Work to establish a new exchange for grains and other commodities is to begin early next year, according to statements by Minister of Supply and Internal Trade Khaled Hanafi. The new institution will cater to Egypt's needs as well as those of neighbouring Arab and African countries. The decision to establish the exchange is part of efforts to develop the country's internal markets and exercise more control over hikes in food prices. Food commodities will be traded electronically at the new exchange, and transparency in these operations should undercut attempts to monopolise the market by some traders and intermediaries, thus limiting price hikes. The exchange is also expected to help Egypt become an international centre for trade in grains since it plans to be connected to international bourses such as the Chicago Board of Trade (CBOT). Hanafi and an accompanying technical team studied the Chicago model during a recent US visit. The head of the CBOT is expected to visit Cairo later this month to advise on establishment of the exchange and give recommendations on how to move forward. The new exchange is expected to include branches in various governorates, with the network connected to the CBOT. Sherif Sami, chair of the Egyptian Financial Supervisory Authority (EFSA), announced that the EFSA is preparing regulations for the new institution, including rules governing the trading system, pricing mechanisms, licence permissions, regulations for receiving and delivering goods and staff training. Commodity exchanges were set up in Egypt in the 19th century, notably in cotton, but these were closed after the 1952 Revolution. Experts have since called for their re-establishment. Ahmed Al-Wakeel, chair of the Egyptian Federation of Chambers of Commerce (EFCC), told the Weekly that Egypt is in a position to benefit from its geographical location to become a regional trading centre. The EFCC had presented a request to the government to set up a grains exchange some time ago, but had received no response, he said. “Two months ago the government started to take concrete action towards setting up the new exchange. We have a promise that the government will finish the legislation needed by the end of this year,” Al-Wakeel said. In preparation, the EFCC has bought 59 feddans of land in the Beheira governorate to build an exchange for grains and commodities there. The establishment of the new exchange will help develop the internal market and put an end to price distortions, Al-Wakeel said. It will also benefit small farmers who will store their harvests in state warehouses until it can be sold at suitable prices, he added. Farmers will no longer be obliged to sell their goods at the low prices offered by the Ministry of Agriculture or private-sector traders, Al-Wakeel said. They will be able to take out loans secured against their harvest as long as this is registered with the new exchange. Under the agreement with the CBOT, the latter will help Egypt set up several related projects, including logistics and storage areas at a cost of $100 million. Ten other logistics zones for storing vegetables and fruit will be established at a cost of LE1.1 billion. According to Al-Wakeel, the new exchange will help provide accurate data about market conditions and set prices for each grain or product being traded. It will help achieve transparency, as prices will be publicly announced, allowing traders and consumers to follow real market prices. As a result, it will be more difficult for traders and brokers to increase prices arbitrarily, as they can now, he said. To encourage investors to do business at the new exchange, Al-Wakeel suggested that the government should issue a decree to exempt capital traded on the exchange from taxes as long as it remains in the institution. When the money leaves the exchange, the investor will receive a selling invoice and the money will be subject to taxes, he added. Mohamed Abu Shadi, a former minister of supply and internal trade, agreed that the move to establish the exchange will benefit farmers and that internal trade needs to be improved. However, he said, more research should be done first. He asked whether if is possible for Egypt to become a viable wheat exchange when it is also the world's top wheat importer. “Egypt cannot do business in a given commodity unless it enjoys competitiveness in it, which is not the case now,” he said. “The country would be better off increasing its agricultural production and achieving 70 to 80 per cent self-sufficiency in basic commodities,” he said.