Precarious policy
As the battle between the government and traders brews over price fixing, consumers continue to pay an exorbitant price for everyday goods. Sherine Nasr writes
The latest upsurge in household commodity prices caused by the devaluation of the pound has dealt a painful blow to the budgets of the majority of Egyptian families.
Hoping to maintain some control over the unjustifiable price rises, the government has fixed the prices of a number of essential commodities that are believed to be indispensable to Egyptian households, such as sugar, oil, margarine, flour and tea.
With the impending US war against Iraq threatening to cause further price hikes for imported goods, the government is up against a serious challenge.
"Decisions of this sort are taken to be violated rather than followed," said Sayed Abdeen, head of the Grocery Division at the Egyptian Federation of Chambers of Commerce. "A shift from a supply-and-demand market to a fixed-price market cannot be made through a decision. There is no way to control the market through a list of pre- determined prices."
In what is considered a public admission of the awkward situation in which the government has found itself, Prime Minister Atef Ebeid announced early this week that there will be no return to the compulsory fixed-prices market of the early 1960s, which was abolished under the liberalisation policies of 1991.
Wholesale traders claim, however, that the earlier decision had created a state of uncertainty that is believed to be more harmful than the decision itself. "Fearing that the government will take legal measures against violators of the set prices, traders stopped putting commodities on the market, making the situation even worse," said Salah Abdel-Aziz, secretary-general of the Grocery Division and a wholesale trader.
During the past two months, importers, local producers and wholesale traders have exchanged accusations over the latest price increases. Importers claim that wholesalers raised prices to make money out of the devaluation of the pound. Wholesalers, on the other hand, say they had to raise prices because they bought the commodities at much higher prices from local producers and importers.
Others charge that the government is responsible for the string of price hikes. According to Abdeen, public sector wholesale food companies, which are the mediators between factories and wholesalers, were the first to raise prices, with the private sector following suit.
"If commodities are purchased at the source at a higher price, it is only natural that wholesalers will sell at an equally higher rate," Abdeen said.
Retailers, who are at the end of the price chain, are the ones who bear most of the brunt. "We are stuck in quite an awkward situation," said Mohieddin Ali, the owner of a supermarket. Retailers now have to put up with commodity inspectors, whose task is to make sure that the goods are sold at the set prices, while having to buy the commodities at the higher prices set by the wholesalers.
"Worse is the fact that wholesalers refuse to issue bills for the commodities sold, leaving retailers with no legal claim in case they are accused of violating the government's fixed prices," Ali said.
Meanwhile, the new price labels have already been affixed to almost every commodity at supermarkets and grocery stores, and there is little the government can do to ensure that the prices will go back to what they were two months ago. "When prices go up, they usually do not go back down again," Abdel-Aziz said.
The government's only way to help now, as he sees it, is to open as many public commodity outlets as possible, where goods are offered at reasonable prices. Another possible solution, according to Abdel-Aziz, would be for commodities to be sold directly from factories to consumers without the use of mediators.
Al-Ahram Weekly Online : 20 - 26 March 2003 (Issue No. 630)
Located at: http://weekly.ahram.org.eg/2003/630/ec3.htm