Sisi’s commodity initiative fails to find universal favour

tn_IMG_4707A plan by Egypt’s Presi­dent Abdel Fattah al-Sisi to bring down runaway commodity prices is seen by a wide section of the public as one last at­tempt to help the poor put food on the table but some economists fear it could scare investors away.

Sisi said Cairo would intervene to prevent commodity prices ris­ing even more in the local markets, vowing to bring the prices down quickly. The government will sell basic commodities at more than 4,000 state-run supermarkets below market prices. It also has coordi­nated campaigns by the Interior Ministry and the Ministry of Sup­ply to crack down on traders who increase prices.

Most importantly, the army, which acts as an autonomous agri­cultural and industrial production entity, producing everything from macaroni to cooking machines, will sell vegetables, cooking oils, meat, chicken and butter at re­duced prices. The plan has been warmly wel­comed by the public but econo­mists say the scheme could scare investors away and introduce un­fair competition into the market.

Shereen al-Shawarbi, an eco­nomics professor at Cairo Univer­sity, said Egypt needs to attract investment. “If the government offers these commodities at these low prices, the private sector could run away because it will not be able to stand the competition,” Shawarbi said.

Other economists counter that the government should protect the poor. “The government has the right to take measures to protect the poor in society,” economist Bassant Fahmi said. “These measures will, at the end of the day, coerce greedy traders to reduce their profit mar­gins because they will not stand competition with the government, which has strong economic means to tame uncontrollable prices.”

In the past two years, most com­modities in Egyptian markets rose 30-60%, according to economists. A kilogram of tomatoes rose from about 7 US cents two years ago to around 13 cents now. A kilogram of beef rose from $7.50 in 2013 to more than $10 now. Most com­modities had similar price increas­es. Egypt’s annual inflation rate was 9% in September. Some 2% lower than the September 2014 rate, the drop was not felt by the majority of Egyptians.

A vendor waits for customers at a vegetable market in Shubra on the outskirts of Cairo September 27, 2011. Egypt, once the breadbasket of the ancient Roman empire and now the world's biggest wheat importer, is paying a hefty price to keep its citizens fed with cheap loaves and other foodstuffs. The $5.5 billion which it spends each year on food subsidies, mostly on wheat, is a burden that it can ill afford as the economy falters and the budget deficit balloons after the uprising that ousted president Hosni Mubarak in February. Picture taken September 27, 2011.  To match Feature EGYPT-FOOD/   REUTERS/Mohamed Abd El-Ghany (EGYPT - Tags: BUSINESS)

Rising commodity prices are threatening to translate into politi­cal unrest with activists, including those at the forefront of the 2011 uprising, calling for another revo­lution in January 2016. Observ­ers have linked Sisi’s initiative to lower commodity prices to those movements.

The success of the president’s campaign is still not certain. One of the challenges for the government will be to have its cheap commodities pro­gramme reach areas where most of the poor live. State-run supermarkets and army vehicles selling meat and vegeta­bles at reduced prices can be found in urban centres but it is not known whether the same opportunities are available to Egyptians living  in other areas of the country.

How long the state can offer commodities at reduced prices to the public is another question given that Egypt has plans to slash commodity and fuel subsidies in a desperate bid to bridge a growing budget deficit.

Yumn al-Hamaqi, an economics professor from Cairo University, said Sisi’s plan could succeed in lowering commodity prices if the government can deliver cheap commodities to all poorer Egyp­tians, including those living in the countryside and city slums. “This is the real challenge, in fact,” Hamaqi said. “If the govern­ment fails in making these cheap commodities available to the poor everywhere, we will then be talk­ing about a campaign that is pre­sent in the media while the major­ity of the public will continue to suffer.”

This article by Amr Emam originally appeared in The Arab Weekly

Leave a Reply

Your email address will not be published.