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  • Report No. 49086-EG

    ARAB REPUBLIC OF EGYPT UPPER EGYPT: PATHWAYS TO SHARED GROWTH October 21, 2009 Social and Economic Development Group Middle East and North Africa Region The World Bank

    Document of the World Bank

  • (Exchange Rate as of June 19, 2009)

    Currency Equivalents

    Currency Unit LE 1

    US$ 1

    = = =

    Egyptian Pound (LE) 0.1779 5.6203

    F I SC A L Y E A R

    JULY 1- JUNE 30

    ACRONYMS AND ABBREVIATIONS AERI Agricultural Exports and Rural Incomes AFIS Agricultural Farm Income Survey CGE Computable General Equilibrium Models DHS Demographic and Health Survey ELMPS Employment and Labor Market Panel Survey ERF Economic and Research Forum FDI Foreign Direct Investment GAFI General Authority for Investment GDP Gross Domestic Product GEF Global Environmental Facility HDI Human Development Index HIECS Household Income Expenditure and Consumption Survey HIECPS Household Income Expenditure and Consumption Panel Survey IMR Infant Mortality Rate LFSS Labor Force Sample Survey LE Livre Egyptien (Egyptian pound) MARL Ministry of Agriculture and Land Reclamation MDG Millennium Development Goals PBDAC Principal Bank for Development and Agriculture Credit SFD Social Fund for Development SME Small and Medium Enterprises TFP Total Factor Productivity UE Upper Egypt UNDP United Nations Development Programme USAID U.S. Agency for International Development WDI World Development Indicators

    Vice President: Daniela Gressani Country Director: Emmanuel Mbi Sector Director: Ritva S Reinikka Sector Manager: Farrukh Iqbal Task Team Leader: Ruslan Yemtsov

  • A C K NOW L E DG E M E NT S

    The report has been prepared by a team led by Ruslan Yemtsov (Lead Economist, MNSED). The team comprised Heba El Laithy (Professor at Cairo University and Consultant, MNSSD), who provided critically important inputs, as well as Sandra Schnellert (Consultant, MNSED), May Barghout (Consultant, MNSED), Samiha Ouda (Local Consultant), Claudia Nassif (Economist, MNSED), Sherine El-Shawarby (Senior Economist, MNSED). Hoda Selim (Research Analyst, MNSED) provided outstanding research assistance, with further help from Irina Shaorshadze (ETC, MNSED), Jeihan Abu-Tayeh (Intern, Voice program), and Taheya Sakr (Assistant, MNCO3). North South Consultancy Exchange, a research firm based in Cairo, conducted village case studies in Sohag, which constitute a core qualitative evidence to support quantitative analysis. Its team members, in particular Maghda Ghoneem (Principal Investigator), Zohra Merabet (Director), Don Ross (Senior Advisor), Claudia Marinaro (Researcher), Dr. Ahmed Radi (Field Researcher), and Hossam Hussein (Coordinator) contributed a lot to this study concepts and recommendations. Farruk Iqbal (Sector Manager, MNSED) provided critically important advice during the study finalization. Hilary Gopnik (Consultant, MNSED) thoroughly edited the report. The report was prepared with financial support from the Multi-Donor Trust Fund “Diagnostic Facility for Shared Growth”, which support has been crucial at all stages of the work. It is closely linked with the on-going poverty work in Egypt. Authors of the report are grateful to Spatial and Local Development Team at the World Bank which organized several brainstorming sessions and commented extensively on the report at various stages of its preparation, and to the World Development Report 2009 group for generously sharing ideas and materials. Chaitri N. Hapugalle (Consultant, MNSED) provided integrative links with WDR. Alexandre Kremer (Senior Economist, MNSSD), Franck Bousquet (Sr Financial Spec., AFTU2), Ayat Soliman (Senior Economist, MNSSD), and Pierre Rondot (Senior Economist, MNSSD) contributed to the work. The team benefited significantly from the advice and substantive outputs of scholars, think-tanks, international institutions, and donors working in Egypt. Special thanks go to Dr. Hanaa Kheir-El-Din, ECES Director, and principle author of Egypt’s poverty reduction strategy and studies on Upper Egypt. Mr. Tamer El-Meehy, president of the NGO “Entrust”, and a leader of the SME research project, Dr. Ahmed Dakrouri, head of the Agricom in Menia, kindly shared his views and experiences from the field. The team acknowledges help provided by Mr. Mohamed El Eraky, the IFAD Country Presence Officer in Sohag, village officials, representatives of the Horticulture Export Improvement Association (HEIA) and Farmer Associations formed under the USAID funded AERI project, who were interviewed during the preparation of the study. The team would like to recognize the significant leadership role of H.E. Dr. Osman Osman (Minister of Economic Development), and H.E. Dr. Mahmoud Mohieldin (Minister of Investment) who shared their vision and formulated the objectives for the study. The team would like to express its gratitude to many Egyptian officials for cooperation, particularly to Ms. Nevine El Shafie, Vice-Chairman of GAFI, Dr. Mohamed Fathi Sakr, Advisor to the Minister to Ministry of Economic Development, Dr. Lobna M. Abdellatif, Advisor to the Minister of Local Development, Dr. Hussein Soliman, Head of Livestock Department and Advisor to the Minister of Agriculture and Land Reclamation, Mr. Tarek El-Baez, consultant to the Ministry of Trade, Dr. Tarek Abdelfattah Moursi (Information and Decision Support Center IDSC), and to Mr. Ahmed El Ariny (Industrial Modernization and Center Business Development Services Support Project). The work has benefited from managerial guidance provided by Emmanuel Mbi (Country Director, MNC03), Miria Pigato (Sector Manager, MNSED), and Farrukh Iqbal (Sector Manager, MNSED). Peer reviewers, Marie-Hélène Collion (Lead Agriculture Services Specialist, LAC), Ken Simler (Senior Economist, PRMPR), and Vivian Hon (Senior Economist, Spatial and Local Development Team, SDN) provided quality assurance and advice. Amira Zaky (Program Assistant, MNC03) provided superb support to all missions, contacts with local counterparts and consultants, and Sheela Reddi (MNSED) performed desktop publishing of the report. Andrew Stone (Senior Economist, MNSED), Andrea Liverani (MNSSD), Julian Lampietti (Lead Economist, MNSSD) and Nicholas Minot (IFPRI) provided advice at various stages of the work.

  • 2

    TABLE OF CONTENTS Preface.............................................................................................................................................. i Executive Summary ........................................................................................................................ 1

    Poverty in Upper Egypt is concentrated in rural areas ............................................................... 1 Demographic factors are key to explaining the poverty gap between Upper and Lower Egypt 1 Excessive land fragmentation decreases the earning power of households in Upper Egypt ...... 2 Low and declining off-farm employment restricts the scope for income enhancement in rural Upper Egypt ................................................................................................................................ 3 Internal migration has played a limited role in reducing poverty in rural Upper Egypt ............. 4 The limited effect of increased public investment on rural poverty ........................................... 5 Targeted transfers are not adequately exploited as a poverty reduction instrument ................... 5 The outlook for Upper Egypt is worrying but not hopeless........................................................ 5

    CHAPTER 1. Poverty in Upper Egypt ........................................................................................... 7 Upper Egypt: Geography, Economy, Welfare ........................................................................ 7 How Has Poverty in Upper Egypt Evolved over Time? ......................................................... 9 Upper Egypt is Lagging in Many Aspects of Development ................................................. 11 Where is Poverty in Upper Egypt? ....................................................................................... 12 Pockets of Poverty Persist in Upper Egypt ........................................................................... 13 The Social and Economic Fabric of Upper Egyptian Villages ............................................. 14

    CHAPTER 2. Causes of Poverty: The Role of Demography ....................................................... 18 Causes of Poverty: Decomposition Approach ...................................................................... 18 The Source of Higher Rates of Dependency in Upper Egypt: .............................................. 20 Gender and Employment Outcomes ..................................................................................... 21

    CHAPTER 3. LAND FRAGMENTATION LIMITS FARM INCOMES .................................................... 24 The Importance of Agriculture for Poverty Reduction ......................................................... 24 Shrinking Farm Size in Upper Egypt .................................................................................... 26 How Land Fragmentation is Affecting Farm Productivity ................................................... 27 Overcoming the Negative Effects of Land Fragmentation ................................................... 31

    CHAPTER 4. LIMITED OPPORTUNITIES FOR OFF-FARM EMPLOYMENT ........................................ 35 Subsidized Credit is Not Sufficient to Stimulate the Development of Off-farm Activities . 40 A Lack of Human Capital is Constraining Off-Farm A

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