The Expected Impacts Of Jatropha Curcas Plantations On The Egyptian Economy

The strategic problem Egypt confronts is that, its renewable water supplies cannot be expanded, while population is growing and economy is expanding. By2017, the National Water Resource Plan estimates that total water requirements will exceed90BCM. Thus, Egypt current resources faces great challenges. Alternative resources should be found and used. One important source is Wastewater, with current collected amount of about6.5Billion m3/year. Just used of them about0.7Billion m3/yr. therefore, the Egyptian government tried to make use of this resource by starting a wide range of new projects aiming to expand the green stretch in the desert by introducing forest plantations. Thus, Jatropha plantations started as an experiment, with the seeds imported from India in1997. Promising results prompted the Egyptian Government to plant this species on a wider scale, including the establishment of42ha of Jatropha in2001, irrigated by treated sewage water (drip irrigation). All desert areas of Upper Egypt governorates and in the New Valley are considered potentially suitable for Jatropha plantations. The marginal land that has been planted with Jatropha in Egypt presently covers around844ha.This study evaluated the financial and the economic impacts of Jatropha plantation and the related biodiesel industry. A descriptive analysis and a Cost-Benefit analysis approach is used to evaluate the financial aspects in the investment, having both sectors as one large investment. Then a comparative static Computable General Equilibrium (CGE) model is used to evaluate the economy-wide impacts for the expansion of the new sectors Jatropha plantations and Biodiesel industry.CBA analysis results shows that the project is likely to contribute to enhance Egypt’s welfare, as it has a positive economic net present value of$160million worth of present dollar value (net benefits discounted at12%). In general, the investment is better than option "zero", which is doing nothing, as the current investment will make use of unused resources such as wastewater and land and even assign market value for them as illustrated in the analysis. As a result, the study in this context recommends that the investment should be accepted.Risk analysis results shows that under95%of confidence level and with around95%of certainty level, NPV has a positive value, with minimum value of zero, and maximum value of$297million. However, the entire range of change for NPV is from-67to516million USD, with probability less than3%of having negative NPV, while mean estimated to be around$136million. Moreover, the expected net present value ENPV estimated to be around$135.9million. Thus, the investment should be accepted. On the other hand, the expected-loss ratio estimated to be around0.003, which telling that, this investment is not risky, supported by the result of the risk-exposure coefficient, which estimated to be around54.39that is, the risk-exposure coefficient is a positive value, which assures that the investment is not risky and should be accepted.CGE results shows that nominal GDP increased around$40million after the first-step and about$429million after the second-step, which makes in total around$468million increase after the two-steps shock, which represents around0.36%from the base GDP. With the total increase in real GDP was about$206million, which represents about44%from the total increase in Nominal GDP, thus, about56%increase in Nominal GDP due to the increase of the Price index, which was about$262million. The sensitivity analysis of the CGE model shows that, the primary factor sigma is the most likely to affect real GDP rather than the other selected elasticities. Moreover, applying Chebyshev’s inequality with99%of confidence, assures that whatever the distribution of real GDP, it will always lie between0.14439and0.14461percent.As a result some policy implications recommended by the study includes that any policy for expanding Jatropha plantations in Egypt should be corresponding to another policy promoting the biodiesel industry to take the full advantage of both sectors, as the former serves as the latter one’s intermediate input. Additionally, a policy should be found to control the expansion of the new sectors and make sure it will take place only on the new marginal land. Furthermore, the plantation locations in the marginal land should be located near the concentrated population in poor areas.However, the study did not cover the environmental impacts of the expansion of these new sectors. Therefore, a separate study to investigate such impacts on the ecological system is recommended. In addition, a social study covering labour and the society is needed as future research.