CAIRO: The Central Bank of Egypt approved a Ministry of Trade request to continue the suspension of the required cash cover for sugar imports until the end of this year, the ministry said Monday.
The suspension of the cover was originally scheduled to end mid-year.
Then-Minister of Trade and Industry Samiha Fawzy said on Monday that sugar companies will import about 1.2 million tons of raw sugar to satisfy local demand. The decision was taken to benefit the Egyptian consumer and in an effort to reinforce the country’s supplies, she added.
“Suspending the cover reduces the barriers to import and also reduces the cost of importing, so it is a good move,” as long as companies are dealing with established traders, because they plan to keep importing indefinitely, said Jennifer Bremer, chair of the Public policy department at the American University in Cairo.
The ministry had announced on its website Thursday that the General Agency for Supply Commodities signed contracts to purchase 180,000 tons of American and French wheat at prices ranging between $345.37 to $360.90 per ton without freight, which would be available for consumption starting next April.
The ministry held an international tender to import wheat, in which 24 bids were made and according to the ministry only 3 were acceptable in terms of prices and the technical specifications for the quality of wheat in accordance with Egyptian standards.
“The expectation is that wheat prices will continue moving upward, unfortunately. Thus, the ministry is doing the right thing to lock in the price by making large purchases now. Egypt is one of the world’s largest wheat importers,” said Bremer.
In another decision to support investment in the industrial sector during the current phase — particularly industrial projects currently under construction that have been negatively affected by the volatility of employment and labor during the recent events in Egypt — the minister announced that the Industrial Development Authority would now grant an extension of three months starting from Jan. 26, 2011 for investors to take the necessary steps to insure seriousness of intent in their industrial projects.
The minister added that this will only apply to investors for whom the legal status is compatible with the laws, rules and regulations prescribed in this regard.
The minister stressed the ministry’s keenness to continue the policy of the government in support of industrial investment as a strategic mechanism for the state to increase employment opportunities and rates of production and thereby increase the competitiveness of the national economy. She noted that this decision comes within the framework of the proposed policies being considered by the ministry to address the current situation, which have negatively affected the industrial growth rate.
For Bremer, this seems sensible, given the current regulations.
Although she said that over time, it would be better to move to a system whereby investors are required to post a substantial financial bond that is forfeited if they do not go ahead and do not cancel the project within a certain time frame, rather than getting the government too directly involved in second-guessing what constitutes a viable investment.
This type of decision is so discretionary that it invites corruption.
In general Bremer said that these “are all good steps as immediate measures, but much more is needed to encourage local investment as well as continued foreign investment.”
“They should also be taking more action to reassure investors that they recognize the linkage between private investment and employment growth, given that the latter must be a priority for the government,” she added.
