The recent tariff cuts were supposed to bring prices down. They have not. Mona El-Fiqi tries to find out why When the government decided to cut tariffs on imports two months ago, consumers were promised that the move would soon result in cheaper prices on basic consumer goods. To date, those reductions have not appeared. Consumer confidence in the three-month old cabinet, meanwhile, has eroded. "We do not trust the government any more," said teacher Ola Taha, a mother of three. With the cost of our basic food needs consuming the bulk of our income, taking the children out for fun has become a luxury we cannot afford," Taha said. The decision to cut customs duties on imports -- from an average of 14 per cent to just nine per cent -- was accompanied by lofty pronouncements about the positive impact that move would soon have on prices. The cuts came as a direct result of growing complaints from limited- and middle-income groups about skyrocketing prices, mainly blamed on the devaluation of the pound vis-�-vis the dollar. Importers, as well as local manufacturers, all welcomed the government's decision. The latter promised to reduce prices in order to compete with imported goods. Two months later, however, the prices of most products are continuing their upward trend. Only vehicles and durable goods went down, by some 10 to 20 per cent. "Consumers would have felt the price reductions if the customs cuts had included completely manufactured products," said one economic expert, who said the impact of the cuts was not very effective because the items that enjoyed the most exemptions are either components or raw materials, rather than final products. As such, experts said, the decision to reduce prices was left to producers. "Why would traders and producers reduce prices if the market agrees to pay higher," asked Hamdi Abdel-Azim, president of Sadat Academy for Administrative Sciences. According to Abdel-Azim, prices are usually determined by supply and demand. "As long as Egypt's local food production does not exceed 40 per cent of its consumption, prices will never go down." Abdel-Azim also said the tariff cuts coincided with a rise in prices worldwide, thus undercutting whatever effect the former might have had on prices. Importers have their own views of why prices have not dropped. Mustafa Zaki, chairman of the importers division at the Cairo Chamber of Commerce, said importers were not to blame since many of the products that were imported before the tariff cuts are still on the market. Zaki did, nonetheless, wonder why a product like tea, for instance, had not seen a price drop considering customs duties were reduced from 35 to five per cent. Adding to the mystery is that most tea is imported from Kenya and other African countries, thus enjoying zero customs duties within the framework of the COMESA agreement. In any case, consumers are becoming more and more fed up. According to Central Agency for Public Mobilisation and Statistics (CAPMAS) figures, prices of food and beverages went up by 20.6 per cent in 2003 alone. Prices of services rose by 13.5 per cent. A few months ago, in an attempt to control prices and provide low- and middle-class families with good products at reasonable prices, the government decided to make seven basic food commodities available for those who carry ration cards. These included rice, tea, sugar, cooking oil, and macaroni. Just last week, the government also began offering Sudanese meat at official co-op stores at LE15.5 per kilo, as a way of offsetting meat prices at other stores and butchers that had risen as high as LE28 to LE40 per kilo. Zaki said, however, that the Sudanese meat would not make much of a difference since only 200 tonnes were being made available per week. Annual consumption ranges between 180,000 and 200,000 tonnes, or over 3,500 tonnes per week. Abdel-Azim said the government was not approaching the issue in the proper manner, since attempts to control prices without issuing new legislation to protect consumers from monopolistic practices would make all such efforts worthless. "Establishing a consumer protection law that gives consumer protection associations the competent authority to protect consumers' interests is crucial," he said. Meanwhile, traders blame producers for the price rise, and vice versa. Economic experts said the market needed a new crop of producers who would help to control prices. As long as just a few big producers control each sector's prices, they said, those prices would not be going down anytime soon.
