<p style="text-align: justify;">In this week&rsquo;s edition, we shed light on the lack of transparency in Ras al-Hekma deal and the increase in protein prices</p>
<hr>
<h2><span style="color: rgb(6, 71, 137);"><strong>No Transparency in Gulf Investment Deals</strong></span></h2>
<p dir="ltr" style="text-align: justify;">Egypt <a href="https://www.facebook.com/EgyptianCabinet/posts/pfbid02oCLurhYsreyFqookPB7JfWCe9LrV69LWv7Prc6XGAU9JuQE3ESTp5cPhrBTHB8abl">signed</a> the biggest direct investment deal in its history, giving ADQ, an Emirati sovereign fund, the right to <a href="https://sis.gov.eg/Story/271397/%D8%B1%D8%A3%D8%B3-%D8%A7%D9%84%D8%AD%D9%83%D9%85%D8%A9-..-%D9%86%D8%AD%D9%88-%D8%B4%D8%B1%D8%A7%D9%83%D8%A9-%D8%AA%D9%86%D9%85%D9%88%D9%8A%D8%A9-%D9%85%D8%B3%D8%AA%D8%AF%D8%A7%D9%85%D8%A9?lang=ar">develop</a> 170 million m2 of the best beaches on the North Coast, located in Ras al-Hikma. While officials celebrated the <a href="https://aps.aucegypt.edu/en/articles/1354/challenges-exacerbated-by-state-policies-fdi-outflows-and-high-real-estate-prices">investment</a>, hoping it would pull Egypt out of its economic slump, Egyptians have been cut out of the loop, given no information about the project details, the price of the land, the specifics of the Emiratis&rsquo; 65% share of the project returns, or how affected landowners will be compensated.</p>
<p dir="ltr" style="text-align: justify;">The Ras al-Hikma deal exemplifies two features that have characterized privatization deals in Egypt since 2022: Gulf states&rsquo; acquisition of premium assets&mdash;assets of unique historical value or prized location, or profitable, promising companies&mdash;and the lack of transparency and regulation.</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1709478991imageEd 62_5-2 EN.png" alt="" width="405" height="180"></p>
<h3 dir="ltr"><strong>The shift from aid to investment</strong></h3>
<p dir="ltr" style="text-align: justify;">The Russia-Ukraine war and the Covid-19 pandemic <a href="https://apnews.com/article/egypt-economic-crisis-inflation-russia-ukraine-war-0bf22bb11d5b7fe2060eac52279b9df3">compounded</a> the fragility of Egypt&rsquo;s debt-laden, inflation-ridden, <a href="https://www.iiss.org/publications/strategic-comments/2023/egypts-economic-crisis-and-uneasy-position-in-the-middle-east/">mismanaged</a> economy, prompting the government to seek assistance from Gulf states. But after giving Egypt more than an estimated <a href="https://apnews.com/article/russia-ukraine-politics-egypt-government-united-arab-emirates-2e2e35a90ff6a77a83d9749b91d06a37">USD100 billion</a> in various forms of aid from 2013 to 2022, Gulf governments began to criticize the Egyptian government&rsquo;s <a href="https://carnegie-mec.org/2023/05/08/gulf-investment-in-egypt-balance-of-mutual-need-pub-89641">utilization</a> of those funds and <a href="https://arabic.cnn.com/middle-east/article/2023/03/02/egypt-gulf-states-aid-mime">decided</a> to abandon unconditional support and lean into for-profit investments.&nbsp;</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1709479081imageEd 62_4 EN.png" alt="" width="405" height="404"></p>
<h3 dir="ltr"><strong>Is it a fair deal?</strong></h3>
<p dir="ltr" style="text-align: justify;">The lack of detailed info about the deal, in addition to the negative track record of similar projects, raises a lot of questions about the fairness of the&nbsp;<a href="https://aps.aucegypt.edu/en/articles/1358/foreign-ownership-policies-and-the-real-size-of-state-bureaucracy">deal</a> in terms of value as well as its environmental and social consequences.</p>
<p dir="ltr" style="text-align: justify;">The UAE has been awarded contracts to manage the ports of Ain Sokhna and Safaga, while Saudi and Emirati sovereign funds acquired a 52% share in Alexandria Container and Cargo Handling. The firm controls activity in the port of Alexandria, the transit point for <a href="https://apa.gov.eg/en/">60%</a> of Egypt&rsquo;s foreign trade. The Egyptian government brought in EGP6 billion on the deal, a modest sum given that the company&rsquo;s profits in 2022/23 came to EGP4 billion. Qatar is currently seeking to acquire the ports of Damietta and Port Said. If the deal goes through, the most important Egyptian ports would all be under Gulf management.</p>
<p dir="ltr" style="text-align: justify;">Egypt sold 41.3% of <a href="https://www.masrawy.com/news/news_economy/details/2022/8/9/2272085/%D9%87%D8%AF%D9%81-%D9%84%D8%B5%D9%86%D8%A7%D8%AF%D9%8A%D9%82-%D8%A7%D9%84%D8%A7%D8%B3%D8%AA%D8%AB%D9%85%D8%A7%D8%B1-%D8%A7%D9%84%D8%AE%D9%84%D9%8A%D8%AC%D9%8A%D8%A9-%D9%85%D8%A7%D8%B0%D8%25A">Abu Qir Fertilizers</a>&mdash;the second largest company listed on the Egyptian stock exchange and the largest fertilizer producer in the country&mdash;to Saudi and Emirati sovereign funds for EGP14 billion, which is equivalent to the firm&rsquo;s annual profits in the fiscal year ending in June 2023. The Gulf funds also own a 45% stake in <a href="https://manassa.news/stories/6945">Misr Fertilizers Production Company</a>, which together with Abu Qir was included in <a href="https://www.mopco-eg.com/ar/news/according-to-the-classification-of-forbes-mopco-among-the-50-best-companies-in-the-egyptian-market">Forbes&rsquo;</a> list of the 50 best companies operating in the Egyptian market. Both firms receive subsidized gas, a measure originally approved by the government to reduce agricultural costs for farmers but which will now subsidize the profits of Gulf sovereign funds.</p>
<p dir="ltr" style="text-align: justify;">Additionally, the government <a href="https://aps.aucegypt.edu/en/articles/1358/foreign-ownership-policies-and-the-real-size-of-state-bureaucracy">sold</a> a 39% share (subsequently increased to 51%) in the holding company that owns seven historic hotels for USD800 million to the Talaat Moustafa Group&rsquo;s Icon and a &ldquo;foreign&rdquo; partner whose identity was not disclosed at the time. A 40.5% stake in Icon was then sold to Abu Dhabi Investment Fund and ADNEC, in January 2023. While the budgets of these hotels are not made public, they are strong competitors with the private sector due to their outstanding locations and historical value, as well as the fact that they are managed by international firms. The hotel deal raised questions about the legality of selling buildings that are more than a century old. The sale came a few months after the minister of the public business sector <a href="https://www.shorouknews.com/news/view.aspx?cdate=16042023&amp;id=756e63f4-3110-4d93-a377-5bc0beea74b7">confirmed</a> that these historic hotels were not on the block because it was too difficult to appraise them. As the minister remarked, &ldquo;They are invaluable.&rdquo;&nbsp;</p>
<p dir="ltr" style="text-align: justify;">Most of those deals were concluded absent a competitive bidding process, and the criteria involved in choosing between a public offering or sale to a strategic investor have not been made public. Nor has the public been informed of how the companies&rsquo; shares have been valued in cases of public offerings on the stock exchange, making it difficult to assess the fairness of the deals. And, of course, no agreement has been put to parliament, and MPs have not taken the initiative to submit formal briefing requests about any agreement.</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1709479708imageEd 62_6 EN.png" alt="" width="405" height="405"></p>
<h3 dir="ltr"><strong>Transparency and accountability are a necessity, not a luxury</strong></h3>
<p dir="ltr" style="text-align: justify;">Although the state celebrated the Ras al-Hikma deal and its impact on alleviating the dollar crunch, it did not announce how it planned to spend the first tranche of the deal (USD15 billion). The dollar gap is currently <a href="https://www.businesstodayegypt.com/Article/1/4014/Goldman-Sachs-forecasts-Egypt-s-financing-needs-at-25B">estimated</a> at USD25 billion until 2028, while total external debt stands at USD164 billion. Nor did officials explain how the returns on this project would differ from the anticipated yield on investments pumped into al-Alamein which came at&nbsp; <a href="https://www.cairo24.com/1835611">EGP 185 </a>billion. Finally, no state party has clarified the environmental impacts of the Ras al-Hikma. This question is no longer a luxury that concerns only visitors to the North Coast,&nbsp; it is related to the erosion of the entire Egyptian coastline with its consequences on the lives of Egyptians.</p>
<hr>
<h2 dir="ltr" style="text-align: left;"><span style="color: rgb(6, 71, 137);"><strong>No Meat, No Lentils: For Egyptians, Protein is Expensive</strong></span></h2>
<p dir="ltr" style="text-align: justify;">The price of red meat has jumped by 41% since the beginning of 2024, reaching an average of EGP450 per kilo. Meanwhile, poultry has gone up by an average of <a href="https://www.shorouknews.com/news/view.aspx?cdate=04022024&amp;id=fed098bd-afc6-41e3-80be-2bd8e38a1a29">44%</a> in January and February, while the price of plant protein (legumes) has risen <a href="https://www.shorouknews.com/news/view.aspx?cdate=04022024&amp;id=fed098bd-afc6-41e3-80be-2bd8e38a1a29">30%</a> on average since the beginning of 2024.</p>
<p dir="ltr" style="text-align: justify;">These increases are only the latest in a series of ever-spiralling prices over the past year, which could have implications on Egyptians' intake of protein and thus on their health. Already the rate of food insecurity&mdash;the percentage of Egyptians who do not have access to healthy food&mdash;rose to <a href="https://www.fao.org/3/cc8743en/online/sofi-statistics-africa-2023/food-insecurity-experience-scale.html">28.5%</a> from 2020 to 2022, compared to 27.8% in the period of 2014&ndash;2016.</p>
<p dir="ltr" style="text-align: justify;">Current conditions in the local market for animal and plant protein raise several questions about the future of food security in Egypt. Given the gap between domestic production and consumption, what is the status of national projects designed to plug this gap?&nbsp;</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1709480173imageEd 62_2 EN.png" alt="" width="405" height="404"></p>
<h3 dir="ltr"><strong>Red meat and the failed state initiatives&nbsp;</strong></h3>
<p dir="ltr" style="text-align: justify;">Since the beginning of 2024, increases in the price of protein has been driven by the price of fodder, which constitutes 80% of the cost of production. Fodder prices have risen several times in recent months due to the high cost of the dollar on the parallel market&mdash;which reached <a href="https://www.asharqbusiness.com/article/59859/%D8%A5%D9%86%D9%81%D9%88%D8%BA%D8%B1%D8%A7%D9%81-%D8%A7%D9%84%D8%AF%D9%88%D9%84%D8%A7%D8%B1-%D9%8A%D9%82%D9%81%D8%B2-%D8%A5%D9%84%D9%89-70-%D8%AC%D9%86%D9%8A%D9%87%D8%A7%D9%8B-%D9%85%D8%B5%D8%B1%D9%8A%D8%A7%D9%8B-%D8%A8%D8%A7%D9%84%D8%B3%D9%88%D9%82-%D8%A7%D9%84%D8%B3%D9%88%D8%AF%D8%A7%D8%A1/">EGP70</a> in some transactions&mdash;in addition to supply shortages resulting from the <a href="https://www.asharqbusiness.com/article/59859/%D8%A5%D9%86%D9%81%D9%88%D8%BA%D8%B1%D8%A7%D9%81-%D8%A7%D9%84%D8%AF%D9%88%D9%84%D8%A7%D8%B1-%D9%8A%D9%82%D9%81%D8%B2-%D8%A5%D9%84%D9%89-70-%D8%AC%D9%86%D9%8A%D9%87%D8%A7%D9%8B-%D9%85%D8%B5%D8%B1%D9%8A%D8%A7%D9%8B-%D8%A8%D8%A7%D9%84%D8%B3%D9%88%D9%82-%D8%A7%D9%84%D8%B3%D9%88%D8%AF%D8%A7%D8%A1/">decline</a> in imports in 2023.&nbsp;</p>
<p dir="ltr" style="text-align: justify;">There is a production-consumption gap in the red meat market, reflected in a decline in the self-sufficiency rate to <a href="https://www.capmas.gov.eg/Pages/IndicatorsPage.aspx?Ind_id=2335">56.6%</a> in 2021, compared to 64.6% in 2016, which contributed to a 23% reduction in the per capita consumption of red meat from <a href="https://www.capmas.gov.eg/Pages/Publications.aspx?page_id=5104&amp;YearID=23524">2016</a> to 2020, to reach 7.3 kg according to Adasa calculations. The <a href="https://alelm.net/146815/%d8%a8%d8%a7%d9%84%d8%a3%d8%b1%d9%82%d8%a7%d9%85-%d9%86%d8%b5%d9%8a%d8%a8-%d8%a7%d9%84%d9%81%d8%b1%d8%af-%d9%85%d9%86-%d8%a7%d8%b3%d8%aa%d9%87%d9%84%d8%a7%d9%83-%d8%a7%d9%84%d9%84%d8%ad%d9%88%d9%85/#:~:text=%D9%85%D9%86%20%D8%A7%D9%84%D9%85%D8%AA%D9%88%D9%82%D8%B9%20%D8%A3%D9%86%20%D9%8A%D9%86%D9%85%D9%88%20%D9%86%D8%B5%D9%8A%D8%A8%20%D8%A7%D9%84%D9%81%D8%B1%D8%AF%20%D9%85%D9%86%20%D8%A7%D8%B3%D8%AA%D9%87%D9%84%D8%A7%D9%83,%D8%A7%D9%84%D9%81%D8%AA%D8%B1%D8%A9%20%D9%85%D9%86%202020%20%D8%A5%D9%84%D9%89%202022%20%D8%A5%D9%84%D9%89%2028.8%20%D9%83%D9%8A%D9%84%D9%88%D8%AC%D8%B1%D8%A7%D9%85%D8%A7">global average</a> per capita consumption of red meat stands at 28.1 kg.</p>
<p dir="ltr" style="text-align: justify;">The production gap for red meat and the decline in supply (local and imported)&mdash;attributable to the high price of the dollar, needed for both local production inputs and imports&mdash;raises questions about the fate of national projects that were announced years ago to develop Egypt&rsquo;s livestock wealth. Both the National Veal <a href="https://www.sis.gov.eg/Story/229560/%D8%A7%D9%84%D9%85%D8%B4%D8%B1%D9%88%D8%B9-%D8%A7%D9%84%D9%82%D9%88%D9%85%D9%8A-%D9%84%D8%A5%D8%AD%D9%8A%D8%A7%D8%A1-%D8%A7%D9%84%D8%A8%D8%AA%D9%84%D9%88?lang=ar">&nbsp;project</a> and the <a href="https://egy-map.com/project/%d9%85%d9%84%d9%8a%d9%88%d9%86-%d8%b1%d8%a3%d8%b3-%d9%85%d8%a7%d8%b4%d9%8a%d8%a9">Million Head project</a> aimed to narrow the gap between production and consumption by increasing production, but this objective has not been met, according to official figures.</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1709480286imageEd 62_3 EN.png" alt="" width="405" height="404"></p>
<h3 dir="ltr"><strong>Costlier feed increases poultry and fish prices&nbsp;</strong></h3>
<p dir="ltr" style="text-align: justify;">The self-sufficiency rate reached about <a href="https://www.capmas.gov.eg/Pages/Publications.aspx?page_id=5104&amp;YearID=23524">98%</a> for poultry and 78% for fish. Year on year, poultry prices rose 43% and fish prices <a href="https://aps.aucegypt.edu/en/articles/1312/fish-in-egypt-extravagant-prices-extravagant-projects">83%</a>. These price increases were driven by higher demand in light of the soaring cost of meat, as well as the dollar-based inputs used in the production of feed for both poultry and fish farming.&nbsp;</p>
<h3 dir="ltr"><strong>Legumes: abandoned by the state</strong></h3>
<p dir="ltr" style="text-align: justify;">The state <a href="https://meae.journals.ekb.eg/article_223829_6a33bda4d43e3826a00063e8c67d4635.pdf">did not devote</a> enough attention to legumes, although they are cheap sources of protein for middle- and low-income groups. The cultivated area of legumes has declined in recent years, leading to a parallel decline in production quantities and a widening gap between production and consumption. As a result, the state resorted to imports, thus falling into the <a href="https://aps.aucegypt.edu/en/articles/1351/wages-and-food-inflation-are-government-policies-exacerbating-or-mitigating-the-crisis">inflation</a> trap because of the price of the dollar.&nbsp;</p>
<p dir="ltr"><img style="display: block; margin-left: auto; margin-right: auto;" src="https://api-aps.aucegypt.edu/uploads/tinymce/1709480426imageEd 62_EN 1-2.png" alt="" width="405" height="174"></p>
<h3 dir="ltr"><strong>How to secure protein sources for Egyptians?</strong></h3>
<p dir="ltr" style="text-align: justify;">In light of the high prices of protein sources, action must be taken to make these sources affordable in the markets at reasonable prices. The following actions should be taken:&nbsp;</p>
<ul>
<li dir="ltr" style="text-align: justify;" role="presentation"><a href="https://www.almasryalyoum.com/news/details/3096088">Localize</a> fodder crops, the fodder industry, and fodder additives to reduce the proportion of dollar-based components in the production of animal protein and thus maintain stable prices regardless of fluctuations in the exchange rate.&nbsp;</li>
<li dir="ltr" role="presentation"><a href="https://meae.journals.ekb.eg/article_223829_6a33bda4d43e3826a00063e8c67d4635.pdf">Expand</a> the cultivation of legumes both horizontally and vertically, especially on newly reclaimed land suitable for cultivation; fava beans in particular are more productive when cultivated on new land.</li>
<li dir="ltr" role="presentation"><a href="https://meae.journals.ekb.eg/article_223829_6a33bda4d43e3826a00063e8c67d4635.pdf">Adopt</a>&nbsp; <a href="https://www.fao.org/uploads/media/Contract-Farming-Introduction.pdf">contract farming</a> to improve the conditions for the domestic exchange of legume and fodder crops. Contract farming brings high prices for farmers and offers them support, ensuring that they can cover costs and obtain an attractive net return that encourages them to continue growing these crops.&nbsp;</li>
<li dir="ltr" role="presentation">Enforce laws to <a href="https://aps.aucegypt.edu/en/articles/1366/turkish-export-policies-and-international-inflation-combating-practices-what-do-we-learn-from-them">regulate</a> markets and protect consumers to tamp down on price manipulation and monopolies.&nbsp;</li>
</ul>
<hr>
<p dir="ltr"><em><a href="https://aucegypt.us17.list-manage.com/subscribe?u=5e42bef7fee7e6a299c3d932d&amp;id=e0d95df1c1&amp;mibextid=Zxz2cZ">Subscribe to the weekly edition&nbsp;</a></em></p>
<div style="text-align: justify;"><em>"Adasa" is a weekly policy digest by Alternative Policy Solutions. </em><em>"Adasa" provides an analysis of a select number of policy developments and their effect on inclusive development and socioeconomic change.</em></div>

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