KAFA’A KNOWLEDGE AND ACTION FOSTERING

ADVANCES IN AGRICULTURE

Export and Marketing of Horticultural Products in Egypt

Prepared by

Prof. Mohammad Samir El-Habbab

August 2004

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Table of Contents Page

Abbreviations..............................................................................................3 1. Introduction... ........................................................................................4 2. Economic policies that affect horticultural products exports...........................4

2.1 Economic Reform Program...................................................................4 2.2 The Fifth Socio-Economic Plan.. ............................................................4 2.3 The Main features of macro-economic policies.. ......................................5

3. Agricultural Sector in Egypt 7...................................................................... 3.1 Agriculture in the economy.. ................................................................7 3.2 Agricultural Resources and production...................................................8

3.2.1 Agricultural Land...........................................................................8 3.2.2 Water Resources... ........................................................................8

3.3 Agricultural production…......................................................................9 4. Agricultural trade .................................................................................. 11 5. Structure of Local and Export Market ...................................................... 15 6- Agreements Related To Horticultural Products .......................................... 19

6.1 Multilateral Agreements..................................................................... 19 6.2 Bilateral Agreements..........................................................................20

7. Quality Control and Certification ............................................................. 21

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Abbreviations COEIC Central Authority for Import and Export Control Authority COMESA Common Market for Eastern and Southern Africa EAGA Egyptian agri-business association EOS The Egyptian Organization for Standardization and Quality Control GAFTA Greater Arab Free-Trade Area GDP Gross Domestic Product. GOEIC General Organization for Export and Import Control HEIA Horticultural export Improvement Association IMF International Monetary Fund MALR Ministry of Agriculture and Land Reform RPT Refrigerated Perishable Terminal TIFA Trade and Investment Framework Agreement WTO World Trade Organization

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1. Introduction The Egyptian government is generally positive regarding foreign investment and considers the expansion of private sector investment as a means of achieving its growth rate target of 8 % per annum. The government is especially interested in foreign investment for projects relating to the reclamation and cultivation of desert lands for agriculture, industry, tourism, housing and reconstruction and projects which require modern technologies, increase exports, decrease imports or are labor intensive.

2. Economic policies that affect horticultural products exports

2.1 Economic Reform Program Since 1991, Egypt has pursued a comprehensive economic reform and structural adjustment program that aimed to: Create an open, market oriented, decentralized, private sector-led economy. Foster economic growth, promote foreign direct investment. Encourage private sector investment and integrate Egypt into the global economy.

The reform program consisted of four overlapping phases: The first phase of the stabilization program, involving fiscal and monetary

tightening, exchange rate liberalization, and price deregulation. The second phase of the program involves further deregulation of prices, market

investment, the financial sector, and a greater role of the private sector. Egypt has now completed the third phase. A fundamental policy challenge facing

Egypt now is to consolidate and extend the ongoing recovery, particularly in view of increased global challenges. This will require continued strong macroeconomic policies, accelerated structural reform, and the promotion and diversification of exports.

The goals of phase four include continued fiscal reform, enhancing the instruments of monetary policy, increasing the pace of structural reform and enhancing transparency in the regulatory and institutional frameworks. The government also intends to faster export-led economic growth and development. Other goals include promoting human development, improving living conditions for low income groups and developing high skill-based industries.

2.2 The Fifth Socio-Economic Plan The specific objectives of the fifth socio-economic plan 2002-2007 are: Improving quality of life and standard of living, through improving the basic

services (education, health, …etc.) Facing the unemployment problem, this includes creating about 382 thousand new

job opportunities annually through the five years of plan. Decreasing the ratio of poverty and realizing more socio-economic equity either

among different regions or among different social classes. Increasing annual economic growth rate up to the average of 6.2%.

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Re-realizing economic balance through a package of fiscal and monetary policy tools to accelerate growth rates and achieving a surplus in the balance of current transactions.

Increasing women participation in development processes. Improving rural sector and Egyptian villages' situation through making basic

services and soft loans available to them. Supporting Security for the country and citizens through developing the capability

of national army

2.3 The Main features of macro-economic policies a. Fiscal policy Revise and modify income tax rates and decline its upper limit. Rationalizing public expenditure. Revising tax exemptions to be more attractive for investors. Encouraging unofficial sector to get in under the umbrella of official sector, in

order to expanding the base of tax population. Improve tax regulations and legislations to be more adapted to current economic

reform environment. Continuing providing subsidy to basic food items for lower income classes. Accelerate finalizing the on going projects in order to incorporate their contribution

to national production. b. Monetary policy Achieving proper monetary stability and controlling inflation. Strengthen supervision and inspection role of central bank. Keeping a balance of foreign exchange market through improving the balance of

payment. Managing the interest rate as an effective tool for investment guidance and

allocation. Activating the role of banking system in the area of export enhancing and

improvement.

On January 28, 2003, the Government of Egypt reversed its long-standing policy of fixed exchange rate system and announced that is currency would float. This is a major economic reform step for the government since foreign exchange rates will now be determined by market conditions rather than being set by the government. If implemented as stated, the new exchange rate mechanism is expected to enhance confidence in the Egyptian economy and make Egyptian exports more competitive. The parallel market is still active although the gap between the bank rate and the parallel market rate has narrowed in recent days. The price of many food and feed items particularly imports, increased approximately 20 to 30 percent in reaction to the devaluation of the pound. Many importers are reporting that foreign exchange availability is tight in the banking system and they are unable to open letters of credit in banks. Importers also note that they are unable to price their products because of frequent fluctuations of the Egyptian Pound. As a result, many businesses have decided to monitor the market for a while before making new purchasing plans.

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c. Investment policy Improve performance of different authorities responsible for investment activities

and develop efficient systems for investment services and information. Activate promotion efforts for local and foreign investment, and making the

feasibility studies of promising investment opportunities available. Revising regulations and legislations framework affecting investment in order to

develop a unique framework, and also to unifying the responsible authorities in a single mechanism.

Concentrate the role of public investment in the area of social development and infrastructure projects which looks unfavorable to private sector.

Encourage financing small and medium size projects. d. Foreign Trade Policy Facing and relaxing the main Egyptian export obstacles either for commodities or

services. Activating the role of export institutional framework including the supreme export

board1. Enhancing the national economy amalgamation in the global economy through

strengthening its relations with different economic groups and markets. Developing education, research, training, market studies concerning export

development. Seeking the establishment of national specified companies in the field of

international marketing. Solving export transportation problems in the direction of expanding capacity,

decreasing cost, and timing perfection. In an attempt to calm worried consumers, the government announced March 10, 2003 that it would suspend the purchase of "non-essential" imports for a period of three months. Goods imported by the private sector are not affected by this policy. According to the announcement, the government would continue to import basic food commodities such as wheat, corn, sugar, vegetable oil and other "strategic commodities." Moreover, the announcement said that the government plans to "fix" the price of 21 commodities produced by the private sector companies including sugar, flour, vegetable oil, soap, macaroni, cheese, tea and meat. However, most of the commodities mentioned in this announcement are in the hands of private trade not the government. Therefore, this measure is not expected to affect the price of most commodities. In an attempt to reform its import and export regime, the Government of Egypt took a significant step to streamline the process of import inspection by issuing a Presidential Decree No. 106 of 2000 which centralized the process of inspection and certification of imported goods. In the past, there were five government entities involved in the import clearance process. With this decree, inspection will only be done through the Central Authority for Import and Export Control Authority (GOEIC) of the Ministry of Foreign Trade. 1The Supreme Export Council was established in 1996 to eliminate bureaucratic obstacles to exporters; adopting reduced customs, duties and tariffs; abolishing a government office of investors' services, long seen as a bureaucratic obstacle to investment.

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Free trade zones have been established in Cairo, Alexandria, Suez City, Arish, Ismailia, Port Said, Damietta, Safaga and Sohag.

Under an agreement with the IMF and the World Bank, minimum tariff rates were set at 5% and maximum rates were set 60% in 1994 and 50% in 1995, but these have so far not been implemented. Tariffs on products previously on the list of prohibited goods, however, have been increased (tractors, cement, frozen vegetables and most recently poultry and fabrics).

Egypt applies prohibitive customs duties on alcoholic beverages. Egypt also applies customs surcharges of 2% or 3% of the value of a consignment depending on the rate of duty applicable. These would appear to be in violation of GATT.

In 1998, Egypt imposed a direct shipment requirement for a wide range of consumer goods and certificates of origin.

Some products are "subject to prior permission and special conditions" and certain products are subject to quality control on importation and require approval from various public bodies and ministries.

However, in 1998, the government took a number of measures to restrict trade, in particular of consumer goods. Most of these measures may be incompatible with WTO rules. Other trade problems with Egypt include burdensome labeling and marking requirements and violations of WTO bound rates, mainly in the dairy, poultry and food preparations and in the chemicals, metals and machinery sectors.

3. Agricultural Sector in Egypt

3.1 Agriculture in the economy

The value of total production in agricultural sector (including irrigation and fishing subsectors) estimated by about L.E. 79.2 milliard in year 2002/2003. While GDP from agriculture sector for the same year was about L.E. 60.0 milliard in constant price (1996/1997), represents the second important sector after manufacturing industries sector (16.4% for agriculture versus 19.6% for manufacturing).

Agriculture sector contribution in total GDP fell from about 25.6% in mid 1980's to about 17.3% in the year 1997/98, and has a slow downward in the next years, from about 16.7% in 1999/2000, to about 16.4% in 2002/2003. The agricultural production depends mainly on private sector which represents about 99.5% of total agricultural production and also from agricultural GDP.

Real growth rate of GDP from agricultural sector ranged between 2.0% and 3.7% annually from the beginning of the first five year plan (1982-1987). In common, real growth rate of GDP from agricultural sector is less than the total GDP real growth rate, as the follows:

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Table 1. Real Growth Rate of GDP from Agricultural Sector

Item Agriculture sector Total GDP %

First plan (1982-87) 3.0 6.2

Second plan (1987-92) 2.7 4.0

Third plan (1992-97) 3.1 4.3

The four years (1997-2001) 3.6 5.5

The year (2001/2002) 2.0 2.0

The year (2002/2003) 2.8 3.1

3.2 Agricultural Resources and production

3.2.1 Agricultural Land A. Rainfed agriculture Egyptian agriculture relies mainly on the Nile Water for irrigation of almost 96% of the agricultural lands. Rainfed agriculture is very limited in some northern costal areas represents about 3% of agricultural lands (about 104 thousand hectares). Rainfed also used in feeding water into northern lakes, the underground reservoirs, and soil leaching. There is an annual average of torrent water estimated at 1.5 Billion cubic meters; Ministry of Water Resources builds dams on certain valleys to store such waters for future use and also for feeding the underground reservoirs. B. Irrigated Agriculture: With the very minor importance of rainfed agriculture area, Egyptian agriculture is almost entirely dependent on irrigation; consequently agricultural development is mainly dependent on the efficient use, maintenance and management of the water resources. The irrigated agriculture area constitutes about 97% of total agriculture area, but it constitutes a higher ratio from the total agriculture production. In the irrigated land, the cropped area is almost a double of land area with an intensive ratio of about 200%.

3.2.2 Water Resources River Nile is the major source of water in Egypt, besides there are another three minor resources, they are; underground water, effective rainfall and non-traditional water resources. The total available quantity from different sources is about 73.8 Billion Cubic Meters annually. The currently used water estimated by about 62.6 Billion Cubic Meters.

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3.3 Agricultural production Very wide variety of crops are grown in Egypt, the major groups are: Cereal crops: wheat, barley, maize, sorghum and rice. Fiber crops: cotton and flax. Sugar crops: Sugar cane and sugar beet. Oilseed crops: peanut, sesame, soybean and sunflower . Legumes: broad bean, lintels, fenugreck, chick peas and lupine. Starchy crops: potatoes and sweet potatoes. Fodder crops: clover, alfalfa and others. Onion and garlic. Vegetable crops (more than fifty varieties). Fruits (more than twenty five varieties) Aromatic & medical crops: (move than twenty varieties)

Table (2) exhibits a list of more common agricultural crops in Egypt and its production estimate for a latest available year (2002).

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Table 2. Common Agriculture Crops Production in Egypt in 2002 Crop Production

(1000 m.t) Crop Production

(1000 m.t)Crop Production

(1000 m.t) Cereals :

- Wheat 6624.9 - Cauliflower 110.4 - Others 2.1 - Barley 100.8 - Eggplant 826.9

Fruit trees

- Rice 6105.5 - Pepper 476.7 - Dates 1090.0 - Maize 6431.0 - Okra 94.3 - Oranges 1808.6 - Sorghum 902.2 - Jews Mallow 98.4 - Mandarin 601.7 Oil seed crops - Taro 66.3 - Sour lime 324.6 - Peanut 191.0 - Radish 14.1 - Other lime 2.0 - Sesame 36.9 - Parsley 68.6 -Sour Oranges 30.2 - Soya Bean 17.7 - Rocket 33.9 - Grape Fruit 3.1 - Sun flower 35.3 - Egyptian leek 35.3 - Grapes 1073.8 - Sugar Crops: - Artichoke 61.0 - Mango 287.3 - Sugar Cane 16016.8 - lettuce 144.5 - Banana 877.6 Sugar beet 3168.3 - Carrot 115.0 - Apple 224.9 Fiber Crops: - Turnip 42.1 - Peach 339.3 - Cotton 761.7 Dill 43.9 - Plum 19.8 - Flax 78.4 - Spinach 45.1 - Fig 194.6 - Kenaf (teel) 1.7 - Strawberry 60.5 - Prickly Pear 29.4 Legumes: -Green Peas 352.3 - Guava 244.6 - Broad Bean 646.0 - chard 5.4 - pomegranate 24.9 - Lentil 3.5 Market crops : - Apricot 103.1 - Chick peas 13.6 - water melon 1720.6 - Pear 34.7 - lupine 5.4 - Melon 219.8 - Olives 336.4 - Fenugreek 14.9 - Cucumber 541.9 - Almond 28.5 Fodder crops: - Snake Cucumber 91.2 - Custard Apple 2.7 - clover 95504.6 - Cantaloupe 489.1 - Other Fruits 9.9 - Alfalfa 1787.8 - Other 31.9 - Others 4156.1 Other crops : Starchy crops - Aromatic &

Medicinal plant 178.7

- Potatoes 1985.3 - Papyrus 4.4 - Sweet Potatoes 207.1 - Matting Cyperus

( Simmer) 23.5

Onion % Garlic - Lufa 25.7 - Onion 1543.5

Seeds, water melon 52.5

- Garlic 246.4 Greenhouses : Vegetables: - Cucumber 340.6 - Tomato 6788.9 - Tomatoes - Squash 672.9 - pepper 73.4 - Beans 286.4 - Eggplant 4.2 - Kidney Beans 73.3 - Green beans 9.6 -Cabbage 556.6 Cantaloupe 93.2

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4. Agricultural trade Traditionally, agricultural products are an essential component of Egyptian foreign trade, either as raw products or as preserved and processed products. Agricultural products importance of exporting commodities produced in other developing sector. In recent years, the share of agricultural exports in total commodity exports has fluctuated from year to year, between 10% to 15%, without no defined trend, the share of agriculture in importation trade has marked increasing trend from about 10.6% in 1998 to about 16.0% in 2002, as shown in Table (3). From the same table it could be concluded that food products have a relatively high percentage for importation (about 12.5%) and a relatively small but increasing percentage for exportation.

Table (3) Agricultural and food products in commodity trade (value in million US $)

Agricultural

crops Food products

Textile

products

Chemical &

medicinal

industries

Others Trade Total

V % V % V % V % V %

Exports

1998 3260 515 15.8 56 1.7 833 25.5 319 9.7 1537 47.1

1999 3574 530 14.8 87 2.4 743 20.8 363 10.2 1051 51.8

2000 4696 506 10.8 98 2.1 911 19.4 400 8.5 2781 59.2

2001 4123 529 12.8 101 2.4 801 19.4 325 7.9 2367 57.4

2002 4692 660 14.1 110 2.3 794 16.9 379 8.1 2749 58.6

Imports

1998 16537 1747 10.6 1897 11.5 382 2.3 2614 15.8 9897 59.8

1999 16020 1839 11.5 1952 12.2 320 2.0 2638 16.5 9271 57.9

2000 13907 1857 13.4 1794 12.9 234 1.7 2246 16.2 7776 55.9

2001 12639 1784 14.1 1598 12.6 225 1.8 2178 17.2 6854 54.2

2002 12524 2004 16.0 1519 12.1 234 1.9 2098 16.7 6669 53.2 Source: Ministry of Foreign Trade, Collective Foreign Trade Report, Volume 3, No. 7,

February 2004.

The main important agricultural exports are raw cotton, rice, potatoes, oranges and onion. On the other hand, the main agricultural imports are wheat, corn, vegetable & animal fats and oils, raw sugar, soybeans and other oilseeds, meat, fish, livestock (cows and buffaloes), milk and dairy products, dry legumes, cake for animal feeding, and seeds for plantation (Table 4). Egyptian development strategies, objectives and policies largely emphasize on the dimension of foreign trade as an essential tool to achieve a higher support to the national capability towards economic and social development, through; enhancing GDP growth rates, improving balance of payment, stabilization of exchange rate,

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creating new employment opportunities, and ensuring sufficient needs from essential food products. The specific agricultural trade objective within the wide scope of national trade objective as targeted in the Fifth Economic and Social Development Plan 2002/2007 are:

Increasing agricultural exports from about U.S.D. 590 million in 2001/2002 to about one billion US$. in the year 2006/2007, with a targeted rate of growth 12.3% in average annually.

The above objective relies mainly on expanding exports from fresh and frozen vegetables in general and potatoes, onion, and tomato. Citrus and other fruits in particular with an annual average growth rate of about 24%, medicinal and ornamental plants with about 9.5%, and rice with about 6.3% in average annually within the period of the fifth plan 2002/2007.

Regain the traditional markets of Egyptian cotton exports, as well as opening new markets for it.

Promote export development of cut-flowers and put-plants. The main objective of imports is to ensure the necessary needs from essential food commodities, side by side with improvement of self sufficient ratios from those items with positive promising indicators to improve it from year to year. Within that framework, the planned objective is to increase imports in general by about 5.3% in average annually, with a specific ratio of about 6.5% for investment commodities and specific ratio of about 5.4% for the production requirement commodities, and a negative ratio of about 4.4% for consumption commodities. Which means that the target for the consumption commodities is to decrease its value of imports from year to year within the period of the on-going plan (2002/2007).

Total exports of selected non-traditional horticultural products are shown in Table 4. This table shows that table grapes exports had increased dramatically from 2.5 thousand tons in 1997 to 14 thousand tons in 2003. Cut flowers followed the same pattern, since it increased from 200 tons in 1997 to 1.2 thousand tons in 2003. The only product that decreased in export during the same period was Bobby Beans, but it was compensated by the increase of exports of extra fine and fine beans.

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Table (4). Major Agricultural Export and Import Items 2000-2002

(in L.E. millions), 2000 2001 2002

Exports

Fresh raw: Raw cotton 672.9 740.8 1490.2

Fresh onion 43.1 56.6 106.5

Potatoes 92.8 118.5 192.6

Orange 50.8 201.6 157.5

Legumes 72.0 76.0 n.a

Raw flax 30.0 40.0 No

Manufactured : Dairy Products 19.2 21.3 41.9

Dried onion 50.9 42.0 71.1

Rice (bleached) 360.7 529.3 467.1

Frozen vegetables 45.0 48.0 n.a

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Raw : Wheat 2122.6 1707.3 3013.7

Corn 1933.5 2201.2 2673.3

Soybeans 162.1 315.6 322.2

Other oilseeds 211.0 249.0 n.a

Intermediate commodities: Raw sugar 94.2 204.9 213.2

Vegetable & animal oils & fats 771.7 521.0 514.1

Seeds for plantation 434.6 223.9 360.3

Commodities for consumption: cake (for animal feeding) (non-durable) 710.1 884.7 976.0

Meat 983.2 640.2 1020.1

Fish 476.3 532.5 423.0

Life cows & Buffalos) 406.2 435.4 266.8

Milk & dairy products 635.6 625.1 665.0

Dry legumes 277.0 465.0 n.a

n.a. : not available Source: National Bank of Egypt, Economic Bulletin, Vol. 56, Cairo, 2003.

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Table 5: Total Exports of Selected Non-Traditional Horticultural Products

1997 1998 1999 2000 2001 2002 2003 Crop Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value Table Grapes 2500 5.76 3200 9.69 5100 10.2 6000 12 6500 13 8000 16 14000 28 Green Beans 22000 33 25500 40.8 24000 36 26500 45.05 28000 56 28000 64.4 29000 72.5 Extra fine & Fine beans 1100 2550 3600 5300 7000 9800 14500 Bobby Beans 20900 22950 20400 21200 21000 18200 14500 Strawberry 3000 15 4800 26.4 5000 30 5500 34100 6000 38.4 6800 42.84 8000 52 Herbs and Spices 21000 84 20000 120 21000 115.5 21000 84 22000 132 22000 143 23000 147.2 Cut-Flowers 2000 1 230 1.265 500 2.6 550 3.3 650 3.835 700 4.06 1200 7.32 Source: HEIA records, Egypt 2004

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5. Structure of Local and Export Market Within the context of economic reform and structural adjustment since early 1990's, marketing services in general and for food & agricultural products in particular were a main field of dramatic improvement in Egypt, either for domestic or export marketing. Private sector has leading role in some areas of marketing systems and marketing services improvement, with a significant contribution and promotion from government side in all areas. Among different areas improvement, the remarkable achievement including the following elements of domestic and exporting market services, facilities and infrastructure: Development of total trucks loading capacity up to about 1.5 million mt. of cargo,

66% belongs to private sector. The national marine fleet units have been increased to about 123 vessels, about 90

units are cargo vessels with a total capacity of about 580 thousand mt. The annual capacity of railways cargo transportation is about 5000 million mt/km. The river shipment capacity is about 2.3 million mt/km. The number of Egyptian airports approved as international airports has been

increased to nine airports allocated all over the country. Improvement of sea ports capacities and facilities. Currently there are 8 seaports,

four at red sea and four at Mediterranean sea with total capacity of about 54 million mt of trade (exports & imports) annually, approximately 24 million mt are being handled annually, the excess capacity has been planned for future growth of trade activities.

Establishment of improved wholesale markets for agricultural products in different cities and governorates, El-Obour wholesale market at Cairo city is an example of new agricultural wholesale modern markets with good facilities of cold store, grading and packing.

Grading and packaging center in an Export farm in Ismaeliea

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Spreading of modern food distribution channels, with modern retail outlets; chain stores, super markets and chain restaurants is slow 2 . Egypt's retail trade is dominated by a large number of small privately-owned shops and vendors. Government cooperatives with hundreds of outlets also combine wholesale and retail activities. Most consumer-ready food products are sold through mom-and-pop shops and supermarkets. Most Egyptians still buy fresh meats from local butchers instead of supermarkets. Middle and upper class Egyptians buy most of their foodstuffs from supermarkets or other food shops. Small supermarkets are widespread in Cairo, Alexandria and other big cities. Table 6 shows the number of retail outlets in Egypt.

Table 6. Number of Outlets (2000/2001)

Location

Wholesalers

Super- markets

Groceries

Kiosks

Gas Stations

Total

Cairo + Giza

2123

119

33623

6401

274

42540

Alexandria

450

25

7753

2327

110

10665

Total Delta

1917

4

23143

5834

336

31234

Grand Total

4490

148

64519

14562

720

84439

Source: FAS/Cairo global Agriculture Information Network (GAIN) Report No. EG1032, available via FAS web site www.fas.usda.gov Improvement of food processing industry with a remarkable increasing tendency of

processed food consumption and partially prepared or semi-cocked food stuffs consumption. This tendency is accompanied with a significant improvement of consumer packaging, labeling and using media or other methods of advertising. In this respect HEIA applies market quality standards and regulations, and increase members' awareness and assist them to apply most up-to-date practices to produce safe food. Quality Control Inspection is carried out by 21 highly trained inspectors. There is also Food Safety Program in Farms and packing houses, facilities and suppliers audits.3

The food service industry is expanding and consumers’ habits are changing. Dining outside the home is becoming more popular. The number of working women outside the home is growing, and the number of dual income families is increasing. Restaurants, hotels and resorts are expanding not only in Cairo but also in the Red Sea Coast and Sinai. American fast-food chains dominate the market. At present, thirty American fast food franchisors, such as A&W, Chili’s, Fuddruckers, Hard Rock Café, KFC, Kenny Rogers, Little Caesars, Pizza Hut, McDonalds, and TGI Fridays operate in Egypt. Consumers in Cairo, Alexandria, and the Red Sea area are more aware of international trends in food. Middle and

2 Egyptian consumers have increasing demand for quality and variety. Demand for consumer ready products is trending upward due to the expansion of local supermarket chains and multi-national firms investing in Egypt, such as "Carrefour" French and "Shoprite" South Africa. 3 HEIA, "HEIA Pamphlet" Horticultural Export Improvement Association. Cairo, Egypt. 2002

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upper-middle income shoppers are drawn to supermarket chains4 Establishment of association supporting marketing and exporting of food and

agricultural products, such as consumer protection associations (there are about 46 of it in recent years), Horticultural export improvement association (HEIA) and Egyptian agri-business association (EAGA).

Developing improved marketing information systems to support both local and export marketing. Ministry of Agriculture and Land Reclamation (MALR) has established a new specialized project for marketing information collection & dissemination of agricultural products. Ministry of foreign trade with ITC established a specialized unit for export markets information which called Trade Point.

Establishment of relatively specialized, large size firms for agricultural export, most of them, if not all, have modern, sufficient, and adequate packing houses and cold store facilities, some of them are enjoying a high degree of vertical integration between local & export marketing systems.

Establishing a cold store terminal at Cairo airport for perishable export products administered by HEIA5.

Significant development has occurred in the area of harvesting and post harvesting practices through extension and training programs implemented by both governmental and private sectors6.

The marketing channels for fruits and vegetables are shown in Figure 1. The exportable products are produced in specialized farms, where most of the producers in these farms are also exporters who sign contracts with importers in the foreign countries. The large farms, mainly the ones having EurepGap certificates, have their grading and packing hoes, and cols storage facilities. The produce is sent mainly to the cold storage yards in the airport, where it is checked for security inspection and then shipped by airplanes to its destination.

4 Ali Abdi & Manal El Masry. Egypt Exporter Guide Annual 2003. GAIN Report Number: EG3023, USDA Foreign

An Export Farm in Ismaeliea

5 For more details look in the next page 6 Mjahed, Waheed. Agriculture And Food Security In Egypt Towards A Regional Program For Food Security And Agricultural Development In Caeu-Member Countries. FAO. Egypt 2004

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Figure 1. Marketing Channels in Egypt Most of the producers who sell for the local markets send the produce to the wholesale or central markets7 to be sold to the merchants in these markets after paying a market fee of LE 3/ton. The rest of the produces is collected by small traders from the farms and re-soled in the central markets. The merchant in the central markets sell the produce, mainly, to the retailers, and partly to other semi-wholesalers who sell what they got to consumers who come to the market or to peddlers and retailers. The wholesalers collect a commission of 4-8% of the value of sales from the producers, the higher rates are charged on the producers who receive loans from these merchants. The buyer pays LE 7/ton to the central markets administration.

One of the achievements that made a push to exports of horticultural products was the establishing of the "Refrigerated Perishable Terminal (RPT)" in 2003. It is designed to have the daily capacity of 180 tons of perishable goods. Four mechanical and one manual entrances have been built to speed up the pace of work in the reception, storage and discharge areas.

The objectives of establishing the RPT could be summarized as follows:

Meeting EU/ International market requirements; Enforcing Egypt’s competitive position within the international market; Maintaining the cool chain from grower to consignee, ensuring long shelve

life; Enhancing process quality and increasing quantity of perishable goods; Introducing new products to the international market; Offering faster, better and more reliable handling services

7 There are four large-volume wholesaling markets for fresh fruits, vegetables, fish, meat and poultry in Egypt. The first one in Cairo, "El Obour Market," the second one in Alexandria, the third one in Mansoura. The fourth one is in the 6th of October City, one of the new industrial cities.

Producers for local market

Producers for export market

Imports

Exports Local markets

Central markets

Retailers

Processing

Consumers

Pedlers

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The RPT covers a total area of 24,000 m2 including:

Ground-plan cooled area of 4000 m2 with storage capacity of 72 pallet positions. The RPT maintains temperature ranging from 2 to 6 Centigrade. Reception area covers 1,130 M2 and the exit area covers 730 M2. The import area consists of four chambers (800 m2);

Administration and customs offices; A water tank; A power-generating room

6- Agreements Related To Horticultural Products Over the past years, Egypt has been pressing to secure the many benefits of open markets for the economy, among which are growth and development. To fulfill the vision of open market and development, the government has been, in addition to other trade reforms, pressing for free trade agreements with a number of countries8.

6.1 Multilateral Agreements:

In 1994, Egypt joined the General Agreement on Tariffs and Trade (GATT) and reduced its tariffs on many imported products.

On first of January 1998, Egypt and other Arab countries (including Jordan)

started implementing the Greater Arab Free-Trade Area (GAFTA)

8 Free trade zones have been established in Cairo, Alexandria, Suez City, Arish, Ismailia, Port Said, Damietta, Safaga and Sohag.

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In June 1998, Egypt joined the 21 member common Market for Eastern and Southern Africa "COMESA" with a view to establishing a customs union by 2004 and a monetary union by 2025.

The European Union and Egypt signed a partnership agreement on June 24,

2001 whereby import tariffs on most products, including agricultural products will be cut substantially, or eliminated over the next 12-15 years. The Agreement is expected to be implemented in the next 12-15 months. Both Egyptian and European exporters of various agricultural commodities will gain substantial benefits from the Agreement. The EU 15 countries’ total exports to Egypt increased from 5.8 billion Euros in 1996 to a record level of 7.8 billion Euros in 2000. When implemented, the EU-Egypt Partnership Agreement may disadvantage some U.S. agricultural products in the market, particularly value added products

The Egyptian parliament ratified the Egyptian partnership agreement with E.U.

in March 2003. An interim agreement, signed in December 2003, enables the early application of trade provisions in the association agreement. The agreement will permit Egypt to join the proposed Euro-Mediterranean free-trade zone, to be established by 2010.

In January 2003, Egypt initiated the Aghadir Agreement which will establish a

free trade area with Tunis, Morocco and Jordan. The agreement is expected to be concluded in due course

Egypt established bilateral free zones with each of Jordan, Lebanon, Yemen

and some Arabian Gulf countries. Egypt seeks to strengthen economic and trade cooperation with Asian countries

in general and in particular with Japan, China, India and South Korea.

6.2 Bilateral Agreements:

A trade agreement between Egypt and Syria had been approved and executed since 1991. According to this agreement, a list of commodities of national origin is exempted from trade tariffs and attached taxes (excluding sales taxes). The listed commodities include few Egyptian food and agricultural exports such as ornamental oils, and soups or broth. On the other hand, the list includes some Syrian food and agricultural exports such as potatoes seeds, lentil, barley, castor seeds and raw wool.

A five year agreement with Jordan, automatically renewing, had been

introduced to execution in mid 1991. The agreement cover's almost all commodities of national origin including Egyptian exports of food products. This agreement was actively executed in December 1998, including a reduction (not exemption) of tariff duties on Egyptian and Jordanian commodities of a national origin. The agreement cover's Egyptian exports from plant products. Tomato paste is out of tariff reduction in this agreement.

In July 1999, Egypt and United States signed a trade and investment

framework agreement (TIFA). TIFA aims to enhance investment and trade co-

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operation between the two countries, by facilitating greater reciprocal access to the respective markets of both countries through the removal of non-tariff barriers and other impediments to trade and investment flows. Another important goal of TIFA is to help pave the way towards freer trade between the two countries.

7. Quality Control and Certification The Egyptian Organization for Standardization and Quality Control (EOS) in the Ministry of Industry has sole responsibility for establishing, adopting and publishing food standards and codes of practice. If no mandatory Egyptian standard exist, the following could be applied: Egyptian product standards; International Standards (ISO/IEC); European Standards (EN); American Standards (ANS); Japanese Standards; and Codex Standards. Egyptian authorities are stricter in enforcing product standards on imported food products than on locally produced food products.9 The Ministry of Health issued a new Decree 73 of 2001 regarding colors admissible for use on packaging materials. It is mandatory that colors used on internal and external packaging must not be harmful to human health. The decree also confirmed that all food wrappings should be suitable for the product and usage. The packing must NOT produce toxic substances or any harmful compounds that may lead to coloration of contents or cause damage to the food. Ink is prohibited to be used on the internal surface or packages. However, external surfaces may be painted with safe and durable inks according to handling circumstances, provided that such materials are approved for use and that the painting material does not permeate to the food. For products, such as butter and ice cream, it is imperative to isolate the colored layer from the external surface in a manner that ensures non-penetration of the color. In February 2000, Presidential Decree No. 106 was issued to centralize the process of inspection and certification of imported goods under the General Organization for Export and Import Control (GOEIC), Ministry of Foreign Trade. In the past, there were five government entities involved in the import clearance process. With the new decree, inspection will only be done through GOEIC. However, there are representatives from other ministries such as, the Ministry of Agriculture and the Ministry of Health who also monitor the inspection process. Release Certificates are not issued by GOEIC unless all authorities approve the consignment.

Standards for imported and exported goods are designed and implemented by the General Organization for Export and Import Control (GOEIC), which also participates in the setting of international standards.

With the exception of frozen products, each agency draws its own samples and tests the consignment independently. Samples are drawn for each type of product mentioned on the invoice and for each product with different production and expiry dates, regardless of the size and weight of the products. In many cases, inspectors pulling samples at the port lack the technical experience in sampling the product.

9 Egypt Exporter Guide Annual 2003. GAIN Report Number: EG3023. Ibid

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Sometimes they damage the sample, which is why different authorities require a complete sample, for example, a complete carton to assure a product's safety.10

The Egyptian authorities have introduced increasingly strict labeling requirements (particularly on textile and food products.) In January 1998, Egypt introduced extremely burdensome labeling requirements for poultry and meat. In December 1998, the authorities revived old labeling requirements for many products. A strict implementation of these measures would probably make trade more difficult.11

Egypt requires restrictive labeling for imports of food products. With the exception of the production and expiration dates, information only in English (or other foreign language) is not allowed. Dates are accepted in English, but the word "Production" and "Expiry" MUST be written in Arabic. Arabic language is mandatory. Labels can be printed on the package or be of a permanent adhesive type. Products cannot show more than one date of manufacture or expiration on the package. For example, goods have been rejected if the inside package has a different date than the outside carton. Information on the label cannot be erased, scratched, or altered in any way. Requirements are more restrictive for meat and poultry products. In November 1997, the Ministry of Trade issued Decree No. 465 which calls for the insertion of labels inside the packaging of imported products, including information of the name and address of each importer in Arabic. This requirement necessitates separate production procedures for products destined for the Egyptian market which increases production costs and limit marketing options for U.S. exporters. This also leads to higher prices for Egyptian consumers. Amending information on the label is permitted, but amendments must be done inside the customs area. Amendments can be done for some types of information by a sticker. However, if dates need to be amended, it must be printed on the package (outer and inner package). Amended stickers for dates are not acceptable. Import regulations are routinely developed and enforced without prior notice. This makes Egypt a very risky place to do business. Also, Egypt has mandatory standards for a number of quality characteristics, moving beyond restrictions imposed for health and safety reasons. Many of these quality characteristics should be voluntary industry standards rather than mandatory government standards. These standards such as fat content in meat or brix on fruit juice are unnecessary and their existence coupled with arbitrary enforcement lends credence to Egypt’s reputation as one of the most difficult countries in the world in which to do business. This excessive regulation is unfair to trading partners, raises costs to Egyptian consumers, and discourages investment in Egypt. Import regulations require that food be packed in containers, suitable to the nature and type of commodity, to be clean, sound and free of bad smell, to be kept in good

10 Team Canada "Egypt Agri-Food Country Profile" Market and Industry Services Branch, Agriculture and Agri-Food Canada. August 2002

11 "Egypt Agri-Food Country Profile" ibid

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condition. Also, the consignment should be symmetric in weight and package. The following information should be written on each package in Arabic not liable to deletion:

- Name of producer and trademark; if any. - Country of origin. - Type of product and grade. - Name and address of importer. - Production and expiration date. - Product use instructions (optional). - Product ingredients. - Storage instructions or temperature. - Net weight. - Gross weight and total number of the packages per case or carton. - If the product contains preservatives, the percentage of each preservative

should be indicated. - If the product is meat or poultry, the following statement must appear: "Slaughtered according to the Islamic ritual" or "halal slaughtered."

Egyptian shelf-life requirements for food products differ in many respects from the standards used by other countries. "Best-Used-By" dates are not acceptable in Egypt. Egyptian shelf-life standards ignore quality difference between producers and are often established without scientific bases.