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FINAL REPORT

Egypt Agricultural Export Strategy


Cairo October, 2007
This document is confidential and is intended solely for the use and information of the client to whom it is addressed.

This report outlines the agriculture export promotion plan for Egypt, which addresses current sector performance challenges and leverages lessons from best-in-class exporters
Egypt Agricultural Export Strategy Objectives Baseline Egypts agricultural export performance and identify key competitive advantages, as well as major impediments to overall growth World-wide agricultural commodities export market Current and potential performance for Egyptian agricultural exports Local and global trends that could affect Egypt agriculture export trade Competitive positioning vs. other countries (by Egyptian export-crop category) Egypts main trade agreements Key competitive advantages and main impediments along the export value chain Present lessons learned from best-in-class agricultural exporters Benchmarking methodology Export promotion agencies Leveraging small farmers potential Transportation Government agricultural regulations Agriculture capacity building programs Estimate Egypts agricultural export market potential Identify strategic crops for Egypt agricultural exports and estimate associated targets in volume and value Analyze the competition landscape, by assessing market share distribution and comparing import prices Develop an export promotion plan for Egypt agricultural products for the next 10 years
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Proprietary & Confidential

Table of Contents
Egypt Agriculture Export Baseline Lessons Learned from Best-in-Class Agricultural Exporters Egypts Agricultural Export Market Potential Five-year Export Promotion Plan

Proprietary & Confidential

Egypt Agriculture Export Baseline


Market Definition and Methodology Egypt Agricultural Commodities Export Performance Crop-specific Export Performance and Market Assessment Competitive Advantages and Challenges in the Export Value Chain

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Egypt exports of agricultural commodities were classified under 6 groups, which comprise one or more standard Food and Agriculture Organization (FAO) categories
Agricultural Commodities Categories *
1 Horticulture Fruits Fruits Strawberries, oranges, Strawberries, oranges, tangerines, citrus fruit, bananas, tangerines, citrus fruit, bananas, dates, guavas, mangoes, dates, guavas, mangoes, avocados, kiwis, grapes, etc. avocados, kiwis, grapes, etc. Beans, cassava, chick peas, Beans, cassava, chick peas, lentils, broad beans, lupins, lentils, broad beans, lupins, vetches vetches 5 Cotton Cotton Vegetables Vegetables Onions, garlic, lettuce, cauliflowers, Onions, garlic, lettuce, cauliflowers, tomatoes, leguminous vegetables, tomatoes, leguminous vegetables, cabbages, cucumbers, artichokes, cabbages, cucumbers, artichokes, spinach, green pepper etc. spinach, green pepper etc. Potatoes, sweet potatoes, yams, etc. Potatoes, sweet potatoes, yams, etc.

Pulses Pulses

Roots & Roots & Tubers Tubers

2 Cereals Cereals

Rice, barley, oats, rye, millet and Rice, barley, oats, rye, millet and sorghum, maize and wheat sorghum, maize and wheat

Cotton Cotton

3 Sugar Crops Sugar Crops

Sugar cane, sugar beet, molasses Sugar cane, sugar beet, molasses

SSF SSF Spices, Spices, Stimulants & Stimulants & Flowers Flowers

Anise, chamomile, badian, basil, Anise, chamomile, badian, basil, henna, corian, fennel, clovers, henna, corian, fennel, clovers, cinnamon, pepper, cut flowers bulbs, cinnamon, pepper, cut flowers bulbs, trees etc. trees etc.

4 Oil Crops Oil Crops

Cottonseed, groundnuts, Cottonseed, groundnuts, sunflower seed, sesame seed, sunflower seed, sesame seed, palm kernel equivalents, almonds, palm kernel equivalents, almonds, etc. etc.
Proprietary & Confidential

Note (*): Current scope of study does not cover livestock, forestry, fisheries, forage crops Source: FAOSTAT; UN Comtrade 4

We have assessed the agriculture sectors performance across the whole value chain to better understand the challenges and opportunities facing Egyptian agricultural exporters
Key Stakeholders along the Agriculture Export Value Chain

Production and Harvesting

Packaging, Labeling and Storage Pack houses and Pack houses and mills mills

Sale to Foreign Market

Transportation

Export Logistics and Customs Procedures

Distribution in Foreign Markets Foreign Foreign wholesalers and wholesalers and retailers retailers Sponsors Sponsors

Farmers Farmers

Exporters Exporters

Transportation agents Transportation agents

Vertically integrated producers // exporters Vertically integrated producers exporters

Land transport Land transport companies companies

Customs, Taxes Customs, Taxes & Quarantine & Quarantine

Farming cooperatives, farmers associations Farming cooperatives, farmers associations


Production planning Soil inputs purchasing Harvesting & PostHarvesting Handling Cleaning Carton & pallets Packing Labeling Cooling Sanitary testing Marketing to foreign market Price and terms setting Coordination of logistics to purchaser Post-delivery support
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Air and maritime transport companies Air and maritime transport companies
Procure transport capacity Local transportation from pack-house to various ports or airports International transport through land, air, or maritime shipping Customs clearance handling Quality control (quarantine) Export control (customs) Goods reception Distribution through terminal centers Distribution through retail chains national distribution centers
Proprietary & Confidential

To that end, we have interviewed around 60 stakeholders who operate as exporters, transporters, retailers, agriculture experts,
List of Interviewees IMC, AEC and Exporters IMC, AEC and Exporters
Adham Nadim IMC Deputy Executive Director Adham Nadim IMC Deputy Executive Director Helmy Aboul Aish Sekem Group Helmy Aboul Aish Sekem Group Tarek Tawfik Farm Fritz, Marketing Director Tarek Tawfik Farm Fritz, Marketing Director Sherif Rashed AEC Executive Director Sherif Rashed AEC Executive Director Cherifa Rashad Organic Crops Committee, Chairwoman Cherifa Rashad Organic Crops Committee, Chairwoman Alaa Diab Pico, AEC Strawberries committee Alaa Diab Pico, AEC Strawberries committee Ahmed Al Wakil Wakalex, AEC Rice committee Ahmed Al Wakil Wakalex, AEC Rice committee Hussein Al Aguizy Al Aguizy Export Company Hussein Al Aguizy Al Aguizy Export Company Abd El-Hamid El-Demerdash MAFA CEO Abd El-Hamid El-Demerdash MAFA CEO Sherif El Beltagi Belco Sherif El Beltagi Belco Wahib Abdel-Malik Narouz AEC Inputs, Customs and Wahib Abdel-Malik Narouz AEC Inputs, Customs and Taxes Committees Taxes Committees Magdy Abdul Messih Daltex, Export Director Magdy Abdul Messih Daltex, Export Director Sara Salama Daltex, Sales Executive Sara Salama Daltex, Sales Executive Ayman Korra Consukorra, Managing Director Ayman Korra Consukorra, Managing Director Hamed Ahmed El Shiaty Shoura Exports, Chairman Hamed Ahmed El Shiaty Shoura Exports, Chairman Houssam Mahmoud Shalaby ESHEDA Houssam Mahmoud Shalaby ESHEDA Ayman Nassar -- Alcotexa Ayman Nassar Alcotexa Ahmed Al Boussaty Alcotexa Ahmed Al Boussaty Alcotexa Mohamed Samir Sharaf El-Din ATEC Mohamed Samir Sharaf El-Din ATEC
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Transporters and Retailers Transporters and Retailers


Asaad Derwish Egypt Air, AEC Air Cargo Committee Asaad Derwish Egypt Air, AEC Air Cargo Committee Essam Ali ABX Logistics, Sales Manager Essam Ali ABX Logistics, Sales Manager Samia Ahmed Venus International Transport, Chairman Samia Ahmed Venus International Transport, Chairman Ahmed Fouad Venus International Transport, Marketing Ahmed Fouad Venus International Transport, Marketing Manager Manager David Browne Maersk Egypt, General Manager David Browne Maersk Egypt, General Manager Mohamad El Hawary Hyper One, Chairman Mohamad El Hawary Hyper One, Chairman Emad El Hawary Hyper One, Advisory Board Emad El Hawary Hyper One, Advisory Board Hussein Sabry CMA-CGM, Sales Director Hussein Sabry CMA-CGM, Sales Director Tareq Fahmi MSC Egypt, Managing Director Tareq Fahmi MSC Egypt, Managing Director

Agricultural Experts Agricultural Experts


Bob Acord SPS Expert Bob Acord SPS Expert Josse Dorra Fiani Fiani & Partners // Kompass Egypt, Josse Dorra Fiani Fiani & Partners Kompass Egypt, chairperson & CEO chairperson & CEO Arthur Westneat Agriculture Marketing Expert Arthur Westneat Agriculture Marketing Expert Amit Kapoor Retailing Expert Amit Kapoor Retailing Expert Gamal Siam Cairo University Professor of Agricultural Gamal Siam Cairo University Professor of Agricultural Economics Economics Dr Aqila Food Security Agency Dr Aqila Food Security Agency Dr Mohamed Omran Consultant Dr Mohamed Omran Consultant Saad Al Nassar -- Consultant Saad Al Nassar Consultant
Proprietary & Confidential

as well as key public sector institutions, and various associations involved in the sector
List of Interviewees Public Sector Institutions Public Sector Institutions
Amin Abaza Ministry of Agriculture, Animal and Fish Amin Abaza Ministry of Agriculture, Animal and Fish Wealth and Land Reclamation, Minister Wealth and Land Reclamation, Minister Youssef Amin Wally Deputy Prime Minister Minister of Youssef Amin Wally Deputy Prime Minister Minister of Agriculture, Animal & Fish Wealth & Land Reclamation Agriculture, Animal & Fish Wealth & Land Reclamation Madhat Meligy Special Advisor the Minister -- Minister of Madhat Meligy Special Advisor the Minister Minister of Agriculture, Animal & Fish Wealth & Land Reclamation Agriculture, Animal & Fish Wealth & Land Reclamation Mohamed Gomaa Head of Land Reclamations -- Minister Mohamed Gomaa Head of Land Reclamations Minister of Agriculture, Animal & Fish Wealth & Land Reclamation of Agriculture, Animal & Fish Wealth & Land Reclamation Hussein El-Atfy Ministry of Water Resources and Hussein El-Atfy Ministry of Water Resources and Irrigation, Sector Head in Ministers Technical Office Irrigation, Sector Head in Ministers Technical Office Tarek Hussein El Baz Ministry of Foreign Trade and Tarek Hussein El Baz Ministry of Foreign Trade and Industry, Senior Assistant to First Assistant to the Minister Industry, Senior Assistant to First Assistant to the Minister Sahar Mounir Ministry of Foreign Trade and Industry, Sahar Mounir Ministry of Foreign Trade and Industry, Undersecretary Undersecretary Mohamed Ragui Export Development Fund, Executive Mohamed Ragui Export Development Fund, Executive Director Director Ahmed Wissam General Authority for Export & Import Ahmed Wissam General Authority for Export & Import Control (GOEIC), Chairman Control (GOEIC), Chairman Samir El Gammal General Authority for Export & Import Samir El Gammal General Authority for Export & Import Control (GOEIC) Control (GOEIC) Barbara Stacher Economic Modernization in the EC Barbara Stacher Economic Modernization in the EC Delegation, EU Trade Counsellor Delegation, EU Trade Counsellor Thomas Viot Economic Modernization in the EC Thomas Viot Economic Modernization in the EC Delegation, EU Trade and Agriculture Expert Delegation, EU Trade and Agriculture Expert
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Farmers/Exporters Associations Farmers/Exporters Associations


Dinah Hamdy Egyptian Agribusiness Association Dinah Hamdy Egyptian Agribusiness Association Osama Khier El-Din UPEHC, Chairman Osama Khier El-Din UPEHC, Chairman Yasser Aly Khayal UPEHC, IT Specialist Yasser Aly Khayal UPEHC, IT Specialist Amr El-Tonsy HEIA, Executive Director Amr El-Tonsy HEIA, Executive Director Mostafa Tawfek HEIA, Information Department Mostafa Tawfek HEIA, Information Department Douglas Anderson ACDI/VOCA, Egypt Country Douglas Anderson ACDI/VOCA, Egypt Country Representative and Chief of Party Representative and Chief of Party Ali El Saied ACDI/VOCA, Director of Programs Ali El Saied ACDI/VOCA, Director of Programs Herb Williamson AERI, Business Development Services Herb Williamson AERI, Business Development Services (BDS) staff (BDS) staff Tom Herlehy AERI, El Shams Project, Chief of Party Tom Herlehy AERI, El Shams Project, Chief of Party Ayman Abdel Salam AERI, Care project Ayman Abdel Salam AERI, Care project Peter Wetzel AERI, Care project Peter Wetzel AERI, Care project Mohamed Samy AERI, MUCIA, Project coordinator Mohamed Samy AERI, MUCIA, Project coordinator Ayman Abou Hadid E-traceability project, Consultant Ayman Abou Hadid E-traceability project, Consultant Kelly Harrison EmmeFlor, Previous Manager of ATUT Kelly Harrison EmmeFlor, Previous Manager of ATUT

Proprietary & Confidential

Additionally, the team has reviewed past projects conducted for the Government of Egypt by various international and nongovernmental organizations,
-List of Reports and Studies NON TIIVE NON T VE S US AU EXH A EXHAgriculture Outlook, Reforms & Competitiveness Agriculture Trade and Exports Agriculture Trade and Exports Agriculture Outlook, Reforms & Competitiveness
Egypt Country Profile Economist Intelligence Unit 2006 Egypt Country Profile Economist Intelligence Unit 2006 Rapid Alert System for Food and Feed Annual Report EU, 2005 Rapid Alert System for Food and Feed Annual Report EU, 2005 Pre-clearance Programs APHIS, 2005 Pre-clearance Programs APHIS, 2005 SGS Annual Report, 2005 SGS Annual Report, 2005 Value Chain Report Egypt Rates, 2005 Value Chain Report Egypt Rates, 2005 Monitoring, Verification and Evaluation Unit Agricultural Policy Reform Monitoring, Verification and Evaluation Unit Agricultural Policy Reform Program Abt Associates, 2002 Program Abt Associates, 2002 Assessment of Egypts Agricultural Sector Competitiveness Assessment of Egypts Agricultural Sector Competitiveness Development Alternatives, 2002 Development Alternatives, 2002 Egypt Country Strategy Paper Euro- Med Partnership, 2002 Egypt Country Strategy Paper Euro- Med Partnership, 2002 Accomplishments in Agricultural Policy Reform Abt Associates, 2001 Accomplishments in Agricultural Policy Reform Abt Associates, 2001 Towards Agricultural Competitiveness World Bank, 2001 Towards Agricultural Competitiveness World Bank, 2001 Social and Structural Review World Bank, 2001 Social and Structural Review World Bank, 2001 The Harmonization of Agricultural Health and Quality Standards The Harmonization of Agricultural Health and Quality Standards between Egypt, Jordan, Israel Palestine IPCRI, 2001 between Egypt, Jordan, Israel Palestine IPCRI, 2001 Agricultural Sector Model of Egypt CIHEAM, 2000 Agricultural Sector Model of Egypt CIHEAM, 2000 Country Assistance Evaluation World Bank, 2000 Country Assistance Evaluation World Bank, 2000 The Structural Adjustments Programmes in Egyptian Agriculture The Structural Adjustments Programmes in Egyptian Agriculture CIHEAM 1995 CIHEAM 1995 An Agricultural Strategy World Bank, 1993 An Agricultural Strategy World Bank, 1993 Trade, Agriculture and Development OECD, 2006 Trade, Agriculture and Development OECD, 2006 Trade and Development Aspects of Logistics Services UNCTAD, 2006 Trade and Development Aspects of Logistics Services UNCTAD, 2006 Enabling Small Commodity Producers and Processors in Developing Enabling Small Commodity Producers and Processors in Developing Countries to Reach Global Markets UNCTAD, 2006 Countries to Reach Global Markets UNCTAD, 2006 Logistic Study for Agricultural Trade Flow between Egypt and Europe Logistic Study for Agricultural Trade Flow between Egypt and Europe Eureopaid, 2006 Eureopaid, 2006 Arab Republic of Egypt, Upper Egypt Challenges and Priorities for Rural Arab Republic of Egypt, Upper Egypt Challenges and Priorities for Rural Development World Bank, 2006 Development World Bank, 2006 Food Export Strategy Study IMC, 2006 Food Export Strategy Study IMC, 2006 Egypt Freight Transport Report Business Monitor, 2006 Egypt Freight Transport Report Business Monitor, 2006 Review of Agricultural Policies Brazil OECD, 2006 Review of Agricultural Policies Brazil OECD, 2006 The Retail Distribution Channel IBM, 2005 The Retail Distribution Channel IBM, 2005 Tackling Trade in Agriculture OECD, 2005 Tackling Trade in Agriculture OECD, 2005 Egypts Export Puzzle, Future of Egypt-US Economic Relation, Egypt Egypts Export Puzzle, Future of Egypt-US Economic Relation, Egypt Trade Liberalization ECES, 2005 Trade Liberalization ECES, 2005 Global Agricultural Trade and Developing Countries World Bank, 2005 Global Agricultural Trade and Developing Countries World Bank, 2005 ExpoLink Final Evaluation Development Associates, 2005 ExpoLink Final Evaluation Development Associates, 2005 Arab Logistics and Freight Forwarding The National Investor, 2005 Arab Logistics and Freight Forwarding The National Investor, 2005 Informal Export Barriers and Poverty World Bank, 2004 Informal Export Barriers and Poverty World Bank, 2004 Strengthening the Cold Chain in Upper Egypt to Enhance Horticultural Strengthening the Cold Chain in Upper Egypt to Enhance Horticultural Exports USAID, 2003 Exports USAID, 2003 Export Promotion Benchmarking USDA, 2002 Export Promotion Benchmarking USDA, 2002 The impact of Euro- Mediterranean Partnership on Jordans and The impact of Euro- Mediterranean Partnership on Jordans and Palestines agricultural sectors from a water perspective Institut de la Palestines agricultural sectors from a water perspective Institut de la Mediterranee, 2001 Mediterranee, 2001 Agricultural Trade and the New Trade Agenda UN, 2001 Agricultural Trade and the New Trade Agenda UN, 2001 WTO and International Trade Prospects CATI, 2001 WTO and International Trade Prospects CATI, 2001 Egypts Export Strategy ADR, 1993 Egypts Export Strategy ADR, 1993 The Future of Egyptian Agricultural Foreign Trade CIHEAM, 1990 The Future of Egyptian Agricultural Foreign Trade CIHEAM, 1990 Proprietary & Confidential

Agriculture Commodities Agriculture Commodities


Cotton World Markets and Trade USDA, 2007 Cotton World Markets and Trade USDA, 2007 Oilseeds World Market and Trade AFS-USDA, 2006 Oilseeds World Market and Trade AFS-USDA, 2006 Grain World Market and Trade AFS-USDA, 2006 Grain World Market and Trade AFS-USDA, 2006 OECD FAO Agricultural Outlook 2005-2014 FAO, 2005 OECD FAO Agricultural Outlook 2005-2014 FAO, 2005 The Seed Industry in Jordan NCART, 2002 The Seed Industry in Jordan NCART, 2002 Risk Management Prospects for Egyptian Cotton World Bank, 1993 Risk Management Prospects for Egyptian Cotton World Bank, 1993
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And compiled a comprehensive data repository of agricultural exports based on cross-reference from multiple sources, and adopted core principles to ensure data consistency
Data Sources and Guiding Principles
Data Source Data Source Information Extracted Information Extracted Production, yield, area harvested Production, yield, area harvested Export // Import values and volumes Export Import values and volumes Consumption, feed, seed and other uses Consumption, feed, seed and other uses Active population in agriculture Active population in agriculture Breakdown of exported/ imported value by destination/ Breakdown of exported/ imported value by destination/ origin * origin * GDP, population GDP, population Agricultural Land Agricultural Land Cotton exported Value Cotton exported Value Cotton destination countries Cotton destination countries Cotton produced and exported volumes Cotton produced and exported volumes Cropped area, reclaimed lands, yield, production Cropped area, reclaimed lands, yield, production Cost of production, producer price (farm gate price) Cost of production, producer price (farm gate price) Old lands vs. new lands Old lands vs. new lands Exported volumes to EU Exported volumes to EU Cotton world wide price Cotton world wide price Fertilizers consumption, water quality and quantity Fertilizers consumption, water quality and quantity Core Guiding Principles Core Guiding Principles Rely as much as possible on one Rely as much as possible on one data source to provide data source to provide consistent and comparable consistent and comparable export figures export figures Cross-check trade data with Cross-check trade data with alternative data sources alternative data sources Prefer mirrored data sets over Prefer mirrored data sets over single-source single-source Complement missing information Complement missing information with statistical regression and with statistical regression and interpolation interpolation Assume under-reporting of Assume under-reporting of export figures. As a result, export figures. As a result, choose higher volume for choose higher volume for conflicting export figures conflicting export figures

FAOSTAT FAOSTAT

UN Comtrade // ITC UN Comtrade ITC WDI WDI CAPMAS/ MOFTI CAPMAS/ MOFTI Alcotexa Alcotexa Ministry of Ministry of Agriculture and Agriculture and Land Reclamation Land Reclamation GOEIC GOEIC Eurostat Eurostat Cotlook Cotlook ESI ESI

(*) Wheat and maize exported value and volume have been extracted from UN Comtrade; Egypts exports to GCC countries have been also extracted from UN Comtrade 9

Proprietary & Confidential

Egypt Agriculture Export Baseline


Market Definition and Methodology Egypt Agricultural Commodities Export Performance Crop-specific Export Performance and Market Assessment Competitive Advantages and Challenges in the Export Value Chain

Proprietary & Confidential

Egypts agricultural commodities exports have grown rapidly over the past 5 years, to reach US$ 1.2 billion in value in 2004 Outpacing most other agricultural exporting countries
Global Agricultural Commodities Exports* (2000-2004, Million $)
419,307 Market Share(%) CAGR** (2000-2004)

World

11%

364,342 307,479

38%

Other

13%

280,258

290,050

153,573 132,467 104,918 97,850 109,217 45,721 28,875

37%

EU - 25

10%

11% 5% 2.5% 1.5% 0.8% 0.28%

USA

7% 9% 7% 14% 8% 24% 8%

34,813 20,235

35,601 19,515

36,764 23,592

41,920 28,728

Note:

(*) Agricultural Exports included in the scope of the document; (**) CAGR stands for compound annual growth rate calculated by taking the nth root of the total percentage growth rate, where n is the number of years in the period Proprietary & Confidential Source: FAOSTAT; ITC http:/www.intracen.org for cotton exported value; CAPMAS for Egypts cotton values, 11

2000

2001

2002

2003

2004

China Australia Turkey Chile Egypt 0.25% Israel

Cotton, horticulture and cereals represent over 90% of Egypts exports in value - Sugar cane molasses have grown significantly over the last years
Breakdown of Egypt Agricultural Commodities Exports Value by Commodity Type (20002004, Million $)
CAGR (2000-2004)

Total 1,170
63

24% 15% 15%

Oil Crops - Mainly seeds Spices, Stimulants & Flowers

Sugar Crops (mainly molasses) 49% 21% Cereals (mainly rice) 16%

830 681 553 487


13 125 136 190 32 144 168 320 183 370 33 114 174 41 163 211

245

339

29% Horticulture (mainly potatoes, oranges, onions)

26%

479

41% Cotton

26%

2000

2001

2002

2003

2004

Source: FAOSTAT ; CAPMAS for cotton value; Cotton International export; UN Comtrade for wheat and maize 12

Proprietary & Confidential

The European Union still represents over a third of Egypts agriculture commodities destination markets However, Far East and CIS countries have replaced GCC as secondary trade partners
Relative Share of Destination Markets* for Egypt Agricultural Commodities Exports (2000-2004, %)
CAGR Exports (2000-2004) Total 24% Main Trade Commodity

34%

36%

29%
3% 6% 5% 22%

33%

24%
4% 5% 5% 27%

Others CIS GCC USA Far East

13% 175% -4% 14% 45% Horticulture Horticulture Cotton Cotton

13% 6% 13%

2% 12% 3% 14%

3% 5% 5% 22%

34%

33%

35%

32%

36%

EU - 25

23%

Horticulture

2000

2001

2002

2003

2004

Note(*): Far East includes Japan, India, China, Singapore, Korea, Hong Kong, Philippines, Indonesia, Viet Nam, Taiwan, Pakistan, Sri Lanka CIS stands for Russia, Ukraine, Belarus, Moldova, Kazakhstan, Armenia, Uzbekistan, Turkmenistan, Azerbaijan, Tajikistan, Kyrgyzstan and Georgia Source: FAO STAT ; UN Comtrade; ITC for breakdown of countries importing; Alcotexa Proprietary & Confidential 13

To analyze the evolution of agricultural exports, we have broken down the Export Value into three components: Volume exported, FOB price in LE, and Currency Exchange rate
Exported Value Breakdown and Dependencies

Exported Value = Volume X FOB Price X ($) Exported (Ton) (LE per Ton)

FX Rate ($ per LE)

EV Exported Value (M $) 2000 487 1,170 X 2.4

V Volume (M Ton) 2.32 6.08 X 2.62

F FOB Price (LE per Ton) 755 1,196 X 1.58

C FX Rate ($ per LE) 0.28 0.16 X 0.57

2004 Ratio

Source: FAOSTAT ; UN Comtrade; CAPMAS

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Proprietary & Confidential

The rise in Export Value from 2000 to 2004 was primarily driven by growth in exported volumes, with the rise in FOB price mostly offset by the Egyptian Pound devaluation to the dollar
Component Marginal Analysis of Egypt Agricultural Exports Value* (Million $) (2000- 2004)

+225

+46 %

-166

-34 %

1,170

+624 487

+128 %

Cumulative Effect 140 %

Exported Value 2000

Increase in Exported Volume

Increase in LE FOB

Decrease in Currency Exchange Rate

Exported Value 2004

Note: (*) to impact respective impact of each component, the following mathematical approximation was used: EV / EV = V/V + FOB/ FOB + FX/ FX Source: FAOSTAT; UN Comtrade for wheat and maize values, Alcotexa and CAPMAS for cotton exported volumes and value; FX History for the conversion rate & Confidential Proprietary 15

Export Volume

Greater export volumes were largely the result of an increase in production, coupled with a drop in local consumption
Egypt Agricultural Commodities Trade Balance (Excluding Cotton and Flowers) (20002004, in Million Tons)

- 19.1

17.3 - 60.3 2.2

Year 2000

64.3

Production

Feed, Seed and Other Use


- 1.3 (2%)

Imports

Consumption

Exports

+ 4.3 (+2%)

-3 (-5%)

+3.8 (-2%)

+ 3,8 (+28%)

14.3 - 20.5 14.3 - 56.5 6

Year 2004

68.7

Production

Feed, Seed and Other Use

Imports

Consumption

Exports

Note: (*) Supply chain and the store consumer relationship are improving, then wastage is dropping which partially explains the increase in production Proprietary & Confidential Source: FAOSTAT 16

Export Volume

Agricultural production is driven by available agricultural land, cropping intensity, and crop yield
Agriculture Commodities Production Drivers

Available Available Agricultural Agricultural Land Land

Available land for agricultural use (excludes urban and rural areas, desert, natural parks, etc.)

Production Production Volume Volume

Average Crop Average Crop Yield Yield

Overall agriculture commodities harvested in ton per feddan cultivated Ratio of yearly harvested area (including all agricultural commodities) to overall agricultural land Short-growing seasons allow use of same physical areas multiple crop rotation

Average Average Cropping Cropping Intensity Intensity

Production Volume (Ton)

Agricultural Land (Feddan)

Average Crop Yield (Ton/Feddan)

Average Cropping Intensity (%)

Source: FAOSTAT

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Proprietary & Confidential

Export Volume

Egypts land reclamation efforts have brought up total agricultural land to 8.4 million feddans in 2004 Ambitious projects envisage an additional 3.4 million feddans by the year 2017
Egypt Total Agricultural Lands* (in 000 Feddan) 11, 625 Key Ministry of Agriculture Reclamation Projects Main Main Projects Projects Location Location Southern Southern part of the part of the western western desert desert South west South west of the of the western western desert desert Western Western desert desert Date of Date of Start Start Increase Increase Source of Source of in 000 in 000 Water Water Feddan Feddan 540 540 Nile Nile

Estimated CAGR 3%

8,200

CAGR 0.3%

8,400
17%

Reclaimed Lands
(40%)

Toshka Toshka

1997 1997

Sharq Al Sharq Al Awaynat Awaynat

1997 1997

254 254

Ground Ground water water

Old Lands
83%

(60%)

Darb El Darb El Arabaeen Arabaeen Al Salam Al Salam Canal Canal

1997 1997

12 12

Ground Ground water water Nile and Nile and Drainage Drainage Water Water

Sinai Sinai

1997 1997

619 619

1996

1997

1998

1999

2000

2001

2002

2003

2004

2017E

Total Total

3,400 by 2017 3,400 by 2017


Proprietary & Confidential

Note: (*) Agricultural lands include alfalfa, orchards, palms area and field crops with the latter representing 8 M Feddan Source: CAPMAS Table 9-19, Winter Agricultural Statistics 2004 p 29; Oxford Business Strategies; Ministry of Irrigation 18

Export Volume

Agriculture yields have steadily increased since 2000, and rank high compared to international benchmarks
Yield (Ton per Feddan)
CAGR 1%
6.2 6.1 6.1 6.1 6.3

Rice Yield (Ton per Feddan)(2004)


Egypt USA Spain Morocco Turkey Italy China Philippines India World Israel 0 4 3 3 3 3 3 3 1 1 1

Horticulture Yield (Ton per Feddan)(2004)


Israel USA Egypt Spain Italy Morocco South Africa Turkey China World India 20 17 12 12 11 11 11 10 6 8 7

Average Yield

2000

2001

2002

2003

2004

3.8

3.9

3.9

4.1

4.1

Rice

2000
11.0

2001
11.4

2002
11.5

2003
10.8

2004
11.9

Horticulture

Cotton Yield (Ton per Feddan)(2001)


Israel Syira Turkey Greece China Spain Brazil Egypt USA Pakistan India 0.6 0.6 0.5 0.5 0.5 0.5 0.4 0.4 0.3 0.1 0.2
Egypt Morocco Spain China USA India Italy Turkey World Cuba

Sugar Crops Yield (Ton per Feddan)(2004)


46 32 29 27 25 25 19 18 17 15

2000

2001
0.41

2002

2003

2004
0.42

0.36

0.43

0.41

Cotton

2000

2001

2002

2003

2004

45 2000

45 2001

53 2002

46 2003

46 2004

Sugar Crops

Source: Ministry of Agriculture and Land Reclamation, FAO STAT, ITC, CAPMAS

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Proprietary & Confidential

Export Volume

This is partly explained by an intensive use of agricultural land and heavy reliance on fertilizers
Cropping Intensity (Area Harvested by Agricultural Land)* (2004)
0.9 0.5 0.5 0.5 0.5 0.6 0.6 1.4 1.0

0.2 0.1
Australia

0.2

0.3

0.3

0.3

0.4

0.1
Morocco USA Turkey Italy Germany Greece South Africa Israel Japan India France China Philippines World Egypt UK

Average Annual Fertilizer Consumption** (In Kilogram per Feddan of Agricultural Land) (2001-2003)
71 95 109 128 153

1525 192

2 Sudan

3 Nigeria

5 Yemen

17 Morocco

21 Australia

34 Kuwait

39 Jordan

45 KSA

47 USA

55

Israel

Japan

UAE

Europe

France

Egypt

Note: (*) Area harvested refers to the area a crop is gathered, the area is counted as many times as the area is harvested; Agricultural lands refers to arable lands (under temporary crops, meadows), under permanent crops (such as cocoa, coffee planted for several years) and lands under permanent pastures (mainly forage planted for 5 years) Egypts high cropping intensity is due to the fragmented land ownership, as the small farmers have high incentives to turn over their small lands (**)Fertilizers products cover nitrogenous, potash and phosphate fertilizers; the metric measures the quantity of plants nutrients used per unit of agricultural land Proprietary & Confidential Source: FAOSTAT for area harvested, WDI for agricultural land and ESI 2005 for average 20 annual fertilizer consumption

Taiwan

World

Export Volume

In parallel, the drop of maize and wheat imports, whose local production continues to be encouraged by the Government, has impacted overall agricultural imports
Change in Agriculture Imported Volumes (2000-2004, in Thousand Ton)
Cereals CAGR (2000-2004) Maize -15% Horticulture Cereals

Change in Agriculture Production Volumes (2000-2004, in Thousand Ton)


CAGR (2000-2004)

-2,295

2,921

3%

-532

Wheat

-3%

Wheat

614

2%

-932

Rice Sugar Crops -8%

352
Maize

Drop in total Drop in total agricultural imports agricultural imports by 5% over the by 5% over the 2000-2004 period 2000-2004 period

-238
-74
Spices & Stimulants -32% Sugar Crops

The government The government maintained maintained subsidies of subsidies of maize and wheat maize and wheat

1%

-1%

495

1%

Horticulture

169

8%

Spices & Stimulants Oil Crops

0%

Oil Crops

556

3%

198

5%

Source: FAOSTAT

21

Proprietary & Confidential

Export Volume

Finally, the drop in domestic consumption in Egypt is mainly attributed to a substantial decrease in the use sugar crops, which have been diverted to export markets
Change in Consumption Volume (2000-2004, in Thousand Ton)
CAGR CAGR (2000-2004) (2000-2004)

Change in Exported Volume (2000-2004, in Thousand Ton)

-3,130 -1,042 -890 -63

Sugar Crops* Cereals Oil Crops Aromatic

-5% -2% -12% -13%

29% 32% 20% -14%

Sugar Crops* Horticulture** Cereals Cotton


1,317

1,731

Decrease in Volume Consumed = 3.8 M Tons

612

Increase in Volume Exported = 3.8 M Tons

77

-2Cotton 1,335

-13%

26%

Oil Crops

54

Horticulture**

2%

-7%

Aromatic

-4

(*) The decrease in sugar crops consumptions could be attributed to the decrease of subsidies which led to an increase in sugar price (**) Horticulture stands for vegetables, fruits, pulses, roots and tubers Source: FAO STAT ; Alcotexa for cotton volumes, MOFT for 2003 and 2004 22

Proprietary & Confidential

FOB Price

Competitive pricing of Egyptian agricultural commodities compared to world markets have significantly contributed to boosting exports and world market share capture
World Average and Egypt FOB Price Differential versus Egypt Exported Volumes* ($ per Ton, 000 Ton, 1995-2004)
5,894
Egypt Exported Volume (Thousand Ton) CAGR (1995-2004) +19%

4,402 3,275 2,217 1,575 1,198 25 87 1,018 19 1,768 68 1,549 55 103 141 3,332 166 122

170

World Average and Egypt FOB Differential ($ per Ton)

+24%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

0.13%

0.17%

0.11%

0.18%

0.15%

0.21%

0.31%

0.29%

0.38%

0.46%

Egypt Agricultural Commodities World Market Share**

Notes:

(*) Excluding Cotton (**) Egypts Agricultural commodities market share stands for the percent of volumes exported by Egypt among the total volumes exported in the world Source: FAO STAT 23

Proprietary & Confidential

Currency Exchange Rate

Devaluation of the LE against the USD partly accounts for the export price differential, as it helped exporters maintain stable FOB prices in USD, while earning higher revenues in LE
Egypt Average Agricultural Commodities FOB in LE and $ vs. Currency Exchange Rate

$ or LE per Ton CAGR LE in $ (1995-2004) 0.4 CAGR (2001-2004)

800
-2% 15%

Egypt FOB (LE per Ton)

0.3

400

Currency Exchange Rate (LE in $)

0.2
-6% -13% 0%

0 1995 1996 1997 1998 1999 2000 2001


24

Egypt FOB ($ per Ton)

-8%

0.1

2002

2003

2004
Proprietary & Confidential

Source: FAO STAT; Fx History

This has contributed to increasing agricultural Egyptian exporters profit margins since year 2000
Exporter Profit for Egypt Agricultural Commodities (Excluding Cotton) (1995 2004)

FOB Price (LE per Ton)

Producer Price + (LE per Ton)

Exporter Margin (LE per Ton)

881

889 739 741


35% 27%

32%

686 615
19% 21%

636 513
20%

483
12%

518
20%

38% 31%

Margin (LE per Ton)

FOB (LE per Ton)


68% 73% 65% 81% 79% 80% 88% 80% 69% 62%

Producer Price (LE per Ton)

1995

1996

1997

1998

1999

2000

2001
25

2002

2003

2004
Proprietary & Confidential

Source: FAOSTAT, UN Com trade; Agricultural Statistics

However, a large proportion of Egyptian agricultural export volumes are concentrated in low margin staples, such as cotton, rice and sugar cane
Volumes Growth and Profit Margin for Egypt Leading Agricultural Export Products**
[Profit Margin %,2004]= [(FOB / Producer Price -1), 2004]
500% Spices(5) Tomatoes Oranges Garlic Green Beans Average Volume Growth (32%)

Grapes

Tangerines(4)

High Volume Growth and High Relative Margin

Average Profit Margin (41%)

100%
Guavas(7) Beans (8) Beans (3)

Sunflower Seed Cotton

Onions(2) Potatoes

Artichokes

Lemons, Limes

Vegetables nec(1)

Rice Sugar Beet Sugar Cane(6)

-20%
Decrease in Exported Volume and Negative Profit Margin

0%

20%

40%

60%

80%

400%

Egypt Export Volume CAGR (2000-2004)


Groundnuts Bubble Proportional to Export Volume

-100%

(*) Some commodities such as strawberries have not been included due to lack of data (**) Egypt Agricultural Exports Selected = 99% of (Total Export Volume in 2004) (1) Maize green, okra, cassava leaves, chicory roots (2) Onions including shallots and green; (3) Beans including cow peas, dry; (4) Tangerines, clementines, and mandarins; (5) Anise, badian, fennel, corian; (6) Molasses ; (7) Mangoes and mangos teens; (8) Broad beans and horse beans dry; Source: FAOSTAT; Alcotexa; CAPMAS; Agricultural Statistics for cotton producer price; UN Com Trade Proprietary & Confidential 26

Overall, almost all Egyptian export commodities have steadily gained market share over the past years
Growth of Egyptian Export and International Demand for Egypts Leading Agricultural Export Commodities
World Import Value CAGR (2000-2004)
20%

Diagonal of Constant Market Share


Oilseeds(6) Potatoes Guavas(1) Cotton Sugar Cane Oranges Green Beans(5) Sugar Beet

Underachievers (Losers in Growth Market)


10%
Vegetables nec(7) Rice Dry Beans(4) Spices(3)

Champions (Winners in Growth Markets)

Onions(2) Grapes Lemon & Limes Strawberries

-20%

0% 0%

20%

40%

60%

80%

100%

Egypt Export Value CAGR (2000-2004) Losers in Declining Markets


-10%

Winners in Declining Markets


Bubble Scale = US$ 100 Million Egypt Agricultural Exports Selected = Egypt Agricultural Exports Selected = 95% of (Total Export Value in 2004) 95% of (Total Export Value in 2004)

(1) Guavas, mangoes and mangosteens; (2) Onions including shallots and green; (3) Anise, badan, fennel, corian (4) Beans including cow peas, dry; (5) including string beans (6) safflower, melon seed and poppy seed; (7) Maize green, okra, cassava leaves, chicory roots; Source: FAOSTAT; ITC for cotton world imports; CAPMAS for cotton exported values; UN Comtrade, Toward Agricultural Competitiveness World Bank (2001) Proprietary & Confidential 27

A similar analysis by destination market reveals that Egypt has consolidated its export volumes towards Europe, with CIS markets confirming their growth potential
Growth of Egyptian Exports Value and International Demand by Destination Market*
World Import Value CAGR (2000-2004) Underachievers (Losers in Growth Market)
30%
EU

Diagonal of Constant Market Share


Romania

Champions (Winners in Growth Markets)


CIS(4)

GCC (3) UAE

20%

Saudi Arabia

Spain(1) Jordan Austria Poland Netherlands Turkey Italy France Switzerland UK 10% USA Portugal Germany Israel(2) Indonesia Syria Japan Far East

Czech Greece

Russia Belarus

0% -20% 20%
Kenya

60%

200%

300%

Egypts Export Value CAGR (2000-2004) Losers in Declining Markets


-10%

Winners in Declining Markets


Others USA European Union CIS Far East GCC

(*) Excludes cotton (1) Spain imports rice, flowers and onions from Egypt; (2) Israel mainly imports vegetables nec HS 0709 and rice; (3) GCC negative export growth from Egypt is due to the decrease of citrus imports (oranges mainly); (4) Egypt export growth to CIS countries is only due to the increase in citrus growth Proprietary & Confidential Source: ITC; UN Comtrade; FAOSTAT for Import values; Toward Agricultural Competitiveness World Bank (2001) 28

Bubble Scale = US$ 15 Million

Importing Countries Selected = 87% of (Export Value in 2004)

Trade agreements with Arab countries, EU and the USA have facilitated access to agricultural export markets
Egypt Main Trade Agreements*
EFTA-Iceland, Liechtenstein, EFTA-Iceland, Liechtenstein, Norway and Switzerland Norway and Switzerland Since January 2007 Since January 2007 Trade liberalization in industrial and Trade liberalization in industrial and processed agricultural products processed agricultural products Protection of IP rights, competition Protection of IP rights, competition and technical cooperation and technical cooperation QIZ (USA) QIZ (USA) Since 2004 Since 2004 Special trading advantages to Special trading advantages to products made in 3 IZ in Egypt products made in 3 IZ in Egypt entering the USA without customs entering the USA without customs Conditions: Egyptian raw material Conditions: Egyptian raw material in a range from [[ 35% to 88%] with in a range from 35% to 88%] with an Israeli component of 11% an Israeli component of 11% EU Agreement EU Agreement Since 2004 Since 2004 15 years agreement on preferential 15 years agreement on preferential treatment of certain quotas of treatment of certain quotas of agricultural products agricultural products Import tariffs cut substantially Import tariffs cut substantially Subject to liberalization Subject to liberalization Confirmation of rights and Confirmation of rights and obligations under WTO and GATS obligations under WTO and GATS Traceability and compliance to Traceability and compliance to standards prerequisite for EU to standards prerequisite for EU to import Egypts agricultural products import Egypts agricultural products COMESA COMESA Initiated in 1982 Initiated in 1982 Adoption of a common external tariff and Adoption of a common external tariff and standards, free movement of labor, capital standards, free movement of labor, capital and goods, quality control procedures, tax and goods, quality control procedures, tax harmonization, harmonization, Common External tariff of 5% for raw Common External tariff of 5% for raw materials materials Exports of originating goods from member Exports of originating goods from member states (with a minimum local value added states (with a minimum local value added of 45%) exempted from customs duties of 45%) exempted from customs duties MAFTA (Maghreb FTA) MAFTA (Maghreb FTA) Since 2005 Since 2005 Free movement of ingredients, raw Free movement of ingredients, raw materials for further processing before materials for further processing before exporting to the EU exporting to the EU AGADIR-Jordan, Tunisia, Morocco, Egypt AGADIR-Jordan, Tunisia, Morocco, Egypt Since 2004 Since 2004 Removal of all tariffs on trade Removal of all tariffs on trade Covering government procurement, Covering government procurement, financial services and dispute settlement financial services and dispute settlement Lebanon, Iraq, Libya, Syria Lebanon, Iraq, Libya, Syria Bilateral agreements Bilateral agreements Might be absorbed by GAFTA Might be absorbed by GAFTA GAFTA (Greater Arab FTA) GAFTA (Greater Arab FTA) Since 1998 Since 1998 17 members 17 members Dismantle customs tariffs by 10% points Dismantle customs tariffs by 10% points annually over a decade annually over a decade Free trade with zero tariffs Free trade with zero tariffs Comparative advantage for Egypt when Comparative advantage for Egypt when compared to oil rich Arab countries with compared to oil rich Arab countries with limited agricultural industry limited agricultural industry Possible abuse of certificates of origin Possible abuse of certificates of origin
Proprietary & Confidential

Note: (*) Egypt has also signed bilateral free trade agreements with Turkey Source: MOFTI

29

However, these agreements do not seem to be adapted to actual demand for Egyptian agricultural exports, as evidenced by some commodities significantly exceeding their export quotas
Ratio of Egyptian Agricultural Exports-to-Quota for EU 15
Few Commodities Exceed Quotas
8 22

Most horticulture products are exported much below the quotas


5 4 3 3 3 3 3

Suggests that demand for some Egyptian agricultural commodities in EU are much higher that quotas
Export Quota to EU

Oranges

Lettuce

Other Live Plants

Other Melons

Cucumbers, gherkins

Sweet Potatoes

Rice

Peaches, Nectarines

Pears, quinces

Foliage, branches

Carrots, Turnips

Potatoes

Onions

Garlic

Plums and Sloes

Leguminous Vegetables

Cabbages, cauliflowers

Bulbs, tubers

Strawberries

Cut Flowers

2004 2005 2006

Source: EU Egypt Agreement; GOEIC Data ware house department 30

Proprietary & Confidential

All in all, Egypts export performance remains well below its potential, given its agricultural production, size of economy, population, and arable land
1

% of Agricultural Commodities Exports vs. Production* (2004)


45% 40% 40% 33% 26% 24% 11% 9% 9% 3% 2%
Egypt focuses Egypt focuses on self on self sufficiency sufficiency

Agriculture Commodities Export Share of GDP (2004)


2.0% 1.9% 1.7% 1.5% 1.5% 1.3% 1.3% 1.1% 1.0% 0.9%

France Spain Israel Italy South Africa USA Turkey Morocco Egypt India China
3

Turkey Spain Morocco France Egypt South Africa Italy India China Israel USA
4

0.4%

Agricultural Commodities Export Value per Feddan of Agricultural Land ($ per Feddan, 2004)
Israel Italy France Spain Egypt Turkey USA India China South Morocco 599 441 277 142 65 45 16 14 12 12
The largest The largest impediment to growth impediment to growth is availability of land is availability of land and scarcity of water and scarcity of water of source of source

Agricultural Commodities Export per Capita ($ per Capita, 2004)


517 490 384 161 154 86 64 27 16 15 7
Proprietary & Confidential

763

France Spain Italy Israel USA Turkey South Africa Morocco Egypt China India
31

(*) Cotton not included Source: WDI; FAOSTAT, ITC; UN Com trade

A high-level correlation analysis of export to GDP, agricultural land, and population suggests a potential value of $6 billion for Egyptian exports in 2004, compared to the actual $1.2 billion
IIVE VE AT AT IIC C IIND Dependent ND Variables

Egypt Agricultural Commodities Export Potential*


Rationale Encapsulates overall labor and factor productivity
2004 China Egypt India Israel Italy Morocco South Africa Spain Turkey USA Algeria Australia Belgium Brazil Canada Denmark France Germany Greece Japan New Zealand Philippines Switzerland UK GDP ($ Billion) 1,932 79 695 117 1,678 50 215 1,040 303 11,712 85 637 352 604 978 241 2,047 2,741 205 4,623 99 90 358 2,124 Population (Million) 1,288 71 1,064 7 58 29 46 42 71 291 32 20 10 181 32 5 60 83 11 128 4 80 7 60 Agricultural Land Current Export Predicted Export ('000 Fed) ($ million) ($ million) 1,358,953 19,250 18,302 8,400 1,170 5,975 475,758 7,453 9,063 1,384 1,056 6,168 36,756 22,007 11,012 72,333 840 6,402 238,034 2,883 7,980 72,732 20,165 9,362 94,941 6,198 7,235 1,024,171 45,721 47,444 95,118 42 6,654 1,054,043 10,312 14,795 3,589 15,061 6,885 631,470 19,835 11,539 176,325 14,109 9,892 6,424 3,764 6,580 70,839 31,247 12,348 41,416 22,349 14,197 20,543 2,333 6,555 12,745 2,406 19,590 41,407 2,276 6,389 29,217 1,731 6,133 3,745 2,230 6,908 40,638 15,338 12,380

GDP

Correlates with human capital stock and innovation Agricultural production (hence export) are limited by available arable land out of overall land lost to urbanization or desertification Larger population given arable land probably discourages export in favor of local consumption

Agricultural Land

Population

On the other hand, larger manual labor force positively influence agricultural production

Predicted Export Value for 2004 = $ 5.9 Billion


Note(*): statistical regression on sample of 24 agricultural exporter countries with R-square of 0.55 (**): Assuming a growth rate of 2% for population, 4% for arable land and 5% for GDP, the predicted export value stands at $6.2 billion in 2017 Source: WDI; FAOSTAT; ITC 32

Proprietary & Confidential

Moving forward, global trends point to a further decline in commodity prices in real terms, putting pressure on agricultural export prices
Forecast of Agricultural Commodities Prices in Real Terms

Global Demand and Supply Equilibrium Global Demand and Supply Equilibrium Global demand for agricultural commodities Global demand for agricultural commodities will be largely driven by two main factors will be largely driven by two main factors Real GDP Growth: 3% annual increase Real GDP Growth: 3% annual increase between 2004 and 2014 between 2004 and 2014 Population Growth: 2% annual increase Population Growth: 2% annual increase between 2004 and 2014 between 2004 and 2014 Global supply of agricultural commodities, on Global supply of agricultural commodities, on the other hand, will strongly pick-up and overtake the other hand, will strongly pick-up and overtake global demand due to several factors: global demand due to several factors: Productivity yield growth (expected to be Productivity yield growth (expected to be very high in the non-OECD countries) very high in the non-OECD countries) Agricultural Land growth Agricultural Land growth Growing number of low-cost suppliers Growing number of low-cost suppliers
0.4 1994 1996 1998 0.8 1.2 1.6

Outlook for World Crop Prices (Index of Nominal Prices)

CPI

Wheat Rice Oil seeds

Raw Sugar

2000

2002

2004

2006

2008

2010

2012

Source: OECD- FAO Agricultural Outlook 2005-2014 33

Proprietary & Confidential

2014

A rapidly growing population, coupled with a fluctuating exchange rate, continue to pose a threat to Egypt agricultural export potential
Egypt Past and Projected Population Growth (Million)
80 CAGR 3% 46 85

Egypt Past and Projected Exchange Rate (LE in $)

0.3

0.2

1985

1990

1995

2000

2005

Projected 2010

0.1
1995 2000 2005
Projected 2010

(*) Source: WDI; EIU

34

Proprietary & Confidential

Finally, environmental issues, such as water supply and pollution, are emerging as a key threat to further growth of agriculture production
Water Quantity Index(1)
Guyana Canada Australia USA
-0.21 -0.57 -0.82 -0.83 -1.14 -1.31 0.77 0.34 1.79
Ranking (out of 146 countries) Ranking (out of 146 countries)

ESI Water(2) Quality Index (3)


Finland Canada Japan UK Australia Kuwait

2.96

1 11 29 43 67 98 122 123 140 146

Best

2 5 8 17 15 57 75 91 113

1.61 1.2 1.06 0.92 0.84 0.16

France Italy Japan UK Egypt UAE

-0.01 Greece -0.24 -0.46 -1.46


Jordan Egypt Morocco

Worst

146

Water quantity metric measures the per Water quantity metric measures the per capita volume of available water resources capita volume of available water resources Water quantity reflects the countrys ability to Water quantity reflects the countrys ability to support the needs of the population support the needs of the population

Egypt s fresh and groundwater are polluted prior to Egypt s fresh and groundwater are polluted prior to any treatment, which implies water eutrophication any treatment, which implies water eutrophication Freshwater and groundwater are contaminated by Freshwater and groundwater are contaminated by Extensive use of fertilizers Extensive use of fertilizers Industries emission of pollutants Industries emission of pollutants

Notes:

(1) Internal renewable resources: rain, surface and groundwater (2) Freshwater and groundwater (3) Water Quality index measures the level of pollution of fresh and groundwater Source: Environmental Sustainability Index, 2005

35

Proprietary & Confidential

as measured by a study by ESI covering fresh and ground water availability as well as various chemicals concentration

Water Quantity Index Water Quantity Index


Dissolved Dissolved Oxygen Oxygen Concentration Concentration Eutrophicatio Eutrophicatio n level n level

Water Quality Index* Water Quality Index*


Electrical Electrical Conductivity Conductivity Metal Metal concentration concentration and salinity and salinity Phosphorus Phosphorus Concentration Concentration Eutrophicatio Eutrophicatio n level n level Suspended Suspended Solids Solids Water Water turbidity turbidity

Sub Sub Metric Metric

Freshwater Availability Freshwater Availability

Groundwater Availability Groundwater Availability

Objective Objective

Countrys ability to Countrys ability to support its population support its population needs needs

Probability that a country Probability that a country can sustainably manage can sustainably manage its groundwater its groundwater

Methodology Methodology

Sum of internal renewable Sum of internal renewable resources per capita :: resources per capita runoff, precipitation runoff, precipitation

Groundwater data per Groundwater data per capita capita

Level of Level of dissolved dissolved oxygen oxygen

Conductivity Conductivity

Concentration Concentration of PH of PH

Concentration Concentration of suspended of suspended solids solids

Data Data Source Source

Center for Environmental Center for Environmental Systems Research Systems Research

FAO FAO Aquastat Aquastat

UNEP UNEP OECD OECD EEA EEA

UNEP UNEP GEMS GEMS EEA EEA

UNEP UNEP GEMS GEMS OECD/EEA OECD/EEA

UNEP UNEP

Notes: (*) Water Quality index measures the level of pollution of fresh and groundwater Source: Environmental Sustainability Index, 2005 36

Proprietary & Confidential

Egypt Agriculture Export Baseline


Market Definition and Methodology Egypt Agricultural Commodities Export Performance Crop-specific Export Performance and Market Assessment Competitive Advantages and Challenges in the Export Value Chain

Proprietary & Confidential

We have analyzed the selected specific agricultural categories along a fact sheet covering basic production/export information, margins, pricing and key characteristics
Agricultural Commodity Production and Export Volume Agricultural Commodity Production and Export Volume Agricultural Commodity Exporter Profit Agricultural Commodity Exporter Profit

T Ton

6,000 4,000 2,000

E L PL E MP AM EX A EX

1%

Produced Volume

LE per Ton

CAGR (1995-2004) FOB 4%

1000

E L PL E MP AM EX A EX

Producer 6% Price

1995

1996

1997

1998

1999

2000

2001

2002

2003

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Margin* 33% 20% 19% 2% -2% 22% -3% 7% 14% 15% Agricultural Commodity Key Characteristics Agricultural Commodity Key Characteristics

2004

1%

Exported Volume

500

-9%

Agricultural Commodity FOB Egypt vs. World Average Agricultural Commodity FOB Egypt vs. World Average

300 250 200 150 100

$ per Ton
E L PL E MP AM EX A EX

CAGR (1995-2004) World Egypt 0% -2%

Key comments on Egypts competitive positioning in world Key comments on Egypts competitive positioning in world markets markets Notable Government financial assistance and intervention Notable Government financial assistance and intervention Key information about market structure (e.g., main Key information about market structure (e.g., main stakeholders, producers and exporters fragmentation, stakeholders, producers and exporters fragmentation, competition among exporters) competition among exporters) Main destination markets Main destination markets

1995

1996

1997

1998

1999

2000

2001

2002

2003

(*) Margin is defined as the difference between the FOB and the producer price divided by the producer price; 38

2004

Proprietary & Confidential

1/6 Horticulture

Horticulture exports in volumes have far outpaced production growth although Egyptian produces are still sold at a discount, gross margins for exporters remain comfortable
Horticulture Production and Export Volume Horticulture Production and Export Volume Horticulture Exporter Profit Horticulture Exporter Profit

M Tons 30 4%

LE per Ton Produced Volume

CAGR (1995-2004) FOB 2%

20 10

1000

X 2 Margin Exported Volume

1995

1996

1997

1998

1999

2000

2001

2002

2003

0 1995 1996 1997 1998 1999

2000

2001

2002

2003

2004

Margin* 38% 35% 47% 42% 32% 13% 12% 23% 63% 101%
Horticulture Key Characteristics Horticulture Key Characteristics

2004

10%

500

Producer -2% price

12%

Horticulture FOB Egypt vs. World Average Horticulture FOB Egypt vs. World Average

$ per Ton

CAGR (1999-2004) World 2%

500

300
Egypt -4%

100 1999 2000 2001 2002 2003 2004

Horticulture has been Egypts success story since 1995 and Horticulture has been Egypts success story since 1995 and has led the way of agricultural export growth has led the way of agricultural export growth Mostly grown along the newly reclaimed lands of the Western Mostly grown along the newly reclaimed lands of the Western Desert Road Desert Road Egypts products still sell its products at a significant discount to Egypts products still sell its products at a significant discount to world prices world prices However margins for exporters have increased considerably in However margins for exporters have increased considerably in particular since 2001 (mostly as a result of the pound particular since 2001 (mostly as a result of the pound devaluation) devaluation) Organic horticulture is fast growing in European markets Organic horticulture is fast growing in European markets
Proprietary & Confidential

(*) Margin is defined as the difference between the FOB and the producer price divided by the producer price; 39 Source: ITC; FAOSAT; Interview Notes

1/6 Horticulture

Egypt concentrates most of its horticultural exports mainly potatoes and oranges towards Europe
Horticulture Egypt Export Value per Destination (M$, 2004) Horticulture World Import Market Breakdown (M $, 2004)

339

81,058 Others USA Mainly grapes Far East Mainly oranges, potatoes GCC Mainly onions, lemons and limes(1) CIS Mainly oranges

9% 3% 10% 11%

20% 3% 13% 13% 19%

Others GCC CIS Far East USA

EU Extra EU - 25

66%

EU 25 Mainly potatoes, oranges

31%

EU Intra EU - 25

2004

2004

(1) HS 0703, onions, shallots and garlic; According to UN Comtrade in 2004, Egypt exported lemons and limes HS 080530 to GSS where as in the previous years, it used to export to GCC oranges Proprietary & Confidential Source: ITC; UN Comtrade 40

1/6 Horticulture

In addition, export growth has also been focused to Europe where Egypt has been gaining substantial market share
Growth of Egypts Horticulture Export Value vs. International Demand Per Country
Worlds Horticulture Import Value Growth (2000-2004)

30%

Diagonal of Constant Market Share

Champions (Winners in Growth Markets)


CIS(2)

Underachievers (Losers in Growth Market)


GCC(1)

Czech

Greece Slovakia

Russia Spain

20%
Far East Syria Malta Italy Netherlands Austria Poland France Germany USA Switzerland

Belarus

UAE

10%

UK Jordan Indonesia Israel

-20%

Saudi Arabia 0%

Japan

20%
Turkey

Kenya

60%

200%

300%

Egypts Horticulture Export Value Growth (2000-2004)

Losers in Declining Markets


-10%

Winners in Declining Markets


USA Bubble Scale = US$ 25 Million EU-25 CIS Far East GCC

Others

Importing Countries Selected = 88% of (Export Value in 2004)

(1) Egypts horticultural CAGR (EV) to GCC Is negative because of the decrease of oranges export to GCC (2) CAGR (EV) to CIS is positive because of the increase of oranges exports Proprietary & Confidential Source: ITC; UN Comtrade; FAOSTAT, Toward Agricultural Competitiveness World Bank (2001) 41

1/6 Horticulture

Despite its recent growth, Egypts positioning remains as a niche supplier


% USA Imports 35% 12% 10% 6% 5% 4% 3% 3% 0% % GCC Imports 18% 15% 8% 8% 6% 6% 5% 5% 3%

Largest Exporters of Horticulture to USA vs. Egypt

% EU Imports 11% 9% 7% 6% 5%

Largest Exporters of Horticulture to EU vs. Egypt

Mexico Chile Canada Costa Rica Guatemala Ecuador India H Peru Egypt 4 643 512 392 294 268 1,218 1,039

3,699

USA Turkey Chile Morocco Costa Rica Argentina Ecuador Israel Egypt 224 754 710 681 660 1,035 938 1,382

1,747

USA Imports USA Imports = $ M 10,495 = $ M 10,495

5% 4% 4% 1% % CIS Imports 23% 11% 11% 10% 7%

EU Imports from EU Imports from Outside EU Outside EU = $ M 15, 215 = $ M 15, 215

Largest Exporters of Horticulture to GCC vs. Egypt

Largest Exporters of Horticulture to CIS vs. Egypt

India USA Turkey Chile Jordan China Syria Pakistan Egypt

182 148 77 77 65 61 53 50 34
42

Ecuador Poland China Turkey Argentina Morocco Spain Netherlands Egypt 37 118 93 79 70 184 179 171

376

GCC Imports from GCC Imports from Outside GCC = $ M 1,007 Outside GCC = $ M 1,007

6% 5% 4% 2%

CIS Imports from CIS Imports from Outside CIS = $ M 1,647 Outside CIS = $ M 1,647

Source: FAO STAT ; ITC

Proprietary & Confidential

1/6 Horticulture

exporting mostly to the EU during the window opportunity between on and off-season growing seasons
Overall Production and Trade of Horticulture
EU Market (2002-2003) 20% annual growth in fresh vegetables imports; 28% annual growth in fresh fruits imports

Northern Hemisphere

Off-season supplier Tropical supplier Niche supplier

Equator
GCC Market (2002-2003) -3% annual growth in fresh vegetables imports; 15% annual growth in fresh fruits imports

Southern Hemisphere

Source: Douglas A. Anderson, Missing European Business Export Opportunities Where Egypt Needs to Focus (December 2006) 43

Proprietary & Confidential

2/6 Cereals

Although Egypts main cereal export crop, rice remains a key subsistence crop because of its water consumption, the Government continues to regulate its production
Rice Production and Export Volume Rice Production and Export Volume Rice Exporter Profit Rice Exporter Profit

T Ton

LE per Ton 1% Produced Volume

6,000 4,000 2,000

CAGR (1995-2004) FOB 4%

1000

Producer 6% Price

1995

1996

1997

1998

1999

2000

2001

2002

2003

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Margin* 33% 20% 19% 2% -2% 22% -3% 7% 14% 15%


Rice Key Characteristics Rice Key Characteristics

2004

1%

Exported Volume

500

-9%

Rice FOB Egypt vs. World Average Rice FOB Egypt vs. World Average

300 250 200 150 100

$ per Ton

CAGR (1995-2004) World Egypt 0% -2%

Key subsistence crop mostly grown in the delta Key subsistence crop mostly grown in the delta Because of its high water usage and ground desalination Because of its high water usage and ground desalination properties, yearly zoning maps are published. Rice growing properties, yearly zoning maps are published. Rice growing outside these regions requires official licensing outside these regions requires official licensing Rice export dominated by top 4 private exporters (Egyptian Rice export dominated by top 4 private exporters (Egyptian Traders, Al Fawakih Al Tasga, Al Walili, Wakalex represents Traders, Al Fawakih Al Tasga, Al Walili, Wakalex represents 40% of exports as of 2005) 40% of exports as of 2005) Egypts famous for short-medium grain variety, in great demand Egypts famous for short-medium grain variety, in great demand in Far East countries. Europe imports long-grain variety in Far East countries. Europe imports long-grain variety Rice exports from 2004 to 2006 exceeded the quotas agreed Rice exports from 2004 to 2006 exceeded the quotas agreed upon with EU countries; as such at least twice the quota has upon with EU countries; as such at least twice the quota has been exported (Quotas 32 Thousands Ton) to EU been exported (Quotas 32 Thousands Ton) to EU

1995

1996

1997

1998

1999

2000

2001

2002

2003

(*) Margin is defined as the difference between the FOB and the producer price divided by the producer price; (**) The price support given is almost 80% which limits the market potential Proprietary & Confidential Source: FAOSTAT; FAPRI 2004 Agricultural Outlook 44

2004

2/6 Cereals

Egypts main destination for rice is Syria where the Government purchases the vast majority of imports to date EU and CIS markets have been underserved by Egyptian exports
Cereals Egypt Export Value Per Destination (M$, 2004)
245

Cereals World Import Market Breakdown (M $, 2004)


47,380

21% 2% 6% 8% 14% 12%

Others Rice CIS EU 25 Rice GCC Rice Far East Rice Turkey Rice

37%

Others

2% 2% 4%

USA CIS GCC Far East

31%

37%

Syria - Rice

Syria Government Syria Government purchases 60% of purchases 60% of overall imports of overall imports of rice as a main rice as a main subsistence crop subsistence crop

6% 14%

Extra EU - 25 Intra EU - 25

2004

2004

Source: ITC

45

Proprietary & Confidential

2/6 Cereals

Cereals export growth is concentrated towards Syria and Jordan EU markets, such as Spain and UK, have recently posted substantial growth
Growth of Egypts Cereals Export Value vs. International Demand Per Country
Worlds Cereals Import Value Growth (2000-2004)

Underachievers (Losers in Growth Market)

30%

Diagonal of Constant Market Share

Champions (Winners in Growth Markets)

EU

GCC

20%
Russia Jordan Turkey UAE Israel Syria Spain UK

10%
Saudi Arabia Kuwait

0% -20%
Kenya

20%

60%

150%

200%

Egypts Cereals Export Value Growth (2000-2004)

Losers in Declining Markets

-10%

Winners in Declining Markets


Others Bubble Scale = US$ 15 Million EU-25 CIS Far East GCC

Importing Countries Selected = 87% of (Cereals Export Value in 2004)


Proprietary & Confidential

Source: ITC; FAOSTAT; UN Comtrade, Toward Agricultural Competitiveness World Bank (2001) 46

2/6 Cereals

Despite its recent growth, Egypts market share of cereals exports in USA, EU, GCC and CIS countries remains marginal
% USA Imports 50% 22% 7% 5% 3% 3% 2% 2% 0% % GCC Imports 35% 20% 14% 12% 7% 6% 2% 1% 1%

Largest Exporters of Cereals to USA and Egypt (M$,2004)

% EU Imports

Largest Exporters of Cereals to EU and Egypt (M$,2004)

Canada Thailand Chile India Sw eden Argentina China Finland Egypt 0 66 42 27 24 22 15 195

446

22% 18% 11% 10%

USA Canada Argentina Brazil Thailand India Russia Australia Egypt 15 163 160 143 124 330 311 552

669

USA Imports = $ M 889 USA Imports = $ M 889

5% 5% 5% 4% 0% % CIS Imports

EU Imports Extra EU EU Imports Extra EU = $ M 3,100 = $ M 3,100

Largest Exporters of Cereals to GCC and Egypt

Largest Exporters of Cereals to CIS and Egypt (M$,2004)

India Australia Pakistan Argentina USA Canada Russia Egypt Netherlands 44 20 10 129 105 262 221 364

659

22% 14% 11% 11% 7%

Lithuania Denmark Thailand China USA Germany Viet Nam Sw eden Egypt 5 21 19 18 14 34 31 41

65

GCC Imports GCC Imports Extra GCC = $ M 1825 Extra GCC = $ M 1825

6% 6% 5% 2% 47

CIS Imports CIS Imports Extra CIS = $ M 297 Extra CIS = $ M 297

Source: ITC; FAOSTAT; Un Comtrade

Proprietary & Confidential

3/6 Sugar Crops

Sugar crops exports mostly molasses - have grown substantially, in the past 10 years - Government intervention in production and processing continues to affect export profit margins
Sugar Crops Production and Export Volume Sugar Crops Production and Export Volume Sugar Crops Exporter Profit Sugar Crops Exporter Profit

20

M Tons 3%

LE per Ton Produced Volume


150 100 50

CAGR (1995-2004) FOB 3%

10
Exported

Producer 1% Price

1995

1996

1997

1998

1999

2000

2001

2002

2003

0 1995 1996 1997 1998

1999

2000

2001

2002

2003

2004

Margin* 49% 3% 18% -35% -48% -52% -13% -9% -2% 30%
Comments Comments

2004

39%

Volume

- 5%

Sugar Crops FOB Egypt vs. World Average Sugar Crops FOB Egypt vs. World Average

40 30 20 10

$ per Ton

CAGR (1995-2004) World 2%

Egypt -6%

Vast majority of export is molasses used in sugar industry Vast majority of export is molasses used in sugar industry processing processing Production largely liberalized but localized around Production largely liberalized but localized around Government-owned sugar cane factories. Export still controlled Government-owned sugar cane factories. Export still controlled largely by Government. As a result of state intervention, market largely by Government. As a result of state intervention, market still significantly distorted; between 1998 and 2003 average still significantly distorted; between 1998 and 2003 average profit margins were negative profit margins were negative Water demanding crop: consumes 6% of the cultivated area, Water demanding crop: consumes 6% of the cultivated area, 18% of the total water and contribute to 9% of the value add 18% of the total water and contribute to 9% of the value add

1995

1996

1997

1998

1999

2000

2001

2002

2003

(*) Margin is defined as the difference between the FOB and the producer price divided by the producer price 48 Source: FAOSTAT;

2004

Proprietary & Confidential

3/6 Sugar Crops

A third of Egypts sugar crops export, mainly sugar cane, is sent to Kenya another third is exported as molasses to the Far East
Sugar Crops Egypt Export Value Per Destination (M$,2004)
63

Sugar Crops World Import Market Breakdown (M $, 2004)


20,745

6% 1% 8% 21%

Others USA GCC Mainly molasses EU 25- Mainly molasses

29% 3% 6% 10%

Others GCC CIS USA Far East EU 25 - Extra EU

31%

Far East Mainly molasses

15% 10%

34%

Kenya- Mainly sugar cane

27%

EU 25 - Intra EU

2004

2004

Source: ITC; UN Comtrade 49

Proprietary & Confidential

3/6 Sugar Crops

Egypts sugar crops export industry seems to be losing out on the growing EU and Turkey market while concentrating export growth and volume on Kenya
Growth of Egypts Sugar Crops Export Value vs. International Demand Per Country
Worlds Sugar Crops Import Value Growth (2000-2004)

Underachievers (Losers in Growth Market)

EU

80%

Diagonal of Constant Market Share Champions (Winners in Growth Markets)


Turkey

Spain

40%
UK Portugal USA France

Italy Netherlands Korea Indonesia 20% Taiwan Israel KSA Oman UAE

0% -100% -60% -20% -40%

60%

100%

Kenya 140%

180%

Egypts Sugar Crops Export Value Growth (2000-2004)

-80%

Losers in Declining Markets


-120%

Jordan

Winners in Declining Markets

Others

USA Bubble Scale = US$ 2.5 Million

GCC

EU-25

Far East

Importing Countries Selected = 97% of (Sugar Crops Export Value in 2004)


Proprietary & Confidential

Source: ITC; UN Comtrade; FAOSTAT, Toward Agricultural Competitiveness World Bank (2001) 50

3/6 Sugar Crops

Sugar crops main import markets USA and EU are dominated by large players, such as Canada or Mauritius
% USA Imports
26% 15% 6% 5% 4% 4% 4% 4% 0% % GCC Imports 74% 7% 2% 2% 1% 1% 1% 1% 1%

Largest Exporters of Sugar Crops to USA vs. Egypt (M$, 2004) 549 Canada

% EU Imports 21% 7% 6%

Largest Exporters of Sugar Crops to EU vs. Egypt (M$, 2004) 445 Mauritius

Mexico Brazil UK Dominican* Guatemala China Colombia Egypt 6 135 112 91 84 78 77

314

Fiji Sw aziland Jamaica Serbia** Guyana Pakistan Israel

154 125 117 114 98 91 70

USA Imports = $ M 2,120 USA Imports = $ M 2,120

6% 5% 5% 4% 3% 1% % CIS Imports 52% 27% 4%

EU Imports Extra EU EU Imports Extra EU = $ M 2,078 = $ M 2,078

Largest Exporters of Sugar Crops to GCC vs. Egypt (M$, 2004) Brazil 373

13 Egypt Largest Exporters of Sugar Crops to CIS vs. Egypt (M$, 2004) Brazil Cuba Poland Thailand El Salvador Colombia Netherlands Germany Egypt 39 19 17 15 11 11 0
Proprietary & Confidential

Germany China Turkey Indonesia Spain India H Netherlands Egypt

37 12 9 7 7 6 6 5
51

519 265

GCC Imports from GCC Imports from Outside GCC= $ M 507 Outside GCC= $ M 507

2% 2% 1% 1% 1% 0%

CIS Imports from Outside CIS Imports from Outside CIS = $ M 990 CIS = $ M 990

(*) Dominican Republic; (**) Serbia and Montenegro Source: ITC

4/6 Oil Crops

Oil crops have experience substantial growth since 1995 exporter margins have been comfortable
Oil Crops Production and Export Volume Oil Crops Production and Export Volume Oil Crops Exporter Profit Oil Crops Exporter Profit

Tons 1,200 3%

LE per Ton Produced Volume


1000

CAGR (1995-2004) FOB 1% Producer 4% Price

600
Exported

1995

1996

1997

1998

1999

2000

2001

2002

2003

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Margin* 47% 45% 55% 7% 51% 106% 91% 66% 47%18%


Oil Crops Key Characteristics Oil Crops Key Characteristics

2004

29%

Volume

- 10%

Oil Crops FOB Egypt vs. World Average Oil Crops FOB Egypt vs. World Average

$ per Ton
400 300 200 100 0 1999 2000 2001 2002 2003 2004

CAGR (1999-2004) Egypt -10% World 3%

The government reduction of subsidies to oil crops producers The government reduction of subsidies to oil crops producers from 1995 to 1999 (LE 0.5 Billion) led to the increase of its from 1995 to 1999 (LE 0.5 Billion) led to the increase of its producer price producer price Nuts and oil crops consume less than 2 % of the land, Nuts and oil crops consume less than 2 % of the land, insignificant amount of water and benefit from a high producer insignificant amount of water and benefit from a high producer price compared to the cost of production per Feddan price compared to the cost of production per Feddan

(*) Margin is defined as the difference between the FOB and the producer price divided by the producer price 52 Source: FAOSTAT

Proprietary & Confidential

4/6 Oil Crops

The EU absorbs almost 2/3 of Egypts ground nuts exports the large Far East markets are clearly underserved
Oil Crops Egypt Export Value Per Destination (M$, 2004)
21 Others Far East GCC Morocco Mainly Oil Seeds Syria Mainly Ground Nuts

Oil Crops World Import Market Breakdown * (M$, 2004)

3,164

20% 2% 6% 13%

21%

Others GCC CIS USA

30%

EU - 25

58%

EU 25 Mainly Ground Nuts

45%

Far East

2004

2004

Note (*): Estimate based on UN Comtrade Source: UN Comtrade; FAOSTAT; ITC 53

Proprietary & Confidential

4/6 Oil Crops

Growth of Egypts oil crops exports is concentrated on Europe Italy in particular


Growth of Egypts Oil Crops Export Value vs. International Demand Per Country
Worlds Oil Crops Import Value Growth (2000-2004)

Underachievers (Losers in Growth Market)


EU

60%

Diagonal of Constant Market Share


Morocco

Champions (Winners in Growth Markets)

Greece

20%
Germany

Italy Netherlands Portugal Switzerland Turkey UK Belgium Saudi Arabia

Algeria Spain France Syria Tunisia

-10%

60%

130%
Egypts Oil Crops Export Value Growth (2000-2004)

Losers in Declining Markets

-20%

Winners in Declining Markets


Bubble Scale = GCC Others US$ 1 Million Importing Countries Selected = 94% of (Oil Crops Export Value in 2004) EU-25

Source: UN Comtrade; FAOSTAT, Toward Agricultural Competitiveness World Bank (2001) 54

Proprietary & Confidential

4/6 Oil Crops

Oil crops main import market in the EU is dominated by South American countries, in particular Brazil
% USA Imports 33% 12% 8% 5% 5% 4% 4% 3% 0% % GCC Imports 29% 16% 16% 9% 8% 5% 4% 3% 2%

Largest Exporters of Oil Crops to USA vs. Egypt * (M$, 2004) 55 Canada

% EU Imports 44% 22% 5% 5% 3%

Largest Exporters of Oil Crops to EU vs. Egypt (M$, 2004) 438 Brazil

China India H Netherlands Mexico Germany Chile Japan Egypt 0 9 7 6 6 5 13

20

USA Paraguay China Argentina Canada Uruguay Australia Egypt 46 46 35 26 23 19 11

221

USA Imports = $ M 167 USA Imports = $ M 167

3% 2% 2% 1% % CIS Imports 27% 22% 11%

EU Imports Extra EU EU Imports Extra EU = $ M 1,000 = $ M 1,000

Largest Exporters of Oil Crops to GCC vs. Egypt (M$, 2004)

Largest Exporters of Oil Crops to CIS vs. Egypt (M$, 2004)

USA China Brazil Argentina Singapore India H Netherlands Spain Egypt 1 1 1 0 2 2 4 4

China Germany Netherlands USA France Turkey India H Denmark Egypt 0 1 1 1 1 2 2 5

GCC Imports Extra GCC GCC Imports Extra GCC = $ M 24 = $ M 24

7% 4% 4% 4% 3% 0% 55

CIS Imports Extra CIS CIS Imports Extra CIS = $ M 22 = $ M 22

Note (*): Estimate based on UN Comtrade Source: ITC; UN Comtrade

Proprietary & Confidential

5/6 Cotton

As its main export, Egypts extra long staple remains a niche product sought for its quality in textile manufacturing
Cotton Production and Export Volume Cotton Production and Export Volume

Cotton Key Characteristics Cotton Key Characteristics


Produced Volume

T Ton* 2%

Cotton is a key export crop for Egypt and represents 40% of Cotton is a key export crop for Egypt and represents 40% of its export value in 2004 its export value in 2004 Export value has been growing at an annual rate of 14% for Export value has been growing at an annual rate of 14% for the last ten years the last ten years Cotton consumes about 6% of the cultivated area, 6% of Cotton consumes about 6% of the cultivated area, 6% of the total water and contributes to about 9% of the total the total water and contributes to about 9% of the total farmer value add Its farm gate price is twice as much as farmer value add Its farm gate price is twice as much as its costs of production partly because cotton is subsidized its costs of production partly because cotton is subsidized (the government guarantees a minimum price to buy the (the government guarantees a minimum price to buy the exceeding cotton) exceeding cotton) Egypt is one of the largest producer of cotton of high quality Egypt is one of the largest producer of cotton of high quality (around 280,000 T). Extra Long Staple ELS is famous and (around 280,000 T). Extra Long Staple ELS is famous and highly demanded by several designers (Tommy Hilfiger, highly demanded by several designers (Tommy Hilfiger, Armani, Gap, etc) Armani, Gap, etc) ELS is being increasingly used as a mix with cheap imports ELS is being increasingly used as a mix with cheap imports (e.g., Greece, Sudan). New chemical compounds are (e.g., Greece, Sudan). New chemical compounds are starting to emerge that could provide a cheaper alternative starting to emerge that could provide a cheaper alternative than ELS than ELS In addition, since the Multi-Fiber Agreement, China and India In addition, since the Multi-Fiber Agreement, China and India are increasing their dominance in textile and increasingly are increasing their dominance in textile and increasingly putting pressure on Europe but also Egypts local industry putting pressure on Europe but also Egypts local industry

200

-1%

Exported Volume

0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
CAGR (1995-2004) Egypt 15% World

Cotton FOB Egypt vs. World Average Cotton FOB Egypt vs. World Average

$ per Ton

2500

1500

-3%

500
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

(*) Thousands Ton Source: Cotlook, Alcotexa, CAPMAS, CEO of Shura Exports; WB report in 1998

56

Proprietary & Confidential

5/6 Cotton

Egypt exports 44% of its cotton to Far East, while the EU and the USA absorbs another 24% which basically matches overall world import markets breakdown
Cotton Egypt Export Value Per Destination (Million $)(2004)
479

Cotton World Import Market Breakdown (Million $)(2004)


46,530

33%

Others

29% 1% 4% 9% 11%

Others CIS GCC USA EU Extra EU - 25 EU Intra EU - 25

9% 18%

USA EU - 25

40%

Far East

44%

Far East

2004

2004

Source: ITC; Cotton International export; CAPMAS

57

Proprietary & Confidential

5/6 Cotton

Demand for cotton is shifting from European and American to Far East markets, that are increasingly dominating the textile industry
Growth of Egypts Cotton Export Value vs. International Demand Per Country
Worlds Cotton Import Value Growth (2000-2004)

Underachievers (Losers in Growth Market)

30%

Diagonal of Constant Market Share


China

Champions (Winners in Growth Markets)

20%
EU

Turkey Far East

10% Greece
Italy

Pakistan Germany USA Korea Japan

0% -20%
Italy

20% Switzerland

Thailand India Indonesia

60%

300%

-10%

Egypts Cotton Export Value Growth (2000-2004)

Winners in Declining Markets Losers in Declining Markets


-20%
Others Bubble Scale = US$ 25 Million EU-25 CIS Far East GCC

Importing Countries Selected = 91% of (Cotton Export Value in 2004)


Proprietary & Confidential

(*) According to CAPMAS, Egypt did not export cotton in 2004 to GCC and CIS Countries Source: ITC for cotton import value; CAPMAS; Alcotexa, Toward Agricultural Competitiveness World Bank (2001) 58

5/6 Cotton

In all major markets, Egypt remains a niche supplier of cotton Pakistan and Turkey dominate the industry with market shares over 20%
% USA Imports 24% 9% 9% 6% 5% 4% 3% 2% 2% % GCC Imports 26% 23% 13% 9% 4% 2% 2% 2% 0% Source: ITC

Largest Exporters of Cotton to USA vs. Egypt (M$, 2004)

% EU Imports 21% 12% 8% 7% 3%

Largest Exporters of Cotton to EU vs. Egypt (M$, 2004)

Pakistan China Italy Korea Japan India Turkey Egypt Brazil 114 97 87 63 43 31 179 172

476

Turkey India Pakistan China Syria Indonesia USA Egypt Thailand 123 109 104 88 74 280 235 414

746

USA Imports = $ M 2,000 USA Imports = $ M 2,000

3% 3% 2% 2% % CIS Imports 21% 16% 14% 9% 8% 4%

EU Imports from Outside EU EU Imports from Outside EU = $ M 4,000 = $ M 4,000

Largest Exporters of Cotton to GCC Countries vs. Egypt (M$, 2004)

Largest Exporters of Cotton to CIS Countries vs. Egypt (M$, 2004)

Pakistan India China UK Indonesia USA Turkey Italy Egypt 0 28 17 12 12 61 93 168

188

Germany China Kyrgyzstan Turkey Italy France Pakistan UK Egypt 1 4 10 9 23 22 37 41

57

GCC Imports Extra GCC GCC Imports Extra GCC = $ M 720 = $ M 720

4% 1% 0% 59

CIS Imports Extra CIS CIS Imports Extra CIS = $ M 270 = $ M 270

Proprietary & Confidential

6/6 SSF

Exports of Spices Stimulants & Flowers has been stable over the last few years since the devaluation, gross margins for exporters have started to dramatically increase
Spices and Stimulants Production and Export Volume Spices and Stimulants Production and Export Volume Spices and Stimulants Exporter Margin Spices and Stimulants Exporter Margin

Thousands Tons

LE per Ton Produced Volume


10,000

CAGR (1995-2004) FOB X 7 Margin X4 Producer 2% Price 13%

80

1%

40
0% Exported

5,000

1995

1996

1997

1998

1999

2000

2001

2002

2003

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Volume

FOB/ PP* 3

3.2

3.6 2.9

2.5 2.9 4.2 6.1

7.3

2004

10%

Spices and Stimulants FOB Egypt vs. World Average Spices and Stimulants FOB Egypt vs. World Average

Spices and Stimulants Key Characteristics Spices and Stimulants Key Characteristics

$ per Ton

CAGR (1999-2004) World Egypt -5% 10%

2,000

500 1999 2000 2001 2002 2003 2004

Spices is a growing sector in Egypt (mostly grown in Spices is a growing sector in Egypt (mostly grown in cooperation with small farmers that supply most of export cooperation with small farmers that supply most of export quantities) quantities) Aromatic consume insignificant areas of cultivated land, water Aromatic consume insignificant areas of cultivated land, water but experience a high value add with its producer price (price but experience a high value add with its producer price (price sold on the local market) being twice as much the cost of sold on the local market) being twice as much the cost of production per feddan production per feddan The devaluation of the Egyptian pound has led to the increase The devaluation of the Egyptian pound has led to the increase of the FOB in local currency and, as a result, to greater margin of the FOB in local currency and, as a result, to greater margin for exporters for exporters

(*) FOB divided by the Producer Price Source: FAOSTAT; Interview Notes

60

Proprietary & Confidential

6/6 SSF

Egypts spices, stimulants and flowers mainly exported to EU, Jordan and Morocco represent 0.1% of the total market
S S F Egypt Export Value Per Destination (M$, 2004 S S F World Import Market Breakdown (M $, 2004)
29,090 Others GCC CIS Far East USA

22

18%
35%
Others- Mainly Jordan, Syria, Turkey Mainly tea CIS Mainly tea (2) Far East- Mainly plants and caraway seeds GCC Mainly plants live and tea USA Mainly fennel seeds

2% 3% 10% 16%

4% 5% 11%

21%

EU Extra EU

43%

EU- 25 Mainly plants, live(1)

31%

EU Intra EU

2004
(1) Stands for HS 0602 Live plants, roots, cuttings, mushroom spawn, includes roses and trees (2) Stands for HS 0902 Green and dark tea Source: FAO STAT ; ITC; UN Comtrade 61

2004

Proprietary & Confidential

6/6 SSF

Spices, stimulants and flowers export growth are aligned with each countrys import potential
Growth of Egypts SSF Export Value vs. International Demand Per Country
Worlds SSF Import Value Growth (2000-2004)

Underachievers (Losers in Growth Market)

20%

Diagonal of Constant Market Shares

EU

Champions (Winners in Growth Markets)


Russia Greece

10%
France Ital Israel y 0% USA Germany UAE Netherlands Turkey Jordan Spain

CIS

-10%
Saudi Arabia

30%

70%

182%
Egypts SSF Export Value Growth (2000-2004)

Losers in Declining Markets


-10%

Winners in Declining Markets

Others Bubble Scale = US$ 1 Million

European Union

CIS

Far East

GCC

Importing Countries Selected = 70% of (SSF Export Value in 2004)


Proprietary & Confidential

(*) Syria is a main importer of Egypts SSF with 1.6 M$, however we are missing its growth of import value of SSF Source: ITC; UN Comtrade; FAOSTAT, Toward Agricultural Competitiveness World Bank (2001) 62

6/6 SSF

The USA and EU are served by a multitude of players that include Egypt at the bottom of the lost
% USA Imports 20% 10% 9% 6% 5% 5% 5% 4% 0% % GCC Imports 26% 25% 10% 8% 4% 3% 3% 2% 0% Source: ITC

Largest Exporters of S S F to USA (M $,2004)


Colombia Canada Brazil Netherlands Guatemala Indonesia Costa Rica Mexico Egypt 3 295 248 233 216 204 447 395 932

% EU Imports 17% 10% 7% 7% 6%

Largest Exporters of S S F to EU (M $,2004)

Brazil Kenya Viet Nam Colombia India Indonesia China Costa Rica Egypt 10
Largest Exporters of S S F to CIS (M $,2004)

1,054 625 452 446 339 243 226 195

USA Imports = $ M 4,600 USA Imports = $ M 4,600

4% 4% 4% 0% % CIS Imports

EU Imports Extra EU EU Imports Extra EU = $ M 6,200 = $ M 6,200

Largest Exporters of S S F to GCC (M $,2004) Sri Lanka

129 125

India Guatemala China Kenya Yemen Netherlands Syria Egypt 1 22 17 16 11 40 51

28% 16% 11% 5%

Sri Lanka Netherlands India Poland Ecuador Indonesia Colombia China Egypt 0 41 36 31 28 25 82 121

218

GCC Imports Extra GCC GCC Imports Extra GCC = $ M 500 = $ M 500

5% 4% 4% 3% 0% 63

CIS Imports Extra CIS CIS Imports Extra CIS = $ M 780 = $ M 780

Proprietary & Confidential

Egypt Agriculture Export Baseline


Market Definition and Methodology Egypt Agricultural Commodities Export Performance Crop-specific Export Performance and Market Assessment Competitive Advantages and Challenges in the Export Value Chain

Proprietary & Confidential

Egypts strategic location, favorable climate, international politics weight and economic situation are key levers to expand further its agricultural exports
Egypts Agricultural Exports Competitive Advantages

Strategic Location
Ideal geographical location to supply shelf-life sensitive crops to Europe, Middle East, Africa Large inbound sea shipping volume provides sufficient dry-container capacity to export nonperishable agricultural products Access to 1.5 billion consumers with substantial disposable income (e.g., EU, GCC, CIS)

Favorable Climate
Favorable soil condition, water supply and climate provide an open-air greenhouse for agricultural commodities Egypts latitudinal span offers ideal conditions to expand growing seasons windows (e.g., 36 micro-climates between Lower and Upper Egypt governorates)

International Politics Leverage


Egypts weight in international politics was beneficial to obtain favorable agreements with US, Europe and other political entities Egypt has also received substantial aid money from Western donors to help the agriculture sector development

Agricultural Agricultural Exports Exports Competitive Competitive Advantages Advantages

Economic Situation
Egyptian pound devaluation has promoted to substantial increase of agricultural exports, especially from 2001 to 2004 Large supply of low-wage labor for nonmechanized agricultural exports Egypts economic liberalization policies since 1990s has vastly improved competitiveness of overall export sector

Source: ACDI/VOCA; Booz-Allen Analysis 65

Proprietary & Confidential

Egypts agricultural export sector faces six key challenges


Major Challenge Major Challenge Lack of demand-driven Lack of demand-driven orientation orientation Lack of coordination among Lack of coordination among exporters exporters Untapped potential of small Untapped potential of small farmers farmers Transportation Transportation Description Description
Little market intelligence conducted to understand customer demand Little market intelligence conducted to understand customer demand Poor promotion of Egyptian exports Poor promotion of Egyptian exports Inadequate competitive pricing Inadequate competitive pricing Little leverage of all distribution channels to provide Egyptian produces Little leverage of all distribution channels to provide Egyptian produces Fierce competition among Egyptian exporters Fierce competition among Egyptian exporters Little lobbying by private sector of Government during trade negotiations Little lobbying by private sector of Government during trade negotiations No effective body to coordinate efforts of public-private agriculture export stakeholders No effective body to coordinate efforts of public-private agriculture export stakeholders Large untapped potential from small growers towards export Large untapped potential from small growers towards export Substantial human capital development needs for small farmers Substantial human capital development needs for small farmers Poor transportation infrastructure in Upper Egypt Poor transportation infrastructure in Upper Egypt Insufficient reefer container capacity Insufficient reefer container capacity Excessive maritime transportation delays from Egypt to key destination markets Excessive maritime transportation delays from Egypt to key destination markets High air shipping prices charged by quasi-monopolistic cargo operator High air shipping prices charged by quasi-monopolistic cargo operator Capacity issues for air cargo during peak export seasons Capacity issues for air cargo during peak export seasons Uncompetitive inputs import restrictions and Government regulations Uncompetitive inputs import restrictions and Government regulations Support to state-owned enterprises contribute to market distortions Support to state-owned enterprises contribute to market distortions Inefficient Government financial assistance that misallocates scarce natural resources Inefficient Government financial assistance that misallocates scarce natural resources Lack of robust sanitary infrastructure in Egypt Lack of robust sanitary infrastructure in Egypt Weak Government extension services Weak Government extension services Inadequate educational system and vocational training Inadequate educational system and vocational training Capacity building needs for certification, e-traceability and SPS Capacity building needs for certification, e-traceability and SPS
66

Inadequate regulations Inadequate regulations

Capacity issues Capacity issues

Source: BAH Analysis, Interviews

Proprietary & Confidential

1. Lack of Demand Driven Orientation

A successful demand-driven strategy must rely on market intelligence to identify target markets and offer a product with adequate characteristics, promotion, pricing and distribution
Demand-Driven Strategy Components
Understand end-customers tastes and regional preference for Understand end-customers tastes and regional preference for agricultural commodities in various target markets agricultural commodities in various target markets Provide overall service level that meets clients expectations. For Provide overall service level that meets clients expectations. For instance, fresh produce retailers expect quality products but also ,, instance, fresh produce retailers expect quality products but also reliable, predictable and flexible supply reliable, predictable and flexible supply Differentiate commodity offering through branding association (e.g., Differentiate commodity offering through branding association (e.g., Israels Carmel) Israels Carmel) Launch advertising campaigns to raise export countrys profile with Launch advertising campaigns to raise export countrys profile with end-customers and purchasers end-customers and purchasers Determine optimal pricing that considers willingness to pay in various Determine optimal pricing that considers willingness to pay in various target markets and competitors offering target markets and competitors offering Apply dynamic pricing, yield management and elasticity research to Apply dynamic pricing, yield management and elasticity research to optimize exporters profitability optimize exporters profitability

Product Product Characteristics Characteristics

Product Promotion Product Promotion Demand-oriented Demand-oriented Market Intelligence Market Intelligence
Assess key target markets & trends Survey direct competitors Understand key stakeholders in the value chain

Product Pricing Product Pricing

Product Distribution Product Distribution

Analyze optimal distribution channel that minimizes cost and increase Analyze optimal distribution channel that minimizes cost and increase overall reach overall reach Determine most appropriate transportation mode (e.g., land, sea, air) Determine most appropriate transportation mode (e.g., land, sea, air)

Sources: BAH Analysis 67

Proprietary & Confidential

1. Lack of Demand Driven Orientation

Better market intelligence could help Egyptian exporters reduce their dependence on a few target markets
Market Distribution of Selected Egyptian Agricultural Commodities (2004)
HS070200- Tomatoes 1.6 M$
10% 15%

HS070310- Onions, Shallots 36 M $ 351 TT

HS080610- Grapes 6.4 M$ 8.5 TT

HS08010- Oranges 45 M$ 160 TT

HS080540- Guavas, Mangos 1.3 M$ 2.9 TT

7 TT
9% 8% 8%

Others UK Netherlands
45% 33% Others 29% 35% Others 27% 21% 31% 35%

Others
12% 17%

Others

18%
8% 11% 15%

Russia

8% 8% 23%

9%

Kuwait

Italy
27%

8%

Greece Belarus

12% Lebanon

22% Belgium

26%

31%

32%

Saudi Arabia

56%

70%

Saudi Arabia

29%

47% Saudi

40%

35% Netherlands

37%

35%

Russia

35%

31%

Korea

Arabia % of Volume % Share % of Volume % Share % of Volume % Share % of Volume

% Share

% of Volume

% Share

Source: UN Comtrade 68

Proprietary & Confidential

1. Lack of Demand Driven Orientation

In addition to high-quality agricultural products, retailers are increasingly demanding predictable, flexible and reliable service delivery
Product and Service Requirements of Agriculture Commodities Importers

Retailers are increasingly requiring high quality products by imposing certain certification standards Retailers are increasingly requiring high quality products by imposing certain certification standards (e.g., Eurepgap, BRC) (e.g., Eurepgap, BRC)

High Quality High Quality Product Product

Failure to adopt and enforce quality standards, sterilization and laboratory checks is contributing to Failure to adopt and enforce quality standards, sterilization and laboratory checks is contributing to the perception of Egyptian products as commodities, and allowing competitors to gain most of the the perception of Egyptian products as commodities, and allowing competitors to gain most of the added value for their products added value for their products Given the number of recent food scares, product traceability has also become a key stepping stone Given the number of recent food scares, product traceability has also become a key stepping stone of their supply chain of their supply chain

Predictable, Predictable, Flexible and Flexible and Reliable Reliable Service Service Delivery Delivery

Predictability: Whereas the demand is variable, irregular, and changes from one day to another, Predictability: Whereas the demand is variable, irregular, and changes from one day to another, retailers expect that their changing requirements would be predicted by their suppliers retailers expect that their changing requirements would be predicted by their suppliers Flexibility: The retailers prefer not to commit to purchase specific quantities. Retailers such as Flexibility: The retailers prefer not to commit to purchase specific quantities. Retailers such as Carrefour try to order the agriculture crops that they need few days in advance Carrefour try to order the agriculture crops that they need few days in advance Reliability: On-shelf availability is one of the top priority fore retailers. Retailers are very sensitive Reliability: On-shelf availability is one of the top priority fore retailers. Retailers are very sensitive about time. They want to track the status of their crop order, and to make sure that delivery would be about time. They want to track the status of their crop order, and to make sure that delivery would be on-time on-time

69

Proprietary & Confidential

1. Lack of Demand Driven Orientation

For instance, food produce retailers in the UK are reducing their inventory stock levels and as such require more flexible and frequent deliveries from their suppliers
LE LE MP MP A A EX EX UK UK
30

Retail Logistics Trends (2006)


Average Retailer Stock Level (in Day) Average Delivery Frequency from Distribution Center per Category per Week
Non Foods 3.6

25

Slower Moving Grocery

4.6

Stock Level (Days)

CAGR (1996-2005) Category


20

Frozen Beers, Wines and Spirits Chilled / Fresh Meats Fast Moving Grocery Produce

5.1

BWS
15

-0.7%

5.1

Non Foods SMG


10

-6.3% -1.8%

7.5

FMG -1.2% Frozen -3.4%

9.8 0 2 4 6 8 10 12

5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Delivery Frequency

Sources: IGD Research, Retail Logistics 2006

70

Proprietary & Confidential

1. Lack of Demand Driven Orientation

Except for cotton, Egyptian producers and exporters have not managed to promote their products which are perceived as simple commodities, with inadequate quality standards
Promotion Issues Impacting Egyptian Agricultural Exports

Except for cotton, Egyptian agriculture exporters are positioning their products on the lowest rung Except for cotton, Egyptian agriculture exporters are positioning their products on the lowest rung of the supply chain. Egyptian products are being perceived as commodities of the supply chain. Egyptian products are being perceived as commodities

Weak Weak Branding Branding

Agriculture producers did not manage to brand their crops as Made in Egypt Agriculture producers did not manage to brand their crops as Made in Egypt Agriculture producers are not leveraging the Fair Trade trends. They are not associating their Agriculture producers are not leveraging the Fair Trade trends. They are not associating their products to the natural heritage of specific regions, and not emphasizing the role of small farmers products to the natural heritage of specific regions, and not emphasizing the role of small farmers in producing the crop in producing the crop

Limited Limited Promotion Promotion Campaigns Campaigns

Limited number of export promotion events are organized annually to promote exports of field Limited number of export promotion events are organized annually to promote exports of field and horticultural crops. They mainly are handled by: and horticultural crops. They mainly are handled by: Development agencies Development agencies Export associations Export associations Few advertising campaigns are launched to promote Egyptian agriculture products in export Few advertising campaigns are launched to promote Egyptian agriculture products in export markets markets

Sources: Interviews; BAH Analysis

71

Proprietary & Confidential

1. Lack of Demand Driven Orientation

Egyptian agricultural commodities pricing could be optimized to compete more effectively with direct competitor countries on major terminal markets
Pricing of Egyptians Fruits and Vegetables in Global Terminal Markets (Jan 29th, 2007)
Price of 250g of Strawberries (New Covent Garden, UK) (in US$) Price of 5Kg of Peppers (New Covent Garden, UK) (in US$)
17.84

Price of 9/250g of Cherry Tomatoes (New Covent Garden, UK) (in US$)
9.91 8.92 8.92

1.98 1.59

11.89

Spain

Egypt

Egypt

Spain

Egypt

Israel

Spain

Price of 15 Kg of Lemons (Rotterdam, The Netherlands) (in US$)


11 10.67 10.35

Price of 15 Kg of Oranges (Rotterdam, The Netherlands) (in US$)


11.65 9.7 9.06

Price of 5Kg of Peppers (Hamburg, Germany) (in US$)


23.45

11.72

11.07

Egypt

Tunisia

Spain

Morocco

Egypt

Spain

Israel

Egypt

Spain

Sources: Fresh Produce Journal, England; Service des Nouvelles des Marches, France; Tricop, Rotterdam, The Netherlands; ZMP, Hamburg, Germany; BAH Analysis 72

Proprietary & Confidential

1. Lack of Demand Driven Orientation

Agricultural commodities are typically distributed to retailers through category managers or to wholesalers, mostly on a consignment basis
Agricultural Commodities Distribution Channels

Retailers Retailers (Category (Category Managers) Managers)

In Western European countries, fresh produce imports is now dominated by retail chains In Western European countries, fresh produce imports is now dominated by retail chains To handle year-long supply of food produces, retailers employ dedicated category managers, To handle year-long supply of food produces, retailers employ dedicated category managers, who serve as interface with various international exporters who serve as interface with various international exporters Those category managers typically charge exporters 8% of retail price Those category managers typically charge exporters 8% of retail price Contractual arrangements are typically done on a consignment basis. As a result, most of the Contractual arrangements are typically done on a consignment basis. As a result, most of the commercial risk is borne by the exporters. In some cases, however, weekly arranged prices can commercial risk is borne by the exporters. In some cases, however, weekly arranged prices can be agreed for certain high-value crops (e.g., strawberries in UK) be agreed for certain high-value crops (e.g., strawberries in UK) Category Managers distribute products to retail chains national and regional distribution centers Category Managers distribute products to retail chains national and regional distribution centers

Wholesale Wholesale Market Market

Wholesale channels continue to dominate distribution channels in most countries Wholesale channels continue to dominate distribution channels in most countries Retailers source their products from these large terminal markets Retailers source their products from these large terminal markets Contract typically organized under a consignment arrangement Contract typically organized under a consignment arrangement The share of wholesale sales in developed countries began to decline, since part of the value The share of wholesale sales in developed countries began to decline, since part of the value added has been appropriated by producers and large retailers with retailers integrating added has been appropriated by producers and large retailers with retailers integrating backwards and producers forward backwards and producers forward

Sources: Interviews; BAH Analysis

73

Proprietary & Confidential

1. Lack of Demand Driven Orientation

Egyptian agricultural products are not widely distributed in major global terminal markets
Presence of Egyptians Fruits and Vegetables in Global Terminal Markets (January 2007)
Terminal Market Fruit/Vegetable
Grapefruit Grapefruit Lemons Lemons Oranges Oranges Tangelos Tangelos Raspberries Raspberries Strawberries Strawberries Avocados Avocados Grapes Grapes Kiwi Kiwi Beans Beans Peas Green Peas Green Peppers Peppers Radishes Radishes Squash Squash Tomatos Tomatos Cherry tomatoes Cherry tomatoes EGYPT EGYPT EGYPT, Spain EGYPT, Spain Morocco Morocco Spain Spain EGYPT, Israel, Spain EGYPT, Israel, Spain New Covent Garden New Covent Garden (UK) (UK) Israel, Tunisia Israel, Tunisia Spain Spain Morocco, Spain Morocco, Spain Israel, Spain, Tunisia Israel, Spain, Tunisia Spain Spain EGYPT, Spain EGYPT, Spain Rungis Rungis (France) (France) Spain Spain Spain Spain Spain Spain Morocco, Spain Morocco, Spain Spain Spain Spain Spain Morocco Morocco Spain Spain Morocco Morocco Morocco, Spain Morocco, Spain EGYPT, Israel, Spain EGYPT, Israel, Spain Spain Spain Spain Spain Rotterdam Rotterdam (Netherlands) (Netherlands) Israel, Tunisia Israel, Tunisia EGYPT, Spain, Tunisia EGYPT, Spain, Tunisia EGYPT, Morocco, Spain EGYPT, Morocco, Spain EGYPT, Israel, Tunisia EGYPT, Israel, Tunisia Hamburg Hamburg (Germany) (Germany)

Israel, Spain Israel, Spain EGYPT, Israel, EGYPT, Israel, Morocco, Spain Morocco, Spain

Fruit or vegetable available in Terminal market

Country Egypt or a direct competitor exporting in market

Sources: Fresh Produce Journal, England; Service des Nouvelles des Marches, France; Tricop, Rotterdam, The Netherlands; ZMP, Hamburg, Germany Proprietary & Confidential 74

1. Lack of Demand Driven Orientation

In order to improve their supply delivery system, retailers such as the Compass Group are creating distribution centers to bypass wholesalers and reach directly the farmers
Optimization of Food Service Supply Chain

Fragmented Supply Channels Fragmented Supply Channels

Retailer-Controlled Supply Channels Retailer-Controlled Supply Channels

Grower 1

Grower 2

Grower 3

Grower 4

Grower 5

Grower 1

Grower 2

Grower 3

Grower 4

Grower 5

Wholesaler

Consolidation Depot Retailer Controlled Distribution Center

Decoupled Logistics Provider or Decoupled Wholesaler

Retailer Depot 1

Retailer Depot 2

Retailer Depot 3

Retailer Depot 1

Retailer Depot 2

Retailer Depot 3

75

Proprietary & Confidential

2. Lack of Coordination Among Exporters

Egyptian agricultural exporters do not cooperate effectively to influence Governments policies or negotiation terms for international trade agreements
Lack of Coordination Among Exporters

Fierce Internal Fierce Internal Competition Competition

Egyptian exporters seem to be competing among each other rather than addressing threats pose Egyptian exporters seem to be competing among each other rather than addressing threats pose by formidable agricultural export competitors such as Turkey, Israel, Morocco and other by formidable agricultural export competitors such as Turkey, Israel, Morocco and other competitors competitors Egyptian exporters have not sufficiently pooled their resources to promote the overall sector growth Egyptian exporters have not sufficiently pooled their resources to promote the overall sector growth

Little Active Little Active Government Government Lobbying Lobbying

Due to their fragmentation, exporters do not sufficiently put forward recommendations to the Due to their fragmentation, exporters do not sufficiently put forward recommendations to the Government Government Only the horticulture and rice sector have managed in the past to effectively lobby for favorable Only the horticulture and rice sector have managed in the past to effectively lobby for favorable Government policies Government policies

Low Low Negotiation Negotiation Bargaining in Bargaining in Trade Trade Agreements Agreements

According to exporters, various agreements were badly negotiated: According to exporters, various agreements were badly negotiated: Under the EU-Egypt Association agreement, quotas for produces that are not extensively grown Under the EU-Egypt Association agreement, quotas for produces that are not extensively grown in Egypt (e.g., plums, cauliflower) are generous whereas quotas for potatoes, strawberries and in Egypt (e.g., plums, cauliflower) are generous whereas quotas for potatoes, strawberries and citrus have already been reached citrus have already been reached The EU-Egypt Association Agreement also extended grapes export window towards Egypts off The EU-Egypt Association Agreement also extended grapes export window towards Egypts off seasons seasons Citrus continue to be banned altogether from US markets, as APHIS imposed stringent SPS Citrus continue to be banned altogether from US markets, as APHIS imposed stringent SPS controls on imports controls on imports

Sources: Interviews, BAH Analysis

76

Proprietary & Confidential

2. Lack of Coordination Among Exporters

This lack of coordination may be exacerbated by a fragmented agricultural export sector, especially when benchmarked to international competition
Top 5 Exporters Market Share of Total Export In Various Developing Countries (2004)
Egypt Total = 1,497
5
Top 5 Exporters Remaining Exporters

Israel Total = 350


5

Chile Total = 100% Total = 600


5

Total = 100%
15%

Total = 100%

52% 80% 1,492 85% 345 595

48% 20%
No. of Exporters % of Exports Value No. of Exporters % of Exports Value No. of Exporters % of Exports Value

Source: General Organization for Export and Import Control (GOEIC), 2006; Ministry of Trade Israel,, Chilean Fresh Fruit Association, ProChile Database 77

Proprietary & Confidential

2. Lack of Coordination Among Exporters

In addition, Egyptian exporters organizations whether private or public operate mostly independently of each other
Egypt Main Stakeholders in Export Development

Cooperatives Cooperatives

UPEHC UPEHC

AEC AEC

EAGA EAGA

Expolink Expolink

HEIA HEIA

Associations Associations

Consolidate and standardize production efforts Share best practices among members on pest control Contribute to higher bargaining power for growers compared to exporters

An association of agriculltural exporters Its aim is to support small exporters and growers with information, and consulting to improve their production quality and boost exports

An association of Egypts agricultural exporters Aims at identifying improvement initiatives for Egypts agricultural sector

An agricultural association aiming at increasing interaction beteween different stakeholders of Egypts agricultural sector through seminars, and workshops etc.

An association that aims at matchmaking local exporters with international buyers to improve Egyptian exports

An association of Egypts agricultural exporters Aims at training growers, and increasing awareness on latest export standards / requirements of the export market

El-Shams project (operated by Egypt-Care) has created 100 farmer associations in Upper Egypt to promote modern agriculture practices and boost export potential

Public Associations

Public-Private Associations

Private Associations
78

Source: ODEPA/MINAGRI Chile, Lit Search, ASOEX, FedeFruta, Booz Allen Analysis

Proprietary & Confidential

2. Lack of Coordination Among Exporters

which contrasts with other successful agricultural export countries that have setup an overall coordination body to oversee private and public efforts to promote exports
Chile Main Stakeholders in Export Development
Coordinates the export promotion effort of the different stakeholders Govt. Export Promotion Bureau (part of Min. of Foreign Affairs) Founded in 1974

Pro Chile Pro Chile

ASOEX ASOEX

FedeFruta FedeFruta

Dole Dole

Del Monte Del Monte

Del Curto Del Curto

Private assoc. of fresh fruit and vegetable growers of Chile Founded in 1935

Non profit trade union related with public and private sector Founded in 1985

Subsidiary of USA Dole Food Started in Chile in 1981 as Standard Trading

Former UTC (United Trading Company) acquired by USA Del Monte Fresh in 1997

Largest 100%-Chilen capital exporter Founded in 1950

Public and Private Associations


Source: ODEPA/MINAGRI Chile, Lit Search, ASOEX, FedeFruta, Booz Allen Analysis 79

Private Companies

Proprietary & Confidential

3. Untapped Potential of Small Farmers

While most large exporters adopt a vertically integrated model to mitigate supply risks, small exporters often rely on uncertain supply from fragmented farmers and packers
Large Exporters vs. Small Exporters
Production and Harvesting Packaging, Cooling and Storage Pack houses and Pack houses and mills mills Sale to Foreign Market Small Exporters Small Exporters Export Logistics and Customs Procedures Distribution in Foreign Markets Wholesalers and Wholesalers and retailers retailers Sponsors Sponsors

Transportation

Small Farmers Small Farmers

Transportation agents Transportation agents Land transport Land transport companies companies Customs, Taxes Customs, Taxes and Quarantine and Quarantine

Vertically integrated producers // exporters Vertically integrated producers exporters Farming cooperatives, farmers associations Farming cooperatives, farmers associations

Air and maritime transport companies Air and maritime transport companies

Large Exporters Large Exporters Large exporters are normally vertically integrated along Large exporters are normally vertically integrated along the whole supply chain, and have their own production the whole supply chain, and have their own production lands, packing houses and export contracts lands, packing houses and export contracts The rationale behind their business model is to: The rationale behind their business model is to: Reduce supply risk and dependency on the large Reduce supply risk and dependency on the large number of small size farmers number of small size farmers Better control cost and quality of crops produced Better control cost and quality of crops produced Large exporters base their business on supplying major Large exporters base their business on supplying major international retail chains international retail chains
Source: Interviews, BAH Analysis 80

Small Exporters Small Exporters Small exporters mainly focus on selling crops produced Small exporters mainly focus on selling crops produced by the multitude of small producers operating in the by the multitude of small producers operating in the sector sector Small exporters depend on dealers and packing houses Small exporters depend on dealers and packing houses to supply them with their needs of export volumes to supply them with their needs of export volumes The level of profitability for small exporters in much lower The level of profitability for small exporters in much lower than large ones since they pay for the mark-ups of all than large ones since they pay for the mark-ups of all player upstream of the supply chain (Farmers and player upstream of the supply chain (Farmers and packers) packers)
Proprietary & Confidential

3. Untapped Potential of Small Farmers

The potential from small growers towards exporting agricultural commodities has not been fully leveraged because of 5 main impediments
Challenges in Leveraging Egypts Small Growers Potential for Export
1 1 Lack of coordination Lack of coordination among small farmers among small farmers 2 2 Lack of Education Lack of Education and Training and Training 3 3 Weak Financial Weak Financial Capabilities Capabilities 4 4 Little Export Market Little Export Market Orientation Orientation 5 5 Local Transportation Local Transportation challenges challenges The majority of small growers is currently grouped in largely inefficient parastatal cooperatives. As a The majority of small growers is currently grouped in largely inefficient parastatal cooperatives. As a result ,Government-wide programs to build capacity fail to reach out effectively to all players result ,Government-wide programs to build capacity fail to reach out effectively to all players Fragmentation stokes information asymmetry between large exporters and small farmers and fuels Fragmentation stokes information asymmetry between large exporters and small farmers and fuels distrust between parties in terms of margins and product quality distrust between parties in terms of margins and product quality Most small farmers lack formal or technical training in modern farming techniques: Most small farmers lack formal or technical training in modern farming techniques: Little marketing capability in growing varieties in demand for export Little marketing capability in growing varieties in demand for export Lack of sanitary infrastructure to ensure quality necessary to pass strict SPS controls Lack of sanitary infrastructure to ensure quality necessary to pass strict SPS controls Little awareness on irrigation and farming techniques that enhance cropping yield Little awareness on irrigation and farming techniques that enhance cropping yield Because of weak property rights, small farmers lack sufficient collateral to borrow working capital for Because of weak property rights, small farmers lack sufficient collateral to borrow working capital for farming inputs (e.g., fertilizers, seeds) farming inputs (e.g., fertilizers, seeds) There is little awareness on forward contracts that could help finance operating costs There is little awareness on forward contracts that could help finance operating costs Micro-credit models for small farmers have not yet gained ground in Egypt Micro-credit models for small farmers have not yet gained ground in Egypt There is no institutionalized information link between international agricultural markets and small There is no institutionalized information link between international agricultural markets and small farmers farmers Most small farmers focus their cropping for the local market with little attention to the potential of Most small farmers focus their cropping for the local market with little attention to the potential of export export Many small farmers operate in Upper Egypt, with little modern road connection to ports or airports Many small farmers operate in Upper Egypt, with little modern road connection to ports or airports Even existing road infrastructure cannot accommodate low-cost container-based trailers and Even existing road infrastructure cannot accommodate low-cost container-based trailers and requires archaic transportation, prone to farming loss requires archaic transportation, prone to farming loss

81

Proprietary & Confidential

4. Transportation

Transportation represents a significant portion of agricultural exports cost structure, and could reach 43% of total costs for some crops
Cost Structure for Large Integrated Exporters (2006)
Grapes Exported by Sea From Egypt to UK Strawberries Exported by Air From Egypt to EU

23% 20% 11% 31% 13% Total Costs

Sea shipping

43%
Packing Labor, insurance, customs clearance Tax, interests and financing expenses SG&A

Air transport

15% 7% 25% 10% Total Costs

Packing Labor, insurance, customs clearance Tax, interests and financing expenses SG&A

Sources: Interviews; BAH Analysis

82

Proprietary & Confidential

4. Transportation

Air and land transportation represent a small fraction of Egyptian agricultural products transportation maritime represents more than 90 % of the total
Volume and Value of Agriculture Products Exported by Egypt per Transportation Mode (2004)
6.08 million tons $ 1,170 million Land transport

1%

9%

Air transport

99%

91%

Maritime transport

Volume of Exported Agricultural Crops (in million tons)


Sources: Interview with Egypt Air, BAH Analysis

Value of Exported Agricultural Crops (in $ million)


83

Proprietary & Confidential

4. Transportation

and is concentrated towards European market, with a strong emphasis on Italy


Egypt Reefers Key Export Markets (2006) (in TEU)
TOTAL: 6,847 TEU TOTAL: 6,847 TEU Key export markets: Key export markets: 5,743 TEU 5,743 TEU Remaining destinations: Remaining destinations: 1,104 TEU 1,104 TEU

NETHERLANDS: 137 TEU NETHERLANDS: 137 TEU Rotterdam: 137 TEU Rotterdam: 137 TEU UK: 695 TEU UK: 695 TEU Portbury: 411 TEU Portbury: 411 TEU Felixstowe: 246 TEU Felixstowe: 246 TEU

Main Carriers and Main Carriers and Destinations Destinations


GUILNAVI GUILNAVI Salerno: 1,088 TEU Salerno: 1,088 TEU Vado Ligure: 916 TEU Vado Ligure: 916 TEU
GREECE: 181 TEU GREECE: 181 TEU Thessaloniki: 122 TEU Thessaloniki: 122 TEU Piraeus: 59 TEU Piraeus: 59 TEU CYPRUS: 118 TEU CYPRUS: 118 TEU Limassol: 118 TEU Limassol: 118 TEU TURKEY: 104 TEU TURKEY: 104 TEU Kumport: 104 TEU Kumport: 104 TEU UAE: 444 TEU UAE: 444 TEU Jebel Ali: 436 TEU Jebel Ali: 436 TEU

ITALY: 2,736 TEU ITALY: 2,736 TEU Salerno: 1,124 TEU Salerno: 1,124 TEU Vado Ligure: 916 TEU Vado Ligure: 916 TEU Ravenna: 219 TEU Ravenna: 219 TEU Venice: 186 TEU Venice: 186 TEU Trieste: 168 TEU Trieste: 168 TEU

ITALIA MARITIMA ITALIA MARITIMA Thessaloniki: 118 TEU Thessaloniki: 118 TEU Valencia: 118 TEU Valencia: 118 TEU Rotterdam: 114 TEU Rotterdam: 114 TEU MAERSK MAERSK Jeddah: 734 TEU Jeddah: 734 TEU Jebel Ali: 436 TEU Jebel Ali: 436 TEU Kumport: 104 TEU Kumport: 104 TEU MSC MSC Portbury: 411 TEU Portbury: 411 TEU Felixstowe: 246 TEU Felixstowe: 246 TEU Ravenna: 219 TEU Ravenna: 219 TEU Jeddah: 174 TEU Jeddah: 174 TEU Trieste: 154 TEU Trieste: 154 TEU ZIM ZIM Venice: 186 TEU Venice: 186 TEU

NORTH AMERICA: 188 TEU NORTH AMERICA: 188 TEU New York: 123 TEU New York: 123 TEU Montreal: 32 TEU Montreal: 32 TEU

SPAIN: 182 TEU SPAIN: 182 TEU Valencia: 170 TEU Valencia: 170 TEU

EGYPT

KSA: 958 TEU KSA: 958 TEU Jeddah: 910 TEU Jeddah: 910 TEU Dammam: 48 TEU Dammam: 48 TEU

Source: Maritime companies operating in Egypt (2007) 84

Proprietary & Confidential

4. Transportation

In Egypt, the supply chain from exporter to consignee for maritime transport is fragmented and, as a result, suffers from capacity issues and long transportation delays
Traditional Shipping Value Chain
Shipping Agent Shipping Agent 3PL // Freight 3PL Freight Forwarder // Forwarder Customs Customs Agent Agent Origin Origin Ground Ground TransporTransportation tation Origin Origin Port // Port Terminal Terminal Sea Sea Shipping Shipping Carrier Carrier Destination Destination Port // Port Terminal Terminal Destination Destination Ground Ground TransporTransportationn tationn 3PL // Freight 3PL Freight Forwarder // Forwarder Customs Customs Agent Agent

Exporter Exporter

Consignee Consignee

Outbound Cargo Flow

Inbound Cargo Flow

Capacity Capacity Constraints Constraints

Because of a fragmented supply chain and poor information dissemination, exporters and Because of a fragmented supply chain and poor information dissemination, exporters and shipping lines fail to synchronize properly on expected capacity needs shipping lines fail to synchronize properly on expected capacity needs Little regulation of small and unreliable freight-forwarding agents exacerbates mistrust between Little regulation of small and unreliable freight-forwarding agents exacerbates mistrust between exporters and shipping lines and deters appropriate investment in capacity exporters and shipping lines and deters appropriate investment in capacity

Long Long Transportation Transportation Delays Delays


Source: Interviews; BAH Analysis

The complex transportation processes and customs procedures are creating major delays in The complex transportation processes and customs procedures are creating major delays in sea shipping. For example, the delivery of agricultural products to Eastern Europe takes 7 to 10 sea shipping. For example, the delivery of agricultural products to Eastern Europe takes 7 to 10 days: 2 local trucking days, 1 day for customs, 4 to 7 days for transportation days: 2 local trucking days, 1 day for customs, 4 to 7 days for transportation Lack of dedicated investment into Egypt-based lines to main target markets requires multiple Lack of dedicated investment into Egypt-based lines to main target markets requires multiple stopovers that negatively affect transportation time stopovers that negatively affect transportation time
Proprietary & Confidential

85

4. Transportation

In addition, sea transport from Egypt is on average 20% more expensive than comparable competitors when exporting to Europe
Comparison of Transport Costs for Shipping 20ft Container by Sea to UK (in $ per Km per Container) (2006)
Distance in Km 1,100
Morocco - Tangier to London 2.09

Morocco mainly Morocco mainly relies on trucking for relies on trucking for exporting to Europe exporting to Europe

3,300

Egypt to London (Peak)

0.76

3,300

Egypt to London (OffPeak) Israel - Tel Aviv to London Jordan - Aqaba to London

0.67

3,600

0.56

3,700

0.54

Freight Charges in US $ per Km per Container


Sources: Interviews; BAH Analysis

86

Proprietary & Confidential

4. Transportation

Egypt has initiated a few projects to address the recurring lack of capacity and transportation delay issues with a number of container port terminal and ro-ro vessel dedicated lines
Recent Developments in Egypt Sea Shipping Sector
The Alexandria International Container Terminals (part of the Hutchison Port Holding) is The Alexandria International Container Terminals (part of the Hutchison Port Holding) is developing two general cargo terminals into modern container handling facilities, in the ports of developing two general cargo terminals into modern container handling facilities, in the ports of Alexandria and El Dekheila. With the first phase of the project scheduled for completion in 2007, Alexandria and El Dekheila. With the first phase of the project scheduled for completion in 2007, the development would enhance the export capabilities of the two ports the development would enhance the export capabilities of the two ports Damietta International Ports Authority will start operating a new container terminal by 2008 in Damietta International Ports Authority will start operating a new container terminal by 2008 in Damietta. This will attract giant vessels to Egypt Damietta. This will attract giant vessels to Egypt The Suez Canal Container Terminal (SCCT) has established in 2006 a world-class container The Suez Canal Container Terminal (SCCT) has established in 2006 a world-class container terminal in Port Said, equipped with 12 large quayne cranes that can handle large vessels terminal in Port Said, equipped with 12 large quayne cranes that can handle large vessels afloat. This initiative could turn SCCT into an important regional hub. afloat. This initiative could turn SCCT into an important regional hub.

Development of Development of Container Port Container Port Terminals Terminals

ro-ro Vessels ro-ro Vessels between Egypt between Egypt and Europe and Europe

Ro-ro vessels are being introduced between Egypt and Italian and Slovenian ports to facilitate Ro-ro vessels are being introduced between Egypt and Italian and Slovenian ports to facilitate reefer cargo reefer cargo Egyptian Container Line (ECL) launched in 2005 a twice-weekly multipurpose service between Egyptian Container Line (ECL) launched in 2005 a twice-weekly multipurpose service between ports in Egypt and Koper (Slovenia), deploying two ro-ro vessels. Trieste may be added at a ports in Egypt and Koper (Slovenia), deploying two ro-ro vessels. Trieste may be added at a later stage. The operation lifts conventional cargo plus Egyptian perishable export cargoes in later stage. The operation lifts conventional cargo plus Egyptian perishable export cargoes in refrigerated containers refrigerated containers Champion Ferries, a major Greek ro-ro operator, partnered with Falcon to establish a maritime Champion Ferries, a major Greek ro-ro operator, partnered with Falcon to establish a maritime route between Alexandria and Piraeus. During trial shipments in 2006, the line carried up to 50 route between Alexandria and Piraeus. During trial shipments in 2006, the line carried up to 50 trailers per sailing. However, operations are facing challenges due to lengthy and complex trailers per sailing. However, operations are facing challenges due to lengthy and complex customs procedures customs procedures
87

Proprietary & Confidential

4. Transportation

Air transport of agricultural commodities exports constitute 56% of total Egypt Air freight volume and is mainly targeted at European and Middle Eastern markets
Egypt Air Exports in 2006 (in Million Ton)
29.4 Transit Other exports Flowers
7.2 3.1 0.6 2.3 8.4 0.3

32.1

11.4 Vegetables and fruits


21.3 18.4 7.1 3.1 1.2 Europe
Vegetables, fruits and flowers (as % of exports) Vegetables, fruits and flowers (as % of total volume) 87.7%

1.9 0.4
Far East
4.2%

1.5 America
3.3%
TOTAL

Middle East
69.0%

Africa
28.1%

72.0%

68.1%

63.7%

10.7%

1.5%

2.8%

55.7%

Sources: Interviews; BAH Analysis

88

Proprietary & Confidential

4. Transportation

Egypt Air has dedicated 4 planes to transport perishable agricultural products such as cut flowers, green beans, strawberries and grapes
Distribution of Egypt Air Annual Cargo Capacity (2006) (in Thousand Tons)
160 Machinery and Other Textile
20% 46%

96
6%

186
15%

Egypt Air Cargos Egypt Air Cargos Cut Flowers Egypt Air has 4 planes Egypt Air has 4 planes dedicated for cargos dedicated for cargos Egypt Air rents space Egypt Air rents space on commercial flights on commercial flights when additional when additional capacity is needed capacity is needed Cargo operates 2-3 Cargo operates 2-3 flights to Europe with flights to Europe with 45 tons capacity each, 45 tons capacity each, and smaller loads for and smaller loads for commercial flights commercial flights Main destinations for Main destinations for cargos are: Hahn cargos are: Hahn (Germany), Ostend (Germany), Ostend (Belgium), Stansted (Belgium), Stansted (UK), Chateauroux (UK), Chateauroux (France), Jeddah (France), Jeddah (KSA), etc. (KSA), etc.
Proprietary & Confidential

20%

36%

Green Beans

20%

20%

Strawberries

Perishables

60% 29% 30%

Grapes

Annual Volume of Cargo Leaving Cairo (in Thousand Ton)


Sources: Interviews; BAH Analysis

Annual Exported Perishables Volume (in Thousand Ton)

Annual Exported Perishables Value (in Million $)

89

4. Transportation

Egypt Air relies on government subsidies in order to match prices offered by other airlines
Egypt Air Cost Structure and Prices Destination to UK (2006) (in $ per kg)
Egypt Air Costs Egypt Air Prices 2.0 Competitor Prices

1.43
Other 15% SG&A 12% Maintenance 30%

-0.2 1.23 1.2 1.3 1.1 1.2 1.25

Fuel 43%

Egyptair Cost Structure

Government Subsidy

Egyptair Subsidized Cost

Egyptair Price, CairoEU in Oct.

Egyptair Price, CairoUK in Oct.

Egyptair Price, CairoEU in June

Egyptair Price, CairoUK in June

Egyptair Price, KenyaEU

Lufthansa Price, CairoEU

Egypt Air cargo rates defined annually by the Government


Sources: Interviews; BAH Analysis

90

Proprietary & Confidential

4. Transportation

After the introduction of subsidies to Egypt Air cargo, the air traffic volume of Venus grew at 21% annually, mainly through charters and Egypt Air cargos
Distribution of Export Air Traffic Volume for Perishable Agricultural Products Shipped through Venus International Transport (2001-2003) (in Ton)
Introduction of Subsidies for Egypt Air in April 2002 34,113
11,260

CAGR (2001-2003) 36,109 Total 21.4%

9,975

Charters

41.5%

24,516
5,627 15,607 9,430 16,187

Egypt Air

31.0%

9,459

8,531

8,662

Scheduled Airlines

-4.3%

2001
Sources: Interviews; BAH Analysis

2002

2003

91

Proprietary & Confidential

4. Transportation

The volume exported by air exhibits seasonality patterns, with peaks in November-December and May-June that exceed the average capacity of Egypt Air
Monthly Volume of Fresh Produce Exported by Air From Egypt to Europe (2001-2004) (in Ton)

6,000 5,000 4,000 3,000 2,000 1,000 0 Nov Nov Nov Jun Jun Jun Jul Jul May May May Jan Jan Aug Aug Mar Mar Jan Oct Oct Mar Apr Apr Dec Dec Dec Feb Feb Sep Sep Feb Apr Jul

In Tons

Average monthly capacity of Egypt Air *

2001

2002

2003

2004

Note: (*) Egypt Air has an annual capacity of 60,000 tons leaving Cairo. Fresh produce constitute around 60% of this volume. Sources: Interviews; BAH Analysis 92

Proprietary & Confidential

4. Transportation

During peak periods, agriculture exports face capacity problems that are usually addressed by using charters or re-routed freighters at very high costs
Air Freighter Prices during Peak Periods (2006) (in $ per kg)
Type of Freighter Type of Freighter Egypt Air Freigher Egypt Air Freigher Description Description Egypt Air has 4 freighters with a Egypt Air has 4 freighters with a capacity of 40 tons each capacity of 40 tons each Approximate Price per Kg Approximate Price per Kg Egypt Air operates its freighters Egypt Air operates its freighters between Cairo and Europe at $1.2 between Cairo and Europe at $1.2 per kg per kg

Full charter Full charter

A charter goes from origin city A to A charter goes from origin city A to Cairo, loads the freight, then flies to Cairo, loads the freight, then flies to destination city B. Finally, it returns destination city B. Finally, it returns to origin city A to origin city A A freighter going from city A to city B, A freighter going from city A to city B, is re-routed to pass by Cairo and is re-routed to pass by Cairo and load freight, then fly to destination load freight, then fly to destination city B city B

The exporter has to pay for two The exporter has to pay for two additional legs, which is very additional legs, which is very expensive expensive

Re-routed freighter Re-routed freighter

The re-routed freighter would cost The re-routed freighter would cost around half the price of a full charter, around half the price of a full charter, up to $2 per kg up to $2 per kg

Sources: Interviews; BAH Analysis

93

Proprietary & Confidential

4. Transportation

Foreign air carriers do not find economic incentives to transport Egypts export volume surplus during peak times, as the country does not fall along the major air cargo routes
Primary Air Freight Flows (2004) (in Bn FTK)

North America 13.0 12.4 2.9 3.0 0.1 Latin America 2.7 1.7 Egypt 0.1 Africa Europe
1.3 1.3

23.5 23.5

14.2 2.0 3.4 2.0 12.4

Asia Pacific 9.7 9.7

16.3 29.4

2.5 Middle East

Major Air Cargo Routes 2003


Other 13% Asia - North America 21%

Indian Subcontinent 5% Latin America 6% Intra Asia 9%

Asia Europe 18%

Europe - North America 14%


Source: MGI Global Air Freight Flow Model (Merge Global Inc.), Boeing 94

Domestic North America 14% Proprietary & Confidential

4. Transportation

In-land transports tariffs from Egypt seem in line with other Arab countries
Land Transport Tariffs to Neighboring Countries (in USD per Ton per Km) (2005)
3.96

2.32 1.83 1.50 0.90 1.00 1.17

2.40 1.77

0.56

0.66

0.77

Syria

Egypt

Lebanon
20 Container

Qatar
40 Container

Jordan

KSA

Sources: BAH Benchmarking 95

Proprietary & Confidential

5. Inadequate Government Regulations

Strict Government regulations on seed imports and Government control on fertilizers and pesticides are hurting the competitiveness of Egyptian agriculture exporters
Egypts Government Inputs Import Restrictions and Regulations
Seeds Import Control Seeds Import Control Lengthy procedures: Horticulture Research Lengthy procedures: Horticulture Research Center can take up to 18 months to validate new Center can take up to 18 months to validate new seeds (although new regulations reduced lead seeds (although new regulations reduced lead times to 2 growing seasons) times to 2 growing seasons) Positive restrictions: Government restrictions on Positive restrictions: Government restrictions on all seeds except authorized list all seeds except authorized list High costs: Approval process costs up to $6,000 High costs: Approval process costs up to $6,000 and require substantial quantity of test seeds and require substantial quantity of test seeds (e.g., up to 20 kg) (e.g., up to 20 kg) Opportunity cost: Particular variety of crops are Opportunity cost: Particular variety of crops are key to enter certain markets (e.g., out of 16 key to enter certain markets (e.g., out of 16 variety, only one broccoli type is imported into variety, only one broccoli type is imported into European markets) European markets) Serbias Ministry of Agriculture provides a preSerbias Ministry of Agriculture provides a preapproval process that authorizes new seeds to approval process that authorizes new seeds to be imported within 7 days. Unless stated be imported within 7 days. Unless stated otherwise, pre-approval is considered final after 6 otherwise, pre-approval is considered final after 6 months months Canadian Food Inspection Agency sets some Canadian Food Inspection Agency sets some specific requirements related to seed import: the specific requirements related to seed import: the importer must provide a signed statement importer must provide a signed statement justifying the names, the need, the certificate of justifying the names, the need, the certificate of analysis, sign a declaration form and obtain analysis, sign a declaration form and obtain approval from the Import Service Center approval from the Import Service Center Fertilizers, Pesticides Regulations Fertilizers, Pesticides Regulations Availability: Drastic regulations are hampering Availability: Drastic regulations are hampering access to key fertilizers and pesticides (e.g., access to key fertilizers and pesticides (e.g., recent bans on urea and nitrogen used for recent bans on urea and nitrogen used for fertigation) fertigation) High costs: High costs: Restrictive import regulations (e.g., Restrictive import regulations (e.g., distribution through PBDAC encourages distribution through PBDAC encourages black market for fertilizers) black market for fertilizers) Additionally, Government ownership of most Additionally, Government ownership of most fertilizer factories hampers well functioning fertilizer factories hampers well functioning and development of a competitive markets and development of a competitive markets As a result, fertilizers prices are sometimes As a result, fertilizers prices are sometimes 40% above world market prices 40% above world market prices In Indonesia, fertilizers imports can be conducted In Indonesia, fertilizers imports can be conducted only by Registered Fertilizers Importers and only by Registered Fertilizers Importers and require to have an import license; However a require to have an import license; However a ceiling price for urea fertilizer has been set by ceiling price for urea fertilizer has been set by the Ministry of Agriculture the Ministry of Agriculture In Australia, fertilizer imports must also meet strict In Australia, fertilizer imports must also meet strict Australian Quarantine regulations administered by Australian Quarantine regulations administered by the Australian Quarantine Inspection Service the Australian Quarantine Inspection Service (AQIS). Most fertilizer products require an import (AQIS). Most fertilizer products require an import permit and are required to conform to import permit and are required to conform to import conditions conditions

Egypt Egypt

International International Benchmarks Benchmarks

Source:

Interviews; DAI Assessment of Egypts Agricultural Sector Competitiveness (2002); Seed Industry in Jordan NCART (2002); BAH Analysis Proprietary & Confidential 96

5. Inadequate Government Regulations

Governments control of production and downstream processing for strategic crops cotton, rice, sugar cane induces an antiexport bias and an unfair competitive environment
Egypts Government Agriculture Production and Processing Regulations Description
Cotton production still controlled by Government to Cotton production still controlled by Government to ensure consistent quality within growing seasons ensure consistent quality within growing seasons Rice zones are assigned to various Governorates Rice zones are assigned to various Governorates (around 1 million feddan) to limit water-consumption and (around 1 million feddan) to limit water-consumption and combat soil salinity. In other Governorates, farmers need combat soil salinity. In other Governorates, farmers need specific licensing in order specific licensing in order Sugar Cane agricultural lands typically limited around Sugar Cane agricultural lands typically limited around Government-owned factories Government-owned factories

Impact
Anti-Export Bias: Government Anti-Export Bias: Government decisions for food-security and decisions for food-security and local industry protection local industry protection purposes on local supply can purposes on local supply can dramatically affect local prices. dramatically affect local prices. Depending on world market prices, Depending on world market prices, producers would have little producers would have little incentives to export vs. selling on incentives to export vs. selling on local markets local markets

Production Production Regulations for Regulations for Strategic Strategic Crops Crops

Downstream Downstream Processing Processing Government Government Control Control

50% of cotton production is bought by Government50% of cotton production is bought by Governmentowned ginning and trading companies (e.g., Port Said owned ginning and trading companies (e.g., Port Said Cotton Company, Alexandria Commercial) to supply local Cotton Company, Alexandria Commercial) to supply local spinning & weaving industry spinning & weaving industry Sugar Cane processing is fully owned by GovernmentSugar Cane processing is fully owned by Governmentowned factories that also organizes overall marketing and owned factories that also organizes overall marketing and export effort export effort

Unfair Competitive Environment: Unfair Competitive Environment: By purchasing commodities at By purchasing commodities at subsidized prices, Governmentsubsidized prices, Governmentowned downstream factories owned downstream factories present unfair competition to present unfair competition to private-sector traders and private-sector traders and exporters, with stricter profit/losses exporters, with stricter profit/losses requirements requirements

Sources: Interviews; DAI Assessment of Egypts Agricultural Sector Competitiveness (2002); BAH Analysis 97

Proprietary & Confidential

5. Inadequate Government Regulations

In addition, Governments financial assistance discourages efficient allocation of scarce natural resources and does not promote investments in long-term capacity building
Egypts Government Financial Assistance Programs Description
Government currently finances most of the water Government currently finances most of the water infrastructure (irrigation canals), pumping equipment, fuel infrastructure (irrigation canals), pumping equipment, fuel and costs in old lands and costs in old lands However, in newly reclaimed lands, the Government However, in newly reclaimed lands, the Government has introduced cost-sharing arrangements for has introduced cost-sharing arrangements for infrastructure with the private sector infrastructure with the private sector In all cases, water is provided free of charge to In all cases, water is provided free of charge to agriculture lands agriculture lands

Impact
Scarce Natural Resources Scarce Natural Resources Misallocation: current export mix Misallocation: current export mix does not price-in the cost of scarce does not price-in the cost of scarce water resources. For instance, rice water resources. For instance, rice and sugar cane consumes a and sugar cane consumes a disproportionate amount of disproportionate amount of resources given their share of resources given their share of export value-add export value-add

Water Water Infrastructure Infrastructure Support Support

Agricultural Agricultural Export Export Financial Financial Assistance Assistance

Between 2002 and 2006, Egypt Government has provided Between 2002 and 2006, Egypt Government has provided direct payments to promote exports depending on the direct payments to promote exports depending on the type of crops (on average LE 100/Ton) type of crops (on average LE 100/Ton) Financial help was not tied to any concrete long-term Financial help was not tied to any concrete long-term investment to create a sustainable competitive advantage investment to create a sustainable competitive advantage for Egyptian exporters for Egyptian exporters Overall, over LE 300 million were distributed to exporters Overall, over LE 300 million were distributed to exporters through the Export Development Fund (Ministry of Trade through the Export Development Fund (Ministry of Trade and Industry) and Industry)

Short-term Financial Assistance: Short-term Financial Assistance: Most Governments financial Most Governments financial help was passed as price help was passed as price discounts to importers discounts to importers Private sector exporters are Private sector exporters are now lobbying the Government now lobbying the Government for tax breaks to compensate for tax breaks to compensate for lost financial assistance for lost financial assistance

Sources: Interviews; DAI Assessment of Egypts Agricultural Sector Competitiveness (2002); BAH Analysis 98

Proprietary & Confidential

5. Inadequate Government Regulations

For instance, as a result of Government water policy, rice represents 35% of water consumed but contributes only 21% to export value vs. respectively 16% and 30% for horticulture
Contribution of Commodities to Value Added and Exports Vs. Water Used (2004) *

Other Cotton Sugar crops Horticulture

26%

28% 43%

6% 17%

7% 8% 6%

16% 43% 30%

Cereals - Rice
35% 14% 21%

% Water Used

% Value Added **

% Export Value ***

(*) The commodities were selected as to cover 99% of exported value in 2004. Clover was not included in the analysis (**) % Value add is defined as the percentage profit made by the farmer (Value Add = Producer price Cost of production) (***) % Export value corresponds to contribution of the category/ crop to the overall export value Sources: FAOSTAT; Agricultural Statistics, CAPMAS N9-3; World Bank Report 99

Notes:

Proprietary & Confidential

5. Inadequate Government Regulations

Additionally, to simply offset previous financial assistance, exporters are now lobbying the Government to provide sales and custom tax breaks
E L PL E MP AM EX A EX

Example of a Proposed Replacement of Government Direct Assistance with Sales & Custom Tax Breaks
407

257
207 207

Sales Tax

56

52 27 25
Proposed Sales & Customs Tax Breaks Previous Government Assistance

52 27 25
Proposed Sales & Customs Tax Breaks Previous Government Assistance

150

Customs

Previous Government Assistance

Proposed Sales & Customs Tax Breaks

Citrus
Production cost per Ton of Crop (in LE) Tax and Customs (as % of production cost) Previous Government Assistance (as % of production cost)
Source: Interviews; BAH Analysis

Grapes
7,150 1.9% 2.9%

Strawberries
36,850 1.1% 0.6%

4,048 1.3% 1.4%

100

Proprietary & Confidential

6. Capacity Building Requirements

In spite of the various development initiatives aimed at building capacity within the agricultural sector
Agricultural Sector Development Initiatives
Initiative Initiative
APRP APRP Agricultural Agricultural Policy Reform Policy Reform Program Program ALEB ALEB Agriculture-Led Agriculture-Led Export Export Businesses Businesses ATUT ATUT Agricultural Agricultural Technology Technology Utilization and Utilization and Transfer Transfer AERI AERI Agricultural Agricultural Exports and Exports and Rural Incomes Rural Incomes Traceability for Traceability for EU MarketEU MarketUnido Unido The Green The Green Corridor Italy Corridor Italy

Description Description
Set up a framework of agricultural rules Set up a framework of agricultural rules Promote reductions in protection and trade-distorting support Promote reductions in protection and trade-distorting support

Select Achievements Select Achievements


Agriculture research Agriculture research undertaken undertaken Institutions and unions Institutions and unions created for cotton, rice, created for cotton, rice, wheat, etc. wheat, etc. Market information and trade Market information and trade counseling provided to large counseling provided to large exporters exporters Relationship strengthened Relationship strengthened between large exporters and between large exporters and importers importers Creation of HEIA Creation of HEIA Technical and management Technical and management training provided training provided Marketing knowledge Marketing knowledge disseminated disseminated New Law prepared for New Law prepared for farmers associations farmers associations Capacity enhancement of Capacity enhancement of small and medium farmers, small and medium farmers, and link to large exporters and link to large exporters Development of survey for Development of survey for exportable horticultural crops exportable horticultural crops Expected to export about Expected to export about 3000 tons of agriculture 3000 tons of agriculture products to Italy products to Italy

Project Timeline and Project Timeline and Budget Budget


Timeline: 1995-2003 Timeline: 1995-2003 Budget of $ 301 million Budget of $ 301 million

Established through USAID to enhance global competitiveness Established through USAID to enhance global competitiveness of Egyptian food processing companies and increase their of Egyptian food processing companies and increase their exports exports

Timeline: 1999-2005 Timeline: 1999-2005

Focus on developing efficient and competitive export capability Focus on developing efficient and competitive export capability for a selected group of fresh, high value, non-traditional export for a selected group of fresh, high value, non-traditional export oriented horticulture products oriented horticulture products Work with large growers // exporters having the financial Work with large growers exporters having the financial capacity to invest in capital intensive and high-risk venture capacity to invest in capital intensive and high-risk venture BDS program: Develop farmers business through improving BDS program: Develop farmers business through improving access to credit financing, high quality seeds, fertilizers, and access to credit financing, high quality seeds, fertilizers, and pesticides pesticides El Shams/Care program: Improve farmers growing, and El Shams/Care program: Improve farmers growing, and harvesting practices to achieve high production yields harvesting practices to achieve high production yields MUCIA: Support to small farmers MUCIA: Support to small farmers Build capacity of Egyptian exporters to comply with adoption of Build capacity of Egyptian exporters to comply with adoption of traceability scheme for all food and ingredients traded within traceability scheme for all food and ingredients traded within the European Union the European Union Enhance the production of exportable crops in West Nubariya Enhance the production of exportable crops in West Nubariya area, and assist in exporting the agricultural products to Italy area, and assist in exporting the agricultural products to Italy
101

Timeline: 1995-2002 Timeline: 1995-2002 Budget of $60 million Budget of $60 million

Timeline: 2002-2007 Timeline: 2002-2007 Budget of $ 57.3 million Budget of $ 57.3 million

Timeline: 2003 Timeline: 2003 Budget of $ 1.2 million Budget of $ 1.2 million Timeline: 2006-2007 Timeline: 2006-2007 Budget of Euro 250 thousand Budget of Euro 250 thousand Proprietary & Confidential

Sources: interviews, BAH Analysis

6. Capacity Building Requirements

Egypt still needs substantial development efforts, necessary to exploit its full export potential
Egypts Key Capacity Building Requirements

Lack of Robust Lack of Robust Sanitary Sanitary Infrastructure Infrastructure

Government regulations, human and infrastructure resources to control agriculture production and export quality control Little current capacity to fully trace agriculture commodities along the value chain Extension services are key to developing adequate exporters expertise in new growing, handling and packaging techniques that are suitable to exports. They provide particular Egypt's current extension services are inefficient, over staffed and do not provide sufficient expertise to exporters and farmers

Weak Extension Weak Extension Services Services

Unreliable Unreliable Agricultural Agricultural Statistics Statistics

Statistical information reported by different bodies (e.g., CAPMAS, Export Associations, NGOs, Customs Office, GOEIC) report significantly different numbers and use inconsistent reporting formats Such repository is key to assess the overall local market dynamics and enable long-term as well as shortterm planning for Government, exporters and growers alike

Inadequate Inadequate Education System Education System and Vocational and Vocational Training Training

Current education system does not sufficiently teach commercially-oriented competencies (e.g., autonomous decision-making, team work). According to certain exporters, it takes almost 3-4 years before recruits can actually operate independently and make good-judgment decision on their own Despite recent efforts (e.g., AERIs MUCIA), vocational training by Government or private organizations still requires substantial investments and efforts
Proprietary & Confidential

Sources: Interviews, BAH Analysis

102

6. Capacity Building Requirements

For instance, due to a lack of robust control on spot trading, Egypts exports rank poorly against other countries in food safety record, which damages the overall Egyptian export sector
Lack of Government Quality Control on Agricultural Exports
Spot Trading Spot Trading Spot trading is typically carried out by small Spot trading is typically carried out by small exporters that serve as intermediary between local exporters that serve as intermediary between local growers and foreign importers growers and foreign importers Because of the lack of rigorous Government Because of the lack of rigorous Government control, some of the small traders are tempted to control, some of the small traders are tempted to turn quick profits by exporting unsanitary products, turn quick profits by exporting unsanitary products, especially towards the end of growing seasons especially towards the end of growing seasons The most significant sanitary problem with the EU The most significant sanitary problem with the EU concern the brown-rot in potatoes; exports from concern the brown-rot in potatoes; exports from Egypt are consistently tested positive year after Egypt are consistently tested positive year after year year EU RASFF Reports by Country (2005) * EU RASFF Reports by Country (2005) *
24 17 15 15 11 9

Egypt

Tunisia

Chile

Morocco

South Africa

Israel

Overall Impact on Egypt Export Sector Overall Impact on Egypt Export Sector As a result, risk assessments from international sanitary organizations (e.g., DG Sanco, APHIS) As a result, risk assessments from international sanitary organizations (e.g., DG Sanco, APHIS) still rank Egypt low because of inability to provide sufficient and consistent sanitary standards still rank Egypt low because of inability to provide sufficient and consistent sanitary standards Lack of sanitary control damages Egypts image abroad among importers Lack of sanitary control damages Egypts image abroad among importers
Note (*): RASFF: Rapid Alert System for Food and Feed Source: Interviews, BAH Analysis

103

Proprietary & Confidential

6. Capacity Building Requirements

As a result, private sector players are actively involved in providing inspection, testing, certification and verification services for Egyptian exporters
E L PL E MP AM EX A EX

Example of Private Sector-provided Quality Assurance in Egypt

Socit Gnrale de Surveillance Socit Gnrale de Surveillance

Inspection Inspection Services Services

Inspects and verifies quantity, weight and quality of traded goods at manufacturers/suppliers premises Tests product quality and performance against various health, safety and regulatory standards through own laboratories Certifies that products, systems or services meet requirements of standards set by governments, standardization bodies or importers Ensure products and services comply with global standards and local regulations

Private sector company, founded in 1878 Private sector company, founded in 1878 in Rouen as French grain shipment in Rouen as French grain shipment inspection house, specialized in quality inspection house, specialized in quality assurance assurance Operates a network of 1,000 offices and Operates a network of 1,000 offices and laboratories around the world laboratories around the world Provides services across industries, such Provides services across industries, such as agricultural, automotive, food and as agricultural, automotive, food and forestry forestry Services cover all steps along the value Services cover all steps along the value chain from raw materials to finished chain from raw materials to finished products. products.
Source: Interviews, BAH Analysis

Testing Testing Services Services

Certification Certification Services Services

Verification Verification Services Services

104

Proprietary & Confidential

Lessons Learned from Best-in-Class Agricultural Exporters


Benchmarking Methodology Export Promotion Agencies Leveraging Small Farmers Potential Transportation Government Agricultural Regulations Agriculture Capacity Building Programs

Proprietary & Confidential

Benchmarking Methodology

The benchmarking analysis focused on seven key dimensions directly addressing challenges facing Egypts agricultural export sector
Benchmarking Dimensions Mapping Against Agriculture Export Challenges
Government Agricultural Regulations Benchmarking Dimensions Egypt Agriculture Export Challenges (Baseline Section)

II Export Export Promotion Promotion Agencies Agencies

II II Leveraging Leveraging Small Small Farmers Farmers Potential Potential

III III Transport Transport

IV IV Subsidies Subsidies

V V Water Water Policy Policy

VI VI Agriculture Agriculture Input Policy Input Policy

VII VII R&D // R&D Intellectual Intellectual Property Property

VIII VIII Capacity Capacity Building Building Programs Programs

Lack of demandLack of demanddriven orientation driven orientation Lack of coordination Lack of coordination among exporters among exporters Untapped potential Untapped potential of small farmers of small farmers Transportation Transportation Inadequate Inadequate regulations regulations Capacity issues Capacity issues

106

Proprietary & Confidential

Benchmarking Methodology

A combination of quantitative and qualitative criteria were selected to identify relevant countries for benchmarking
Country Selection Framework
Quantitative Quantitative Agricultural Export Growth (%, 2000-2004)
15% 12% 11% 11% 9% 9% 9% 8% 6%

Qualitative Qualitative Seasonality and Target Markets Mix of On, Off and Niche agricultural exporters Target market overlap for agricultural exports
On Season Niche Season Off Season

Portugal

South Africa

India

Italy

Australia

Chile

France

Israel

Pakistan

Agricultural Export Overlap with Egypt (%, 2004) (1)


88% 68% 61% 60% 44% 44% 42% 42% 41%

Scarcity of Natural Resources Challenges related to scarcity of natural agricultural resources e.g. water, arable land Best-in-class examples in overcoming resourcescarcity

Pakistan

South Africa

Chile

Portugal

India

Israel

Italy

Australia France

GDP per Capita ($, 2005)


30.2 17.5 19.2 33.9

Rural Society Structure


34.7

Egypt: 1.3

0.7
Pakistan

0.7
India

5.1
South Africa

7.1
Chile Portugal Israel Italy France Australia

Structure of land distribution dominance of large or small farmers and implications for agricultural sector Existence of associative solutions within each scenario (dominance of large / small farmers)

(1) % of Export Value from Crops that Make 80% of Egypts Export Value 2004 Source: IMF; FAOSTAT; Lit Search; BAH Analysis

107

Proprietary & Confidential

Benchmarking Methodology

As a result, Chile, Israel and South Africa were selected as main benchmarking targets however, when applicable best practices from other countries were also analyzed
Benchmarked Countries
Chiles exports have a high level of overlap with Egypts exports (same crops) The country is one of the main fruit and vegetable supplier to Europe Chile is recognized as having a distinguished institutional structure to support export activities Chile has invested in small farmers despite large concentration in land ownership Chilean water policies are seen as a role model for other countries Israel represents formidable competition to Egypt and share similar growing seasonality Israels export promotion agencies have established a strong positioning in Europe Israel faces important environmental restrictions, especially in available water resources Transportation arrangements are considered of international standards

Chile Chile

Israel Israel

South Africa South Africa

South Africa has significantly developed its agricultural exports internationally, growing at 12% Crops exported by South Africa overlap significantly with Egypt and present similar logistics requirements (e.g., cold chain) South Africa faces severe scarcity of resources (e.g., land, water) Seed and fertilizer policies (Spain, Serbia, Australia, Indonesia, Canada) Transportation infra-structure for small farmers (Brazil)

Others Others

Product pricing tools (Serbia, USA) Intellectual Property protection (Brazil)


108

Proprietary & Confidential

Lessons Learned from Best-in-Class Agricultural Exporters


Benchmarking Methodology Export Promotion Agencies Leveraging Small Farmers Potential Transportation Government Agricultural Regulations Agriculture Capacity Building Programs

Proprietary & Confidential

I. Export Promotion Agencies

Most countries around the world have invested in an Export Promotion Agency (EPA), which number has almost tripled over the last decades
Number of Countries with EPAs (1980-2000)
116

Objective and Roles of EPAs

x3
40

Objective Objective

Help potential exporters find markets for their products, as well as provide them with a better understanding of products demanded in different export markets Coordinate overall export promotion efforts among existing agencies Promote country image building, advocating and taking part in promotional initiatives Provide export support services, namely Training and Technical Assistance Capacity Building and Regulatory Compliance Dissemination of information on logistics, customs, packaging and pricing Execute marketing initiatives (trade fairs, business missions, follow-up by representatives abroad) Perform market research (gather and generate market information and referral databases on the general, sector and firm levels)
Proprietary & Confidential

1980s

2000s

Geographic Distribution of EPAs (%, 2006)


Algeria Algeria Egypt Egypt Jordan Jordan Lebanon Lebanon Malta Malta Morocco Morocco Tunisia Tunisia West Bank West Bank and Gaza and Gaza Yemen Yemen

Middle East and North Africa 12% Latin America And Caribbean 26%

Roles Roles

OECD(2) 17%

Sub-Saharan Africa 20%

Asia (1) 25%

(1) World Bank classifies European developing countries under Asia; (2) OECD comprises 30 member countries, mainly developed European and Asian countries, and North America Sources: Export Promotion Agencies: What Works and What Does Not (2006) World Bank; Booz Allen Analysis 110

I. Export Promotion Agencies

Export Promotion Agencies play a decisive role in improving exports each US$ 1 invested can boost total exports by about US$ 320 depending on the region
Export Promotion Agencies Impact in Total Exports for Each US$ 1 Invested
$490

Relevance and Best Practices for EPAs Relevance and Best Practices for EPAs Results of Export Promotion Agencies over countries Results of Export Promotion Agencies over countries exports are statistically significant (R-square > 50%) exports are statistically significant (R-square > 50%) Average of US$ 320 increase for each US$ 1 Average of US$ 320 increase for each US$ 1 invested in export promotion invested in export promotion

$320 $227 $137 $96 $160

Heterogeneity exists across regions, Heterogeneity exists across regions, depending on levels of development and types depending on levels of development and types of instruments of instruments Exporters who leverage on Export Promotion Exporters who leverage on Export Promotion Agencies initiatives tend to have higher profitability Agencies initiatives tend to have higher profitability than those who do not than those who do not Countries achieve better results by having fewer Countries achieve better results by having fewer stronger EPAs than disperse numerous organizations stronger EPAs than disperse numerous organizations Support to non-traditional sectors has usually better Support to non-traditional sectors has usually better outcomes outcomes

Middle East / North Africa

SubSaharan Africa

OECD(1)

Asia(2)

Latin Median America & Caribbean

(1) OECD comprises 30 member countries, mainly developed European and Asian countries, and North America; (2) World Bank classifies European developing countries under Asia Sources: Export Promotion Agencies: What Works and What Does Not (2006) World Bank; Booz Allen Analysis 111

Proprietary & Confidential

I. Export Promotion Agencies

This result was derived from studies which assessed export promotion impact both from a country and an internal organization structure dimensions
World Bank EPA Study Overview of Statistical Procedures
Steps Description Impact assessment from broad economic and trade-related variables on countrys exports
Step 1 Step 1 Country Country Variables Variables

Variables EPA budget per capita GDP per capita Import trade restrictiveness to rest of world Export trade restrictiveness from other countries Exchange rate volatility Days to comply with export regulation Executive board seats to private sector Degree of decentralization of agencies devoted to export promotion Share of agency budget spent of non-export promotion activities Strategy focuses on non traditional exports or sector specific Share of EPA funding from public sources Shares in EPAs expenditure Country image activities Export support services Large clients Established Exporters Representation offices abroad
Proprietary & Confidential

Correlation of all variables and value of total exports were determined Resulting variables weights measure positive or negative impact on exports

Step 2 Step 2 Endogenous Endogenous EPA EPA Variables Variables

Assessment of impact from internal EPA organization and general practices on countrys total exports Statistical procedures similar to the above described

Note: Different levels of information for countries were adequately treated through random selection statistical procedures Source: Export Promotion Agencies: What Works and What Does Not (2006) World Bank; Booz Allen Analysis 112

I. Export Promotion Agencies

However, empirical studies indicate that returns on investment in EPAs are maximized within a certain range under or over-funding can become detrimental to the agencys efficiency
E VE TIIV T RA RA ST ST U U LL IILL

Investment in Export Promotion (Total) Maximization of Impacts

Adequate Dimension of Export Promotion Adequate Dimension of Export Promotion Agencies Agencies Efforts should have a minimum scale, and Efforts should have a minimum scale, and should not turn into excessively big initiatives should not turn into excessively big initiatives

Impact on Countrys Exports

Very low Very low levels of levels of investment investment may lead to may lead to negative negative results results

Excessive Excessive investments investments may have may have marginal or marginal or even declining even declining results results
Zone of Maximum Efficiency

Very low or very high budgets for Very low or very high budgets for investments in export promotion may lead investments in export promotion may lead to lower efficacy to lower efficacy Maximum impact is achieved with total Maximum impact is achieved with total country investment (agriculture // other country investment (agriculture other products) between US$ 0.60 and US$ products) between US$ 0.60 and US$ 2.70 per capita 2.70 per capita Three different structures for collection of private Three different structures for collection of private resources resources Membership fees: paid periodically to Membership fees: paid periodically to regional and/or national entities, who regional and/or national entities, who forward resources to coordination bodies forward resources to coordination bodies Project-based fees: extraordinaire fees to Project-based fees: extraordinaire fees to fund specific projects (e.g. booth at Fruit fund specific projects (e.g. booth at Fruit Logistica for ProChile) usually voluntary Logistica for ProChile) usually voluntary

0.60

2.70

Level of Investment (Total US$ per capita)


Sources: Export Promotion Agencies: What Works and What Does Not (2006) World Bank; Booz Allen Analysis 113

Commission on sales: Agrexco works on Commission on sales: Agrexco works on a sales-commission base, differentiated a sales-commission base, differentiated by product by product

Proprietary & Confidential

I. Export Promotion Agencies

The establishment of export promotion agencies improve demanddriven orientation and enforce coordination among exporters, two key export challenges identified in Egypt
Export Promotion Agencies Issues Addressed and Implications
Issues Faced By Egypt Key Shortcomings Little market intelligence conducted to understand customer demand Poor promotion of Egyptian exports Inadequate competitive pricing Little leverage of all distribution channels to provide Egyptian produces Fierce competition among Egyptian exporters Little lobbying by private sector of Government during trade negotiations No effective body to coordinate efforts of publicprivate agriculture export stakeholders Export Promotion Agencies Role EPAs are decisive in providing the initial spark to sectorwide efforts - avoid market failures Private sector does not have the incentives to give the initial step - e.g. pioneering new markets, making investments that might be leveraged by competitors Through EPAs, scale necessary to establish international market intelligence networks is achieved Essential source of target-market data for exporters Efficient matchmaking between exporters and buyers EPAs provide adequate representation of exporters interests before policy makers Agencies play a catalytic role in pooling overall sector efforts to key market-development initiatives, that would most likely not take place without a coordination body e.g. Country branding initiatives Effective marketing of products in international markets

Lack of Lack of DemandDemandDriven Driven Orientation Orientation

Lack of Lack of Coordination Coordination Among Among Exporters Exporters

Sources: BAH Analysis 114

Proprietary & Confidential

I. Export Promotion Agencies

Most best-in-class countries have a hierarchy of export promotion agencies organized along country, agricultural and crop-specific dimensions
Export Promotion Agency Hierarchy in Benchmarked Countries
Dimensions Broad Broad Scope Scope Chile Chile Israel Israel South Africa South Africa

Overall Country Exports

Agricultural Produce

Crop / Product Oriented

Focused Focused
Overall country EPA encompasses agriculture, manufacturing and services .. and coordinates effectively with agricultural produce entity Crop-focused boards develop individual efforts focused on certification

Country Country Overview Overview

Overall country EPA encompasses all sectors, however focusing on technology Agrexco executes main countrys agricultural promotion efforts Crop-oriented bodies develop own branding, however sell most produce through Agrexco
115

DTI encompasses all sectors but agriculture Agricultural produce entity plays incipient role in promotion Crop-specific bodies formed a broader product oriented entity to coordinate and capture scale in marketing Proprietary & Confidential

I. Export Promotion Agencies

For the sake of illustration, we have selected to detail three EPAs that span a broad spectrum of ownership and focus
Export Promotion Agency Map
Overall Country Exports

Broad Scope Broad Scope

Government body, formed to promote Government body, formed to promote countrys overall exports countrys overall exports Leads country broad branding strategy and Leads country broad branding strategy and coordinates // partially funds export coordinates partially funds export promotion projects promotion projects

Agricultural Produce

Private company with Israeli government Private company with Israeli government among shareholders among shareholders Centralizes export activities and countrys Centralizes export activities and countrys branding strategy branding strategy Not-for-profit institution revenues are split Not-for-profit institution revenues are split among farmers among farmers

Focus

Crop / Product Oriented

Focused Focused

Producer and private company association Producer and private company association to coordinate and capture scale in to coordinate and capture scale in marketing efforts marketing efforts Development of country fruit umbrella Development of country fruit umbrella brand and specific crop brands brand and specific crop brands Funding done primarily by private sector Funding done primarily by private sector

Private Private
Essentially Private

Ownership
Private With Public Shareholding
116

Public Public
Essentially Public
Proprietary & Confidential

I. Export Promotion Agencies

EPAs governance and funding are typically based on a publicprivate partnership membership is voluntary and includes growers and exporters existing associations
South Africa FRUIT SA Fruit SA is led by the private companies representative body, in association with producers associations Entitys Board of Directors composed of 12 people 3 of each of the 4 component associations Decisions are made in a consensus base, in monthly meetings Main leaders are the members of 2 component associations, who led formation of the entity Role not based in formal rules Mandates vary according to rules of component associations Funding comes from two main sources: Membership fees paid to component associations Levies determined by countrys laws - tax on each carton of fruit sold internally or exported is held by Ministry of Agriculture and distributed to associations Voluntary membership Members mostly associations (grower or company) Broad range of commercial farmers sizes, who are represented as members of associations Mostly medium and large-sized companies Israel AGREXCO Agrexcos decision processes ensure adequate representation of farmers and government board of directors is evenly distributed between those two sectors 8 government representatives 4 representatives of farmer associations 4 representatives of crop-specific marketing boards Chile PROCHILE Part of the Ministry of Trade Affairs ProChiles decisions are made in a consensus base, in periodic roundtables (each 2-3 months) with: 1 member of ProChile 1 member of SAG (Quality Assurance) 1 member of Ministry of Agriculture 1 member of INDAP (agricultural research) 15 members of industry associations

1 1

Governance & Organization

2 2

Funding & Project Allocation

Agrexco is held by government (50%), farmer cooperative (25%) and production boards (25%) Funding is split between public and private sector, accordingly to shareholders equity Not-for-profit institution revenues are split among members Voluntary membership Members mostly farmer cooperatives and production boards who hold shares in Agrexco Farmer cooperatives joint mostly small farmers who seek scale solutions through cooperative (from production to access to credit)
117

Private companies provide funds (through membership fees and other levies) to sector associations, which transfer funds for ProChile as per projects financial plans ProChiles resources come from the Ministry of Foreign Affairs not-for-profit institution Membership is voluntary and associated with projects being undertaken by ProChile Associations might nominate members to be registered in a database utilized by ProChile for matchmaking between exporters and international buyers (by request of either side) Proprietary & Confidential

3 3

Membership

Sources: Lit Search, Interviews, BAH Analysis

I. Export Promotion Agencies

1 Organization and Governance 1

For example, ProChiles governance centers on a public/private participatory process through decision forums the organization relies on a matrix model to cater for specific projects initiatives
ProChile Internal Structure and Decision Forums
Decision-Making Processes -- Agriculture Decision-Making Processes Agriculture

Pro Chile Pro Chile

Part of the Ministry of Foreign Affairs Coordinates export promotion efforts through project approval and funding

Financial Planning Financial Planning and Resource and Resource Allocation Allocation Coordination

Organizational Details Organizational Details ProChiles personnel are public employees no preProChiles personnel are public employees no preestablished mandate periods established mandate periods ProChile has highly qualified personnel human resources are ProChile has highly qualified personnel human resources are required to be specialized, and working for the entity actually is required to be specialized, and working for the entity actually is a matter of status a matter of status 4 departments under the agriculture sector directorate 4 departments under the agriculture sector directorate Fresh produce Fresh produce Agro-industry (e.g. frozen fruit) Agro-industry (e.g. frozen fruit) Wine Wine Meat & Dairy Meat & Dairy

Industry Industry

Services Services

Agriculture Agriculture

Country Country Strategy Strategy Intl Intl Offices Offices Regional Regional Offices Offices Promotion Promotion Support Support

Export Export Promotion Promotion Projects Projects Support (Matrix)

Public // Private Public Private Decision Decision Forums Forums

Decision Forums -- Governance Decision Forums Governance Each market researcher conducts a periodical roundtable for Each market researcher conducts a periodical roundtable for discussion with industry representatives each 2-3 months discussion with industry representatives each 2-3 months Members are accepted accordingly to sector directorate rules Members are accepted accordingly to sector directorate rules no individual representatives (associations only) no individual representatives (associations only) Decisions are made through consensus no voting Decisions are made through consensus no voting In each meeting, initiative stakeholders must present evolution In each meeting, initiative stakeholders must present evolution of assigned initiatives follow-up is not open to general public of assigned initiatives follow-up is not open to general public Yearly, a public project selection is held to decide on funding Yearly, a public project selection is held to decide on funding Industry representatives must apply to (potentially) Industry representatives must apply to (potentially) obtain funds to projects presented In roundtables obtain funds to projects presented In roundtables Funding cover maximum 4-6 year timeframes of Funding cover maximum 4-6 year timeframes of projects additional efforts must be undertaken with projects additional efforts must be undertaken with own resources by postulants own resources by postulants
118

Private Private Sector Sector

Sources: ProChile, Lit Search, Interviews, Booz Allen Analysis

Proprietary & Confidential

I. Export Promotion Agencies

2 Funding 2

Most EPAs also rely on a public/private funding model that helps catalyze industry-wide efforts while ensuring offered services are market-oriented
Breakdown of Expenditures On Export Promotions by Source (Agricultural, Forestry and Fishery Products 2002)
Need for Public // Private Joint Need for Public Private Joint Funding Funding Public funding creates catalyst Public funding creates catalyst for industry-wide efforts on for industry-wide efforts on their own initiative, private sector their own initiative, private sector will most likely not cooperate will most likely not cooperate Governmental presence Governmental presence avoids information avoids information asymmetry among asymmetry among members members Avoids market failures from Avoids market failures from lack of initial spark for lack of initial spark for efforts (e.g. international efforts (e.g. international presence, pioneering presence, pioneering ventures in new markets) ventures in new markets) Private funding incentivizes Private funding incentivizes EPAs to deliver market-oriented EPAs to deliver market-oriented services services Private sector pressures Private sector pressures agency to provide useful agency to provide useful and effective information and effective information Makes viable to attract Makes viable to attract best-in-class personnel best-in-class personnel EPAs depends on funding EPAs depends on funding to maintain operations to maintain operations running running
Proprietary & Confidential

50%

57%

63% 82% 97%

Industry Funding

50%

43%

37% 18% 3%

Government Funding

Chile

European Union - Total

USA

Cairns Group Total

South Africa

Note: Cairns Group includes Australia, Argentina, Brazil, Canada, Chile, Malaysia, New Zealand, South Africa and Thailand Source: USDA Export Promotion Benchmarking (2002); Booz Allen Analysis 119

I. Export Promotion Agencies

3 Membership 3

As a coordination-only body, membership to Fruit SA is voluntary, includes existing associations, and accepts growers as well as exporters
South Africa Export Promotion Agency

CoordiCoordination nation

Fruit SA Fruit SA

Private association founded in 2000 Coordinates fruit marketing strategy for South Africa
SA Subtropical SA Subtropical Growers Growers Association Association

Founding Founding Members Members

Deciduous Fruit Deciduous Fruit Prod. Trust Prod. Trust

Citrus Growers Citrus Growers Association Association

Fresh Produce Fresh Produce Exporters Forum Exporters Forum

Apples, Grapes, Stone Fruits

Oranges, Lemons

Avocadoes, Mangoes

Exporter Companies

Crop-Specific Voluntary Voluntary Members Members Regional Regional Associations Associations

Crop-Specific Regional Regional Associations Associations

Crop-Specific Regional Regional Associations Associations

Farmers Farmers

Company Associations (Private)

Crop-Specific Associations (Private)

Source: Fruit SA; DFPT; CGA; Subtrop; FPEF, Lit Search, Booz Allen Analysis

120

Proprietary & Confidential

I. Export Promotion Agencies

EPAs typically offer five types of services: market intelligence, product definition, promotion, pricing & financing, as well as distribution support
Activities
Gather and Disseminate Market Intelligence Information

South Africa FRUIT SA


Publication of monthly industry report, distributed to members and consumers Specialized consultancy firm is hired under an umbrella contract to perform new market assessment and shared with members

Israel AGREXCO
Leveraging of global network of branches and agents to collect market information Close relationships to media and retailers to keep track of new opportunities varieties, packaging, competitors movements

Chile PROCHILE
Periodic reports detailing new market potential, characteristics and recent evolution Information shared directly with companies and associations (in context of projects or ad-hoc manner)

A A

B B

Support in Product Definition

Still incipient Fruit SA will hold an international business mission in mid-2007 to establish networking with retailers and category manager in Europe to gather knowledge Development of a country brand to be leveraged by individual private exporters (affiliated to Fruit SA member associations) Participation in international trade fairs to promote brand initiative led by private companies No activity in this area Pricing monitoring to start in mid-2007, in an ad-hoc basis, as a secondary goal for the international roadshow to be held No credit lines available through Fruit SA

Panel category managers, distributors and wholesalers plan transport, storage and packing for each target destination Leader in packaging development Participation in international trade fairs under the Agrexco Carmel brand Promoting organic vegetable brands, with a comprehensive marketing strategy e.g. packaging is made of recycled paper

Investment in packaging development if a requirement for export promotion projects e.g. sanitary regulation in a target market Maintenance of database of Chilean exporters for matchmaking (exporters and international buyers) Participation in international trade fairs, aiming at building awareness of the country umbrella brand part of long-term export projects (4 to 6 years) Systematic support to growers via online database updated daily by specialized consultancy firm Easier access to credit through partnerships with other government bodies Support in overcoming exchange rate barriers Direct support to small and medium-sized exporters in developing product distribution

C C

Develop and Execute Product Promotion Strategies

N/A

D D

Support Product Pricing & Financing

E E

Support Product Distribution

Specialized consultancy firm has extensive network of contacts in the logistics industry worldwide provision of highly detailed logistics study, but no direct support in establishing distribution

Distributes produce of diverse products and executes bulk distribution 2 leased specialized reefer vessels to reach destination ports Acts as category managers for major retail chains 121

Sources: Lit Search, Interviews, BAH Analysis

Proprietary & Confidential

I. Export Promotion Agencies

A Market Intelligence A

EPAs establish a network of international branches to gather local market intelligence in addition to Government help, infrastructure can be financed by the private sector
Export Promotion Agencies International Network
Chile ProChile Chile ProChile South Africa Fruit SA South Africa Fruit SA Israel Agrexco Israel Agrexco

Head Office Branch Sales Agents Distribution Center

Network of Network of Offices Offices

56 international offices, providing services to both sector and geographic directorates

All international branches are held by private companies Information is shared in an adhoc basis through the FPEF structure Private companies e.g. Capespan Provide support to private companies, mostly independently from Fruit SA market information and direct contact with local buyers (e.g. retail chains)
122

9 International branches in Europe and USA 28 Sales agents in other regions Distribution centers in Marseilles and Liege Agrexco funded with shareholders resources, according to equity shares Source of market intelligence information Category manager services for major retailers Negotiation and sales
Proprietary & Confidential

Infrastructure Infrastructure Financing Financing

ProChile totally funded with governmental resources Provide target market information and support in development of projects (e.g. local market sizing, consumer behavior, potential buyers, etc.)

Roles Roles

Sources: ProChile; Capespan; Agrexco; BAH Analysis

I. Export Promotion Agencies

A Market Intelligence A

Through market intelligence, Chile has identified a niche in European markets for blueberry despite little local consumption / awareness ProChile and ASOEX play key roles in marketing
Chile Market Intelligence for Blueberry Export Development
Background
Blueberries are not consumed in Chile production was always targeted at export markets, leveraging: Off-seasonality with main consumer market (North America) Favorable climatic and sanitary conditions Development of blueberry exports was prospected as the country looked for new profitable export products after the 1980s economic depression The Chilean government at the time owned a 50% stake in a profit-making venture capital organization (Fundacin Chile) Blueberry production experiments were funded by Fundacin Chile and interested private Chilean companies government research institutes also took part in the effort Once production proved to be viable and profitable, Fundacin Chile sold its stake to private companies

Current Status
Main blueberry exporters are large Chilean companies and multinational subsidiaries Virtually all other berry export activities (strawberry, raspberry) were converted to blueberry higher profitability allows coping with high air transport costs As the market is very concentrated in 6 companies (85% of exports), the industry has been able to control market connections in other countries international buyers are trading companies held by exporters Intensive marketing activities to develop new markets e.g. ASOEX / ProChile co-funding of UK Eat the Blues campaign Aggressive sampling at radio stations and shows Free 3-week distribution to premium health spas Co-funding of R&D for improved quality standards and development of new varieties

Description Description

Role of Export Role of Export Promotion Promotion Agency Agency

Sources: The Emergence of New Successful Export Activities in Latin America: The Case of Chile (IADB); Lit Search, Interviews, BAH Analysis Proprietary & Confidential 123

I. Export Promotion Agencies

B Product Definition B

To provide a marketable product, Agrexco uses a panel, including growers and distributors, that addresses production, transportation and packaging concerns
Agrexco Product Definition Process
Agrexco The Panel Agrexco The Panel

Agrexco Carmels produce is marketed through a Agrexco Carmels produce is marketed through a board known as the Panel board known as the Panel The Panel is composed of category managers, The Panel is composed of category managers, wholesalers and distributors who handle single or wholesalers and distributors who handle single or multiple varieties multiple varieties Most of Agrexcos sales are done through a full Most of Agrexcos sales are done through a full service model dimensions considered are: service model dimensions considered are: Shipment and transit arrangements Shipment and transit arrangements Storage planning and management at Storage planning and management at destination destination Specific consumer packaging Specific consumer packaging Distribution to warehouses and/or stores Distribution to warehouses and/or stores Eventually, growers, clients, the Panel and Eventually, growers, clients, the Panel and Agrexco management conduct negotiations jointly Agrexco management conduct negotiations jointly to make the intended process viable to make the intended process viable As a result, some growers end up producing As a result, some growers end up producing exclusively for a single overseas customer high exclusively for a single overseas customer high level of customization level of customization

Differentiated Retail Packaging

Taste, quality, appearance and shelf-life that you want


Proprietary & Confidential

Sources: Agrexco; Lit Search, BAH Analysis 124

I. Export Promotion Agencies

C Product Promotion C

ProChile promotes an overall national umbrella brand for exports, while ASOEX focuses on agriculture and crop-specific category promotion
Chile Brand Hierarchy for Fruits
Brand Hierarchy Functioning Brand Hierarchy Functioning Scope Scope Brand Brand Owner Owner ProChile has established a ProChile has established a national brand to all Chiles national brand to all Chiles exports All Ways Surprising exports All Ways Surprising Fresh Fruit exports have specific Fresh Fruit exports have specific brands, aligned to the major brands, aligned to the major country brand hierarchy of country brand hierarchy of brands: brands: All Ways Surprising All Ways Surprising Fruta Fresca Fruta Fresca Specific fruit // country brands Specific fruit country brands ASOEX leads the regional ASOEX leads the regional branding initiatives branding initiatives Has two dedicated marketing Has two dedicated marketing managers managers Hires local advertising Hires local advertising agencies to develop focused agencies to develop focused brands brands The existence of umbrella brands The existence of umbrella brands allows capturing of synergies allows capturing of synergies and enhancing of promotion and enhancing of promotion cost-effectiveness cost-effectiveness

National National Brand Brand

ProChile

Industry Industry Brand Brand

ProChile / ASOEX

Category Category Brands Brands

ASOEX

Private Private Company Company Brands Brands

E.g. Dole Chile, Del Monte Chile (ex. UTC), Del Curto
125

Source: Chilean Fresh Fruit Association

Proprietary & Confidential

I. Export Promotion Agencies

C Product Promotion C

.. That features different characteristics depending on regional markets preferences


Chile Geography-Driven Branding
Region Region Description Description Brands // Logos Brands Logos
EX EX AM AM PL PL ES ES

Asia Asia

Cartoon-based visual communication aligned with general Asian market branding characteristics Development of an umbrella-brand, with a set of product sub-brands

Mexico Mexico

Image of premium quality products to corporate and retail buyers

Brand association with consumption of healthy food United United States States Image of supplier of high quality summer produce during wintertime in North America

Source: Chile CFFA, Interviews, ODEPA/MINAGRI Chile; Booz Allen Analysis

126

Proprietary & Confidential

I. Export Promotion Agencies

D Product Pricing D

Through ASOEX, Chilean exporters producers dispose of a highly sophisticated pricing monitoring system and market analysis
SIM-ASOEX (Market Information System) - Chile
Decofruts International Offices Decofruts International Offices gather and send data to gather and send data to Decofrut in Chile Decofrut in Chile who updates an online system available who updates an online system available to registered growers and exporters to registered growers and exporters

Europe Europe Spain Spain England England Italy Italy North America North America USA Los Angeles, USA Los Angeles, Miami, Philadelphia Miami, Philadelphia Mexico Mexico Asia Asia Hong Kong Hong Kong Taiwan Taiwan

Weekly Market News Weekly Market News Market Overviews Market Overviews Specific Studies Specific Studies European Retailer Contact European Retailer Contact Database Database Weekly Volume and Pricing Weekly Volume and Pricing Information for Main Information for Main International Markets International Markets
127

Developed jointly by Developed jointly by ASOEX and Decofrut ASOEX and Decofrut

Source: ASOEX; Interviews; Booz Allen Analysis

Proprietary & Confidential

I. Export Promotion Agencies

D Product Pricing D

Other countries, like Serbia and the USA, have also established effective and innovative product pricing tools
Serbia and USA Product Pricing Tools
Agro SMS -- Serbia Agro SMS Serbia
Through leveraging of information systems, the Serbian government created databases with produce prices in two main markets: Internal wholesale (updated weekly) Main European terminals (updated daily) By sending SMS messages through mobile phones, Serbian producers have access to price data for their crops Service provision is made at cost to producers (non-profit initiative) The tool has allowed farmers to leverage on a powerful tool to maintain profitability

USDA FATUS -- USA USDA FATUS USA


The FATUS service provides historical prices for USAs exports and imports, by crop and country of origin / destination User-friendly interface, with updated information Diverse breakdowns, allowing producers to even assess impact of customs and duties on market prices for their crops Service is on-line and free of charge Data is collected by US Customs Service

Overview Overview

Relevance Relevance to Industry to Industry

Avoid excessive margin losses in negotiations with buyers Make quick and accurate decisions on product price points

The tool allows producers to check trends and recent development of crops in international markets, and act accordingly Monitor competitors positions Assess and act on seasonal trends

Source: USAID; USDA; Booz Allen Analysis

128

Proprietary & Confidential

I. Export Promotion Agencies

D Product Pricing D

Recent exchange rate evolution has seriously affected agriculture exports in benchmarked countries Only Chile and the US have come up with innovative responses
South Africa Export Volume and FX Rate (1995-2004)(000 Tons, US$)
16000
14,671

Impact of Exchange Rates Impact of Exchange Rates


350

14000 12000 10000


8,644 11,714

13,933

13,917

14,418

300
11,756 12,033 10,497

Exchange rates have recently revamped from Exchange rates have recently revamped from historical devaluation trends, reducing historical devaluation trends, reducing exporters earnings in local currency exporters earnings in local currency especially in South Africa and Chile especially in South Africa and Chile
Exchange Rate (Rand / US$) 1995=100

Export Volume (000 Tons)

250
9,945

None of the benchmarked countries seem to None of the benchmarked countries seem to be pursuing strategies to mitigate negative be pursuing strategies to mitigate negative effects, with the exception of Chile and USA effects, with the exception of Chile and USA Chiles exchange rates have fallen due to Chiles exchange rates have fallen due to significant increase in copper exports significant increase in copper exports (major US$ influx) Farmers and (major US$ influx) Farmers and exporters, negatively impacted by recent exporters, negatively impacted by recent developments, have proposed the developments, have proposed the government to index their tax payments in government to index their tax payments in dollars dollars In USA, export subsidies are adjusted In USA, export subsidies are adjusted according to international commodity prices according to international commodity prices additional support conceived in case additional support conceived in case prices fall below certain boundaries prices fall below certain boundaries

200

8000 150 6000 4000 2000 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 100

50

Source: Interviews; Oanda FX History; FAOSTAT; Booz Allen Analysis 129

Proprietary & Confidential

I. Export Promotion Agencies

E Distribution E

Distribution of agricultural commodities varies greatly depending on the target destination Europe, in particular, is increasingly relying on retailers to the detriment of wholesalers
Agricultural Commodities Distribution Channel Breakdown in Key Egypt Destination Markets (2005, %)
Four chains account for Four chains account for 73% of grocery sales at 73% of grocery sales at supermarkets supermarkets

Implications
Share of retailers in Western Europe and Share of retailers in Western Europe and USA is becoming increasingly prevalent. USA is becoming increasingly prevalent. However, GCC, CIS and Far East remain However, GCC, CIS and Far East remain largely dependent on wholesale largely dependent on wholesale Product quality requirements are Product quality requirements are increasingly enforced by a few companies increasingly enforced by a few companies e.g. Tesco (UK) has developed its own e.g. Tesco (UK) has developed its own set of good agricultural practices to be set of good agricultural practices to be implemented by supplier farmers implemented by supplier farmers Relationships with retailers and Relationships with retailers and wholesalers are of different natures wholesalers are of different natures Retailers demand year-round supply Retailers demand year-round supply from nominated partners from nominated partners In some countries (e.g. UK) exporters In some countries (e.g. UK) exporters are referred to category managers to are referred to category managers to serve chains. In others (e.g. serve chains. In others (e.g. Germany, France), exporters deal Germany, France), exporters deal directly with supermarkets directly with supermarkets Wholesalers work with consignment Wholesalers work with consignment commercial risk is borne by exporters, commercial risk is borne by exporters, who can, however, refuse to deliver who can, however, refuse to deliver should prices fall below profitable should prices fall below profitable levels levels

10% 33% 30% 30% 50% 65% 80% 90% 67% 70% 70% 50% 35% 20% 20% 80%

Wholesalers

Retailers
SA ce ol la nd Ea st an y U G C Fr an U m G er Fa r C IS K C

Western Europe
Source: Interviews; FAO; The Economist ( Big chains enjoy a buyer's market; Competition policy in the EU 2007); Lit Search; Booz Allen Analysis 130

Proprietary & Confidential

I. Export Promotion Agencies

E Distribution E

In continental Europe, Agrexco has successfully developed direct relationships with retailers to provide them with year-long, predictable, volume and diversified fresh produce supply
Key Success Factors for Direct Access to European Retailers
Long-Term Long-Term Relationship Relationship with with Retailers Retailers Relationships with retailers take years to establish and persist over time Compliance with quality requirements and optimization of supply chain mature over longer periods Consumer behavior knowledge and deployment into product features (e.g. packaging) and marketing (e.g. promotions) also require time Retailers rely on their supplier partners to manage in-store product flows and determine ideal shelf positioning and even pricing to maximize sales and profits Category managers are also expected to plan and execute all promotional activities for products under their scope Retailers nominate their fresh produce suppliers in an yearly basis ability to provide year-long supply of crops is a must-have for players willing to compete Suppliers must develop an international network of growers, so as to balance on and off-seasonality and guarantee predictable delivery Benefits for Agrexco Benefits for Agrexco Israels Agrexco has Israels Agrexco has succeeded in succeeded in positioning itself as a positioning itself as a category manager category manager for major for major international retailers international retailers Agrexco then Agrexco then benefits from benefits from extensive knowledge extensive knowledge on consumer on consumer behavior, and has behavior, and has channels to quickly channels to quickly test and introduce test and introduce innovations (e.g. innovations (e.g. new packages) new packages) Retailers also Retailers also conceive Agrexco conceive Agrexco with privileged with privileged opportunities for inopportunities for instore campaigns and store campaigns and access to local access to local media media
Proprietary & Confidential

Retail Retail Management Management Capabilities Capabilities

Year-Long & Year-Long & Predictable Predictable Supply Supply

Volume and Volume and Broad Broad Product Product Portfolio Portfolio

Providers need to able to supply volumes required by buyers Preferred providers are those who deliver a broad year-long portfolio of crops to retailer optimization of supply-chain costs and centralization of relationship
131

Source: Interviews; FAO; Booz Allen Analysis

I. Export Promotion Agencies

In summary, an Export Promotion Agency can play a decisive role in promoting Egyptian exports, provided its governance, organization and focus are carefully designed
Key Lessons Learned for Egypt from Export Promotion Agencies Benchmarks
II

Institutional Institutional Governance Governance

Export promotion agencies (EPAs) must actively involve the private sector in their governance to ensure a focused and efficient provision of services in particular, a majority of board seats should be reserved to industry executives EPAs must be funded jointly by private and public sector resources to balance the need for appropriate allocation of financial resources and the need to jump-start collective industry efforts Export promotion programs should be limited in time so as to not become addictive subsidies Proliferation of small agencies disperse overall efforts and limit the efficiency of these programs as such, promotion efforts should be funneled as much as possible through a few key entities Branding for agricultural products is often integrated within an overall pyramidal promotion structure, handled by the EPA (e.g., country level, industry-specific) Export promotion agencies size must fall within a certain range to avoid become too small and inoperative or oversized and inefficient Membership to export promotion agencies must be recursive in nature to co-opt existing organizations with little required sector reorganization Personnel within export promotion agencies must be highly qualified and customer-oriented

II II

Organization Organization Structure Structure

III III

Export Export Promotion Promotion Focus Focus

Export promotion agencies role in business development requires international offices that provide exporters with on-the-ground intelligence on market opportunities Export promotion agencies typically also help exporters in defining their marketing mix EPAs tend to perform better when focused on non-traditional/ innovative sectors
132

Proprietary & Confidential

Lessons Learned from Best-in-Class Agricultural Exporters


Benchmarking Methodology Export Promotion Agencies Leveraging Small Farmers Potential Transportation Government Agricultural Regulations Agriculture Capacity Building Programs

Proprietary & Confidential

II. Leveraging Small Farmers Potential - Associations

ProChile promotes associative solutions to incorporate small farmers into agricultural export sector private sector accounts for a majority of the funding
Internationalization of Small Farmers (INTERPAC) Internationalization of Small Farmers (INTERPAC) Develop farmers capabilities to manage export projects and participate in marketdevelopment initiatives led by ProChile (e.g. international business missions) Phase I: Project Design Selected growers join a pool of potential exporters, and are expected to voluntarily form groups with other farmers Once group is formed, an expert from ProChile is assigned to perform market assessment Once potential is assessed, a second expert joins the group to develop a project to be presented to ProChile for funding and implementation assistance Orientation Orientation to Export to Export Markets Markets Mobilization Mobilization of Private of Private Resources Resources Principles Principles

Overview Overview

Projects are not entirely funded by governmental resources public investment is aimed at adequately mobilizing private resources 90% private in Phase I 85% private in Phase II

Stages Stages

Phase II: Set-Up

ProChile only funds projects related to crops with export potential according to international market opportunities identified

After Phase II, ProChile ends direct assistance programs


Source: ODEPA; Interviews; Booz Allen Analysis 134

Proprietary & Confidential

II. Leveraging Small Farmers Potential Contract Farming

Contract farming has developed around the world as a mutually beneficial commercial agreement between large producers / exporters and small farmers
Contract Farming Overview and Key Success Factors
Overview Overview
Agreement between farmers and processing and/or marketing firms (sponsor) for the production and supply of agricultural products under forward agreements Farmers provide commodity in predetermined quantities and quality Sponsors offer training, inputs and managerial support Payments usually have a fixed and a variable component For sponsors: Overcoming of eventual land constraints; shared risk; more reliable production and consistent quality Cons: sometimes inadequate small farm land tenure conditions; eventually high support-activity costs For farmers: Pros: access to credit for inputs; access to training in technology and quality standards; reduced risks Cons: need previous market knowledge to avoid exploitation from sponsors (prices, expected yields, etc.)
135

Key Success Factors Key Success Factors


Sponsors must have an extensive market information ensures profitability and sustainability From farmers point of view, time investment must provide adequate economic and technological (e.g., managerial) returns

Market Market Knowledge Knowledge

Description Description

InfraInfraStructure Structure

Contact farming demands basic infrastructure to perform adequately Transport infrastructure (e.g., roads) Adequate utilities (e.g., electricity) for farmers to comply with sanitary and quality requirements Legal system must recognize contract formats and provide sufficient guidance on conflict resolution Governments should shy-away from strong regulatory role Technical advice and training provided by Governmental agriculture extension services
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Pros and Pros and Cons Cons

Government Government Support Support

Source: Interviews: Contract Farming Partnerships for Growth (FAO 2001)

II. Leveraging Small Farmers Potential Access To Credit

In order to improve farmers access to capital, South Africa has developed a model based on financial intermediation at the local level through Village Banks
South Africa Village Banks
South Africas farmers had difficulty in accessing credit through commercial banks Distance from branch networks Lack of collateral Moral hazard and adverse selection Government did not offer customized credit lines for small farmers Village Banks project was funded by USAID, with additional resources from World Bank Savings-first institutions concession of credit only when volume of savings allowed it Institutions owned by member farmers controlled by local communities Decentralized services at local level Typically negligible loss ratio Background Background

Village Bank Evolution


Savings Phase
Rotating savings associations (saving of specified amounts to give lump payouts to each member) Deposit and withdrawal services for local producers Self-regulated with no government interference Small size and profits staff is motivated through variable earnings

Loans Phase
Loans to community authorities as well as for individuals for entrepreneurial and targeted investment activities Only achieved after savings assets are at the level of supporting loan portfolio

Commercial Phase
Provision of insurance and fund transferring to producers At this stage, link to the formal financial sector is stressed eased regulations to become formal institutions (e.g. lower capitalization requirements)

Overview Overview

Different products according to farmer segments (defined by gender and source of income) e.g. women farm workers, unemployed rural poor, small scale employers, etc. Bank revenue is generated by interest on loans and depositing of resources in the nearest commercial bank branch (link bank)

Service Offering Service Offering

Source: Lit Search; Booz Allen Analysis 136

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II. Leveraging Small Farmers Potential - Infrastructure

In Brazil, access to road infrastructure was a major challenge for small farmers one of the countrys largest states developed a prioritization model to invest specific logistical funds
C CL LIIE EN N T TE EX XA AM MP PL LE E

Small Farmer Accessibility Studies Small Farmer Accessibility Studies

Description Description Small farmers accessibility to major logistics network in Brazil was evaluated through studies funded by government

Baselining Baselining

Assessment of time and distance to main transportation backbones helped determine which areas required investments Qualitative aspects, such as pavement conditions, were also considered Results of baselining stage were a set of logistics infrastructure interventions required to enhance accessibility of small farmers to transportation backbones, with cost estimates and eventually forecast of return rates (based on production and trade flow estimates) Portfolio was prioritized considering a cost per capita metric projects with lower cost per capita were the first to be completed

Prioritization Prioritization

Indicators for completion of projects were incorporated to the states overall performance metrics accessibility of small farmers to logistics network became part of the states strategy and has specific budget allocation A letter of commitment was signed by local representatives and states authorities, so as to ensure continuity of projects past government mandates (4 years)
Proprietary & Confidential

Source: Booz Allen Project RumoS 2015 (Government of Rio Grande do Sul State Brazil); Booz Allen Analysis 137

II. Leveraging Small Farmers Potential Training

The Growers Association of Chile has developed Capfruta as an initiative aimed at pooling training for small farmers and streamlining Government tax exemptions
Capfruta Training Initiative (Chile)
General Description General Description Chilean companies are allowed, up to a certain limit, to deduct training expenses from income tax Fedefruta (National Fruit Grower Association) has developed Capfruta Large farmers and exporters pay Capfruta a payment equivalent to their income tax deduction Capfruta centralizes responsibility for training among all participating companies Target audience are small farmers, working in cooperation with large farmers/exporters For Large For Large Exporters/ Exporters/ Farmers Farmers Benefits Benefits Reduced bureaucracy Capfruta provides support to companies in: Properly registering training initiatives to authorities Adequately performing accounting procedures to deduction Better usage of tax exemption possibilities credits now also cover internal indirect costs, instead of only direct expenses from trainings

Capfruta provides companies with Government-authorized tax certificates trained staff must provide to authorities a declaration that they had effectively attended courses

For Small For Small Farmers Farmers

Economies of scale and scope in training initiatives are properly captured Provide with up-to-date technical and managerial training Potentially broader range of trainings available
Proprietary & Confidential

Source: Fedefruta; Booz Allen Analysis 138

II. Leveraging Small Farmers Potential

In sum, tapping into small farmers potential typically rely on cooperatives, contract farming, road infrastructure, access to credit, and adequate training
Key Lessons Learned for Egypt from Leveraging Small Farmers Potential Benchmark
II Critical Mass Critical Mass Through Through Cooperatives/ Cooperatives/ Associations Associations Access to international markets require small farmers to pool capabilities through cooperatives or associations, in order to reap scale benefits In addition, export promotion agencies have typically stepped in to foster cooperation between small growers and large exporters by providing on-the-ground technical and managerial support Contract farming provides an affordable financing tool for small farmers and reduces delivery uncertainty risk for exporters Innovative forward contracts agreements also provide small farmers with access to training on quality assurance and marketing capabilities Micro-credit initiatives have been successful in overcoming adverse selection and moral hazard challenges for lenders to small farmers especially when no borrowing collateral is available Micro-credit is typically run in pools to increase peer pressure for reimbursement, utilize local staff to closely monitor operations and focus on small and practical investments Access to adequate and economical transport infrastructure is key to linking small farmers to international agricultural markets Master-planning and prioritization of infrastructure efforts in remote areas must be carefully crafted by Government authorities to ensure fairness and focus on an adequate return on investment Cooperation between established private exporters can be effective in reaping economies of scale for large-scale on-the-farm technical training programs for small farmers These trainings can be effectively supported by the Government intervention through tax-break incentive
139

II II Contract Contract Farming Farming III III Access To Access To Credit Credit

IV IV Access to Access to Transport Transport Infrastructure Infrastructure V V Training Training

Proprietary & Confidential

Lessons Learned from Best-in-Class Agricultural Exporters


Benchmarking Methodology Export Promotion Agencies Leveraging Small Farmers Potential Transportation Government Agricultural Regulations Agriculture Capacity Building Programs

Proprietary & Confidential

III. Transportation

Agricultural commodities shelf-lives typically require various transportation modes


Agricultural Cargo Types and Transportation Alternatives
Agricultural Commodities Type
Increased shelf-life Less transportation requirements

Description Description Crops that may be stored for longer periods of time (around 12 months) and that dont need to undergo a cold chain during transportation and storage Examples: most types of grains (rice, maize) and cereals (wheat, oat, barley) Crops that require handling in controlled atmospheres (temperature / humidity) after harvesting Under controlled atmospheres, crops might be stored and transported for periods of time between four and twelve weeks Examples: apples Crops that require cold storage after harvesting Even under those conditions, those crops have very limited shelf-life up to 21 days maximum Examples: cut flowers, strawberries

Transportation Time & Transportation Time & Means (1) Means (1) Transportation time within weeks Sea transportation in dry containers or bulk carrier ships no refrigeration needed Transportation time between 0 to 4 weeks Reefer containers (refrigerated units)

Market Characteristics Market Characteristics and Trends and Trends Major international shipping lines handle the bulk of cargo System operates within a hub and spoke model More players move towards offering of door-to-door logistics services, streamlining the transportation chain System seeks optimal equilibrium between cost and speed in sea shipping Air cargo is last resort costs still prohibitive for majority of crops
Proprietary & Confidential

1 1 NonNonPerishable Perishable

2 2 Perishable Perishable

Reduced Shelf Life Stronger Transportation Requirements

3 3 Short-shelf Short-shelf life life Perishable Perishable

Transportation time between 0 to 8 days Three main possibilities: Air cargo Reefer vessels Ro-Ro vessels

(1) International transportation does not encompass inland transit Source: Interviews; Booz Allen Analysis

141

III. Transportation

For agricultural commodities, the transportation system operates within a hub and spoke model, with major shipping lines operating the bulk of cargo among main global hubs
Maersk Line Main Routes Served
E LE PL MP AM A EX EX AL AL TU TU AC AC
10 weekly dep. btw. Europe and North America CHARLESTON BARCELONA 15 weekly dep. to Asia, 3 weekly dep. to Oceania 6 weekly dep. btw. South 4 weekly dep. America and PORT SAID btw. South Europe and North America ABIDJAN 1 weekly dep. btw. Africa and North America 2 weekly dep. btw. South America and SANTOS Africa SHANGHAI BOMBAY

1 1 2 2 3 3

14 weekly dep. from Europe to Asia, 11 weekly + 2 biweekly dep. btw. Africa and Europe FELIXSTOWE ROTTERDAM MARSEILLES 15 weekly dep. to North America 14 weekly dep. from Asia to Europe

HUBS FEEDER LINES

VALPARAISO

6 weekly dep. btw. Oceania and Asia MELBOURNE

3 weekly departures to North America 1 weekly dep. btw. Oceania and Europe

3 weekly dep. btw. Asia and South America

Source: Maersk

142

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III. Transportation

Although sea shipping has been dominated by traditional container service operators, new integrated players have become more preponderant
Market Shares and Dynamics Global Sea Freight

1 1 2 2 3 3

Global Sea Freight Forwarding Breakdown Traditional Container Service Operators (% of tons) Top Players
Kinetsu 2% Expeditors 2.3% Nippon Express 3% Panalpina 4% Schenker / BAX 4.1% Kuehne & Nagel 7.3% DPWN/ Exel 8.4% Traditional Container Service Operators SDV 1.9%
Container Operator
A.P. Moller Group (acquired P&O Nedlloyd in 02/06) MSC Evergreen CMA-CGM Group NOL/APL China Shipping COSCO Hanjin/DSRSenator NYK

Market Dynamics Market Dynamics The sea-freight market is The sea-freight market is highly fragmented with freight highly fragmented with freight forwarders only having about forwarders only having about 20%-30% of the market 20%-30% of the market There is ongoing M&A activity There is ongoing M&A activity in the sector with some major in the sector with some major takeovers in recent years takeovers in recent years AP Moeller // P&O AP Moeller P&O Nedlloyd (Feb 2006) Nedlloyd (Feb 2006) DPWN // Exel (2005) DPWN Exel (2005) Key drivers Key drivers Customer demand for Customer demand for end-to-end services and end-to-end services and complete visibility complete visibility rising volumes of trade rising volumes of trade flows flows shifting trade pattern shifting trade pattern towards containerization towards containerization

Fleet

TEU cap (000)


1,005 713 450 427 322 304 300 296 287

399 264 150 192 106 108 116 77 107

Integrated Players

Note: AP Moeller acquired P&O Nedlloyd in Feb 06, All AP Moeller figures excluding P&O Source: HELVEA, Logistics A Long-Term Growth Strategy (March 2006), UNCTAD Review of Maritime Transport (2006) 143

Proprietary & Confidential DRAFT REPORT

III. Transportation 1 1

and offer door-to-door service from producers to distributors


Reefer Capacity Streamlining of Transportation Chain
Traditional vs. Integrated Transportation Process Traditional vs. Integrated Transportation Process Producer Exporter Forwarder Trucker Warehouse Port Ship Port Warehouse Customs Broker Trucker Importer Distributor
Source: Transport Intelligence (2006) 144

2 2 3 3

Recent Trends Recent Trends Excessive number of interfaces along Excessive number of interfaces along transportation is a cause of delays and subtransportation is a cause of delays and suboptimal system operation optimal system operation Demand increases for more integrated service Demand increases for more integrated service players expand the scope of their operations and players expand the scope of their operations and start offering integrated door-to-door service start offering integrated door-to-door service e.g.: e.g.: Kuehne & Nagel acquisitions of Haering Group Kuehne & Nagel acquisitions of Haering Group and Pracht Spedition in Germany, USCO and Pracht Spedition in Germany, USCO Logistics in US Logistics in US UPS & FedEx establishing NVOCC UPS & FedEx establishing NVOCC relationships with ocean carriers (UPS Supply relationships with ocean carriers (UPS Supply Chain Solutions and FedEx Freight) Chain Solutions and FedEx Freight) For customers, motivation is maintenance of For customers, motivation is maintenance of quality and elimination of delays quality and elimination of delays Integration of services provides additional benefits Integration of services provides additional benefits to be captured to be captured Holistic management of the system allow better Holistic management of the system allow better resource allocation transportation system is resource allocation transportation system is optimized optimized Increased scale drive cost reductions which Increased scale drive cost reductions which eventually extend customers possibilities in eventually extend customers possibilities in negotiations negotiations
Proprietary & Confidential

Integrated Process

Producer

Forwarder's Agent

Integrated Service

GSA or wholesaler

Trucker Warehouse Port Ship Port Warehouse Customs Broker Trucker

Distributor

III. Transportation

For short shelf-life perishables, companies must strike a balance between speed and cost when selecting air cargo, dedicated or traditional reefer vessels as well as ro-ro ferries
Air Cargo Air Cargo Reduced transit time Smoother handling requires simpler packaging, with lower costs Good alternative for market management e.g. South Africa uses air cargo to increase grape exports in early harvesting seasons (sell more at higher prices) Traditional & Traditional & Specialized Reefer Specialized Reefer Vessels Vessels Significantly lower loading times vs. containerized cargo High speed makes easier handling of delays (buffers in the route) Flexible usage of capacity increase possibility of backhauling agreements (e.g. cars for Agrexco) Storage of empty pallets is an additional operational issue, as they have to return to producer to be reutilized Pallets have high maintenance costs High investments in boats Ro-Ro Ferries Ro-Ro Ferries Easy and fast loading and unloading operation Flexible use with no major customization required Reasonable costs and ease to load and unload make Ro-Ro vessels an interesting option for fresh produce exports especially those with controlled atmosphere (up to double shelf-life) Elevated ship maintenance costs and accident rates (complex water insulation systems) Usage of containers makes difficult usual inspection processes

1 1 2 2 3 3

Speed vs. Costs Reference: Agrexcos Exports Ashdod to Liege

Advantages Advantages

Speed
5-hour flight ~ US$ 1,000 / ton Air Cargo Ro-Ro Ferries

3 days ~US$ 400/ton

Higher costs than other transport alternatives Reduced cargo capacity vs. ships Requires cooling infrastructure at airports, operating in smaller scales than in ports

Disadvantages Disadvantages

Specialized Reefer Vessel

4-5 days ~US$ 200/ton

Cost Competitiveness

Notes: (1) Air Cargo and Specialized Reefer Vessels Costs obtained through interviews; (2) Ro-Ro Ferry cost consider 26 pallets @ 0.7 ton each (Agrexco avg.) - 7.2k from Ashdod to Greece, considering trucking to Marseilles Source: Interviews; Port to Port Logistics Portal; Logistics Study for Agricultural Flow Egypt / Europe; Lit Search; Booz Allen Analysis 145

Proprietary & Confidential

III. Transportation

To deliver shelf-life sensitive crops, Agrexco uses mostly specialized reefer vessels while air cargo and conventional reefer vessels make up the rest
Agrexcos Routes and Breakdown of Exports
Conventional Reefer Vessels 16%
TO USA

1 1 2 2 3 3

Sea Shipping Sea Shipping From Ashdod, virtually all products go to Marseilles there, Agrexco has a distribution center All transportation since then is made by truck to every destination in Europe In peak seasons, Agrexco utilizes ports in Koper (Slovenia) and Piraeus (Greece) to reach Europe the latter is the only route in which there are ro-ro vessels available

Air Cargo 19%

Specialized Reefer Vessels 65%

AMSTERDAM

Air Cargo Air Cargo


COLOGNE DISTRIBUTION IN EUROPE LEGEND: Air Truck MARSEILLES KOPER Sea (Spec. Reefer) Sea (Conv. Reefer)

PIRAEUS ASHDOD Source: Interviews; FAO - Global Agricultural Marketing Management (1997); Booz Allen Analysis 146

About 45% of the air cargo lands at the distribution center in Cologne (GER) rest is directly sent to various destinations From Cologne, produce is transported by truck to client destinations To USA (main market after Europe), air cargo is utilized from Amsterdam From Israel, produce goes by sea to Marseilles and truck to Amsterdam Total transit time to USA is 6 days

Proprietary & Confidential

III. Transportation

Israels Agrexco has two custom-built reefer vessels, that account for 65% of the companys export transportation
Agrexcos Specialized Reefer Vessels Key Facts
Agrexco has two specialized reefer vessels bearing its name, delivered in 2003 15-year usage contract with owner The ships feature new technologies that allow flexibility in capacity usage cars can be loaded into the refrigerated area, providing an important asset for backhaulage During peak seasons, Agrexco charters two additional vessels, along with support ventilated liners Average speed is 22 knots almost twice as fast as any other reefer vessel Capacity of 880 TEU (~60,000T) Return business consists of cars back to Israel (to Israeli and Asian markets) Agrexco products set sail from Haifa and Ashdod towards Europe (Marseilles and Valencia) From Ashdod (loading port) to Marseilles, usually ships take 3 days 80% of the produce go to the companys distribution center in Marseilles At Marseilles, new containers and cars are loaded into the vessel - two dayshifts for cargo loading Ship heads to Valencia (additional cars are loaded) and after 14 days of departure, arrives back at Ashdod The 14-day timetable is composed so that there is time to make up if delays occur due to bad weather ships can be loaded at night, for an extra cost that is worth vs. fuel and other additional costs Agrexco also charters capacity to 3rd party companies (round-trip contracts)

1 1 2 2 3 3

Overview Overview

Economics Economics

Routes and Routes and Markets Markets Served Served

Time and Time and Capacity Capacity Mgmt. Mgmt.

Source: Interviews; Logistics Study for Agricultural Flow Egypt / Europe; FAO - Global Agricultural Marketing Management (1997); Lit Search; Booz Allen Analysis 147

Proprietary & Confidential

III. Transportation

In summary, Egypt should provide a conducive environment for integrated logistics players, encourage long-term transport capacity planning and invest in transportation
Key Lessons Learned for Egypt from Transportation Benchmark
II Attract Large Attract Large Integrated Integrated Logistics Logistics Players Players II II Promote Promote Long-Term Long-Term Logistics Logistics Planning Planning III III Invest in Invest in Dedicated Dedicated Transport Transport Modes Modes To adequately transport shelf-life sensitive crops, most best-in-class countries have invested in a range of transportation modes that balance cost and time to market: air cargo, traditional & dedicated reefer vessels as well as ro-ro ferries are the most common transportation means In particular, dedicated reefer vessels have been a key success factor in enabling superior time-tomarket advantage for exporters to provide retailers with reliable and quality products (e.g., Agrexco) To secure sufficient international transport capacity (especially for perishable products), exporters associations typically help coordinate export volume projections with large logistics providers (i.e., air, ground, maritime) on a yearly basis, especially during peak seasons To induce logistics provider to commit necessary capacity, exporters typically enter binding forward agreements, tied to flexible export volume targets Large integrated logistics players provide substantial cost and effectiveness improvement by providing door-to-door transportation services, from farms to agricultural retailers Governments can attract those large international players by providing bureaucracy-free regulatory and operational administrative export procedures

148

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Lessons Learned from Best-in-Class Agricultural Exporters


Benchmarking Methodology Export Promotion Agencies Leveraging Small Farmers Potential Transportation Government Agricultural Regulations Agriculture Capacity Building Programs

Proprietary & Confidential

IV. Government Agriculture Regulations Subsidies

In 1994, WTO members signed the Agriculture Agreement to discipline international trade and progressively phase-out tariffs, domestic support and export subsidies by 2004
WTO Uruguay Round Agriculture Agreement
Topic 1 Average Agricultural Tariffs Cut Minimum Agricultural Tariffs Cut Developed Developing Countries Countries (1995-2000) (1995-2004) - 36% - 24%

Trade Tariffs Trade Tariffs

Most non-tariff barriers (e.g., quotas) are eliminated or converted to tariffs Most tariffs are effectively bounded to avoid arbitrary increase from importers While most non-tariffs barriers (e.g., quotas) are converted to tariffs, tariff-rate quotas for agricultural products are allowed (import tax escalation over a predetermined quantity) Multi-Fiber Agreement plans textile trade liberalization by 2005

- 15%

- 10%

2 Domestic Domestic Support Support

3 Export Export Subsidies Subsidies

Financial assistance to growers through direct (price support) or indirect (water subsidies) are classified in 4 categories: Green Box: acceptable as minimally trade-distorting (e.g., direct income Domestic supports targeted at particular products decoupled from production level) Agricultural Amber Box: discouraged as trade distorting (e.g., measures to support Support Cut prices, or subsidies directly related to production quantities) Blue Box: permitted as minimally trade-distorting (e.g., any support that would normally be amber but requires production limits) Export Export subsidies include cash subsidies, export credit guarantees & insurance, Subsidies state trading enterprises subventions, subsidized export marketing costs and Cut in Value special domestic transport charges. They can be further split into: Export Uniform subsidies applied to every unit exported Subsidies Targeted subsidies applied to specific markets or products Cut in Selective subsidies applied to certain industries (e.g., agriculture) Volume
150

- 20%

- 13%

- 36%

- 24%

- 21%

- 14%

Source: WTO Agricultural Negotiations (2004)

Proprietary & Confidential

IV. Government Agriculture Regulations Subsidies

The largest amount of assistance to agriculture and food sector is provided through trade tariffs and domestic support export subsidies typically represent only a small fraction of the total
Estimates of Effective Support For Agriculture By Region By Instrument (US$ billion, 2001) Estimates of Effective Support For Food Sector By Region By Instrument (US$ billion, 2001)

90 75

172

43

Total Agriculture Total Agriculture Subsidies = Subsidies = US$ 219 Billion US$ 219 Billion

82

Total Food Total Food Subsidies = Subsidies = US$ 280 Billion US$ 280 Billion

26 7 3 1 Trade Tariffs
Developing Countries

0.1

Trade Tariffs

Domestic Support Export Subsidies


High Income * Countries

Domestic Support Export Subsidies

Note (*): High-income countries include OECD, as well as newly industrialized East Asian customs territories of Honk-Kong, Korea, Singapore and Taiwan Source: The Relative Importance of Global Agricultural Subsidies World Bank (2006); GTAP (2006) 151

Proprietary & Confidential

IV. Government Agriculture Regulations Subsidies

Indeed, applied trade tariffs facing agricultural exporters remain high when compared to other sectors

18%

Average Applied Trade Tariffs By Sector By Exporting Region * (%, 2001)


16% 14%

8%

7%

8%

2%

3% 1% Textile 1%

3%

3%

Agriculture

Food
High-Income ** Countries

Other
World

Developing Countries

Note (*): import-weighted averages of applied tariffs Note (**): High-income countries include OECD, as well as newly industrialized East Asian customs territories of Honk-Kong, Korea, Singapore and Taiwan Source: Agricultural Trade Reform and the Doha Development Agenda World Bank (2006); GTAP (2006) 152

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IV. Government Agriculture Regulations Subsidies

Egyptian Government support to farmers is very low when compared to OECD countries
Producer Support Estimate 2002-2004
Comments Comments

58%

30% 17% 4% Australia 5% Russia 8% 21% 22%

34%

Producer Support Estimate Producer Support Estimate (PSE) stands for gross annual (PSE) stands for gross annual monetary values to support monetary values to support agriculture producers, expressed agriculture producers, expressed a percentage of the gross farm a percentage of the gross farm receipts receipts Egypt has been cutting its Egypt has been cutting its contribution to farmers, (e.g. contribution to farmers, (e.g. support has been reduced from support has been reduced from 78 M$ in 1997 to 36 M$ in 1998) 78 M$ in 1997 to 36 M$ in 1998) Egypt helps indirectly the farmers Egypt helps indirectly the farmers by not charging the water to its by not charging the water to its consumers consumers

2% Egypt

2% New Zealand

3% Brazil

China

Mexico

Canada

Note (*): Support divided by production value evaluated at the producer price Source: OECD; FAO; FAOSTAT

OECD

Japan

USA

EU

153

Proprietary & Confidential

IV. Government Agriculture Regulations Subsidies

26 WTO members can still subsidize agriculture exports average amount totals US $4 billion per year committed to reduce fully
WTO Members Agriculture Export Subsidies Breakdown (2002)
US Poland Mexico 4% 4% 4% Switzerland Canada 2% 3% Israel Colombia 2% 2% South Africa 2% Other 7%

Norway 9% New Zealand 10%

Brazil 7%

Turkey 10%

Australia Slovak 7% Republic 6% Venezuela 3% Indonesia 2% Romania 0% Iceland 2% Uruguay 0% Cyprus Czech 1% Republic 16%

EU-15 70%

Hungary 12%

Total = US $ 4 Billion Total = US $ 4 Billion

Bulgaria 15%

Source: Agriculture and the New Trade Agenda World Bank (2004/); Export Subsidies Trade Note World Bank (2003) 154

Proprietary & Confidential

IV. Government Agriculture Regulations Subsidies

Over 30% of these export subsidies are used to support export promotion and marketing activities of agricultural products especially dairy, meat and cereals
Breakdown of Export Subsidies (2002)

Alcohol 3%

Fruits and Vgtbls. 2%

Other 1%

Sugar 10% Inc. Prod. 12% Cereals 15% Meat 23% Dairy 34%

EPAs 38%

Others 62%

Source: The Competition in 2002 USDA (2002); TPR Israel WTO (2006); Roadblock to Reform: The persistence of agricultural export subsidies UNCTAD (2006) 155

Proprietary & Confidential

IV. Government Agriculture Regulations Subsidies

Eliminating global support in particular trade tariffs - would raise global economic welfare even though export subsidies cut would hurt non-OECD countries since they are net food importers
Breakdown of Impact on Economic Welfare of Subsidies Liberalization by Region by Instrument (%)
L A UA L T PT U P CE NC E CO N CO Trade
7.6

Food Trade Balance - Agriculture (Exports / Imports 2004 US$ Value)

Tariffs

Domestic Support

Export Subsidies

4.7

109% 89%
2.6

1.4

1.3

1.3

1.1

1.1 0.8 0,6 0.5 0.5

Net Exporters Net Importers 0.5 0.4

6%

1%

5%
Br az il Au st ra lia m an Is ra

Fr an

Af ri

Tu

High Income * Countries

Developing Countries

Note (*): High-income countries include OECD, as well as newly industrialized East Asian customs territories of Hong-Kong, Korea, Singapore and Taiwan Source: The Relative Importance of Global Agricultural Subsidies World Bank (2006); CIA Factbook; FAOSTAT; GTAP (2006) 156

G er

Proprietary & Confidential

M or

S.

Eg

-10%

rk ey

ia

el

hi le

SA

oc co

In d

hi n

yp t

ce

ca

IV. Government Agriculture Regulations Subsidies

Eliminating global support in particular trade tariffs - would benefit global economic welfare. Non-OECD farmers/exporters would also experience a raise in net income
Breakdown of Impact on Net Farm Income of Subsidies Liberalization by Region by Instrument (%)
Trade Tariffs Domestic Support Export Subsidies
19.9%

Agricultural GDP vs. Total GDP (2006 est.)

14.7%

52% 38%

11.9% 8.0% 5.9% 3.8%

10%

2.6% 2.6% 2.2%

1.0% 0.9% 0.9%

In di a Eg yp t C hi na Br az il C hi Au l e st ra l ia Is ra S. el Af ric a Fr an ce

SA U G

-53%

-44%

High Income * Countries

Developing Countries

Note (*): High-income countries include OECD, as well as newly industrialized East Asian customs territories of Honk-Kong, Korea, Singapore and Taiwan Source: The Relative Importance of Global Agricultural Subsidies World Bank (2006); GTAP (2006); CIA World Factbook; Booz Allen Analysis 157

Proprietary & Confidential

er m

an y

-3%

V. Government Agriculture Regulations Water

Egypts agriculture water consumption for agriculture irrigation is high compared to other countries and is not justified by the share of agriculture in the economy
Water Withdrawn for Agriculture as % Renewable Water Resources (2000, %) Agriculture Share of GDP vs. Water Withdrawn for Agriculture as % Renewable Water Resources (2000, %)

643%

100%

Sample Average Egypt

In Egypt, water In Egypt, water withdrawal for agriculture withdrawal for agriculture is twice as much as water is twice as much as water required (2) required (2)

75%

50%

Italy India South Africa China Turkey Cote dIvoire Kenya USA EU Ghana Chile
0% 10% 20%

92% 1% 8% 12% 15% 22% 29% 49%

25%

Sample Average Congo

0%
India Tunisia Egypt KSA

Chile 90 Turkey China South Developing Africa Countries

30% 40% 50% 60% % Agriculture Share of GDP

Renewable Water 922 Resources (Km3)


Notes:

317

229

154

50

1897

58

(1) Renewable water resources corresponds to the long-term average annual flow of rivers (surface water) and recharge of aquifers (groundwater) generated from precipitation (2) Water required corresponds to the level of water needed and absorbed by the crops, water withdrawal encompasses the water required, water losses and water evaporated Source: AquaStat; OECD; WDI 2003 Proprietary & Confidential 158

V. Government Agriculture Regulations Water

Most countries have adopted water resource management programs that integrate efforts from all stakeholders and focus on infrastructure, farm management, water allocation and pricing
Water Resource Management Typical Themes
Modernize Infrastructure
Expand and rehabilitate major canal transmission Modernize irrigation systems, tanks Improve agricultural infrastructure including irrigation techniques, drainage systems, crop technologies, mainly through PPP Introduce water metering and water control measures

Promote Water Pricing


Introduce water pricing mechanisms to rationalize water usage and improve infrastructure maintenance Estimate overall cost burden: operation and maintenance, capital charges, opportunity and economic externalities costs

Improve on Farm Management Integrate Water Resource Management


Coordinate overall Government agencies and stakeholders efforts Educate, train farmers on how to improve practices and optimize the tools they use Set up an association to provide advisory services Create irrigation training institutes providing courses on conveyance efficiency

Allocate Water Rights


Determine water allocation scheme ( water rights) User group management institution implies collective decision making among water users (e.g. Australia) Agency allocation ensures technical water control through technical expertise (e.g. Chile) Water trading market creates incentives to conserve water (e.g. Chile)
159

Source: World Bank

Proprietary & Confidential

V. Government Agriculture Regulations Water

In particular, water resource pricing programs typically encompass five key components for success
Key Success Factors in Water Pricing
1 Determine Overall Determine Overall Cost Structure Cost Structure 2 Involve Users in Involve Users in Defining Service Defining Service Level & Pricing Level & Pricing 3 Assess Willingness Assess Willingness & Capacity To Pay & Capacity To Pay 4 Determine components for cost of water supply: operation and maintenance, capital charges, Determine components for cost of water supply: operation and maintenance, capital charges, opportunity, economic, social and environmental externalities costs opportunity, economic, social and environmental externalities costs Estimate costs by category (e.g., staff, material) and by services (e.g., irrigation, drainage) Estimate costs by category (e.g., staff, material) and by services (e.g., irrigation, drainage) Disseminate cost structure information to beneficiaries to increase awareness (e.g. Mexico) Disseminate cost structure information to beneficiaries to increase awareness (e.g. Mexico) Involve users in determining quantity, quality, timing and duration of irrigation requirements (e.g. Involve users in determining quantity, quality, timing and duration of irrigation requirements (e.g. in Mexico local water users associations prepare irrigation plans in coordination with irrigation in Mexico local water users associations prepare irrigation plans in coordination with irrigation agency) agency) Use focus groups and participatory approaches to assess willingness to pay for services Use focus groups and participatory approaches to assess willingness to pay for services Assess benefits against increases in water charges (e.g. Philippiness system rehabilitation cost Assess benefits against increases in water charges (e.g. Philippiness system rehabilitation cost 30% less than incremental income by better water management during dry season) 30% less than incremental income by better water management during dry season) Design alternative source of funding to cater for poor harvesting seasons (e.g. Chinas water Design alternative source of funding to cater for poor harvesting seasons (e.g. Chinas water users association) users association) User Fees: typically proportional to irrigated area/ type of crop. Typically implemented in twoUser Fees: typically proportional to irrigated area/ type of crop. Typically implemented in twopart tariff structure (fixed/variable) part tariff structure (fixed/variable) Property Tax: proportion of land value. Not transparently linked to the provision of irrigation Property Tax: proportion of land value. Not transparently linked to the provision of irrigation services and recurrent land reevaluation creates significant administrative overhead services and recurrent land reevaluation creates significant administrative overhead In-Kind Distributions: farmers provide labor, material to maintain infrastructure In-Kind Distributions: farmers provide labor, material to maintain infrastructure Replacement of Assets: ensure sufficient attention to maintain existing infrastructure by Replacement of Assets: ensure sufficient attention to maintain existing infrastructure by including depreciation costs in pricing (e.g. Vietnam) including depreciation costs in pricing (e.g. Vietnam) Water Rights Trading: build buy and sell water access exchange markets that limit severe Water Rights Trading: build buy and sell water access exchange markets that limit severe financial downside for farmers (as compared to actual user fees) financial downside for farmers (as compared to actual user fees) Ensure a transparent cycle from fees collection to direct local investment in irrigation Ensure a transparent cycle from fees collection to direct local investment in irrigation infrastructure (e.g. Philippines, India) in order to limit potential misappropriation infrastructure (e.g. Philippines, India) in order to limit potential misappropriation
160

Determine Determine Appropriate Appropriate Charging Mechanism Charging Mechanism

5 Promote Pricing Promote Pricing Transparency Transparency

Source: Water Pricing Experiences, The World Bank

Proprietary & Confidential

VI. Government Agriculture Regulations Input Policy

Spain Seed Import Regulations work under certified origin schemes other countries also adopt solutions to facilitate seed and fertilizer imports
Seed Import Regulations
Spain works under a certified-origin scheme. For varieties registered in the EU, some countries have (for specific types of seeds) same treatment as EU countries Internal trade of imported varieties must be communicated to the Ministry of Agriculture (database of imported seed sellers, buyers and transactions) Spain also adheres to OECD-sponsored seed scheme that harmonize regulations in order to facilitate the import and export of seed; typically through removal of technical trade barriers with recognized labels (e.g., passports for trade) Serbia: Ministry of Agriculture provides a preapproval process new seeds are imported within 7 days, and, unless stated otherwise, preapproval is considered final after 6 months Canada: Food Inspection Agency sets specific requirements related to seed import importer must provide a signed statement justifying the names, the need, the certificate of analysis, sign a declaration form and obtain approval from the Import Service Center

Fertilizer Import Regulations


For fertilizers, imports also work under certifiedorigin and positive list approval Fertilizers have to be previously registered at the Ministry of Agriculture to be allowed to enter Spain Only fertilizers from certified plants are accepted for countries outside the EU, importers are required to send Certification of Approval in country of origin and related legislation to be vetted by Spanish Authorities

Spain Spain

Other Other Countries Countries

Indonesia: imports can be conducted only by Registered Fertilizers Importers and require to have an import license; However a ceiling price for urea fertilizer has been set by the Ministry of Agriculture Australia: fertilizer imports must also meet strict Australian Quarantine regulations administered by the Australian Quarantine Inspection Service (AQIS). Most fertilizer products require an import permit and are required to conform to import conditions

Source:

Interviews; Spains Ministry of Agriculture; DAI Assessment of Egypts Agricultural Sector Competitiveness (2002); Seed Industry in Jordan NCART (2002); BAH Analysis 161

Proprietary & Confidential

VII. Government Agriculture Regulations - R&D / Intellectual Property

While, South Africas R&D efforts are handled both by public and private entities with little coordination
South Africa Research Bodies
Agricultural Research Agricultural Research Council Council Technological research in seeds and production / harvesting techniques for: Horticulture Field crops Livestock Development of new crop varieties Technology management e.g. IT systems, e-commerce SAPO SAPO South Africa Plant South Africa Plant Improvement Org. Improvement Org. Production of certifiable propagation plant material Phytosanitary and genetic upgrading of deciduous fruit plant material e.g. virus elimination and testing Supply of propagation plant material to deciduous fruit nurseries Development of new plant varieties Revenues from royalties paid by producers for plant improvement services and usage of varieties developed

DFPT Research DFPT Research

Areas of Areas of Focus Focus

Development of new production and harvesting techniques for deciduous fruit Improvement of cold storage technology Support to independent researchers in taking new outputs to market

Budget allocation by the Ministry of Agriculture Sources of Sources of Funding Funding

DFPT resources, from DFPT FIN non-profit organization DFPT members define budget and control expenditures

Private Institutions
Source: ARC, DFPT, SAPO, Booz Allen Analysis 162

Proprietary & Confidential

VII. Government Agriculture Regulations - R&D / Intellectual Property

Israel sets up steering committee to include private sector representatives in order to set yearly national R&D priorities
Israel Agricultural R&D Structure (2006)
Independent Independent Evaluation Evaluation Committees Committees Research Steering Research Steering Committees Committees Private Sector Ministry of Ministry of Agriculture Agriculture

Israel R&D Funding Breakdown (2006)


Statutory Levies (1) 8% Intl Agreements 13% Ministry of Agriculture 50%

Chief Scientist Chief Scientist

Agric. Research Agric. Research Organization (ARO) Organization (ARO) Universities Universities

Private Sector 28%

Horticulture Horticulture

Plant Protection Plant Protection

Livestock Livestock

Soil, Water & Soil, Water & Environm. Quality Environm. Quality Technology in Technology in Storage Storage Agricultural Agricultural Engineering Engineering

Prioritization and Funding Decision Process Prioritization and Funding Decision Process Chief Scientist allocates funds from Ministry of Chief Scientist allocates funds from Ministry of Agriculture under a national yearly R&D plan Agriculture under a national yearly R&D plan Research Steering Committees (comprised by Research Steering Committees (comprised by researchers, extension personnel and farmers) researchers, extension personnel and farmers) suggest research priorities suggest research priorities Independent evaluation committees assess Independent evaluation committees assess suggestions and provide additional input in suggestions and provide additional input in decision-making decision-making Researchers are required to periodically update Researchers are required to periodically update steering committees on research progress steering committees on research progress

Product-Oriented Institutes

Discipline-Oriented Institutes Gilat Newe Yaar Araya Valley

Regional R&D Regional R&D Centers Centers

(1) Statutory Levies are collected by farmer associations and invested in research projects Source: Interviews, ARO, Lit Search; Booz Allen Analysis 163

Proprietary & Confidential

VII. Government Agriculture Regulations - R&D / Intellectual Property

In Chile, INDAP funds R&D efforts that are aligned with export priorities defined by ProChile and other private sector representatives
Chile Coordination Between Export Promotion Agency and Main Agricultural R&D Entity
Background: INDAP Background: INDAP The INDAP (Institute for Agricultural Development) is part of the Ministry of Agriculture and focuses on developing agriculture through: Funding of R&D projects Support in implementation of quality assurance initiatives Credit for implementation of agricultural development projects INDAP manages financial resources earmarked by the Ministry of Agriculture, investing according to internallydefined criteria INDAP has a specific export-oriented division, which interacts constantly with ProChile Division carries out primary research required by the ProChiles fresh produce export projects Specific budget allocation for export-oriented R&D Any credit requested by growers aligned to export projects is conceived directly by INDAP
Source: Interviews; INDAP; Booz Allen Analysis 164

Definition of Definition of Export Strategies Export Strategies

ProChile and industry representatives define main export strategies e.g. crops, target markets, research priorities Strategies are deployed into projects with up to 5-year reach Focus exclusively in export promotion Decision on ProChile funding is made at this stage Primary research requirements from export promotion projects are sent to INDAPs exportoriented division

Deployment into Deployment into Long-Term Long-Term Projects Projects

Identification of Identification of Primary Research Primary Research Requirements Requirements

Follow-Up Follow-Up

ProChile and INDAP review progress of research projects on a yearly-basis, providing input to overall export -project review

Proprietary & Confidential

VII. Government Agriculture Regulations - R&D / Intellectual Property

UPOV agreements aim at protecting plant breeders rights internationally most of Egypts competitors - South Africa, Israel and Chile - are now members
UPOV Conventions Overview
Signed by South Africa and Chile, amongst other 23 countries Covers commercial marketing, offering for sale and marketing of propagating material of a protected variety Only seeds are protected growers might save seeds for usage in following seasons, not having to pay rights Varieties might be freely utilized for development of new species Protection period: 15 years New countries joining UPOV must do so under the 1991 convention Signed by Israel, amongst other 36 countries Covers, in addition to 1978 Conventions scope, exporting, importing and stocking for the above purposes of protected material Protection of harvested material Royalties paid according to volume produced Growers willing to save seeds to following seasons must pay additional royalties Development of new varieties based on protected varieties is object of royalty payment processes might also be patented (adjustment to comply with recent biotechnological progress) Protection period: 20 years Migration from the 1978 to 1991 Convention is in discussion in diverse countries Might move unbearable costs to farmers, as they would have to buy protected propagating material for each season However, the 1978 model makes it harder to adequately fund the plant breeding industry and is not fully aligned to new biotechnology requirements
165

General Description General Description The UPOV Convention was established The UPOV Convention was established in 1961 to ensure that member states in 1961 to ensure that member states acknowledge the achievements of acknowledge the achievements of breeders of new plant varieties by breeders of new plant varieties by making available to them exclusive rights making available to them exclusive rights for a given period of time for a given period of time Under UPOV agreements, materials Under UPOV agreements, materials protected in one country will also be protected in one country will also be protected in other affiliated countries protected in other affiliated countries (reciprocity principle) (reciprocity principle) Countries might be affiliated to UPOV Countries might be affiliated to UPOV under two conventions 1978 (now under two conventions 1978 (now closed) and 1991 closed) and 1991 UPOV advocates that its regulations: UPOV advocates that its regulations: Provide incentives for plant Provide incentives for plant breeders to invest in research in breeders to invest in research in different countries different countries Stimulate cooperation among Stimulate cooperation among member countries sharing of member countries sharing of experiences and testing on behalf of experiences and testing on behalf of others others Reduce costs for obtaining Reduce costs for obtaining protection in several territories protection in several territories
Source: UPOV; Lit Search: Booz Allen Analysis

Migration

1991 Convention

1978 Convention

Proprietary & Confidential

VII. Government Agriculture Regulations - R&D / Intellectual Property

Joining UPOV is increasingly becoming essential for agricultural exporters, especially to ensure access to new varieties Egypt has already stated that it will join the entity as of 2008
UPOV Rationales for Membership and Egypts Situation
Reasons for Joining UPOV Reasons for Joining UPOV All agricultural exporters are likely to join UPOV All agricultural exporters are likely to join UPOV in a near future main exporters have already in a near future main exporters have already joined joined Outside of UPOV frameworks, alternative Outside of UPOV frameworks, alternative agreement structure for IPR protection are highly agreement structure for IPR protection are highly complex complex Need for bilateral agreements with all countries Need for bilateral agreements with all countries involved in trade involved in trade Requirement for combined TRIPs, patents and sui Requirement for combined TRIPs, patents and sui generis regulatory procedures generis regulatory procedures For countries not members of UPOV, access to For countries not members of UPOV, access to foreign R&D investments and positioning as foreign R&D investments and positioning as provider of technological services are hindered provider of technological services are hindered If breeding material is copied and exported from a If breeding material is copied and exported from a non-UPOV country, it is difficult to prosecute non-UPOV country, it is difficult to prosecute violators violators If material is taken from R&D centers in non If material is taken from R&D centers in nonmember countries and replicated in other member countries and replicated in other locations, prosecution is also difficult locations, prosecution is also difficult Farmers might face higher costs however Farmers might face higher costs however membership provides access to crops of higher membership provides access to crops of higher value-added and promotes R&D investments value-added and promotes R&D investments
Source: BAH Interviews 166

Implications for Egypt Implications for Egypt Egypt is expected to join UPOV as of 2008 Egypt is expected to join UPOV as of 2008 Egypt has already stated over and over in Egypt has already stated over and over in international forums that it will join UPOV international forums that it will join UPOV According to interviewees, Egypt has a history of According to interviewees, Egypt has a history of non-compliance with Intellectual Property non-compliance with Intellectual Property Protection that is hindering the countrys Protection that is hindering the countrys competitiveness therefore justifying affiliation to competitiveness therefore justifying affiliation to UPOV UPOV Egyptian producers tried to export strawberries of Egyptian producers tried to export strawberries of protected varieties to France, without the protected varieties to France, without the adequate payment of royalties adequate payment of royalties European authorities have become much more European authorities have become much more vigilant over Egypts exports as a result vigilant over Egypts exports as a result As affiliation to UPOV is increasingly becoming a As affiliation to UPOV is increasingly becoming a must have for agricultural exporters, Egypt may must have for agricultural exporters, Egypt may also pursuit affiliation To export varieties desired also pursuit affiliation To export varieties desired by international markets, access to breeding material by international markets, access to breeding material is required; that is much easier under UPOV is required; that is much easier under UPOV regulations regulations

Proprietary & Confidential

VII. Government Agriculture Regulations - R&D / Intellectual Property

To establish itself as leader in grains R&D, Brazil has followed three basic principles in adhering to intellectual property laws, as defined by UPOV
Brazil Principles of Intellectual Property Protection Laws

Registrar of new varieties is handled by the Ministry of Agriculture, as affiliated member of UPOV No Overlap of No Overlap of Interests Interests Registration of new varieties is entirely segregated from research institutes (especially Government-owned): the main agricultural research institution is a state-owned enterprise, also under the Ministry of Agriculture, but management is entirely separated

Stakeholder Stakeholder Association Association

When establishing its laws for protection of Intellectual Property, the Ministry of Agriculture promoted the creation of an independent National Association of Plant Breeders, to: Aggregate industry members interests to interact with the Government Design a practical system for royalties of protected cultivars to be collected The royalty collection system, as designed by the stakeholders, was successful around 95% to 98% of forecasted royalties were effectively collected The government has added to the general legal framework regulations to protect general countrys economic interests e.g. to avoid abuse of economic power or unfair market control In predetermined cases mostly for varieties developed inside the country license is given to other entities to produce breeding material for a certain period of time with no royalty payment required Small farmers are free to trade or donate to other small farmers seeds of protected varieties, however exclusively to non-commercial ends

Protection of Protection of Economic Economic Interests Interests

Source: EMBRAPA, JurisDoctor Website, Interviews: Booz Allen Analysis 167

Proprietary & Confidential

IV-VII. Government Agriculture Regulations

Egypt should apply the methods of countries that have reformed their subsidies regime, water and input policies, as well as their R&D & Intellectual Property frameworks, to promote its exports
Key Lessons Learned for Egypt from Government Agriculture Regulations Benchmark
II Subsidies Subsidies Most of trade distortions result from domestic support and direct export subsidies for farmers in developed countries. Outmatched, most best-in-class agricultural exporting countries in the developing world tend to focus their WTO negotiations on removing all barriers to trade Full trade liberalization could lift both overall economic welfare for local consumers as well as net income for local farmers in most agricultural exporting countries Faced with water shortages for their agriculture, most best-in-class exporting countries have embarked on reforms focusing on 5 key thrusts: integrated management, infrastructure investment, on-farm management, water policy rights attribution as well as pricing Water pricing is key to ensure proper investment in productive infrastructure and restrain wastage. International experience provides a number of pricing options that can be tailored to country specificities Input imports processes are key to enhance competitiveness in agriculture-exporting countries new varieties, for instance, need to be introduced at reasonable costs and within adequate timeframes In order to expedite seed and fertilizer import policies, best-in-class countries have adopted regulations such as pre-approval processes and certification of origin R&D management in benchmarked countries rely significantly on the participation of the private sector in order to encourage applied research. In addition, some export promotion agencies play an active role in ensuring alignment of R&D investments to export promotion strategic objectives To encourage innovation from the private sector, intellectual property must be strictly enforced. In particular, affiliation to UPOV has been a fixture of most best-in-class exporters to encourage local investment from private seed & fertilizer companies
168

II II Water Policies Water Policies

III III Input Policies Input Policies

IV IV R&D // R&D Intellectual Intellectual Property Property

Proprietary & Confidential

Lessons Learned from Best-in-Class Agricultural Exporters


Benchmarking Methodology Export Promotion Agencies Leveraging Small Farmers Potential Transportation Government Agricultural Regulations Agriculture Capacity Building Programs

Proprietary & Confidential

VIII. Capacity Building Programs Sanitary Infrastructure

In Chile, ASOEX has championed the creation of ChileGAP, an internationally recognized quality certificate
ChileGAP Certificate Description
Structure
To enter other main external markets (USA and Europe) countries, Chilean products need to carry certification either from: PrimusLabs (USA) EurepGAP (Europe) Obtaining any of those certifications is very expensive for Chilean producers Background Background

Steering Steering Committee Committee


Multi-disciplinary conduction of efforts 12 representatives: 4 exporters 4 growers 2 industrial 2 academic

Technical Technical Committee Committee


Analyze, develop an propose to Steering Committee on certification processes and approval of certification bodies 9 expert members (4 export, 4 academic and 1 research)

ChileGAP is a private program for certification in Good Agricultural Practices (GAP) Program has been developed by the FDF (Foundation for Development of Fruticulture) under the mandate of ASOEX Certification is executed by ASOEX accredited and internally-trained agents, at cost-levels (no margin is earned from the service)

Overview Overview

Executive Executive Secretary Secretary


Registrar of certification bodies, consultants and trainers

Certification Certification Bodies Bodies Advisors Advisors Trainers Trainers Auditors Auditors
Proprietary & Confidential

ChileGAP aims at harmonizing key requirements from main international certifications covers 80% of PrimusLabs standards and fully complies with EurepGAP Main objective is to improve access to external markets to Chilean producers, through less-costly quality certification procedures expansion of access to internationally-accepted certification

Source: ChileGAP; Booz Allen Analysis

Objectives Objectives

170

VIII. Capacity Building Programs - Sanitary Infrastructure

which took 5 years to develop but reduced significantly certification costs for Chilean farmers
ChileGAP Harmonization to EurepGAP Process Description
Development (3 Years) Development (3 Years) Benchmarking (2 Years) Benchmarking (2 Years) Marketing and Updating Marketing and Updating (Continuous) (Continuous)
Once Chile received the EurepGAP equivalence certificate, European retail chains (active members of EurepGAP management) logically recognized the new standard as acceptable (1) ChileGAP management keeps track on EurepGAP updates and properly deploys implications into new standards ProChile plays a role in promotion of ChileGAP in foreign markets through commercial missions to Europe and mainly USA North-American retailers started to accept ChileGAP as quality certification, substituting PrimusLabs standards

Certification Costs (US$ / farm / year)


900-1,000 900-1,000

Researchers and developers gathered key facts on EurepGAP requirements and adapted them to Chilean characteristics Initial development process took about 3 years to be completed 1 year of academic research / 2 years of field pilot programs with selected farmers Funding was shared between public and private sector 60% private sector (expert salaries and participation in forums) 40% government (training and promotion)

After initial stages of development, an additional 1 year was spent finalizing guidelines, which were then sent to EurepGAP for equivalence accreditation EurepGAP offers a standardized benchmarking process, to be applied by any country seeking equivalence EurepGAP spent around 8 months evaluating ChileGAPs benchmarking documents On-site visits to Chile were then carried out by EurepGAP personnel (independent expert and approval certification staff)

550-600

EurepGAP

ChileGAP

(1) European chains can still require EurepGAP certification instead of ChileGAP General Regulations impose no restrictions; however this has not happened to date Source: Interviews, EurepGAP; ChileGAP; UNCTAD; Lit Search, Booz Allen Analysis Proprietary & Confidential 171

PrimusLabs

VIII. Capacity Building Programs - Sanitary Infrastructure

PPECB is the quality assurance body for South Africa it operates as a private entity with a public service mandate to inspect perishables products exports
PPECB Overview
South Africas official export certification agency for perishable products, mandated by the Government of South Africa controls all agriculture and animal exports from the country Defines rules and impose penalties Negotiates with producers, shipping companies and other stakeholders Inspection Inspection Cold Chain Cold Chain R&D R&D Cold Chain Cold Chain Services Services Protocols & Protocols & Standards Standards Inspection Inspection Services Services Citrus Citrus Grapes Grapes Pome & Stone Pome & Stone SubTropical SubTropical Official Food Official Food Safety Safety
Public Service Obligation
172

Organizational Chart
Chief Chief Executive Executive Customized Customized Services Services Quality Mgmt. Quality Mgmt. Systems Systems Mycotoxin Mycotoxin Analysis Analysis
Pesticides Pesticides Program (SAPIP) Program (SAPIP)

General General Description Description

Finance & IT Finance & IT HR HR Secretariat Secretariat Support Areas

Independent service provider of quality certification and cold chain management services for producers and exporters Organization Organization Board composed by representatives of main crop producers and largest exporter companies 30 offices located in 11 production regions, reaching 1.500 locations Matrix accreditation units crop-specific and functional specialization Two main service streams, reflected in the organizational structure Statutory services (Inspection & Cold Chain): governmentmandated activities Non-Statutory Services (Customized Services): independent and profit-oriented service providing, with tailored solutions Funds are acquired through a legislated levy placed on all exporters (fixed cost per carton exported, migrating to a differentiated levy by product type)
Source: PPECB

Certification Certification Food Safety Food Safety Specialized Specialized Services Services Conference Conference Center Center

Services Services

Proprietary & Confidential

VIII. Capacity Building Programs Sanitary Infrastructure

PPECB performs inspections along the overall export supply chain guaranteeing sanitary compliance from farm to transport operators
PPECB Inspection Process
3 Export Notification 4 Cold Store Registration

Farm/Orchard

Container Depot

5 Container Depot Inspection

1 Advice to Producer

Pack-house or intake Depot

2 Product Inspection

Inland Cold Store 7 Monitoring During Loading

6 Container Cleanliness & Pre Trip Inspection

8 RRMT Registration

Refrigerated Truck (RRMT)

9 Monitoring during Off-loading

Pallets

Flatbed Truck with or without Refrigerated Container (depending on distance & product)

Container or Pallets?

Rail Wagon with or without Refrigerated Container (depending on distance & product)

Container Loading Container Sea Port Cold Store 4 Cold Store Registration Airport Cold Store 9 Monitoring during Offloading & Loading Sea Port Container Terminal

10 Container Checks in Sea Port Terminal

12 Vessel Inspection, Calibration & Carrying Instruction

11 Container Monitoring Prior to Sailing

14 Monitoring Prior to Loading Conventional Refrigerated Vessel Refrigerated Container Vessel

Aircraft

Source: PPECB

15 Quality Monitoring Overseas

173

13 Product Temperature Management (During & after Voyage) Proprietary

& Confidential

VIII. Capacity Building Programs Sanitary Infrastructure

Moreover, PPECBs role had to be amended to account for market deregulation imperatives
Market De-Regulation in South Africa
Before 1994, South Africas agricultural exports were done through government-regulated marketing boards Government bought all the production and paid fixed prices for farmers and sold pooled production in the international market Between 1994 and 1996, a de-regulation process took place, as economic barriers to the country (due to Apartheid) were removed Governmental marketing boards were abolished Producers started to negotiate directly with buyers abroad, receiving prices defined by international markets PPECB, who controlled quality in a centralized framework, along with the governmental marketing boards, had to deal with hundreds of producers PPECB also had to assist a number of new players establish themselves in the market Numerous producers encountered bankruptcy in the process, resulting in significant bad loans, absorbed by PPECBs finances
Internal Internal

PPECBs Strategies During De-Regulation


Investment in IT systems to quickly build producer databases and manage status of quality audits Training of accreditation personnel to deal with new geographical coverage demands Promote local associations through liaising with farmers Producers should push export agents towards quality-maintenance procedures Exchange of best practices among producers, within associations, was an effective means of disseminating quality standards Those associations, leveraging on the assets of former marketing boards, became important crop-oriented associations (e.g. DFPT) Visited European farmers to discuss recent developments and sustain relationships during reorganization Established inspectors at European harbors to enforce quality at destination to create confidence in PPECB in the interim period

Background Background

Implications for Implications for PPECB PPECB

Source: South Africa Department of Agriculture; PPECB; Booz Allen Analysis

Intl Markets Intl Markets

Producers Producers

174

Proprietary & Confidential

VIII. Capacity Building Programs Sanitary Infrastructure

PPECB also acts as the Food Safety Agency for South Africa initiatives are conducted individually and in partnership with international entities
PPECB Food Safety Initiatives
PPECB was mandated by the Department of Agriculture to define and ensure compliance to food safety standards, by conducting audits on all registered FBOs (Food Business Operators) In terms of safety assurance, PPECB has developed the following initiatives: Accreditation in diverse Good Agricultural Practice standards (e.g. EurepGAP, Tesco Natures Choice) Biological analyses (e.g. Mycotoxin) in own internationally-certified laboratory network On-site audits on HACCP (Hazard Analysis Critical Control Points), according to internally-defined standards Training and consulting services to growers and other operators in the supply chain to comply with food safety standards The majority of South Africas fresh produce exports are destined for the European market requirements for pesticide residues in products have become highly restrictive The European Union has pro-actively approached its main suppliers to ensure compliance on pesticide requirements the SAPIP (South African Pesticide Initiative Programme) was established as a result The program has two main focuses: Assist exporting producers to comply with food safety requirements Develop small farmers through training and empowerment initiatives to grow South African export volumes to Europe Activities developed involve dissemination of information, research on pesticide-free production methods and training of farmers Funding is split 75/25 between European Union and the Department of Agriculture of South Africa the PPECB is the mandated implementation agent
175

PPECB PPECB Initiatives Initiatives

Joint Joint Initiative Initiative SAPIP SAPIP

Source: PPECB, Booz Allen Analysis

Proprietary & Confidential

VIII. Capacity Building Programs Sanitary Infrastructure

Developing countries exporters have negotiated with their main agricultural trade partners pre-clearance bodies to expedite custom & sanitary controls
Pre-Clearance Bodies Overview
Reasons for Establishing Pre-Clearance Bodies Reasons for Establishing Pre-Clearance Bodies Steps for Establishing a Pre-Clearance Body Steps for Establishing a Pre-Clearance Body

Risk Risk Mitigation Mitigation

For importers, pre-clearance reduces risk of contamination shipped products are certified on departure For exporters, pre-clearance is an additional point of inspection that helps ensure export quality level

Expedition Expedition of Trade of Trade Procedures Procedures

Minimize inspection requirement on arrival, allowing quicker access to destination markets and, reducing overall delivery lead-time Reduce rejection ratio (no transportation cost incurred for inadequate produces)

Formal invitation by host country (exporter) Definition of scope (products covered and pests / organisms of concern, according to importer regulations) Definition of participating organizations Definition of inspection standards, documentation and technical parameters Quality assurance and monitoring at each point of production and transportation chain Liaison with farmers and producers Funding of inspection procedures Execution of inspections Gathering of operating data and statistics Definition of corrective actions in case of nonconformity

Source: Work Plan for USDA Pre-Clearance Inspection and Cold Treatment of South Africa Deciduous Fruit Designated for Export to USA (2005); USDA / AHPIS PreClearance Programs Overview; Booz Allen Analysis 176

Proprietary & Confidential

VIII. Capacity Building Programs Sanitary Infrastructure

South Africa is currently in the process of establishing a preclearance body to USA, for its main export crops
South Africa Pre-Clearance Body (USA Market)
Scope Scope South Africas pre-clearance body agreement with USA covers DFPTs crops apples, grapes, pears, stone fruits Pests and organisms of concern were defined accordingly to USA standards for the selected crops

Participating Participating Organizations Organizations

Definition of inspection standards, documentation and technical parameters USDA (in accordance to US Federal Laws and USDA regulations Quality assurance and monitoring at each point of production and transportation chain DFPT (logistical support to inspection when required) PPECB (biological analyses according to food safety procedures, quality inspection in pack houses, additionally to its cold chain inspection statutory activities) Liaison with farmers and producers DFPT (liaising of farmers and growers to ensure awareness and adherence to the program) Funding of inspection procedures DFPT (integral coverage of costs) USDA (accounting and reporting to other involved institutions, at its own costs) Execution of inspections Conjoint work between professionals of USDA and Department of Agriculture of South Africa (DoA) Through the PEECB, the Department of Agriculture will monitor Good Agricultural Practices at farms and schedule inspections PPECB personnel will be certified by USDA to perform inspections USDA will certify pack houses, vessels and calibrate equipment utilized in transportation Gathering of operating data and statistics Department of Agriculture Definition of corrective actions in case of non-conformity USDA (actions taken by DoA and reported to USDA)

Source: Work Plan for USDA Pre-Clearance Inspection and Cold Treatment of South Africa Deciduous Fruit Designated for Export to USA (2005); Booz Allen Analysis 177

Proprietary & Confidential

VIII. Capacity Building Programs Agricultural Statistics

Finally, Chile has built a central repository for agricultural statistics that provides not only comprehensive information but also data mining capabilities
Chile Agricultural Statistics Repositories
Statistical Data Inputs Statistical Data Inputs Main Outputs Main Outputs
Benefits Benefits Ease in locating and Ease in locating and accessing any required accessing any required agricultural data agricultural data Convergence of info Convergence of info under a single under a single specialized unit allows specialized unit allows development of more development of more sophisticated analyses sophisticated analyses especially to support especially to support market studies and market studies and policy assessment policy assessment Reduced costs and Reduced costs and improved data improved data consistency consistency No duplicate inputs No duplicate inputs for same data for same data Other entities are Other entities are provided with provided with information by the information by the central repository central repository (e.g. ProChile) (e.g. ProChile)

Own Research Central Bank National Statistics Institute Environmental Resource Database

Others

ODEPA Office of Agricultural Studies and Policies

Economic Agriculture / Livestock GDP Foreign Trade Balance (Natl Accounts) Production volumes and harvested areas Market Info recent pricing information for local markets Price Series historical product pricing information Foreign Trade detailed trade information (e.g. trade matrixes per product) Dairy Market Info data relevant to specific governmental projects

Customs

Detailed Foreign Trade Info (e.g. historical database of exports per company)

Source: ODEPA; Booz Allen Analysis 178

Proprietary & Confidential

VIII. Capacity Building Programs - Education

In South Africa, the Agriculture R&D leverage the extensive network of universities, organized by crop-specific areas of specialization
Joint Initiatives between ARC and Universities Integration with Farmers ARC Network of Universities and Research Focus
Universities University of Pretoria University of Stellenbosch University of Orange Free State University of Natal Research Focus Citrus and Ornamental Crops Deciduous Fruit and Viticulture Vegetables Subtropical Crops and Vegetables Horticultural Horticultural Training Training Two year diploma-course and training in horticulture for farmers, including management, marketing and negotiation of production Conducted by the faculty of agriculture in each university and in other specific organization under supervision of ARC Maintenance of a database of all current and completed research projects undertaken by ARC institutions Communication tools such as periodic reports, scientific journals and national congresses to disseminate project information Field research in association with farmers in technological projects of quick implementation e.g. fog harvesting (high-performance fog water stowage)
Proprietary & Confidential

Project Project Database Database

Field Work Field Work


Source: ARC; Lit Search; Booz Allen Analysis 179

VIII. Capacity Building Programs

Most benchmarked countries have focused their long-term capacity building efforts on a robust sanitary infrastructure, agricultural statistics repository and effective education system
Key Lessons Learned for Egypt from Capacity Building Programs Benchmark
II Robust Robust Sanitary Sanitary Infrastructure Infrastructure Establishing Good Agricultural Practices through a robust sanitary infrastructure is a fundamental precondition to boosting commodities export. As such, quality assurance bodies have become increasingly critical in enforcing strict SPS standards for export To avoid unnecessary bureaucratic burden, some benchmarked countries have established private companies to monitor export quality, with a strong supervisory role from the Government Informed decision-making and strategic planning requires accurate, consistent and relevant data sources on agriculture statistics from production to export. This data repository provides exporters with market intelligence information, which enables them to build a demand-driven strategy Most benchmarked countries have established an integrated institute that collects agriculture production/export data repository from all Governmental and non-Governmental reliable statistical sources in the industry

II II Accurate Accurate Agricultural Agricultural Statistics Statistics

III III Effective Effective Agricultural Agricultural Education Education Building long-term competitive advantage for agricultural export require adequate investment in a superior educational system that prepares agri-graduates for their future employment As such, most benchmarked countries have established a strong institutional link (e.g., traineeship, applied research grants) between University Excellence Centers and farmers to focus technological and managerial teachings on market demands
180

Proprietary & Confidential

Egypts Agricultural Export Market Potential


Introduction Identification of Strategic Crops for Egypt Agricultural Exports Selected Market Analysis of Egypt Strategic Crops Appendix

Proprietary & Confidential

To assess future Egypts commodity export, this document identifies high potential crops and provides a high level assessment of the competitive landscape in key target markets
Objectives of Document

Identify strategic crops for Egypt agricultural exports, and estimate associated targets in volume and value, taking into account supply-side constraints, as well as new demand opportunities: Conduct supply driven analysis to identify optimal crops produced by Egypt, that maximize the yield of natural resources Conduct demand driven analysis to assess new crop export opportunities for Egypt Develop the long-term export targets, in volume and value, for a combined list of crops which meets supply-side constraints, as well as new demand opportunities Identify top 6-8 crops on which to focus export promotion efforts in priority For the selected top 6-8 crops, and for the major importing countries, identify competing exporting countries, their market share, and import prices

182

Proprietary & Confidential

Egypts Agricultural Export Market Potential


Introduction Identification of Strategic Crops for Egypt Agricultural Exports Selected Market Analysis of Egypt Strategic Crops Appendix

Proprietary & Confidential

We have followed an approach of six worksteps to analyze Egypts strategic crops and their importing markets
Approach for Analyzing Egypt Strategic Crops and Importing Markets
Supply Analysis 1 1 Analyze current Analyze current crop production crop production mix for Egypt mix for Egypt 2 2 Identify optimal Identify optimal crops that crops that maximize yield of maximize yield of natural resources natural resources 5 5 Identify top 6-8 Identify top 6-8 crops, based on crops, based on their forecasted their forecasted export value, export value, resource resource optimization and optimization and technical feasibility technical feasibility 6 6 Analyze importing Analyze importing country markets for country markets for the top 6-8 export the top 6-8 export crops crops Combined Analysis Market Analysis

Demand Analysis 3 3 Analyze crop Analyze crop categories that categories that could be could be potentially potentially produced by Egypt produced by Egypt 4 4

Identify top crops Identify top crops based on volume, based on volume, value, and growth value, and growth potential in major potential in major destination destination markets markets

184

Proprietary & Confidential

A screening framework driven by supply and demand considerations was used to short-list Egypt top agricultural crops, based on their export value and resource yield optimization
Screening Framework for Identifying Egypt Strategic Crops
SUPPLY ANALYSIS COMBINED ANALYSIS

Crops Produced in Egypt

Optimization of Land Use and Water Consumption

Short-List A 10-20 Crops HS-6 Codes

DEMAND ANALYSIS(1)

6-8 Crops

Crop Categories HS-4 Code

Relative Short-Listed Import Volume, Value, and Growth Crop Categories Significance in HS-4 Code Volume and Value in each Market

Short-List B 20-30 Crops HS-6 Codes

Egypt Forecasted Export Value Crops Technical Feasibility and Resource Optimization

Note: (1) Given the amount of data required to analyze overall demand across a large number of countries and products, initial demand analysis had to be done at crop category level and then tailored to the crop-specific level Proprietary & Confidential 185

Supply Analysis

Currently, Egypt produces 69 crops (HS-6 code) distributed across 6 major crop categories: horticulture, cereals, sugar crops, oil crops, fibers, and SSF (spices, stimulants and flowers)
Egypt Agricultural Production (2005)
Potatoes Tomatoes Onions Garlic Cauliflowers Lettuce Carrots Rice Wheat Rye Sugar cane Sugar cane Sugar beet Sugar beet Molasses Molasses Nuts Nuts Ground nuts Ground nuts Soybeans Soybeans Cotton Cotton Flax Flax Bulbs Bulbs Cut flowers Cut flowers Live plants Live plants Foliage Foliage Pepper Anise Badian Coriander Cumin Caraway Fennel Walnuts Linseed Sunflower Cotton Seeds Sesamum Seeds Cucumbers Peas(1) Beans(2) Artichoke Eggplants Spinach Olives Barley Maize Sorghum Sweet Potatoes Bananas Dates Figs Avocados Mangos Guavas Oranges Tangerines Lemon/ Limes Grapefruits Citrus Grapes Watermelons Apples Pears/ Quinces Apricots Peaches / nectarines Plums Strawberries Raspberries Cantaloupe Pomegranate Parsley Dill

Horticulture Horticulture

Cereals Cereals

Sugar Crops Sugar Crops

Oil Crops Oil Crops

Fibers Fibers

SSF SSF

Notes: (1) Peas include chick peas and cow peas; (2) Beans include green beans, dry beans, broad beans, and horse beans 186

Proprietary & Confidential

Supply Analysis

Horticulture represents the main crop category in production volume, followed by cereals and sugar crops The breakdown of exports by category is similar to that of production
Breakdown of Egypt Agricultural Production Volume by Crop Category (2005, in Million Ton) Breakdown of Egypt Agricultural Exports Volume by Crop Category (2005, in Million Ton)

20.4
Sugar 17% Beet Sugar 83% Cane Others

1.0

1.0

0.1

73.1
Sugar Beet Sugar Canes Molasses Others

0.5
11% 89%

0.04

Flax Cotton 88%

0.2

0.01

3.0

0.9

23.0
Rice 99%

Rice 27% Maize 33% Wheat 36% Others Dried Beans Onions Potatoes Grapes Watermelon Oranges

1.4
4% 7% 27%

27.7
Others(1) Onions Oranges Potatoes Tomatoes 42%
5%

9% 27%

5%

45%

Horticulture Cereals

Sugar Crops

Oil Crops

Fibers

SSF

Total

Horticulture

Cereals

Sugar Crops

Oil Crops

Fibers

SSF

Total

Note: (1) Includes around 33 crops that each represents less than 3% of the total horticulture production Source: FAOSTAT, Ministry of Agriculture and Land Reclamation, UN Comtrade, AEC 187

Proprietary & Confidential

Supply Analysis

The export value yield per land and water utilization was analyzed for the key 69 crops currently produced
Methodology and Assumptions for Resource Yield Optimization
Export Value per Land Utilization Export Value per Land Utilization Metric Selected Metric Selected Unit Unit Export value per unit of area harvested Export value per unit of area harvested = FOB x Yield = FOB x Yield USD per feddan harvested for exports USD per feddan harvested for exports FOB: UN Comtrade; Ministry of Agriculture and FOB: UN Comtrade; Ministry of Agriculture and Land Reclamation statistics Land Reclamation statistics Yield :: FAOSTAT Yield FAOSTAT Export Value per Water Consumption Export Value per Water Consumption Export value per unit of water consumed Export value per unit of water consumed = FOB x Yield // Water consumed per Feddan = FOB x Yield Water consumed per Feddan USD per m3 of water consumed for exports USD per m3 of water consumed for exports FOB: UN Comtrade; Ministry of Agriculture and FOB: UN Comtrade; Ministry of Agriculture and Land Reclamation statistics Land Reclamation statistics Yield: FAOSTAT Yield: FAOSTAT Water consumed: World Bank Report 1998 Water consumed: World Bank Report 1998 Crop Seasonality: Ministry of Agriculture and Land Crop Seasonality: Ministry of Agriculture and Land Reclamation statistics Reclamation statistics Water Consumption per Water Consumption per Type of Crop Type of Crop Area Harvested Area Harvested Summer crops 4,485 m3 per Fed Summer crops 4,485 m3 per Fed Winter crops 1,400 m3 per Fed 1,400 m3 per Fed Winter crops All season crops 3,300 m3 per Fed All season crops 3,300 m3 per Fed Cotton 3,180 m3 per Fed 3,180 m3 per Fed Cotton Rice 8,800 m3 per Fed 8,800 m3 per Fed Rice Sugar cane 12,000 m3 per Fed 12,000 m3 per Fed Sugar cane Potatoes 3,300 m3 per Fed 3,300 m3 per Fed Potatoes 1,600 m3 per Fed Wheat 1,600 m3 per Fed Wheat Orchards 3,310 m3 per Fed 3,310 m3 per Fed Orchards Water is subsidized and assumed to be at no cost Water is subsidized and assumed to be at no cost
188

Source Source

Costs per area harvested and per crop are Costs per area harvested and per crop are constant for all crops constant for all crops Costs of new lands are not considered Costs of new lands are not considered Assumption Assumption

Proprietary & Confidential

Supply Analysis

Fourteen crops produced in Egypt record the highest export value per resource consumption
Egypt Agricultural Production Resource Optimization
Export Value per Water Consumption vs. Export Value per Land Utilization
7

Short-List A of Crops Short-List A of Crops Fourteen crops optimize Fourteen crops optimize the export value per land the export value per land and water utilization :: and water utilization 1. Strawberries 1. Strawberries 2. 2. 3. 3. Grapes Grapes Tomatoes Tomatoes Artichokes Artichokes Garlic Garlic Flax Flax Lettuce Lettuce Watermelon Watermelon Cucumbers Cucumbers

$ 3,000 per Feddan

Export Value per Water Consumed ($ per m 3)

High Export Value per Water Consumed

Strawberries

Garlic

Flax
3

Artichokes

Tomatoes Grapes

High Export Value per Land Used

4. 4. 5. 5. 6. 6. 7. 7. 8. 8. 9. 9.

Lettuce Cucumbers Watermelon Eggplant Dates Cauliflowers Peach Sweet potatoes Plum Bananas Sugar cane Sugar beet 4,000 8,000 12,000
189

$1.1 per m 3

Fennel Cotton 0

10. Cauliflowers 10. Cauliflowers 11. Peaches // nectarines 11. Peaches nectarines 12. Dates 12. Dates 13. Eggplant 13. Eggplant 14. Sweet Potatoes 14. Sweet Potatoes

16,000

Export Value per Land Used ($ per Fed)


Proprietary & Confidential

Source: UN Comtrade; FAOSTAT; Ministry of Agriculture; World Bank Report 1998

Demand Analysis

Demand for agricultural commodities was assessed in 49 major countries distributed along five key export regional markets: Europe, USA, CIS, GCC, and Far East
Egypt Agriculture Export Regional Markets
EU-25 EU-25 Austria Austria Belgium Belgium Cyprus Cyprus Czech Republic Czech Republic Denmark Denmark Estonia Estonia Finland Finland France France Greece Greece Germany Germany Hungary Hungary Ireland Ireland Italy Italy Latvia Latvia Lithuania Lithuania Luxembourg Luxembourg Malta Malta Netherlands Netherlands Poland Poland Portugal Portugal Slovakia Slovakia Slovenia Slovenia Spain Spain Sweden Sweden UK UK CIS CIS Armenia Armenia Azerbaijan Azerbaijan Belarus Belarus Georgia Georgia Kazakhstan Kazakhstan Kyrgyzstan Kyrgyzstan Moldova Moldova Russia Russia Tajikistan Tajikistan Turkmenistan Turkmenistan Ukraine Ukraine Uzbekistan Uzbekistan GCC GCC Bahrain Bahrain Kuwait Kuwait Oman Oman Qatar Qatar Saudi Arabia Saudi Arabia UAE UAE Far East Far East China China Hong Kong Hong Kong Japan Japan Malaysia Malaysia South Korea South Korea

USA USA

190

Proprietary & Confidential

Demand Analysis

To analyze demand, the 62 crop categories (HS-4 code) available on UN Comtrade were ranked based on their volume, value and forecasted growth in destination markets
Demand Driven Selection Framework
A A
Crop categories were ranked Crop categories were ranked based on import volume in based on import volume in each market. Categories that each market. Categories that appeared among the top 10 in appeared among the top 10 in at least 3 markets got selected at least 3 markets got selected Then, crop categories were Then, crop categories were ranked based on import ranked based on import volume growth in each volume growth in each market. Categories that market. Categories that appeared among the top 10 in appeared among the top 10 in at least 3 markets got selected at least 3 markets got selected

TOTAL UN COMTRADE CROP CATEGORIES

List of Crop List of Crop Categories Categories (HS-4 Code) (HS-4 Code) HS 0803 HS 0803 HS 0805 HS 0805

EU EU

USA GCC CIS USA GCC CIS

FE FE

gro gro gro gro gro 2005 gro 2005 gro 2005 gro 2005 gro 2005 gro 2005 wth 2005 wth 2005 wth 2005 wth 2005 wth wth wth wth wth wth

46 Crop 46 Crop Categories Categories Actually Actually Produced by Produced by Egypt Egypt

HS 1001 HS 1001 HS 1005 HS 1005 HS 5201 HS 5201

High volume and growth

C C

High value and growth

HS 0602 HS 0602 HS 0803 HS 0803 HS 1001 HS 1001 HS 0804 HS 0804 HS 0805 HS 0805 HS 0713 HS 0713

Top Ranking Crop Categories in Volume and Volume Growth (2005)


B B
List of Crop List of Crop Categories Categories (HS-4 Code) (HS-4 Code) HS 0803 HS 0803 HS 0805 HS 0805 HS 0805 HS 0805 HS 0806 HS 0806 HS 5301 HS 5301 EU EU USA GCC CIS USA GCC CIS FE FE

16 Crop 16 Crop Categories Categories Potentially Potentially Produced by Produced by Egypt Egypt

gro gro gro gro gro 2005 gro 2005 gro 2005 gro 2005 gro 2005 gro 2005 wth 2005 wth 2005 wth 2005 wth 2005 wth wth wth wth wth wth

62 Crop Categories

Top Ranking Crop Categories in Value and Value Growth (2005)


191

Crop categories were ranked Crop categories were ranked based on import value in each based on import value in each market. Categories that market. Categories that appeared among the top 10 in appeared among the top 10 in at least 3 markets got selected at least 3 markets got selected Then, crop categories were Then, crop categories were ranked based on import value ranked based on import value growth in each market. growth in each market. Categories that appeared Categories that appeared among the top 10 in at least 3 among the top 10 in at least 3 markets got selected markets got selected

HS 1005 HS 1005

HS 0808 HS 0808 HS 0810 HS 0810 HS 1006 HS 1006 HS 1701 HS 1701

HS 0806 HS 0806

HS 0901 HS 0901

List of Highest Ranking Crop Categories across the Five Markets

Proprietary & Confidential

Demand Analysis

10 crop categories (HS-4 code) were retained based on their ranking in 2005 and on their forecasted growth for 2005-2017, in terms of import volume, in each of the five destination regional markets
A A

Highest Ranking Crop Categories in Import Volume (2005) and Forecasted Growth (2005-2017) (1)
EU-25 EU-25
2005 2005 4,862 4,862 2,358 2,358 1,590 1,590 7,864 7,864 2,942 2,942 1,116 1,116 2,446 2,446 135 135 1,282 1,282 462 462 334 334 1,014 1,014 440 440 Growth Growth 2% 2% 2% 2% 5% 5% 2% 2% 1% 1% 3% 3% -1% -1% 8% 8% 10% 10% 5% 5% 3% 3% 3% 3% 1% 1%

List of Crop Categories List of Crop Categories (HS-4 Code) (HS-4 Code)
HS 0803 Bananas HS 0803 Bananas HS 0805 Citrus Fruits HS 0805 Citrus Fruits HS 0808 Apples, Pears and Quinces HS 0808 Apples, Pears and Quinces HS 1001 Wheat and Meslin HS 1001 Wheat and Meslin HS 1005 Maize (Corn) HS 1005 Maize (Corn) HS 1006 Rice HS 1006 Rice HS 1701 Solid Cane or Beet Sugar HS 1701 Solid Cane or Beet Sugar HS 0602 Live Plants nes HS 0602 Live Plants nes HS 0804 Dates, Figs, Pineapples, HS 0804 Dates, Figs, Pineapples, Avocado, Guava Avocado, Guava HS 0810 Fruit nes (2) HS 0810 Fruit nes (2) HS 0702 Tomatoes HS 0702 Tomatoes HS 0806 Grapes HS 0806 Grapes HS 1003 Barley HS 1003 Barley

USA USA
2005 2005 4,089 4,089 522 522 201 201 1,295 1,295 282 282 408 408 2,088 2,088 128 128 1,121 1,121 265 265 952 952 636 636 120 120 Growth Growth 1% 1% 10% 10% 3% 3% -3% -3% 1% 1% 9% 9% -1% -1% 0% 0% 14% 14% 6% 6% 5% 5% 5% 5% -9% -9%

GCC GCC
2005 2005 257 257 522 522 192 192 210 210 1,366 1,366 1,308 1,308 916 916 2 2 79 79 36 36 248 248 45 45 6,026 6,026 Growth Growth 7% 7% 6% 6% 9% 9% 24% 24% -2% -2% 12% 12% 17% 17% 29% 29% 40% 40% 27% 27% 11% 11% 10% 10% -3% -3%

CIS CIS
2005 2005 1,197 1,197 1,214 1,214 997 997 360 360 53 53 535 535 4,599 4,599 60 60 66 66 102 102 246 246 264 264 251 251 Growth Growth 80% 80% 45% 45% 78% 78% 36% 36% 62% 62% 54% 54% 56% 56% -7% -7% 102% 102% 116% 116% 100% 100% 104% 104% 1% 1%

Far East Far East


2005 2005 1,744 1,744 875 875 147 147 15,451 15,451 20,722 20,722 2,152 2,152 5,628 5,628 497 497 400 400 691 691 10 10 241 241 1,244 1,244 Growth Growth 4% 4% -3% -3% -5% -5% -3% -3% -2% -2% 0% 0% -1% -1% 49% 49% 7% 7% 22% 22% 6% 6% 7% 7% 0% 0%
Top 10 in less than 3 markets Top 10 in volume growth in at least 3 markets Top 10 in volume in at least 3 markets


Top ten HS-4 code crop category in specific market

xxx Volume in thousand ton

x% Forecasted growth in volume for 2005-2017

Notes:(1) The forecasted value of import volume growth is based on historical growth from 1995 to 2005, and in few cases from 2003 to 2005 (when historical values were not available) Proprietary & Confidential 192 (2) HS 0810 includes strawberries

Demand Analysis

Similarly, 11 crop categories (HS-4 code) were retained based on their ranking in 2005 and on their forecasted growth for 2005-2017, in terms of import value, in each of the five destination regional markets
B B

Highest Ranking Crop Categories in Import Value (2005) and Forecasted Growth (2005-2017) (1)
EU-25 EU-25
2005 2005 4,057 4,057 1,742 1,742 1,680 1,680 1,481 1,481 549 549 1,577 1,577 4,765 4,765 318 318 752 752 1,587 1,587 870 870 361 361 227 227 Growth Growth 3% 3% 3% 3% 5% 5% 4% 4% 1% 1% 0% 0% -6% -6% 7% 7% 23% 23% 9% 9% 7% 7% 4% 4% 4% 4%

List of Crop Categories List of Crop Categories (HS-4 Code) (HS-4 Code)
HS 0803 Bananas HS 0803 Bananas HS 0805 Citrus Fruits HS 0805 Citrus Fruits HS 0806 Grapes HS 0806 Grapes HS 0808 Apples, Pears and Quinces HS 0808 Apples, Pears and Quinces HS 1006 Rice HS 1006 Rice HS 1701 Solid Cane or Beet Sugar HS 1701 Solid Cane or Beet Sugar HS 0901 Coffee HS 0901 Coffee HS 0602 Live Plants nes HS 0602 Live Plants nes HS 0713 Vegetables, Leguminous Dried HS 0713 Vegetables, Leguminous Dried HS 0804 Dates, Figs, Pineapples, HS 0804 Dates, Figs, Pineapples, Avocado, Guava Avocado, Guava HS 0810 Fruit nes (2) HS 0810 Fruit nes (2) HS 0702 Tomatoes HS 0702 Tomatoes HS 0703 Onions HS 0703 Onions

USA USA
2005 2005 1,372 1,372 434 434 1,149 1,149 232 232 261 261 926 926 2,895 2,895 374 374 183 183 938 938 481 481 1,126 1,126 442 442 Growth Growth 0% 0% 19% 19% 9% 9% 7% 7% 8% 8% -3% -3% -4% -4% 12% 12% 14% 14% 13% 13% 11% 11% 9% 9% 5% 5%

GCC GCC
2005 2005 104 104 221 221 27 27 102 102 685 685 237 237 73 73 2 2 32 32 43 43 30 30 31 31 64 64 Growth Growth 8% 8% 6% 6% 4% 4% 9% 9% 13% 13% 25% 25% 0% 0% 16% 16% -25% -25% 27% 27% -23% -23% 9% 9% 11% 11%

CIS CIS
2005 2005 554 554 566 566 170 170 421 421 135 135 1,229 1,229 116 116 85 85 8 8 36 36 68 68 136 136 94 94 Growth Growth 33% 33% 32% 32% 45% 45% 37% 37% 15% 15% -8% -8% 31% 31% 146% 146% 34% 34% 30% 30% 73% 73% 106% 106% 72% 72%

Far East Far East


2005 2005 826 826 751 751 362 362 90 90 805 805 1,403 1,403 1,146 1,146 129 129 157 157 349 349 584 584 13 13 1,560 1,560 Growth Growth 4% 4% 0% 0% 5% 5% 0% 0% 3% 3% 20% 20% -6% -6% 6% 6% 33% 33% 7% 7% 15% 15% 8% 8% 1% 1%
Top 10 in value growth in at least 3 markets Top 10 in value in at least 3 markets


Top ten HS-4 code crop category in specific market

Top 10 in less than 3 markets

xxx Value in million US dollars

x% Forecasted growth in value for 2005-2017

Notes:(1) The forecasted value of import volume growth is based on historical growth from 1995 to 2005, and in few cases from 2003 to 2005 (when historical values were not available) Proprietary & Confidential 193 (2) HS 0810 includes strawberries

Demand Analysis

Demand analysis resulted in the selection of 13 crop categories: 2 for their high import volume and growth, 3 for their high import value and growth, and 8 for their high import volume, value, and growth
C C

Selected List of Crop Categories (1)


High Value and Growth HS 0602 Live Plants nes HS 0602 Live Plants nes HS 0803 Bananas HS 0803 Bananas

High Volume and Growth

HS 1001 Wheat and Meslin HS 1001 Wheat and Meslin

HS 0804 Dates, Figs, HS 0804 Dates, Figs, Pineapples, Avocado, Guava Pineapples, Avocado, Guava HS 0805 Citrus Fruits HS 0805 Citrus Fruits HS 0808 Apples, Pears and HS 0808 Apples, Pears and Quinces Quinces HS 0810 Fruit nes(2) HS 0810 Fruit nes(2)

HS 0713 Vegetables, HS 0713 Vegetables, Leguminous Dried Leguminous Dried

HS 0806 Grapes HS 0806 Grapes

HS 1005 Maize (Corn) HS 1005 Maize (Corn)

HS 0901 Coffee HS 0901 Coffee HS 1006 Rice HS 1006 Rice HS 1701 Solid Cane or Beet HS 1701 Solid Cane or Beet Sugar Sugar 2 Crop Categories 8 Crop Categories 3 Crop Categories

Notes: (1) The crop categories that were selected represent around 50% of total volume and value for all markets; (2) HS 0810 includes strawberries Proprietary & Confidential Source: BAH Analysis; UNComtrade 194

Demand Analysis

The 13 crop categories (HS-4 code) translated into a list of 47 crops (HS-6 code), out of which we retained a Short-List B of 27 crops mostly based on relative value and volume considerations,
Top HS-6 Code Crops Selection
HS-4 HS-4 Code Code Retained (HS-6 Code) Retained (HS-6 Code)
HS 060210 -- Cuttings and HS 060210 Cuttings and slips slips HS 060220 -- Trees HS 060220 Trees HS 060240 -- Roses HS 060240 Roses

Removed (HS-6 Code) Removed (HS-6 Code)


HS 060230 HS 060230 Rhododendrons and Rhododendrons and azaleas azaleas HS 060291 -- Mushroom HS 060291 Mushroom spawn spawn HS 060299 -- Plants live HS 060299 Plants live HS 071310 -- Peas dried HS 071310 Peas dried HS 071320 -- Chickpeas HS 071320 Chickpeas HS 071332 -- Red beans HS 071332 Red beans HS 071340 -- Lentils dried HS 071340 Lentils dried

HS-4 HS-4 Code Code HS 0808 HS 0808

Retained (HS-6 Code) Retained (HS-6 Code)


HS 080810 -- Apples HS 080810 Apples HS 080820 -- Pears and HS 080820 Pears and Quinces Quinces HS 081010 -- Strawberries HS 081010 Strawberries HS 081040 -- Cranberries HS 081040 Cranberries and blueberries and blueberries HS 081090 -- Fruit, nes HS 081090 Fruit, nes HS 090111 -- Coffee, not HS 090111 Coffee, not roasted, not roasted, not decaffeinated decaffeinated

Removed (HS-6 Code) Removed (HS-6 Code)

HS 0602 HS 0602

HS 0810 HS 0810

HS 0713 HS 0713

HS 071331 -- Gram beans HS 071331 Gram beans HS 071333 -- Kidney and HS 071333 Kidney and White Pea beans White Pea beans HS 071350 -- Broad and HS 071350 Broad and Horse beans Horse beans HS 080300 -- Bananas HS 080300 Bananas HS 080410 -- Dates HS 080410 Dates HS 080430 -- Pineapples HS 080430 Pineapples HS 080440 -- Avocados HS 080440 Avocados HS 080450 -- Guavas and HS 080450 Guavas and Mangoes Mangoes HS 080510 -- Oranges HS 080510 Oranges HS 080520 -- Mandarins HS 080520 Mandarins HS 080530 -- Lemon and HS 080530 Lemon and limes limes HS 080540 -- Grapefruits HS 080540 Grapefruits HS 080590 -- Citrus, nes HS 080590 Citrus, nes HS 080610 -- Grapes HS 080610 Grapes

HS 081020 -- Raspberries, HS 081020 Raspberries, Blackberries, Mulberries, Blackberries, Mulberries, HS 081030 -- Currants and HS 081030 Currants and gooseberries gooseberries HS 090112 -- Coffee, not HS 090112 Coffee, not roasted, decaffeinated roasted, decaffeinated HS 090122 -- Coffee, HS 090122 Coffee, roasted, decaffeinated roasted, decaffeinated HS 090190 -- Coffee HS 090190 Coffee substitutes substitutes HS 090121 -- Coffee, HS 090121 Coffee, Roasted, not decaf. Roasted, not decaf. HS 100111 -- Durum wheat HS 100111 Durum wheat HS 100510 -- Maize seed HS 100510 Maize seed HS 100610 -- Rice in the HS 100610 Rice in the husk (paddy or rough) husk (paddy or rough) HS 100620 -- Rice, husked HS 100620 Rice, husked HS 100640 -- Rice, broken HS 100640 Rice, broken HS 170112 -- Raw sugar, HS 170112 Raw sugar, beet beet
Proprietary & Confidential

HS 0901 HS 0901
HS 080420 -- Figs HS 080420 Figs

HS 0803 HS 0803

HS 0804 HS 0804

HS 1001 HS 1001 HS 1005 HS 1005 HS 1006 HS 1006

HS 100120 -- Wheat and HS 100120 Wheat and Meslin Meslin HS 100590 -- Maize HS 100590 Maize HS 100630 -- Rice, semiHS 100630 Rice, semimilled or wholly milled milled or wholly milled

HS 0805 HS 0805

HS 1701 HS 1701 TOTAL TOTAL


195

HS 0806 HS 0806

HS 170111 -- Raw sugar, HS 170111 Raw sugar, cane cane

27 crops retained 27 crops retained

19 crops removed 19 crops removed

Source: BAH Analysis; UNComtrade

Demand Analysis

And removed 18 crops that were insignificant in volume and value percentages within their category
N N NO NO % Value E VE TIIV ST US AU HA EX H EX

Percentage of Value and Volume of Crops within each Crop Category (1)
HS 0804 Top Crops Selection HS 0804 Top Crops Selection
% Value Pineapples 40% Avocados Mangos 20% Cranberries Strawberries Currants 0% Raspberry 50%

HS 0810 Top Crops Selection HS 0810 Top Crops Selection


Fruit, nes

40%

20% Dates 0% 0% Figs 20%

% Volume 40% 60%

0%

% Volume

HS 0805 Top Crops Selection HS 0805 Top Crops Selection


% Value 60% Oranges 40% Grapefruit Mandarin 20% Lemons and limes Citrus nes 0% 20% 40% % Volume 60% 50% % Value

HS 1006 Top Crops Selection HS 1006 Top Crops Selection


Rice, semi-milled

Rice in the husk Rice, husked 0% 0% Rice, broken 20% 40% 60% 80% % Volume

0%

Note: (1) Similar analysis was undertaken on the categories HS-0602, HS-0713, HS-1701,HS-1001 and HS 1005 and lead to discarding xxx Removed Rhododendrons and Azaleas, Mushroom Spawn, Plants live, Peas dried, Chickpeas, Red beans, Lentils dried, drum wheat, maize seed Proprietary & Confidential 196 and Raw Sugar Beet

Combined Analysis

Thus, after combining the selected crops from the supply analysis (Short-List A) and the selected ones stemming from the demand analysis (Short-List B), a total of 38 crops (HS-6 code) was obtained
Supply and Demand Analysis Crop List
HS 070200 -- Tomatoes HS 070200 Tomatoes HS 070320 -- Garlic HS 070320 Garlic HS 070410 -- Cauliflowers HS 070410 Cauliflowers HS 070519 -- Lettuce HS 070519 Lettuce HS 070700 -- Cucumbers HS 070700 Cucumbers HS 070910 -- Artichokes HS 070910 Artichokes HS 070930 -- Eggplants HS 070930 Eggplants HS 080410 -- Dates HS 080410 Dates HS 080610 -- Grapes HS 080610 Grapes HS 081010 -- Strawberries HS 081010 Strawberries HS 060210 -- Cuttings and slips HS 060210 Cuttings and slips HS 060220 -- Trees HS 060220 Trees HS 060240 -- Roses HS 060240 Roses HS 071331 -- Gram beans HS 071331 Gram beans HS 071333 -- Kidney and White beans HS 071333 Kidney and White beans HS 071350 -- Broad and Horse beans HS 071350 Broad and Horse beans HS 080300 -- Bananas HS 080300 Bananas HS 080430 -- Pineapples HS 080430 Pineapples HS 080440 -- Avocados HS 080440 Avocados HS 080450 -- Guavas and Mangoes HS 080450 Guavas and Mangoes HS 080510 -- Oranges HS 080510 Oranges HS 080520 -- Mandarins HS 080520 Mandarins HS 080530 -- Lemon and Limes HS 080530 Lemon and Limes HS 080540 -- Grapefruits HS 080540 Grapefruits
197

Only Supply Analysis Outcome

HS 071420 - Sweet Potatoes HS 080710 - Watermelons HS 080930 Peaches and nectarines HS 530129 - Flax

11 crops Short-List A: 14 crops 3 crops

Both Supply and Demand Analyses Outcome

Only Demand Analysis Outcome

HS 080590 - Citrus, nes HS 080810 - Apples HS 080820 - Pears and Quinces HS 081040 - Cranberries HS 081090 - Fruit, nes HS 090111 - Coffee, not roasted, not decaffeinated HS 100120- Wheat except durum wheat, and meslin HS100590- Maize except seed HS 100630 - Rice, semi-milled or wholly milled HS 170111 - Raw sugar, cane

Short-List B: 27 crops 24 crops

38 crops in total

Proprietary & Confidential

Combined Analysis

We also added cotton, potatoes and onions, since they represent around 31% of Egypts exported value in 2005, leading to a final combined list of 41 crops
Additional Crops based on 2005 Export Value
Guavas and Mangoes Others
14%

Flax

Rationale and Conclusion Rationale and Conclusion

Onions 1% Potatoes 6%

Grapes 1% 2% 3% Strawberries 3%

Total Egypt Exports: $ 1,356 million in 2005


24%

17% Oranges

The list obtained from the supply and The list obtained from the supply and demand analysis does not include demand analysis does not include cotton, potatoes, and onions, which cotton, potatoes, and onions, which represent around 31% of Egypts represent around 31% of Egypts export value in 2005 export value in 2005 These crops were added to the model These crops were added to the model to allow their evaluation with the crops to allow their evaluation with the crops derived from the supply and demand derived from the supply and demand analysis analysis Thus, the final list of 41 crops includes Thus, the final list of 41 crops includes 38 selected crops 38 selected crops

Cotton

22% Rice

Selected Crops

Cotton Cotton Potatoes Potatoes Onions Onions

38 selected crops Crops added to the model Other crops that were not included in the model
Source: UN Comtrade; Ministry of Agriculture and Statistics 198

Proprietary & Confidential

Combined Analysis

Furthermore, a number of crops mentioned in our interviews with key stakeholders were not selected in the top 41 list due to a combination of supply or/and demand limitations
Supply & Demand-Side Considerations For Some Non-Selected Crops
Crops Not Selected Supply-Side Analysis Supply-Side Analysis Pomegranate was not ranked among the top 17 performers in yield of natural resources utilization Demand-Side Analysis Demand-Side Analysis No available HS6 code Highest demand for juice (processed food) Herbs did not belong to the top 10 HS 4 with the highest demand in volume , value or growth

Pomegranate Pomegranate

Herbs Herbs

Herbs natural resources yield ranks poorly compared to other crops Olives were not ranked among the top 17 performers in yield of natural resources utilization ( land and water)

Olives Olives

Main demand market is processed food (e.g., canned olives, olive oil) and not raw commodities Cut-flowers were not ranked among the top 10 performers in volume, value or growth demand There is no HS6 standing for each of these crops, therefore these can not be singled out in the analysis

Cut-flowers Cut-flowers

No available data on cut-flowers natural resources yield

Other: Broccoli, Other: Broccoli, Mungtouth, sugar Mungtouth, sugar snap peas snap peas

There is no HS6 code standing for each of these crops, therefore these crops were not included in the supply analysis

Source: UN Comtrade; Ministry of Agriculture and Statistics

199

Proprietary & Confidential

Combined Analysis

The selected 41 crops had a 2005 total import market volume of 120 million tons in the five regional destination markets Egypt exported around 1.4 million tons of these crops
E V TIIV E US T US A H XH A EX N--E NO N NO

Import Market Volume per Crop for the 41 Selected Crops By Destination Market (2005, in Thousand Ton)
Egypt Exported Volume (2005)
0 0 58 0 0 895 150 594 0.33 10 86 26 2 363 1,441

HS-6 Code
100120 100590 170111 080300 090111 100630 520110 080510 080810 080710 070310 080610 070320 070190

Crop Name

EU-25 Market Imported Volume (2005)


2,888 6,003 1,783 4,862 2,572 254 516 1,042 1,118 507 271 692 72 603 30,490

USA Market Imported Volume (2005)


224 896 1,750 4,089 1,112 370 7 69 123 908 299 611 952 286 14,467
200

GCC Market Imported Volume (2005)


1,364 156 877 257 27 1,191 8 369 169 25 296 37 248 34 5,454

CIS Market Imported Volume (2005)


32 145 4,251 1,197 50 478 7 525 683 182 338 199 246 362 10,226

FE Market Imported Volume (2005)


31,646 13,357 4,251 1,744 531 1,883 3,141 512 136 185 531 189 10 59

Total Imported Volume (2005)


36.154 20,556 12,912 12,149 4,292 4,176 3,679 2,517 2,229 1,807 1,735 1,728 1,528 1,344

Wheat except durum Maize except seed Raw sugar, cane Bananas Coffee, not roasted(1) Rice Cotton Oranges Apples Watermelon Onion Grapes Garlic Potatoes

TOTAL

Note: (1) Not decaffeinated

59,796 120,434 Proprietary & Confidential

Combined Analysis

The 41 crops were further filtered according to forecasted export value, technical feasibility, and resources optimization
Selection of 6-8 Strategic Crops for Egypt Exports
Combined List of 41 Crops Filtering Method Overview Filtering Method Overview The last filter ranks the 41 crops according to their: The last filter ranks the 41 crops according to their: Forecasted export value in 2017 Forecasted export value in 2017 6-8 Crops Technical feasibility Technical feasibility Current resources optimization Current resources optimization Egypt forecasted export value per crop and per Egypt forecasted export value per crop and per regional market is based on the: regional market is based on the: Projection of each regional markets demand in Projection of each regional markets demand in 2017 2017 Estimation of Egypt market share per crop in Estimation of Egypt market share per crop in 2017 2017 Forecast of Egypt FOB per crop and per market Forecast of Egypt FOB per crop and per market in 2017 in 2017 Technical Feasibility assesses qualitatively Egypts Technical Feasibility assesses qualitatively Egypts capabilities to produce, export and promote the capabilities to produce, export and promote the crops crops Current resources optimization ranks the crops Current resources optimization ranks the crops according to the current export value per resource according to the current export value per resource utilization (land used and water consumed) utilization (land used and water consumed) The final ranking of crops is derived from the The final ranking of crops is derived from the consolidation of the three rankings, and leads to the consolidation of the three rankings, and leads to the selection of the top 6-8 crops selection of the top 6-8 crops
Proprietary & Confidential

Three Dimensional Filter

Egypt Forecasted Export Value Technical Feasibility

Resources Optimization (Yield of Natural Resources )

201

Combined Analysis

An analytical model was developed to identify the top 6-8 strategic crops for Egypt exports, through five major steps
Analytical Model Structure
Destination Market Destination Market Import Volume per Import Volume per Crop 2005 Crop 2005 Destination Market Destination Market Import Volume Import Volume Growth Growth Egypt Market Egypt Market Share per Crop Share per Crop 2005 2005 Historical Trend a Egypt Forecasted Egypt Forecasted Market Share based Market Share based on historical trends on historical trends 2 2 Forecasted Market Forecasted Market Share of Egypt per Share of Egypt per Crop (as highest of Crop (as highest of a and b in 2017) a and b in 2017) 1&2&3 1&2&3 Egypt Forecasted Egypt Forecasted Exported Value Exported Value per Crop per Crop Historical Trend and Studies 1 1 Destination Market Destination Market Forecasted Import Forecasted Import Volume Volume

Forecasted Export Value


Weight of natural resources optimization is a variable which has to be validated by respective policy makers

Technical Feasibility **
4 4 Ranking of Technical Ranking of Technical Feasibility Feasibility

1&2 1&2 Egypt Forecasted Egypt Forecasted Volume per Crop Volume per Crop

Resource Optimization : Yield of Natural Resources


5 5 Ranking of the Crops Ranking of the Crops Yield of Natural Yield of Natural Resources Resources

Egypt Market Egypt Market Share Growth Share Growth

Targeting Regional Competitor Market Share Market Share of Market Share of Egypts Main Egypts Main Competitor per Competitor per Crop 2005 Crop 2005

Historical Trend and Studies Egypt FOB per Egypt FOB per Crop Crop 3 3 Egypt Forecasted Egypt Forecasted FOB per Crop FOB per Crop Egypt FOB Growth Egypt FOB Growth Prioritization Weight of Export Value Prioritization Weight of Yield of Natural Resources and technical feasibility 1&2&3&4&5 1&2&3&4&5 List of 6-8 Crops with List of 6-8 Crops with Optimizing Forecasted Optimizing Forecasted Export Value and Export Value and Optimizing Resources Optimizing Resources Utilization Utilization

b Target Egypt MS Target Egypt MS in 2012 = Competitor in 2012 = Competitor MS in 2005 per crop* MS in 2005 per crop*

Outcome

Note: (*) Egypt market share reached in 2012 is a function of the competitors current market share; (**) Measures technology growing requirements, environment. Confidential Proprietary & Market competition 202 between suppliers and management requirements

Combined Analysis

A number of assumptions were set to estimate conservatively volume and price growth rates
Model Assumptions
Inputs
Destination Market 1 1 Forecasted Import Volume

Data Source
UN Comtrade Studies

Assumptions
Forecast Method: Market import volume growth is derived using historical growth or import trends/ forecast studies Growth Rate Estimation: The minimum between the short-term (2003-2005) and long-term (1995-2005) growth rate is selected The effect of high yearly growth is attenuated as following: CAGR between 10% and 20% are reduced linearly between 10% and 15%; CAGR between 20% and 50% are reduced linearly between 15% and 25%; etc. Egypt vs. Comparable Top Performing Country ( Importer within Egypts production window If Egypts market share for a crop in 2017 is expected to be higher than the market share of the top competitor, then Egypts market share is forecasted using the historical growth If Egypts market share for a crop in 2017 is expected to be lower than the market share of the top competitor, then If Egypts current exported volume is null, then Egypts market share is expected to reach in 2012 the competitors 2005 market share without exceeding 20% market share Otherwise, Egypts market share is expected to reach in 2012 the competitors 2005 market share without exceeding a 20% annual growth rate Growth Rate Estimation: The minimum between the short-term (2003-2005) and long-term (1995-2005) growth rate is selected The effect of high yearly growth is attenuated as following: CAGR between 10% and 20% are reduced linearly between 10% and 15%; CAGR between 20% and 50% are reduced linearly between 15% and 25%; etc. Forecast Method: Egypt FOB is derived using the historical growth, as well as trends and forecast studies Growth Rate Estimation: The minimum between the short-term (2003-2005) and long-term (1995-2005) growth rate is selected The effect of high yearly growth is attenuated as following: CAGR between 10% and 20% are reduced linearly between 10% and 15%; CAGR between 20% and 50% are reduced linearly between 15% and 25%; etc. The ranking assesses qualitatively Egypts capabilities to produce and export the crops. The ranking is based on a measurement of technology requirements for growing crops, shipping conditions and marketing environment

UN Comtrade

2 Market Share of 2
Egypt per Crop

Forecasted

Egypt 3 Forecasted FOB 3 per Crop

UN Comtrade Studies

4 4

Technical Feasibility

Interviews Experts

5 Yield of Natural 5
Resources

UN Comtrade FAOSTAT MoA World Bank

Assessment Method: The crops are assessed based on their Current export value per unit of land used for exports Current export value per unit of water consumed for exports
203

Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

Proprietary & Confidential

Combined Analysis

The forecast of the destination markets import volume highlights the most demanded crops (among the selected 41 crops), with a large portion that could be potentially produced in Egypt
1 1

Destination Markets Forecasted Import Volume (2017)


Volume of Top Imported Crops in FE (in %, 2017) 48%
17%

45%

Volume of Top Imported Crops in EU (in %, 2017)


9% Bananas 5% Coffee, not R 5% Pineapples 4% Grapes 3% Maize 3% Peach 3% Apples 3%

8% Raw sugar, cane

6% Cotton

5% Rice

5% Fruit, nes

3% Bananas

Imports of Top Crops = 80% of Total Imports Imports of Top Crops = 80% of Total Imports of 47 M Tons of 47 M Tons

Watermelon

Wheat

Imports of Top Crops = 94% of Total Imports Imports of Top Crops = 94% of Total Imports of 65 M Tons of 65 M Tons

Volume of Top Imported Crops in USA (in %, 2017)


18% 9% 9% 8% 8% 5% 5% 5% 4% 4% Garlic Grapes

Volume of Top Imported Crops in GCC (in %, 2017)


50% 22% 7% Rice 7% Maize 2% Garlic 2% Oranges 2% Onions 2% Bananas

Wheat

Maize

Volume of Top Imported Crops in CIS (in %, 2017)


15%15% 13% 10% 9% 6% 5% 5% 5% Grapes Peach Pears Garlic

Roses Raw sugar, cane Avocado

Pineapples Lemon and limes Coffee, not roasted Watermelon

Imports of Top Crops = 75% of Total Imports of Top Crops = 75% of Total Imports of 24 M Tons Imports of 24 M Tons

Imports of Top Crops = 95% of Total Imports of Top Crops = 95% of Total Imports of 25 M Tons Imports of 25 M Tons
204

Imports of Top Crops = 83% of Total Imports of Top Crops = 83% of Total Imports of 33 M Tons Imports of 33 M Tons
Proprietary & Confidential

Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

Watermelon Raw sugar, cane Bananas Apples, fresh Mandarin

Bananas

Raw Sugar

Wheat

Combined Analysis

We assumed that Egypt would be targeting its top competitors market share by 2012, unless the historical trends lead to a larger market share in the long-term
2 2
Egypt MS based on Egypt Crop Competitor Top
(HS-6 Code)

Forecasted Market Share ( MS) of Egypt per Crop (1)


Egypt MS based on Top Competitor 100% Flax

Egypt Market Share in EU (% Volume, 2017)


Historical = Competitor Strawberries Flax Potatoes Oranges Broad Beans Artichoke 50%

Egypt Market Share in USA (% Volume, 2017)


Historical = Competitor

MS

Sweet Potatoes 50% Carrots Cucumbers Mandarin Watermelon Onion Cotton Grapes 0% Egypt MS based on Top Competitor 75%

50% Citrus Rice Artichoke 0% 50% Egypt MS based on Top Competitor Flax Historical = Competitor Cotton

0%

Egypt MS based on Historical

0%

Egypt MS based on Historical 100%

Market Share in GCC (% Volume, 2017)


Historical = Competitor Strawberries

Egypt MS based on Top Competitor 60%

Market Share in CIS (% Volume, 2017)

Market Share in FE (% Volume, 2017)

Artichoke 40%

Historical = Competitor Oranges

50% Potatoes Sweet Potatoes Avocado 0% 0% 20% Artichoke Onion 40% Grapefruit Beans

Lemons 20% Oranges 0% 80% 0% Carrots Grapes 20%


205

25%

Potatoes 40% 60% Egypt MS based on Historical

Potatoes 0% 0%

Dates 20%

Strawberries

60%

Note: (1) Top competitors of Egypt are assumed to be Morocco, Spain and Israel Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

40% Egypt MS based on Historical Proprietary & Confidential

Combined Analysis

On average, FOB of exports to the EU would grow faster than FOB of exports to the GCC
3 3

Egypt FOB Growth, Volume Growth and Value per Crop Towards EU and GCC markets (2005-2017)
Egypt Exports Towards GCC Egypt Exports Towards GCC
Forecasted CAGR of FOB to GCC 30% (2005-2017) High Growth of Exported Volume and FOB Lettuce 20%

Egypt Exports Towards EU Egypt Exports Towards EU


Forecasted CAGR of FOB to EU (2005-2017)

High Growth of Exported Volume and FOB

10%

Tomatoes Rice Oranges Grapes

Cucumbers

Eggplant 10% Artichoke Garlic 60% Watermelon Strawberries Oranges Onion Broad Beans Peaches, nectarines Rice Grapes 25% Guavas, mangoes Fruit, nes

Guavas, mangoes Peaches and nectarines Watermelon

Onion Cotton Potatoes

Bananas Kidney Beans Dates

40%

-10%

Forecasted CAGR of Volume Exported to EU (2005-2017) -20% Size of the bubble proportional to export value 2005 $4 M Export value towards EU Grapefruit

Forecasted CAGR of Volume Exported to GCC (2005-2017)

Size of the bubble proportional to export value 2005 $10-30% M Export value towards GCC Proprietary & Confidential

Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

206

Combined Analysis

FOB of Egypt main commodities exported to USA ( cotton) and CIS are expected to grow between 0% and 5%, with the exception of potatoes
3 3

Egypt FOB Growth, Volume Growth and Value per Crop Towards USA and CIS markets (2005-2017)
Egypt Exports Towards CIS Egypt Exports Towards CIS
Forecasted CAGR of FOB to CIS (2005-2017)

Egypt Exports Towards USA * Egypt Exports Towards USA *


Forecasted CAGR of FOB to USA 10% (2005-2017)

High Growth of Exported Volume and FOB

10%

High Growth of Exported Volume and FOB

5% 5% Rice Cotton -20% Onion Flax Rice

Mandarins Grapes Oranges 20% 40% 60%

Potatoes -10% 10% 20% 30% 40% Strawberries Forecasted CAGR of Volume Exported to CIS (2005-2017)

Forecasted CAGR of Volume Exported to USA (2005-2017) Size of the bubble proportional to export value 2005 $3 M Export value towards USA
(*) Cotton corresponds to more than 90% of Egypts exports to USA Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

-10%

Size of the bubble proportional to export value 2005 $7 M Export value towards CIS Proprietary & Confidential

207

Combined Analysis

The Far East would offer high FOB growth opportunities for current Egyptian exports, particularly for horticulture products
3 3

Egypt FOB Growth, Volume Growth and Value per Crop Towards FE market (2005-2017)
Egypt Exports Towards FE Egypt Exports Towards FE
Forecasted CAGR of FOB to FE (2005-2017)

20%

High Growth of Exported Volume and FOB Potatoes

10%

Strawberries

Grapes

Cotton -10%

Oranges Dates 10% 20% 30% Forecasted CAGR of Volume Exported to FE (2005-2017)

-10%

Size of the bubble proportional to export value 2005 $2.5 M Export value towards FE
Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

208

Proprietary & Confidential

Combined Analysis

In sum, the FOB of most horticulture crops would have room for growth, with the exception of potatoes, onions and beans which would experience a decline in FOB
3 3
Forecasted CAGR of FOB (2005-2017) High Growth of Exported Volume and FOB

Egypt FOB Growth, Volume Growth and Value per Crop Towards the 5 Regional Markets (2005-2017)

10% Lettuce Guavas, mangoes Sweet Potatoes Cotton Artichoke Rice Oranges Potatoes Kidney Beans Strawberries Dates 20% Onion Bananas Carrots Eggplant Mandarin Cauliflowers 40% Cucumbers 60% Fruit, nes

Watermelon

Forecasted CAGR of Volume Exported (2005-2017)

-10% Grapefruit Cuttings and slips Size of the bubble proportional to Egypt export value in 2005 $15 M Total export value

Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

209

Proprietary & Confidential

Combined Analysis

The combination of forecasts for import market size, Egypts market share, and FOB, are expected in an Egypt export value of $4.3 Billion in 2017 for the 41 crops
1 1 2 2 3 3

Egypts Exported Value, Volume and Market Share in 2017


E g y p t E x p o rte d V a lu e 2 0 1 7 T o w ard s 5 R e g io n a l M a rk e ts M $ 553 339 751 80 72 120 61 70 45 173 257 5 8 3 45 40 21 10 35 3 1 52 2 2 57 9 3 0 11 1 1 0 1 1 1 1 0 0 0 0 0 2 ,8 3 7 E g y p t E x p o rt V o lu m e 2 0 0 5 T o w a rd s 5 R e g io n a l M a rk e ts K Tons 26 18 593 4 10 25 6 0 86 59 158 0 5 2 363 3 13 1 0 1 2 0 0 0 11 0 3 0 6 1 6 0 9 0 0 0 0 0 0 0 0 1 ,4 1 3 E g y p t E x p o rt V o lu m e 2 0 1 7 T o w ard s 5 R e g io n a l M a rk e ts K Tons 237 109 1 ,6 6 9 29 79 93 67 90 354 62 595 4 15 3 274 24 41 11 54 6 2 88 4 2 71 26 8 1 33 1 5 0 32 6 1 6 0 1 1 0 0 4 ,1 0 6 5 R e g io n a l M a rk e ts T o ta l I m p o r t V o lu m e 2005 K Tons 1 ,7 2 8 126 2 ,5 1 7 11 1 ,8 0 7 695 947 541 1 ,7 3 5 3 ,6 7 9 4 ,1 7 6 491 123 1 ,5 2 8 1 ,3 4 4 668 1 ,2 6 7 71 476 58 7 897 30 32 1 ,3 0 9 2 ,2 2 9 419 82 14 80 31 1 2 ,9 1 2 721 1 2 ,1 4 9 39 10 4 ,2 9 2 31 1 ,5 8 2 3 6 ,1 5 4 2 0 ,5 5 6 1 1 7 ,5 6 4 5 R e g io n a l M a rk e ts T o ta l I m p o r t V o lu m e 2017 K Tons 5 ,1 6 5 659 3 ,5 3 3 67 8 ,1 9 0 1 ,4 5 5 4 ,1 1 1 1 ,4 3 9 1 ,9 6 4 4 ,4 0 1 6 ,7 8 2 1 ,0 8 5 229 3 ,6 4 3 1 ,1 0 6 3 ,6 7 4 3 ,6 6 5 188 2 ,4 7 4 55 4 2 ,8 8 2 30 138 5 ,7 4 0 5 ,5 7 8 661 116 520 120 73 2 6 ,7 2 1 932 1 6 ,4 2 6 128 2 ,3 0 6 5 ,1 5 8 67 5 ,0 7 1 3 5 ,4 5 0 4 4 ,1 5 3 2 0 6 ,1 5 8 E g yp t M ark e t S h a r e in V o lu m e 2 0 0 5 % 3% 22% 40% 41% 1% 6% 1% 3% 11% 1% 8% 0% 5% 0% 30% 1% 1% 4% 3% 6% 47% 2% 4% 2% 1% 0% 1% 1% 19% 1% 33% 0% 3% 0% 1% 1% 0% 1% 0% 0% 0% 1% E g y p t M ark e t S h a r e in V o lu m e 2 0 1 7 % 5% 16% 47% 43% 1% 6% 2% 6% 18% 1% 9% 0% 7% 0% 25% 1% 1% 6% 2% 12% 59% 3% 14% 2% 1% 0% 1% 1% 6% 1% 8% 0% 3% 0% 1% 0% 0% 2% 0% 0% 0% 2%

E g y p t E x p o rte d V a lu e 2 0 0 5 T o w ard s 5 R e g io n a l M a rk e ts C ro p s M $ G ra p e s 42 S tra w b e rrie s 32 O ra n g e s 225 A rtic h o k e 6 W a te rm e lo n 7 G uavas & m angoes 19 M a n d a rin & c le m e n tin e 3 C u cu m b e rs 0 O n io n 17 C o tto n 130 R ic e 54 T o m a to e s 0 D a tes 3 G a rlic 1 P o ta to e s 73 P e a c h e s & n e c ta rin e s 5 L e m o n a n d lim e s 3 E g g p la n t 0 A vocad o 0 S w e e t p o ta to e s 1 F la x 2 P e a r s a n d q u i n c e s , fr e s h 0 C a u liflo w e rs 0 L e ttu ce 0 F ru it, n e c ( in c . p e rs im m .) 5 A p p l e s , fr e s h 0 K id n e y B e a n s 2 C ra n b e rrie s , b lu e b e rrie s 0 T ree s 3 G ra m B e a n s 1 B ro a d B e a n s 2 R a w su g a r, c a n e 0 G r a p e fr u i t 2 B a n a n a s , in c lu d in g p la n ta 0 C itru s 0 R oses 0 C o f fe e , n o t r o a s t e d , n o t d e 0 C u t tin g s a n d s lip s 0 P in e a p p le s , fre s h o r d rie d 0 M a iz e 0 W heat 0 T o ta l 640

Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

210

Proprietary & Confidential

Combined Analysis

A qualitative analysis of Egypts capabilities for production, export and promotion was conducted on each of the 41 crops to determine their feasibility
4 4 Crops
Grapes

Crop Technical Feasibility


Rank
4 4

Relevant Variety
Early varieties

Constraints

Advantages
Established business Established business Easy to manage production Easy to manage Sufficient resources to position Egypt Sufficient Advantageous market window: April - May Advantageous market window: April - May

Strawberries

H H

Fresh

Very capital intensive Very capital intensive Old chain management Old chain management Very delicate product Very delicate product Risky for small growers Risky for small growers

Advantageous market window: Nov- Dec Advantageous market window: Nov- Dec for Europe, Jan- Feb- March for GCC and for Europe, Jan- Feb- March for GCC and year round for CIS and FE year round for CIS and FE Easily shipped Easily shipped

Cranberries, blueberries Onion Garlic

H H

Fresh Dry Onions Green garlic

Requiring specific conditions Requiring specific conditions Very good product for small growers Very product for small growers Production and export processes well Production and export processes well mastered from a technical point of view mastered from a technical point of view Not producing the right variety Not producing the right variety Storage problem Storage problem Easy to manage production Easy to manage production Interesting for small growers Interesting for small growers Requiring very little resources Requiring very little resources Market window: year round, with the Market window: year round, competitive advantage of winter seasons competitive advantage of winter seasons Advantageous winter window Advantageous winter window Cost competitive Cost competitive Market proximity Market proximity Right growing conditions Right growing conditions

4 4

Sweet Potatoes

4 4

Artichoke Watermelon

4 4

Limited area to grow Limited area to grow

Seedless varieties

Not producing the right variety Not producing the right variety High sensitivity to a disease High sensitivity Lack of technological information Lack of technological information

Source: BAH Analysis; Interviews with agriculture experts

211

e Low 4 High Proprietary & Confidential

Combined Analysis

A qualitative analysis of Egypts capabilities for production, export and promotion was conducted on each of the 41 crops to determine their feasibility ( Contd)
4 4 Crops Oranges Mandarins Rank
3 3

Crop Technical Feasibility


Relevant Variety Constraints
Low profit margin for the exporter Low profit margin for the exporter compared to the other varieties of citrus compared to the other varieties of citrus Not widely available as of now but could Not widely available as of now but could be easily planted (2~3 years) be easily Not producing the right variety that is highly Not producing the right variety that is highly demanded ( dry and semi dry) demanded ( dry and semi Processing facilities and fiber extract Processing facilities and fiber extract techniques not available which reduces the techniques not available which market potential market potential Strong local consumption Strong local consumption Not producing the right variety ( move from Not producing the right variety ( move from green production to yellow) green production to yellow) Low availability of root stock Low availability of root stock EU quotas restrictive EU quotas restrictive Salad tomatoes, crop expensive to export Salad tomatoes, crop expensive to export Capital intensive in greenhouses Capital intensive in greenhouses

Advantages
Established business Established business

3 3

Easy peeler Easy peeler

Production and export processes easily Production and export processes managed managed Optimal growing conditions Optimal growing conditions Easily shipped Easily shipped Labor Intensive crop Labor Intensive crop

Dates

3 3

Dry, semi dry Dry, semi dry

Flax

3 3

Guavas & mangoes

3 3

Yellow mangoes Yellow mangoes

Easy to manage crop Easy to manage crop Potential growing areas: governorates of Potential growing areas: governorates of Ismalia, Sharkyia, and Nobaria Ismalia, Sharkyia, and Nobaria Well established market Well established market Little competition during winter season Little competition during winter season Cherry tomatoes with high FOB Cherry tomatoes with high FOB Cost effective Cost effective Labor intensive Labor intensive Good weather conditions Good weather conditions

Potatoes Tomatoes Lemon and Limes

2 2

Easy peeler Easy peeler

2 2

Cherry tomatoes Cherry tomatoes

2 2

Limes Limes e Low 4 High Proprietary & Confidential

Source: BAH Analysis; Interviews with agriculture experts

212

Combined Analysis

A qualitative analysis of Egypts capabilities for production, export and promotion was conducted on each of the 41 crops to determine their feasibility ( Contd)
4 4 Crops Avocado Rice Cotton Raw sugar cane Kidney/ Broad Beans Peaches & Nectarines Grapefruit/ citrus nes Cucumbers/ Eggplant Cauliflowers Lettuce Cuttings and slips Apples Pears & quinces Bananas Rank
2 2 2 2 2 2 1 1 1 1 1 1 1 1 V V V V 1 1 0 0 0 0 0 0 0 0 Fresh Fresh Demanding chilling requirements for good Demanding requirements for good quality apples quality apples Overlap with the Italian season Overlap with the Italian season Water intensive Water intensive Not cost competitive with chiquita banana Not cost competitive with chiquita banana
213

Crop Technical Feasibility


Relevant Variety Constraints
Not producing the right variety Not producing the right variety Water intensive Water intensive Local consumption growing Local consumption growing Challenges due to changes in the textile Challenges due to changes in the textile manufacturing industry manufacturing Being replaced with sugar beet Being replaced with sugar beet Dried beans Dried beans Overlap with the Italian season in general Overlap with the Italian season in general Easy peel Easy peel Advantageous market window :: early Advantageous market window early production production High quality (long fiber) High quality (long fiber)

Advantages

Good opportunity in the future Good opportunity in the future

Fresh Fresh

Low

High

Source: BAH Analysis; Interviews with agriculture experts

e Low 4 High Proprietary & Confidential

Combined Analysis

A qualitative analysis of Egypts capabilities for production, export and promotion was conducted on each of the 41 crops to determine their feasibility ( Contd)
4 4 Crops Coffee not roasted/ Pineapples Roses Fruits nes Rank
0 0 0 0 0 0 Tea roses Tea roses

Crop Technical Feasibility


Relevant Variety Constraints
Tropical product not suitable for Egypt Tropical product not suitable for Egypt Not suitable growing conditions in Egypt Not suitable growing conditions in Egypt Very high costs of productions Very high costs of productions Lack of specification Lack of specification

Advantages

Source: BAH Analysis; Interviews with agriculture experts

214

Proprietary & Confidential

Low

High

Combined Analysis

When combining filtering criteria (on weighted basis), 7 strategic export crops were identified: grapes, strawberries, watermelons, oranges, artichokes, mandarin & clementines, and guavas & mangoes
1 1 2 2 3 3 4 4 5 5

Selection of Top Seven Crops *


Ranking of Yield of Natural Resources Ranking W ater Use Optim ization 1 2 9 6 8 11 9 21 4 15 19 11 11 4 15 21 15 21 19 6 6 1 15 4 8 17 18 9 22 31 34 3 11 2 21 13 23 10 24 14 Ranking Land Use Optim ization 2 1 16 4 8 18 19 10 21 29 28 3 6 9 25 7 22 11 23 14 Total Ranking Rationale (1= Best) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 + + + + + + + Highly demanded in EU and CIS Established business Highly demanded in EU Optimal resources utilization Highly demanded in CIS, EU and GCC Highly demanded in EU Efficient in land and water utilization

Ranking of Egypt Export Value

Ranking of Crops Attractiveness

Crops Grapes Strawberries Oranges Artichoke Watermelon & Other Melons Guavas & Mangoes Mandarin & clementine Cucumbers Onion Cotton Rice Tomatoes Dates Garlic Potatoes Peaches & Nectarines Lemon and limes Eggplant Avocado Sweet potatoes

2017 2 3 1 7 8 6 10 9 14 5 4 22 21 25 13 15 17 19 16 24

+ Highly demanded in EU and CIS + Highly demanded in GCC + Efficient in water utilization + Production and export processes well mastered + Demanded in EU - Overlap with the Italian season + Demanded in CIS - Production of the wrong variety + Efficient in land and water utlization + Optimal growing conditions + Highly demanded in GCC + Production and export processes well mastered + Highly efficient in land and water utilization + Cherry tomatoes is the variety highly demanded + Egypt's market share growing in GCC and CIS - Water intensive + Growing market share in EU - Water intensive + Easily grown in Egypt with little resources + Efficient in land and water utilization + Egypt's market share increasing in EU + Potential to focus production on exports - Egypt's market share decreasing - EU quotas restrictive + Egypt's market share growing in EU and FE

(*) Prioritization weighting: 50% weight of the export value, 15% for land utilization, 10% for water and 25% for crops technical feasibility Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics; Interviews with Experts 215

Selected Crop + Advantages _ Constraints Proprietary & Confidential

Combined Analysis

When combining filtering criteria (on weighted basis), 7 strategic export crops were identified: grapes, strawberries, watermelons, oranges, artichokes, mandarin & clementines, and guavas & mangoes
1 1 2 2 3 3 4 4 5 5

Selection of Top Seven Crops *


Ranking of Yield of Natural Resources Ranking Water Use Optimization 11 32 21 29 37 29 21 2 32 15 21 21 21 37 29 32 32 32 37 37 37 5 19 12 7 35 25 27 35 35 30 29 20 28 16 26 35 35 35 35 32 33 Ranking Land Use Optimization 13 20 12 15 35 24 31 35 35 33 32 5 27 17 26 35 35 35 35 30 34 Total Ranking Rationale (1= Best) 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 + Highly demanded - Not specific - Overlap with the Italian season + Efficient in land and water utilization, attractive - Flax processing not feasible in Egypt + Efficient in land and water utilization + Efficient in land and water utilization - Chilling requirements not met - Yield low, leading to inefficieny in land utilization - Stable demand + Potential with the easy peelers variety + Market share growing in EU - High competition and not cost competitive + High potential - Production to be initiatied + Efficient in land utilization - Under replacement with sugar beet - Low demand and low efficiency in water and land utlization - Low demand and low efficiency in water and land utlization - Lack of specifity - High costs of production - Not suitable growing conditions in Egypt - Not suitable growing conditions in Egypt - Not suitable growing conditions in Egypt - Limited demand - Egypt highly dependent on maize imports - Egypt highly dependent on wheat imports

Ranking of Egypt Export Value

Ranking of Crops Attractiveness

Crops Flax Pears and quinces Cauliflowers Lettuce Fruit, nes Apples, fresh Kidney Beans Cranberries, blueberries Trees Gram Beans Broad Beans Raw sugar, cane Grapefruit Bananas Citrus Roses Coffee, not roasted, not dec Cuttings and slips Pineapples Maize Wheat

2017 28 12 26 27 11 20 23 35 18 31 29 39 32 33 34 30 36 38 37 40 40

(*) Prioritization weighting: 50% weight of the export value, 15% for land utilization, 10% for water and 25% for crops technical feasibility Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics; Interviews with Experts 216

+ Advantages _ Confidential Proprietary & Constraints

Combined Analysis

The top crop selection is not highly sensitive to different criteria weighting scenarios
Scenario A : Scenario C : Scenario B : Recommended Highest 70% Export Value in 2017 50% Export Value in 2017 34% Export Value in 2017 Ranking 15% Crops Technical Feasibility 25% Crops Technical Feasibility 33% Crops Technical Feasibility 15% Yield of Natural Resources 25% Yield of Natural Resources 33% Yield of Natural Resources
1 2 3 4 5 6 7 8 9 11 13 15 17 19 21 23 25

Lowest Ranking

Grapes Strawberries Oranges Artichokes Watermelon (6) Guavas (3) Rice Cotton Cucumbers Mandarin (1) Onions Peach (2) Potatoes Pears (4) Dates Lemon (5) Avocado Tomatoes Eggplant Fruits nes Garlic Sweet potatoes Apples Trees Cauliflowers

1 2 3 4 5 6 7 8 9 11 13 15 17 19 21 23 25

Grapes Strawberries Oranges Artichokes Watermelon Guavas (3) Mandarin (1) Cucumbers Onions Cotton Rice Tomatoes Dates Garlic Potatoes Peach (2) Lemon (5) Eggplant Avocado Sweet potatoes Flax Pears (4) Cauliflowers Lettuce Fruits nes

1 2 3 4 5 6 7 8 9 11 13 15 17 19 21 23 25

Strawberries Grapes Artichokes Watermelon Oranges Garlic Guavas (3) Tomatoes Mandarin (1) Onions Dates Cucumbers Sweet potatoes Peach (2) Eggplant Flax Cotton Potatoes Rice Lemon (5) Avocado Cauliflowers Pears (4) Lettuce Broad Beans

Conclusions Conclusions Scenarios A, B and C differ in their Scenarios A, B and C differ in their respective prioritization weighting respective prioritization weighting of the export value in 2017, crops of the export value in 2017, crops technical feasibility and the yield of technical feasibility and the yield of natural resources covering the natural resources covering the scheme from large to small scheme from large to small growers growers Scenario B is the one Scenario B is the one recommended as maintaining a recommended as maintaining a balance between the supply and balance between the supply and demand analysis demand analysis The three scenarios position The three scenarios position grapes, strawberries, oranges, grapes, strawberries, oranges, watermelon, mandarins & watermelon, mandarins & clementines, mangoes & guavas clementines, mangoes & guavas and artichokes as the top crops and artichokes as the top crops optimizing the export value, crops optimizing the export value, crops technical feasibility as well as the technical feasibility as well as the yield of natural resources yield of natural resources

(1) Mandarins, clementines& tangerines; (2) Peaches and nectarines (3) Guavas & mangoes; (4) Pears and quinces; (5) Lemon and limes; (6) Watermelon & OtherConfidential Proprietary & Melons 217 Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics

..

Combined Analysis

In conclusion, Egypt should focus on investing in the identified top 7 crops other crops could either be pursed opportunistically, or dropped altogether
Top Egypt Agricultural Export Crop Selection
Best

Market Potential (2017,M$) 800 Invest

Average Crops Attractiveness Oranges Invest

Rice 200 Cotton Guavas * Strawberries

Grapes

Watermelon *** Artichoke Cucumbers Mandarin ** Lemon and limes Fruit, nes Pears and quinces Onion Avocado Peach Gram Beans Dates Potatoes Eggplant Divest
Worst

Average Market Potential Crops Attractiveness


Best

35
Worst

30

25

20

15

Pursue Opportunistically 10 5 1

Crops attractiveness weights equally yield of natural resources and the technical feasibility
Not Selected Crop Top 7 Crops Proprietary & Confidential
(*) Mangoes & guavas; (**) Mandarins, clementines, tangerines; (***) watermelon and other melons Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics 218

Combined Analysis

While focusing on these top 7 crops, Egypts agricultural export could reach $3.5 to $4.9 billion in 2017, with corresponding export volume varying from 4.7 to 7 million tons
Forecasted Egypt Exports Value (in Million USD) (2005-2017)
Top 7 crops represented Top 7 crops represented 26% of 2005 exports and 26% of 2005 exports and are expected to constitute are expected to constitute 57% of 2017 exports 57% of 2017 exports

Forecasted Egypt Exports Volume (2005-2017)


Volume (in K Tons) 2012 2017 2005 Total Exports(1) (Scenario 1) 2,408 4,964 7,036 Volume CAGR 2005-2017 10%

4,922

Total Exports(2) (Scenario 2) 3,364 3,480


Mandarins (5) Cucumbers Watermelon (4) Artichokes Guavas (3) Strawberries Cotton Rice Grapes Oranges

2,296 6 0 11 4 26 26 150 895 28 620

3,574 23 73 33 13 67 73 150 1,166 96 1,246

4,767 60 116 80 29 93 116 150 1,331 239 1,697

6% 21% 13% 18% 18% 12% 13% 0% 3% 20% 9%

2,239 1,356

2005

2012

2017

Notes: (1) Scenario 1 assumes that exports outside the 5 regional markets grow in line with those within the 5 regional markets (2) Scenario 2 assumes that the remaining crops export value remains constant from 2005 until 2017 (3) Guavas and mangoes; (4) Watermelon and other melons; (5) Mandarins and clementines Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics 219

Proprietary & Confidential

Egypts agricultural market exports would continue to be predominantly focused on EU However GCC and CIS would gain in importance, with exports of selected top crops
Forecasted Egypt Exports Value (in Million USD) (2017) 3,483 13% 1,477 30% Others Peach Potatoes Cucumbers Cotton Rice 2,006 3% 10% 16% 6% 18% 28% Mandarins (1) Watermelon (2) Artichokes Guavas (3) Strawberries
49%

Forecasted Egypt Exports Value of Top Crops per Regional Market (in Million USD) (2017) 80 73 62 2,006

120 354

15%

11% 15%

25% 34%

556
92%

761
29% 20% 70%

Grapes

Oranges Grapes Straw- Guavas WaterTotal 7 Artichokemelon Mandarins berries 1,696 EU 239 USA 116 CIS 93 29 GCC 80 FE 60 Exported Volume (K Tons) Other

22%

38%

Oranges

(1) Mandarins & Clementine (2) watermelon & other melons; (3) guavas and mangoes Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics 220

Proprietary & Confidential

Besides the 7 strategic crops, the EU would remain an important market for other crops in the top 20 list, with the CIS gaining in importance for rice and other horticulture products
E x p o rt V a lu e t o EU 2012 O ra n g e s 203 G ra p e s 176 S tr a w b e r r ie s 147 A r tic h o k e 27 W a te r m e lo n 26 G uavas, m angoes 2 11 M a n d a r in , c le m e n tin e C u c u m b e rs 2 R ic e 0 C o tto n 82 F r u it, n e s 6 P e a r s a n d q u in c e s 0 P o ta to e s 48 O n io n 3 Peach 14 Avocado 23 L e m o n a n d lim e s 3 T re e s 6 E g g p la n t 2 A p p le s , fr e s h 0 D a te s 1 T o m a to e s 1 K id n e y B e a n s 2 S w e e t P o ta to e s 1 G a r lic 1 C a u liflo w e r s 0 L e ttu c e 1 F la x 1 B ro a d B e a n s 1 R oses 0 G ra m B e a n s 0 G r a p e fr u it 0 B ananas 0 C itr u s 0 0 C r a n b e r r ie s , b lu e b e r r 0 C o ffe e , n o t ro a s te d , n P in e a p p le s 0 C u ttin g s a n d s lip s 0 R a w s u g a r, c a n e 0 W heat 0 M a iz e 0 T o ta l 792 E x p o rt V a lu e t o USA 2012 0 0 0 0 0 0 7 4 2 19 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 33

Breakdown of Target Export Value by Regional Market (in Million USD) (2012 and 2017)
E x p o rt V a lu e t o GCC 2012 129 4 8 0 0 67 1 0 46 0 5 0 1 28 3 0 2 0 0 0 0 0 0 0 1 1 0 0 1 0 0 1 0 0 0 0 0 0 0 0 0 299 E x p o rt V a lu e t o C IS 2012 171 6 1 0 0 0 4 18 120 0 9 25 9 0 0 2 0 0 2 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 371 E x p o rt V a lu e t o FE 2012 2 2 3 0 0 0 0 0 0 48 1 0 0 0 0 0 2 0 0 0 4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 61 E x p o rt to R e g io n a l M a rk e ts 2012 505 188 159 27 27 69 23 24 168 149 20 25 58 31 17 25 7 6 4 5 5 2 3 1 2 1 1 2 2 0 1 1 0 1 0 0 0 0 0 0 0 1 ,5 5 7 E x p o rt V a lu e t o EU 2017 376 514 321 80 72 7 34 5 0 103 20 0 41 3 35 30 7 10 7 0 3 2 3 3 2 0 2 1 1 0 1 0 1 0 0 0 0 0 0 0 0 1 ,6 8 4 E x p o rt V a lu e t o USA 2017 0 0 0 0 0 0 13 10 9 27 0 0 0 0 0 0 0 0 0 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 63

E x p o rt V a lu e t o GCC 2017 152 15 9 0 0 113 3 3 108 0 9 0 0 41 5 0 2 0 0 1 1 0 0 0 1 2 0 0 0 0 1 1 0 0 0 0 0 0 0 0 0 469

E x p o rt V a lu e t o C IS 2017 221 17 2 0 0 0 12 52 139 0 27 51 3 0 0 5 0 0 3 8 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 541

E x p o rt V a lu e t o FE 2017 2 7 9 0 0 0 0 0 0 43 1 0 0 0 1 0 11 0 0 0 5 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 79

E x p o rt to R e g io n a l M a rk e ts 2017 751 553 339 80 72 120 61 70 257 173 57 52 45 45 40 35 21 11 10 9 8 5 3 3 3 2 2 1 1 1 1 1 1 1 0 0 0 0 0 0 0 2 ,8 3 7

Source: BAH Analysis; UN Comtrade; FAOSTAT; Ministry of Agriculture statistics; Interviews with Experts 221

Proprietary & Confidential Main Destination Market

Egypts Agricultural Export Market Potential


Introduction Identification of Strategic Crops for Egypt Agricultural Exports Selected Market Analysis of Egypt Strategic Crops Appendix

Proprietary & Confidential

Market Analysis

Further analysis was undertaken to assess Egypts competitive position in the main importing country markets, for each of the seven strategic crops
L AL TU A TU P P E CE NC ON CO C

Competitive Market Analysis of Strategic Crops


Country Selection Top 2 Importing Countries Competitive Analysis

EU-25 EU-25

USA USA

GCC GCC

CIS CIS

FE FE

Within each regional Within each regional market, select up to 2 market, select up to 2 destination country destination country markets for each markets for each strategic crop strategic crop Selection of destination Selection of destination country markets based country markets based on: on: Highest net import Highest net import volume (Total volume (Total imports Total imports Total exports) in 2005 exports) in 2005 Positive or neutral Positive or neutral net import volume net import volume growth from 2003 to growth from 2003 to 2005 2005 Other attractive Other attractive qualitative or qualitative or quantitative quantitative attributes (e.g. attributes (e.g. customer customer awareness, market awareness, market penetration) penetration)

Austria Austria Belgium Belgium France France UK UK USA USA

The competitive The competitive analysis is undertaken analysis is undertaken for each strategic crop for each strategic crop and within every and within every destination country destination country market for 2006 market for 2006 For each strategic crop: For each strategic crop: Identify major Identify major competitors having competitors having the highest market the highest market share within Egypt share within Egypt market window in market window in the destination the destination country market country market Compare Egyptian Compare Egyptian market share with market share with that of competitors that of competitors Compare import Compare import price of Egypt with price of Egypt with that of competitors that of competitors in destination in destination country market country market

Main Market Competitor Share s

CIF

Chile Chile Israel Israel Egypt Egypt

48% 48% 29% 29% 3% 3%

450 450 445 445 501 501

Chile Chile Brazil Brazil Egypt Egypt

33% 33% 23% 23% 11% 11%

252 252 251 251 303 303

Saudi Arabia Saudi Arabia Bahrain Bahrain Oman Oman .. .. Russia Russia Armenia Armenia Uzbekistan Uzbekistan

Egypt Egypt Syria Syria Jordan Jordan

59% 59% 15% 15% 14% 14%

750 750 832 832 845 845

Brazil Brazil Spain Spain Egypt Egypt

33% 33% 23% 23% 1% 1%

10 10 9 9 15 15

Malaysia Malaysia China China Japan Japan .. ..

Israel Israel Spain Spain Egypt Egypt

25% 25% 19% 19% 2% 2%

254 254 299 299 323 323

223

Proprietary & Confidential

Market Analysis

Egyptian grapes, strawberries, watermelon and oranges are predominantly imported by Germany and France within EU region
Selection of Top 2 EU-25 Countries For Each Strategic Crop
CAGR Net Imports Grapes (2003-3005) (Country, Imports Within Egypt Window K Tons) 100% Slovakia Netherlands 200% UK, 170 0% Italy France 0%
-500 0 500

CAGR Net Imports Strawberries (2003-3005) (Country, Imports Within Egypt Window K Tons) 400%

Germany, 200 France, 11 Germany, 30 Net Imports (2005, K Tons) 100

Net Imports (2005, K Tons)

50

CAGR Net Imports Watermelons (2003-3005) (Country, Imports Within Egypt Window K Tons)

CAGR Net Imports Oranges (2003-3005) (Country, Imports Within Egypt Window K Tons)

100%

Slovakia Portugal France, 150 Germany, 150

0%

UK

Germany, 233 France, 200

0%

Spain -20% Net Imports (2005, K Tons)


-500 0 500 1,000 Proprietary & Confidential

-100%
0

Poland
100 200 300

Net Imports Net Imports (2005,Tons) (2005, K T Tons)


-1,000

Note: (*) The country had a negative net import in 2003, therefore the growth was calculated using the absolute value Source: UN Comtrade; BAH Analysis 224

Market Analysis

Italy and France are the main importers of Egyptian artichokes


Selection of Top 2 EU-25 Countries For Each Strategic Crop
CAGR Net Imports (2003-3005) 100%

Artichokes *
(Country, Imports Within Egypt Window K Tons) Czech Rep. Italy, 8 France, 10 Netherlands Estonia

0%

Spain Greece

-100%
-5 0 5 10 15

Net Imports (2005, K Tons)

CAGR Net Imports (2003-3005) 25%

Mandarins & Clementines


(Country, Imports Within Egypt Window K Tons)

CAGR Net Imports (2003-3005) 100%

Guavas & Mangoes


(Country, Imports Within Egypt Window K Tons)

UK, 100 0% Germany, 100 0 -25% Net Imports (2005, K Tons)


0
225

Netherlands, 35 France

UK, 35

Net Imports (2005, K Tons)


25 50

500

(*) Egypt is the main country exporting to all of the EU countries Source: UN Comtrade ; BAH Analysis

Proprietary & Confidential

Market Analysis

Saudi Arabia and UAE are the largest net importers of grapes, strawberries and oranges in the GCC, and watermelon is mainly imported by Oman
Selection of Top 2 GCC Countries For Each Strategic Crop
CAGR Net Imports (2003-3005)

Grapes
(Country, Imports Within Egypt Window K Tons)

CAGR Net Imports (2003-3005) 800% 600% Oman

Strawberries
(Country, Imports Within Egypt Window K Tons)

Qatar 0% Oman

UAE, 5 Saudi Arabia, 15

400% 200%

Qatar

Bahrain 0 CAGR Net Imports (2003-3005) 0% Oman, 50

Net Imports (2005, K Tons)

0%
0

Bahrain
10

Saudi Arabia, 1 UAE, 2


20 30

Net Imports (2005, K Tons)

Watermelon
(Country, Imports Within Egypt Window K Tons) Qatar KSA is self sufficient in KSA is self sufficient in watermelons, therefore watermelons, therefore does not appear as a top does not appear as a top importer importer 0% Oman Bahrain -20% Bahrain

Oranges
(Country, Imports Within Egypt Window K Tons) UAE, 50 Saudi Arabia, 226

-25% 10
Source: UN Comtrade; BAH Analysis

Net Imports (2005, K Tons)


0
226

250

500

Net Imports (2005, K Tons)

Proprietary & Confidential

Market Analysis

Similarly, UAE and Saudi Arabia are the largest net importers of mandarins, guavas and mangoes, while artichokes imports mainly go to UAE and Qatar
Selection of Top 2 GCC Countries For Each Strategic Crop
CAGR Net Imports (2003-3005) 20% Bahrain Saudi Arabia, 15 UAE, 10 0% Oman Net Imports (2005, K Tons) -50%
0 50

Mandarins & Clementines


(Country, Imports Within Egypt Window K Tons)

CAGR Net Imports (2003-3005) 50%

Guavas & Mangoes


(Country, Imports Within Egypt Window K Tons)

10%

Qatar 0%

Qatar Oman

UAE, 10

Saudi Arabia, 48

-10%

Net Imports (2005, K Tons)

Selection of Top 2 Countries For Artichokes in GCC Selection of Top 2 Countries For Artichokes in GCC UAE has been selected as: UAE has been selected as: Most important in GCC market (( 60% of total GCC imports) Most important in GCC market 60% of total GCC imports) Ranked No. 3 in world importers of artichokes (Based on value of imports) Ranked No. 3 in world importers of artichokes (Based on value of imports) Qatar has been selected as: Qatar has been selected as: Second-most important GCC import market (30% of the total GCC imports) Second-most important GCC import market (30% of the total GCC imports) Ranked No. 11 in world importers of artichokes (based on value of imports) Ranked No. 11 in world importers of artichokes (based on value of imports) Customer awareness is low in Saudi Arabia and does not represent a sizeable export opportunity Customer awareness is low in Saudi Arabia and does not represent a sizeable export opportunity

Source: UN Comtrade; BAH Analysis

227

Proprietary & Confidential

Market Analysis

In the CIS region, Russia is the largest importer of grapes, strawberries, watermelon, mandarins and oranges but does not currently import artichokes, guavas and mangoes from Egypt
Selection of Top 2 CIS Countries Importing Each of the Strategic Crops*
CAGR Net Imports (2003-3005) Ukraine, 15 500%

Grapes
(Country, Imports K Tons**)

CAGR Net Imports (2003-3005) Belarus 100%

Strawberries
(Country, Imports K Tons**) Russia, 9

Rep. of Moldova 250% Georgia 0%


0

Georgia 0% Russia, 100


100 200 300

Belarus

Net Imports (2005, K Tons)

10

15

Net Imports (2005, K Tons)

CAGR Net Imports (2003-3005) 100% Moldova 0%

Watermelon
(Country, Imports Tons **)

CAGR Net Imports CAGR Net Imports Oranges (2003-3005) (2003-3005) Mandarins & Clementines (Country, Imports K Tons **) (Country, Imports K Tons **) 200% 100% Ukraine 0% Russia, 200 Net Imports 0% (2005, K Tons) -250 Ukraine Russia, 410 -100%
0 250

Russia, 200

200%

-100%
0 100

Net Imports (2005, K Tons)

(*) CIS market of artichokes, guavas & mangoes and mandarins in insignificant; (**) within Egypt market window 228 Source: UN Comtrade; BAH Analysis

Net Imports (2005, K Tons) 0 250 Proprietary & Confidential

Market Analysis

In the Far East, Hong Kong is the dominant importer of Egyptian grapes, strawberries, watermelon, oranges, mandarins but is surpassed by China for guavas and mangoes imports
Selection of Top 2 FE Countries Importing Each of the Strategic Crops
CAGR Net Imports (2003-3005) 10%

Grapes
(Country, Imports K Tons **) South Korea

CAGR Net Imports (2003-3005)

Strawberries
(Country, Imports K Tons **)

Top Importing Country of Top Importing Country of Mandarins Mandarins Hong Kong is the most Hong Kong is the most important Far-East import important Far-East import market (40% of the total Farmarket (40% of the total FarEast imports) East imports) Hong Kong is ranked No. 9 in Hong Kong is ranked No. 9 in world importers (based on world importers (based on value of imports) value of imports)

5%

50% Hong Kong, 20 0% Malaysia China, 15


20 30

Malaysia Hong Kong, 2 Japan, 2

0%

-5%
0

Japan
10

Net Imports (2005, K Tons)

-50%
0.0 2.5

Net Imports (2005, K Tons) 5.0

Watermelon
(Country, Imports K Tons**) CAGR Net Imports (2003-3005) 10% Hong Kong, 30 CAGR Net Imports (2003-3005) 10%

Oranges
(Country, Imports K Tons**) CAGR Net Imports (2003-3005) Malaysia

Guavas & Mangoes


(Country, Imports K Tons**)

China, 3

5%

0%

0% Japan Hong Kong, 40 Rep of Korea, 30 -50% Net Imports (2005, K Tons)0 100

South Korea

Japan Malaysia Hong Kong, 15

Japan 0%
Note:

China*, 20 50 Net Imports (2005, K Tons)

0 (*) The country had a negative net import in 2003, therefore the growth was calculated using the absolute value; Far East imports of artichokes are insignificant; (**) Within Egypt market window Proprietary & Confidential 229 Source: UN Comtrade; BAH Analysis

25

10

Net Imports (2005, K Tons) 20

Market Analysis

In summary, Egypt could focus on sixteen major destination countries to drive exports of the seven strategic crops, as well as other crops in the proposed production mix
Best Export Country Markets for Egypt Strategic Crops
Strategic Crops Regional Export Markets Germany Germany France Germany France France Italy

II Grapes Grapes

II II Strawberries Strawberries

III III Oranges Oranges

IV IV Artichokes Artichokes

V V Water Water melon/ melon/ Other Other Melons Melons


Germany France

VI VI Guavas & Guavas & Mangoes Mangoes

VII VII Mandarins Mandarins

Netherlands UK

Germany UK

EU EU

UK

USA USA

USA

USA

USA

USA

USA

USA

USA

GCC GCC

Saudi Arabia UAE

Saudi Arabia UAE

Saudi Arabia UAE

UAE Qatar

Oman

Saudi Arabia UAE

Saudi Arabia UAE

CIS CIS

Russia Ukraine

Russia

Russia

NA

Russia

NA

Russia

China

Japan Hong Kong

Hong Kong Rep of Korea

NA

Hong Kong China

China Hong Kong

Hong Kong

Far East Far East

Hong Kong

230

Proprietary & Confidential

Market Analysis: Grapes

Leveraging early market window should enable Egypt to reinforce its position in EU, while moving up-market in GCC would provide substantial gains in exports
Market Analysis for Grapes (2006; 2017)
Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017

Strategic Crop

Market Entry Success Factors

Comments

II Germany (200; 11%)

Egypt: 2%, $1,613 Italy: 50%, $1,328 Greece: 12%, $1,628 Turkey: 7%,$ 940 Egypt: 9%, $1,500 Spain: 23% $1,691 Greece: 13%, $2,368 India: 6%, $1,673 Egypt: 4%, $530 Turkey: 20%, $407 India: 13%, $687 Lebanon: 10%,$867 Egypt: 7%, $530 Syria: 20%, $1,291 Italy: 13%. $1,470 India: 5%, $932 Pakistan: 5%, $953

EU (400)
UK (170; 10%)

Grapes
KSA (15; 1%)

GCC (40)
UAE (5; 10%)

Leverage early market window (late April) Compete on quality with Italy (avoid head on cost battle with Turkey) Focus on seedless grapes Move from wholesalers (45% of current customers) to supermarkets Leverage early market window (late April) Dislodge India on logistics & Spain on cost advantage Strengthen relationships with supermarkets chains Enter market in May Differentiate offer from low cost (Turkey) Target Lebanon and to some extent India Serve hotels & restaurants Undercut Syria and Italy with quality products Serve hotels & restaurants Enter market in May

MS 7% Volume 40 KT FOB $1,830/Ton Value $M 73 MS 18% Volume 109 KT FOB $2,250Ton Value $M 248 MS 10% Volume 1.6 KT FOB $ 700/Ton Value $M 1 MS 13% Volume 1.7 KT FOB $ 1,800/Ton Value $M 3

Egypt Season: April to end of July Produce in Upper Egypt (best conditions) Improve cold chain transportation Promote Egyptian band/ grapes

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 231

Proprietary & Confidential

Market Analysis: Grapes

Focus on quality, seedless grapes should allow Egypt to further penetrate the Hong Kong market, while low cost is a major determinant to gain market share in China
Market Analysis for Grapes (2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window ( Egypt Window K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

II Russia (100; 15%) Egypt: 2%, $853 Uzbekistan: 40%, $994 Turkey: 20%, $ 1,306

CIS (150)

Target Turkey by undercutting average quality export grapes Use early export window to gain market share from Uzbekistan Export year round using Egypts geographical advantage Move from traders to new supermarkets Export low to average grapes to dislodge Italy Improve cost advantage Attempt to gain market share from USA Focus on seedless and high quality grapes to enter Hong Kong Move from green groceries (100% of current customers) to catering for hotels and restaurants Prioritize cost over quality Export the lowest cost grapes Dislodge USA by focus on different export window

MS 4% Volume 11 KT FOB $1,300/Ton Value $M 15 Egypt Season: April to end of July Produce in Upper Egypt (best conditions) Improve cold chain transportation

Ukraine (15; 15%)

Egypt: 1%, $373 Turkey: 50%, $ 311 Italy: 20%, $350

Grapes
Hong Kong (20; -4%) Egypt: 1%,$1 ,626 USA: 97%,$1,987

MS 2% Volume 1KT FOB $430/Ton Value $M 0 MS 7% Volume 1 KT FOB $2,000/Ton Value $M 2 MS 6% Volume 0.6 KT FOB $1.550/Ton Value $M 1

Far East (50)


China (15; -4%) Egypt: 0%, $983 USA: 90%, $ 1,549

Total

Target: $343 Million in 2017 (62% of overall projections in 5 Key Regional Markets)
Proprietary & Confidential

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 232

Market Analysis: Strawberries

Shipping strawberries through sea should lower the import price to EU and allow Egypt to take significant market share from Moroccan exports of strawberries to the EU, given its market window advantage
Market Analysis for Strawberries (2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

II II France (40; 9%) Egypt*: 2%, $5,540 Morocco: 59%,$2,106 USA: 15%, $ 3,184

EU (150)
Egypt*: 7%, $4,322 Morocco: 32%, $1,393 Poland: 32%; $800 Mexico: 99%, $ 1702 Egypt: 82%, $753 USA: 5%, $1,193

Germany (12; 4%)

Strawberries USA
USA (55) KSA (1; 11%)

Enhance competitive position in France by undercutting USA (avoid Morocco because captive market) Leverage market window to supply in late Nov/Dec (Christmas) Focus on fresh, big and fully colored with green leaves Target supermarkets Break into Moroccos position through aggressive pricing (Poland mostly low grade for processing) Leverage market window to supply in late Nov/ Dec Target supermarkets Market hard to penetrate due to logistical constraints Capture US market share Export Jan to March Focus on small berries

MS 4% Volume 4 KT FOB $2,570/Ton Value $M 10 Egypt Season: from Nov to April Produce in Upper Egypt (best conditions) Ship strawberries through sea instead of air to reduce CIF

MS 12% Volume 2 KT FOB $1,900/Ton Value $M 4

MS 87% Volume 3KT FOB $955/Ton Value $M 3 MS 62% Volume 2 KT FOB $2,500/Ton Value $M 4

GCC (2)
UAE (2; 3%) Egypt: 58%, $2,200 Australia: 21%, $3,753 Maintain market share by providing higher grade to catering industry

(*) Egypt exports 6% of its exports to EU to Germany and France 233 Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts

Proprietary & Confidential

Market Analysis: Strawberries

Strawberry imports in CIS and Far East are dominated by Turkey and the US respectively, forcing Egypt to compete on CIF price
Market Analysis for Strawberries (2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

II II

CIS (15)

Russia (9; 30%)

Egypt: 1%, $1,300 Turkey: 50%, $1,305 Poland: 40%, $1,318 Egypt: 2%, $ 6,000 USA: 90%,$8,403

Focus on Christmas period and on low cost exports to undercut Turkey Export large berries Move from traders (100% of current customers) to new supermarkets Attempt to gain market share in Far East, where USA has invested heavily in promotion and brand recognition, with attractive prices Avoid Californian season from Sept to Oct start the exports in November Prioritize quality and traceability Far East has strict quality control restrictions Focus on the packaging as its relevant to the Far East Move from restaurants (50% of current customers) to supermarkets

MS 3% Volume 5 KT FOB $830 /Ton Value $M 4 MS 15% Volume 0.3 KT FOB $8,000 /Ton Value $M 2.5 Egypt Season: from Nov to April Produce in Upper Egypt (best conditions) Ship strawberries through sea instead of air to reduce CIF

Japan (2; 0%)

Strawberries Far East (5)


Hong Kong (2; 5%) Egypt: 1%, $3,600 USA: 51%, $4,994 Australia: 8%, $4,456

MS 17% Volume 1KT FOB $5,649 /Ton Value $M 3

Total

Target: $31 Million in 2017 (10% of overall projections in 5 Key Regional Markets)

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 234

Proprietary & Confidential

Market Analysis: Oranges

Egyptian orange exports face fierce competition from Spain in the EU, and from Mexico in the US. Main market differentiators are presentation, packaging, and cost
Market Analysis for Oranges (2006; 2017)
Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017

Strategic Crop

Market Entry Success Factors

Comments

III III Egypt: 2%, $572 Spain: 60%, $692 Greece: 15%, $592 Italy: 12%, $661

Germany (233; -6% )

EU (600) Oranges
France (200; -4% ) Egypt: 1%, $587 Spain: 60%, $806 Morocco: 10%, $585

USA (13)

USA (13, 2%)

Mexico: 80%,$1,269 Italy: 9%, $1,372

Compete with Spain by focusing on low cost/high volume (margin MS 14% business) Volume 51 KT Focus on uniformity in size and color of oranges FOB $505/Ton Package strongly and firmly Value $M 26 Move from traders (20% of current customers) to discount markets Compete with Spain by focusing on low cost/high volume ( margin MS 15% business) Volume 19 KT Target freshness of oranges FOB $465/Ton Package loosely as it will be repackaged and re-branded Value $M 9 Export Naval oranges Move from wholesalers (20% of current customers) to supermarkets Hard to penetrate Well established competition from Mexico Import restrictions APHIS: Irritation/ deep cooling because of Peach Fly Niche market on blood oranges for Italy

Egypt Season: Nov to May Amend regulations in order to allow the production of oranges in old lands, specialized for the production of wheat and maize Invest for production in Upper Egypt

(*) 4% of Egypt s 2005 export s to EU are sent to France and Germany Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 235

Proprietary & Confidential

Market Analysis: Oranges

Egypt can gain market share in KSA by segmenting its offer between low quality juice oranges and higher quality to hotels and restaurants
Market Analysis for Oranges (2006; 2017)
Total Imports within Egypt Window ( K Tons) Target Country Import Volumes & Growth within Egypt Window (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017

Strategic Crop

Market Entry Success Factors

Comments

III III KSA (226; 5%) Egypt: 60%, $346 Lebanon: 10%, $150 Syria: 2%, $300 Capture Lebanons market share in juice oranges by providing lower quality product Target also hotels and restaurants by providing higher quality Leverage geographical proximity to dislodge USA Export high quality and medium size oranges Target retailers, hotels and restaurants MS 65% Volume 168 KT FOB $359/Ton Value $M 60

Egypt Season: Nov to May Amend the regulations in order to allow the production of oranges in the old lands, specialized for the production of wheat and maize Invest for production in Upper Egypt

Oranges

GCC (240)
UAE (50; 18%) Egypt: 17%, $400 USA: 50%, $491

MS 39% Volume 121 KT FOB $450/Ton Value $M 54

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 236

Proprietary & Confidential

Market Analysis: Oranges

Egypt oranges should gain market share in Russia by leveraging its long-standing relationship, competing on cost and focusing trade on supermarkets
Market Analysis for Oranges (2006; 2017)
Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017

Strategic Crop

Market Entry Success Factors

Comments

III III Egypt: 31%, $524 Morocco: 36%, $525 Turkey: 29%, $532

CIS (450)

Russia (350; 8%)

Gain market share from Morocco by leveraging established relations with Russia Lower cost (most important criteria to Russia) by providing average quality product Move from traders (100% of current customers) to supermarkets Leverage logistics advantage to capture Californias share Undercut competitors on medium to high quality Move from catering institutions (30% of current customers) to supermarkets Maintain market share in HonkKong Shift from low/middle quality towards high quality oranges (quality is the most important criteria to Hong Kong)

MS 47% Volume 380KT FOB $580/Ton Value $M 220

Egypt Season: Nov to May Amend regulations in order to allow the production of oranges in the old lands, specialized for the production of wheat and maize Invest for production in Upper Egypt Egypts Exports to Rep of Korea and Hong Kong = 18% of Exports to Far East

Oranges Far East (100)

Rep. of Korea (30; 2%)

Egypt: 0%, $890 USA: 90%, $986

MS 2% Volume 1KT FOB $1,053/Ton Value $M 1 MS 2% Volume 1KT FOB $1,018/Ton Value $M 1

Hong Kong (40; 6%)

Egypt: 2%, $500 USA: 70%, $953

Total

Target: $371 Million in 2017 (49% of overall projection in 5 Key Regional Markets)
Proprietary & Confidential

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 237

Market Analysis: Artichokes

Egypt should expand its artichoke target market by competing with Spain on the right variety and market window It should also target the UAE and Qatar during the summer seasons
Market Analysis for Artichokes (2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

IV IV France (10; -1%) Egypt: 7%, $ 583 Spain: 70%, $1,541 Italy: 20%, $726

EU ( 18)
Italy (8; 15%) Egypt: 68%, $1,242 Spain: 20%, $946 Mexico: 79%, $ 1,908 Egypt: 0%, $331 Netherlands: 98%, $4,154 Egypt: 11%, $331 Netherlands: 96%, $4,989

Artichokes

USA (1)

USA UAE (1; 25%)

GCC (2)
Qatar (0.3; 10%)

Expand market by offering higher MS 22% quality and undercuting Spain Volume 2KT Enter in Nov/ Dec FOB $1,700/Ton Export big and green globes Value $M 3.5 Move from traders (10% of current customers) to new supermarkets Maintain market share MS 67% Drive down costs to compete with Volume 24 KT Spain FOB $1,500/Ton Export pink and medium size Value $M 36 Move from traders (5% of current customers) to new supermarkets Difficult market Envision frozen artichokes (processed food) MS 2% Volume 0.2 KT Focus on summer season FOB $4,000Ton Undercut Netherlands Value $M 1 Grow green variety of artichokes MS 15% Target high quality catering for Volume 0.13 KT hotels and restaurants FOB $5,000/Ton Value $M 0.6 Non- significant market

Egypt Season: from Sept to April Expand growing areas beyond Kafr Al Dawar into new lands to support export targets (4.5 ton/acre required)

CIS Far East Total

Target: $41 Million in 2017 (51% of overall projections in 5 Key Regional Markets)
Proprietary & Confidential

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 238

Market Analysis: Watermelon & Other Melons

Egypt competes with Spain and Morocco for watermelon exports to the EU, and should focus on producing the right varieties
Market Analysis for Watermelon & Other Melons (2006; 2017)
Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017

Strategic Crop

Market Entry Success Factors

Comments

V V Germany (150; 1%) Egypt: 0.1%, $450 Spain: 55%, $738 Brazil: 10%, $1,217

EU (380)
France (150; 7%) Egypt: 0%, $1,000 Spain: 30%, $768 Morocco: 25%, $1,362

Watermelon & Other Melons USA

Capture window between Brazil and Spains season Focus on seedless, medium, with consistent colors inside, with low tenure in sugar ( e.g. Galia melons) Move to supermarkets Capture window between Brazil and Spains season Focus on seedless, medium, with consistent colors inside, with low tenure in sugar (e.g., Charentais) Move from wholesalers (10% of current customers) to direct supermarkets Hard to penetrate Develop direct trading partnership with Oman (away from UAE hub) to capture market share from Iran Raise awareness of Egyptian watermelons Focus on sweet and ripe watermelon

MS 7% Volume 12 KT FOB $910/Ton Value $M 11 Egypt Season: from Sept to April Produce in Upper Egypt (best conditions) Improve infrastructure and transportation means MS 2% Volume 1 KT FOB $300 /Ton Value $M 0.3

MS 7% Volume 22 KT FOB $913/Ton Value $M 20

USA (905)

Mexico: 38%, $455

GCC (100)

Oman (50; 1%)

Egypt: 0%, $260 Iran: 60%, $213

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 239

Proprietary & Confidential

Market Analysis: Watermelon & Other Melons

Egyptian watermelons should compete on cost to gain market share in CIS and Chinese markets, and on quality and traceability to enter Hong Kong
Market Analysis for Watermelon & Other Melons (2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

V V

CIS (250)

Russia (200; 7%)

Egypt: 0%, $500 Uzbekistan: 45%, $560 Kazakhstan: 40%, $526 Egypt: 0%, NA Malaysia: 35%, $391 China: 35%, $322

Watermelon & Other Melons

Hong Kong (30; 0%)

Far East (70)


China (20; 28%) Egypt: 0%, NA Vietnam: 90%, $167

Leverage market window advantage by exporting watermelon during Christmas Prioritize cost over quality Focus on new supermarkets Attempt to gain market share by leveraging market window advantage - November Prioritize quality and traceability over cost but price competitively Focus on packaging Export seedless watermelons Focus on new supermarkets Attempt to gain market share in China by leveraging market window advantage - November Cut down costs Provide lower quality products Focus on new supermarkets

MS 1% Volume 4 KT FOB $600 /Ton Value $M 5

Egypt Season: from Sept to April Upper Egypt (best conditions) Improve infrastructure and transportation means Current Egypts exports to the Far East are nul

MS 2% Volume 1 KT FOB $400 /Ton Value $M 0.3

MS 2% Volume 0.4 KT FOB $200 /Ton Value $M 0

Total

Target: $37 Million in 2017 (50% of overall projections in 5 Key Regional Markets)

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 240

Proprietary & Confidential

Market Analysis: Guavas & Mangoes

Egypt guava & mango exports to the EU are price competitive, but should be re-focused on better quality varieties (red and yellow) In the GCC, Egypt should compete on price
Market Analysis for Guavas & Mangoes (2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

VI VI

Undercut Brazil CIF prices Target high-end customers Egypt: 0%, $850 Export red/ yellow mangoes (e.g. Netherlands Brazil: 47% , $1,243 Tommy Atkins) and medium size (35; 14%) green guavas Peru: 17%, $1,178 Move from traders (10% of current customers) to new supermarkets EU (100) Target ethnic population (e.g. Indian Egypt: 0%, $850 & Pakistani community) and valueUK Pakistan: oriented customers Focus on flavor and aroma (35; 5%) 16%,$1,719 Move from traders (15% of current Brazil: 14%,$1,020 customers) to supermarkets Guavas & Target Saudi nationals Mangoes Differentiate offer from loss leader providers Egypt: 21%, $460 KSA Capture Yemens share by providing Pakistan: 31%, quality products (48; 15%) $414 Move from traders (70% of current Yemen: 25%, $704 customers) to supermarkets ( e.g. GCC (80) Panda, Charbatli) Target foreign workers (main consumers) Egypt: 10%, $450 Provide lower quality and compete UAE (10; 22%) Pakistan: 75%,$258 on price Move from traders (55% of current customers) to supermarkets Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 241

MS 1% Volume 1 KT FOB $1,550/Ton Value $M 1 MS 6% Volume 4 KT FOB $2,000 Ton Value $M 8 MS 46% Volume 53 KT FOB $640Ton Value $M 34

Egypt season: Sept to January Introduce & Develop adequate varieties for Egypt Produce in Ismaili, Sharquia and in the New Lands Improve productivity in Egypt (increase supply) in order to reduce price on the local market (currently $2,000/Ton) Promote the brand

MS 15% Volume 13 KT FOB $397 Ton Value $M 5

Proprietary & Confidential

Market Analysis: Guavas & Mangoes

The number of competitors in guava and mango imports is growing in the Far East markets These markets should not be a priority focus for Egypt
Market Analysis for Guavas & Mangoes (2006; 2017)
Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017

Strategic Crop

Market Entry Success Factors

Comments

VI VI China (3; 6%) Egypt: 0%, NA Thailand: 60%,$1,259 Indonesia: 26%, $1,708

Establish tactical campaigns to chip away a few percentage points in MS from Thailand Compete on price and low-medium grade (most important criteria to China) Move from traders (80% of current customers) to supermarkets

MS 2% Volume 0.1 KT FOB $1,260Ton Value $M 0

Egypt season: Sept to January Produce in the governorates of Ismaili, Sharquia as well as in the New Lands Far East is a hard to penetrate market, as Thailand and Philippines are well established and the number of competitors is growing

Guavas & Mangoes

Far East (20)


Hong Kong (15; -7%) Egypt: 0%, NA Philippines: 50%, $1,019 Thailand: 34%,$950

Mirror Philippines offer in pricing Focus on aroma, taste and quality product Grow and export medium size guavas and mangoes Move from traders (15% of current customers) to supermarkets

MS 2% Volume 0.1KT FOB $1,020Ton Value $M 0.1

CIS Total

Non significant market

Target: $50 Million in 2017 (41% of overall projections in 5 Key Regional Markets)
Proprietary & Confidential

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 242

Market Analysis: Mandarins & clementines

Egyptian mandarin exports should target the EU market with high quality, easy peel varieties, and GCC market with lower cost sweet varieties
Market Analysis for Mandarins & Clementines(2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

VII VII Germany (100; 8% ) Egypt: 0%, $653 Spain: 49%, $1,315

EU (300)
UK (150; 6% ) Egypt: 0%, $960 Spain: 45%, $1,008 Turkey: 12%, $792 Hard to penetrate KSA (15; 2%) Egypt: 5%, $ 380 Turkey: 40%, $413 Pakistan: 30%, $222 Egypt: 3%, $350 Pakistan: 85%,198

Mandarins & Clementines

Enter the market in Dec/ January to avoid competition from Spain (starts in January) Export high quality, medium size, easy to peel, sweet and seedless varieties Target supermarkets Enter the market in Dec/ January to avoid competition from Spain (starts in January) Export medium quality mandarins Move from wholesalers (20% of current customers) to supermarkets Leverage proximity to capture a few points from Turkeys market share Lower export costs Move from wholesalers (90% of current customers) to supermarkets Export sweet and high quality mandarins Move from wholesalers (90% of current customers) to supermarkets

MS 3% Volume 5 KT FOB $1,500/Ton Value $M 7 MS 3% Volume 5 KT FOB $1,200/Ton Value $M 6 Egypt season: Dec to April Expand the growing area Produce in New Lands MS 7% Volume 1 KT FOB $420/Ton Value $M 0.5 MS 17% Volume 8 KT FOB $220/Ton Value $M 2
Proprietary & Confidential

USA

GCC (100)
UAE (10; 15%)

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 243

Market Analysis: Mandarins & clementines

Egypt should gain market share in CIS and Far East by undercutting its respective competitors: Morocco and USA
Market Analysis for Mandarins & Clementines(2006; 2017)
Strategic Crop Target Country Total Imports Import Volumes & within Egypt Growth within Window Egypt Window ( K Tons) (K Tons; % 02-06) Egypt and Main Competitors: Market Share, CIF ( $/ Ton) Market Entry Success Factors Egypt Target Market Share (MS) & Volume& FOB & Export Value in 2017 Comments

VII VII Egypt: 0%,$573 Morocco: 37%, $707 Turkey: 23%, $591

CIS (300)

Russia (210; 10%)

Leverage existing trade relations between Russia & Egypt Enter the market by undercutting Morocco Lower the costs as determinant factor for Russia Grow Sadsouna variety Capture some of Californias market share Export sweet, easy peeling mandarins Prioritize quality over cost Move from traders (100% of current customers) to supermarkets

MS 3% Volume 17 KT FOB $1,000/Ton Value $M 17.5

Egypt season: Dec to April Expand the growing area

Mandarins & Clementines Far East (100)


Hong Kong (5; 8%) Egypt:0%, $641 USA: 51%, $1,400

MS 5% Volume 1 KT FOB $3,300/Ton Value $M 2

Produce in New Lands

Total

Target: $34.5 Million in 2017 (56% of overall projections in 5 Key Regional Markets)

Source: UN Comtrade ; Trademap; Eurostat; FAS; BAH Analysis; Interviews with Experts 244

Proprietary & Confidential

Egypts Agricultural Export Market Potential


Introduction Identification of Strategic Crops for Egypt Agricultural Exports Selected Market Analysis of Egypt Strategic Crops Appendix

Proprietary & Confidential

Three drivers: forecasted export value, crops technical feasibility and yield of natural resources enable the ranking of each of the 41 crops
1&2&3&4&5 1&2&3&4&5

Crops

Rank

Forecasted Export Value

Crops Technical Feasibility

Yield of Natural Resources

Comments
According to historical growth, Egypt's market share in EU has been increasing by 22% yearly in an already growing market (10%) with an increasing FOB (3% yearly) According to historical growth Egypt's market share in CIS has been increasing by 25% yearly in an already growing market (19%) with an increasing FOB (3% yearly) According to historical growth, Egypt's market share in EU has been increasing by 11% yearly in an already growing market (11%) with an increasing FOB (3% yearly) According to historical growth, Egypt's market share in EU has been increasing by 15% yearly in a growing market ( 1%) According to historical growth, Egypt's market share in GCC has been increasing by 3% yearly in GCC growing market (4%) According to historical growth, Egypts market share in CIS has been increasing by 15% in CIS growing market (4%) EU demand is growing at a rate of 11% yearly and Egypts market share is expected to shift from 2% until reaching in 2017 Moroccos current market share in EU, which is 9% Egypts market share in EU is expected to stay stable (40% to 43% in 2017) in a market growing at a rate of 17% Egypts exported volume is expected to grow at a rate of 29% yearly in EU ( growing at 4%) and CIS ( growing at 19%) in order to reach Morocco's current market share Ranking explained
e

Grapes

Strawberries

Selected Crops

Oranges

Watermelon

4 3 4
50%

4 4 3
25%

4 4 2
25%
246

Artichoke

Mandarins

Prioritization Weight

Last 10

Proprietary & Confidential

Top 10

Three drivers: forecasted export value, crops technical feasibility and yield of natural resources enable the ranking of each of the 41 crops
1&2&3&4&5 1&2&3&4&5

Selected Crop

Crops

Rank

Forecasted Export Value

Crops Technical Feasibility

Yield of Natural Resources

Comments
Egypt market share in GCC countries is growing at a rate of 15% in GCC growing market ( 6% annually) with an increased FOB Garlic is efficient in terms of land and water usage Green garlic can easily be transported and produced in Egypt Egypts market share in EU is growing at a rate of 3% in a high growth market ( rate of 13%) Egypts production and export overlap with the Italian season CIS market is growing at a rate of 23% yearly and Egypt should reach by 2017, half of Spains current market share in the CIS countries ( 10%) Egypts market share in EU is growing at a rate of 11% in order to reach in 2017 Israels current market share ( 9%) Dates could take advantage that its competitor Tunisia is reaching capacity Onions are gaining market share in GCC countries with an export growth of 9%, higher than the 6% of the market demand Green/spring onion can easily be grown in Upper Egypt Cherry tomato is the new variety highly demanded and that can easily be grown in Egypt Tomatoes are as efficient in water as in land Ranking explained
e 4 Last 10 Top 10 Proprietary & Confidential

Guavas & Mangoes

3 2 3 3

3 4 1 1

2 4 4 3

Garlic Peaches & Nectarines

8 9

Cucumbers

10

Dates

11

Onions

12

2 1
50%

4 2
25%

2 4
25%
247

Tomatoes

13

Prioritization Weight

Three drivers: forecasted export value, crops technical feasibility and yield of natural resources enable the ranking of each of the 41 crops
1&2&3&4&5 1&2&3&4&5

Crops

Rank

Forecasted Export Value

Crops Technical Feasibility

Yield of Natural Resources

Comments
Egypts market share is growing at 12% and 28% in GCC and CIS respectively Rice is water intensive which leads to its low positioning in terms of yield of natural resources Egypts market share in EU is growing at a rate of 10% Cotton is water intensive and the export value per land is among the lowest EU demand of sweet potatoes is decreasing at a rate of 6% Sweet potatoes can easily be grown in Egypt but the competition from South Africa and Israel is high Even though Egypts market share in EU is increasing at 12% yearly in a growing market 7%, however Extra EU total demand remains insignificant ( 5 Thousands tons) Limited opportunity for eggplant Egypt is planned to reach in EU a market share of 22% by 2017 catching up with Israel which current market share is 30% in EU Local market demand is low, opportunity to focus on exports Egypt's market share in EU is dropping by 2% yearly in a slightly decreasing market Neither Egypt nor Israel, Spain and Morocco entered the 4 other regional markets EU quotas are limiting the volumes that can potentially be exported to EU Ranking explained
e 4 Last 10 Top 10 Proprietary & Confidential

Rice

14

Cotton

15

4 1 2

2 4 1

0 3 3

Sweet Potatoes

16

Eggplant

17

Avocados

18

Potatoes

19

Prioritization Weight

50%

25%

25%
248

Three drivers: forecasted export value, crops technical feasibility and yield of natural resources enable the ranking of each of the 41 crops
1&2&3&4&5 1&2&3&4&5

Crops Lemon and Limes

Rank

Forecasted Export Value

Crops Technical Feasibility

Yield of Natural Resources

Comments
According to historical growth, Egypts market share is growing at a rate of 11% and 24% in EU and the Far East respectively Only limes can be exported According to historical growth, Egypts market share is growing at least at a rate of 30 % in CIS, already increasing at a rate of 22% Fruits nes can not be selected for its lack of precision Egypt plans to reach in 2017, the same market share than Spains current market share (5%) in the growing market of CIS ( 16% annual growth) Egypts season for pears & quinces overlap with Italian season Even though Egypts market share in EU is increasing at 10% yearly , total EU demand is actually declining and its total volume is insignificant (4 Thousands tons) Many opportunities could be seized if the processing facilities were improved and fiber extract facilities Egypt entered GCCs market and its market share has been growing at 50% yearly which justifies the 2 $ M exported towards GCC According to historical growth, Egypts market share decreases in EU by 2% in a market growing at 15% of a current total volume of 5 Thousands Tons Lettuce is a winter crop which partially explains its high water efficiency Ranking explained
e

20

Fruits nes

21

Pears & quinces

22

Flax

23

Cauliflowers

24

Lettuce

25

Prioritization Weight

50%

25%

25%
249

Last 10

Proprietary & Confidential

Top 10

Three drivers: forecasted export value, crops technical feasibility and yield of natural resources enable the ranking of each of the 41 crops
1&2&3&4&5 1&2&3&4&5

Crops

Rank

Forecasted Export Value

Crops Technical Feasibility

Yield of Natural Resources

Comments
Egypt targets to reach by 2017, Spains current market share in the CIS countries Egypt dont have the chilling requirements to export Anna apples Kidney beans yield is low, which leads to a low ranking in terms of optimization of land and water Grapefruits demand is extremely stable, except in the GCC with a demand growth of 7% and Egypt's market share of 19% There might an opportunity to seize for the grapefruit that can easily be peeled According to historical growth, Egypts market share in EU is growing at a rate of 7% in an already growing market (15%) which justifies the $ 10M of forecasted exported value Egypt, Morocco and Israel did not manage to enter the 5 regional markets, therefore Egypt wont be able to gain market share Egypt, Morocco and Israel did not manage to enter the 5 regional markets, therefore Egypt wont be able to gain market If Egypt were to produce cranberries, Egypt would benefit from its window Egypt, Morocco and Israel did not manage to enter the 5 regional markets, therefore Egypt wont be able to gain market Even though raw sugar cane might be a good opportunity, however the tendency of the government is to reduce areas of sugar cane and replace it with sugar beet Ranking explained
e 4 Last 10 Top 10 Proprietary & Confidential

Apples

26

2 1 1 2 0 0

0 1 1 0 0 4

1 0 0 0 2 0

Kidney beans

27

Grapefruit

28

Trees Bananas

29 30

Cranberries, Blueberries

31

Raw sugar cane

32

Prioritization Weight

50%

25%

25%
250

Three drivers: forecasted export value, crops technical feasibility and yield of natural resources enable the ranking of each of the 41 crops
1&2&3&4&5 1&2&3&4&5

Crops

Rank

Forecasted Exported Value

Crops Technical Feasibility

Yield of Natural Resources

Comments
Egypts market share in EU is growing at a rate of 3% in a market increasing by 4% yearly, which justifies the $1 M of forecasted Egypt exports Dried beans represent a great opportunity for Egypt Egypts market share in EU is growing at a rate of 9% in a market declining at 14% yearly, which justifies the $1 M of forecasted Egypt exports Dried beans represent a great opportunity for Egypt The new varieties of citrus represent a good opportunity for Egypt to seize The growing conditions in Egypt are not suitable to the production of roses Tropical fruit difficult to compete with Ivory Coast Tropical products not suitable for Egypt, stiff competition from sub-Saharan Africa, Brazil, and others The opportunity to export cuttings and slips is limited Maize and wheat represent more than half of Egypts imports Maize and wheat are both water intensive

Gram Beans

33

Broad Beans

34

0 0 0 0 0 0 0

1 1 0 0 0 0 0

0 0 0 0 0 0 0

Citrus nes Roses Pineapples Coffee not roasted not decaffeinated Cuttings and slips Maize/ Wheat

35 36 37 38 39 40/41

Prioritization Weight

50%

25%

25%
251

Ranking explained

Last 10

Proprietary & Confidential

Top 10

Five-year Export Promotion Plan

Proprietary & Confidential

To meet these targets, the plan should address five strategic objectives
Egypt Export Promotion Plan Strategic Objectives

Strategic Objectives
A Consolidate Egypt's Consolidate Egypt's export promotion export promotion capacity capacity B Brand Egypt as a Brand Egypt as a premium quality exporter premium quality exporter C Improve Egypt's access Improve Egypt's access to international markets to international markets D

Rationale
Consolidation of current export promotion capacity aims at coordinating and institutionalizing prevailing efforts of all industry stakeholders, both from the private and public sector, within a proper sector governance framework Targeted branding of Egyptian agricultural products enables access to international markets. Sustainability of such initiatives requires however industrywide efforts to put greater emphasis on the quality of industry supply chain and export control quality Access to international markets would be further facilitated through closer collaboration on trade agreements, air and maritime transport capacity enhancements, and the establishment of international distribution offices in key export markets Long-term competitiveness and export potential requires structural modernization of the agricultural production capacity through an overhaul of current agricultural R&D practices in Egypt, as well as further development of small farmers potential in Upper Egypt Full liberalization of agricultural sector would lead to market-based efficiencies and entails review of a number of policy areas in terms of input imports, water subsidies as well as support in agricultural production, processing & marketing

Realize Egypt's Realize Egypt's agriculture full export agriculture full export potential potential

Encourage full Encourage full liberalization of Egypt's liberalization of Egypt's agricultural sector agricultural sector

253

Proprietary & Confidential

These strategic objectives are translated into phased initiatives, over the coming decade,
Example: Planning of Initiatives in Five-Year Export Promotion Plan
PLE

AM EX

Strategic Objectives and Related Initiatives A


Consolidate Egypt's export promotion capacity
1 Mobilize efforts to revamp export promotion 2 Outline export promotion governance and road-map 3 Formalize proposed institutional changes 4 Launch export governance reorganization

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

B C D E

Brand Egypt as a premium quality exporter Improve Egypt's access to international markets Realize Egypt's agriculture full export potential Encourage full liberalization of Egypt's agricultural sector

254

Proprietary & Confidential

And assigned to individual owners The plan includes new and ongoing initiatives
TEM
Strategic Objective: Owner: Duration:
Description

Strategic Initiative: Number: Status:


Key Dependencies / Prerequisites Cost -Benefit Analysis

PLA

TE

KPI

Key Risks / Mitigation Plans

Key Milestones

Action Plan

255

Proprietary & Confidential

As such, 16 initiatives are consolidated in the Export Promotion plan to set the agenda and underlying actionable steps, in order to boost Egypts agricultural exports over the coming decade
Strategic Objectives A Consolidate Egypt's export promotion capacity 1 2 3 4 B Brand Egypt as a premium quality exporter C Improve Egypt's access to international markets D Realize Egypt's agriculture full export potential E Encourage full liberalization of Egypt's agricultural sector 1 2 3 1 2 3 4 1 2 1 2 3 Enabling Initiatives
Mobilize efforts to revamp export promotion Outline export promotion governance and roadmap Formalize proposed institutional changes Launch export governance reorganization Create and launch export quality control agency Strengthen existing agro-export local supply chain Launch international Egyptian branding Initiative Drive common agriculture trade advocacy efforts Streamline and expand Egypts maritime transport Enhance Egypts air cargo sector competitiveness Broaden Egypts export distribution reach Promote market-driven agricultural R&D Build agricultural export potential in Upper Egypt Encourage import regulation reforms for agroinputs Advocate sustainable water policies Support full production deregulation of agriculture sector
256

2007 2008 2009 2010 2011 2012 2013 2014 2015

Proprietary & Confidential

In the first year, the overall effort for consolidating export promotion efforts and establishing an export quality control agency would require around $10 million in funding
Objectives A Initiatives
Market Intelligence Packaging Trainings

First Year Priority Activities


Identify target markets and products with greatest likely-hood of sales Determine importers, distributors, wholesalers, retailers, standards and requirements

Costs
$ 250,000

Analyze current packaging of Egyptian products in view of promoting quality and freshness, portion $ 70,000 control, to positive attributes such as variety, origin Provide trainings to companies on Sales & Marketing; Advertising; Sales Promotion; Public Relations; Negotiation; Customer Service etc Engage International and target market local media with news on Egyptian Agriculture, events, companies news, new products, promotional campaigns Spear-head participation at trade fairs Launch Fresh Produce website Identify Trade Offices in target markets Provide trainings to Trade Attaches on the products, customers etc Cover yearly operational costs of EPA Identify necessary regulatory changes to impose GOEIC as the sole authority for export control Identify by target marker the regulations and standards for market entry by product Conduct nation-wide campaign to accredit public/private laboratories to increase national footprint capacity for sanitary controls Update GOEIC website to include Standards requirements for export. Notify all exporting companies on where to find it and the process for GOIEC inspections Launch Pesticide Residue Program. Collect data on agricultural commodities most frequently exported and match against export market requirements Design and launch EgyptGAP in accordance with GlobalGAP Launch Quality Control awareness campaign nationally and internationally Cover other operational costs

$ 120,000 $ 200,000 $1M $ 10,000 $ 150,000 $1M $ 3.8 M $ 15,000 $ 10,000 $1M $ 10,000 $ 100,000 $ 250,000 $ 500,000 $4M $ 5.9 M

Consolidate Egypt's export promotion capacity

Launch export Media governance reorganization Trade fairs (A1-A4) Communications Trade Representation Operations

Regulatory Changes Standards Create and launch export quality control agency (B1) Laboratories Certification Information Dissemination Pesticide Residue Program EgyptGAp Quality Control Awareness Operations

Brand Egypt as a premium quality exporter

Total Costs incurred the first year for the two initiatives
257

$ 9.7 Proprietary & Confidential M

Strategic Objective: Consolidate Egypt's export promotion capacity Owner: Chairman of AEC Duration: 1 month
Description Current efforts to promote exports in Egypt are too fragmented to provide sufficient support for private sector growth: lack of market intelligence, cooperation among exporters on mutually-beneficial initiatives, institutionalized export promotion, consistent branding of Egyptian products or advanced distribution networks significantly hamper Egypts export potential As such, the existing framework for export promotion in Egypt must be revisited and amended to create a sustainable environment that will promote Egypts agriculture exports The overall effort will be kick-started by the AEC that will engage key stakeholders in the agricultural export sector (e.g., Ministry of Trade, Ministry of Agriculture, EEPC, IMC, ExpoLink, UPEHC, HEIA, EAGA, ESHEDA) KPI Steering committees chairman election status Seed funding availability Steering committees support staff headcount (actual vs. target)

Enabling Initiative: Mobilize efforts to revamp export promotion Number: A1 Status: New
Key Dependencies / Prerequisites N/A Cost -Benefit Analysis Cost: N/A Benefit: Increase awareness for export promotion drive

Key Risks / Mitigation Plans Excessive Government management: assign responsibility to private sector Overlap in responsibilities of existing institutions: engage institutions currently involved in export

Key Milestones Steering committee creation Appointment of steering committee chairman Allocation of seed funding

Action Plan Prepare agenda to kick-start export promotion drive Call meeting with key stakeholders (e.g., Ministry of Trade, Ministry of Agriculture, EEPC, IMC, ExpoLink, UPEHC, HEIA, EAGA) to review export performance and discuss strategic objectives Create steering committee to monitor the progress of export promotion drive and elect chairman Secure seed funding to start outlining export promotion governance Appoint 3-4 dedicated staff to support steering committee
258

Proprietary & Confidential

Strategic Objective: Consolidate Egypt's export promotion capacity Owner: Steering Committees Chairman Duration: 4 months
Description The current export-oriented programs lack coordination and effectiveness The end objective of this initiative is to propose a new governance that will streamline and better coordinate existing efforts

Enabling Initiative: Outline export promotion governance and road-map Number: A2 Status: New
Key Dependencies / Prerequisites A1 Cost -Benefit Analysis Cost: 3-4 FTEs (LE 3,000/month/employee) - LE 36,000~48,000 Benefit: streamlining of current export promotion efforts

KPI Baseline completion status Gap and overlap analysis completion status Governance map completion status Number of planned activities

Key Risks / Mitigation Plans Broad focus: establish deadlines and KPIs Lack of cooperation from existing organizations: insist on coordinationonly role for export promotion effort

Key Milestones Presentation of proposed governance changes Approval of action plan

Action Plan Review exact scope and mandate of current export promotion programs and organizations within public or private sector (agriculture-specific and overall trade) Confirm/infirm possible overlaps, either in practice or through bylaws, in various initiatives, programs and organizations Devise target governance, organization charts (e.g., creation laws, by-laws amendments, defining new membership type, funding mechanism) Define high-level manpower plan with detailed job descriptions Present findings and proposal to steering committee Seek approval from steering committee to proceed with next steps

259

Proprietary & Confidential

The Agriculture Export Council (AEC) should become the focal point for providing export intelligence to the industry at large EEPC will serve as main conduit for public & development aid
Proposed Agricultural Egypts Export Promotion Structure
Y AR Y NA R IIMIIN L M L PRE PRE
Service Providers EEPC EEPC Serve as main conduit for channeling donor aid towards export promotion Broker service requests from/to various councils Help coordinate export promotion efforts across sectors Expo Link Expo Link
Provide logistical support for international trade fairs

Egypt Commercial Egypt Commercial Service Service


Offer international presence

Funding Sources IMC IMC


Conduct sectorial analysis Provide funding

EU EU USAID USAID World Bank World Bank GTZ GTZ MoA MoA

Other Other Councils Councils

Agriculture Agriculture Export Export Council Council


Provide export data, market intelligence Conduct PR & branding of commodity industry Promote overall cooperation in the industry (e.g., fairs, logistics) Deliver customized service (e.g., training)

Export Export Development Fund Development Fund MoFTI MoFTI

Voluntary Members Other Other Producer // Producer Exporter Exporter Associations Associations

Other

Fund directly AEC Provide input to AEC

HEIA HEIA

UPEHC UPEHC

ESHEDA ESHEDA

CAPMAS // ITC CAPMAS ITC


Provide statistical agricultural data

ARC ARC
Oversees applied agricultural research

Private

Public Private

Public

Other
260

Proprietary & Confidential

The AEC will spearhead industry efforts in seven key areas: export development, communications, market intelligence,
Description of AEC Key Functions
Function Main Activities Spearhead Egyptian presence at international trade shows and fairs Export Development Develop contacts in international markets and provide international support to exporters with potential clients Promote coordination among stakeholders along export value chain (e.g., Maritime Transport, Upper Egypt Development, Trade Negotiation) Develop and manage Egypts local and international agriculture commodity brand Administers media promotion and press announcements for overall industry Provides support to companies with media & marketing materials, packaging, design, etc. Gather and disseminate market information from international markets to Egyptian companies, growers, Ministries and associations, through various means. For example, Market Intelligence could use AgroSMS, a fresh market pricing system providing data published by www.ams.usda.gov on a daily basis to indicate market prices of fresh fruits and vegetables in foreign markets Market Intelligence (1) Leverage various forms of market information dissemination: Agro-SMS, e-mail newsletter, newspapers, agricultural extension service public announcements, radio (agricultural news), television (agricultural news), agricultural magazines Inform exporters of market opportunities via e-mail as information becomes available. For example, if there is a freeze in Spain affecting the citrus crop, then Egyptian growers need to know the details as soon as possible in order to capitalize on the shortfall.

Communication, Marketing & Branding

261

Proprietary & Confidential

finance and investment, legal, trade & policy advocacy, and education & training
Description of AEC Key Functions
Support Function Main Activities Work and coordinate with EEPC, public bodies and NGOs to secure funding assistance for specific projects and programs to promote overall competitiveness of the sector Develop and implement programs that address the financial and investment requirements of the different sectors and companies including trade financing, business plans, financial restructurings and investments Assist companies with legal organization, foreign trade matters, contracts, etc. Identify, in coordination with Sector Leads, policy changes needed to facilitate export growth Legal, Trade & Policy Advocacy Prepare position papers for each sector, in order to support the Ministry of Foreign Trade and Industry in trade negotiations Lobby Government on key of policy issues (e.g., Ministry of Agriculture on Law of Protection of Varieties and membership in UPOV, Ministry of Education on reforming agronomy curriculum to best fit the needs of the industry) Provide trainings to companies in specific areas of deficiencies (e.g., logistics, post-harvesting) Education and Training Embed trainings into local curriculums Coordinate and support existing organizations and donor programs

Finance & Investment

262

Proprietary & Confidential

The target AEC organization structure encompasses core members support functions as well as forums/committees where members actively participate in decision-making
Proposed AEC Organization Structure
Strategic and Business Planning for AEC Management and development of infrastructure including IT, assets and facilities Financial Planning Budgeting Accounting Member Forums Committees Committees Rice Rice Potatoes Potatoes Citrus Citrus Peanuts Peanuts Onions Onions Aromatic Aromatic Flowers Flowers Strawberries Strawberries Grapes Grapes Trade Advocacy Trade Advocacy New Crops New Crops Agro-Inputs Agro-Inputs Maritime Transport Maritime Transport Air Transport Air Transport
Source: BAH Analysis

President President Strategy Strategy Planning Planning 2

33 Corporate Corporate Secretary Secretary 2

Legal, trade and policy advocacy services


Contract Management with members/ contractors HR Support & Administration Training Procurement

Treasurer Treasurer

HR & HR & Administration 4 Administration

Core Member Support Functions Market Intelligence Market Intelligence 4 Horticulture Horticulture Communications Communications 4 Internal Internal Consulting and Consulting and Advisory Advisory 6 Marketing Strategy Marketing Strategy Export Export Development Development Initiatives Initiatives Operational & Operational & Logistics Logistics Export Export Development 4 Development Fairs & Exhibitions Fairs & Exhibitions International International Representation Representation Education & Education & Training Training 4 Educational Educational Programs Programs Training Training

Cereals Cereals Oil, Sugar Crops, Oil, Sugar Crops, SSF SSF Cotton Cotton Gathering market information from international markets Market opportunities information

Public Relations Public Relations Advertisement Advertisement

Internal communication with its members Media communication Advertisement to attract new members
263

Advisory services to its members including branding and monitoring implementation of export development initiatives

Negotiation with exporters and shippers

Provide/Manage trainings for members

Proprietary & Confidential

AECs Board will comprise key management officers, prominent private sector players and Government representatives
Proposed Board Composition for AEC
1 Management Officers 1 President President Treasurer Treasurer
Chair Chair Vice Chair Vice Chair

AECs Board of Directors AECs Board of Directors


2 2
Large Large Producers/ Producers/ Exporters Exporters Associations Associations

3 3
Small Producers/ Small Producers/ Exporters Exporters Associations Associations Government Government Representatives Representatives

Secretary Secretary 1 1 Management Officers to Management Officers to Support Board Support Board

Board Composition Management officers support the Board in executing its management, financial, investment, and administrative functions, thereby alleviating the workload of the Chair and Vice-Chair Management officers typically have non-voting rights 3 to 5 large producers/ exporters associations are permanent members of the Board, determined on the basis of average annual export volume, as ascertained by the board, over the consecutive five years 2 representatives of smaller exporter/ producer associations on a rotating basis All members have voting rights as Directors Influential member of the Ministry of Trade or Agriculture (e.g., IMC chair) to ensure sufficient visibility and awareness of the AEC
264

2 2 Private Sector Private Sector Representatives Representatives

3 3 Government Government Representatives Representatives

Proprietary & Confidential

AEC will be funded for its standard operating expenses by EEPC project and specific services will be mainly compensated by AECs members
AECs Funding Funding of AEC operational, projects and specific services needs

Needs Funder

1 Basic Operational Needs Basic Operational Needs


EEPC EEPC EEPC is responsible for seeking EEPC is responsible for seeking funding for AECs operation from the funding for AECs operation from the following sources: following sources: Donor agencies (World Bank // Donor agencies (World Bank USAID // EU // UNIDO..) USAID EU UNIDO..) Ministries (( MoFTI, Mo Trade, Ministries MoFTI, Mo Trade, MoA) and MoA) and Public organizations such as IMC Public organizations such as IMC and Expo Link and Expo Link AECs operational needs have been AECs operational needs have been estimated to $1 Million (~30 FTEs) estimated to $1 Million (~30 FTEs)

Project Needs Project Needs


Members and Other Funding Members and Other Funding This type of funding is temporary This type of funding is temporary and allows to meet project needs and allows to meet project needs that have been agreed upon at that have been agreed upon at roundtables with all AECs members roundtables with all AECs members Members can decide to contribute to Members can decide to contribute to the funding if they desire to be part the funding if they desire to be part of the project of the project EPA projected expense budget (see EPA projected expense budget (see first year initiatives): first year initiatives): $1,500,000 from Industry $1,500,000 from Industry $1,500,000 from Government $1,500,000 from Government

Specific Customized Services Specific Customized Services


Members Members A fee structure sets the costs for A fee structure sets the costs for each type of specific service each type of specific service provided by AEC such as provided by AEC such as Education and training Education and training Export development initiatives Export development initiatives Logistics optimization Logistics optimization Ministry of Agriculture is solicited to Ministry of Agriculture is solicited to contribute to the funding of training contribute to the funding of training and seminars and seminars

265

Proprietary & Confidential

Strategic Objective: Consolidate Egypt's export promotion capacity Owner: Steering Committees Chairman Duration: 12 months
Description The further elaboration of the agricultural promotion effort requires the buy-in from the industry at large. In particular, legal changes required to formalize proposed institutional changes need to be ratified by the Egyptian legislature In addition, organizations that were not initially involved in designing governance changes should be engaged at this stage to maintain overall effort momentum The objective is this initiative is to obtain final approval of governance and organizational changes and secure funding to launch actual promotion KPI Funding status Required legislative changes enactment status

Enabling Initiative: Formalize proposed institutional changes Number: A3 Status: New


Key Dependencies / Prerequisites A2 Cost -Benefit Analysis Cost: 3-4 FTE (LE 3,000/month/employee) - LE 108,000~144,000 Benefit: ensure long-term sustainability of export promotion

Key Risks / Mitigation Plans Legislative process delays: launch quick wins in promotional efforts prior to formal legislation

Key Milestones Formal Agreement on proposed action plan Funding secured Legislative changes enacted

Action Plan Build business plan and business case: Forecast staff headcount, infrastructure needs (e.g., international sales office), funding for activities Project additional revenues in export attributable to promotional activities Detail institutional changes required Obtain approval from the steering committee on proposed business case Organize socialization gatherings with key stakeholders: Government (e.g., Ministry of Trade, IMC, Ministry of Agriculture) Agricultural associations EU, USAID and World Bank
266

Secure commitment of logistical support, funding and long-term pledge from various stakeholders (e.g., Ministry of Trade, EU, World Bank) Follow-up on legislative changes required to enhance Egypts agricultural export promotion governance

Proprietary & Confidential

Strategic Objective: Consolidate Egypt's export promotion capacity Owner: Agricultural Export Councils Director Duration: 9 months
Description Once the legislative changes have been approved, the reorganization of Egypts export governance can be launched in full This initiative can start with quick wins identified in A2 so as to raise the profile of the export promotion efforts and encourage the passage of legislation

Enabling Initiative: Launch export governance reorganization Number: A4 Status: New


Key Dependencies / Prerequisites A2, partly A3 (Quick wins could be launched prior to full legislative changes) Cost -Benefit Analysis Cost: Hiring and Operations Budget: 12 million LE / year Benefit: LE 285 million per year (differential impact in total export value between best and base scenario assuming 96-to-1 return on investment over next 11 years) Key Milestones Organization fully operational

KPI AECs operational performance indicators per promotion program Year-on-year agricultural export growth

Key Risks / Mitigation Plans Failure of Legislative confirmation: create export promotion board as a non-governmental entities

Action Plan Finalize AEC executive management structure Ramp-up key positions within AEC as per target governance identified in A2 Sector Specific Leads (Experts) Support Leads responsible of each support function Export Development Communications Market Intelligence Financial & Investment Legal Trade & Policy Advocacy Logistics Education & Training Assign quick wins identified in A2 to sector specific leads. For instance, AEC could initiate the following short-term actions: coordinated press awareness campaign in Egypt on current efforts International media promotion of Egypts agriculture exports Develop internal process to coordinate and develop matrix-based organization, aligned on specific export promotion programs Develop focused work-plans for each sector with specific performance indicators to assess progress against plans Follow-up on proposed changes to overall export promotion governance (e.g., funding and interfaces with EEPC/IMC

267

Proprietary & Confidential

In the first year, AEC should launch a number of activities to help promote Egypts agricultural exports
1 Market Intelligence Market Intelligence 2 Packaging Packaging 3 Trainings Trainings 4
Media Media

AECs First Year Priority Activities


Identify target markets and products with greatest likely-hood of sales for both value and volume. (See Booz Allen Market Analysis) Determine importers, distributors, wholesalers, and retailers, standards (GlobalGAP), and requirements Analyze current packaging of Egyptian products in view of promoting (a) quality and freshness, (b) portion control, (c) to positive attributes such as variety and origin. Packaging can also increase perceived value of fresh produce. Consumers will pay more for some individually labeled and packaged produce than for bulk produce. Provide trainings to companies on Sales & Marketing; Advertising, Sales Promotion, and Public Relations; Packaging Design, Negotiation, Customer Service, Financial Mgmt Contract out trainings packaging to Studio Spear (www.studiospear.com), negotiation (swanson & randolf www.csradr.com) Engage International and target market local wedia with news on Egyptian Agriculture, events, companies news, new products, promotional campaigns, etc. (Eurofruit Magazine www.eurofruitmagazine.com, Fresh Produce Journal www.freshinfo.com, Fresh Plaza www.freshplaza.com, Agra-Net (FoodNews) www.agra-net.com, AsiaFruit Magazine www.asiafruitmagazine.com, Americafruit Magazine www.americafruitmagazine.com Spear-head participation at trade fairs at U.S. Produce Marketing Association (PMA) (www.pma.com), Germany (Global), ANUGA (www.anuga.com), Fruit Logistica (www.fruitlogistica.com), SIAL (www.sial.fr), MACFRUT (www.macfrut.com), IFE Fresh Produce (www.ifefreshproduce.com), Fresh Rotterdam (www.freshrotterdam.nl), FRESH (www.freshcongress.com), Southern Hemisphere Congress (www.shcongress.com), Middle East Congress (www.middleeastcongress.com) Launch Fresh Produce website 4 topics: (1) About us - keep it short and relevant (50 to 300 words) (2) Products & Availability - varieties, dates of availability, certifications, packaging and copackaging options, relevant shipping and storage information. (3) News - where to present new products, announce trade shows and promotional campaigns and other developments of interest and (4) Contact information main contact person in each area, address, phone, fax, email Identify Trade Offices in Target markets. Where necessary based on market growth opportunity, new stand alone Egyptian Agricultural Promotional Offices may be established Provide trainings to Trade Attaches on the products, customers, how to gather market intelligence (pricing, buyers, news articles, etc.) and supply to AEC, and on setting-up promotional activities
268

5 Trade Fairs Trade Fairs 6 Communications Communications 7 Trade Representation Trade Representation

Proprietary & Confidential

In the short term, AEC should monitor major trade publications about EU fresh produce markets, and compile information into weekly newsletters published via e-mail each Friday
Major Trade Publications on Fresh Produce Markets in EU
Trade Publication
EUROFRUIT www.eurofruitmagazin e.com FRESH PRODUCE JOURNAL / FRESHINFO www.freshinfo.com

Front Page

Description Eurofruit is the leading monthly magazine in Europe for fresh produce Eurofruit reaches more than 8,000 readers worldwide Copies are distributed to buyers free of charge at major trade shows such as Fruit Logistica The Fresh Produce Journal has been a leading source of news about fresh produce markets since 1895 FPJ now boasts the largest paid circulation of any weekly publication in the industry FPJ publishes daily updates and news alerts via the FreshInfo website and publishes Fresh Product Guides and the Fresh Deskbook Fresh Plaza is an independent news source for companies operating in the global fruit and vegetable sector Based in the Netherlands, FreshPlaza aims to provide producers and buyers with a variety of perspectives from as many sources as possible Daily readership of the Fresh Plaza newsletter is 7,500. The service is free of charge but stories may be less thoroughly checked than other sources Agra-Net is the online home of Agra Informa Group, a leading information specialist on agriculture and food policy, markets and trade The Agra-Europe division publishes specialized trade magazines and newsletters, including FoodNews, Fruit and Vegetable Markets, Agra-Europe Weekly and many more For fresh exporters, FoodNews and Fruit and Vegetable Markets are most relevant These publications reach up to 16,000 decision makers in 85 countries
269

FRESH PLAZA www.freshplaza.com

AGRA-NET www.agra-net.com

Proprietary & Confidential

AEC could also launch Agro-SMS, an effective program for disseminating pricing information from international markets to Egyptian exporters
Agro-SMS Service Concept
Agro-SMS provides customers with market data through short messages on their mobile phone Agro-SMS provides customers with market data through short messages on their mobile phone Agro-SMS can be offered by marketing firms that use SMS as a means of promotion. These Agro-SMS can be offered by marketing firms that use SMS as a means of promotion. These firms have bulk SMS contracts with phone companies that allow subscribers to access firms have bulk SMS contracts with phone companies that allow subscribers to access information with their cell phone information with their cell phone Customers enter a code in the SMS text box and send to designated number. They are charged Customers enter a code in the SMS text box and send to designated number. They are charged a small fee for the information, and obtain fresh market pricing in targeted markets updated daily a small fee for the information, and obtain fresh market pricing in targeted markets updated daily The main challenge for promoting the Agro-SMS service is to develop a simplistic language The main challenge for promoting the Agro-SMS service is to develop a simplistic language system system Promotion of Promotion of the Service the Service Promotion can be undertaken through agricultural news magazines, extension services, or Promotion can be undertaken through agricultural news magazines, extension services, or distribution of small wallet-size cards that have all directions and access codes distribution of small wallet-size cards that have all directions and access codes

Service Service Description Description

Information Information Sources Sources

Info sources for foreign terminals are: Info sources for foreign terminals are: USDA website: http://www.ams.usda.gov/fv/mncs/intfru.htm -- For fruits USDA website: http://www.ams.usda.gov/fv/mncs/intfru.htm For fruits USDA website: http://www.ams.usda.gov/fv/mncs/intveg.htm -- For vegetables USDA website: http://www.ams.usda.gov/fv/mncs/intveg.htm For vegetables Today Market website: www.todaymarket.com -- For fruits and vegetables Today Market website: www.todaymarket.com For fruits and vegetables Primary source of information for London (New Covent Garden), Sofia, Paris, Hamburg and Primary source of information for London (New Covent Garden), Sofia, Paris, Hamburg and Rotterdam terminals is USDA web site. Only in case some information does not exist on USDA Rotterdam terminals is USDA web site. Only in case some information does not exist on USDA web site you should use Today market web site as a backup source web site you should use Today market web site as a backup source
270

Proprietary & Confidential

Strategic Objective: Brand Egypt as a premium quality exporter Owner: Agricultural Export Councils Director Duration: 36 months
Description Organize and structure an independent export quality control agency responsible of monitoring and advising on agricultural exports safety under government contract Involve Ministry of Agriculture and Ministry of Health to coordinate programs The QA Agency is to provide competitive fee based trainings and services for Quality Assurance systems, HACCP*, Egypt Gap, and food safety and facilitate process of obtaining pre-clearance of agricultural exports KPI Yearly sanitary interceptions in key export markets

Enabling Initiative: Create and launch export quality control agency Number: B1 Status: New
Key Dependencies / Prerequisites N/A Cost -Benefit Analysis Cost: N/A agency should run on a break-even basis Benefit: Elimination of interceptions and quarantined shipments to Western markets Key Risks / Mitigation Plans Resistance from Ministry of Health: program should be joint initiative sponsored by various Ministries Enforcement: design proper incentive and regulatory system to ensure strict application of quality controls Key Milestones Establishment of new quality control agency

Action Plan Form quality control advisory board Ministry of Health, Ministry of Agriculture (e.g., quarantine), and selected private sector exporters Secure seed funding and mobilize expert team (e.g., legal, sanitary control) Baseline existing quality control legislations and processes Propose target sanitary legislation for agricultural export control Design regulatory environment to ensure Government maintains proper control over quality control agency Prepare quality control agency governance & business case structure agency on commercial-basis with inspection services provided under government contract (e.g., pesticide residues) Identify funding, experts and skills requirements Assess benefits from increased quality control on export potential
Note: (*) Hazard Analysis Critical Control Point 271

Lobby for legislation changes with help from quality control advisory board Launch quality control agency with the following proposed initiatives: Start pesticide residues monitoring program Design and Implement Egypt GAP Launch quality control awareness nationally (e.g., packhouses, transport companies) and internationally (e.g., DG Sanco, APHIS) Investigate feasibility of pre-clearance frameworks for EU and US exports Proprietary & Confidential

To effectively control the sanitary quality of commodities export, GOEIC should become a private-public joint-venture, regulated by the Ministry of Trade
Proposed Agriculture Commodities Quality Control Structure
Food Safety

Ministry of Ministry of Health Health


Regulate Human Health Standards

GOEIC GOEIC
Coordination Supervision
Develop sanitary & quality standards according to target export countries Inspect exports of agricultural commodities for sanitary issues (e.g., fertilizers, pesticides, residues) along all the value chain Administers sanctions & fine regimes for non-compliance Certify sanitary laboratories

Regulation

Ministry of Trade Ministry of Trade


Regulates GOEICs activities

Food Safety Food Safety Authority * Authority *


Define & control basic food standards

Coordination Export Supply Chain Stakeholders

Organization for Organization for Standardization Standardization & Quality Control & Quality Control
Administers overall national quality standards

MoA -MoA Quarantine Quarantine


Liaise with GOEIC on import regulations

Customs Customs
Inspect administrative details for all agricultural exports

Accredited Accredited Individual Individual Private Individual Private Individual Labs Sector Labs Sector Labs Labs Sanitary Sanitary Labs Labs Inspection

MoA / MoA Individual/ Individual Individual Individual GOEIC GOEIC Labs Labs Labs Labs Sanitary Sanitary Labs Labs

MoFTI MoFTI
Liaise with GEOIC on trade data analysis

CAPMAS CAPMAS
Communicate statistical data related to fertilizers and number of producers/ exporters

Growers Growers Fields Fields Private

Cold Cold Facilities & Facilities & Storages Storages Public Private

PackPackHouse House Public


272

Ports, Ports, Airports & Airports & Transits Transits

E-Traceability E-Traceability UNIDO UNIDO


Promote traceability capability at pack-houses

Proprietary & Confidential

GOEIC will define basic sanitary & quality standards will ensure that all commodities exports out of Egypt fulfill basic sanitary requirements
Description of GEOIC Key Functions
Function Main Activities Develop and manage Egypts sanitary and quality standards for each target export market country in Standards collaboration with the Ministry of Agriculture, Ministry of Health (food safety) Champion the creation of an Egypt-based quality standard (e.g., Egypt GAP) to comply with GlobalGAP and Primus Labs Control all agriculture exports from Egypt at port of departures (e.g., airport, port) according to specifications & norms Inspection & Fines Inspect sanitary and quality standards along the value chain (e.g., packing houses, ports, loading facilities) Maintain relationships with testing laboratories, either under Government or private contract Administers sanctions & fines regime Define procedures and protocols to accredit various laboratories Provide accreditation services to various laboratories across Egypt Accreditation Audit existing laboratories

273

Proprietary & Confidential

The GOEIC should be reorganized as to focus on its role of setting standards, inspection and laboratory accreditation
Proposed GOEIC Organization Structure
President President Planning Planning 2 185 Corporate Corporate Secretary Secretary 2

Treasury Treasury

HR & HR & Administration 2 Administration

Standards Standards
Fresh produce Fresh produce Imports/Exports Imports/Exports Food Imports/Exports Food Imports/Exports

Inspection Inspection

150

Laboratory Accreditation Laboratory Accreditation


Assessment & Capacity Assessment & Capacity Building Building Audit Audit

20

Pesticides, Fertilizers, Pesticides, Fertilizers, Residues Laboratories Residues Laboratories Storage & Logistic Inspection Storage & Logistic Inspection Fines & Sanctions Fines & Sanctions Conduct inspection along the value chain Handle fines & sanction regime

Industrial and Engineering Industrial and Engineering Imports/Exports Imports/Exports Establish sanitary & quality standards

Accredits national laboratories for compliance with sanitary & quality standards Verifies continued compliance of accredited laboratories
Proprietary & Confidential

Source: BAH Analysis

274

GEOICs Board will comprise key management officers, prominent industry members along the export value chain and Government representatives
Proposed Board Composition for GEOIC
1 Management Officers 1 President President Treasurer Treasurer
Chair Chair Vice Chair Vice Chair

GEOIC Board of Directors GEOIC Board of Directors


2 2
Exporters Exporters Associations Associations Growers Growers Associations Associations Logistics Logistics Associations Associations

3 3
Government Government Representative Representative

Secretary Secretary 1 1 Management Officers to Management Officers to Support Board Support Board

Board Composition Management officers support the Board in executing its management, financial, investment, and administrative functions, thereby alleviating the workload of the Chair and Vice Chair Management officers typically have non-voting rights 2 to 3 representatives from exporter associations 2 to 3 representatives from growers associations 1-2 representative from national & international logistics companies All members have voting rights as Directors

2 2 Private Sector Private Sector Representatives Representatives

3 3 Government Government Representatives Representatives

Influential member of the Ministry of Trade or Agriculture (e.g., IMC chair) to ensure sufficient visibility and awareness of the GOEIC
275

Proprietary & Confidential

GEOIC will fund its activities by collecting levies & fines on all exporters additionally, GOEIC could complement its activities by providing customized services to the industry
GOEICs Funding Various Sources for Funding

Needs Funder

1 1

Basic Operational Needs Basic Operational Needs


Exporters Exporters GOEIC will subsidize its basic GOEIC will subsidize its basic operational needs through levies operational needs through levies collected from each exporter collected from each exporter Initial CAPEX investment can come Initial CAPEX investment can come from existing infrastructure (e.g., from existing infrastructure (e.g., laboratories) laboratories) Adjust levy based on cost-recovery Adjust levy based on cost-recovery for inspection for inspection GOEIC estimated operational budget GOEIC estimated operational budget is estimated at $5 Million (150~180 is estimated at $5 Million (150~180 FTEs $2M & operating expenses FTEs $2M & operating expenses $3M) $3M)

2 2

Sanction & Fines Sanction & Fines


Exporters Exporters GOEIC will be entitled to levy fines GOEIC will be entitled to levy fines and sanctions against exporters who and sanctions against exporters who would violate sanitary & quality would violate sanitary & quality standards standards Sanctions & fines would be based Sanctions & fines would be based on cost recovery program authorized on cost recovery program authorized by Ministry of Agriculture by Ministry of Agriculture

3 3

Specific Customized Services Specific Customized Services


Private Sector Private Sector Additional revenues could be Additional revenues could be generated by adding some add-on generated by adding some add-on services (subject to approval by services (subject to approval by regulatory authorities): regulatory authorities): BRC, GlobalGAP certification BRC, GlobalGAP certification Technical Support & Training Technical Support & Training through Food Safety through Food Safety Workshops Workshops

276

Proprietary & Confidential

In the first year, GOEIC will launch a series of initiatives to move Egypt towards meeting international market standards
GOEICs First Year Priority Activities
1 Regulatory Changes Regulatory Changes 2 Standards Standards 3 Laboratories Laboratories Accreditation Accreditation 4 Information Information Dissemination Dissemination 5 Pesticide Residue Pesticide Residue Program Program 6 EgyptGAP EgyptGAP Identify necessary regulatory changes to impose GOEIC as the sole authority for export control of commodities Define regulatory regime with Ministry of Agriculture on GOEIC operations & inspection legislative and judiciary implications Identify by target market the regulations and standards for market entry by product. Such as, approved pesticides, tolerance levels, residue allowances, EurepGAP, HACCP, chilling requirements, etc. Conduct nation-wide campaign to accredit public/private laboratories to increase national footprint capacity for sanitary controls Update GOEIC website to include Standards requirements for export. Notify all exporting companies on where to find it and the process for GOIEC inspections Launch Pesticide Residue Program. Collect data on agricultural commodities most frequently exported and match against export market requirements. Design and launch EgyptGAP in accordance with GlobalGAP, but adapting to localized to Egypt: (1) Encouraging adoption of commercially viable Farm Assurance Schemes, which promote the minimization of agrochemical inputs, within Europe and worldwide. (2) Developing a Good Agricultural Practice (G.A.P.) Framework for benchmarking existing Farm Assurance Schemes and Standards including traceability. (3) Providing guidance for continuous improvement and the development and understanding of best practice. (4) Establishing a single recognized framework for independent verification. Launch Quality Control awareness campaign nationally (e.g. packinghouses, transport companies) and internationally (e.g. DG Sanco, APHIS)
277

7 Quality Control Quality Control Awareness Awareness

Proprietary & Confidential

Strategic Objective: Brand Egypt as a premium quality exporter Owner: AEC - Education/Training/Support & Logistics Lead Duration: On-going
Description Current efforts to improve the existing local supply chain lack coordination and planning AEC should coordinate the various programs (e.g., UNIDO, World Bank, AEC, HEIA, Ministry of Agricultures Extension Services) and link them to achieve greater focus and effectiveness KPI Survey results from Egyptian exporters on quality of local supply chain (e.g., road infrastructure, professionalism of ground haulage companies) Survey results from Egyptian exporters on average loss ratio on exported agricultural commodities

Enabling Initiative: Strengthen existing agro-export local supply chain Number: B2 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: enhanced exportability of Egyptian agricultural commodities Key Milestones Establishment of Agricultural Project Review Committee

Key Risks / Mitigation Plans Lack of buy-in from existing programs: promote a cohesive integrated export strategy with quick tangible results

Action Plan Identify all programs/ initiatives that support capacity along the local supply chain (e.g., ground transport, packaging, traceability, training, support services) Map different programs and ensure efficient coordination/ linkages from one program to another Establish Agricultural Project Review Committee consisting of AEC, Export Quality Control Agency, Ministry of Agriculture, and all Donor Projects to empower existing programs on following themes: Traceability : encourage UNIDO project and link up with Export Quality Control Agency Post-harvesting and packing: centralize & specialize vocational trainings and ensure integration with local extension services Local transport/infrastructure improvements: create task force with local ground transportation companies and freight forwarders to examine key challenges to be addressed Setup exploratory committees with local (e.g., HyperOne) and international (e.g., Carrefour) retail chains to assess development of retail market in Egypt in order to further enhance local supply chain

278

Proprietary & Confidential

Strategic Objective: Brand Egypt as a premium quality exporter Owner: AEC - Communications and Export Development Lead Duration: On-going
Description Creation and Launch of an Egyptian Brand for export promotion of quality assured agricultural products

Enabling Initiative: Launch international Egyptian branding initiative Number: B3 Status: New
Key Dependencies / Prerequisites A4, B1 Cost -Benefit Analysis Cost: Total $120,000 Brand Creation $20,000 Promotion: $100,000 Benefit: Enhancement of Egypts agriculture image and quality recognition by foreign buyers

KPI Survey results from international importers on Egyptian brand awareness and perception

Key Risks / Mitigation Plans Failure of exporters to adhere to brand reputation: vetting by quality control agency of exporters promoted under the brand

Key Milestones Brand Creation Media Campaign Launch

Action Plan Develop Request for Proposals for the creation of an Egyptian agriculture commodities brand (either sector-wide or focused on fresh products, cotton and rice) Solicit bids from a minimum of 3 competent agencies. Consider creating a branding competition Review of bids and competencies by Communications Team. Submission to AEC Board of Directors for Approval Execute and disseminate communication plan to members and exporters community at large (e.g., ensuring awareness, logo availability) Link brand to Egyptian quality through media campaign and labeling as well as control from quality control agency Monitor on a recurrent basis awareness and perception of Egyptian produces. Adjust promotional campaigns accordingly

279

Proprietary & Confidential

Egypt branding initiative could adopt a hierarchy model which is common to national export promotion branding efforts
Egypt Brand Hierarchy for Fruits
Scope Scope Brand Brand Owner Owner Brand Hierarchy Functioning Brand Hierarchy Functioning EEPC would establish a national EEPC would establish a national brand to all Egypts exports brand to all Egypts exports Agricultural commodities exports Agricultural commodities exports would have specific brands, would have specific brands, aligned to the major country aligned to the major country brand hierarchy of brands brand hierarchy of brands (Specific fruit // country brands) (Specific fruit country brands) Fruits brands (e.g., oranges, Fruits brands (e.g., oranges, mangoes, grapes) mangoes, grapes) Vegetables brands (e.g., Vegetables brands (e.g., artichokes, potatoes) artichokes, potatoes) Cereals brand (e.g., rice) Cereals brand (e.g., rice) Cotton brand (currently used) Cotton brand (currently used) E.g., MAFA, SONAC, SEKEM, El Wadi, Agro Farms, Green Egypt, Al-Kenana, Green Land, Fresh Fruit Company, El Aguizy, Green Farm Company AEC leads the regional AEC leads the regional branding initiatives branding initiatives The existence of umbrella brands The existence of umbrella brands allows capturing of synergies allows capturing of synergies and enhancing of promotion and enhancing of promotion cost-effectiveness cost-effectiveness

National National Brand Brand

EEPC

Industry Industry Brand Brand

Food Food Commodity Commodity Council Council

Textile Textile Council Council

E.g., AEC, Furniture Council, Textile Council

Category Category Brands Brands

HEIA

Private Private Company Company Brands Brands

280

Proprietary & Confidential

The request for proposal for branding Egyptian agricultural products should comprise an overview, clear guidelines for evaluation, expectations as well as administrative details
Primary Components of Branding RFP
Situational overview that describes the desired results of the project and objectives for building a brand Situational overview that describes the desired results of the project and objectives for building a brand Framework of the problem at hand and how an external entity can help meet the organizations goals in Framework of the problem at hand and how an external entity can help meet the organizations goals in developing a holistic brand and campaign developing a holistic brand and campaign Background of the organization and previous initiatives related to branding and marketing Background of the organization and previous initiatives related to branding and marketing Relevant sections in RFP: Introduction, overview Relevant sections in RFP: Introduction, overview

Project Project Overview Overview

Evaluation Evaluation

Clearly defined evaluation process that enumerates how the project will be awarded as well as the criteria Clearly defined evaluation process that enumerates how the project will be awarded as well as the criteria Types of branding firms or marketing organizations/individuals that qualify, necessary credentials, and Types of branding firms or marketing organizations/individuals that qualify, necessary credentials, and necessary experience. necessary experience. Relevant sections in RFP: Evaluation criteria, Eligibility, Candidate Qualifications & References Relevant sections in RFP: Evaluation criteria, Eligibility, Candidate Qualifications & References Types and content of deliverables required from the contractor. The awarding entity also states what Types and content of deliverables required from the contractor. The awarding entity also states what information it is responsible for providing to the contractor information it is responsible for providing to the contractor Conditions for managing and implementing the project, including decision rights and authority Conditions for managing and implementing the project, including decision rights and authority

Expectations Expectations

Schedule and development process for the project. Includes deadline of proposal delivery by date and Schedule and development process for the project. Includes deadline of proposal delivery by date and hour, decision date and notification details of award winners, targeted project completion date and any hour, decision date and notification details of award winners, targeted project completion date and any factors that may be driving that date factors that may be driving that date Relevant sections in RFP: Deliverables, Management Requirements, Timelines Relevant sections in RFP: Deliverables, Management Requirements, Timelines Details on how contractors are to submit pricing information Details on how contractors are to submit pricing information Information on purchase contracts, nondisclosure agreements, copyright ownership, and other legal Information on purchase contracts, nondisclosure agreements, copyright ownership, and other legal documents as appropriate documents as appropriate Specifics on payment terms, i.e. payment timelines, type of contract (fee-for-service contract or lump-sum Specifics on payment terms, i.e. payment timelines, type of contract (fee-for-service contract or lump-sum contract), acceptable expenses or charges, etc. contract), acceptable expenses or charges, etc. Relevant sections in RFP: Pricing, Contracts and Licenses, Payment Terms Relevant sections in RFP: Pricing, Contracts and Licenses, Payment Terms Proprietary & Confidential
281

Administrative Administrative Details Details

Strategic Objective: Improve Egypts access to international markets Owner: AEC - Legal, Trade & Policy Advocacy Lead Duration: On-going
Description Current efforts on advocating interests of agricultural commodities exporters are too fragmented and fail to leverage full potential AEC could play a coordination role between various sector stakeholders to liaise with the Ministry of Trade in order to present a common and cogent front in trade negotiations

Enabling Initiative: Drive common agriculture trade advocacy efforts Number: C1 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: 681 million LE per year (Average difference in total export over next 11 years between best and base case following trade liberalization - average increase of 1% in market share per crop) Key Milestones Establishment of Foreign Trade Advocacy Committees

KPI Year-on-year percentage reduction in tariffs/quotas/windows facing Egypt per crop category in key destination markets

Key Risks / Mitigation Plans Conflicting interest among exporters: create institutionalized, transparent, data-driven and participatory mechanism to ensure fair representation. Remind overall sector incentive of lowering trade tariffs and export subsidies

Action Plan Assemble Foreign Trade Advocacy Committee for each agricultural sector Build analytics (e.g., econometrics model) to justify position Disseminate negotiation schedule to all members to prepare for upcoming negotiations Institutionalize participatory mechanism to: Build common negotiation position among Egyptian agricultural exporters based on benefits to overall sector Prepare position papers on trade matters for Egyptian Government. (AEC to prepare all background information)
282

AEC to conduct trade analysis to determine economic advantages of establishing partnership with Cairns Group and other international trade bodies. Discuss proposal with various Trade Advocacy Committees and key sector stakeholders Develop working papers to be presented to Egyptian Government to assist in negotiations benefiting the Egyptian agricultural sector

Proprietary & Confidential

The Cairns group is a coalition of 19 agricultural exporting countries, mostly developing countries, intent on bringing about full liberalization of global agricultural trade
Cairns Group Description
Geographical Distribution Geographical Distribution Historical Background Historical Background

Established in 1986, the Cairns Group is a coalition of Established in 1986, the Cairns Group is a coalition of agricultural exporting countries which account for over 25% of agricultural exporting countries which account for over 25% of the worlds agricultural exports the worlds agricultural exports The Groups objective is to bring about liberalization of global The Groups objective is to bring about liberalization of global trade in agricultural produce and abolish trade-distorting trade in agricultural produce and abolish trade-distorting measures measures Most notable success occurred during Uruguay Round of the Most notable success occurred during Uruguay Round of the WTO talks with the conversion of import restrictions into WTO talks with the conversion of import restrictions into tariffs. Helped develop stricter rules against export subsidies tariffs. Helped develop stricter rules against export subsidies and a decrease in domestic agricultural support policies and a decrease in domestic agricultural support policies
Member Countries Member Countries Argentina Australia Bolivia Brazil Canada Chile Colombia Costa Rica Guatemala Indonesia Malaysia New Zealand Pakistan Paraguay Peru the Philippines South Africa Thailand Uruguay
283

Accession Process Accession Process

No official membership process. Interested countries usually No official membership process. Interested countries usually complete following steps to join the Cairns Group: complete following steps to join the Cairns Group: Exhibit support of 3 main Cairn tenets: deep tariff cuts, Exhibit support of 3 main Cairn tenets: deep tariff cuts, export subsidy elimination, prevention of agri-support export subsidy elimination, prevention of agri-support Express interest to the Australian Minister of Trade, Express interest to the Australian Minister of Trade, chair of the Cairns Group chair of the Cairns Group Obtain approval from Cairns Group members Obtain approval from Cairns Group members Attend on provisional basis technical meetings Attend on provisional basis technical meetings Join officially as member at Ministerial meetings Join officially as member at Ministerial meetings
Proprietary & Confidential

Egypt would benefit from joining the Cairns group by reaping greater bargaining power, opening up additional trade opportunities and gathering trade intelligence & know-how
Benefits of Joining Cairns Group

Greater Greater Bargaining Bargaining Power Power

Acting collectively, the Group has more influence and impact on agriculture negotiations than any individual members could have independently, which is done by building consensus on some of the important issues for developing countries during trade negotiations In the case of Egypt, a large majority of its exports sent to the EU. Because of the dependency on one trading partner, Egypt maintains little ability to leverage its position independently, which could be offset by joining a consortium of other countries trading with the EU

Additional Trade Additional Trade Opportunities Opportunities

Membership increases the ability for Egypt to strike new relationships with member countries and open additional target markets for exports

Most of Egypts competitors in fresh produce are members of the Cairns group (except Israel). Egypt would gain better visibility on the strategy and objectives of comparable countries

Intelligence & Intelligence & Know-How Know-How

Egypt would also be exposed to the Cairns group negotiation techniques, that were honed over the last 20 years. This could help agriculture negotiation teams within the Ministry of Trade to acquire new skills & knowhow
284

Proprietary & Confidential

Strategic Objective: Improve Egypts access to international markets Owner: AEC Logistics Lead Duration: 36 months
Description Streamlining Egypts maritime logistics through: Coordinated efforts to merge volumes increase logistical capabilities through implementation of integrated transportation process increased availability of Ro-Ro service, reefer container service Creation of a designated reefer vessel fleet and EU maritime distribution terminal KPI Mix of various transportation modes (percentage reefer containers, reefer vessels, air cargo, truck, etc...) Year-on-year evolution of average unit cost (per ton, per km) faced by Egyptian exporters

Enabling Initiative: Streamline and expand Egypts maritime transport Number: C2 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: Maritime commissioned studies: ~3 million LE Benefit: 475 million LE per year (Average annual impact over next 11 years resulting from a 20% reduction in cost per kg of reefer containers, reefer vessels, and RoRo vessels) Key Risks / Mitigation Plans Exporter fail to unite: Financial analysis detailing advantages No buy-in from shipping companies: volume negotiation No financing for Reefer vessel: open door to private operators Key Milestones Establishment of Agricultural Logistics Export Committee and Maritime Shippers Committee Establishment of Reefer Vessel

Action Plan Commission a study of Egypts agricultural export transport logistics and processes: Review current regulation bottlenecks that hamper cost-effective service of ro-ro vessels operating out of Egypt Enhance current planning and coordination for reefer container service: Establish Maritime Shippers Committee to identify common opportunities for expansion of service availability on reefer container service (e.g., greater coordination) Identify key bottlenecks to improve service time and reliability for reefer containers (e.g., Egyptian Customs streamlining procedures for expediting exports)
285

Conduct a maritime study and assess the cost and benefits for the implementation of a designated reefer vessel (e.g., Flexcon 21) Assess needs and feasibility of maritime distribution hub in dedicated port

Proprietary & Confidential

Strategic Objective: Improve Egypts access to international markets Owner: AEC - Logistics & Legal Lead Duration: 5-10 years
Description Current air cargo market is characterized by a quasi-monopoly from Egypt Air. Other providers (e.g., Lufthansa, Air France) ship cargo but only on commercial aircrafts Through deregulation of the sector, exporters should reap the benefits of quality air cargo logistics, price stability, and peak volume management

Enabling Initiative: Enhance Egypts air cargo sector competitiveness Number: C3 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: 430 million LE per year (Average annual impact over next 11 years resulting from a 20% reduction in cost per kg of air transport) Key Risks / Mitigation Plans Egypt Air/Government reluctance to de-regulate air cargo market: submission of economic cost of monopoly Key Milestones Organization of air cargo committee Presentation of business case for air cargo deregulation

KPI Year-on-year evolution of average air transportation cost (seasonally adjusted)

Action Plan Create agriculture air cargo committee (incl. foreign airlines, exporters) Prepare business case for air cargo liberalization: Conduct a complete analysis and review of air cargo challenges Estimate current burden imposed by quasi-monopoly by Egypt Air through econometric model Prepare and disseminate business case for de-regulation of air cargo market to key export stakeholders Submit business case to Government Coordinate industry capacity planning: Develop program for consolidation of exporter volumes to negotiate improved air cargo rates and coordinate capacity with airlines

286

Proprietary & Confidential

The AEC should lobby the Ministry of Civil Aviation and Egypt Air for deregulation of the air cargo market in Egypt along 7 distinct components to achieve full liberalization in 10 years
Egypts Proposed Air Cargo Liberalization Steps
1 Promote Creation of Promote Creation of Civil Aviation Civil Aviation Regulatory Authority Regulatory Authority Award National Air Award National Air Cargo Carrier Licenses Cargo Carrier Licenses 3 Negotiate Bilateral Negotiate Bilateral Reciprocal Cargo Reciprocal Cargo Agreements Agreements Abolish Egypt Air Abolish Egypt Air Quasi-Monopoly on Quasi-Monopoly on Cargo Handling Cargo Handling Establish Egypt Air Establish Egypt Air Cargo Facilities Sharing Cargo Facilities Sharing Arrangements Arrangements
Propose to create independent authority, independent from current air transport incumbent (Egypt Air) to regulate all air transport activities and infrastructure Promote vibrant and competitive air transport and infrastructure industry Propose to authorize a number of new carriers to operate air cargo services (including mail), either scheduled or charter or both Review multi-lateral agreement by Arab Civil Aviation Commission (ACAC) should help promote open skies principles applied to cargo services throughout the Arab League. Propose to implement a bilateral negotiating strategy of seeking reciprocal open skies for dedicated air cargo services by 2010, including 5th Freedom rights Promote national carriers to operate in a flexible manner, without geographic restrictions within an enlarged market, and in some cases, to operate cargo hubs throughout Egypt Propose immediate abolition of Egypt Airs monopoly on air cargo handling facilities and allow new entrants into the air cargo ground handling services market Promote a competitive market in air cargo ground handling services that would deliver services at the required quality and cost levels that customers demand Open-up Egypt Airs existing air cargo buildings to facilitate and allow other operators to share the existing facilities Maintain short-term arrangement until opening of dedicated air cargo facilities by new entrants Engage with customs authorities with the objective of improving air cargo processes to address cost and speed issues, for example, for interlining and shipment consolidation Ensure efficient and timely processing of sensitive goods through customs while guaranteeing adequate sanitary quality control Establish full liberalization of air cargo transport by 2016, fully regulated by Civil Aviation Regulatory Authority Enable Egypts export industry access to affordable & quality air shipping services from major Egyptian airports
287

6 Streamline Customs & Streamline Customs & Security Procedures for Security Procedures for Air Cargo Air Cargo 7 Promote Full Promote Full Liberalization of Air Liberalization of Air Cargo Market Cargo Market

Proprietary & Confidential

Strategic Objective: Improve Egypts access to international markets Owner: AEC - Export Development, Communication Lead Duration: 5 years
Description Best-in-class experience reveals that international offices help establish a link between exporters and importers As such, the establishment of AEC promotion offices in designated foreign markets would improve business relationships, help implement Egyptian promotional campaigns and open new business for Egyptian exporters KPI Implementation of agricultural trade promotional offices status Number of promotional agents hired Frequency of promotional campaigns Increase in sales opportunities

Enabling Initiative: Broaden Egypts export distribution reach Number: C4 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: ~500,000 LE annually / office Benefit: Improved promotion of quality Egyptian products and increased sales in targeted markets Key Milestones Promotional offices opened in target markets

Key Risks / Mitigation Plans Pressure to hire political appointees: establish Scope of Work requiring industry persons only

Action Plan Prepare analysis and business case for the establishment of agricultural trade promotion offices in targeted markets. In particular, assess the need to coordinate promotional offices with other industry to share investments Prepare budget and submit business case to AEC Board and Ministry of Trade to secure funding Hire sales promotion manager for target markets Must have industry background ideally in target market Must speak language of target market Roll-out offices in target markets Establish working relationships with distribution companies, category managers and buyers Implement promotional campaigns with distributors, super markets, produce markets, restaurants and in local media Seek out sales opportunities and send back to AEC sector leads for followup with appropriate companies
288

Proprietary & Confidential

In summary, Egypt could focus on 15 major destination countries to enhance the exports of its seven strategic crops
Best Export Country Markets for Egypt Strategic Crops
Strategic Crops Regional Export Markets Germany Germany France Germany France

II Grapes Grapes

II II
Strawberries Strawberries

III III Oranges Oranges

IV WaterIV Watermelon/ melon/ other other Melons Melons


Germany France

V V Artichokes Artichokes

VI VI Mandarins Mandarins

VII VII Guavas & Guavas & Mangoes Mangoes

France Italy

Germany UK

Netherlands UK

EU EU

UK

USA USA

USA

USA

USA

USA

USA

USA

USA

GCC GCC

Saudi Arabia UAE

Saudi Arabia UAE

Saudi Arabia UAE

Oman

UAE Qatar

Saudi Arabia UAE

Saudi Arabia UAE

CIS CIS

Russia Ukraine

Russia

Russia

Russia

NA

NA

NA

China

Japan Hong Kong

Hong Kong Rep of Korea

Hong Kong China

NA

Hong Kong

China Hong Kong

FE FE

Hong Kong

289

Proprietary & Confidential

The location of the agricultural trade promotion offices should be determined through market and return-on-investment analyses
Selection Process for the Location of International Agricultural Trade Promotion Offices

Market Analysis Market Analysis


Analyze target Analyze target market along the market along the following axes: following axes: Product Product preferences preferences Pricing structure Pricing structure Distribution Distribution channels channels Potential Potential customers customers Competitors Competitors Regulations Regulations

Market and Profitability Assessment Criteria Market and Profitability Assessment Criteria
Which Egyptian products have the best opportunity in the Which Egyptian products have the best opportunity in the targeted market? targeted market? Is there sufficient demand? Does the current pricing Is there sufficient demand? Does the current pricing structure allow for profits on sale of Egyptian products? structure allow for profits on sale of Egyptian products? Are investments necessary to ensure successful marketAre investments necessary to ensure successful marketentry? Are these justified, given expected returns? entry? Are these justified, given expected returns? What are available distribution channels? What are available distribution channels? Is there a qualified and skilled workforce to manage Is there a qualified and skilled workforce to manage logistics (transport, warehousing, delivery)? logistics (transport, warehousing, delivery)? Who are the existing retailers (buyers)? What is their Who are the existing retailers (buyers)? What is their knowledge and perception of Egyptian products? knowledge and perception of Egyptian products? How can customers find more information on Egyptian How can customers find more information on Egyptian products? Is there an efficient customer service? products? Is there an efficient customer service? Who are competitors in the market? What are their Who are competitors in the market? What are their strengths and weaknesses? strengths and weaknesses? How are they operating in the market? How are they operating in the market? What are the relationships between competitors and target What are the relationships between competitors and target customers? customers? Are competitors supplying through distributors or directly? Are competitors supplying through distributors or directly? Are there any market regulations, duties or standards Are there any market regulations, duties or standards required for Egyptian products? required for Egyptian products?
290

Location Selection Location Selection


Selected markets Selected markets should provide should provide favorable aspects favorable aspects along the different along the different assessment criteria assessment criteria Selected markets Selected markets should provide should provide significant significant opportunities, based opportunities, based on in-depth financial on in-depth financial analysis analysis Local promotional Local promotional offices should offices should provide high value provide high value to AEC in the to AEC in the specific location specific location

Proprietary & Confidential

Thus increasing the opportunity for success by establishing strategies tailored for each market
Country Germany & Netherlands (Berlin) Centrally located to expand local market and push into Switzerland, Austria, Slovenia and Hungary Trading Center Value Proposition Strategically located US trading center to service US and Eastern Canada. Proximity to port facilities in New England, Northeast and Mid-Atlantic National recognition Diverse population Very large market and rapid growth opportunity Competitive logistics Centrally located Mangoes Key Crop Rationale Logistics center to service regional markets Wide variety of distribution channels Centrally located Constraints Keitt is the preferred mango variety Well established competition (e.g., Pakistan, Brazil) Lack of Egyptian brand recognition High Egyptian market share Direct market access Domestic competition and protectionist policies Initiatives

EXH ON-Identify distributors EXH ON AUS AUS Launch Egyptian mango promotionalIV TI V T E E campaign Assess the necessity of adding more internationally recognized varieties. Identify greater regional expansion Trade fair: Fruit Logistica, Rotterdam
Capitalize on the success of Egyptian artichoke in Italy by pushing into neighboring EU countries (e.g., Slovenia, Austria). Identify regional access points, wholesalers and distributors. Trade fair - MACFRUT Become a certified pest-free supplier Launch promotional campaign highlighting the quality of Egyptian Clementines Identify distributors and retailers Trade Fair - PMA

N N

Italy Artichokes (Bergamo)

USA Mandarin (New York)

APHIS: Irradiation/deep cooling is required because of Peach Fly. Well established competition (e.g. Morocco & Spain) import restrictions

Russia (Moscow)

Grapes & Oranges

Competition has a very well established market share and distribution. Customs entry long and complicated
291

Identify distributors and retailers Develop branding and promotional campaigns Initiate pre-customs clearance in Egypt for agricultural exports to Russia Trade Fair IFE Fresh & Confidential Proprietary Produce

Thus increasing the opportunity for success by establishing strategies tailored for each market (Contd)
Country Key Crop Rationale

Target MarketsConstraints
Distances to reach to other regional countries Air Cargo Logistics for regional delivery Maintaining freshness

Initiatives

KSA Strawberries (UAE-Dubai)

Strategically located Large Regional Market Competition logistics easily challenged (USA) Expanding HORECA market Regional proximity to Chinese Mainland, Taiwan and Japan High demand and sufficient market capacity Central trading hub to build increased distribution Volume consumer and EU distribution center Located in strategic European terminal market Established Egyptian Market Share on which to build growth targets Low Egyptian Market share with opportunity for growth High visibility and market accessible Access to fastest growing EU retailers
292

EXH N EXH Identify importers, distributors, ON-AUS AUS retailers TIIV T VE E Examine Establishment of Logistics hub Launch Egyptian Strawberry Quality promotional campaign Trade fair - Gulfood Fresh Produce
Identify importers, distributors, wholesalers, retailers and foodservice Launch Egyptian Seedless Grape Promotional campaign Identify market constraints to entry Trade fair Fresh Produce Shanghai Identify distributors and retailers Launch promotional campaign highlighting the quality of Egyptian Produce Examine establishment of Egyptian fruit & vegetable terminal Trade fair - SIAL Examine establishment of Egyptian Fruit & Vegetable market terminal Identify distributors and retailers Launch Promotional Campaign highlighting Egyptian Quality Trade Fair participation
Proprietary & Confidential

NO N

China Grapes (Hong Kong)

Egyptian market share Logistics distance from Egypt Lack of quality recognition

France (Perpignan & Rungis

Strawberries, Artichokes & Melons

Low Egyptian product recognition Long relationships with competing regional suppliers. French protectionism of domestic growers. Price competition Egypt is high (Melon) but very competitive with Guava/Mango Low product recognition and availability Limited retail access

UK (London)

Watermelon & Guava/Mango

Thus increasing the opportunity for success by establishing strategies tailored for each market (Contd)
Country Key Crop Rationale

Target Markets Constraints


Low CIF Price. Large influx of Turks in distribution and close proximity to Turkey Very diverse distribution channels open air markets, small retailers and large supermarkets all commanding different price points

Initiatives

Ukraine Grapes (Kiev)

Growing Demand large market Large regional Market Black Sea access with opportunity for regional growth and direct transport access to Russian Market EU competition selling at much higher prices High value proposition during opposing Southern Hemisphere season Regional market Thailand, Malaysia, Vietnam, Indonesia Access to 550 million consumers Zero Egyptian presence High Profile Market High Value Opportunity Educated consumer base with healthy eating demands

N Identify importers, distributors, EXH NON-EXH ON retailers AUS AUS TIIV T VE Examine establishment of E Egyptian Produce Distribution Center for Region (Incl. Russia) Launch Egyptian Quality promotional campaign Trade Fairs: ANUGA, IFE Moscow, Fresh
Identify market access procedures Identify importers, distributors, and retailers Examine opportunity for Egyptian regional trade logistics hub Launch promotional campaign to raise awareness of Egyptian High Quality Produce Trade Fair: Asia Fruit Logisitica Identify market access procedures Identify importers, distributors and retailers. Launch promotional campaign to raise awareness of Egyptian High Quality Produce. Trade Fair Asia Fruit Logistica
Proprietary & Confidential

Logistical delivery and service Low product recognition Difficult regulations for market entry

Singapore

Oranges, Artichokes, Grapes, etc

Japan Strawberries (Tokyo)

Logistics air cargo expensive Zero supplier awareness High market access quality control restrictions. Market dominated by US who have invested heavily in promotion and brand recognition

293

Strategic Objective: Realize Egypts agriculture full export potential Owner: Agricultural Export Councils Director Duration: 4 years
Description This initiative intends to federate current agricultural R&D efforts into an integrated strategy that will focus on applied research for export development The promotion of a unified Agricultural Research Center, with direct link to private sector agricultural producer/processor/exporters and the AEC would increase Egypts agricultural competitiveness In addition, Egypts membership in Union for Protection of Varieties can further stimulate private sector agricultural R&D investment in Egypt KPI Launch of ARC status Consolidation of all applied research R&D efforts in Egypts status Number of yearly Egyptian-registered agricultural patents Egypts UPOV membership status

Enabling Initiative: Promote market-driven agricultural R&D Number: D1 Status: New


Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: Develop and promote leading edge technologies for the advancement of agriculture sector export Key Risks / Mitigation Plans Government has low budget available for R&D: lobby private sector and donor agencies for assistance Challenge by existing seed companies to UPOV: prepare crop analysis for benefits of new varieties Key Milestones Establishment of agriculture research committee Establishment of new R&D Agency Membership in UPOV

Action Plan AEC to organize agriculture research steering committee with growers, packers, processors, exporters and agricultural scientists to develop the Agriculture Research Center (ARC) Prepare analysis, business case and position paper on roles 7 prerogatives of such a center Support ARC as dedicated agency to foster applied research (e.g. food technology, R&D, packaging materials, new varieties, growing & harvesting techniques, irrigation, crop protection - pest management) Encourage ARC to launch initiatives towards greater agricultural export performance: Consolidate and unify all applied research R&D efforts in country under ARC Prepare analysis for UPOV membership and obtain buy-in from Ministry of Agriculture for Egypt to become member

294

Proprietary & Confidential

The Agriculture Research & Development Agency is based on a Private-Public Partnership (PPP), which undertakes applied research aligned with the export strategy
Agriculture Research and Development Agency Organization
Include AEC Director, Ministry of Agriculture Chief Scientist, University of Agriculture Scientist Designate, Minister of Science (if applicable) and top exporter firms. Include producers, packers and exporters who require innovative technologies and products for the export market Structured, organized and managed by each Sector Lead in their respective sectors Provide guidance to the Individual Evaluation Committee

Independent Evaluation Independent Evaluation Committees Committees

Ministry of Ministry of Agriculture Agriculture

Research Steering Research Steering Committees Committees

Chief Scientist Chief Scientist

Universities Universities

Horticulture Horticulture Cereals Cereals Product Oriented Institutes Sugar Crops Sugar Crops Oil Crops Oil Crops Cotton Cotton

Plant Protection Plant Protection Disease and pest management Disease and pest management Soil, Water & Environment Quality Soil, Water & Environment Quality Management of fertile soils, water Management of fertile soils, water resources and environment resources and environment Technology in Storage Technology in Storage Extension of shelf-life to hold products Extension of shelf-life to hold products in markets until prices increase in markets until prices increase Agricultural Engineering Agricultural Engineering Development of resistant crops, crops Development of resistant crops, crops designed for dry climates, etc. designed for dry climates, etc.

Discipline Oriented Institutes

Developed under the renewed Extension Service i.e. Ministry of Agriculture and University School of Agriculture

SSF SSF

Regional R&D Centers Regional R&D Centers


295

Proprietary & Confidential

The Agriculture Research & Development Agency could be funded through several options that depend on the status of the agency
Agriculture Research & Development Agency Funding Options

Agriculture Research & Development Agency funded by the Ministry of Agriculture, if Agriculture Research & Development Agency funded by the Ministry of Agriculture, if assimilated to a Directorate of this Ministry assimilated to a Directorate of this Ministry

Public Public Funding Funding

Agency could also be established as a separate public entity, jointly funded by the Ministry Agency could also be established as a separate public entity, jointly funded by the Ministry of Agriculture and the Ministry of Science of Agriculture and the Ministry of Science

Agriculture Research & Development Agency could be established under the University Agriculture Research & Development Agency could be established under the University system, and receive funding from multiple parties: system, and receive funding from multiple parties:

PublicPublicPrivate Private Funding Funding

Industry or AEC, for specific projects Industry or AEC, for specific projects Ministries of Agriculture, Science and Education for ongoing activities Ministries of Agriculture, Science and Education for ongoing activities

296

Proprietary & Confidential

Strategic Objective: Realize Egypts agriculture full export potential Owner: AEC - Agricultural Export Councils Director Duration: 5 years
Description For Egypt to realize its full export potential, additional farming resources from Upper Egypt must be leveraged. Indeed, current resources (water, land, labor) dedicated to exports will not suffice to reach full potential As such, AEC should lead the coordination of all capacity building efforts by the Ministry of Agriculture, EU, USAID, and World Bank to formulate a united strategy for Upper Egypt farming on a number of topics KPI Establishment of Upper Egypt Agricultural Development Committee and Investment Fund Revitalization and enhancement of Agricultural Extension Service status Improved access to credit and financial tools status Number of vocational trainings provided and embedded in local institutions Share of agricultural export from Upper Egypt

Enabling Initiative: Build agricultural export potential in Upper Egypt Number: D2 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: increased export volumes and quality

Key Risks / Mitigation Plans Conflict between subsistence and export farming: build consensus around basic development needs for farming in developing potential

Key Milestones Creation of Upper Egypt Agricultural Development Committee Integrated strategy implemented

Action Plan Create Upper Egypt Agricultural Development Committee and Investment Fund in coordination with Ministry of Agriculture and bilateral/multilateral donor organizations Establish mandate for Development Committee through: Cataloguing current capacity building programs in Upper Egypt Arranging consolidation of various funding initiatives under Upper Egypt Agricultural Development Fund Commissioning Upper Egypts farming potential baseline along 5 key themes: cooperatives/associations, contract farming, access to infrastructure, access to credit, extension & training Developing integrated implementation strategy for identified weaknesses in coordination with existing donor programs
297

Propose various initiatives to Development Committee: Analyze current extension services, materials and functionality. Create partnership between Ministry of Agriculture and School of Agriculture for the enhancement and revitalization of Extension Services. Develop new extension materials focused on varieties best suited to Upper Egypt conditions Develop access to credit and financial tools. Encourage cooperation within small farmer community and ensure that economies of scale may be obtained with competitive opportunities implement vocational training (e.g., logistics coordination, market education, etc.) through donor programs Proprietary & Confidential

Strategic Objective: Encourage full liberalization of agricultural sector Owner: AEC - Legal Policy Advocacy Lead Duration: 24 months
Description Current Government regulations for fertilizers, pesticides and seeds prevent full development of Egypt export potential The objective of this initiative is to Improve the value chain process for the importation of agricultural inputs through process streamlining and acceleration KPI Working group assembly and meetings status Input analysis and position paper status Improvement to current procedures status

Enabling Initiative: Encourage import regulation reforms for agro-inputs Number: E1 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: Improved competitiveness and cost reductions Key Milestones Assembly of working group Submission of position paper and recommendations for procedural changes Reforms launched

Key Risks / Mitigation Plans

Action Plan Assemble a working group with an interest to ensure liberalization and streamlining of imports for agricultural inputs. Review all current laws Conduct analysis of best practices in other countries Submit position paper and seek procedural changes to current system that would help the industry Seek buy-in from the government Launch reform program

298

Proprietary & Confidential

The newly proposed import procedures for seeds should establish an expedited registration process and investigate classifying varieties into few distinct groups
y arry n iin a m liim e rre l P P

Key Elements of Seed Import Law

Registration Process Registration Process

Recommended List of Varieties Recommended List of Varieties


After being registered, each variety needs to be tested in the test After being registered, each variety needs to be tested in the test fields for three years (local varieties after 2 years of preliminary fields for three years (local varieties after 2 years of preliminary testing and approval, also need to be tested for additional three testing and approval, also need to be tested for additional three years) years)

Every variety of fruits and vegetables needs to be listed in the Every variety of fruits and vegetables needs to be listed in the Register of Varieties before it is allowed to be sold on local market Register of Varieties before it is allowed to be sold on local market Documents needed for registration of foreign varieties: Documents needed for registration of foreign varieties: Requirement for registering new variety in the Register of Requirement for registering new variety in the Register of varieties varieties Morphologic variety description with UPOV descriptors Morphologic variety description with UPOV descriptors Authorization of variety owner for registering the variety in the Authorization of variety owner for registering the variety in the Register of varieties Register of varieties Statement on delivering seedlings for the needs of List of Statement on delivering seedlings for the needs of List of recommended varieties and soils recommended varieties and soils Prescribed number of foreign variety seedlings for test fields Prescribed number of foreign variety seedlings for test fields for the needs of List of recommended varieties and soils for the needs of List of recommended varieties and soils Suggest payment of processing tax and handling charges. Suggest payment of processing tax and handling charges. Payment should be reasonable Payment should be reasonable If all documents are valid, new varieties will be registered within 7 If all documents are valid, new varieties will be registered within 7 days. After registration, new variety can be produced, imported or days. After registration, new variety can be produced, imported or traded. traded. Documents needed for registration of local varieties: Documents needed for registration of local varieties: Requirement for accepting new variety Requirement for accepting new variety Prescribed number of foreign variety seedlings for test fields Prescribed number of foreign variety seedlings for test fields Suggest local variety tax as well Suggest local variety tax as well Testing of local varieties lasts 2 years after which results are Testing of local varieties lasts 2 years after which results are statistically processed and Commission on new varieties gives its statistically processed and Commission on new varieties gives its opinion. opinion. Varieties that do not have to be registered in the Register of Varieties that do not have to be registered in the Register of varieties are mainly for: varieties are mainly for: Scientific purposes cant be sold or multiplied Scientific purposes cant be sold or multiplied Import for the sake of export needs to be exported until the Import for the sake of export needs to be exported until the set date set date
299

The list of recommended varieties is made after this period The list of recommended varieties is made after this period divided in four types: divided in four types: 1. 1. 2. 2. 3. 3. List A: Varieties suitable for production in all test fields, List A: Varieties suitable for production in all test fields, therefore recommended for planting across Egypt therefore recommended for planting across Egypt List B: Suitable for production in some test fields, therefore List B: Suitable for production in some test fields, therefore recommended in certain regions recommended in certain regions List C: Varieties that got optimal results in two year List C: Varieties that got optimal results in two year preliminary testing which will get final recommendation after preliminary testing which will get final recommendation after 3 year testing 3 year testing List D: Not recommended, but allowed for planting List D: Not recommended, but allowed for planting

4. 4.

Proprietary & Confidential

Strategic Objective: Encourage full liberalization of agricultural sector Owner: Agricultural Export Councils Director Duration: 5 years
Description Egypts irrigation withdrawal share of overall consumption ranks among the highest in the world. As the country develops further its agricultural potential, water is fast becoming a scarce resource and a limiting factor to achieve full potential As such, Egyptian agriculture exporters should preempt any attempt from the Government to introduce anti-export legislation (e.g., rice export tax) and advocate sustainable policies that will curb water wastage and optimize cropping pattern mix while maintaining a competitive market KPI Agriculture irrigation share of national water consumption Overall Egyptian exporter value added Cropping pattern and associated land & water usage Action Plan Assist current Government efforts to establish an integrated water management approach (e.g., actively participate working committees) Advocate among aid agencies (e.g., World Bank) greater funding towards building/renovating national, regional and district canals as well as irrigation equipments (e.g., water pumps) Coordinate current R&D and training efforts (e.g., HEIA, Extension Services, ARDAAS) in on-farm on-farm water management techniques Assemble working group with agriculture exporters associations (e.g., UPHEC, El Shams) to prepare position paper on water right allocation and water pricing. Lobby Government to pre-empt legislation that would hurt overall export potential (e.g., export tax on rice)
300

Enabling Initiative: Advocate sustainable water policies Number: E2 Status: New


Key Dependencies / Prerequisites A4, D1 Cost -Benefit Analysis

Cost: 690 million LE in reduced added value per year Benefit: 2,500 million LE in increased added value per year

Key Risks / Mitigation Plans Reluctance from exporters to advocate water management: build case for benefit to overall industry

Key Milestones

Baseline and expected benefit

Proprietary & Confidential

Introducing water saving incentives such as pricing or control mechanisms could deter farming of low-margin and waterintensive export crops with an overall positive effect on production
L L UA UA T T EP Current vs. Optimized Land Allocation * EP C NC ON O C C

Estimated Impact of Water Pricing on Egypts Gross Exporter Margin ** (2004, million LE)
Pricing would optimize land Pricing would optimize land allocation towards more allocation towards more water- efficient crops water- efficient crops and increase overall export and increase overall export profitability thanks to higher profitability thanks to higher exporter margins exporter margins

3,883

Others

52%

52%

+2,530 2,056
Vegetables Cotton Rice Sugar Cane Wheat

+1,827 (+88%)

8% 5% 11% 4% 19%

13% 11%

-691

24%

Current Crop Mix

Optimized Crop Mix

Current Exporter Cost of Pricing Margin Water

Note (*): linear optimization of exporter margin per m3 of water based on land allocation Note (**): Cost of water = 0.05 LE/ m3 in old lands and 0.2 LE/ m3 in new lands Source: FAOSTAT; CAPMAS; World Bank; Ministry of Agriculture Statistics 301

Projected Additional Exporter Margin Exporter Margin From Optimized Crop Mix

Proprietary & Confidential

Strategic Objective: Encourage full liberalization of agricultural sector Owner: AEC - Export Development, Legal Lead Duration: 5 years
Description Although Egypts Government since the 1980s has largely deregulated the production, marketing and processing of the agriculture sector, some pockets of strategic crops continue to experience anti-export bias and unfair competition from state-owned enterprises AEC must continue to lobby the Government for complete de-regulation and removal of agricultural production or processing support mechanisms KPI Year-on-year price support estimate per crop Percentage of agriculture product processing capacity owned by private sector

Enabling Initiative: Support full production deregulation of agriculture Number: E3 Status: New
Key Dependencies / Prerequisites A4 Cost -Benefit Analysis Cost: N/A - included in AECs budget Benefit: healthy agriculture sector that promotes efficiency through competition

Key Risks / Mitigation Plans Politically sensitive: Include food security experts

Key Milestones Assembly of working group Publication of position paper De-regulation and removal of Government support mechanisms

Action Plan Organize working group on deregulation in the agricultural sector with key stakeholders (e.g., Government, Food Security Institute, FAO) Conduct analysis on strategic crops and effects of Government interventions Prepare position paper based on increase in exports and values realized through de-regulation Submit position paper to Ministry of Agriculture, Ministry of Trade, Ministry of Commodities Supply

302

Proprietary & Confidential