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Thursday, 21 February 2019

Egypt: Cracking down on monopolies

Parliament has agreed on amendments to laws toughening penalties on monopolistic practices in a bid to curb increases in the prices of basic goods

Nesma Nowar , Wednesday 12 Dec 2018
Egyptian Parliament
Egyptian Parliament (Reuters)
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Parliament agreed in principle on Sunday on government-drafted amendments to two laws, the Supply Affairs Law and the Protection of Competition and Prevention of Monopolistic Practices Law, in a bid to toughen up penalties for monopolistic practices.

Final approval was postponed to another session due to the lack of a quorum, however. The amendments aim to rein in prices on local markets, particularly those of essential goods.

A report prepared by parliament’s Legislative and Constitutional Affairs Committee and Economic Affairs Committee said the floatation of the Egyptian pound and the elimination of a large part of fuel, power and water subsidies had led to monopolistic practices and the manipulation of the prices of essential products on the local market.

The new amendments introduce the crime of hoarding strategic goods, such as petroleum products, with the aim of driving up prices. Those found guilty could face a jail sentence ranging from one to five years and a fine of LE100,000 to LE1 million.

The changes impose penalties on smuggling petroleum products, and other products prohibited for export, that amount to jail sentences ranging from three to seven years and fines of LE100,000 to LE1 million.

If offenders commit the same crime again, they could be sentenced to a prison term ranging from five to 10 years and fined from LE200,000 to LE2 million.

The new amendments also give greater powers to inspectors affiliated with the Ministry of Supply, the Consumer Protection Agency and the Ministry of the Interior’s Supply Control Department to help them “discipline the local market, tighten the grip on monopolistic practices, and ensure that citizens get essential goods at reasonable prices,” according to the report.

Parliamentary Speaker Ali Abdel-Aal said on Sunday that the changes aimed to crack down on those who tamper with government-subsidised products and those who may be tempted by monopolistic practices.

“This move is long overdue. We’ve been suffering from greedy traders who hike prices for no reason,” said Doaa Mohamed, a 43-year-old private-sector employee. She said that economic reform measures had raised prices across the board, but that sometimes some traders had raised their prices inexplicably.

“That’s why supervision from the government is necessary, and I hope these new amendments will lead to stricter supervision,” Mohamed told Al-Ahram Weekly.

Deputy head of the Foodstuffs Division at the Cairo Chamber of Commerce Amr Asfour said that toughening penalties would do little to stabilise prices on the market. “The only viable way to bring prices down is to increase supply through local production,” he said.

He said that the majority of traders did not hoard goods in a way that could be considered a monopoly. These should be a clear definition of a “monopoly,” he said, because factories and retailers often hoard goods for production and trade purposes.

Asfour said that harshening penalties could work as a “temporary painkiller”, but they would not bring the needed stability to the market. He said that price increases had not come out of the blue but had been the result of the flotation of the pound and lifting energy subsidies.

Earlier this month, President Abdel-Fattah Al-Sisi stressed in a meeting with ministers the need to continue exerting efforts to deliver basic commodities at affordable prices.

This should happen through an integrated strategy that includes strict oversight over the markets to eliminate monopolistic practices and to monitor prices, according to a press release from the presidency.

Inflation in Egypt has accelerated over recent months on the back of cutting fuel subsidies at the beginning of fiscal year 2018/2019. Egypt’s annual headline inflation increased to 17.5 per cent in October, up from 16 per cent in September largely due to higher vegetable prices.

However, inflation eased in November to 15.6 per cent, mainly due to a decrease in food and beverage prices by 1.4 per cent month-on-month.

Al-Sisi has regularly directed the government to ensure that basic goods are available at reasonable prices on the market. In September, he ratified amendments to the Consumer Protection Act setting out the legal framework by which the government could institute price controls on goods should there be signs of price manipulation or price gouging.

*A version of this article appears in print in the 13 December, 2018 edition of Al-Ahram Weekly under the headline: Cracking down on monopolies 

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