Egypt Tries to Revive Ailing Cotton Market

EGYPTIAN cotton is world-renowned for its long fibers, fineness, homogeneity, and strength. But nationalization policies begun in the 1960s initiated a steady drop in cotton production and export.

Today an aggressive program is underway to liberalize Egypt's cotton and return it to its former glory. The government has freed the price of cotton in stages over the last three years. Producers are no longer required to plant this crop, nor must they sell all their produce to the government for a set rate, as before.

The government plans to liberalize cotton trading and processing companies. Some private traders already have licenses. The government has also begun advertising processing facilities for lease. More than 25 years after it was closed, the cotton market of Mina El-Bassal, west of Alexandria, is scheduled to reopen this fall. But laws to facilitate the reopening must be enacted. Cotton farmers optimistic

Cotton experts and government officials hope these policies will lift the cotton sector from the doldrums. "The vehicles of a free market will work if the government stays away from production and trading and just gives technical support and advice," says Kamal Nasser, managing director for the Principal Bank for Development and Agricultural Credit.

Farmers agree. "I'm optimistic about Egypt's cotton, because it's going to be free," says Amrullah N. Baligh, a major cotton farmer.

In 1961, Egyptian president Gamal Abdel Nasser placed cotton under government control. Officials determined how much cotton farmers would plant, what varieties they would grow, and where they would plant them. Producers sold all their produce to the government at 40 percent of the international price.

As a result of these and subsequent policies over the years, Egypt's cotton production fell by nearly a half, from a high of nearly 11 million kentars [1 ton equals 18.18 kentars] of lint in 1969-70 to a low of 6 million kentars in 1990-91. Exports dropped even more dramatically, from 6.5 million kentars of lint in 1969-70 to 300,000 kentars in 1991-92. Poor management

The quality of Egypt's cotton remains superb, but one cotton expert says this is despite the government's policies, not because of them. "The state of Egypt's cotton is a miracle.... Our cotton is the best in the world up to this moment in spite of what has been done to it in the last 30 years," says cotton expert Galal El-Rifai.

Nationalization made cotton unprofitable for farmers. They ignored government regulations and planted more-lucrative crops or delayed planting of cotton in order to earn more from previous harvests. Cotton's quality also decreased slightly because farmers ignored new technology. They used dated irrigation systems, neglected to store and package cotton well, and carelessly applied pesticides and insecticides.

As production fell, the government erroneously assumed in the late 1980s that Egypt's high-quality cottons would capture a higher price. Inadequate supplies of Egyptian cotton on the world market caused customers to switch to other varieties.

The government began importing lower-quality cotton for its local mills so the better cotton could be exported. But so far the scheme has been largely unsuccessful. With domestic demand increasing and the government limiting cotton imports, the nation's use of high-quality cotton has not substantially declined. Nor has Egypt been able to increase exports.

Although government officials and cotton experts alike agree the answer to Egypt's cotton problems is liberalization, the process will not be easy. Cairo is trying to free this market during a global economic slump. World cotton prices fell 20 percent last year.

"The government is serious about liberalization, I think, but something could happen to cause them to backslide, i.e. if farmers abandon ship and stop producing cotton," a western economist adds.