World's largest wheat importer has agricultural potential
The challenge is not how to feed Egypt, but how to support Egypt to feed itself with the active involvement of investors
Egypt is the most populous country in the Middle East with more than 82.5 million people. Feeding such a large, and rapidly growing, population under Egypts climate and topographic conditions is a challenge. Today, Egypt is the largest importer of wheat in the world.
This makes the country dependent on external supplies and subject to the volatility of global markets. Buffering price and supply swings are politically inevitable, yet they put a huge strain on the governments coffers. These are funds which are later lacking for crucial investments without which the current vicious circle cannot be broken.
However, this is not how it has to be. Egypt has strong agricultural potential and has the ability to massively improve its agricultural supply. Local and international private companies are ready to invest provided they find the right conditions. One example where there is vast room for improvement is the efficiency of production and distribution infrastructure.
According to estimates, up to 50% of production is wasted through the various stages of processing, logistics, trading and retail distribution. Egypt could save up to $500 million annually if wheat and maize losses were reduced by half. The estimated losses in horticultural products are also substantial, reaching 19% in fresh fruits and 29% in fresh vegetables, partially due to the limited refrigerated storage capacity.
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Given this unused- or under-used potential, the challenge is not how to feed Egypt, but how to support Egypt to feed itself with the active involvement of investors. For this, the role of the private sector is critical as the public sector does not have the means and is not equipped to tackle the existing inefficiencies. Private sector investments are urgently needed along the whole value chain from production to storage and distribution.
A more efficient allocation of resources will not only increase and improve output; it will also serve as an engine for innovation and higher added-value production. The search for yields will incentivise producers to tap into new markets with new products, especially in respect to advanced export markets, and with higher returns such as processed food.
The drive for higher efficiency will in turn lead to a better use of resources resulting in higher productivity. For example, opportunities for energy generation can be created through better use of food waste (approximately 28 million tonnes) since around only 5% is used, while the remaining 95% adds to environmental pollution.
With over 20 years of experience in promoting the transition to market economies and facilitating access to finance for private entrepreneurs the EBRD sees itself ideally placed to support reforms to boost Egypts economy. In the agribusiness sector alone the bank today has a portfolio of 3.4 billion euro. The EBRD can act as a pioneer in attracting foreign direct investors, and it also plays a crucial role as a linchpin between the private and the public sector.
This is all the more important as the public sector also has crucial tasks to fulfill. While private sector investment is key in addressing Egypts food security challenges, the public sectors role is equally important in helping to improve the business climate and ensure transparent, predictable and coordinated public policies.
For example, the agribusiness sector lacks streamlined regulation to ease the process of owning and leasing agricultural land and lacking alternative sources of collateral such as warehouse receipts access to finance from banks remains severely constrained.
There is no doubt that Egypts agriculture and food industry boasts strengths that can be leveraged. The improvement of the agricultural production and basis is a vital first step. But Egypt could do more and progress with the full participation of the private sector. Egypt can embark on this reform process which ultimately promises rich yields and EBRD stands ready to help.
- Gilles Mettetal is EBRD Director, Agribusiness
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