Market Threads by Çalışkan Koray

Author:Çalışkan, Koray [Çalişkan, Koray]
Language: eng
Format: epub
ISBN: 978-1-4008-3392-4
Publisher: Princeton University Press
Published: 2010-03-03T16:00:00+00:00

Public companies are required to use the exchange rate posted by the Central Bank when sending price quotes or firm offers to companies abroad, whereas private companies use informal and free market exchange rates that depress their cost relative to public companies. This is an effective subsidy for private merchants, preventing government companies with a large client portfolio from being competitive, an objective of the privatization of the cotton sector. Thus, private merchants acquire both the international clients and traders of public companies.

The pace of this transformation should progress slowly, for if it went too quickly, the private sector could not absorb the rich and hard-to-sustain client portfolio of the public sector. If the transformation of the cotton trade in Egypt follows the present trajectory for another decade, it is safe to assume that public trading companies will disappear. A public trading house director also predicts such a future:

Private companies also play on the fluctuation of the dollar. The public sector receives payment through public banks. We cannot use our foreign exchange in the private market; instead, we have to use the National Bank’s rates. I’ll give you an example: today the [exchange] rate is 4.61 LE. But you cannot simply buy as many dollars as you need, if you want to import stuff, or for God knows what reason. So if you want a lot of dollars, say a million dollars, you need to buy it from private dealers, who sell it for 5.20 LE. This is the private sector. It is illegal. It is informal. But this is what they are doing in Egypt. Private cotton traders also make money out of this scheme. When private merchants get their dollars in exchange for cotton, they sell the dollar in Egypt to those who need it the most. So they make money this way, too. We [public companies] cannot make money under such conditions. We’ll go bust soon.

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