PANEL DISCUSSION ON INFRASTRUCTURE AND INVESTMENTS

Infrastructure financing in Egypt since 2011 and future outlook FAO Investment Centre Peter Talks, Cairo, 25 May 2016

Wheat 2016/17 Wheat imports estimated at 11.5 million tonnes (AMIS) 2016/17 Production, 8.5 m Wheat yields stable Source: FAO and AMIS LHS -Wheat yields in tonnes/hectareRHS – Production, imports: millions tonnes Demand and imports rising

Maize 2016/17 Maize imports estimated at 8 million tonnes (AMIS) 2016/17 Maize production, 6 m Rising demand driven by feed use Source: USDA and AMIS LHS –Food & feed use, million tonnes RHS – Production, imports: mln tonnes Increasing share of maize from imports

Grain consumption rose by one third since 2000 Increase in grain demand was met by  Imports: +6.0 million tonnes to 17.6m, 66%  Domestic production: +1.3 mt to 16.9m Source: OECD-FAO Data for wheat plus coarse grains, million tonnes

Grain consumption is forecast to increase 16% in the next ten years OECD-FAO Forecasts for :  Demand to rise from 34m to 39m, +16%  Imports forecast to increase by 3m to 20m  Dom. production to increase by 1.8m

Grain imports are essential for Egyptian food security 65% of food energy supply is from cereals, roots & tubers Agrifood imports provide 62% of calories in the diet. Imported cereals provide over half of total food energy supply Over 75% of grain imports are for the private sector However: Cereal imports cost 5 billion US dollars/year Cereal imports are equivalent to 1.8% of GDP, significantly higher than many other countries, e.g. Turkey 0.3% Egypt’s agrifood trade deficit was USD 8.7 billion in 2014

Efficient and modern grain import infrastructure is essential  A modern, efficient grain import infrastructure reduces costs  Scope to raise efficiency in the MENA region  Both physical and ‘soft’ infrastructure are important  Logistics cost for one tonne of wheat from port to mill: The Netherlands, USD 11; South Korea, USD 17; MENA, USD  Transit times are also slower than international norms: MENA, 78 days; South Korea, 47 days; Netherlands,18 days  Average waiting time for vessels to discharge: MENA, 3 days; Netherlands, less than 1 day  Reducing vessel wait times to 1 day would reduce import costs by USD 3/tonne

Port Storage Capacity thousands tonnes GovernmentPrivate Volume of Imports Storage Capacity Source: FAO/EBRD Egypt Wheat Sector Review Notes: Data for average

Government Infrastructure Projects Large government programmes to upgrade storage volumes and storage quality Capacity for strategic reserves, reduced losses and more accountability DescriptionCapacityFinance 25 storage silos &60kt/silo for strategic reserves kUAE, USD 300m 12/14 silosKSA, USD 110m 10 vertical silos Logistics area for grain, fruit and veg 500 k - Italy, USD 17m USD 28m Blumberg storage, to replace up to 105 shonasGovt, USD 28 m Alexandria port improvements – faster unloading speed and berth capacity 90,000k Silo Holding Company EGP 60m

Private sector infrastructure investments Grain import handling infrastructure : minimal investment : one major investment in Alexandria; several acquisitions Plans for : Most grain houses plan important investment projects Most expect to increase imports 10% over the next 3 years However: Issues with land availability at port Insufficient piers/berthing capacity Short leasing offers at ports discouraging long term investment

Potential gains USD 30 million savings for GASC imports from import efficiency gains: reduced tender complexity and using private port of loading inspections (EBRD/FAO Wheat Sector Review) USD 40 million savings from reduced inland storage losses EGP 150 million increased profits for General Silo Company following Alexandria port improvements

Potential gains estimates What would be the impact of a reduced phytosanitary risk premium? Current phytosanitary rules create a risk premium, assumed as USD 5 If this premium was reduced to USD 2.5, the net present value of reduced costs would be USD 430 million by 2024 Reducing vessel waiting times from 3 days to 1 day: USD 516 million

Potential gains The real benefits for the Egyptian economy and food security come from a creating a thriving private sector able to invest and compete. Infrastructure investments have scope to reduce import costs Small gains have big effects Government investment capacity is limited How can these gains be realised? Foster a policy environment that is conducive to investment Working together through public-private dialogue can help address challenges