ABSTRACT
Relative prices of farm machinery, labor and commodities play an important part in influencing the spread and type of mechanization adopted. Egypt’s economy remains relatively closed with a major role in resource allocation still being held by the State and carried out by direct allocation and price manipulation. Considerable subsidies exist to encourage capital-intensive farm development. At the same time, labor is subsidized and small-scale farmers are protected against displacement. In an economy with a rapidly expanding industrial demand for labor or in a farm sector with rapid area expansion, both policy goals could be attained. However, under Egypt’s peculiar circumstances, neither industry nor new lands development has absorbed the quantities of labor expected. Despite a decline in the relative share of farm workers in total employment, their absolute numbers have risen faster than sectoral labor demand. Despite significant capital subsidies, Egyptian farming remains labor intensive and the Five-Year Plan goal of complete mechanization of tillage, threshing and water-lifting during the present decade is unlikely to be reached. In fact, the evidence is already clear that the underlying pattern of mechanization continues to be one of a slow build-up with random injections of new machines under State programs followed by an overall decline in the condition of the machinery park due to restrictions on parts imports and problems associated with reaching an economic scale of machine operation. This essay looks at: (1) Egypt’s experience in using administered pricing to influence farm mechanization; (2) whether the mechanization goals are attainable as defined and desirable given the opportunity cost; and (3) proposes an alternative approach to stimulating sectoral growth.
