Al-Ahram Weekly   Al-Ahram Weekly
25 Nov. - 1 Dec. 1999
Issue No. 457
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Cotton exports collapse

By Gamal Essam El-Din

The volume of Egyptian cotton exports has slumped dramatically, with most market insiders pointing an accusing finger at the government's decision to place an export ceiling of one million quantars on three cotton varieties -- Giza 85, 86 and 89. (One qantar is equal to 50 kilogrammes).

According to official sources, the ceiling was necessary in order to reserve enough long-staple cotton -- some two thirds of total production -- for local mills. In previous years there has been no limit set on the export of cotton varieties.

Although Prime Minister Atef Ebeid was reported as denying the government decision in several newspapers, the opposition press published a document, pre-dating the prime minister's denial by two days, in which Public Business Minister Mokhtar Khattab appeared to give instructions to cotton exporting companies to abide by the ceiling.

The decision sparked mixed reactions in the cotton market, with several experts applauding the prioritising of supplies to local mills. "Meeting local needs is always more important than exporting," said Fathi Nematallah, a director of the Holding Company for Spinning and Weaving and Ready-made Garments. In previous years, Nematallah said, local mills have faced shortages of certain kinds of long-staple cotton varieties. "Due to this shortage, they were working at half capacity and only for seven or eight months per year. This means a drop in production, losses in returns and redundancy for a large number of workers," Nematallah said.

Mustafa Mazhar, a professor at Menoufiya University's Faculty of Commerce, has shown that exporting cotton in raw form generates lower foreign exchange returns than the export of finished products such as ready-made garments. These earn greater foreign currency revenue, providing added value to the national economy as a whole. Mazhar also believes that the decision allows local mills to develop their potential, guaranteeing year-round employment for workers and boosting the export of high-quality products processed from long-staple cotton.

Public Business Minister Mokhtar Khattab has emphasised that in the long-run the decision will boost textile exports by 20 per cent. "The decision is aimed to meet the needs of local mills and prompt them to produce high-quality products for the world markets," he said.

A number of agricultural economists, however, have questioned the wisdom of the policy -- particularly its supposed long-term export potential -- and have characterised it as counter to the current drive to promote economic liberalisation.

Amin Hamad, a member of parliament who directed a question to Prime Minister Atef Ebeid about the reasons behind the decision, indicated that in his last speech before a joint meeting of the People's Assembly and Shura Council, President Mubarak emphasised that boosting exports, especially in the area of agricultural commodities, is now a matter of life and death. "Keeping this in mind and taking into consideration the ballooning deficit in the trade balance, the question is why the decision was issued in the first place. It will clearly cause cotton exports, which currently form almost half of total agricultural exports, to contract, giving rival cotton varieties, especially the American Pima cotton variety, a golden chance to dominate the world markets," Hamad said. Worse, Hamad warned, it will lead to further decline in the land area set aside for cotton cultivation. According to Ministry of Agriculture statistics, cotton cultivation decreased from 720,000 feddans in the 1997/1998 to 645,000 in 1998/1999, with long-staple varieties suffering the greatest decline, down from 272,991 feddans in 1997-1998 to 241,774 in 1998-1999.

The Federation of Cotton Exporters (FCE) warned that cotton exporting companies are likely to lose more than LE400 million due to the government's decision. "It is a catastrophe. Long-standing clients in the world market will be lost to other cotton-exporting countries, especially the US, Pakistan and Israel," said FCE's chairman Said Haggag.

An FCE report announced this week that for the coming season (1999-2000) -- beginning 1 October -- contracts for cotton exports showed a 20 per cent drop compared with the same period last year. Extra-long cotton exports, the report noted, had dropped by 26 per cent while long-staple varieties had nose-dived by an astonishing 71 per cent.

The report offered a review of current exports: "India has reduced its purchases of Egyptian cotton by 78 per cent, Italy by 14 per cent, Hungary by 56 per cent, France by 52 per cent and Indonesia by 42.7 per cent. It is also regrettable," the report continued, "that some other clients, such as Malaysia, England, Morocco, Belgium and Romania, have opted not to buy any quantities of Egyptian cotton although they imported large quantities in the same period last year."

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