Lobbies prevent reform of Egypt's subsidy system: Minister of Supply

Ahram Online, Sunday 12 Feb 2012

New parliament quizzes minister over his plans to tackle rising bread prices

Many Egyptians still depend on the subsidised bread for their daily needs (Photo: Reuters)

Making bread available to Egyptians depends on the protection of agricultural land which is one of the duties of parliament, Egypt's Minister of Supply told the country's newly-elected politicians on Sunday.

Gouda Abdel Khalek was attending Egypt's parliament to answer questions and complaints relating to food supplies.
His statement about protecting land led many Members of Parliament (MPs) to accuse him of dodging his responsibilities and failing to provide a coherent vision to solve the decades-old problem of providing bread to Egypt's population.
During Sunday's session, MPs complained that Egyptians in poorer villages face difficulties in acquiring the subsidised bread, while that which is made available is of deteriorating quality.
Abdel Khalek said that the process of providing bread -- from grinding wheat to make flour, to baking -- is full of loopholes that allow dealers to indulge in profiteering by reselling subsidised goods at higher prices.
Bread is subsidised by around LE11 billion ($1.8 billion) in Egypt's budget -- more than half the total that is devoted to subsidising foodstuffs. A loaf of subsidised bread is sold at 5 piasters (less than 1 cent) while its price in private bakeries can reach 50 or even 75 piasters.  
The minister's proposed solutions include building bakeries capable of mass production and would limit the loss of subsidised resources seen at smaller bakeries. The process of supervision would also be more efficient, he said.
Abdel Khalek's second suggestion involved building large storage capacities for wheat.
"Since the year 2000 only 12 silos were built but we have succeeded in building four since last February," he said.
Some MPs suggested the entire subsidies system be shaken up, with the funds handed to producers instead given directly to consumers.
This would theoretically decrease the chances of profiteering from subsidised goods, they said.
Abdel Khalek said that similar suggestions were presented to the cabinet last August, but that sustained lobbying by those benefiting from the current system stopped any meaningful reform.
As for achieving food security for Egypt, a point raised by many MPs, Abdel Khalek explained that the idea of Egypt producing 100 per cent of its needs is uneconomical.
"As a professional economist I tell you that we should only produce 60 or 70 per cent of our wheat consumption," the minister explained.
Government buys wheat from local farmers at prices up to 19 per cent higher than international prices, Abdel Khalek said. 
"We expect production to be up 15 per cent to 3 million tonnes. Last season production stood at 2.6 million."
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