What is keeping Egypt from unlocking its agri-business potential and a transition to a sustainable food system?
Egypt is the largest consumer market of the Middle East and North Africa region. With a civilization built on using the Nile to irrigate farmland and a young labor force eager to work Egypt can be a regional agribusiness powerhouse. Located at the Sinai Peninsula connecting Africa and Asia and the Suez Canal connecting Europe with the Far East Egypt can be a hub for agri-food trade and logistics. But according to a new report by IFC, Egypt is not making the most of this potential.
In its Country Private Sector Diagnostic report for Egypt, the International Finance Corporation (IFC), the private sector arm of the World Bank Group, makes an analysis of the opportunities and challenges for private sector-led investment leading to the creation of jobs and growth of income. The report focusses on a number of sectors, first of which is agribusiness. It concludes that compared to similar countries Egypt can improve its competitiveness, attraction of foreign direct investment and exports with smart reforms to policy and implementation. Key to such an agenda should be to: ‘focus on establishing a culture of transparency and a participatory approach in policy making.’
Egypt’s agribusiness sector, according to the report is held back by barriers to international trade, weak local supply chains and a weak extension and training system. A further challenge is the privileged role for State Owned Enterprises in production, processing and marketing of crops and animal products. This creates unfair competition for private business and is a disincentive for attracting foreign investment and opportunities.
“Egypt’s overarching priorities in promoting private sector development should focus on establishing a culture of transparency and a participatory approach in policy making” – IFC, Creating Markets in Egypt
Trade policies such as unpredictable import duties and restrictions on food products and agricultural inputs create challenges for agri-business. Restrictions on imports of seeds are specifically mentioned as a challenge. Domestic supply chains are characterized by inadequate transport facilities, insufficient bonded warehousing capacity, and weak cold-chain infrastructure, as well as limited assurance of food safety and quality standards. This affects local access to inputs for agri-food processing as well as contributes to food waste and losses.
A key role for agribusiness development lies in the robustness of Egypt’s agricultural knowledge and innovation system. The report states that though there is a large number of agricultural researchers working at universities and government institutions, the extension system is weak. This hampers farmers and firms in access to relevant and innovative technologies, skills and practices, including digital technologies. More can be done, to strengthen the training infrastructure for the skills needed by companies working in commercial agriculture and agri-food processing. Egypt’s expenditure on innovation and research in the sector is below average for emerging economies at 0.44% of value added in agriculture (compared with 0.52% elsewhere). This calls for more public private partnership in agri-food innovation and R&D.
The agri-business policy environment also has consequences for a transition to sustainable food systems. In its study, IFC notes that both fertilizer and pesticides are subsidized to stimulate agricultural production. The production of fertilizers by State owned enterprises with subsidized energy and subsequent sales to farmers at subsidized prices lead to waste and overuse. This leads to a negative environmental impact: bad soil and water quality and an extra carbon footprint. Overuse of pesticides affects biodiversity and human health.
The recommendations for improving the enabling environment provide an action agenda for IFC and other international partners to engage with the government of Egypt and stakeholders in the agri-business sector. Such an agenda can allow Egypt and its people to unlock their potential to become a regional agri-food hub, creating decent jobs, incomes and health diets for all. The Netherlands Government supports this agenda. It funds IFC to invest in and support private sector development in Egypt and other countries in the region.
The agricultural team of the Netherlands Embassy would be eager to explore opportunities for Dutch knowledge providers to contribute their knowledge and expertise to support this agenda for action. Advisory services for climate smart agriculture, agri-logistics, water management and digitalization offer great opportunities for knowledge exchange between the Netherlands and Egypt.