Value Chain Mapping ReportValue Chain Mapping ... schemes such as organic, food safety and quality...
Transcript of Value Chain Mapping ReportValue Chain Mapping ... schemes such as organic, food safety and quality...
Value Chain Mapping Report
Upgrading Medicinal and Aromatic Plants Value Chain Access to Export Markets
July 2011 UNIDO/ETRACE
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Executive Summary
This report reveals the results of the value chain analysis and mapping activity conducted on a
random sample at the different levels of the Medicinal and Aromatic Plants (MAP) value chain
including exporters, growers, traders and service providers. Relevant information was gathered
through in‐depth interviews and field visits, in addition to stakeholders’ consultations. The
analysis identifies the trading shapes, existing clusters and linkages between value chain actors.
In addition, it emphasizes on the current gaps and potential areas for project interventions.
The mapping exercise shows a high level of complexity in the relationships and the linkages
between value chain actors especially in the middle layer (traders/pre‐processors). In most
cases the trader is selling pre‐processed materials to several exporters, who might be
competing at the same market and/or exporting to the same exporter. In some cases the trader
is exporting part of his products to same or other export destinations. The complexity of the
networks and the competition of the different layers result in a mistrust situation between the
value chain actors.
The analysis also emphasizes on a low level of integration and collaboration between MAP
service sectors such as extension, academia and research, as well as their isolation from the
industry. On the other hand, there is are a large number of researchers in the MAP field at
different governmental institutions including Agricultural Research Center (ARC), National
Research Center (NRC), Desert Research Center (DRC) and the faculties of agriculture and its
affiliated centers at different universities. Some of the active researchers provide individualized
services to the export companies as free lance consultants.
The majority of small‐scale growers are using conventional production methods and
applications using low‐tech inputs supplies which are negatively affecting the yield and final
product quality. Large‐scale producers, on the other hand, are using modern techniques and
input supplies including imported seeds and transplants.
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Most of medium and large‐scale exporters are well linked to the global markets and are
continuously exploring new market opportunities. They are implementing many certification
schemes such as organic, food safety and quality management systems as a tool to increase the
marketing opportunities and to satisfy the demands of their clients.
A number of exporters are already working on initiatives to increase the level of value addition
to their products especially those producing essential oils. Moreover, there are also product
development initiatives in the dried herbs and spices sector to produce new varieties and
product forms demanded by the markets.
The value chain mapping activity confirmed most of the bottlenecks identified during the
project development phase and this is listed in detail at the end of this report. This exercise
served also in a better understanding of the organization of the value chain and revealed the
different shapes of clusters and relationships between actors, which will help in designing
customized technical assistance interventions through the planned service centers.
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List of abbreviations
AEC Agricultural Export Council
ARC Agricultural Research Center
ESHEDA Egyptian Spices & Herbs Export Development Association
DRC Desert Research Center
JAS Japanese Agricultural Standards
MAPs Medicinal and Aromatic Plants
NOP National Organic Program
NRC National Research Center
NTC National Technical Coordinator
SECO State Secretariat for Economic Affairs – Switzerland
SP Service Provider
UNIDO United Nations Industrial Development Organization
VC Value Chain
VCM Value Chain Mapping
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Contents
EXECUTIVE SUMMARY......................................................................................................................... 2
1 INTRODUCTION.............................................................................................................................. 7
1.1 Background ...............................................................................................................................................7
1.2 Objective...................................................................................................................................................8
2 METHODOLOGY ...........................................................................................................................10
2.1 Description of the Activities .................................................................................................................... 11
2.2 Data Capturing System............................................................................................................................ 12
2.3 Sample Characteristics ............................................................................................................................ 16
2.4 Stakeholders Consultation ...................................................................................................................... 17
3 VALUE CHAIN ANALYSIS............................................................................................................17
3.1 Growers .................................................................................................................................................. 17
3.2 Traders.................................................................................................................................................... 19
3.3 Exporters................................................................................................................................................. 20
3.4 Service Providers (SP).............................................................................................................................. 23
3.5 Value Chain Mapping .............................................................................................................................. 24 3.5.1 Shape 1.......................................................................................................................................................24 3.5.2 Shape 2.......................................................................................................................................................25 3.5.3 Shape 3.......................................................................................................................................................25 Sample Value Chain Map ........................................................................................................................................30
4 FURTHER FINDINGS, RECOMMENDATIONS AND RESULTS...........................................31
4.1 Revision of the sector bottlenecks .......................................................................................................... 31
4.2 Conclusions & Recommendations ........................................................................................................... 36
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5 ANNEX..............................................................................................................................................39
List of Tables
Table 1 – Geographical range of the selected sample
Table 2 – List of companies interviewed and visited during the value chain
Table 3 – List of main products and quantities produced by the exporters in the sample
Table 4 – List of service providers interviewed in the value chain analysis
List of Figures
Figure 1 – Exporters with owned facilities for drying, screening and packing
Figure 2 – Exporters with screening and packing facilities only
Figure 3 – Exporters with no owned/contracted farms and factories
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1 Introduction
1.1 Background
Egypt has been producing and exporting Medicinal
and Aromatic Plants (MAP) products for many
years. However, the Egyptian MAP sector suffers
from poor conditions of the produce in terms of
quality and safety standards, lack of professional
advisory services, in addition to a highly
underdeveloped value chain (VC). These factors
negatively affect the position of Egyptian MAP
products in export markets and consequently the bargaining power of Egyptian exporters, in
addition to high level of rejections due to nonconformity to TBT/SPS requirements. The MAP
exports generate revenues of approximately US$ 100 Million, representing about 10% of the
total processed food export in Egypt. The Egyptian Processed Food Sector Strategy included the
Herbs and Spices as one of the 9 subsectors considered in the "Opportunities and
Benchmarking" section. Above that 80% of MAP production is located in Upper Egypt which is
considered a priority development area by the Government of Egypt. Being labor intensive, the
MAP sector employs more than 140,000 workers, in addition to other supporting manpower.
The project aims at raising the position and competitiveness of Egyptian MAP products in
export markets and developing its internal supply chain. This will be based on integrated
development strategies of three pillars: 1) Improving productivity, quality and compliance to
TBT/SPS requirements throughout the supply chain. This will be achieved through establishing
MAP service centers affiliated to the Agriculture and Agro‐Industries Technology Center
(Etrace). These centers will provide sustainable advisory services to supply chain members and
upgrading the capacities of pre‐farm and post‐farm gate SMEs; 2) Strengthening SME capacities
in product development and value addition for export growth and diversification. The main
Picture no 1 – Trader in Beni Suef
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target in this endeavor is to introduce ideas and knowledge of new products to the export
markets and; 3) Enhancing position in export markets through coordinated efforts by enforcing
compliance criteria, branding, establishing a national quality mark and competitive pricing
strategies. This will be achieved through establishing a MAP export consortium to manage a
collective export and branding strategy coupled with building trade capacity of exporting SMEs
and upgrading linkages with international buyers.
The Project will adopt UNIDO trade‐capacity building approach, which coincides with SECO
policies for the developing countries, providing institutional capacity building, equipment and
training. The proposed activities will impact a large number of small out‐growers and SMEs and
integrate them into export VCs.
1.2 Objective
The project has undergone a six month inception phase. The objectives of the inception phase
are to evaluate and validate project design and sketch out necessary amendments to the
project document including a baseline assessment for the MAP sector. In addition to the value
chain (VC) mapping report, other outputs of the inception phase include a revised logical
framework, a revised project work plan, a detailed work plan for the first year of the project, a
monitoring and evaluation plan and a revised budget. This report shall document the approach
to the inception, discuss the findings and present the outcomes.
In addition, the main objective of conducting a VC analysis is to identify the main players in the
supply chain of MAPs, and their linkages with other stakeholders influencing the processes of
production and trade. The VC mapping will lead to a better understanding of the sector,
identifying production clusters, popular products, classification of each level of membership in
the supply chain, and thus the possibilities of interventions to ongoing initiatives.
Furthermore the VC analysis includes the conduction of beneficiaries’ feedback on the project
products and directions of them towards new technology transfer, business development,
value added products and the principle of cost sharing of requested services.
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2 Methodology
In the context of the VC analysis and mapping, the current situation of the MAP sector is
analyzed by conducting a gap analysis and studying the internal systems applied in each level of
the supply chain. The following steps are used for the mapping process:
1. Understanding of the MAP Sector/ Sub‐
sector relating to VC through: review of
project documents, analysis of secondary
data and interaction with Key persons.
2. Preliminary interaction with key persons in
the district associated with the VC
(Agricultural Export Council, Agricultural
Research Center, National Research Center, Desert Development Center, Certification
Bodies, and Farmers’ Associations) for developing a district focused flow diagram linked
to the VC and identifying clusters for the field study.
3. Developing questionnaires for in depth analyses for the VC with sector key players and
stakeholders, in addition to conducting a pre‐testing for the implemented tools through
initial field visits.
4. Field study: in depth interaction with number of VC stakeholders linked to each of the
identified clusters through production, supply and trade activities.
5. Finalizing the district focused VC flow diagram.
6. Identifying the activities and actors including understanding the links/dynamics between
the activities and/or actors.
7. Identifying the supporters/Business Development Service Providers (BDSP) and
elaborating their inputs towards the development of the VC.
8. Identifying existing and potential enterprises and employment opportunities; and also
challenges related to the development of the VC.
Picture no 2 – Marketing Visits
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9. Developing a VC mapping diagram.
2.1 Description of the Activities
Data Collection
As a first step for the activity, the sample and its characteristics have been identified by
collecting information about the producer history, location, company size, list of
products and targeted countries characteristics of applied systems. This was performed
by asking each VC actor about his clients and suppliers to identify communication
shapes and define clusters.
Secondly, main VC actors in the production chain at each level of the MAPs have been
listed and identified with further details of scale, specialization, direction, attitude and
new initiatives. Main and secondary VC actors with influence in traceability, food safety,
quality and food chain configuration are identified and evaluated.
Drawing Value Chain Diagram:
Collected data of several VC actors are presented in a diagram exploring VC directions
with flow arrows. In this chart, number of exporters, traders, farmers, and SPs are
allocated in the diagrams (see diagram 1, 2, 3 & 4).
Illustrating Communication Channels between Value Chain Actors:
After depicting the VC actors, the communication map is prepared to capture the
current gaps in communications and provide an overall picture of the chain actors cross
relationships and connections.
Describing Production Steps:
Description of the production steps is done through identifying each step of the
production processes, recording reasons for implementing each step, and showing how
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this step can prevent a food hazard or quality decrease. As a result several production
steps have been listed with overview of the production chain.
2.2 Data Capturing System
The National Technical Coordinator (NTC) has designed and pre‐tested a group of
questionnaires for 4 levels of the VC actors
covering all types of interventions and
participations with other stakeholders. The
description of these questionnaires is as follows:
Form 1 – Medicinal & Aromatic Plants Exporter /
Processor Questionnaire
Exporters in the supply chain of MAPs can be identified by the conceptual meaning as to ship
the MAPs goods out of the ports of Egypt. The seller of such goods is referred to as an
"exporter" who is based in the country of export, whereas the overseas based buyer is referred
to as an "importer". In Egypt there are some actors in the supply chain of MAPs playing more
than one role at a time, so one actor can be:
• Exporter, or
• Exporter and producer, or
• Exporter, producer and grower
The designed questionnaire focuses on the following areas for the exporter/processor:
• Company Profile: legal name, owner of the company, contact information and contact
person.
• Description of the Operation: type of production (fresh, dried and essential), number of
products, production sites and its locations, product list with annual quantities, grades
(organic, clean and conventional), volume of annual production, permanent and
Picture no 3 – Tea Packing
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seasonal staff, gender issues and description of the applied systems for quality and
safety measures.
• Supply Chain Management: procurement system, number of suppliers, means of
transportation (goods), and naming a list of 3‐5 main suppliers for further in‐depth
interviews.
• Business Management: number of products directed to export markets, main
destinations, production capacity, exporting percentage of total production, labels and
trademarks used, annual rejections percentage and logistics system applied.
• Directions and Attitude: business vision, self motivation, main challenges and problems,
feedback on the project work packages, opinions on formulation of export consortium,
business competitiveness, value addition initiatives and opinions on cost sharing
principle.
Results of the interviews with exporters/processors are discussed in the VC mapping (section 3)
of this report.
Form 2 – Medicinal & Aromatic Plants Grower Questionnaire
the questionnaire is implemented through the field visits
to MAPs growers and farmer’s association. The designed
form tackles MAPs growers through both technical and
social aspects to identify differences between MAPs
growers and other growers cultivating and adopting
another pattern of agriculture. The questionnaire
addressed the following areas:
• About the Grower: location, contact information, number of co‐farmers (associations)
and total cultivated area.
• Applied Farming System: description of the irrigation systems (surface, dripping,
spraying and pivot), soil type, seeds sources and the propagation system, fertilization
Picture no 4 – Trials of New Products
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system, pest control system, crop rotations and adopted products, permanent and
seasonal staff and harvesting and drying activities.
• Supply Chain Management: identifying the main sources of all agricultural inputs and
the main suppliers to each grower/farmer’s association.
• Marketing: main products, clients (exporters and/or traders), contracting type, labels
and trademarks used, rejections and distances between production and drying facilities.
• Directions and Attitude: business vision, self motivation, main challenges and problems,
feedback on the project work packages, identifying sources and type of extension
services, acceptance of new technologies, opinions on the cost sharing principle.
Results of the interviews with growers/farmer’s associations are discussed in the VC mapping
(section 3) of this report.
Form 3 – Medicinal & Aromatic Plants Service Provider (SP) Questionnaire
SP is an entity that provides services to other entities.
Usually this refers to a business that provides subscription
or web service to other businesses or individuals. Examples
of these services include inputs such as fertilizers,
pesticides and seeds, quality systems consultants, and web
application hosting. The questionnaire addresses the
following areas:
• Service Provider Profile: service type (consultation, research, extension, input supplies
with technical support provided by the seller), name of the organization, contact
information of the provider and his institute.
• Description of Specialization: background, years of experiences, previous researches,
cooperated researches and list of publications.
• Directions and Attitude: business vision, self motivation, challenges and common
problems and feedback on the project work‐packages.
Picture no 5 – Meeting with AEC
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Results of the interviews with services providers are discussed in the VC mapping (section 3) of
this report.
Form 4 – Medicinal & Aromatic Plants Trader / Pre‐processor Questionnaire
The trader in this VC is an investor who buys and
stores MAPs for a period of time (months to years).
His goal is to profit from short‐term gains in the
market. Usually the trader is grower or director of
farmer’s association. In some cases traders can be
considered as small scale exporters because some of
them could find an exporting opportunity that
attracts them to export by their own and under their
responsibilities. The questionnaire addresses following areas:
• Trader/Pre‐Processor Profile: person in charge, legal formulation, contact information
and contact person.
• Description of the Specialization: production pattern, number of products, production
sites (number/locations), main products, grades, staff capacity and gender issues.
• Supply Chain Management: number of contracted farms, technical support provided to
the farmers, means of transportation of the stuff from contracted farms to the draying
facility.
• Business Management: number of products directed to export companies, main clients,
annual production, contracting type (annual contracts, cash & carry and local
purchasing) and used labels/trademarks.
• Directions and Attitude: business vision, self motivation, main challenges/common
problems, feedback on the project work packages, experience in export, acceptance of
new technologies, food safety procedures and rejection policies.
Results of the interviews with traders/pre‐processors are discussed in the VC mapping (section
3) of this report.
Picture no 6 – Trader in Fayoum
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2.3 Sample Characteristics
Geographical Range:
The NTC has visited many Egyptian governorates where the exporters, processors, traders,
growers and SPs are in place. The following table depicts number of VC actors visited in each
governorate.
Table 1 – Geographical Range of the Selected Sample
Governorate Number of Actors
Greater Cairo (Giza, 6th of October City) 11
Alexandria 5
Fayoum 28
Beni Suef 8
Minya 8
Assyuit 9
Sample Size:
As mentioned earlier, the NTC has drawn a random sample of exporters from some Egyptian
governorates (21 exporters). Each exporter explained his production system and cooperated
with the interviewer to extend the study to 3‐5 of his main suppliers (traders/pre‐processors).
The second level of investigation and VC analysis was conducted by visiting the traders/pre‐
processors (15 traders) in the four suggested governorates of the project (Fayoum, Minya, Beni‐
Suef and Assyuit) to identify the production systems applied in this level and to define a sample
of growers contracting with the trader in his own supply chain. Eighteen growers have been
interviewed, representing different levels of the business scales (small, medium and large).
Finally, a set of interviews conducted with SPs (15 SPs) from many institutions such as academia
professors, researchers, consultants and extension employees.
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2.4 Stakeholders Consultation
During the VC and the inception phase of the project, the NTC has consulted the following
stakeholder to validate and verify the project’s services and work packages:
• The Agricultural Export Council “AEC”
• Egyptian Spices and Herbs Export Development Association “ESHEDA”
• Industrial Modernization Center “IMC”
• Food Technology Center (FTC)
• SIPPO Expo‐link, Switzerland Embassy
3 Value Chain Analysis
During the inception phase a group of activities were in place to identify and map the VC of
MAPs sector in Egypt. The NTC has designed and formulated data collection tools as mentioned
above to facilitate the process of VC analysis and mapping. These tools were targeting four
levels of the VC members (growers/farmer’s associations, traders/pre‐processors, SPs and
exporters/processors).
3.1 Growers
In the VC analysis the NTC visited a number of
growers and farmers’ associations (linked to
identified clusters). Visits outcome shows that
the majority of MAPs are cultivated by small
growers in old conventional areas of
cultivations and concentrated in certain
locations for each specific crop (such as Basil in
Assyuit). Usually the traders and/or growers
formulate an entity where they can facilitate their production and trading under one organized
Picture no 8 – Thyme farm in Minya
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umbrella which is the farmers’ associations. Small growers are suffering from the lake of
awareness and extension services, in addition to the increases of inputs prices.
However, the VC analysis captured a few large scale growers who achieved vertical integration
in the chain such as modern irrigation systems, new seeds and cultivars, modern facilities for
drying and collection. Further details of the results are presented below:
− The NTC has visited growers’ farms in the targeted governorates with the following
concentration: percentage of 22% from
Assyuit, 16% from Beni Suef, 44% from
Fayoum and 16% from Minya.
− Total cultivated area visited of the
suggested governorates are 779 acre,
operated by 18 farms (owned, rented) and
the largest farm of this sample is 220 acre
located in Assuit, while the smallest one is 2 acre located in Fayoum.
− Several irrigation and fertilization systems are founded in the selected sample. Only 16% of
the total samples are applying modern patterns, while the majority of growers are applying
old ways of irrigations and fertilization manual practices.
− Seeds are one of the major challenges for growers due to the shortage of new seeds. Most
of the growers are using their own seeds (cultivated in previous seasons) which have many
defects and incompliance with the market demand. Very few growers are using new
imported seeds from Enza Zaden http://www.enzazaden.com/ and HILD
http://www.hildsamen.de/eng_ueber_uns.htm
− Most of the growers (more than 55%) in the VC sample are adopting the organic farming
systems as they know that it will give them better marketing opportunity and they are
familiar with the organic regulations such as the EU regulation No. 834/2007, National
Organic Program (NOP), Japanese Agriculture Standards (JAS), Bio‐Suess, Naturland and
other standards and trademarks.
Picture no 9 – Farm in Assuit
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− The majority of interviewed growers have experiences in the medicinal and aromatic sector.
Some of them started this business since childhood via family business models.
− The majority of growers accept the idea of testing new inputs such as improved seeds,
fertilizers and drying practices but they require full packages of technical support and they
prefer to see the trials on experimental fields and study tours before adopting the new
techniques on their own farms.
3.2 Traders
Traders and pre‐processors are playing a significant role in the VC of MAPs. They are dealing
with growers and exporters from both sides of the chain and they are the main gate for the
growers. They provide technical support services and extension to the growers of their scope of
work and usually they supervise the harvesting and transportation from the field to the drying
facility, basic cleaning and screening
operations, separate the products according
to quality and sell them to
processors/exporters. In some cases, they
receive the raw materials dried from the
growers. As for essential oils the pre‐
processors/local traders receive fresh
produce and perform oil extraction
operations in small units. In both cases, the pre‐processing facilities are located in the middle of
the cultivation areas and are characterized by very poor manufacturing and hygienic conditions.
The following results are concluded from the VC analysis:
− The sample covers 20% from Assuit, 20% from Beni Suef, 46% from Fayoum and 14% from
Minya.
Picture no 10 – Trader in Assuit
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− The traders are not specialized in certain list of products; they are producing and offering a
wide range of raw materials products. Most of the traders have many locations for drying,
sorting and storage.
− The majority of interviewed traders provide technical support to their growers supervises
the harvesting and drying activities and performs lab analysis on their products to ensure
the quality and safety of the purchased stuff.
3.3 Exporters
This represents the final processing activity in the VC. The VC analysis shows that some of the
exporters have their own farms and they outsource the rest of their demand from other
contracted farms or traders. Also, the NTC observes that there are many types and shapes of
exporters in the Egyptian MAPs sector, described as follows:
• Exporters with owned facilities for drying, screening and packing,
• Exporters with screening and packing facilities,
• Exporters with no owned/contracted farms and factories.
The visited companies are listed in the following table:
Table 2 – List of Companies Interviewed and Visited during the Value Chain Analysis
S. Name location
1 Royal for Herbs Giza
2 United for Import and Export Fayoum
3 Pure‐land for Export and Import Minya
4 Al‐Sherif Co. for Export and Import Alexandria
5 Naggari Co. for International Trade Alexandria
6 The Egyptian Office M.A.A Assuit
7 Royal Herbs Beni‐Suef
8 International Company for Food Industries ‐ TIBA Cairo
9 Long Life Herbals Fayoum
10 AMA for Import and Export Alexandria
11 Egy‐Herbal Fayoum
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S. Name location
12 Safe Herbs and Spices Fayoum
13 EGINTEX Alexandria
14 Orient Group Alexandria
15 Elwefak El Sauidi for Food Industries Cairo
16 Dehydro Foods Co. Cairo
17 Egyptian Organic Agriculture Co. Fayoum
18 Fridal for Herbs and Essential Oils Giza
19 Giza for Seeds & Herbs Giza
20 Organic Valley Fayoum
21 AMD Verde for Import and Export Fayoum
Through the conducted visit, the NTC asked each exporter about the main products his
company offers and the quantities of each item. Results are presented in the following table:
Table 3 – List of Main Products and Quantities Produced by the Sample Exporters
Product Quantity/Tons
Fennel 7562
Green Basil 4848
Caraway 3447
Peppermint 3155
Marjoram 2265
Hibiscus 1553
Parsley 1545
Chamomile 1525
Spearmint 1242
Lemongrass 1180
Anise 1175
Coriander 1010
Dill 765
Calendula 170
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− Total annual production for all the 21
exporters is about 29,430 tons which
represents more than 70 % of the total
production of Egypt.
− Production specialization cannot be
witnessed in the sector as 52% of the
exporters are working in organic, clean, conventional and pesticide free products, while
only one company is specialized in organic, and 42% are not interested in the certification of
products and selling their products as conventional products with acceptable level of
maximum residues of pesticides.
− Exporters have different requirements regarding form and quality of the raw material,
whereas 23% of the sample requires raw plants because they have either drying facilities or
dehydration lines. Fourteen percent of the exporters in this sample have no facilities and
export packed products from trader’s facilities. The majority of the sample (57%) are
receiving raw materials in two main forms: raw dried/fresh and/or semi processed.
− Most of the exports are directed to the European market and the United States. Some of
the exporters have contacts to other markets including: Gulf, Asia, Japan, and Australia.
− The NTC asked each exporter about his opinion on the formulation of export consortium
and they have expressed their negative feedback on this issue (80% of the exporters) stating
that this idea will not be reasonable and will create problems between exporters. However,
the majority of exporters expressed their acceptance of cost sharing principles as they
believe this will ensure the commitment of the members receiving technical services from
the project.
Picture no 11 – Factory in Fayoum
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3.4 Service Providers (SP)
As stated before, these are the technical support bodies
that deliver technical consultation, extension, research,
training, and/or marketing services to the MAPs producers
at all levels. They are available in the sector but their role is
not formally identified because most of the researchers
think that the main source of extension is the Ministry of
Agriculture and Land Reclamation (formal extension
services) while there are many informal sources for extension.
The following list presents the interviewed SPs and consultants in some selected governorates:
Table 4 – List of SPs Interviewed in the VC analysis
S. Name Location S.P. Type Organization
1 Dr. Adel Abdel Aziz Beni‐Suef Researcher ARC
2 Dr. Mahmouod Ali Hassanain
Fayoum Professor FOA‐Fayoum Univ.
3 Dr. Ebtisam Abdallah Fayoum Professor FOA‐Fayoum Univ.
4 Alaa Idress Fayoum MSc FOA‐Fayoum Univ.
5 Dr. Khairy El Sherif Cairo Certification Body ECOA
6 Dr. Nabil Hegazy Cairo Certification Body ECOA
7 Dr. Mahmoud Abdelhady Minya Professor FOA‐Minya Univ.
8 Dr. Salah Sayed Ahmed Cairo Researcher NRC
9 Dr. Mohamed Abdel Wahab
Cairo Researcher DRC
10 Dr. Elsayed Elbadawy Fayoum Researcher Agricultural Department in Fayoum
11 Dr. Hany A. El‐Shemy Cairo Professor Cairo University
12 Ahmed Taha Fayoum Consultant FAODA
13 Mohamed Medany Fayoum Consultant FAODA
Picture no 12 – Trader in Fayoum
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S. Name Location S.P. Type Organization
14 Essam Eldeen Ahmed Mohamed
Assuit Consultant Agricultural Department in Assiut
15 Dr. Hassan Elfoly Minya Researcher Agricultural Department in Minya
3.5 Value Chain Mapping
Value stream mapping is a lean manufacturing technique used to analyze and design the flow of
materials and information required to bring a product or service to a consumer. It is
recommended that VC mapping be conducted in two phases:
a) An initial basic map after the collection of initial data illustrating participants and
functions, and
b) Adjusted mapping, which is conducted following additional and follow‐on interviews.
The detail level of the map depends on mission objectives and requirements established at the
outset.
The following shapes are the main findings of the value chain mapping activity:
3.5.1 Shape 1
As illustrated in Figure (1), this can be considered as controlled chain because the exporter is
fully aware and managing all production steps starting from the farm level followed by
processing and eventually the exporting level.
The main players in this chain are: 1) the exporter who is the leader of the VC, 2) the processing
facilities that can be drying facilities or dehydration ones, and 3) the agricultural suppliers that
can be farms managed by exporters company’s staff or contracted farms under the supervision
and technical support of the company’s staff.
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In addition, exporters outsource some of their demand from trusted traders, which is a bit risky,
so most of the exporters require several proofs to ensure the quality and safety of the
purchased materials
3.5.2 Shape 2
This is different for the above VC shape in the control of all production steps. In VC shape 2, the
exporter invests more in the analysis and investigation of the received products at the gate of
his factory or processing facilities. Most of the supply chain management procedures are
covering most of the information of each supplier and building relations with traders to ensure
the quality and quantity of received stuff. In some cases the trader and/or the contracted farms
are linked to the coverage of technical support provided by the company but this is very rare
and not usually accepted by this chain members.
3.5.3 Shape 3
The third shape of clusters is the most unstable one because it is very risky. In this VC shape the
exporter is not controlling any of the production steps. Actually, he is directly purchasing the
final products from trusted traders or local market. In this case the trader/pre‐processors
finalizes the shipment from receiving the raw material till packing and loading containers. The
trader is the only person who has information about the content and quality of the shipment.
Usually, the exporter has no responsibility of rejections in case of quality issues as they pay
after the release of payments from importer, however, in case of food safety crises and
complaints the exporter can be subject to pursuit by his importers.
Figure 1 – Exporters with Owned Facilities for Drying, Screening and Packing.
Figure 2 – Exporters with Screening and Packing Facilities Only.
Exporter
Processing ProcessingProcessing
Trader TraderTraderContracted
Farms
Traders
FarmerFarmer
Figure 3 – Exporters with no Owned/Contracted Farms and Factories
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Sample Value Chain Map
4 Further Findings, Recommendations and Results
Before going through the final conclusion and recommendation, the following section will overview and
describe the major bottlenecks observed in the MAPs sector in Egypt.
4.1 Revision of the sector bottlenecks
Poor Agricultural Practices
The majority of farmers do not implement good agricultural practices. Although they are very
skilled in terms of utilizing their limited knowledge and resources, the yields are relatively low,
and in most cases the uninformed use of pesticides causes product contamination. Farmers are
used to blindly spraying pesticides without giving attention to neither the appropriate types nor
doses. Poor collection and handling practices result also in microbiological contamination.
Land Fragmentation
Not only the rent of agricultural land in Egypt is amongst the highest in the world but also land
fragmentation in Egypt is one of the highest in the world. This fragmentation of ownership does
not remarkably allow for economies of scale. It also causes significant fluctuations in the supply
which makes it difficult to plan and have proper export commitments. In the case of organic
products, this causes huge problems with pesticides contaminations from neighboring non‐
organic farms.
Shortage of Proper and New Varieties
Egypt has not been able to introduce newer and more demanded MAP products. Same
traditional products have been planted and exported for many years. Seeds that are used are
old and weak with relatively low yields, most of which are also mixed varieties. There have been
no innovations neither on the way of growing nor on the type of seeds. Imported new or pure
varieties get also mixed and become weak over years. This is primarily due to lack of proper
research and development efforts. Processors and exporters exert very limited effort in this
area, as they are not directly involved or connected to the farming part of the supply chain. The
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high fragmentation may also be a cause of their limited interventions. Another cause of this
problem is the lengthy procedures set by the Ministry of Agriculture and Land Reclamation on
the importation of new varieties.
Poor Drying and Handling Practices
In Egypt, the drying of fresh collected MAPs is commonly done by one of the following ways:
• Sun drying by flattening in the field and/or on the sides of roads. This is the most
unhygienic way for drying. The product is exposed to a variety of contaminants including
animals’ and birds’ droppings, dust, and many kinds of microbiological hazards. For
some products, direct sun drying affects the quality of the produced product and lowers
its content of essential oils.
• Drying on concrete floors amongst the farm or
on roofs of buildings. This method is to some
extent better but still completely un‐hygienic as
the product is open to a great variety of
contaminants and pollutants.
• Drying in primitive drying facilities. Such
facilities are with concrete floors and with
fences, but still open to the atmosphere and to direct sun. Very few more sophisticated
facilities are covered with plastic sheets or with shadow nets. Yet, the handling practices
need to be upgraded to meet acceptable
hygienic standards.
• Drying in greenhouses with natural or forced
ventilation. A few pilot drying facilities were
built in this manner. Yet, they suffer from poor
design and low capacity. Designs need to be
revisited and handling practices have to be
Picture no 13 – drying station
Picture no 14 – drying methods
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upgraded.
• Drying in specially designed ovens. Not all MAPs can be dried this way, since it greatly
affects the final product quality. The color of the final product is darkened and the oil
content is much less.
Unfortunately none of these ways is up to any acceptable standard, and this is considered one
of the major bottlenecks affecting the development of the sector. Moreover, MAP operators
reported that post‐harvest losses range between 25% and 40% due to poor handling practices
implemented.
In a nutshell, the drying processes need to be revisited. Technical upgrade is necessary and
should be based on techno‐economic studies considering all the hygienic and product quality
aspects.
Traceability
Traceability is a real challenge within the high fragmentation of the supply chain. Nevertheless,
it is possible with organized efforts. Exporters should
insist on securing the traceability data back to the field
and not to suffice with one step back to the trader.
This will positively impact the organization of the
supply chain and the commitment of all its members.
Squeezed Prices
Egyptian exporters have a weak bargaining power
when it comes to prices, although Egyptian products have a high demand in the export markets
and in some varieties have the leading market share. It is reported that prices can be as low as
one half or one third of those of competitor countries.
This can be led back to one or more of the factors listed below:
Picture no 15 – dehydration machines
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• Poor reputation of Egyptian products in terms of quality and safety, resulting from
fraud cases of inexperienced small scale exporters ruining the image of the rest of
serious exporters.
• Price competition among Egyptian exporters,
where some local traders with poor experience
in dealing with international clients considerably
reduce prices just to close a certain deal.
Typically, foreign importers use their quotations
as a negotiation tool to reduce the prices of
reputable exporters.
• Lack of pure and new varieties, as most of the varieties grown and handled are mixed,
and most of the exporters are not able to source pure varieties or certain varieties not
traditionally grown in Egypt.
• Lack of branded products, as all products are exported in bulk and without any brand or
quality trademark. For price improvement, a quality endorsement trademark should be
developed and promoted, and/or more value added steps should be conducted in order
to export final products to consumers. Merely all the exported products are re‐
processed and in many cases repackaged and re‐exported.
• Global competition, where products from countries like India, China, Morocco, Pakistan,
Turkey, Romania, Australia and Canada are posing serious threats on the local industry.
Although some of the Egyptian products are irreplaceable to a certain degree, the
demand is not very elastic. Importers will resource to other countries, when necessary,
in order to meet their quality and cost targets. These places are able to produce cheaper
and with higher yields compared to Egypt and therefore they become an issue for
consideration.
Picture no 16 – new imported seeds
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International Standards and Regulations
A greater challenge facing the industry is the increasingly enforced regulations for MAP
importation in export countries and in Europe in particular. In addition to different quality and
food safety certifications requested by major importers, traceability requirements comprise
another challenge to local operators and exporters with the high fragmentation of the value
chain.
Access to finance
Although this is a labor intensive industry and although the way it is run in Egypt is not of high
cost, in addition to its being a small family run business and highly fragmented, some reports
still highlight that producers have problems in raising funds. However, this is not an industry
related issue, it is rather a problem with the banking system in general. Due to the recent
complications that banks went through, they have imposed very tough measures and have
made it very difficult for businesses to approach them.
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4.2 Conclusions & Recommendations
According to the results concluded from the VC mapping activity most of the bottlenecks
identified during the project development phase are confirmed. In addition the VC mapping
exercise provided a better understanding of the organization of the value chain and help
revealing the various clusters and relationships between actors in the MAPs sector in Egypt.
These will surely support the design and implementation of the project intervention in general,
and the technical assistance it provides in particular.
During the value chain mapping and stakeholder validation meetings all value chain actors
confirmed the importance of this project to develop the medicinal and aromatic sector in Egypt.
They mentioned that the project will create major new opportunities to improve the position of
Egyptian exports at international markets.
The project partners such as AEC, ESHEDA, IMC and FTC confirmed their contribution and
commitment to the project as expressed before during the development phase of the project.
They declare that they will provide technical, financial and managerial support to ensure the
success of the project.
As a result of the value chain mapping activity the NTC is recommending to consider the
following issues:
1. Linkages between MAP value chain members should be improved with increased value
chain efficiency, transparency, and responsiveness to market demand. It is essential to
establish industrial platforms that link research and technical services and industry, and
support encouraging the value chain actors to participate in national development
initiatives that help improving sector’s linkages and thus creating bases of trust between
all actors at different levels of the VC.
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2. The project should provide technical assistance to the identified clusters formed by
exporters and their suppliers back to the primary production with the objective of
upgrading each cluster in terms of quality enforcement and access to export.
3. Collaboration initiatives should be established with national stakeholders to strengthen
relevant governmental and non‐governmental institutions serving the MAP sector to
ensure sustainability of the project.
4. Importance of studying and exploring different ways for technology transfer including
proper customization to local demand and domestic conditions.
5. The project should integrate with research centers such as Agriculture Research Center,
National Research Center, Desert Research Center and other national institutes to
formulate national research plan targeting the medicinal and aromatic sector. This plan
should address the key steps needed to improve this sector, create positive
interventions with the project stakeholders and focus on the identified bottlenecks.
6. The sustainability of planned service centers shall be evaluated through regular
previously identified and tested processes in order to set the appropriate way of
operating these centers and thus ensures the sustainability of the project.
7. The project should implement the principle of cost sharing to be a part of the
sustainability plan. In other terms, this will help ensure the commitment of beneficiaries
and targeted clusters to the upgrading requirements.
8. There are some new initiatives introduced by the Faculty of Agriculture, Cairo
University, for producing natural medicines based on extracting certain active
ingredients from medicinal and aromatic plants. These initiatives will help in the
responsible work package for product development as it will create new demand for the
pharmaceutical industries. So, it is highly recommended that these initiatives are
studied and tested within the context of the project.
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9. A great attention to the role of extension services is needed to ensure the outreach of
the project services and the technical support activities. This is to ensure the effective
delivery of these services to all SMEs in the targeted governorates.
10. It is recommended that the project study the quality mark schemes applied in India and
China and customize it to match the local context. Both markets have shown remarkable
success stories in the area of quality mark design and introduction to the international
markets.
11. Further investigations on the cluster shapes shall be conducted to formulate the
eligibility criteria for accepting clusters and the type of services required
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5 Annex
Annex 1: Questionnaire for Growers
Annex 2: Questionnaire for Exporters
Annex 3: Questionnaire for Traders
Annex 4: Questionnaire for Service Providers
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Annex 1 – Medicinal & Aromatic Plants Growers Questionnaire
Date Interviewer Time GPS Grower Contacts Grower Name Total cultivated area Address: Telephone: Fax: Email: Website: Mobile:
Applied farming system Irrigation type surface dripping spraying pivot Soil Type Seeds source and type Fertilization system Pest control system Product list
Grades Organic Clean (pesticide free) Conventional Other……….. No. of permanent staff No. of seasonal staff Experience (years) Harvesting and drying activities
Suppliers Supplier name Location Supplier name Location Input supplier(s)
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Marketing Number of items produced annually
Main traders (Clients)
Annual production (tons) Price (average)
Contracting type annual contracts local markets Other……….. Labels, trademarks used Percentage of annual rejections
Distance to drying yards
Directions towards MAP development Where do you see the development of Medicinal and Aromatic Plants sector in Egypt after 5 years? Positive feedback Negative feedback
How can you increase your production?
What are the main challenges / problems disturbing your business?
How can you increase the quality of your production?
If you are planning a project to develop the map sector in Egypt, what are the main areas shall be covered (areas for value addition) and what are the priorities?
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Directions towards MAP development
Do you receive any extension services? If yes, what type and source?
Would you accept the idea of using new seeds for cultivation?
Would you be interested to pay fees for receiving extension services?
If yes, what areas would you be interested on?
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Annex 2 – Medicinal & Aromatic Plants Exporter / Producer Questionnaire
Date Interviewer Time GPS
Company profile Company Name:
Owner Name:
Address:
Telephone: Fax:
Email:
Website:
Contact Person: Mobile:
Description of the operation plan Type of production Fresh Dried Essential oil Number of products Number of production sites Location of production Site(s)
Item Q/T Item Q/T Item Q/T
Product list
Grades Organic Clean (pesticide free) Conventional Other……….. Annual production Year of
Establishment
No. of permanent staff No. of seasonal staff
No. of females staff Type of work (females)
Description of applied food safety procedures
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Procurements Number of raw materials suppliers
Source location(s)
Receiving grade(s) Raw material packaging type
Transportation provided by supplier provided by exporter third party contract Other………..
List of suppliers
Marketing Number of products directed to Export
Main destinations
2010 2009 2008 Production capacity Annual production volume
Exporting percentage Domestic sales percentage
Labels, trademarks used Percentage of annual rejections
Logistics contracted with shipping companies exporting via owned company not applicable Other………..
Directions towards MAP development Where do you see the development of Medicinal and Aromatic Plants sector in Egypt after 5 years? Positive feedback Negative feedback
How can you increase your production?
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Directions towards MAP development What are the main challenges / problems disturbing your business?
How can you increase the percentage of exported quantities?
If you are planning a project to develop the map sector in Egypt, what are the main areas shall be covered (focused for value addition) and what are the priorities?
What is your opinion on creating export consortium to help in branding Egyptian MAP products?
How can you raise the selling prices of your products?
Do you have future plans of creating new products or changing the exported product forms?
Would you accept the principle of cost sharing for all project activities? Yes No
What do you prefer to be a form of interaction between producers and the new station for modern draying:
renting the station from the MIFT MIFT operates the station and serve producers with reasonable fees Other ...........
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Annex 3 – Medicinal & Aromatic Plants Traders / Processors Questionnaire
Date Interviewer Time GPS
Trader / Processor profile Trader / processor Name Company type Address: Telephone: Fax: Email: Website: Mobile
Description of specialization Type of production Fresh Dried Essential oil Number of products Number of production sites
Location of production Site(s)
Product list
Grades Organic Clean (pesticide free) Conventional Other……….. No. of permanent staff No. of seasonal staff No. of females Type of work
Suppliers & contracted farms Number of contracted farmers Location(s) Receiving grade(s) Technical support services to contractors
Transportation provided by farmers provided by trader third party contract Other………..
List of suppliers (contracted farms)
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Marketing Number of products directed to Export companies
Main clients
Annual production (tons)
Price (average)
Contracting type annual contracts cash & carry local markets Other………..
Labels, trademarks used
Directions towards MAP development Where do you see the development of Medicinal and Aromatic Plants sector in Egypt after 5 years? Positive feedback Negative feedback
How can you increase your production?
What are the main challenges / problems disturbing your business?
How can you increase the exported quantities of your production?
If you are planning a project to develop the map sector in Egypt, what are the main areas shall be covered and what are the priorities?
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Directions towards MAP development
Describe your experience towards export? Have you tried to export by yourself?
Would you accept new technologies in the field of draying and processing?
Describe your rejection policy? Where do you direct rejected lots?
Describe your food safety procedures?
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Annex 4 – Medicinal & Aromatic Plants Service Provider Questionnaire
Date Interviewer Time GPS
Service Provider profile Service provider type consultant researcher extension input supplier Organization Address: Telephone: Fax: Email: Website: Contact name: Mobile:
Description of specialization Background
Years of experience Previous researches
Names of co‐researchers
List of publications
Upgrading the Medicinal & Aromatic Plants Value Chain ‐ Access to Export Markets
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Directions towards MAP development Where do you see the development of Medicinal and Aromatic Plants sector in Egypt after 5 years? Positive feedback Negative feedback
How can you develop your services?
What are the main challenges / problems disturbing your services?
If you are planning a project to develop the map sector in Egypt, what are the main areas shall be covered and what are the priorities?