Feeling the pinch
Rice exporters are harshly affected by a government decision to double export duties, Eman Youssef
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The government's decision will urge traders to sell rice domestically at lower prices and ensure its availability in the local market
In an effort to stabilise prices and ensure rice availability for the local market, Minister of Trade and Industry Rachid Mohamed Rachid has decided to increase the export duty on rice to LE2,000 from the current LE1,000 per tonne.
Rachid announced that an export ban on rice, one of several food essentials worldwide, would be extended for an indefinite period, with certain limited qualifications. The ministry will only allow companies to export rice abroad in return for LE2,000 per tonne in export duty, and only if they supply an equivalent amount of rice under tender to the government for distribution as part of its food subsidies programme.
"The aim of the decision was to preserve the stability of prices of rice in the local market, especially before Ramadan," said Sayed Abul- Qomsan, advisor to the minister for foreign trade.
Export agreements approved by the government before this decision will not be affected by the export fees increase.
The Egyptian government initially imposed the ban in April last year, with a LE300 export fee, in order to meet the demands of local consumers hit by soaring food prices, according to Abul-Qomsan. The policy was supposed to end in April this year. It didn't. In February, the export duty on rice was increased from LE300 to LE1,000.
A trade insider said the decision would lead some companies to buy export licences from traders who supply the General Authority for Supply Commodities with rice but do not export themselves. "The decision will harm Egyptian exports and reduce their competitiveness in foreign markets," Wael Salem, executive manager of the Arab Group for International Trade told Al-Ahram Weekly. His company used to export rice to Syria, Russia and Ukraine.
"To allow companies to export only the same amount as they import [presents difficulties] and will lead companies to export commodities other than rice, such as oranges and potatoes," Salem said, adding that the country will lose foreign currency. Shocked by the decision, Salem said the government used to encourage Egyptian exports and support exporting companies, not suspend and ban exports.
He also said that rice is the main substitute for bread whose price has increased following wheat price rises on the international market.
Egypt produces around 4.5 million tonnes of rice a year, of which 3.5 million is allocated to the local market, leaving a surplus of 70,000 tonnes. According to ministry figures, food prices have escalated in Egypt. Meanwhile, the Egyptian government has been trying to tackle uncontrolled inflation.
Egypt's General Authority for Supply Commodities has been bidding to buy rice from the local market since the ban on exports aimed to supply subsidised rice.
"The purpose of this export ban was to ensure that there was no rise in the price of rice after local rice prices rose sharply in response to price rises in international markets, and ensuring the local market will not suffer a deficit in rice," said a senior official at the Ministry of Trade and Industry, adding that other countries such as China were curbing rice exports.
He emphasised that the government's aim behind the decision is to urge traders to sell rice domestically at lower prices. Local consumers were paying LE4 per kilogramme of rice, about 30 per cent higher than normal levels.
Egypt is considered a major exporter of rice, with most exports going to Turkey and Middle East countries, such as Lebanon, Syria and Jordan.