Agricultural is the third largest productive sector of Egypt’s economy after manufacturing and mining, which includes oil and gas. It represents 14 percent of overall GDP, but directly employs at least a third of Egypt’s labor force, and indirectly employs many more through the processing and transportation of agricultural products. Nonetheless, Egyptian agriculture has long been neglected by politicians. Cotton production has dropped over 75 percent from 1972 to 2009, and the amount of arable land (2.4 percent of Egypt’s territory) has hardly budged in that time.
Egypt stands to gain by in multiple ways by investing in its agricultural sector. First and foremost, given that agricultural laborers represent such a large portion of the working population, an increase in their real wages would stimulate economic growth. With 22 percent of the population living under the poverty line, equitable economic growth remains one of Egypt’s most pressing priorities. Secondly, Egypt continues to face food security issues. The portion of the population that is food-insecure relies on government fuel and food subsidies that are a persistent drag on the Egyptian economy. Interestingly, while poverty has, in fact, decreased in recent years, Egypt is unique in that rates of child malnutrition have actually risen at the same time. While the cause of this rise in child malnutrition requires further research, it reveals the extent to which Egypt is dogged by insufficient social services, especially in rural areas, which are both the poorest and the most reliant on agriculture for their livelihoods.
Beyond food security, Egyptian agriculture is failing to allocate its resources in efficient ways to be competitive in the global market. Farmers still focus on crops with low returns, or ones which consume large quantities of water, or both. Farmers also face poor access to credit, are reliant on out-of-date technology, and dependent on farm workers with low skills. There are some more modern farms emerging, ones that are focused on selling higher margin products like flowers, fruits and vegetables, with some for export. But in general, most farms are less than one-acre plots along the Nile that struggle to be competitive. Only rice, cotton, and sugar are regulated, which perhaps is a good thing since regulation seems to double-down on inefficiency. Take cotton, for example. Production of cotton is up 37 percent from last year because in December 2010, the government indicated that prices would be high. Growers responded by planting more acres of cotton. But in fact, cotton prices have tumbled, and now are 40–50 percent lower than expected. Growers are stock piling their harvests and waiting for prices to rise or for the government to intervene. Yet the government cannot, at this time, purchase the cotton without bank financing, which has been hard to attain. Moreover, Egypt is a member of the World Trade Organization, and is thus limited in the responses it can take to relieve growers.
To promote economic growth, reduce poverty, and improve food security, Egypt’s new government should make improving the agricultural sector a high priority.