Promoting climate and water-smart agriculture in Egypt
Egypt is the agribusiness powerhouse of the Middle East and North Africa (MENA-region), watered by the Nile, with age-old soils in the delta, desert oases and the Nile, and with farming experience able to green the desert with productive agriculture. It is not only the region’s primary producers of many crops; with over a hundred million people it is the greatest consumer market and biggest labour reservoir. Egypt is a major producer and exporter of agricultural products such as especially citrus and potatoes support Egypt’s food security and unlock opportunities for Egypt’s local market and export.
With the right resources: partners, knowledge and skills to negotiate a difficult economic climate, Dutch agri-food companies: professionals, entrepreneurs and investors have the potential to do great things in Egypt. By working with Egyptians to unlock opportunities on climate and water smart agriculture, to produce healthy and sustainable diets for Egyptians and its trade partners, the Dutch can create mutually beneficial win-wins. But that will take focus and determination. In this blog post we will describe some opportunities and challenges of this ‘combi-agenda’.
Egypt is faced with numerous challenges in its efforts to transition towards a more sustainable agricultural sector. These issues include water scarcity, soil degradation (salinity), and volatile farming conditions due to climate change and shocks on external markets. As a result, Egyptian farmers are often unable to optimize their yields or maintain their current production levels. Additionally, due to limited access to financing and advisory services on practices and technologies for sustainable intensification such as seeds, inputs and tools for integrated crop protection and integrated soil fertility management, small and medium entrepreneurial farmers have difficulty investing in new technologies or improving their farming practices. Such challenges can be overcome by cooperation between the Netherlands and Egypt and cooperation can lead to investment opportunities and mutually beneficial trade flows: imports and exports of goods and services.
Cooperation
Under the Netherlands’ new multiannual strategy, Egypt is not classified as a purely a focus country for development assistance like fragile states in the Sahel or the Horn of Africa. Rather, Egypt is seen as a combi-country: an emerging market where a combination of cooperation, trade and investment can contribute to stability, sustainable prosperity, and social wellbeing (the Sustainable Development Goals). Water and agriculture have long been at the core of Egyptian-Dutch cooperation, marked by the high-level panel on water (formerly on drainage and irrigation). Recently, at the COP27 climate summit, this cooperation felt the sense of urgency to respond to the opportunities and threats of climate change. In this light climate and water-smart agriculture was selected as the focus of the Dutch combi-agenda for Egypt.
Cooperation between Egyptian and the Dutch will be affected by cultural differences. For instance, the Dutch tend to be direct and critical, valuing efficient problem solving, while in Egyptian culture prestige is important and accepting one’s mistakes is not always easy. Negotiating deals between people from different cultures can prove difficult without understanding each other’s customs, beliefs, and values. This may lead to misunderstandings which could hinder reaching an agreement or lead both parties down different paths than what was originally intended. Ultimately, this may result in wasted time and resources, or worse misinterpretation and offence jeopardizing any future cooperation trade and investment.
Good personal relations are important for partnership between companies or organizations, especially in Egypt. These relations are based on mutual understanding and trust, and effective yet respectful ways of providing feedback. To build cooperation relationship there should be a long-term vision more than individual deals or short projects, with locally based interaction and exchange: Egypt is not a country for trade or development by remote control. Locally active intermediaries (Egyptian, Dutch, bicultural and/or international) are essential to build trust and understanding. The young expert programme (YEP) is an excellent way to build such capacity. PUM (Dutch Senior Expert Programme) is not available in Egypt, but there may be opportunities for programmatic cooperation.
Egyptian farmers, consumers and entrepreneurs have in their long history heard many stories about what they should do or consume. Especially the poor are not eager to try new things, as they cannot afford to risk scarce resources. But when faced with convincing evidence and when their friends and family adopt something new, they are keen to change. Seeing is believing, anywhere, but especially in the Egyptian food system. Through trailing testing and demonstrating will people learn and see what works for them: much better than with lectures or reports.
Trade
With the largest consumer market in the region and a developing agri-food sector there is a strong demand for both food products, food ingredients and agricultural technologies and inputs. At the same time, scarcity of foreign exchange is forcing the government to stimulate export and local production to substitute imports. To export to Egypt companies however must deal with tariffs and regulatory issues such as permitting, product registration and sanitary and phytosanitary regulations (SPS). With careful research preparation and commitment towards compliance Dutch exporters should be able find success exporting their goods into this potentially lucrative market.
Tariffs and quantitative restrictions on imports from the Netherlands and other European markets have been limited by an EU-Egypt Association Agreement and a subsequent agreement on agri-food products (see link). An overview of applicable tariffs and import restrictions is available on the EU Access2Markets database. To provide an insight into import procedures, the agricultural team of the Netherlands Embassy in Cairo commissioned Enroot consultancy to develop a manual covering the main Trade Barriers Facing Dutch Exporters in Egypt (rvo.nl) in the agriculture sector.
The ease of dealing with these procedures and regulations to a large extent depends on the competence of the local importer. Permits and registrations must be obtained by locally registered companies. Over the recent year, with rationing of foreign exchange due to Egypt’s economic challenges (transactions are controlled by the Central Bank of Egypt), importers’ ability to pay for import transaction depended on whether they generate foreign exchange through exports. Good local partners, representation or even presence very much contributes to a company’s success in exporting to Egypt.
From Trade to Investment?
The pearls in the crown of agri-business in Egypt are companies who have moved from trade to investment. This includes companies such as RijkZwaan, Bakker Brothers, Heineken, Farm Frites, Nutreco and DeHeus. Based on good local business relations, these companies established a local presence, sometimes through joint ventures. With teams of competent Egyptian staff, part of the global Dutch family these companies can connect the Netherlands and Egypt, fostering trade, investment and knowledge exchange. This makes these companies well placed to further their sustainability agendas in Egypt as part of their corporate social responsibility, influencing others to follow suit.
To successfully invest in Egypt there are challenges to overcome. Transaction of foreign currency and exchange rate has been an issue during the past few months affecting Dutch agricultural investments in Egypt. Foreign investors may face losses if there is a large disparity between these two currencies when converting them back into their own currency later, even though they sold their product or service for its full price (in local currency).
Further issues may lay in discrepancies between various laws and regulations. For instance, Dutch investors have had difficulty purchasing land, despite that based on the Investment Law No. 72 of 2017, foreign investors can own land under special conditions. Other regulations under the New Urban Communities Authority however, state that foreign investors cannot own land. Ideally such discrepancies are resolved with unified regulations, in the meantime they require high level decision making on a case-by-case basis.
Under the combi agenda for climate and water smart agriculture, the Netherland would like to see more Dutch companies move from trade to investment with joint ventures or partnership with Egyptian entrepreneurs and professionals. Through the Netherlands Enterprise agency (RVO) (for instance with DHI grants) and Invest International such Dutch investment can be stimulated.
Agricultural team
The agricultural team of the Embassy will continue support this combination agenda of cooperation, trade, and investment on climate and water smart agriculture. This summer Agricultural Counsellor Melle Leenstra will be replaced by Tycho Vermeulen. Omar Abdellatif and Walaa Dahab will provide continuity to team. Follow developments via LinkedIn or via AgroBerichten Buitenland or contact us via KAI-LNV@minbuza.nl.