . .. ... .... ..... . .... . .. . . .. . . . . . . . . . . .. . . . .. . . .. .. . .. .
Wheat 684.1 525.6 1289.0 0.6 -0.2 -0.2
Long Berseem 802.8 181.5 /77.2 0.8 0.1 0.3
Short Berseem 292.5 -47.5 294.9 1.2 0.1 0.4
Beans 628.1 134.2 903.0 0.9 0.0 0.1
maize 489.6 216.2 1033.5 0.8 -0.2 -0.2
Rice 609.4 35.1 1362.9 1.0 -0.3 -0.2
Cotton 737.0 740.0 2073.0 0.6 -0.4 -0.3
Potatoes 923.7 361.7 1177.2 0.7 0.0 0.1
Sugar Cane 1836.4 -636.2 1552.0 1.4 0.2 0.6
Sugar Beet 230.0 137.9 953.5 0.9 -0.3 -0.3
Tomatoes 2140.7 1480.2 2665.2 0.4 0.0 0.1
Oranges 1237.3 604.9 1433.3 0.6 0.0 0.1
Sunflowers 616.3 198.7 830.9 0.8 0.0 0.1
6. The results of the DRC analysis for field crops are shown in
Attachment B and summarized in Table 1. The field crops in the old lands can be
divided into three groups with respect to their competitiveness. Egypt has a
strong comparative advantage (DRC < 0.7) for horticulture products (fruits and
vegetables), cotton and wheat. Especially, if the cotton yields of the early 80s
- 85 -
APPENDIX II
Page 3 of 12
could be re-established, the advantage for cotton would be even more pronounced
(an estimated DRC of 0.4). Egypt is moderately competitive (0.7 < DRC < 1) in
several relatively low water consuming crops (maize, beans, potatoes, long
berseem and oilseeds) and has a disadvantage (DRC > 1) in producing the water
intensive crops rice and sugar cane. If beans are treated as a tradable
commodity (import parity price), beans would also fall into the first category
of crops with a strong comparative advantage (DRC of 0.6). In the new lands,
there is a strong advantage for vegetables and fruits (tomatoes, green peas and
watermelon) and a clear disadvantage for traditional crops such as berseem,
wheat, maize and beans.
Table 2: Competitiveness of Major Rotations
Rotatfons Financial Ecornmic Dometic
Net Net Vatue Resource
Return Return Added Cost
.............................. .. .............. ............................
Short Bersem 292.5 -11.5 330.9 1.0
Cotton 737.0 740.0 2073.0 0.6
Totat 1029.5 728.5 2403.9 0.7
...... ............ ......... .............. ........ ................ ...................
Wheat 684.1 525.6 1289.0 0.6
Maize 489.6 216.2 1033.5 0.8
Totel 1173.7 741.7 2322.5 0.7
~~~~~~~~~~~~~~~~~~~............. ........................... ....... .............. .......
Wheat 684.1 525.6 1289.0 0.6
Rice 609.4 35.1 1362.9 1.0
Totat 1293.5 560.6 2651.9 0.8
~.... .... . ... . . . . . . . . . . . . . . . . . . . . . . . . .
Long Bersem 802.8 253.5 849.2 0.7
maize 489.6 216.2 1033.5 O.8
Total 1292.4 469.7 1882.7 0.8
~~~~~~~~~~.............. ................................... .... ....... .........
Sugar 1836.4 -636.2 1552.0 1.4
7. The analysis of individual crops has to be put into perspective of
feasible crop rotations. For example, the extended period required for growing
cotton makes cotton only feasible in rotation with short berseem. Therefore, the
competitiveness of crop rotations was analyzed. While cropping patterns are in
general becoming more diverse, including the practice of inter-cropping and
growing of vegetables, Table 2 compares the returns to the main traditional crop
rotations. Returns to horticulture products are higher, in general, coupled with
greater risk and greater need for specific skills that are not available to all
farmers. All the four main rotations provide a financial return to the farmer
between LE 1029 and LE 1293 per feddan. This is consistent with rational choices
of farmers and simultaneous prevalence of all four rotations. The short berseem-
cotton and the wheat-maize rotation both have a DRC of 0.7 and appear to be
socially more desirable than the long berseem-maize and wheat-rice rotations with
a DRC of 0.8. However, financial returns to farmers favour the latter two
rotations due to the protection for livestock products and the free provision of
irrigation water for rice, respectively.
- 86 -
APPENDIX II
Page 4 of 12
8. Table 3 shows the results of DRC analysis for the major livestock
products. The composition of livestock feed differs considerably with time and
location. Since livestock calculations are sensitive to the assumptions made
about the exact composition of feed, they should be interpreted with care. DRCs
are calculated first using berseem as a marketed input. However, since berseem
is a non-traded input, DRCs have been calculated for the production of livestock
including growing berseem (last column in Table 3). The calculations take the
nitrogen fixing capacity of berseem into account (evaluated as a ten percent
reduction of nitrogen fertilization required in the following season). At
current world market prices, raising cattle for milk and meat production is
competitive for exotic cows (DRC of 0.7). Production from buffaloes is
marginally competitive (DRC of 0.9). However, there are difficulties in
estimating some of the benefits from buffaloes (including some remaining animal
draft and intangible benefits such as social status of farmers from holding
cattle), and in evaluating the outputs from buffaloes which are less comparable
to traded commodities than products from exotic cows. The native Baladi cow does
not produce a positive value added and a sensible DRC is, thus, not defined. Its
production is clearly uncompetitive. Poultry production is marginally
competitive reflecting currently depressed world market conditions for poultry
meat.
Table 3: Competitiveness of Livestock Products
Animat Financial Economic Domestic Domestic
Net Net VaLue Resource Resource
Revenue Revenue Added Cost Cost
-per snitel --------- erseemJ/
~~~~~~~~~~..... ........ ........ ................ ......................... ......................................................
CATTLE, EXOTIC 613.5 214.1 864.1 0.8 0.7
CATTLE, BALADI -201.8 -380.8 -105.8 n.s. 6.5
CATTLE, WUFFALO 317.6 -9.9 540.1 1.0 0.9
POULTRY, NO E 0.7 0.2 5.2 1.0
POULTRY, COh" 0.6 -0.2 10.3 1.0
. ............ ................ ................................. ... .... .............
1/ DRC where farmer grows the berseem, rather than buys it as a merketed input.
9. Three measures of protection were calculated and are shown in
Attachment B. Nominal rates of protection measure the distortion of the output
prices. The largest output price distortion, reflected in a nominal rate of
protection of -0.4 remains for cotton (based on 1991 prices) while some other
previously regulated grains have still negative nominal protection rates. A
possible reason for negative protection despite liberalization is that
liberalization of trade and marketing requires more time before markets become
competitive. In not fully competitive wholesale markets, farmers may not obtain
the full economic value of their products. At current world market prices, there
is positive protection of sugar.
10. Effective rates of protection measure distortions of output prices
relative to distortions in inputs prices. Remaining input subsidies (including
- 87 -
APPENDIX II
Page 5 of 12
free irrigation services) lead to effective rates of protection above nomuinal
rates of protection for all commodities; yet, effective rates of protection are
still negative for the important crops and prominently cotton. Both measures of
protection do not reflect the distortions in non-traded inputs such as water and
land. Therefore, the difference between financial and economic net return was
divided by economic value added to give a measure of total distortion of the
incentives faced by farmers. If this measure of total distortion of incentives
is considered (including lack of water pricing), farmers incentives are
excessively high for all crops with the exception of cotton, for which depressed
output prices just offset the lack of water charges. Incentives are most
distorted for sugar cane and berseem,
Water and land Pricing
11. The most complex task in determining the economic cost of producing the
various agricultural commodities is economic pricing of water and land. Water
is provided to farmers free of charge; a market price, therefore, does not exist.
The land market is distorted through legislative restrictions on land rents which
are legally limited to a multiple of the land tax. This section discusses and
compares various approaches that were used in the past to individually shadow
price land and water. Prices quoted from previous studies have been adjusted to
1991 price levels.2 Since water and land are complementary inputs to agricul-
tural production, their economic values are highly interrelated, and shadow
prices for land and water should be determined simultaneously. A very simple
linear programming approach was used to that end, and the findings are presented
at the end of this section.
12. The economic price of water includes two main components. First,
operation and maintenance expenditures as well as capital expenditures for
replacements are required to maintain the services provided by the irrigation and
drainage system. These current and future O&M and investment costs are
considered a tradable input to agricultural production. Second, Nile water
itself and the investment costs sunk in the existing irrigation and drainage
infrastructure lead to the accrual of resource rents and returns to previous
investments. Since the quantity of water delivered by the system is limited,
irrigation water has an opportunity cost. Calculations of water costs are based
on the net water consumption of different crops (crop consumption and evaporation
losses).
13. The purpose of this report is to assess aggregate production patterns.
Water is, therefore, treated as a homogenous commodity based on average country
wide costs. Several limitations of this aggregate approach should be kept in
mind. The location in the system has an impact on costs. The costs of
delivering a unit of water differ by up to 50 percent between regions. In areas
near the coast, recovered drainage water could be reused only at a higher cost;
actual water consumption is, thus, higher than crop consumptive use. On the
V All calculations of resl prices In this report are based on the Consumer Price Index for Egypt in
the IMF's International Financale Statistics. The difference between this deftatior and the wholesole
price index or the rural coniu nr price index has ben found to not affect the resuLts of this rport.
- 88 -
APPENDIX II
Page 6 of 12
other hand, crop consumptive water use is higher in Upper Egypt due to climatic
conditions. Water quality differs by region and water quality requirements
differ by crop. Data for a systematic treatment of these differentiations are
not available in the given context. However, these factors are, as far as
possible, considered in the discussion of recommendations.
14. Preliminary results of the ongoing cost recovery study indicate that
current expenditures for operation, maintenance and investments for replacement
and rehabilitation of structures of the irrigation and drainage system down to
the mesqa level (excluding tile drainage costs) are about LE 0.013/m3. This
estimate is based on the current insufficient level of expenditures. A second
scenario for the same study that has not yet been completed will assess future
costs of an improved maintenance system based on expenses budgeted for the
following years. Preliminary figures for this improved scenario are in the order
of LE 0.02/m3. The cost of operating the system at the desirable and efficient
level of maintenance would presumably be significantly higher. These figures do
not include a return to the sunk costs of the existing investment in the system
or an opportunity costs of water.
15. An alternative figure for irrigation and drainage system costs for
improved conditions can be derived from annualizing the costs of recent
irrigation and drainage projects. Investment costs per feddan (including on-farm
costs) are in the magnitude of LE 1,350 and LE 900 for the Irrigation Improvement
Project and the National Drainage Project respectively. Recurrent annual costs
are approximately LE 150 per feddan. Annualized over thirty years, these
investment and O&M cost figures imply irrigation and drainage costs of LE
0.041/M3. This figure does not include the costs of the main irrigation and
drainage canals nor returns to sunk costs nor the opportunity cost of water.
Based on an average figure from the different approaches to calculate the system
costs, an economic cost for systems investment and O&K of LE 0.03/m3 has been
used as the base case assumption (tradable component of the cost of water).
16. The opportunity costs of water and the existing infrastructure are the
marginal benefits from water in its best alternative use, measured as residual
returns to water after subtracting all production costs including the current and
future costs of the irrigation system. The best alternative use could be
increased irrigation quantities on existing cropping patterns, changes in
cropping patterns to more water consuming crops and horizontal expansion through
land reclamation. Increased irrigation quantities are unlikely to generate
benefits since farmers already over-irrigate in an economic sense due to the lack
of water measuring devices in the system. Therefore, the crop yield-response to
irrigation quantity dhanges is not an appropriate basis for determining
opportunity costs of water. Land reclamation projects require a long lead time.
Cropping patterns, on the other hand, can generally be changed from year to year.
Hence, the correct short-run opportunity costs of water are the marginal benefits
from cropping pattern changes that become possible with increased water supply.
Long-term opportunity costs are the maximum of marginal benefits from cropping
pattern changes and land reclamation projects. No attempt has been made to
calculate marginal benefits from incremental water consumption in other sectors
of the economy. Subsequently, DRC analysis and statements about competitiveness
assess relative competitiveness of various crops but do not imply statements
- 89 -
APPENDIX 1
Page 7 of 12
about the efficient allocation of water (or land) between different sectors of
the economy.
17. For determining the long-run opportunity costs of water, returns to
water in land reclamation projects must be calculated. For example, the net
benefits from the proposed Northern Sinai Development Project3, annualized at
a rate of 10 percent would result in a return of LE 0.03/m3. The World Bank's
Land Reclamation Sub-sector Review estimates that generic land reclamation
projects would be profitable at water prices below LE 0.13 and 0.07/m3 at 10
percent and 12 percent discount rate respectively. Since benefits are measured
net of systems investment costs, this is a pure opportunity cost to be added to
systems investment and operations costs.
18. A study undertaken in 1988 by HcCarlA examines the reduction in social
benefits resulting from changes in agriculture following a hypothetical reduction
of the annual release of water from the High Aswan Dam. For an up to twenty
percent reduction in water releases, social benefit would fall by LE 0.09-0.15
per m3 of water depending on the size of the reduction. This welfare reduction
is the result of a reduction in cropped area adjusted for changes in cropping
patterns. The difference between the benefits of incrementally increasing water
supply (returns of LE 0.03-0.13/m3 in land reclamation projects) and the cost of
incrementally decreasing water supply (LE 0.09-0.15/m3) is intuitive and reflects
the complementarity between developed land and irrigation water. The incremental
benefits from additional water are relatively low because of the high costs of
developing new lands. Reduction in water availability, on the other hand, would
lead to net reduction in production on already developed agricultural lands.
19. The high complementarity of land and water highlights the need to
simultaneously estimate shadow prices for land and water, for example, through
solving a linear programming problem. The underlying approach would be to
maximize the economic returns to water and land by choice of aggregate cropping
patterns subject to water and land availability and rotation feasibility. The
solution to this problem would provide the socially optimal overall cropping
patterns as well as shadow prices for land and water. This was done in 1979/80
under the Water Master Plan.5 In that study, the shadow price for water,
inflated to 1991 prices, is LE 0.2/mi3; However, economic returns to various
crops and relative prices have changed considerably since then. The results of
that study are, therefore, not applicable any more.
20. In order to indicate the solution to a linear programming problem using
most recent data, a very simple model was used. In the first model, new land
development is not considered and additional water can only be used to grow more
V Based on the project preparatfon report copteted by the FAO/World Bank Cooperative Program In
December 1969.
M/ McCort, Bruce A., An Exam nation of Lake Nassar Operating Pollcies and Associated Pot ices,
January 198S
J Arab Republic of Egypt, Ministry of Irrigation, Master Plan for Water Resources DOevelopment and Use,
The Agro-Economic ModeL, TechnicaL Report #16, March 1981.
- 90
APPENDIX 11
Page 8 of 12
water intensive crops in the old lands. The resulting shadow prices are LE
0.036/m3 and LE 687 per crop per feddan for water and land respectively. This
would be the short-run opportunity cost of water and reflects the benefits from
switching to high water consuming crops (in particular switch from cotton to
rice/wheat). If vegetable production was not constrained by market size and
support infrastructure, the shadow price of water would be LE 0.12/m3 and the
shadow price of land LE 848 per crop per feddan. Since the return to water is
higher from land reclamation projects than from switching cropping patterns
(excluding increase in vegetables), the shadow price of water is the return to
water in such projects (assumed to be LE 0.07/o3), if the possibility of new land
reclamation is included (model 2). The shadow values for land would be LE 609
per crop per feddan. Hence, LE 0.07/m3 would be the long-run opportunity cost
of water.
21. Figure 1
shows the marginal Marginal Benefits of Land and Water
benefit curve (or for Different Quantities of Water Avail.
demand curve) for
water in the old 0.7 1200
lands, decreasing with L
available quantity. E 0.6 . ..... 1000 E
This short-run P 0.5 ....0
opportunity cost curve r 0.0
is obtained from the 0 r4 -
m 600
shadow prices of water 3 0.3 -
from solving the W 0. 400 d
linear programming a d
problem for varying - 0.1 _ _ _ 200 a
amounts of water r 0
available to the 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70
agriculture sector. BCM water to Agriculture
As water availability
increases, the shadow - me of water Old Laid - MO of Water Laid Rcl
value of land - u ofLoad
increases up to LE
1011 when the water Figure 1
constraint is not
binding. This is consistent with currently observed land rents of up to LE 1000
in the absence of water pricing. Above approximately 19 BCM, the marginal
benefits of water arise from shifts to more water consuming crops. Below 19 BCH,
the land constraint is not binding and the marginal benefit of water rises
sharply since land would be left idle. The shadow price of water for significant
reduction of supply below the current level is LE 0.06-0.16/n3 and consistent
with McCarl's LE 0.09-0.15/m3. The assumed marginal benefit of water in land
reclamation of LE 0.07/n3 is shown as a horizontal line in Figure 1. At the
current supply of 35.5 BCM (including evaporation losses), the marginal benefit
of water is higher in land reclamation than in old lands. The long run
opportunity cost curve of water would be the maximum of marginal benefits of
water in old lands and land reclamation.
- 91 -
APPENDIX II
Page 9 of 12
22. Th. assumptions used in defining the linear programming problem are
crude and the results should be interpreted with caution. However, some
additional confidence can be derived from the consistency of the results with the
other approaches discussed above. Based on the discussion, the long-term
opportunity cost of water is assumed to be LE 0.07/n3. Subsequently, an economic
price of water of LE 0.03/o3 for systems investment and O&M (tradable component)
plus LE 0.07/D13 opportunity cost of water (domestic resource component) has been
used as the base case in the following analyses. A total water cost of LE 0.1/m3
falls in the middle of the range of reasonable water cost estimates and is
consistent with the treatment of water costs in the recent Cotton Sub sector
Study done by the Bank. At present, there exists no strong foundation that could
lead to a point estimate for water prices with a high level of confidence.
Therefore, emphasis is put on sensitivity analysis, testing for the robustness
of this report's conclusions with respect to water and land prices.
23. The only available data on land rent are the records of the official
land rent. The official land rent, prior to the recently enacted legislation,
was constrained to seven times the amount of the land tax of around LE20 per
feddan and year. Clearly, the marginal value of land is much higher than the
official land rent. There exists a market for land working through share-
cropping arrangements or cash side payments on top of the official land rent.
As reported, actual rent payments, either in cash or implicit in share-cropping
arrangements, are at or above the level of seven times the official land rent
depending on soil, location and crop6. Since land and water are complementary
inputs to agricultural production, high observed land rents reflect the fact that
irrigation water is provided to farmers free of charge. The marginal return to
land would be lower if water was correctly priced. Recognizing the
complementarity between the economic values of land and water resources, for the
purposes of the analysis it is assumed that the economic cost of land is five
times the official land rent.
Sensitivity Anallsis
24. The three main questions examined through sensitivity analysis are how
robust the assessments of competitiveness of the various crops and rotations are
with respect to the valuation of land ind water, with respect to world market
price changes and with respect to envisioned yield increases for different crops.
In Attachment C, economic faragate prices are calculated for the major traded
commodities based on the 70 percent confidence band of the World Bank Commodity
Price projections for 1995. From the higher and lower limit of the band as well
as the point estimates, economic net returns, value added and DRCs were
calculated. The results show that wheat is competitive under any reasonably
expected price (DRC 0.4 to 0.7). Also, the competitiveness of maize and cotton
is relatively robust. However, for both crops the DRC rises to 1.2 at the lower
price limit. Rice is non-competitive at any expected export parity price. It
could only become competitive on the import market at the higher price limit (DRC
9) Uhile precise data on nmrket land rents are not available, andotoal infoamtion provides a range varying
between L3300-400 per feddan per year, to crop bascd rental values ranging between L.700 per feddan for berscom
to LZIOOO per fedden for a tomato crop. In addition. varying crop sharing arrangments also prevail.
- 92 -
APPENDIX
Page 10 of 12
0.7). The DRCs for sugar range between 1.8 and 0.4 for beet and between 3.1 and
0.7 for cane. The high volatility of world market sugar prices leads to a
situation in which a confident statement about the competitiveness of domestic
sugar production cannot be made. However, at any price, sugar cane is dominated
by sugar beet. Therefore, domestic production of sugar from sugar beet can be
justified. Competitiveness of producing exotic cattle is relatively unaffected
by price changes within the projected band.
25. Attachment D summarizes the impacts of different economic values of
land and water on competitiveness of crops and rotations. As previously
discussed, the economic values for land and water are negatively correlated since
both are complementary inputs to production. Four scenarios are analyzed. In
scenario 1, the water constraint is considered to be not binding and the value
of land is correspondingly high (irrigation systems cost LE 0.012/m3, opportunity
cost zero, land value 10 times the official land rent). Scenario 2 is using the
assumed short-term opportunity cost of water (irrigation systems cost LE 0.03/m3,
opportunity cost LE 0.036/m3, land value seven times the official land rent).
Scenario 3 is the base case using the assumed long-term opportunity cost of water
(irrigation systems cost LE 0.03/m3, opportunity cost LE 0.07/m3, land value five
times the official land rent). Scenario 4 is a case with high water value and
correspondingly low land value (irrigation systems cost LE 0.06/m3, opportunity
cost LE 0.14/m3, land value three times the official land rent). As expected,
water intensive crops (sugar cane, rice) fare worse under scenario 4 while land
intensive crops (berseem, beans) fare worse under scenario 1. Sugar cane remains
uncompetitive under any scenario; wheat, maize and cotton remain competitive
under any scenario. The competitiveness of rice is highly sensitive to water
pricing (DRC 1.6 to 0.7). Production of rice for domestic markets (import parity
prices were used) can be justified at water costs at or below the short-run
opportunity costs (scenarios 1 and 2).
Table 4: Expected Yield Changes 1991-2000
Yield
per feddmn 1991 2000 change
u.uu.33ma**ss#sssu.a*uu3auu.*uuuua 333u3**u*uuu---- uuuus-sa33u***a3u3uu*u*
Fava Bev m Ardeb 6.52 9 38X
Maize Ardeb 17.35 26.18 51X
Sorghum Grain Ardeb 15.8 25 58X
Bersee t 30 40 33X
Wheat Ardeb 14.5 18 24X
Sesam Ardeb 4.33 5.75 33X
Peanut Ardeb 12.5 20 60X
SunfLower t 0.82 1.2 46X
Cotton mks 5.88 8.28 41X
Rice t 3.16 3.5 11X
Sugar Can t 42.3 45 6X
Sugar Beet t 18.5 22 19X
26. The continuing effort of the ARC research institutes and the extension
services are expected to lead to further yield increases in the future. In order
- 93 -
APPENDIX II
Page 11 of 12
to assess whether expected yield increases would lead to any reversal in the
assessment of competitiveness, DRCs and economic returns were recalculated using
yield.s projected for the year 2000 by the ARC institutes as listed in Table 4.
The results, assuming that the only change in the crop budgets are the yields and
ignoring subsequent changes in costs or relative prices, are shown in Attachment
E. The results show that little would change about the relative competitiveness
of various crops if all yield forecasts did materialize. Except for horticulture
crops, which were excluded from this analysis, cotton and wheat would be most
attractive, followed by maize, sugar beet and long berseem. Rice and sugar cane
would remain relatively uncompetitive. Therefore, yield increase expectations
do not appear to impact significantly on the assessment of relative
competitiveness of crops.
Recommended Production Patterns
27. DRC analysis stongly suggests to focus on production of commodities
with a strong and robust comparative advantage, namely wheat and cotton as well
as beans up to the level of self sufficiency. The following paragraphs discuss
the recommended strategy for other commodities with comparative advantage where
significant constraints need to be taken into account and for commodities in
which Egypt does not have a comparative advantage.
28. The calculation of competitiveness indicates that Egypt should focus
on horticulture products. However, for most horticulture products, processing,
transportation and export marketing rather than production are the bottlenecks.
Since this infrastructure is still lacking or incomplete, farmers will not, at
least in the short run, move toward horticulture production on a massive scale
despite the impressive DRCs and high net returns. While the potential of
increased horticulture product exports should be exploited, many of these markets
are thin and it is unrealistic to assume that the area planted to horticulture
crops can be expanded dramatically without the opening of additional export
markets.
29. The analysis of competitiveness of oilseed production is based on
sunflower as an oil crop which fits well with the general cropping patterns and
for which there is ongoing commercial development. Based on the use of high
yielding varieties and modern processing technology, Egypt is moderately
competitive in production of oil seeds. Given the large volume of imported
vegetable oil, there is a significant potential for economically efficient import
substitution. Hypothetically, about 1 million feddan cropped with sunflower
would be required to replace all imports of vegetable oil for food consumption.
However, in terms of returns per feddan oilseeds are relatively low value crops.
Therefore, such large scale substitution would be desirable only at the expense
of other low value crops such as berseem but not at the expense of wheat, cotton
or other crops with higher economic returns.
30. The calculations show that sugar cane production is highly
uncompetitive due to high water consumption. Even if current inefficiencies in
sugar production are removed, growing sugar cane makes little economic sense.
The economic return is relatively poor for sugar beet as well. However, within
the range of reasonable water cost estimates, sugar beet is providing a higher
economic return than sugar cane (the economic return on sugar beet is higher than
- 94 -
APPENDIX IL
Page 12 of 12
for cane above a water cost of LE 0.025/m3 including systems and opportunity
costs). Since domestic production of sugar is a declared political objective
that can be defended considering world market distortions, price volatility and
food security concerns, production of sugar should be shifted to sugar beet.
Advantages of sugar beet versus cane include lower water requirements, more
flexibility for reversing production decisions since beet is a seasonal and cane
a perennial crop that requires 5 to 6 years to grow as well as less critical
timing in the processing of sugar beet to sugar.
31. Growing rice for export markets is highly uncompetitive. Therefore,
import parity prices for rice were used in the base case analysis showing that
rice production for the domestic market is marginally uncompetitive (DRC of 1.0)
at current prices and uncompetitive at projected prices for 1995 (DRC of 1.2).
Even if projected yield increases are taken into account, the economic returns
to rice are inferior to the other main crops due to the high water requirements.
Subsequently, domestic rice production, which is artificially attractive to
farmers due to lacking water pricing, should be significantly reduced. Two
additional aspects, however, need to be taken into account. First, rice is more
robust to soil salinity and low quality irrigation water than most other crops.
Hence, rice production is acceptable in areas where soil and water conditions do
not allow growing other more competitive crops and in areas in the Northern Delta
where rice must be grown as a reclamation crop to avoid seawater seepage.
Second, the base case calculations are based on long-run opportunity costs of
water. This is correct for long-term decisions, such as investments in the
irrigation system or consideration of water availability for land reclamation.
For cropping decisions with a short time horizon, on the other hand, the short-
term opportunity cost of water can be used at which rice is marginally
competitive (DRC of 0.9). Therefore, growing rice for domestic markets is
acceptable as long as no long-term investments are made in related infrastructure
and rice production is given up as soon as additional water is required for land
reclamation or expansion of vegetable areas.
AM WULIC OF EGYPT
AGRICULTURE SECTOR STRATEGY
OLI LAND CIOP 3U6TS
.........................................................................................................................................................................
LONG KRSEEN I U0T 0555 I UIIEAT I IAZEU!
Unit 0 FP EP V EV I O FP EP FV EV I 0 FP EP FV IV I O FP EP FV EV
........................................... ..........................................................................................-.---..........---.--..................-.- -.-
VALIE OF WPRCTION ' '
...........
Hain Crop locat 4.0 262.0 24.0 1128.0 964.0 2.0 262.0 246.0 564.0 492.0 13.9 75.0 100.1 1042.5 1390.7 16.5 64.0 79.9 1183.4 1476.1
By Prodacts hamI 4.0 13.0 13.0 52.0 52.0 2.0 13.0 13.0 26.0 26.0 10.0 30.0 3 0 300.0 300.0 12.0 5.0 5.0 60.0 60.0
seeds S1.3 51.3
TOTAL VALUE LE/fd 1231.3 1067.3 590.0 518.0 1342.5 1690.7 1243.4 1536.1
.................................................. ......................................................................................................... ................................................ ........................ *Zw@>rve==
COST of INPUTS g
............... . I
Seeds KaIa 2.9 26.0 26.0 75.9 75.9 3.7 11.1 11.1 41.1 41.1 6.2 10.0 10.0 62.4 62.4 2.3 29.2 29.2 68.3 68.3
naure Load 45.5 0.23 0.23 10.5 105 ' 52.5 0.23 0.23 12.1 12.1 0.23 0.23 0.0 0.0 225.4 0.23 0.23 51.9 51.9
L fertIl. kg 82.5 0.19 0.22 15.3 18.4 78.5 0.19 0.22 14.5 17.5 400.0 0.19 0.22 74.0 89.0 585.0 0.19 0.22 100.2 130.2
P fertit. kg 176.5 0.19 0.22 32.7 39.4 176.5 0.19 0.22 32.7 39.4 130.0 0.19 0.22 24.1 29.0 84.0 0.19 0.22 15.5 18.7
K ferti. kg 0.93 2.33 0.0 0.0 0.93 2.33 0.0 0.0 0.93 2.33 0.0 0.0 5.0 0.93 2.33 4.7 11.7
Foliar kg 9.00 9.00 0.0 0.0 9.00 9.00 0.0 0.0 9.00 9.00 0.0 0.0 0.2 9.00 9.00 2.2 2.2
Pesticides LE 3.1 3.1 5.9 5.9 8.0 8.0 7.9 7.9
Machine (Hired) LE 97.1 97.1 61.8 61.8 145.1 145.1 96.9 96.9
Animat LE 16.7 16.7 13.7 13.7 20.5 20.5 36.0 36.0
uater. irr/drain 3 11640.0 0.00 0.03 0.0 49.2 11058.0 0.00 0.03 0.0 31.7 1590.0 0.00 0.03 0.0 47.7 2700.0 0.00 0.03 0.0 81.0
uater, opp cost m3 1640.0 0.00 0.07 0.0 114.8 1058.0 0.00 0.07 0.0 74.1 1590.0 0.00 0.07 0.0 111.3 2700.0 0.00 0.07 0.0 189.0
Labor (Mirad) LE S.2 6.00 6.00 31.2 31.2 4.7 6.00 6.00 27.9 27.9 24.0 6.00 6.00 144.0 144.0 24.3 6.00 6.00 6.0 146.0
Labor (Fmily) LE 11.7 6.00 6.00 70.3 70.3 8.3 6.00 6.00 49.7 49.7 16.4 6.00 6.00 96.4 96.4 25.0 6.00 6.00 149.9 149.9
Land Rent LE 75.9 1.00 5.00 75.9 379.4 38.1 1.00 5.00 38.1 190.7 82.0 1.00 5.00 82.0 409.8 66.5 1.00 5.00 66.5 332.5
TOTAL COST LE/fdl 426.5 90S-. 9 297.5 565.S 658.4 116S.2 753.8 1322.0
.........................................................................................................................................................................
MET KEEFIT LE/fdl 802.8 181.5 292.5 -47.5 1 684.1 525.6 | 489.6 216.2
.................................................... ........ ................................................................................................. .................................... ....... ..................
Not Farm Rverae LE/8d 73.1 251.81 342.3 2.3 782.5 424.0 639.5 366.0
DSmstic Reomrel 177.4 S957' 115.8 342.4 324.4 7u.5 362.4 87.4
Value Adde o 900.2 n 2 406.3 294.9 1005.5 13.0 151.9 1033.5
Reunan inter 0.5 0.3 0.8 0.4
D.c 0.8 1.2 0.6 u.s
uP 0.1 0.1 -0.2 -4.2
E P 0.3 0.4 -0.2 -4.2
.................... ..................................... :........................................................................ .............................................--- .....-
.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i
leveerc: .c. urw PRA mwwy su *WW Pu.c .�*rvay
0: uwntity - FPt Financial Pric - E7P Ecomec Price - FV: Financial Value - EV: Econmic Valtue p "
cROPUD.GW1 CS.CKSo n
.. P
C- CT
ARAB REPUBLIC Of EGYPT
AGt ICULTMRE SECTOR STRATEGY
OLD LAND CROP PDCETS
RICE ' ~~~~~~~~CTTNSUGAR CAME I OADBEAUS
Lnt a FP EP FV EV I a FP EP FV EV 11a FP EP FV EV I0 FP EP FV EV
VALLUE OF PWOUCTION ''I
Kain Crop locat 3.1 460.0 659.8 '1426.0 2045.4 5.6 303.1 476.7 1697.2 2 29140.0 60 6. 05226. . 140.0 1 150.4M 1150.4
By Products hemi 5.0 1S.O 15.0 15.0 75.0 10.0 6.0 6.0 60.0 6O. 50.0 50.0 6.5 15.0 15.0 97.5 97.5
TOTAL VALUE LE/fd 1501.0 2120.4 1757.2 272.81 3105.2 2514.4 .1247.9 1247.9
COST of INPUT'3
seeds Call.' 6.7 5.6 5.6 37.6 37.6 7.0 1.0 1.0 6.7 6.7 1.0 96.7 96.7 96.7 96 j 56 10.5 10.5 58.7 58.7
Manure Load 87.7 0.23 0.23 20.2 102 35.7 0.23 0.23 31.2 31. 03 0.23 0.0 '. 8260.23 0.23 19.0 19.0
N Fertil. kg 328.5 0.19 0.22 60.8 73.1 495.0 0.19 0.22 91.6 110.2 840.0 0.19 0.22 155.4 187.0 203.5 0.19 0.22 37.6 45.3
P Fertit. kg 13' 0.19 0.22 24.3 29.4 135.0 0.19 0.22 25.0 30.1 220.0 0.19 0.22 40.7 49:1 171.9 0.19 0.22 31.8 38.4
K fertil. kg 6.0 0.93 2.33 5.6 14.0 11.0 0.93 2.33 10.3 25.6 0.93 2.33 0.0 0. 0.93 2.33 0.0 0.0
Fot iar kg I 0.1 9.00 9.00 1.2 12 05 9.00 9.00 4.7 479.00 9.00 0.0 '. 9.00 9.00 0.0 0.0
Pesticides LE 112.7 12:7 1.0 43.00 165.00 43.0 165.0 12.7 12.7 15.9 15.9
Machine (Hired) L 257.9 257.9 169.4 169.4 246.1 246.1 107.2 107.2 '
Animat LE 47.6 47.6 18.5 18.5 10.7 10.7 19.9 19.9 a
water, irr/dr.in .3 8800.0 0.00 0.03 0.0 264.0 3180.0 0.00 0.03 0.0 95.4 12000 0.00 0.07 0.0 840.0 1350.0 .0 0.03 0.0 40.5. 1
Water. opp cost M3 '8800.0 0.00 0.07 0.0 616.0 '3180.0 0.00 0.07 0.0 222.6 1200 00 .7 0080015. 0.00 0.07 0.0 945
Labor (Hired) LE 39.5 6.00 6.oO 237.0 237.0 641 6.00 6.00 384.4 384 4 91.0 6.00 6.00 546.0 546.0 22.7 6.00 6.00 136.1 136:1
Labor (familty) LE 19.1 6.00 6.00 114.8 114.8 18:8 6.00 6.00 113.0 113:0 17.9 600 60 04104
Land Rent LE ~ 720 10 .0 7. 60 126 10 .0126613.0 160.4 1.00 5.00 160.4 802 2 862 6.00 6.00 10.410.
L&M Rent LE MO 1.00 5.00 72.0 360.0 122.6 1.00 5.00 122.10065.00 8.2 430.9
TOTAL COST LEjfdl 891.6 2065.4 1020.2 199.8 1268.8 3150'.5 619.8 '1113.7
MET BENEFIT LE/fdl 737.0->0. 609.4 35.1 7.0 4.01836.4 -636 1628.1 134.2
.~~~~~~~~~'
Not Form Revenue LE/fd J... ~ *. 24,2 '149.9 850.0 853.0 '1836.4 -636.2 735.5 241.5
Domestic ResoLurces I 43812.60013.0706.4 2188.2 329.6 768.9
Value Added ~~~~~~~~1033.2 1362.9 1357.0 2073.0 2542.8 1552.095.900
Return an matar 0.2 0.7 0.1 0.7
DEC 1.0 0.6 1.4 0.9
NRP -0.3 -0.4 0.2 0.0
ERP -0.2 -0.3 I0.6 0.1
Source: PIDA survey PISAC survey HIALE data PISA survey
D" rt
ARM RtEPIALIC OF EGYPT
ASROIWAUIE KECTOEt STRtATEGY
OLD LAN Cur DGETS
TOM4ATOES IORANGS IPOTATOES SUiGA KEETS
uni t Q FP EP FV EV 0O FP EP FV EV I0 FP EP FV EV a V P EP FV EV
VALUE OF PRODUCTION
..........I.
Main Crop Iocal 9.3 390.0 390.0 3644.2 3644.2 6.5 400.0 396.0 2600.0 2574.0 9.0 320.0 320.0 2872.6 2872.6 17.0 60.0 84.5 1020.0 1436.6
By Products hauL 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
TOTAL VALUIE LEIfd 13644.2 3644.2 2600.0 2574.0 12872.6 2872.6 1020.0 1436.6
�-- - -a.-- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - -
COST of INPUTSI S
Seeds Ka~is 2666. .6 8.9 8. 1.0 305.0 305.0 305.0 305.0 '1359.0 0.7 0.7 928.2 928.2 6.2 10.0 10.0 62.4 62.4
Maure Load 115.7 0.23 0.23 26.6 266 200.0 0.23 0.23 52.0 020 37. .23 0.23 87.0 87.0 0.0 0.23 0.23 0.0 .
Mfertit. kg 11450.0 0.19 0.22 268.3 322.7 625.0 0.19 0.22 115.6 139.1 1022.5 0.19 0.22 189.2 227.6 I400.0 0.19 0.22 74.0 89.0
p Ftrtit. kg 38.0 0.19 0.22 70.5 85.0 500.0 0.19 0.22 92.5 111.6 575.8 0.19 0.22 106.5 128.5 130.0 0.19 0.22 24.1 29:0
K Ftrtil. kg 8.0 0.93 2.33 7.5 18.6 0.93 2.33 0.0 0.0 9.2 0.93 2.33 8.6 21.4 0.93 2.33 0.0 0.0
fotiar kg 9.00 9.00 0.0 0.0 9.00 9.00 0.0 0.0 0.0 9.00 9.00 0.0 0.0 9.00 9.00 0.0 0.
Pesticides LE '195.8 1958 180.0 180.0 45.4 45:4 45.4 45.4
Machine (Hiredl LE 134.9 149260.0 260.0 85.0 85.0 f85.0 85.0 '
Animal L 9.5 9.5 0.00.0 91.3 91.3 91.3 91.3 ~
water, irr/drain m3 13260.0 0.00 0.03 0.0 97.8 '3100.0 0.00 0.03 0.0 93.0 '2700.0 0.00 0.03 0.0 81. '2700.0 0.00 0.03 0.0 81 0
Water, Opp cos-r ml 13260.0 0.00 0.07 0.0 228.2 13100.0 0.00 0.07 0. 217.0 12700.0 0.00 0.07 0.0 189.00 1270.0 0.00 0.07 0.0 1890o
Labor (Hired) LE 52.4 6.00 6.00 314.4 314 4 '49.0 6.00 6.00 294. 294.0 16.0 6.00 6.00 98 958 16.0 6.00 6.00 95.8 95.8
Labor (Faedly) LE 54.1 6.00 6.00 324.6 324:6 j429 .0 60 5..5349 6.00 6.00 257.1 '3 257.3
Land Rent LE 63.6 1.00 5.00 63.6 317.9 63.6 1.00 5.00 63.6 317.9 5.7 1.00 5.00 54.7 27. 47 1.00 5.00 54.7 273.5
TOTAL COST LE/fdl 1503.4 2164.0 1362.7 1969.6 11948.9 2510.9] 790.0 1298.7
WET BENEFIT LE/fdi 2140.7 1480.2 1 1237.3 604.46' 923.7 361.7 1 230.1 137.9
Not farmRemam LEfd 2"5.311104.81237.3 604.4 1181.1 619.1 487.4 395.2
Domestic Resouirces 702.5 1185 LEfd 357.6 828.9 407.8 815.5 407.8 815.6
Vatue Add1ed 2843.2 2665 2 1594.9 1433.3 1331.5 1177.2 637.9 953.5
Reaturn on uate, o:aI 0.5 0.4 0.4
PIC 0.41 0.6 0.7 0.9
NaP 000.0 0.0 0.3
fitp- 00:01 ~~~~~~~~~~~~~~0.11 0.1 -0.3
Source: PICAC survey FAO/CP Prep, National DrairAge Proj PMAC survey mission estimates
ib rt
CaOP0UD6.IK1 05 .cS0 w:.
0m
ARMS REPUSLIC OF EGYPT
AtRICWLTURE SECTOt STRATEGY
OLD LAWD CROP UDGETS
..... ......... . . . .,. . . ... . .. ._._ . .. . . . .
I UMFLOWR I
....... . . ..................,_
Unit I 0 fP EP FV EV
........................... ..................................................
VALUE OF PROSUCTICN
...........
Nain Crop locat. 1.1 950.0 940.0 1026.0 1015.2
sy ProJtS ha '. 0.0 0.0 0.0 0.0 0.0
TOTAL VALUE LE/fd 1026.0 101S.2
.............................................................
cOM of INUTS
..... ............... --
Seads Kati 30.0 30.0
MWana Load; 35.0 0.23 0.23 8.1 8.1
U Fartm. kg 20.0 0.19 0.22 3.7 4.5
P Ferthi. kg 0.0 0.19 0.22 0.0 0.0
K Fortil. kg 0.93 2.33 0.0 0.0
follar kg 9.00 9.00 0.0 0.0
Pesticides LE 15.9 15.9 I
Machine (Nired) LE 49.0 49.0 0D
Animal LE 19.9 19.9 ,
Water, Irr/drain ' 1900.0 0.00 0.03 0.0 57.0
Water, app cost d3 1900.0 0.00 0.07 0.0 133.0 1
Labor (Mired) LE 38.2 6.00 6.00 229.2 229.2
Labor (Family) LE
L Rad Ent LE 54.0 1.00 5.00 54.0 270.0
TOTAL COST LE/fd 409.8 816.5
,... .. .. . . . . . . . .. . . . .. . . . . .. . . . . .
NET &ENEFIT LE/fdl 616.3 190.7 1
--.--.- . . .. . . ..... - 4_... . . . . . . . .. . . . . . . . .
Net Fao Revweme LE/fd' 616.3 198.7
DSuastic Resources 283.2 632.2
Valum AdCbed 99.5 830.9
Return an water 0.4
ARC 0.8
NtP 0.0
EfP 0.1
.......................................................
CIOPUDG.WK1 OS.CK5O
0 rt
0t
Pn
*1P
ARMA REPAULIC OF EGYPT
AGLICULTTUE SECTOR STRATEGY
Summry of Economec Anatysis of Crops
Otd Lgnds
Cross met Financial Economic Domestic Nominal Effective FNR-ENR
Farm Farm et Net Volue Return Resource Rate of Rate of over
Crop Revenue RevenuJ Return Return Added on Water Cost Protection Protection Val Add
....... . ........ .............. ..... . .............. ............................ .. ................................................
Sugar Beet 1020.0 487.4 230.1 137.9 953.5 0.4 0.9 -0.3 -0.3 0.1
Long Berseem 1231.3 873.1 8O2.8 181.5 777.2 0.5 0.8 0.1 0.3 0.8
Short Oerseem 590.0 342.3 292.5 -47.5 294.9 0.3 1.2 0.1 0.4 1.2
AHeat 1342.5 782.5 684.1 525.6 1289.0 0.8 0.6 -0.2 -0.2 0.1
Maize 1243.4 639.5 489.6 216.2 1033.5 0.4 0.8 -0.2 -0.2 0.3
Rice 1501.0 724.2 609.4 35.1 1362.9 0.2 1.0 -0.3 -0.2 0.4
Cotton 1757.2 850.0 737.0 740.0 2073.0 0.7 0.6 -0.4 -0.3 0.0
Sugar Can. 3105.2 1836.4 1836.4 -636.2 1552.0 0.1 1.4 0.2 0.6 1.6
Beans 1247.9 735.5 628.1 134.2 903.0 0.7 0.9 0.0 0.1 0.5
Tom_toes 3644.2 2465.3 2140.7 1480.2 ?665.2 0.8 0.4 0.0 0.1 0.2
Oranges 2600.0 1237.3 1237.3 604.4 1433.3 0.5 0.6 0.0 0.1 0.4
Potatoes 2872.6 1181.1 923.7 361.7 1177.2 0.4 0.7 0.0 0.1 0.5
Sumf lvers 1026.0 616.3 616.3 198.7 830.9 0.4 0.8 0.0 0.1 0.5
.....................................................................................................-------.....-------------...........----------------------------.........-----------------.. ... .... .
CROP5SG.UKI CNI.CX19
Now Lnds
Gross Net FinanciaL Economic Domestic Nominsl Effective FUR-ER
Farm Farm Net Net Value Return Resource Rate of Rate of over
Crop Revenue Revenue Return Return Added on Water Cost Protection Protection Vat Add
.......................................................................................................................................
LONG KERSEEJ 940.0 n/a 612.4 -228.3 410.6 0.1 1.6 0.1 0.8 2.0
GROUMftUJS 1200.0 n/a 650.5 -44.7 843.3 0.2 1.1 0.0 0.2 0.8
U#EAT 680.0 n/a 214.5 -167.6 512.3 0.2 1.3 -0.2 -0.1 0.7
MAIZE 554.6 n/a 67.3 -329.1 464.1 0.1 1.7 -0.2 -0.1 0.9
W MELONS (fr) 2400.0 n/a 1888.1 1313.5 2055.1 0.6 0.4 0.0 0.1 0.3
TOMATOES (C) 2730.0 n/a 2122.5 1650.2 2325.2 1.1 0.3 0.0 0.1 0.2
BAAD BEANS 632.3 n/a 222.3 -128.7 480.5 0.4 1.3 0.0 0.1 0.7
PEAS green) 1426.0 n/a 855.6 371.6 964.9 1.4 0.6 0.0 0.2 0.5
. _...... ... .... ............ .... ....... ....... .............. .. .. ................... ........................................ .. .... .... ......
-~~~~~~~~~~~~~~~~~~~~~~
NEULAUDS.WK`1 C3.CX16 r*
n
my
nt
w
- 106 - Attachment C
Pane 1 of 2
ARAB REPUBLIC OF EGYPT
AGRICULJTURE SECTOR STRATEGY
SENSITIVITY OF ECONOMIC RETURNS TO PRICE CHANGES
All In constant 1991 terms
Import Parity Wheat maize Rico i
|Low Point High I Low Point High, I Low Point High
_.__....... __._. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Projected Price (1985S) S/t 1 82 108 134 47 67 U8 135 178 264
Projected Price (1991S) S/t '122 161 199 70 100 131 201 265 393
+ Ocean Freight-ins S/t 32 32 32 32... 32 32 35 35 35
CIF Alexandria S/t 154 193 231 102 132 .163 236 300 428
CIF Alexandria LE/t 508 636 763 336 434 537 778 989 1411
* QuaLity Adjustment LEJt -156 -198 -282
* Port Charge and HandlinLE/t 30 30 30 40 40 40 40 40 40
* Importer Charge LEJt 36 44 53 24 30 38 4 55 79
* Transp Port-Wholesale LEft 45 45 45 65 65 65 45 45 45
Price at Market LEft 619 755 892 465 S70 680 751 932 1293
- Processing Costs LE/t 30 - 30 30
- Transport Farm-WholesalLE/t 2 25 25 22 25 2 5 25 25
+ By Products LE/t
Concentration 1.00 1.00 1.00 1.00 1.00 1.00 0.65 0.65 0.65
.,............... . . ... ...................................................
Economic Farmgate Price LE/t 1 594 730 867 1 440 545 655 452 570 0S
Economic Farmgate Price LEIvai 89 110 130 ! 62 76 92 452 570 805
~~~~~~~. . ...... .. .. .............................................. .. .................... . .. .
Economic Net Return LE/fdi 274 636 997 ' -115 143 439 -909 -243 485
Value Added LE/fd' 1038 1400 1760 701 960 1256 719 1084 1813
Domestic Resource Cost 0 7 0. 0.4 1.2 0.9 0. 7 1.8 1.2 0.7
Import Parity Sugar Cane Suger Beet Beef (exot)
I Low Point Nigh Low. Point. High Low Point High.
,................................ ..... ......... .............................. ....................
Projected Price (1985S) S/t 135 200 264 " 1350 1780 2210
Projected Price (1991S) S/t 201 297 393
O Ocean Freight-ins S/t 35 35 35
CIF Alexandria S/t 236 332 428 1132 1492 1852
CIF Alexandria LE/t 778 1097 1411 3734 4924 6113
- Quality Adjustment LE/t 1 560 739 917
* Port Charge and HandLinLE/t 30 30 30 30 30 30
+ Importer Charge LE/t 54 77 99 187 246 306
+ Transp Port-Wholesale LE/t 45 45 45 45 45 45
Price at Market LE/t 907 1249 1585 | 907 1249 1585 4556 5983 7411
- Processing Costs LE/t 510 510 510 510 510 510 120 120 120
- Transport Farm-WholesalLE/t 25 25 25 25 25 25 40 40 40
+ By Products LE/t 56 56 561 50 50 so
Concentration 0.09 000 0.0 !0.13 0.13 0.13 0.48 0.48 0.48
................................. ............ ........... ........................ .....................................
Economic Farmgate Price LE/t ' 40 72 103 ' 55 99 143 ' 2110 2795 3480
Economic Formgate Price LE/val 40 72 103 | 5 99 143 I 2.11 2.80 3.48
....................................................................................
Economic Net Return LE/fd'-1493 -206 1040 1 -363 384 1132 63 112 161
VaLue Added LE/fd' 696 1982 3228 452 1200 1947 713 762 811
Domestic Resource Cost 3 1 1.1 0.7 1.8 0.7 0.4 0.9 0.8 0.8
... ... ....................... .................................................... .................... ........................................
- 101 - Attacbment C
Page Z of Z
ARAB REPUBLIC Of EGYPT
AGRICULTURE SECTOR STRATEGY
SENSITIVITY OF ECONOMIC RETURNS TO PRICE CHNGES
All in constant 1991 terms
Export Parity RIeC O Cotton
Low Polnt Nigh I Low Point Nigh
,,...,,,,..............,................................
Projected Price (1985S) S/t 135 178 264 no 1110 1490
Projected Price (1991S) S/t 201 265 393
- Ocean Freight-Ins S/t 35 35 35
FOG Alexandria S/t 166 230 35 1756 2707 3634
FOB Alexandria LE/t 547 7S8 1180 S794 8933 11991
a Quality Adjustment LE/t
- Port Charge and NandlinLE/t 30 30 30 100 100 100
Exporter Charge LE/t 55 76 118 579 693 1199
- Tranmp Port-Wholesale LE/t 45 45 45 50 S0 50
Price at market LE/t 417 607 987 5065 7890 10642
- Processing Costs LE/t 30 30 30 460 4U0 480
- Transport Farm-WholesalLE/t 25 25 25 25 25 25
+ By Products LE/t 0 0 0
Concentration 0.65 0.6S 0.65 1.00 1.00 1.00
..... .... ........ ....... . .......... ...... ........... .. .. ...................
Economic Faorgate Price LE/t 235 3S9 606 t 4560 7385 10137
Economic Forugate Price LE/val 235 359 606 255 413 566
....................................................................
Economic Net Return LE/td|. -897 -131 t -216 747 165s
Value Added LE/fd 430 1196 1 1117 2080 3169
Domestic Resource Cost 1:: 3.1 1.1 1.2 0.6 0.4
...................... ..............................................
ECOMBAND.WK1 A6.084
ARAB REPUBLIC OF EGYPT
AGRICCULTURE SECTOR STRATEGY
Sensitivity of Economic Returns to Land and Water Pricing Assumptions
Sce Vro I Scenwrio 2 IScenatio 3 (Base Case) IScenario 4
'Low-Uater/Wigh-Land VaMue iHed-Uater/Ned-Land Value Ned-Water/Med-Land Value 'High-UWter/Lou-Land Value
lUater System 0.013 lWater Systet 0.030 iuater System 0-030 WUater Systems 0 060
uWater opp cost o.ooy leater opp Cost 0.036 iWater opp Co t 0.070 Water opp Cost 0.140
iLand 10 Lwnd 7 CLpst 5 0L.0d 3
Financial 'Economic Do mestic |Economic Domestic jEconomic Domestic Economic Donestic
Met met Resource muet Resource meOt Resource Met lesource
Crop Return IReturn Cost lReturn Cost IReturn Cost IRetun Cost
.... .......... ........................ .................................................... ....... .............. ... ... ... .... ......... ........................................ ...................
Sugar Beet 230.1 - 99.3 0.9 120.3 0.9 137.9 0.9 -22.7 1.0
Long lersom 802.5 -55.2 1.1 ' 85.5 0.9 | 181.5 0.8 169.2 0.8
Short Serseem 292.5 -146.1 1.5 -87.8 1.3 ' -47.5 1.2 -77.0 1.3
Wheat 68.1 254.1 0.5 415.7 0.7 525.6 0.6 530.5 0.6
maize 489.6 I 118.6 0.9 j 175.0 0.8 2 216.2 0.8 79.2 0.9
Rice 609.4 440.7 0.71 190.3 0.9 35.1 1.0 -700.9 1.6
Cotton 737.0 ' 403.7 0.8 602.9 0.7 7400. 0.6 667.2 0.7
Sugar Can. 1836.4 -394.4 1.2 -549.0 1.4 -636.2 1.4 `1515.3 2.3
Beans 628.1 -179.3 1.2 7.7 1.0 ' 134.2 0.9 171.5 0.8
Tomatoes 214077 1445.9 0.5 1u3.9 0. 1480.2 0.4 1281.3 0.5
Oranges 1237.3 556.2 0.6 582.6 0.6 604.4 0.6 421.S 0.7 -
Potatoe 923 7 323.2 07 344.2 0.e 1 361.7 0.7 201.1 0.8 0
Sunflower 616.3 94.0 0:9 I 155.3 0.8 198.7 0.8 a 116.7 0.8
..... ........ ..................... ............................................... .. ....-...-................------------------.....----..........
Rotations Financisl |Economic Domestic jEcodm Ic Dmeastic jEconomic Domntic Economi c D0Ometic
M.t Met Resource Net Resource Net Resource et Resource
Return Return Cost ,RetIurnetu cos
Return PReturn Cost Peturn cost Return cost Return CoIt
._............ ... .... ......... .................. ........... .....................--.-----.---.._.... ...... ........ ................ ---.. ..___...._.._......
Short Bersm 29 -146.1 1.5 -6 7.8 1.3 -47.5 1.2 1 -71.0.3
Cotton 737:0 403.7 0.8 602.9 0.7 740.0 0.6 667.2 0.7
Total 1029.5 257.6 0.9 515.2 0.8 4 0.0 0.7, 590.2 0.7
..... ................... .......................................... ........................................ ...................................................................................................
wheat 68 .1 1 254.1 0.8 1 415.7 0.7 ' 525.6 0.6 530,5 0.,
tatze 468.1 118.6 0.9 175.0 0.8 a 216.2 0. j 79.2 0.9
Total 1173.7 372.7 0.8 590.7: 0.7 g 741.7 0.7 I 609.6 0.I
.......................... ...................................... ....................______............ _............................. ...... ...........____. __....
Wheat 64.1 254.1 0.8 415.7 0.7 525.6 0.6 530.5 0.6
Rice 609.4 440.7 0.7 190.3 0.9 35.1 1.0 -700.9 1.6
Total 1293.5 694.6 0:8 i 606.0 0.8 560.6 0.8 -170.5 1.1
...........................................,,,... ......................................................P
Long lemrseem; a2.8 -55.2 1.1 85.5 0.9 j181.5 0. 169.2 0.6
Nafz Is49618. . 7. 0.8 216.2 08 a 79.2 0.9
Totat 1292.4 g63.4 1I 9. .82840
sugar 1836.4 -394.4 1.2 1 -549.0 1.4 - 636.2 1.4 1 -1515.3 2.3
,, ---IW ,_,4
CMoPD6JJ.K1 0D2.EL4I
- 103 -
Attachment B
ARAB REPUBLIC Of EGYPT
AGRICULTURE SECTOR STRATEGY
Economic Returns wIth Expected Yleld Increases untiL tho Year 2000
Flnancalt Economic Domestic
Not Net Value Resource
Crop Return Return Added Cost
............... ...................... ..... ............ ............ ............ ................................. ......
Uheat 91.6 935.8 1699.2 0.4
Long lers 1175.1 602.0 1197.6 0.5
Short Nersee 471.7 162.8 505.2 0.7
Seon 1065.2 571.3 1340.2 0.6
maize 983.0 832.5 1649.9 0.5
Rice 793.4 299.0 1626.8 0.8
Cotton 1549.2 2017.7 3350.7 0.4
Potatoes 923.7 361.7 1177.2 0.7
Sugar Can 2201.2 -341.9 1846.3 1.2
Sugar Beet 530.1 560.4 1376.0 0.6
............... ...................... ............ ................... ............ ............ ................... ......
Rotations Financial Economic Domestic
Not Net Value Resource
Return Return Added Cost
, ........................ ....................... ............ ................... ............ ............ .............. .
Short lerseom 478.7 162.8 505.2 0.7
Cotton 1549.2 2017.7 3350.7 0.4
Total 2027.9 2180.5 3855.8 0.4
,........................ ..... ................. ............ ................... ............ ............ ......
Yhest 91.6 935.8 1699.2 0.4
aze 983.0 832.5 1649.9 0.5
Totat 1974.7 1768.3 3349.1 0.5
a ....................... ............ ................... ............ ....................................... ......
wheat 91.6 935.8 1699.2 0.4
Rlce 793.4 299.0 1626.8 0.8
Total 1715.0 1234.8 3326.1 0.6
............... ...................... ............. ................... ............ ............. ..........................
Long l*rseem 1175.1 602.0 1197.6 0.5
maize 983.0 832.5 1649.9 0.5
Total 2158.1 1434.5 2847.5 0.5
............... ............ . ........... ............ ............
Sugar 2201.2 -341.9 1846.3 1.2
...................... ................... ............ ................... ............ ....................
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
National Accounts Sumary at Constant 1987 Prices
(in millions of national currency)
1960 1961 1962 1903 1964 1965 1966 1967 196a 1969 1990
DP at _ rket prices 31,043 32,209 35,400 38,020 40,336 42,999 44,137 45,249 47.023 46,421 49,652
Net Indirect Taxes 2,596 2.659 2.518 2,704 2,866 3,059 3,140 3.216 3,300 3,406 3,550
GOP at factor cost 28.47 29,550 32,682 35,316 37,466 39,940 40,997 42,031 43,723 45,015 46,102
Agriculture 7,222 7,349 7.645 7,866 8,031 6,288 8,463 8,640 6,a56 9.033 9,187
Indkrtry 6.671 9,196 9,406 10,057 10,990 11,857 12,057 12,329 12,676 12,726 13,291
Ninirg wnd qLwmryinug- - - - - - - - -
Nutfacturing - - - - - - - - -
Services, etc. 12,354 13,00S 15,29 17,393 1,447 19,795 20,477 21,062 21,992 23,256 23,624
Surce: World ank Data
-a
El8
- 105 -
APPENDIX III
Table 2
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
Public Sector Investments in the Second Plan and ProDosed
Investments for the Third Plan in Agriculture Sector
(LE million)
Second Planl Third Plan&/
FY88 to FY92 FY93 to FY97
(actual)
Ministry of Agriculture and
Land Reclamation
Vertical Exoansion
Administration Sector 244 421
Services Authorities 295 1,261
Economic Authorities 166 530
Economic Units 678 -
Subtotal 1,383 2,212
Horizontal ExRansion
Administration Sector )1,766 51
Economic Authorities ) 2,525
Subtotal 1,766 2,576
MALR Total 3 149 4 788
Ministrr of Public Works and
Water Resources
Administration Sector 1,093 2,109
Services Authorities 738 1,501
MPWUR Total l1t31 3 610
North Sinai DeveloRnnt -1200
SECTOR TOTAL 4,980 9 S99
J/ In current prices.
2/ In constant prices of 1991/92.
Sources: MALR and MPWWR Third Plan Proposals and MOP.
- 106 -
APPENDIX III
Table 3
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
Sources of Third Five-Year Plan Financing:
Agricultural Sector
(LE million)
Financing Final
NIB Grants/ Plan
Local Foreign Loans Other Total
Ministry of Agriculture &
Land Reclamation
Vertical Expansion 974 69 688 481 2,212
Horizontal Expansion 1,820 166 372 218 2,576
Ministry of Public Works
and Water Resources 1,844 65 1,552 149 3,610
North Sinai Development _ 679 10 511 0 1.200
Total 5,317 310 3,123 848 9,598
Source: MOP and Staff estimates.
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
(a) Share of Agricultural ExDorts in Total ExDorts: 1981-89
YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989
--- (Million US$) -----------
Total Exports .(Nominal) 3,232 3,120 3,215 3.140 1,838 2,214 2,037 2,120 2,648
(Real)l/ 3,069 2,009 3,170 3,165 1,838 1,878 1,573 1,527 1,919
Agricultural
Exportsk1 (Nominal) 729 670 726 752 325 508 444 390 537
(Real)A/ 692 646 716 758 325 430 343 281 389
Agriculture's Share (X) 22.5 21.5 22.6 24.0 17.7 22.9 21.8 18.4 20.3
(b) Share of Agricultural ImRorts in Total Imoorts: 1981-89
YEAR 1981 1982 1983 1984 1985 1986 1987 1988 1989
----------------- (Million US$) -----------
Tota: Imports (Nominal) 8,839 9,078 10,275 10,766 5,495 8,680 7,596 8,657 7,448
(Real)IV 8,395 8,754 10,134 10,853 5,495 7,362 5,866 6,233 5,397
Agricultural
Importsk1 (Nominal) 3,440 3,190 3,071 3,447 1,845 3,003 2,453 2,774 2,845
(Real)WV 3,267 3,076 3,028 3,474 1,845 2,547 1,894 1,997 2,061
Agriculture's Share (X) 39 35 30 32 34 35 32 32 38
/ I)eflated by the Bank's MUV (1985-100)
k/ SITC 0+1+2+4-27-28-233-251
Source: UN Trade Tapes >
I1-4
4-1-4
AM REPUBLIC Of EGYPT
T!bte 3: Exports of Kajor Agriculttur Caomdity Exports
Awvrag VIutg For
e9o 1961 1902 1963 1964 1965 1966 196? 1968 1969 1990 1969-90 dha
(5)
COTTON (000 TONS) 16 .1 17T.6 200.1 206.9 174.3 143.6 145.6 129.9 79.9 56.4 35.0
(000 US) 423.413 57,091 48.724 441,239 465.949 427,247 440r.62 38.52 207,039 274,s02 170.0 222.251 56.4
I.ES (S00 TONS) 110 114 101 145 161 161 75 III 97 154 170
(000 URS) 35.940 47.1s s2.637 72.393 76.M0 6.s21 44"146 69.960 49.174 n.379 5,000 7.190 20.6
PO1ATOES (S TOWS). 144 36 1s5 140 133 1Z 106 123 16 1s6 wo
(M UM) 32.501 25,619 41.101 30.632 36,76 26.974 21.917 z4.3M 31,565 26.04 53,000 39.942 m9.s
RICE (000 TONS) 90 93 23 19 n 16 40 101 71 33 82
(M0 UI) 35.223 Q2.609 11.617 7.01 22.S22 S.400 16.022 39.657 7,63S 6.2" 20.500 14,36 3.6
amilas -CT tOnS) 42 20 13 3s I7 22 21 33 so S5 35
(000 USS) 11646 6,M S.2B7 11.1s s,76 7.6"1 6.554 11.657 12.442 9.692 6.800 9.216 2.4
TOrATOES (000 TONS) 2 -.3 9 17 9 14 7 23 1s 1s 15S
(000 US) 966 1.623 4,25A 7.000 2.031 3,S90 5.456 4,906 2.927 4.227 5,200 4.714 1.2
CRE BEAIS boo TOhS) 0 6 13 11 11 9 16 11 10 9 12
Cooo USO 29 3.s76 8.381 S.352 4.762 3.425 7,969 3.357 2.881 3,936 s.100 4.5sl 1.2
I&TENELOI (000 TmaS) a 11 7 21 23 la 20 .12 11 a a
(000 uSs) 3,685 4,093 389W4 7.592 S.7a? 6.535 11,133 4.161 3,1S0 2,737 2,737 2,737 0.7
DAMTES (000 TollS) 0 0 1 1 1 1 1 1 1 3 3
(000 USO 137 205 525 976 350 2S3 593 863 252 1.056 1,200 1,126 0.3
GARLIC C000 TONS) '10 6 4 a 5 2 1 2 3 2 2
(000 USS 6.062 4,659 3,635 6,659 3,191 837 1,015 1.080 1,414 704 1.200 95Z 0.3
ARTICNOKE (000 TONS) 1 1 2 2 1 1 2 2 1 2 2 2
(COO US$) 400 383 99T 1.103 754 762 A26 S56 332 685 630 656 0.2
p u
p
_ X
O .-H
s 1H
Table 3 (contd.)
Averag Vltue For
1960 1961 1962 1963 194 195 1966 1967 196 1989 1990 1969-9 Mare
OTME CITRUS (000 TOIS) 0 0 1 2 2 1 1 1 1 2 2 2
(000 US$) 0 0 269 "1 342 341 483 231 171 467 450 459 0.1
PEACHES & INECTARIN (000 TONS) 0 0 0 0 0 0 0 0 0 0 0 0
(000 USS) 0 0 0 0 1 1 34 42 245 299 280 290 0.1
GRAPES (000 TONS) 1 0 0 0 0 0 0 0 0 0 0 0
(000 US$) 349 49 91 174 114 136 236 51 34 12 135 74 0.0
BRAD EANS (000 OCS) 0 0 0 0 1 1 1 0 0 0 0 0
(000 US$) 0 0 0 0 328 264 236 148 85 80 80 80 0.0
PLUWS (000 TONS) 0 0 0 0 0 0 0 0 0 0 0 0
(000 Us) 0 0 0 0 104 34 436 88 166 51 51 51 0.0
TANGERIN,ETC (000 TO1 S) 0 .0O 0 2 0 0 0 56 0 4 0 MAa
(000 US$) 0 207 179 1,386 11 20 34 35,864 109 1,613 0 MA N o
ORANGE JUICE (000 TONS) 0 0 0 0 0 0 0 0 0 0 0 0
(000 US$) 0 0 0 0 0 0 0 .0 0 32 32 32 0.0
PEARS (000 TO0S) 0 0 0 0 0 0 0 0 0 0 0 0
(000 U$) 3 19 14 16 16 27 4 9 8 28 28 28 0.0
CARROTS (000 TOIS) 0 0 0 0 0 0 0 0 0 0 0 0
(000 US) 0 0 0 0 11 12 5 9 3 15 15 15 0.0
GRAPE JIICE (000 T1NS) 0 0 0 0 0 0 0 0 0 0 0 0
(000 US) 0 0 0 0 0 0 0 0 0 12 12 12 0.0
Source FAO Tractapcs
ibH
a ,;
0 S-
o% m
H
s1 H
-110 -
APPENDIX I
Table 6
ARAB REPUBLIC OF EGYPT
AN AGRICULTURAL STRATEGY FOR THE 1990s
Trends of Agricultural Commodity Ex2orts. 1980-1990
Quantity Value Unit Value
Nominal US$ Realb Nominal US$ Real'
...... ( p.a.) ------
Total of Commodities - -4.3"* -7.2
given in Table 1
Total excluding cotton - 1.1 -1.8 - -
Cotton -13.6** -7. 0** - 9. * 3.7** 0. 8^
Oranges 1.8 4.3 1.4 2.5 -0.4
Potatoes 2.6 0.8 -2.1 -1.8 -4.7
Rice 0.1 -4.5 -7.4 -4.6 -7.5
Onions 6.3 2.5 -0.4 -3.8 -6.7
Tomatoes 18.9^ 10.5' 7.6* -8.4* -11.3-
Green Beans 1.9 -0.3 -3.2 -2.2 -5.1
Watermelon -1.3 -4.3 -7.2 -3.0 -5.9
Dates 28.7^* 15. 1 12. 2** -13.6 -16.5
Garlic -13.8* -19.2"* -22. 1* -5.4 -8.3
Artichoke 5.3' 0.1 -2.8 -5.2 -8.1
Lemons & Lime 17.6- 12.4 9.5 -5.2 -8.1
Source: Table 1 and IECIT, World Bank
Notesu: implies the'trend is significant at more than 901 level
** implies the trend is significant at more than 991 level
a Trends calculated by long-linear regression with time trend as
explanatory variable.
b Deflated by the World Bank's NUV.
- 111 -
APPENDIX III
0; " Z _ W O - ^ < N r * _ - * ~~Table 7
* ~~ I, | f
I a2Ekg Ii N
I i,!,,I sts
I
g~~~~~~ s ,og|R;
I I - f -
I ~ ig w ig 5 e
- 112 -
APPENDIX III
Table 8
Page 1 of 3
ARAB REPUBLIC OF EGYPT
Import Regulations for Agricultural Products
Commodity Tariff Import Approval
(X) Ban Required
Grains
Wheat 1 -- Yes
Corn 1 -- :
Rice -- Banned
Sorghum/barley 5 --
Grain Products
Wheat Flour 5 --
Semolina 10 --
Starches 30
Bread/pasta/cookies -- Banned
Pulses
Beans 1
Lentils 1
Peas 1
Other 10
Feed
Straw/bran/premixes 5
Hay/forage products 5
Tapioca *5
Oilseeds
Cotton -- Banned
Sunflower I
Soybeans ' 1
Peanut (for sowing) 5 -- Yes
Sesame 1
Palm nuts/kernels 1
- 113 -
APPENDIX III
Table 8
Page 2 of 3
Commodity Tariff Import Approval
(X) Ban Required
Vegetable Oils
All refined -- Banned
Crude/semi-refined 1 --
Cotton, sun, sesame,
soy, palm, corn, rape,
Linseed, other 5 --
Vegetables & Vegetable Seeds
Fresh/frozen/preserved -- Banned
Potato seed 5 -- Yes
Other seeds 5 -- Yes
Tomato Concentrate 1 -- --
Fruit
Fresh fruits (except melon, -- Banned --
grapes, figs & guavas)
Above fresh fruits 50 -- Yes
Dried fruits 50 -- Yes
Peanuts -- Banned --
Dried nuts 60 -- Yes
Juices/Concentrates 110 -- Yes
Suar
Granulated-beet/cane 1 --
Other sugars/syrups -- Banned
Molasses 50 --
Honey -- Banned
Jams/jellies/etc. 110 --
Live animals
Feeder cattle/steers -- Banned
Bred heifers/cows 1 --
Sheep/goats/camels I
Live poultry -- Banned
Swine -- Banned
Chicks (1 day old) I
- 114
APPENDIX III
Table 8
Page 3 of 3
Commodity Tariff Import Approval
(X) Ban Required
Meats
Beef/veal -- Banned
Lamb/goat 1 Yes
Poultry -- Banned --
Edible Heat offals 1 -- Yes
Other meats -- Banned
Table and hatching -- Banned
Dairy Droducts
Dry milk 1 -- --
Milk casein 1
Butter (for retail) 10
Butter (manufacturing) 1
Butter Oil/shortening 1
Lard -- Banned
Processed cheese -- Banned
Other cheese 1 --
Margarine - Banned
Fresh/frozen/canned -- Banned
(except tuna)
Tuna 5
Source:
1) Ministry of Economy, various decrees
2) Ministries of Agriculture, Supply, Industry and Health decrees,
and internal regulations.
-1L5-
Table 9
ARAB REPUBLIC OF EGYPT
AN AGgICULTURAL STRATEGY FOR THE 1990s
EC's Tariffs and Ouotas on Egmt's Malor Horticulua Ciudities
Tariffs (X) From
Jan. 1, 1992 Jan 1, 1993
Oranges Within the quota of 7,000 tons 2.8 0
Beyond the quota 5.2 5.2
Mandarin s 4.4 0
Lemons 1.7 0
Potatoes Within the quota of 105,000 tons
and for period Jan. 1 -Mar. 31 1.8 0
Beyond the quota for the period
Jan. 1 - Mar. 31 9.0 9.0
For the period Apr. 1 - Dec. 31 15.0 15.0
Onions Within the quota of 10,000 tons
and for the period Feb. 1 - Apr. 30 4.3 0
Beyond the quota for the period
Feb 1 - Apr. 30 4.8 4.8
Within the quota for the period
May 1 - May 15 4.3 0
Beyond the quota for the period
May 1 - May 15. 12.0 12.0
For the period May 16 - Jan 31 12.0 12.0
Tomatoes For the period Dec. 1 - Dec. 31 2.4 0
For the period Jan 1 - Feb 28 1.2 0
For the period Mar 1 - Mar 31 2.4 0
Other periods 11.0 11.0
Artichokes Within the quota of 100 tons and
for the period Oct. 1 - Dec. 31 2.0 0
Beyond the quota or for the
period Jan. 1 - Sept. 30 13.0 13.0
Source: EC Office, Cairo
ARAB REPUBLIC OF EGYPT
TOTAL CUILTIVATED AREAS AND MAIN CROPS (IN '000 FEDDAN) anmul rnnal
X change X change X change X change X chwnse
1952 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1952-80 1980-85 1985-90 1952-80- 1980-90
Cultivated area
winter Crops 4364 4927 5024 4963 4983 4945 5038 4944 5098 5050 5270 5593 12.9X 2.3X 11.01 0.51 1.41
Sumr Crops 3026 5045 4994 5007 4830 4818 4845 4799 4842 4919 4984 5055 66.7X -4.0X 4.3X 2.4X O.0O
Nile Crops 1824 803 795 821 880 845 880 890 863 882 864 791 -56.01 9.6X -10.1X -2.0X -0.11
Orchards 94 361 368 390 404 435 457 593 616 646 655 660 284.01 26.61 44.4X 10.1X 8.3X
Total 9308 11136 11181 11181 11097 11043 11220 11226 11419 11497 11773 12099 19.6X 0.81 7.81 0.71 0.91
main Winter Crops
Barley 137 96 91 108 121 126 125 130 112 89 118 127 -29.9X 30.2X 1.61 -1.11 3.22
Beans 355 276 282 314 326 307 339 307 324 363 368 345 -22.31 22.81 1.81 -0.81 2.51
Long Berseem 2202 1722 1756 1791 1866 1972 1923 1866 1707 1614 1685 1660 n/a 11.7X -13.7X n/a -0.4X
Short Berseem 990 1022 914 870 835 918 870 814 790 802 796 n/a -7.3X -13.31 n/a -2.01
Vegetables 63 272 275 272 273 286 291 314 330 348 354 338 331.71 7.01 16.2X 11.81 2.41
Wheat 1402 1326 1400 1374 1320 1178 1186 1206 1373 1422 1533 1955 -5.41 -10.61 64.81 -0.21 4.7X
Main Summer Crops
Cotton 1967 1245 1178 1066 998 984 1081 1055 980 1014 1006 993 -36.7X -13.21 -8.1X -1.31 -2.01
Maize 27 1432 1434 1452 1397 1449 1396 1122 1353 1480 1534 1547 5203.71 -2.51 10.8X 185.81 0.81
Sorghum 378 398 400 366 378 351 331 352 308 308 298 312 5.3X -16.8X -5.72 0.2X -2.2X
Peanut 26 28 28 29 27 24 28 23 25 30 32 29 7.71 0.01 3.61 0.31 0.42
Potato 0 84 74 69 63 62 81 78 71 94 66 70 -3.61 -13.61 -1.71
Rice 362 970 954 1024 1011 983 924 1008 981 837 982 1036 168.01 -4.71 12.11 6.01 0.71
Sesame 42 39 40 47 26 26 22 22 29 29 25 42 -7.11 -43.6X 90.9X -0.3 0. ax
Soybean 0 83 109 144 147 125 119 110 113 117 92 99 43.41 -16.81 1.91
Sugarcane 92 253 251 254 250 244 251 262 250 268 275 274 175.01 -0.81 9.21 6.3X 0.81
Vegetable 118 421 428 422 399 420 446 518 510 506 472 437 256.82 5.9X -2.0X 9.2X 0.4X
Main Nile Crops
Rice 12 2 2 2 2 1 1 1 2 1 1 1 -3.3X -50.0 0.01 -3.02 -5.01
Sorghum 55 12 13 17 14 14 9 19 9 7 8 8 -78.21 -25.01 -11.1X -2.8x -3.3X
maize 1677 473 489 483 555 526 518 361 458 480 470 428 -71.81 9.51 -17.4X -2.6Z -1.01
Potato 0 83 85 85 74 86 96 96 119 113 110 119 15.71 24.01 4.31
Vegetable 71 187 165 188 188 170 185 209 184 183 185 164 163.4X -1.1X -11.4X 5.81 -1.22
RAM REPUBLIC OF EGYPT
AVERAGE YIELDS OF MAIN CROPS (per fd) anmum wuoal
I chaw 2 change Z chwe 2 chg 2 charge
1952 1980 1961 1962 1963 9614 1985 1966 1967 1968 1989 1990 1952-80 1900-85 1965-90 1952-80 1900-90
Barley - ardeb 7.19 9.33 9.44 9.29 9.07 9.53 9.72 9.82 10.1 10.28 8.86 6.6 29.8sx 4.2 -13.0X 1.1 -0.9X
Beans - ardeb 4.53 5.61 5.64 6.11 6.57 6.46 6.84 6.73 7.29 6.45 7.97 7.98 23.82 21.92 16.72 0.92 4.22
Raw Cotton - *.q 4.19 7.18 7.14 7.6 6.83 6.77 6.76 6.54 6.15 5.35 5.03 5.21 71.42 -5.82 -22.92 2.52 -2.72
maize - ardeb 6.31 12.1 12.28 13.34 12.84 13.37 13.8 14 14.27 14.9 14.66 17.4 91.AX 14.02 26.1X 3.32 4.42
Millet - ardeb 8.62 11.19 11.29 11.23 11.3 10.96 11.49 11.67 12.52 13.43 13.8 14.18 29.82 2.7X 23.42 1.1X 2.7X
Peanut - ardeb 10.13 11.97 11.99 10.93 9.91 11.44 10.96 10.26 10.25 11.96 11.87 11.93 18.2X -8.42 8.92 0.6X o.ox
Rice - driba 1.46 2.59 2.49 2.38 2.6 2.4 2.6 2.6 2.45 2.69 2.72 3.01 77.42 0.42 15.82 2.82 1.6.
Sesame - ardeb 2.81 3.42 3.43 3.63 3.63 3.46 3.45 3.68 3.87 3.93 3.96 4.21 21.72 0.9s 22.02 0.82 2.32
Soybean - ton 1.1 1.2 1.2 1.1 1.1 1.18 1.21 1.18 1.1 0.99 1.08 7.3X -8.5s -0.22
Sugrcane - q!nt 785 760 - 779.7 751.2 748 784.6 835.6 861 748 896.2 904.7 902.4 -3.22 9.9s 8.0o -0.1 1.9s
Wheat - ardeb 5.18 9 9.23 9.79 10.08 10.27 10.53 10.66 13.22 13.31 13.85 14.56 73.7n 17.0X 38.32 2.63 6.22
ARAB REPUBLIC OF EGYPT
AVERAGE YIELDS OF MAIN CROPS (t/fd)
1952 1980 1961 1962 1983 1964 1965 1986 1987 1988 1989 1990
Barley 0.86 1.12 1.13 1.11 1.09 1.14 1.17 1.18 1.21 1.23 1.06 1.02
BOOM 0.70 0.87 0.87 0.95 1.02 1.00 1.06 1.04 1.13 1.00 1.24 1.24
Rm Cotton 0.66 1.13 1.12 1.23. 1.08 1.07 1.06 1.03 0.97 0.84 0.79 0.82
Maiz 0.88a 1.69 1.72 1.87 - 1.80 1.87 1.93 1.96 2.00 2.09 2.05 2.4/.
Millet 1.21 1.57 1.58 1.57 1.58 1.53 1.61 1.63 1.75 1.88 1.93 1.99 -4
Peinut 0.76 0.90 0.90 0.82 0.74 0.86 0.82 0.77 0.77 0.90 0.89 0.89
Rice 1.38 2.45 2.35 2.25 2.46 2.27 2.4 2.4 2.32 2.54 2.57 2.84
sesme 0.34 0.41 0.41 0.44 0.44 0.42 0.41 0.44 0.46 0.47 0.48 0.51
Soyben 0.00 1.10 1.20 1.20 1.10 1.10 1.18 1.21 1.18 1.10 0.99 1.08
Sugrc ane 35.33 34.20 35.09 33.80 33.66 35.31 37.60 38.75 33.66 40.33 40.71 40.61
wheat 0.78 1.35 1.38 1.47 1.51 1.54 1.58 1.60 1.98 2.00 2.08 2.18
ARAM REPUBLIC OF EGYPT
AVERAGE YIELDS OF MAIN CROPS (t/ha)
1952 1960 1961 1962 1963 1964 1965 1986 1967 1968 1989 1990
Barley 2.05 2.67 2.70 2.65 2.59 2.72 2.78 2.81 2.89 2.94 2.53 2.42
BeOne 1.67 2.07 2.08 2.25 2.42 2.38 2.52 2.48 2.69 2.38 2.94 2.95
Raw Cotton 1.57 2.69 2.68 2.93 2.56 2.54 2.54 2.45 2.31 2.01 1.89 1.95
a ize 2.10 4.03 4.09 4.45 4.28 4.46 4.60 4.67 4.76 4.97 4.89 5.80
Mitet 2.67 3.73 3.76 3.74 3.77 3.65 3.83 3.89 4.17 4.48 4.60 4.73
Penut 1.81 2.14 2.14 1.95 1.77 2.04 1.96 1.83 1.83 2.14 2.12 2.13
Rice 3.29 5.83 5.60 5.36 5.85 5.40 s.a5 5.85 5.51 6.05 6.12 6.77
sele 0.80 0.96 0.96 1.04 1.04 0.99 0.99 1.05 1.11 1.12 1.13 1.20
Soybean 0.00 2.62 2.86 2.66 2.62 2.62 2.81 2.88 2.81 2.62 2.36 2.57
Sugacans 84.11 81.43 83.54 80.49 80.14 84.06 89.53 92.25 80.14 96.02 96.93 96.69
Wheat 1.85 3.21 3.30 3.50 3.60 3.67 3.76 3.61 4.72 4.75 4.95 5.20 3
.- N
_ N
ARM REPIBLIC OF EGYPT
PRODwCTION 01 PAIN CROPS ('000) V 1
S dc e 2 ca c chu e 2 dch X 2 chwbe
1952 1960 1961 1962 1963 1964 1965 1966 1967 1966 1909 1990 1952-60 1960-85 1985-90 1952-80 1900-90
Barley - wdb 965.0 695.7 a59.0 1003.3 1097.5 1200.6 1215.0 1276.6 1131.2 914.9 1045.5 1074.4 -9.12 35.7x -11.6" -0.32 2.0S
BOWSg - rdb 1606.2 1548.4 1590.5 1916.5 2141.8 1963.2 2318.8 2066.1 2362.0 2341.4 2933.0 2753.1 -3.7X 49.6X 18.72 -0.12 7.62
Raw Cotton - .q 8241.7 8939.1 8410.9 8314.8 6816.3 6661.7 737.6 6899.7 6027.0 5424.9 5060.2 5173.5 6.52 -16.32 -29.22 0.32 -4.22
maize - ardeb 10752.2 23050.5 23614.4 25612.9 25063.7 26605.6 26413.2 20762.0 25643.0 29204.0 29378.6 34365.0 114.42 14.62 30.1X 4.12 4.92
Mitlet - ardeb 3732.5 4567.9 46Z.6 4301.1 429.6 4000.4 3906.6 4329.6 3966.6 4230.5 4222.8 4537.6 Z2.92 -14.82 16.22 o.ax -0.1X
Pewit - adab 263.4 335.2 335.7 317.0 267.6 274.6 306.9 236.0 256.3 356.6 379.6 346.0 27.32 -6.42 12.72 1.0X 0.32
Rice - darIb 546.0 2517.5 2380.4 2441.9 2633.6 2361.6 2405.0 2623.4 2406.4 2254.2 2673.6 3121.4 361.02 -4.52 29.82 12.92 2.42
ses - wdeb 118.0 133.4 137.2 170.6 94.4 90.0 75.9 61.0 112.2 114.0 99.0 176.6 13.02 -43.12 133.02 0.52 3.32
Soybean - ton 0.0 91.3 130.6 172.8 161.7 137.5 140.4 133.1 133.3 126.7 91.1 106.9 53.82 -23.9s 1.72
Suoaa - qsnt 72220.0 192260.0 195704.7 190O64.6 167000.0 191442.4 209735.6 225582.0 167000.0 240161.6 24792.5 24727.6 166.22 9.12 17.92 5.92 2.92
i1t - erdeb 7262.4 11934.0 12922.0 13451.5 13305.6 12096.1 12486.6 12856.0 161S1.1 18926.6 21232.1 2664.8 66.32 4.63 127.9X 2.32 13.92
Veatables 1810.0 5675.0 6830.0 6961.0 7040.0 7322.0 8351.0 9527.0 9964.0 9074.0 644.0 6717.0 47.22 4.42 7.63 5.42
Potatoes 1214.0 1195.0 1164.0 1095.0 1169.0 1476.0 1400.0 1801.0 3239.0 1657.0 1636.0 21.72 10.6x 3.52
ARA REEFUIC Of EGYPT
PODUCTION OF MAIN CROPS ('OOt)
1952 1900 1961 1962 1963 1964 1965 1966 1967 1966 1909 1990
aroly 116.2 107.5 103.1 120.4. 131.7 1W.1 145.5 153.2 135.7 109.6 125.5 126.9
sown 249.3 240.0 24.5 297.4 332.0 307.4 359.4 320.2 366.1 362.9 454.6 426.7
Raw Cotton 129A.1 1407.9 1324.7 1309.6 1073.6 1049.2 1150.9 1066.7 949.3 854.4 797.0 614.6 0
maie 150.3 3227.1 3306.0 3613.8 350s.9 36.5 3697.5 2906.7 3616.0 40a.6 4113.0 4811.1
oIfllet S22.5 642.3 652.5 402.2 620.1 560.1 546.9 606.1 555.6 592.3 591.2 635.3
PON" 19.5 25.1 25.2 23.8 20.1 20.6 23.0 17.7 19.2 26. 25.S. 25.9
Rice S16.0 2379.0 2249.S 2307.6 2486.9 2231.7 2272.7 2479.1 2275.9 2130.2 2526.7 2949.7
see 14.2 16.0 16.5 20.5 11.3 10. 9.1 9.7 13.5 13.7 11.9 21.2
Soean 0.0 91.3 130.5 172.6 161.7 137.5 140.4 133.1 133.3 126.7 91.1 106.9
Sqarca. 3249.9 8652.6 80.7 586.2 8415.0 6614.9 9436.1 10151.2 6415.0 10606.2 11195.7 11126.6
_bet 1069.4 1790.1 193.3 2017.7 1995. 114.7 1873.3 1924 2722.7 2839.0 3164.5 4269.7
vegetaies 1610.0 5675.0 83.0 6901.0 7040.0 7322.0 8351.0 9527.0 9964.0 9074.0 844.0 6717.0
tP tevm 0.0 1214.0 1M.6 1U4.0 1095.0 1189.0 1476.0 1400.0 801.0 3239.0 1657.0 1636.0
r g ~~~~~~~~~~~~~~~~~~~~~~~~~~is
-119-
ENlDIX II
Table 13
Page 1 of 3
M AERPUELIC OF SamP
C2muarativa Average Yields. of Major Crops in Egnmt
and Selected Countries
Crop Country 1979-81 1988 1989 1990
----- ------ kg/ha --------------
Wheat:
Egypt 3,192 4,751 4,941 5,209
Morocco 894 1,735 1,493 1,365
China 2,047 2,968 3,043 3,179
Turkey 1,852 2,186 I,7S8 2,120
*Netherlands 6,280 7,227 7,598 7,716
Egypt 3,947 4,965 5,380 5,301.
Morocco 602 903 993 1,160:
China 3,038 3,928 3,879 4,142
Turkey 2,168 4,014 3,929 4,000O
USA 6,474 5,311 7,300 7,434
*Netherlands 12,912 23,811 25,714 25,714
Ries (Paddy):
*Egypt 5,707 6,064 6,488 7,288
Morocco 3,937 4,451 6,300 4,125
China 4,244 5,281 5,500 5,728
Turkey 4,706 5,150 5,000 4,700
Barley:
Egypt 2,688 3,210 2,784r 2,418
Morocco 785 1,382 1,250 885
China 2,418 3,061 3,333 3,229
Turkey 1,924 2,189 1,351 2,090
*France 4,120 5,263 5,360 6,499
Egypt 3,724 4,443 4,673 4,580
Morocco 445 601 685 609
China 2,493 3,164 2,743 2,795
Turkey -
*Spain 4,702 5,356 5,462 5,463
Potatoes:
Egypt 17,399 37,247 22,413 20,946
Morocco 14,167 20,424 16,706 16,923
China 10,888 11,518 11,067 11,588
Tutkvy 16,681 22,397 21,/11 21,bZZ
*Netherlands 37,752 41,974 41,532 40,206
*: \.gt\eguoctOr\zpt-thb1
- 120 -
APPENDIX III
Table 13
Page 2 of 3
Crop Country 1979-81 1988 1989 1990
------------------ kg/ha ---------------
Egypt 2,035 2,262 2,456 2,500
Morocco 694 607 612 612
China 1,008 1,193 927 1,351
Turkey 1,495 1,200 1,090 1,147
*Puerto Rico 4,583 5,600 5,660 5,660
Faba Bearns:
Egypt 2,134 2,374 2,976 2,641
Morocco 560 1,123 784 713
China 1,161 1,471 L,176 1,529
Turkey 1,748 1,858 1,875 1,867
France 3,063 3,878 3,378 3,875
*Switzerland 3,354 4,156 3,333 5,000
Egypt 2,669 2,625 1,717 2,143,
Morocco 333 1,017 1,000 1,000-
China 1,099 1,435 1,270 1,509
Turkey 893 2,274 2,141 2,105
Italy 2,697 3,260 3,402 3,282
*Ethiopia 2,860 4,615 4,357 4,133
Peanuts (in shelL :
Egypt 2,115 2,540 2,957 3,000
Morocco 1,210 1,935 980 1,333
China 1,487 1,911 1,821 2,127
Turkey 2,246 2,553 2,500 3,150
*Israel 4,429 5,938 6,515 6,452
Sesame:
Egypt 996 1,149 923 929
Morocco 650 586 586 582
China 484 575 468 583
Turkey 594 479 379 419
*Iran IR 990 1,000 1,000 1,000
Egypt 2,646 2,071 1,921 2,296
Morocco 1,623 2,232 2,646 1,288
China 1,613 2,251 2,186 2,395
Turkey 1,967 2,284 2,098 2,418
*Israel 3,547 3,437 3,448 3,848
- 121 -
APPENDIX UI
Table 13
Page 3 of 3
Crop Country 1979-81 1988 1989 1990
------------------ kg/ha ---------------
Egypt 12,247 24,942 23,238 24,571
Morocco 40,657 33,814 32,588 32,982
China 14,254 15,881 15,831 16,089
Turkey 32,941 37,500 38,333 39,000
USA 42,629 49,753 54,720 55,577
*Netherlands 155,236 333,529 365,176 361,111
(greenhouses)
Cucumber:
Egypt 15,792 16,604 15,847 16,216
Morocco - - - -
China 12,412 15,846 16,054 16,292
Turkey 15,968 17,391 17,391 18,826
*Denmark 117,892 384,615 384,615 384,615r
(greenhouses)
Graves:
Egypt 11,762 11,945 12,938 11,600
Morocco 4,033 4,209 5,539 4,659
China 5,046 5,827 6,794 6,671
Turkey 4,378 5,678 5,745 5,700
India 19,135 20,741 20,929 21,189
*Netherlands 24,474 28,571 28,571 28,571
(greenhouses)
Egypt 82,996 95,887 97,065 94,737
Morocco 83,563 73,020 64,537 73,057
China 54,170 56,118 54,003 59,897
Turkey - -
*Zimbabwe 103,775 100,423 116,839 115,323
Onions:
Egypt 33,158 26,480 17,451 21,154
Morocco 11,991 17,964 18,023 18,286
China 12,522 15,256 15,758 15,853
Turkey 14,247 17,936 17,215 19,620
*Korea Rep. 34,597 47,459 54,026 50,875
* Country with highest average yield in 1990
Source: FAO Yearbook, Production, Vol.44,1990
- 122 -
PPDIX JIII
Table 14
ARAB REPUJILIC OF EGYPT
AN AGRICULTURAL STRATEGY FO il1990.
Animal Population in DifferentAr-o.
SPECIES YEAR DELTA UPPER EGYPT NEW LAND DESERT
PROVINCES
Buffaloes 1982 1,404,495 932.908 28,806 12,352
1991 1,620,566 1,436,282 86,016 22,136
Cattle 1982 1,673,616 1,109,490 66,865 56,236
1991 1,315,666 1.222,500 90,175 90,435
Sheep 1982 1,085,181 1,863,570 47,086 375,248
1991 1,131,838 1,556,842 113,487 869,728
Goats 1982 584,555 1,779,748 49,539 333,716
1991 654,401 1,584,070 60,712 578,773
-123-
APPENDIX III
Table 15
&W S EPUBLIC OF EGYPT
- Sesonal Avalabilitv of Roughages and rX-Produccs. 1989-90
(1000 t Dry Matter)
.n .0ri straw
xiw am . rn tops
XZO. moos~~~~~~~~~~~~~~~~~~~~i" maize
.__ .tst straw
___maize stra.'
JM % rv iw y 9O se u
month
Source: NTF-Drawing based on HOA figures
Seasonal AvailabilZEv of Reuthates and EX-Products, 1989-90
(1000 t Dry Macter)
(when applying different conservation tachniqueslL)
am r el up cam tops
i_egren Sraw
-. F W. D W. . IW Are JWI AS. S t. )0. O.
month
Source: VTF-Draving based on HOA figures
A Assuming chth:
SO Z of the maize straw (August and Septeaber harvested) is urea
treated and fed In June and July.
30 1 of tho sugar cane cops are converted into silago for June and July.
10 Z of borsoom Is convorted into sLIage for June and July.
ARA REPItLIC OF EGYPT
AGRICLTtRE SECTOR STRATEGY
Sumnry of Ecanmic Anatysis of Crops
Old LadA
Gross Not Financial Economic Doestic Nominal Effective FUR-ENR
Form Farm Net Net Value Return Resource Rate of Rate of over
Crop Revenue Revenue Return Return Added an Water Cost Protection Protection Val Add
. .. . .... .... ... .... ...................................... ................................................................................... .................................................
Sugar Beet 1020.0 487.4 230.1 137.9 953.5 0.4 0.9 -0.3 -0.3 0.1
Long Berseem 1231.3 873.1 802.8 181.5 777.2 0.5 0.8 0.1 0.3 0.8
Short erseem 590.0 342.3 292.5 -47.5 294.9 0.3 1.2 0.1 0.4 1.2
wheat 1342.5 782.5 684.1 525.6 1289.0 0.8 0.6 -0.2 -0.2 0.1
Maize 1243.4 639.5 489.6 216.2 1033.5 0.4 0.8 -0.2 -0.2 0.3
Rice 1501.0 724.2 609.4 35.1 1362.9 0.2 1.0 -0.3 -0.2 0.4
Cotton 1757.2 850.0 737.0 740.0 2073.0 0.7 0.6 -0.4 -0.3 0.0
Sugar Can 3105.2 1836.4 1836.4 -636.2 1552.0 0.1 1.4 0.2 0.6 1.6
Beans 1247.9 735.5 628.1 134.2 903.0 0.7 0.9 0.0 '0.1 O.5
Tomttoes 3644.2 2465.3 2140.7 1480.2 '665.2 0.8 0.4 0.0 0.1 0.2
'anges 2600.0 1237.3 1237.3 604.4 1433.3 0.5 0.6 0.0 0.1 0.4
Potatoes 2872.6 1181.1 * 923.7 361.7 1177.2 0.4 0.7 0.0 i0.1 0.5
Sunflouers 1026.0 616.3 616.3 198.7 830.9 0.4 9.8 0.0 0.1 0.5
. .................... .... ...... .. .... .................... .......... .................. ......................................... u..... ......... ..... ........
CROPBII)G.UC1 C111.CX9 4
Mew Lands
Gross Net Firnacisl Ecornmic Domestic Nominal Effective FNR-ENR
Farm Farm Net Met Value Return Resource Rate of Rate of over
Crop Revemue Revenue Return Return Added on Water Cost Protection Protection Val Add
....... ............ ........ ................ ...... ........... ......... .................. ......... .................. ... .... .. ........... ......... .. ....... .................... ......................
LONG BIERSEEN 940.0 n/e 612.4 -228.3 410.6 0.1 1.6 0.1 0.8 2.0
GROU.JOUTS 1200.0 n/a 650.5 -44.7 843.3 0.2 1.1 0.0 0.2 0.8
WHEAT 680.0 n/a 214.5 -167.6 512.3 0.2 1.3 -0.2 -0.1 0.7
MAIZE 554.6 n/a 67.3 -329.1 464.1 0.1 1.7 -0.2 -0.1 0.9
W MELONS (fr) 2400.0 n/a 188.1 1313.5 2055.1 0.6 0.4 0.0 0.1 0.3
TOMATOES (u) 2730.0 n/a 2122.5 1650.2 2325.2 1.1 0.3 0.0 0.1 0.2
BROAD hEAS 632.3 n/a 222.3 -128.7 480.5 0.4 1.3 0.0 0.1 0.7
PEAS (ureen) 1426.0 n/a 855.6 371.6 964.9 1.4 0.6 0.0 0.2 0.5
........ ............ ... ..... ....... ........... ....................... ...................... ................................................ ........................................ ............. ... .
EULAEiS.WK1 C113.CK16
O'I4
IERD 23981
ir 20' 0 0 , ' A R A B R E P U B L I C
MEDITERRANEAN SEA Of E G Y P T
BANK/IDA ASSISTED PROJECTS
IN AGRICULTURE SECTOR
.D_, Lm } P r HrlUT t 4 S 500 4,e ^ X 35 r . e T f, Fscr-l Yeo, Appwoved
- I~~~~~~~~~~SRAEL *Upper Deolt Drinoge 1970
M A R S A M A T R U H 24 t } t T I (L # \ISRAEL/ Upper Egypt D,rfoin.eojX9 U 1973
MARSA MATRUH 24 *./ i .s '/ * Upper EgypU DEopi -ge 11 1976
----------G \ ] J O R D A N * Fr,it ord Vegetoble Develop1eet 1976
J 0R D)A N *Nile Dolt Droincgei 11I977
- * ~~~~~~~~~~~~~~~~~~~~~~~~ ~~~Agr.cutora Developemen 1978
4~~~~~~~~~~~ in~~~~~~*Attlle I 1980
t --'O^TTAI7 . '1. *uv @croo J 4 ts \ TeTecical A,sivto-ce 1981
-OA TTAPA ~ ~ ~ ~~~~~~~~~~/*Fish Formi.g91
O'DEPRESSION ,A. o I S N AI N New Land DeVelopment 199e81
SF04 TaIFT ,7~~~~~~~0~~1a SuEz ~~ S I NA I PENIINSULA *Armate I18
aRWA, DASIS , 160 A SA> k t SUEZ '-EC 5 1 N A I P E N I N S -L A 4 Irr;g9t90n Pa ;nping 5UStOti Rehbo,trtion 1983
0,,.at El. FAYOU * Agricaltorol Development II 1985~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~grcut.l -lp- 1 15
<~~~~~~~~~~~~~~~~~~~~*t.~,\ - Drainage V 18
Ch-noel Mointe.-nCe 986
.83t,S-::---- \ 0 25 1�v!S A U DoI AAgtklol St-roge 1988
>_ 25 S A U 0 1 P,,~~~~~~~~~~~~~~~~~~~~~~~0Fmp,ng Stotio- Rehobilitioto II 1990
E.1L M I N Y A ABA Notion..l Drar-g. 1992
m W E S T E R N p-i-t co'p� !'d " -' ' a RBdiCotes project complted
17 22
Et M",OtC a .POPULATION 8Y GOVERN4ORATE
_ E lAma T _ / 11986 DATA)
I CAIRO 6,068.695
DESERT ~~~~~~~~~*,,,j~~~~~~~-g.-- ,.~~~~~~~~~ 2 ALEXANDRIA 2926,859~~~~~~~ AEXNDIA2,2685
DAE S E R T s s TJ | T 13 PORT-SAID 40).172
A 9 S tt,EL ,aa,neI* T,4 SUEZ 327,717
E L BAHR 9 ISMAILIYA 545T259
6 DAMcIETTA 740,365
E L W A D I E L G E D I D EL AH1M1AR 7 OAKA8LIYA 3.484.102
S 0 h A G 8 SHARKIYA 3,414,308
1 \ 9 OALIUBIYA 2.515.924
S-Avge- 10 KAF8-EL.SHEIKH 1,809,221
RED 11~~~~~~~~~~~~~ GNARRIYA 2845
to 'm D E N ,.,, ,A SEA R 12 MENOUFIYA 2.221,315
50 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~S ~ ~ ~SEA W.' 13 BEHtEIRA 3.248.829
UI ~ ~~~~~~ ~ ~ ~~~~14 GIZA 3,725,420
,<20 T 7 N 15 CENI-SUEF 1,449,229
23 ; o * \ - . 16 FAYOUM 1.551,214
M. OrraA -- ,1 7 m,iNIA 2.645,112
MEnlo -Fl t * . . \ , 18 ASSIUT 2,215,679
.E-ED$AAq;WAN,^~ SEA 19 SOUHAG 2,447,033
400 00 ~~~~~~~~~\ ,,.-~~~~~~~ '~~~~ -- 4l~~~~~~~l,., 20 ORNA 3,258,926~~~~~~~~2 GNA2,5892
- ' ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2 1 ASWAN 809,204
to,., / , E 22 C0-SEA 9,72 -4
0000',Ot A f ,., ,. r 20~C2OO N 2 ELWAD) E;-GEDID 113,405
0.0tr^ 3 1 ' _ 9A , 24 f_6 809 M O16163
tm 23 NORTH SINAI 70.'35
"o K- 9--' * 0 0 -SOUTH SINAI 28,929
13~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~S
2: _ ' KIIOm��9- 3 s JO Tovo TOTAL SU.238
_T_ .t 7- t_ _ 2,2_50 ot2
C.alt.otd Ateon
Wodio
1.Pltysico1 Feotares
* Noti-onl Capitol
CA... o~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ G-omnrte Copitols
0 Tomn ood Villag.,
s U ~~~~~~~~~~~-, D A N ~~~~~~~~~~~~~~~~Occ.pied Te-itori.,
000 1992