In this week&rsquo;s edition, we look for Turkish solutions for our export problems and shed light on international policies to contain inflation
<hr>
<h2 dir="ltr">What Does Egypt Need to Match Turkish Exports?&nbsp;</h2>
January saw both Egyptian and Turkish exports rise year-on-year to <a href="https://www.nile.eg/%D8%A8%D8%A7%D9%84%D8%A5%D9%86%D9%81%D9%88%D8%AC%D8%B1%D8%A7%D9%81-%D8%B5%D8%A7%D8%AF%D8%B1%D8%A7%D8%AA-%D9%85%D8%B5%D8%B1-%D8%A7%D9%84%D8%B3%D9%84%D8%B9%D9%8A%D8%A9-%D8%AA%D8%B3%D8%AC%D9%84-3">$3.1</a> billion and <a href="https://www.dailysabah.com/business/economy/turkiye-starts-2024-with-record-20b-exports-in-january">$20</a> billion, respectively. This came after Egypt's exports for the first 11 months amounted to <a href="https://www.instagram.com/p/C3V7ojagGCy/?igsh=dWg1OWVhaTY1bGJs">$38.4</a> billion compared to an all-time high of <a href="https://www.tccb.gov.tr/en/news/542/150680/-our-exports-in-2023-have-broken-the-republican-era-record-#:~:text=Announcing%20the%202023%20foreign%20trade,compared%20to%20the%20previous%20year.">$255</a> billion in Turkish exports for 2023 as a whole.
The Turkish President&rsquo;s recent <a href="https://www.alarabiya.net/aswaq/special-stories/2024/02/15/%D9%85%D8%B5%D8%B1-%D9%88%D8%AA%D8%B1%D9%83%D9%8A%D8%A7-%D8%AA%D8%B9%D9%85%D9%84%D8%A7%D9%86-%D8%B9%D9%84%D9%89-%D8%AA%D8%B9%D8%B2%D9%8A%D8%B2-%D9%85%D9%83%D8%A7%D9%86%D8%A9-%D8%A7%D9%84%D9%82%D8%A7%D9%87%D8%B1%D8%A9-%D9%83%D8%B4%D8%B1%D9%8A%D9%83-%D8%AA%D8%AC%D8%A7%D8%B1%D9%8A-%D8%B1%D8%A6%D9%8A%D8%B3%D9%8A-%D9%84%D8%A3%D9%86%D9%82%D8%B1%D8%A9-%D9%81%D9%8A-%D8%A3%D9%81%D8%B1%D9%8A%D9%82%D9%8A%D8%A7#:~:text=%D9%88%D8%A8%D8%AD%D8%B3%D8%A8%20%D8%A7%D9%84%D8%A8%D9%8A%D8%A7%D9%86%D8%A7%D8%AA%D8%8C%20%D8%A8%D9%84%D8%BA%20%D8%A5%D8%AC%D9%85%D8%A7%D9%84%D9%8A%20%D8%B5%D8%A7%D8%AF%D8%B1%D8%A7%D8%AA,%D9%88%D8%A7%D9%84%D8%A3%D8%B3%D9%85%D8%AF%D8%A9%20%D8%A8%D9%82%D9%8A%D9%85%D8%A9%20357.4%20%D9%85%D9%84%D9%8A%D9%88%D9%86%20%D8%AF%D9%88%D9%84%D8%A7%D8%B1.">visit</a> to Cairo -the first in ten years- underscored Turkey&rsquo;s supremacy in exports both in value and level of diversity.
The two countries have been witnessing a deterioration in the value of their currencies against the US dollar. Theoretically, this should increase the competitiveness of exports due to the decline in their prices. But in practice, compared to the losses in the value of the pound and the lira since 2016, the increase in Egyptian exports is weak while Turkey's <a href="https://www.tccb.gov.tr/en/news/542/150680/-our-exports-in-2023-have-broken-the-republican-era-record-#:~:text=Announcing%20the%202023%20foreign%20trade,compared%20to%20the%20previous%20year.">record</a> jumps continue. So what does Egypt need to do to reach the level of Turkish exports?&nbsp;
<img src="https://api-aps.aucegypt.edu/uploads/tinymce/1708874347imageEd 61_4 EN.png" alt="" width="405" height="404">
<h3 dir="ltr">What is Turkey doing?</h3>
Turkey has a huge industrial base that has fueled growth and supported exports, making Turkey one of the <a href="https://www.tebadul.com/ar/turkey/blog/trade-relations-between-turkey-and-europe">largest</a> trading partners of the European Union. This buffered the effect of many economic challenges that it <a href="https://www.instagram.com/p/C3V7ojagGCy/?igsh=dWg1OWVhaTY1bGJs">shares</a> with Egypt: a depreciating currency, high inflation (29.8% in Egypt; 64.8% in Turkey), and massive foreign debt (USD482.6 billion for <a href="https://www.instagram.com/p/C3V7ojagGCy/?igsh=dWg1OWVhaTY1bGJs">Turkey;</a> USD164 billion for <a href="https://www.instagram.com/p/C3V7ojagGCy/?igsh=dWg1OWVhaTY1bGJs">Egypt)</a>.
Turkey&rsquo;s exports are more diversified than Egypt&rsquo;s. According to the <a href="https://data.worldbank.org/indicator/TX.VAL.MANF.ZS.UN?locations=TR">World Bank</a>, manufactured goods accounted for 74% of total Turkish exports in 2022, but <a href="https://data.worldbank.org/indicator/TX.VAL.MANF.ZS.UN?locations=EG">only</a> 42% of Egyptian exports. This is one reason that Egypt is less well-positioned than Turkey to take advantage of the cheap currency.
Egyptian exports are <a href="https://manassa.news/stories/10449">concentrated</a> in gas, oil, and <a href="https://tradingeconomics.com/egypt/exports-by-category">energy-intensive</a> goods such as plastics, fertilizer, and steel. The prices of most of these products are determined by global energy prices, which means that the low exchange rate represents less of a competitive edge for such exports.
Also, non-oil Egyptian exports rely heavily on the import of intermediate goods and machinery, which raises the cost of production. This is reflected in a higher final price, which undercuts the competitive price advantage of Egyptian exports.
Despite the <a href="https://www.investinegypt.gov.eg/Arabic/Pages/WhyEgyptDetails.aspx?categoryid=22#58">numerous</a> incentives that Egypt offers local and foreign investors and massive <a href="https://www.investinegypt.gov.eg/Arabic/Pages/WhyEgyptDetails.aspx?categoryid=22#55">spending</a> on infrastructure in recent years, Egypt <a href="https://archive.doingbusiness.org/en/doingbusiness">ranks</a> 114 in the World Bank&rsquo;s Doing Business report,while Turkey ranks 33 out of the surveyed 190 countries. The report assesses the ease of investment procedures with higher rankings' indicating simpler procedures to set and operate a business.&nbsp;
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1708874600imageEd 61_6 EN.png" alt="" width="405" height="405">
Turkey channels domestic investments to sectors where it enjoys significant competitive advantages, such as the <a href="https://fundingturkey.com/investment-opportunities-in-turkeys-thriving-automotive-industry/">automotive industry</a>, which had exports worth USD27 billion in 2022. The state developed the auto industry to <a href="https://www.ajnet.me/ebusiness/2023/4/3/%D8%A3%D9%88%D9%84-%D8%B3%D9%8A%D8%A7%D8%B1%D8%A9-%D9%83%D9%87%D8%B1%D8%A8%D8%A7%D8%A6%D9%8A%D8%A9-%D8%AA%D8%B1%D9%83%D9%8A%D8%A9-%D8%A3%D8%B1%D8%AF%D9%88%D8%BA%D8%A7%D9%86-%D9%8A%D8%B7%D9%84%D9%82#:~:text=%D9%88%D8%A3%D9%86%D8%AA%D8%AC%D8%AA%20%D8%AA%D8%B1%D9%83%D9%8A%D8%A7%20%D9%81%D9%8A%20%D8%AD%D9%82%D8%A8%D8%A7%D8%AA%20%D8%B3%D8%A7%D8%A8%D9%82%D8%A9,%D8%A8%D9%86%D8%A7%D8%A1%20%D8%B9%D9%84%D9%89%20%D9%85%D8%A8%D8%A7%D8%AF%D8%B1%D8%A9%20%D9%82%D8%A7%D8%AF%D9%87%D8%A7%20%D8%A3%D8%B1%D8%AF%D9%88%D8%BA%D8%A7%D9%86.">produce</a> the first Turkish-made electric car in 2023. Meanwhile the agricultural and industrial sectors -both with high export potentials-attract a marginal stake of total investments in Egypt.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1708874656imageEd 61_5-2 EN.png" alt="" width="405" height="180">
Turkey also offers extensive support for exports. The <a href="https://www.alborsaanews.com/2019/02/07/1175765">Turkish Export Development Bank</a> covers up to 25% of the value of exports, while <a href="https://www.qna.org.qa/ar-QA/News-Area/News/2023-07/20/0116-%D8%A7%D9%84%D8%AD%D9%83%D9%88%D9%85%D8%A9-%D8%A7%D9%84%D8%AA%D8%B1%D9%83%D9%8A%D8%A9-%D8%AA%D8%AA%D8%B9%D9%87%D8%AF-%D8%A8%D8%AF%D8%B9%D9%85-%D8%A7%D9%84%D8%B5%D8%A7%D8%AF%D8%B1%D8%A7%D8%AA-%D9%88%D9%85%D9%88%D8%A7%D8%B2%D9%86%D8%A9-%D8%A7%D9%84%D8%B7%D9%84%D8%A8-%D8%A7%D9%84%D9%85%D8%AD%D9%84%D9%8A">banks</a> provide credit services amounting to millions of dollars a day to exporters. In contrast, the Export Development Bank of Egypt and the Export Credit Guarantee Company of Egypt do less to promote exports. In some cases, the bank refuses to finance export deals, while EGE collects <a href="https://manassa.news/news/14302">excessive</a> fees from exporters.
Turkey&rsquo;s reliance on overland trade with neighboring countries is an additional advantage since two-thirds of its exports go to relatively nearby countries, which insulates it against high global shipping costs. Egypt currently lacks this advantage due to the active crises and conflicts in the neighboring states of Libya, Sudan, and Palestine.
While Egypt offers many of the same investment incentives as Turkey, in practice, bureaucratic red tape prevents investors from taking advantage of them.
<h3 dir="ltr">How can Egypt boost its exports?</h3>
In light of the Turkish experience, Egypt can pursue several policies to ensure the effectiveness of its export policies and access to new markets. These include:
<ul>
<li dir="ltr" style="text-align: justify;" role="presentation">Adopt a different export policy aimed at diversifying exports, not just increasing their total value&nbsp;</li>
<li dir="ltr" role="presentation"><a href="https://www.youm7.com/story/2020/7/11/%D8%AC%D9%85%D8%B9%D9%8A%D8%A9-%D8%B4%D8%A8%D8%A7%D8%A8-%D8%A7%D9%84%D8%A3%D8%B9%D9%85%D8%A7%D9%84-5-%D9%85%D8%B4%D8%A7%D9%83%D9%84-%D8%AA%D9%88%D8%A7%D8%AC%D9%87-%D8%A7%D9%84%D8%B5%D8%A7%D8%AF%D8%B1%D8%A7%D8%AA-%D8%A7%D9%84%D9%85%D8%B5%D8%B1%D9%8A%D8%A9/4871921">Familiarize</a> exporters with the conditions and criteria for entering export markets. Some sectors, such as foodstuffs and engineering industries, must meet quality standards or technical specifications to enter foreign markets</li>
<li dir="ltr" role="presentation">Educate exporters on how to benefit from trade agreements such as COMESA and EU partnership agreements&nbsp;</li>
<li dir="ltr" role="presentation">Modify the export support program to cover fewer industries, focusing on those like textiles or chemicals that enjoy competitive advantages&nbsp;</li>
</ul>
<hr>
<h2 dir="ltr">International Solutions for Runaway Prices</h2>
In early February, the House of Representatives <a href="https://www.youm7.com/story/2024/1/28/%D9%85%D8%AC%D9%84%D8%B3-%D8%A7%D9%84%D9%86%D9%88%D8%A7%D8%A8-%D9%8A%D9%88%D8%A7%D9%81%D9%82-%D9%86%D9%87%D8%A7%D8%A6%D9%8A%D8%A7-%D8%B9%D9%84%D9%89-%D9%82%D8%A7%D9%86%D9%88%D9%86%D9%8A-%D8%AA%D8%A3%D9%85%D9%8A%D9%86-%D9%88%D8%AD%D9%85%D8%A7%D9%8A%D8%A9-%D8%A7%D9%84%D9%85%D9%86%D8%B4%D8%A2%D8%AA-%D9%88%D8%A7%D9%84%D9%85%D8%B1%D8%A7%D9%81%D9%82/6461741">approved</a> a bill <a href="https://www.shorouknews.com/news/view.aspx?cdate=08022024&amp;id=0ea9f9de-f9c2-4f08-8c19-a50b078bcebf#:~:text=%D9%88%D9%8A%D9%83%D9%88%D9%86%20%D9%84%D9%84%D9%82%D9%88%D8%A7%D8%AA%20%D8%A7%D9%84%D9%85%D8%B3%D9%84%D8%AD%D8%A9%20%D8%B5%D9%81%D8%A9%20%D9%85%D8%A3%D9%85%D9%88%D8%B1%D9%8A,%D8%A3%D8%AE%D8%B0%20%D8%B1%D8%A3%D9%8A%20%D9%85%D8%AC%D9%84%D8%B3%20%D8%A7%D9%84%D8%AF%D9%81%D8%A7%D8%B9%20%D8%A7%D9%84%D9%88%D8%B7%D9%86%D9%8A.">giving</a> the armed forces judicial arrest powers in crimes that affect the supply of basic goods and commodities. Also, the parliament is scheduled to <a href="https://enterprise.news/egypt/en/news/story/2632eaa1-2082-4a01-8d82-a29b28601200/The%20Egypt%20Energy%20Show%20kicks%20off%20today">discuss</a> amendments to the consumer protection law of 2018 to regulate sharply rising prices in the local market.
Egypt is not the only country trying to control the skyrocketing prices. Countries worldwide <a href="https://www.ifpri.org/blog/despite-improved-global-market-conditions-high-food-price-inflation-persists">are witnessing</a> inflationary shocks due first to the Covid pandemic and then to the Ukrainian crisis.&nbsp; This calls for urgent government intervention to regulate markets, though the form of such intervention varies from state to state.
<h3 dir="ltr">The Global North between tax cuts and price-fixing agreements</h3>
Some states in the Global North temporarily <a href="https://www.imf.org/en/Publications/FM/Issues/2022/10/09/fiscal-monitor-october-22">adopted</a> policies aimed at lowering prices by cutting taxes on certain food commodities. This policy is <a href="https://aps.aucegypt.edu/en/articles/778/fighting-inflation-fiscally">effective</a> in fighting inflation in countries that do not have large informal economies, which fall outside the tax system.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1708875021imageEd 61_2 EN.png" alt="" width="405" height="404">
The French government has issued a law stating food producers and retailers hold <a href="https://www.reuters.com/markets/europe/how-france-secured-fall-food-prices-2023-06-12/">negotiations </a>for three months to set wholesale and retail prices for one year, after which they can be renegotiated. Consumer protection agencies also <a href="https://www.reuters.com/world/europe/french-food-groups-agree-renegotiate-prices-minister-2023-05-17/">intensified</a> their scrutiny of companies to ensure compliance with their commitments.&nbsp;
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1708875078imageEd 61_3 EN.png" alt="" width="405" height="404">
For its part, Turkey <a href="https://competitionlawblog.kluwercompetitionlaw.com/2020/06/02/turkey-recent-regulation-on-the-unfair-price-assessment-board-how-the-board-will-function/">established</a> a council to assess unfair pricing practices in the wake of the 2020 Covid crisis. The council monitors the markets, investigates hoarding practices and can sanction violators. <a href="https://globalcompetitionreview.com/review/the-european-middle-east-and-african-antitrust-review/2024/article/turkey-regulator-battles-abuse-of-dominance-revitalised-enforcement-strategies">By law</a>, the council can levy penalties on manufacturers, wholesalers, and retailers of food products, pharmaceuticals, and production inputs. The council has <a href="https://www.dailysabah.com/business/economy/nearly-340-turkish-firms-fined-56m-over-unfair-price-hikes">successfully</a> contributed to safeguarding consumers' interests and ensuring fair pricing. In the first six months of 2023, it <a href="https://193.34.212.89/business/economy/nearly-340-turkish-firms-fined-56m-over-unfair-price-hikes?__cpo=aHR0cHM6Ly93d3cuZGFpbHlzYWJhaC5jb20">fined</a> 369 firms a total of TRY152.8 million.
<h3 dir="ltr">The Global South at a loss</h3>
The situation is worse in the Global South due to weak market regulations. Although the FAO Global Food Price Index has declined, in states like Egypt, Nigeria, Ghana, and Kenya, there is a <a href="https://www.consumersinternational.org/news-resources/news/releases/fair-food-price-monitor-new-analysis-exposes-risk-of-unfair-pricing-in-africa/">growing gap</a> between the cost of production and consumer prices due to price gouging or monopolistic practices. Food prices in most countries of the South increased by 10&ndash;30% over the last year.
To confront the problem, most countries of the Global South <a href="https://www.imf.org/en/Publications/FM/Issues/2022/10/09/fiscal-monitor-october-22">pursued</a> ineffective, palliative measures, for example by directing in-kind and cash assistance to the poorest groups to protect them from spiraling prices.
Poor countries, where the roles of local councils and consumer protection organizations in market supervision are weak, tend to impose price caps, a policy which usually backfires. In<a href="https://www.reuters.com/article/idUSKBN22D48Z/"> Venezuela</a>, which has seen feverish inflation in the past decade, the government stepped in to regulate the pricing of a large number of food and necessities. These controls led to severe shortages of goods and activated the black market.
Argentina, where the inflation rate reached 111% in August, set a ceiling on retail price increases of 5% over 90 days, while offering tax breaks to those who stayed below this limit.
In Egypt, successive government initiatives and appeals to post prices on packaging have <a href="https://aps.aucegypt.edu/en/articles/1335/how-is-government-planning-on-bringing-prices-down-and-increasing-electricity">not managed</a> to bring down the prices of basic commodities or control the markets. For example, although the government asserts that sugar is available in shops at LE27,&nbsp; the majority of Egyptians buy sugar on the black market for more than EGP50 per kg.
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1708875273imageEd 61_EN 1-2.png" alt="" width="405" height="174">
<h3 dir="ltr">Policies that can be applied to curb prices</h3>
With the failure of price restriction policies and&nbsp; police campaigns, more effective ways to control markets must be sought, among which are:
<ul>
<li dir="ltr" style="text-align: justify;" role="presentation">Ensure free competition in the market so that prices are determined based on the dynamics of supply and demand</li>
<li dir="ltr" role="presentation">Provide tax exemptions or incentives to companies that offer their products at uninflated prices</li>
<li dir="ltr" role="presentation">Improve the financial literacy of consumers through public awareness campaigns and initiatives aimed at improving their understanding of market forces and how to know the fair prices of different commodities</li>
</ul>
<hr>
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<div style="text-align: justify;">"Adasa" is a weekly policy digest by Alternative Policy Solutions. "Adasa" provides an analysis of a select number of policy developments and their effect on inclusive development and socioeconomic change.</div>

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