Nile Delta northern lakes “Investment scenarios for restoration actions and sustainable development within ICZM frame"

Workshop

10th -11th December 2013 (Cairo/Egypt)

ECONOMICS OF COASTAL EGYPTIAN AQUACULTURE

FROM EXTENSIVE SCALE TO INDUSTRY

By

DR.AHMED BARRANIA

FISHERIES AND AQUACULTURE ECONOMIST

INSTITUTE OF NATIONAL PLANNING

CAIRO, DESEMBER, 2013

CONTENTS:

<!--Definitions and Importance of Aquaculture Economics

<!--Main Features of Coastal Aquaculture Sector

<!--Macro economic indicators

<!--Micro economic indicators

<!--Critical factors facing sector development and impacting on profitability

<!--Proposed Actions to develop coastal Egyptian aquaculture

 DEFENATION AND IMPORTANCE

Analysis of aquaculture economics can be dealt with from two levels: Macro and Micro.

Macro – economic analysis concerns with the economy as a whole. It serves as a basis in determining aquaculture role in the national economy of the country. It is usually concerned- with the general role of fish culture as source of protein, employment, foreign exchange, etc. It often involves in the assessment of social net benefits of fish culture with alternative means of achieving the same purpose. Institutional actions required during the development are also involved.

Micro-Economics analysis deals mainly with the management measures and elements affecting the efficiency of operation at the farm level. Variable and fixed costs are the main factors. Among others, feed and/or fertilizer, seed and labor are the major variable costs for aquaculture, while the initial construction, infrastructures facilities and machinery are the most important fixed expenses. Cost of production in aquaculture usually varies with local skill of management.

Macro and micro economic analysis provide a basis in the formulation of aquaculture policies and in decision making of the individual farmer. Both are necessary for aquaculture sector to realize its full potential. Thus, greater attention should be focused on availability of proper economic data for analysis, which is either insufficient or inaccurate in many cases.

<!--MAIN FEATURES OF COASTAL Aquaculture Sector

<!--GENERAL

<!--Except for a very limited number of isolated instances, most aquaculture activities (88%) are located in the North Nile Delta Region around northern lakes (Borullos, Manzala, Edko, Maiout) where they utilize mainly both brackish, and see water.

<!--The total area of permanent fish farms (lands invalid for agricultural uses) is estimated at 180,000 feddan, which represent about 3.3% of the total area of agricultural land (8 Million feddan). Almost an equal area is used for temporary aquaculture activities.

<!--Aquaculture production in Egypt has risen significantly from 66,600 tons in 1997 to 987,000 tons in 2011, of which about 159,000 tones are marine species. (GAFRD 2011). Today Egypt is by far the largest aquaculture producer in Africa and ranks 11th all over the world.(FAO)

<!--Private farms production represented 99 % in 2011 (GAFRD). The reasons for the leading role of private farms are the flexibility in management and increasing private farms size. This type of farming suffered a dramatic reduction in numbers during the early 1990s as a result of the competition for land and water from the expansion of land reclamation activities for agriculture.

<!--Considerable number of the fish farmers (1856) is grouping in 9 active cooperative associations under the umbrella of The Union of Fishermen Cooperatives. (UFC 2013)

<!--PRODUCTION SYSTEMS

Aquaculture is practiced using a variety of systems with varying levels of technology:

<!--Traditional extensive farming system in earthen ponds is characterized by low level of intervention, limited use of inputs, low capital investment and poor management. These farms were constructed by reinforcing embankments of natural enclosures, mainly lakes. The size of these enclosures (hosha) varies from 2 to 50 feddan (1-20 Ha). Fish (mainly tilapia) are trapped in the hosha and rely on natural food. The net yield from these systems is low and varies from 100 to 300 Kg/feddan (250-750 Kg/Ha) (Naziri, 2011). The practice has recently been prohibited, because of the destructive effects on lake fisheries and the environment. However, hosha a culture is still illegally practiced in some areas and the production from these systems is generally not captured in aquaculture production statistics.

<!--Semi-intensive pond aquaculture is the basic system used in the country and about 86% of aquaculture production is obtained from these systems. Fish ponds vary in size from 1 to 25 feddan (0.5-12 Ha).(GAFRD)

Annual productivity in semi-intensive systems varies from 2 to 10 tons/feddan.

<!--Intensive pond aquaculture is now expanding to replace large areas of the semi-intensive ponds. Intensive pond systems depend on well designed and constructed earthen ponds (sometimes lined with polyethylene sheets).

Intensive pond aquaculture is now expanding to replace large areas of the semi-intensive ponds. Intensive pond systems depend on well designed and constructed earthen ponds (sometimes lined with polyethylene sheets). Ponds are aerated with electrical paddle wheels and have a higher rate of water renewal (between 2–10 percent per day). Total production from intensive pond systems was 1860 tons or approximately 0, 27 percent of the total production in 2011. (GAFRD)

<!--Intensive cage culture is rapidly developing and now contributes to around 10% of total aquaculture production. Cage culture is common especially in the most northern branches of the Nile Delta. Nile tilapia is the principal cage culture species.

<!--Intensive aquaculture in tanks is another rapidly developing sector during the last ten years (FAO, 2011). Concrete tanks are used within integrated aquaculture and desert agriculture systems. This type of production is gaining an increasing acceptance as a result of the high rate of return on the utilization of water.

<!--Marine aquaculture in Egypt is still in its early stages and its development is still influenced by technical and economical problems.  It still depends heavily on the collection of seed from the wild.  Their production resulted to a total yield of 158728 tons (included mullet) which represents less than 1% of the total aquaculture production. (GAFRD 2011)

<!--Polyculture mainly tilapia and mullet is the most common type of production but monoculture of Nile tilapia is also practiced in many areas. The farming of marine species such as sea bass, sea bream, sole, meager and shrimp began in the late 1980s and early 1990s (FAO, 2011). 

<!--Aquaculture in Egypt exhibits a strongly seasonal pattern, due to seasonal temperature variations affecting fish growth and survival (e.g., tilapia) xx, and due to the reliance on wild fry for marine species, which are available only on a seasonal basis.

<!--The Egyptian aquaculture sector is governed by many outdated laws and regulations. Some of the regulations even have a negative impact on the industry due to the involvement of several authorities, often with contradicting or overlapping objectives. This slows down long-term investments, hindering technological improvement of the sector.

<!--VALUE CHAIN

<!--The value-chain for farmed fish in Egypt is comprised of three main stakeholder groups before fish reaches the consumer: the fish farms (in their various forms and types), the fish traders/wholesalers and the retailer sector.

<!--The local market of fish is controlled by a limited number of large wholesalers who determine the market price mainly in response to supplies and demand.

<!--The value-chain is a short and simple one compared to aquaculture value-chains in some other countries as the exports of farmed fish are insignificant;

<!--There is no processing at all of farmed fish i.e. all fish is sold in whole form, with no value-addition through processing.

<!--There is a growing trend for the sale of live fish motivated by the fact that higher prices can be achieved for live product.( Most fish are sold either fresh on ice in summer months or if sales are made far from farms, or fresh with no ice in winter months and/or if sales are made close to farms).

<!--There is a very short time-period from harvest to final consumption by the consumer (due to the live/fresh nature of all sales), and very low rates (<1%) of post-harvest losses (which is in contrast to many wild fisheries value-chains in developing countries).

<!--Direct employment creation throughout the value-chain is significant, at around 14 full-time equivalents for every 100 tons of fish produced and sold. This employment is fairly evenly divided between those over and under 30 years of age, and is mostly accounted for by men, although some female employment is created in the retail sub-sector. Considerable additional indirect employment creation results from sector activity through jobs created through the production of inputs used by the value-chain i.e. jobs in feed mills, hatcheries, ice plants, suppliers of vehicles, water pumps and generators, building contractors, and manufacturers of boxes.

<!--FINANCE

<!--Most of fish farmers obtain credit from feed mills/traders, and/or from fish traders/wholesalers and fish feed companies. With the significant increases in feed costs since the mid-1990s, the reliance on such forms of finance has become increasingly marked.

<!--Commercial banks consider aquaculture sector to be a high risk investment. They request very high interest and collaterals that can’t be provided by the farmers.

<!--MACRO ECONOMIC INDICATORS

The aquaculture sector makes a significant contribution to income food security, and employment creation in Egypt:

<!--The estimated investments in aquaculture sector and its related subsectors (hatcheries and feed plants) are more than EG10 billion. (Union of fishermen Cooperatives (UFC 2011)

<!--Aquaculture represents 6.22% of the agricultural GDP, with total value of production reached 11,648,803 EGP in 2010.(GAFRD 2011)

<!--Aquaculture is currently the largest single source of fish supply in Egypt accounting for almost 72 percent of the total fish production of the country. Total fishery production in 2011 was 1,362,170 tons of which 986,820 tons were from aquaculture and 387.398 tons from fisheries.(GAFRD 2011)

<!--The per capita consumption of fish from local production was about 16.82 kg in 2011 of which 12.11 kg or 72 % from aquaculture.(GAFRD 2011)

<!--Farmed fish are considered to be inferior in quality by most consumers although they are usually unable to differentiate between farmed and wild caught fish of the same species.

<!--Aquaculture products tend to be consumed in the domestic market as Egypt is not yet self sufficient in fish (about 182,520 tons were imported in 2011 to ensure an annual per capita consumption of 19.09 kg.

<!--The increase in cheaper quantities of imported fish  have a generally depressing effect on fish prices as a whole and will, as a result, have negative effects on the income of fishermen and farmers, but may benefit consumers in general.

<!--At present, Egyptian fish exports of aquaculture fish to EU are not allowed because the quality of products is not compliance with EU quality standards. Therefore the majority of the Egyptian seafood exports are towards Arab Countries.

<!--About 85,000 people are employed directly or indirectly through aquaculture.(UFC 2011)

<!--The productivity of water unit used in aquaculture production is higher comparing with many crops production such as sugar cane, rice, wheat and trefoil. (Heijden 2011)

<!--MICRO ECONOMIC INDICATORS

The stocking densities, energy input, level of management as well as the size and type of infrastructure varies greatly among different farms.

Constructing costs and earnings models for each link in the value chain are:

<!--Fish farmers obtain a high percentage (72%) of the final consumer price, due to the lack of any exports, the short-supply chain, and the lack of value-addition in the value-chain.

<!--The average total production cost across all fish-farms is LE 7,769/ton. This means that the average price of all fish sold by a farm must be more than LE 7,769/ton if the farm is to make a profit.(UFC2011)

<!--Operational costs represent a very high percentage of total costs for all sub-sectors in the value-chain i.e. fixed are relatively small.

<!--Feed costs represent a very high percentage of operational costs for the farming sub-sector (67% of operational costs).

<!--Net profits generated throughout the value-chain are LE 3,736/ton, and value-added (net profits plus wage earnings) is LE 4,619/ton.( LAMANS s.a 2012)  

<!--A for marine species, the running costs are much higher compared to tilapia due to more expensive inputs and mainly fry and feed. In addition, profit per Kg is significantly higher for marine species compared to freshwater species.

<!--Critical factors facing the sector development and impacting on profitability.

<!--The Egyptian aquaculture sector is governed by many outdated laws and regulations. Some of the regulations even have a negative impact on the industry due to the involvement of several authorities, often with contradicting or overlapping objectives. This slows down long-term investments, hindering technological improvement of the sector.

<!--Lack of available land for expansion in many governorates and short lease periods. Fish farmers usually rent the land directly from the Government (GAFRD). The traditional length of the lease contract is 5 years. This reflects the governmental policy which discourages the sale of land and promotes the development of aquaculture in the country. The farmers willing to build intensive systems are afraid that the rental contract might not be renewed and that the large initial investment might be lost.

<!--Access to different coastal areas and the sea is not easy, particularly in areas of interest for aquaculture.  Authorization from the military side is needed.

<!--So far there is no vocational training tailor made for marine aquaculture in Egypt. Perhaps this could be organized in farms and hatcheries under the supervision of a scientific body.

<!--The price and quality of fish feed have had a critical impact on costs and profits. Prices have risen by 200-250% over the last 7 years. Given the high proportion of total operational costs comprising of fish feed, the increase in feed price is a very serious problem for fish farmers, impacting directly on profitability.

<!--lack of access to capital, and the lack of electricity and high fuel costs for generators and vehicles,

<!--The illegal trade concerns fry of mullets, sea bass, sea bream and meager creates an unfair and unlawful competition to the private hatcheries.

<!--Poor practices with regards to feed management, farm design and construction, fish health management, and stocking densities.

With regards to the marketing and distribution of fish, the critical factors are:

<!--Declining fish prices in real terms as consumer prefer wild fish.

<!--Strongly fluctuating seasonal prices (with declines in prices towards the end of the year coinciding with the major harvesting period);

<!--Poor fish hygiene and handling practices throughout the value-chain;

<!--Lack of any value-addition through processing and exports;

<!--In some cases poor road networks impacting on the ability to get fish to markets.

<!--Proposed Actions to develop coastal Egyptian aquaculture

Based on the challenges and critical factors are facing coastal aquaculture development in Egypt, many of the necessary actions should be taken.

These include among others:

<!--Renewal of existing policies, laws and regulations. Implementation of new policies and regulations will play a crucial role in shaping a healthy and internationally competitive aquaculture sector in Egypt.

<!--Facilitate the access to financial institutions for the fish farms operators, in particular for marine farmers.

<!--Initiated a survey and a dialogue between the Ministry of Tourism, the Ministry of Environment and the Ministry of Defense in order to identify coastal areas that could be used for coastal marine farms as well as cages in the sea.

<!--Training for fish farms operators including marine farmers for the development of the aquaculture sectors. This could be achieved by establishing a training and services centre that will support the farmers to improve current practices and procedures, promote the adoption of new harvest/post-harvest technologies, equipment and processes and quality production.

<!--Facilitate the creation of sustainable market and private sector engagement in joint ventures with foreign investors.

<!--These actions should be included in a National Strategic Plan for the development of coastal aquaculture including marine subsector with the following goals:

<!--Make Egypt self-sufficient for aquatic products in the future, providing food security for this commodity.

<!--Create additional direct and indirect employment for a large section of the population.

<!--Generate high quality aquatic products that would be safe for human consumption and increase the possibilities for exports.

 References

-  Triantaphyllidis G. & Barrania A., Feasibility Study for Technical Assistance Programme in the Egyptian Aquaculture Sector / LML - LAMANS/   Report 1: Diagnosis of dynamics, potential and constraints of the Egyptian sector of marine species aquaculture / January 2012.

- Diego Naziri, Financial Services for SME Aquaculture Producers. Egypt Case study, 25 January 2011).

- GAFRD 2011. Fish statistics book 2010.

- Macfadyen Graeme, Ahmed Mohamed Nasr Allah, Diaa Abdel Reheem Kenawy, Mohamed Fathi Mohamed Ahmed, Hussien Hebicha, Ahmed Diab, Samy Mohmed Hussein, Ramadan Mohamed Abouzied, and Gamal El Naggar, 2011. Value-chain analysis of Egyptian aquaculture. The World Fish Center, Penang, Malaysia. 84 pp.

- Van der Heijden, Peter G.M., 2011. Integrated aquaculture - agriculture in Egypt. Towards more efficient use of water resources. Workshop Report Cairo (April 21, 2011). July 2011 Project code 8141104600, Wageningen UR Centre for Development Innovation, 22 p.

- Union of Fishermen Cooperatives (UFC), Reports on water uses policies for fish farms and Fish Farmers cooperatives 2012, 2013.