21 - 27 March 2002
Issue No.578
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Al-Ahram Weekly Online 21 - 27 March 2002 Issue No.578 |
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A crackling affair
Unless more effective import policies are adopted, wheat and cereal products in Egypt could face severe problems. Eman Youssef assesses the road ahead
The rampant shortage of foreign currency on the local market has left most of the nation's industries in a fix. Wheat has been no exception. With continued future threat following the 11 September attacks, wheat importers are urging the government to come up with a solution to alleviate the wheat shortage.
"The high dollar prices and its dearth have led to significant problems in financing the wheat and cereals importation process," said Mahmoud Diab, chairman of the Chamber of Cereals and Products Industries (CCPI).
Egypt imports three million tons of wheat annually from the United States, reflecting 65 per cent of total wheat imports. Egypt also imports wheat from Argentina, Australia, France, Ukraine, Russia and, more recently, India and Pakistan. Imports account for 47 per cent of the country's total wheat consumption, with the remaining 53 per cent coming from local production.
In response to the bleak market conditions, the CCPI recently sent a memorandum to Prime Minister Atef Ebeid urging him to develop an expeditious solution to the current impasse. Diab emphasised that mills and macaroni factories remained in dire straits.
"We must all work together to save this vital industry that provides consumers with breadstuff," he said, adding that banks and the Ministry of Supply should help the CCPI and the Egyptian Federation of Industries (EFI) to overcome the squeeze.
An estimated $250 million is needed to import 1.8 million tons of wheat, which in turn is used to produce fine quality flour, Diab explains. The flour is used in the manufacture of white bread, high quality baladi bread and macaroni -- a goods basket that represents a sizeable 23 per cent of total local food consumption.
The dollar crunch has wheat importers in despair -- unable to import the nation's needs (photo: El-Sayed Abdel Qader)
Unavailability of wheat -- with which importers run their mills -- has led to a 30 per cent decrease in production: a direct result of the running inflation, Diab said.
"Continued inability to meet the mills' needs of imported wheat will devastate about LE10 million of private investment," he stressed. "Banks should facilitate supplying the needed funds for importing wheat rapidly by opening letters of credit."
The solution, Diab said, entailed equal treatment by banks of the private and public sectors. In 1993, the government encouraged the private sector's establishment of new mills for the production of fine quality flour. Investment costs reached LE10 billion -- a figure financed predominantly by Egyptian banks.
"The contribution of the private sector has had a positive effect during the past years," Diab said, adding that they met consumer needs at reasonable prices. In recent years, he said, daily production increased to 9,000 tons, compared with 1,000 tons in 1997. At present, however, the industry is threatened by high dollar exchange prices, and the bias banks have towards the public sector in the provision of letters of credits to import wheat, Diab said. He added that the private sector would be forced to depend on a source other than banks for foreign currency -- a shift that will come at higher prices.
Mohamed El- Barbari, a senior official at the Central Bank, said that contingent upon the bank's reserves of dollars, priority was given to opening letters of credit for wheat and cereal importation.
Wheat, of course, is the main ingredient of macaroni. So the repercussions of the wheat problem are confronting the 200 macaroni factories that make up the private sector.
"High flour prices and the competition of imported macaroni are threatening the factories," Diab said of the LE1,000-per-ton price of flour currently being offered on the market.
The problem may be bigger than the Egyptian consumers realise. For amidst the chaos in the rice market -- where prices are reaching sky-high levels -- Egyptians have managed to reach a compromise; opting for macaroni instead of rice. Few of them, it is safe to assume, realise that their compromise may fly out of the window, too.
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