Public-private policy dialogue as a powerful instrument for enabling more and better investments
Together with the European Bank for Reconstruction and Development (EBRD) and other investment partners, FAO has worked closely with both Ukraine and Egypt, two major players in the global wheat supply chain, one of the critical component of the world’s food system. In this context, FAO supported Ukraine to enhance the supply of grains, while helping simultaneously Egypt to improve its grain’s sector. In both countries, facilitating public-private policy dialogue has proven to be a powerful instrument for negotiating crucial policy changes, providing knowledge, fostering learning, and enhancing the organization of the sector, especially through strengthening sector associations to enable them to participate in policy dialogue with governments.
With over ninety million inhabitants, Egypt is the most populous Arab country. Wheat is the most important crop in Egypt and with 4.3 million farms planting 1.3 million hectares each year (about half of the wintercrop area). The government of Egypt has made progress in reforming its baladi bread programme for the poor and aims at increasing domestic production and decrease grain losses. Consumers have been issued smart cards that can be used to buy up to five loaves of bread per person. Nevertheless, Egypt will continue to rely on wheat imports in the foreseeable future. It imports half (9-10 million tonnes annually) of the wheat consumed, and is thus by far the largest importer of this cereal globally. A steadily increasing population expected to reach 100 million in 2020 and limits to the arable land mean that the country will become increasingly dependent on imports for this staple commodity. In fact, per capita wheat consumption in Egypt has been rising to reach almost 150 kg per year and is equivalent to 1170 kcal per person per day, or around a third of total calorie intake. It is already amongst the highest in the world. Nevertheless, the Food and Agriculture Organization of the United Nations (FAO) and the Organization for Economic Cooperation and Development anticipate a further 15 percent increase in country’s wheat consumption by 2025, to reach 24 million tonnes.
The global wheat trade flows have already shifted: traditional ‘wheat export powers’ such as the USA, Australia and France have seen their exports to Egypt decrease while exports from the so-called Black Sea basin (the Russian Federation, Ukraine, Romania and Bulgaria) have increased substantially. This trend is even more marked in the Middle East and North Africa (MENA) markets where Russia and Ukraine doubled their exports from 2005 to 2015, while traditional exporters reduced their exports to the region. Ukraine has now become Egypt’s second biggest wheat supplier.
There are many differences in the organization of the wheat supply chain in both countries and the evolution in trade flows comes as a challenge. Around half of Egypt’s imported wheat is purchased by the State through its General Authority for Supply Commodities (GASC) in open international tenders to guarantee the physical availability of imports in Egypt. Ukraine, which now accounts for almost one-third of Egypt’s wheat imports, relies almost entirely on its private sector in grain exports: However investments on both on the export and import sides of the supply chain are needed to ensure that rising trade volumes are handled efficiently. These investment in both countries would allow both Dniper and Nile to become major grain transportation routes.
Egypt’s shifting wheat import flows from 2005 to 2015
Source: ITC Trade Map
The growing role and perspectives of Ukraine to become a major contributor to world food security and its policy and infrastructure challenges prompted the involvement of FAO and EBRD to support a public-private policy dialogue in the Ukrainian grain sector in 2011.
The public-private dialogue in the Ukrainian grain sector has resulted in removing major trade barriers and improving the regulatory framework, which in return led to sizable investments. As trade restrictions have been removed and sector regulation improved, EBRD, other financial institutions and their clients have provided more than a billion US Dollars in financing and investment to grain farmers, storage facilities, logistics and exports since 2012. The latter included upgrading grain storage and developing river transport opportunities. Although, far more still needs to be done to unlock the potential of the grain sector. In 2015, FAO and EBRD estimated that Ukraine needs to invest at least USD 5 billion in improving grain and oilseed storage and about one billion in modernizing obsolete railroad capacity, such as outdated and insufficient hopper cars in the next ten years. While these amounts sound difficult to achieve, the lower range of the economic costs of inefficiencies in storage and logistics was assessed at an astonishing USD 600 million a year in 2014-2015 when FAO’s Investment Centre staff worked with the World Bank on the Shifting into Higher Gear: Recommendations for Improved Grain Logistics in Ukraine report.
In parallel, FAO and EBRD have facilitated a public-private policy dialogue in the Egyptian grain sector bringing together major private sector wheat suppliers, the Ministry of Supply and Internal Trade, and other agencies involved in the wheat sector. The dialogue was informed by a sector review, which identified key policy and regulatory issues, provided recommendations and served as a basis for discussion. In addition, grain sector experts from Ukraine and Egypt have exchanged knowledge and experience on critical topics such as wheat quality and phytosanitary issues in trade.
Indeed, the EBRD-FAO sector review argues that measures to address some logistical bottlenecks along the supply chain, and to apply international phytosanitary standards in Egypt, would result in savings of up to USD 43 million a year. Short notices for wheat tenders and convoluted import procedures that include additional inspections and unclear phytosanitary requirements are further aggravated by an obsolete open-air storage system used in purchasing wheat from local farmers.
While EBRD has already started partnering with the private sector by committing financing of up to USD 100 million to local and international companies involved in the Egyptian grain sector, further investments, both from public and private sector players, will be needed to guarantee Egypt’s food security in the near future. For instance, berth and port storage capacity at Egyptian ports need to be increased to reduce the average waiting times of 17-18 days are reported by some grain suppliers in Egypt as compared with one-to-three days in Europe. Without investment, the economic costs of imports will only increase in view of the projected consumption and trade growth. Further investment will also be needed to ensure that the country has sufficient modern storage capacity in-land to keep losses to a minimum.
As wheat moves down the Dnieper and up the Nile, improving the investment climate in the grain sector, identifying investment needs and facilitating investment opportunities is a central aspect of the FAO-EBRD partnership in its efforts to enhance the efficiency of the grain supply chain, both on the exporter and importer side. The goal is to ensure that wheat reaches Egyptian citizens efficiently and that emerging wheat suppliers to the region, such as Ukraine, effectively realize their potential and contribute to regional and global food security. While a lot remains to be done, public-private dialogue has proven to be an effective mechanism, leading to concrete investments that contribute to improving food security.
Authors would like to thank Mr Boris Sterk from FAO’s Investment Centre Division for his research assistance in preparing this article.
Chief of the Investment Centre Service for Europe,
Central Asia, Near East, North Africa,
Latin America and the Caribbean (TCIC).
Dmitry PRIKHODKO, Economist, PhD
Mohamed Manssouri is the Chief of the Investment Centre Service for Europe, Central Asia, Near East, North Africa, Latin America and the Caribbean (TCIC). He is an agricultural economist and an expert in agricultural and rural development, food security and poverty reduction. Before leading TCIC, Mohamed has worked as a Senior Adviser in the Investment Centre in charge of quality enhancement, knowledge sharing and learning. He also coordinated FAO’s “Renewed Commitment to a Hunger-Free Horn of Africa” and led the development of resilience-building strategic plans and investment programmes in the Horn of Africa. Prior to joining FAO, Mohamed was Country Program Manager with the International Fund for Agricultural Development (IFAD) where he led the development and management of various country investment strategies and programmes (Cape Verde, Democratic Republic of Congo, Chad, Ghana, Niger, Republic of Congo) and several regional strategies and programmes in rural finance, Community-Driven Development (CDD), conservation agriculture, and policy development and dialogue (West Africa Rural Hub). Within the scope of the IFAD reform (Action Plan) to improve its development effectiveness, he has led the preparation of IFAD’s Knowledge Management strategy, and other organizational change initiatives (project cycle and policy process). Within the scope of the United Nations High-Level Task Force (HLTF) on Food Security Crises chaired by the UN Secretary-General, he served on the multi-agency team who prepared the Comprehensive Framework for Action (CFA) in response to the 200-2008 Food Crisis. For many years, Mohamed worked as a Development Consultant in support of agricultural investments and policies for several national and international development agencies. He also performed as a trainer in agricultural economics and gave lectures at University Roma III’s Master on Human Development and Food Security. Mohamed Manssouri holds a Master’s degree from AgroParisTech, Paris, France.
Dmitry Prikhodko, Economist, PhD
Personal details: Born on 8 November 1973 in Vladikavkaz, the Russian Federation. Married with two children (15 and 8 y.o.).
Education: Dmitry holds a Specialist’s Degree in Economics with Specialization in Farm Accounting and Audit (1995) from the State Academy of Agriculture and Ecology of Ukraine (currently Zhytomyr National Agro-ecological University) and a Cand. Sciences Degree (Ph.D. equivalent in CIS countries) in Environmental and Nature Resource Economics from Lviv State Agricultural University, 1999 (currently Lviv National Agrarian University, Ukraine).
Working languages: English, Russian and Ukrainian. He also speaks some Italian.
Work experience: During his student years, Dmitry worked in a dairy farm in Sweden (1993). Following completion of post-graduate studies in 1998, he worked for seven years in U.S. Department of Agriculture’s Office in Ukraine as a principal analyst responsible for grains, oilseeds, sugar, dairy, livestock and poultry market analysis, agricultural trade policy reviews. He provided technical assistance in agribusiness, trade and investment-related matters. Dmitry then headed production, consumption and trade analysis as well as business development research for almost a year in a multinational agribusiness company prior to joining FAO’s Investment Centre Division in December 2006.
He has led and participated in a number of missions on the identification, preparation, implementation support and evaluation of investment projects and programmes with focus on financial and economic aspects and conducted a number of policy and agribusiness sector reviews and has worked on technical assistance projects under the FAO-European Bank for Reconstruction and Development (EBRD) Framework Agreement and the FAO-World Bank Cooperative Program and FAO’s Technical Cooperation Program. He has worked in the Russian Federation, Belarus, Kazakhstan, Ukraine, Azerbaijan, Georgia, Tajikistan, Turkmenistan, Kyrgyzstan, Serbia, Pakistan and Egypt covering a wide range of investment and technical assistance projects in different agricultural and agribusiness sectors.
His works also includes creation of an enabling environment for private sector investment though supporting the public-private dialogue on policy issues affecting investment, including work with producer and agro-industry associations, capacity development in the area of agricultural and agribusiness investment as well as the development of legislative frameworks for pre- and post-harvest crop financing (through crop receipts and warehouse receipts) and agricultural wholesale markets.
-  baladi is a subsidized flat bread made from coarse 82 percent extraction flour as opposed to the fino non-subsidized bread from finer 72 percent extraction flour.