IFPRI Egypt Seminar Series

2016 Global Food Policy Report

Presentation Outline

• Global Food Policy Report: Comments• Commodity prices projected to remain weak in

the medium to long run• “Growth with poverty puzzle” in Egypt• Weak firm dynamics: slow enterprise formation,

low growth probability, and “missing middle”• Unemployment profile “mirror image” of weak

firm dynamics• Policy matters• Policy matters with transformational impacts

Reshaping of World Food Systems Requires Democratic Governance and Competitive Markets to Achieve Optimal Tradeoffs

GOVERNANCE

POLICIES REGULATIONS

MARKETS

FIRMS

(technology)

CONSUMERS-LABORERS-CITIZENS

(preference)

OUTCOMES: Well-being of PEOPLE and PLANET

Enabling Conditions

Representative Governance

Independent Press

Division of Power (executive-legislative-

judiciary)

Clean and Honest Elections

Apolitical Military

Competitive Market

Clear Definition and Protection of Property

Rights

Strong Contract Enforcement

Stable Macro economy

Ease of Entry and Exit (access to information)

Regulation and Market Shaped Food Systems Performance

Crude Oil Futures Quotes and Price Projections

0.00

20.00

40.00

60.00

80.00

100.00

120.00

2002 2005 2008 2011 2014 2017 2020 2023

$/b

Petroleum, W. Texas interm. CBOT-WTI

Ag Commodity Price Projections

0.00

4.00

8.00

12.00

16.00

02/03 05/06 08/09 11/12 14/15 17/18 20/21 23/24

$/bu

Corn Farm price Wheat Farm price Soybean Farm price

Slow Growth High Inflation Unemployment and Poverty Incidence

26.3 12.8

4.2

11.8

0

10

20

30

40

0

5

10

15

20

2000 2002 2004 2006 2008 2010 2012 2014

Po

vert

y R

ate

Gro

wth

Un

em

plo

yme

nt

Infl

atio

n R

ate

s

Poverty Unemployment Growth Rate Inflation

5%

3%

12%

15%

Investment Rate 14.4% vs 30%

“Growth with Poverty Puzzle”

0

10

20

30

40

0.00

5.00

10.00

15.00

20.00

2000 2002 2004 2006 2008 2010 2012 2014

Po

vert

y R

ate

Gro

wth

Un

em

plo

yme

nt

Infl

atio

n R

ate

s

Poverty Growth Rate

Firm Dynamics in Egypt

Weak Firm Dynamics: Slow Enterprise Formation

71

30 21

10 6 1 1

-

20

40

60

80

-

20

40

60

80

Firm

En

try

pe

r 1

00

00

wo

rkfo

rce

Ave 80 Countries

Weak Firm Dynamics: Low Growth Probability

Egypt: 5 Year Employment Transitions

SIZE To 2011 Size Change

From 2007 Size

Exit [0, 5] [6, 10] [11, 20] [21, 50] [51, 100] > 100 (-) (+) Net

[0, 5] 16.7 49.9 16.7 16.7 - - - 16.70 33.40 16.70

[6, 10] 9.1 1.0 69.0 17.6 3.3 - - 10.10 20.90 10.80

[11, 20] 9.9 - 21.9 51.5 15.3 0.7 0.7 31.80 16.70 (15.10)

[21, 50] 8.1 0.3 3.2 14.2 62.2 10.7 1.3 25.80 12.00 (13.80)

[51, 100] 8.8 0.6 1.3 1.9 17.0 53.4 17.0 29.60 17.00 (12.60)

> 100 5.4 - - 0.7 1.7 7.4 84.8 15.20 - (15.20)12

Weak Firm Dynamics: “Missing Middle”

Size - # employees

Emp

loye

d

Operational Burden

WBES: Electrical Connection WBES: Collateral Requirement

0.0

50.0

100.0

150.0

Small (5-19) Medium (20-99)

Large (100+) MENA World

Days

Days to Obtain Electrical Connection

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Small (5-19)

Medium(20-99)

Large(100+)

MENA World

Percent

Value of Collateral Needed for a Loan

Un/employment Structure

Increasing Job Informality and Irregularity

Firm and Employment Structure

Small Large

Low SkillsHigh Skills

Mid-level Skills Demand

Missing

“Missing middle”

0

4

8

12

16

Illiterate Read and WriteBasic Educ Secondary EducPost-Secondary Univ and +

FIRMS

SKI LLS

UNEM

PLOYMENT

Educated Unemployed

Unemployment: Share of Very Long Term Unemployed (2 years and above)

0%

20%

40%

60%

80%

100%

1998 2006 2012 1998 2006 2012 1998 2006 2012

Male Female Total

Unemployment: Share of New Entrants in Very Long Term Unemployed

0%

20%

40%

60%

80%

100%

1998 2006 2012 1998 2006 2012 1998 2006 2012

Male Female Total

Policy Matters with Transformational Impacts

LOW

GR

OW

TH

Economic Inefficiency

(misallocation)

Depressed Domestic and FDI

Investments

Cost advantage to connected firms

(lack of competition)

Elevated Macroeconomic

Risk on Returns to Investment

Overvalued Currency

Uncompetitive Exports

Policy Matters: High Inflation and Low Growth in Egypt

GOE Expenditure on Food and Fuel Subsidy Wage Bill and Debt Service

HIG

H IN

FLA

TIO

N

Growing GOE

Deficit

Unbalanced / Unsustainable

Expenditure Policy

Inefficient Tax Structure and

Administration

(informality)Debt Financing of Deficit: Accumulating

Debt

Low Productivity / Inflexible Supply (e.g.

electricity

Increased Demand for non-Tradable

Remittance, Suez Canal, and Tourism

Revenues

Ratio of Rate of Devaluation with Rate of Inflation

-

2.00

4.00

6.00

8.00

10.00

EG IN CN TK RU BR

Dynamism of Export Sector Weakened (particularly small firms)

Source: WB

Egypt and Thailand Population Growth Trajectory

0.00E+00

2.00E+07

4.00E+07

6.00E+07

8.00E+07

1.00E+08

1960 1966 1972 1978 1984 1990 1996 2002 2008

Million

Egypt Thailand

Egypt and Thailand Economic Peformance

Exports as % of GDP Real per capita income ($)

0

20

40

60

80

100

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

EXP%GDP

Egypt Thailand

0

1000

2000

3000

4000

1960 1966 1972 1978 1984 1990 1996 2002 2008

Real Per Capita GDP

Egypt Thailand