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Al-Ahram Weekly 25 Nov. - 1 Dec. 1999 Issue No. 457 
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Published in Cairo by AL-AHRAM established in 1875 |
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Al-Ahram Weekly 25 Nov. - 1 Dec. 1999 Issue No. 457
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| Published in Cairo by AL-AHRAM established in 1875 |
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Egypt Region International Economy Opinion Culture Features Profile Travel Living Sports People Time Out Chronicles Cartoons Letters A spoonful of sugar
By Mona El-FiqiThe government's decision three weeks ago to raise tariffs on imported sugar, in an attempt to protect local producers, will impact negatively on food processors, complain many.
The decree raising tariffs on unrefined imported sugar from five to 24 per cent, and on refined sugar from 10 to 26 per cent, was met with dismay by the food industry, who complain that they must now pay prices that exceed international levels.
"The government has ignored the fact that the international price of sugar is $220 per tonne, and has effectively raised the price of refined sugar to $700 per tonne, which is totally unreasonable," complained Khaled Hamza, head of the Imports Committee at the Egyptian Businessmen's Association (EBA).
Imported sugar is used extensively in the pharmaceutical and food industries because of its degree of purity, according to Hamza.
The decree places local food industries at a disadvantage by incurring higher manufacturing costs at a time when imported food products are increasingly competitively priced.
In response to the decree, the Chamber of Food Industries at the Federation of Egyptian Industry has submitted a memo to the Minister of Finance recommending that tariffs on imported finished-food products be raised so as to protect local producers from the possibility of foreign competitors dumping goods on the Egyptian market.
The decree has been widely criticised as a short-sighted measure, one that does not tackle the root cause of an on-going problem -- which many perceive to be the existing government policies regulating the local sugar industry.
"The government supports sugar cane farmers by subsidising crop prices, but this artificially inflates manufacturing costs that inevitably leads to an increase in price and a decrease in competitiveness," says Ali Fahmi, advisor to the Chamber of Food Industries.
Fahmi estimates that current sugar reserves -- estimated by the government at 1.4 million tonnes -- are sufficient for only a year. "After that, the problem will re-appear, because local production is far below consumption. In 1998 consumption of sugar was 1.7 million tonnes, while local sugar production was 1.4 million tonnes" he added.
The government will then be obliged to reduce the sugar tariffs on imported sugar once again, argues Fahmi.
Although the tariff-raising decree protecting local industry is legitimate, even in the context of Egypt's World Trade Organisation(WTO) commitments, the government, many argue, needs to find "better find solutions for the sugar industry's problems".
The raising of sugar tariffs will also result in an increase of the prices of products whose manufacture depends on sugar, according to Hamza, and will have a particularly negative impact on companies which signed sugar-import contracts before the decree was issued.
Vitrac, a major private-sector jam producer, could well be hard hit. "If we do not fulfill these contracts we will face claims that may result in millions of pounds in fines," says Youssri Kamal, manager of Vitrac's imports department.
According to Kamal, Vitrac has been forced to import sugar since 1994 because of short falls in local supplies. Imported sugar, he said, is often of better quality, and the exporters offer credit facilities that local producers do not.
While the cost price of local processed food products will increase, producers are unlikely to be able to pass the extra burden on to consumers given the fierce competition that exists in the sector, says Kamal. "How does the government envisage that it is protecting the local industries at a time when exported products are cheaper than local ones?" he asks.
Following the new decree, the price of the imported sugar is expected to reach LE1,600 per tonne, local sugar LE1,200 per tonne. But Fahmi predicts that the price of local sugar will increase due to growing demand in Ramadan.
