Finally, experts are praising new government procedures to control prices, as Mona El-Fiqi finds out In an attempt to control prices of some essential products in the local markets, Minister of Trade and Industry Rachid Mohamed Rachid issued a decree on 27 March banning the export of rice and cement for the next six months. Rachid issued another order stating that steel factories cannot stop or reduce production without clear authorisation from his ministry, to guarantee that steel is available on the market. Producers who violate these regulations will be severely penalised. The government's move to issue new rules came as a result of unjustified hikes in steel and cement prices on the local market in the past months. The decisions aim at controlling prices by raising supply and avoiding shortage of these products. Rachid explained that a recent study by the Ministry of Trade and Industry asserted that the demand on cement and steel are expected to rise this summer both in Egypt as well as neighbouring Arab countries. He added that the new procedures, which went into effect on Saturday until October 2008, are temporary and will be reconsidered according to market circumstances later. In a press release issued by the ministry, Rachid explained that the government is within its rights by taking these decisions, as is the case in other countries where such regulations are temporarily imposed on some products to ensure that local needs are met before moving to export. Hesham Ragab, Rachid's assistant for legislative affairs, said these decisions comply with the 1975 imports and exports law, and aim at protecting public interest by raising supply. Ragab added that the ministry will strictly apply penalties against violators according to Law 95/1945. The penalty includes imprisonment for one to five years, a fine between LE300 to LE1,000, and the closure of the violating retailer or factory for six months. The ministry began procedures to stabilise prices in local markets last year by imposing an additional exports fee on steel and cement. According to Ministry of Trade and Industry figures, the fee helped reduce cement and steel exports by 36 per cent and 50 per cent, respectively, between March 2007 and December 2007, compared to the same period in 2006. However, cement exports during February 2008, rose to reach a high of 250,000 tonnes which resulted in the decision to stop cement exports to meet the growing demand on cement by local real estate investors. Due to a notable reduction in cement and steel production levels -- a clear violation of regulations, the Internal Trade Department at Rachid's ministry sent a memo to all cement and steel producers warning them that these acts are forbidden and violators will be penalised in the future. Moreover, the department discovered 1,300 tonnes of steel being hoarded by a wholesaler who wanted to raise prices by drying up supply. He was referred to criminal court. Last week's decisions were welcomed by experts in the steel and cement industry. Ezzat Maarouf, former vice-president of the Iron and Steel Arab Union, praised the move although he felt it should have been taken a long time ago. "It should have been applied ten years ago when cement producers decided to stop production on purpose to cause a shortage in supply and then to raise prices," reasoned Maarouf. He explained that factories used the ruse of carrying out maintenance work on all production lines at the same time as an excuse for stopping production. Maarouf, however, wanted the government's ban on exports to include steel as well, since the market is witnessing unprecedented price increases of this product -- as much as cement and even more, according to him. Moreover, this expert suggested that the Ministry of Trade and Industry should set obligatory prices for products. The value would include the price and an acceptable profit margin, and producers would be obliged to sell at the set price, Maarouf argued. He further feels that the six-month ban should be extended to an unspecified period as long as local production does not cover market needs. "There is a very simple fact that a country should first meet local needs before exporting," he stated. "We can export only if we have a surplus." As for the ban on exporting rice, Rachid said that there will be more rice available on the local market, especially that wheat prices have soared causing the same effect on the cost of pasta and baked products. Total local production of rice annually is estimated at seven million tonnes, which are converted into 4.6 million tonnes of white rice. Local annual consumption is 3.2 million tonnes of rice. Nader Noureddin, professor of agricultural resources at Cairo University, described Rachid's announcements as important and will help stabilise rice prices in the coming six months. Nonetheless, Noureddin did not expect the cost of rice to go down since the international price remain high. This is due to a reduction in production by some countries such as Indonesia, India, Pakistan and Bangladesh -- the world's main exporters of rice. Consequently, the local price of rice rose from LE2 to LE4 per kilogramme, and even reached LE5.5 per kg of high quality packed rice. Due to a shortage in the international rice market, there is more demand on Egyptian rice. This raised Egyptian rice exports from 700,000 tonnes in 2006 to one million tonnes in 2007. Had the ban not been imposed on rice exports, this figure would have reached 1.3 million tonnes in 2008. "If the government had not issued this decree, the cost of rice would reach unaffordable prices for the average consumers, especially that the new rice crop will be harvested in October," stated Noureddin. According to him, the Ministry of Agriculture plans to cultivate one million feddans of rice annually, but when rice prices rise farmers are encouraged to cultivate rice and violate regulations. Noureddin explained that the small fine for violators is not a deterrent since profit is very high. So rice fields reached 1.7 million feddans last year, and are expected to cover two million feddans this season which starts in April. The problem, he explained, is that rice needs a lot of water to harvest which can negatively affect water resources. Last week's decision will cause farmers to think harder before violating regulations and growing rice, Noureddin stated.
