New mandatory pricing list: a merchant’s nightmare

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New mandatory pricing list: a merchant’s nightmare

Hend El-Behary

The interim government has threatened imposing a so-called “mandatory pricing list” on merchants to fight soaring commodity prices and merchants’ “greed,” giving them a grace period of only one week to lower their prices and to follow the new pricing guideline.

Mahmoud Ziad, the spokesperson of the Ministry of Supply and Internal Trade (MSIT) said it could be a final decision if merchants refuse to lower their prices by the end of this week, but until now it is only preliminary.

Minister of MSIT Mohamed Abu Shady warned traders if the new pricing guideline is not upheld, the government would retaliate by forcing the mandatory pricing list, the week after the grace period. The pricing list would force merchants to sell their products at government-mandated prices.

“The grace period is more likely an opportunity for merchants to prove their good intentions and commitment in order to reduce prices,” Abu Shady explained.

The guideline is a list including 28 varieties of vegetables and fruits that merchants must follow during the one week period to avoid the mandatory pricing system being set in place. Consumer who find a merchant violating this list are encouraged to immediately call 19805 or 19468 to complain.

For example, the prices of tomatoes should be sold at average between EGP 1.5 to EGP 2 per kilo, the potatoes between EGP 4.75 and EGP 5.5 per kilo and the local cucumber prices between EGP 2 to EGP 2.5.

Prices soared, consumers screamed

Consumers recently saw an unprecedented soar in prices, compared to the past ten years, as tycoon monopolies and rapacity pushed inflation rates up 0.7 percent, according to Central Agency of Public Mobilization and Statistics (CAPMAS).

Food and beverage prices are the largest amount to Egypt’s consumer price index (CPI), which reached an average of 9.4 percent over the last ten years.

However subsidized food items is delivered to more than two thirds of the whole population, but vegetables and fruits are not included within the subsidized foods list through the ration card system of the government.

Doaa El-Kholy, a housewife, told Egypt Independent that life is so difficult in Egypt because everything is expensive and no good income in return.

She pointed out that she is upset because the poor quality of services provided by the country, besides people conscience disappeared.

“Egypt is too expensive Now, your average wage needs to be 10,000 to live a good life,” Shaimaa Raffat a web editor sighed.

“When people cannot afford to buy their basic grocery items because of high prices, they feel disabled because they work and exert their utmost effort but then do not earn enough money to meet their own life necessities,” said Ahmed Hussien, a 30 year-old accountant and manager of a kids clothes company.

Merchant’s condemnations

The mandatory pricing system, which was in place until the 1990s after being imposed by the administration of President Gamal Abdel-Nasser, provoked a wave of disappointment and frustration from merchants, who considered it “a temporary painkiller.”

Speaking in a press statement, the head of the Federation of Egyptian Chambers of Commerce (FECC), Ahmed El-Wakil, issued number of new proposals to overcome high prices especially of vegetables and fruits which were traded at ever soaring prices by wholesalers.

El-Wakil said proper market economies have no “mandatory prices” imposed by the government, which encourages black markets to thrive, destroys market efficiency and disables competition.

“Policy dealing with hiking inflation rates should be implemented by facing the problem objectively and not by using painkillers,” he said.

El-Wakil noted that the FECC along with economists and logistics management experts carried out number of economic studies which state that to deal with this phenomenon, the government should be wise and follow two strategies.

“The first strategy will be immediate to temporarily fix the crisis. The FECC in cooperation with all chambers of commerce across the country will announce both the average wholesale and customer prices on a daily basis as a reference point so consumers can compare the two,” El-Wakil pointed.

These prices are the sum of the average wholesale prices, the transportation cost depending on the geographical regions, workers’ wages and all direct and indirect expenditures including rent, insurance, electricity, taxes and packaging.

The second strategy, according to El-Wakil, is to increase the efficiency by fixing supply-related issues in the whole internal trade system, which is expected to contribute to a more balanced market with an interest in lower prices.

Hussein El-Sebaie, chairman of Obour Market Device, one of the biggest wholesale markets in Egypt, said the reason of price increase due to the lag, decrease in the supply and transportation troubles between various provinces due to the curfew, which has pushed some merchants to exploit the situation.

“We have gone through the same experience before in Egypt which was met with failure,” said Mohamed Hanafy, member of Federation of Egyptian Industries.

Hanafy pointed that he refuses the mandatory listing of prices because it will encourage corruption and bribery.

Hany noted that the best way to fight high prices is to motivate the governmental outlets and improve the quality of the products in these outlets.

“If prices plummet in the governmental outlets, it will cause a rush of customers. Moreover, it will indirectly force the other storeowners to decrease their prices,” he said.

Echoing on this opinion, the deputy head of Cairo Chamber of Commerce Ali Shoukry said that they completely disagree with the proposed government solution, believing that this decision will pull Egypt back 50 years.

Shoukry said that he has already called on the Ministry of Supply to torpedo this decision.

The government should follow respectful a pricing policy mechanism, by offering variety of prices, to motivate competition, he said.

“If the government improved the quality of the products at its own food outlets with lower prices, why would people go to other big and expensive supermarkets?” Shoukry wondered.

Are the Tycoon traders the real exploiters?

Gouda Abdel Khalek former minister of supply said that the decision violates the law, because the Article 10 of consumer protection law states that mandatory listing could be imposed on industrial products like cement, iron and cars, but it does not mention vegetables and fruits.

He continued, “It’s noticeable that farmers’ prices are so low, however the product is sold to the consumer with soaring prices, which means that there is a monopoly from the middle-men, especially in Obour and 6th of October markets.”

Reda Eissa an economic expert and member of the Citizens Against Rising Prices Campaign told Egypt Independent that Egypt is suffering from high-profit margins. According to the latest bulletins of the Central Agency for Public Mobilization and Statistics, the average margin profit in the last period hit an alarming 40 percent increase, he elaborated.

“According to law the government cannot interfere in setting profit margins and prices except in very rare occasions, but recently we have seen unprecedented profit margins, which could require government interference to fight corruption,” Eissa said.

Commenting on the merchant condemnation of the pricing plan, Eissa said that they are just big businessmen who are defending their businesses, and not paying any attention to social justice.

On the contrary, former Minister of Finance Fayad Abdel Moniem, expressed his rejection of the decision, believing that these mandatory prices have been imposed historically in many countries and each time proved its failure.

Additionally, he said that this new decision does not fit the nature of either the Egyptian economy or the international one, and it will lead to lowering the quality of the products.

“The new strategy will cost much money, because it needs a big group of watchdogs to oversee the market and prevent any manipulation,” he said.

Abdel Monem recommended that it could be more applicable if merchants were to announce their margin profits frankly to fight any manipulation and to set taxes.

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