Bassal Port Cotton Exchange (BPCE) is one of the world’s oldest cotton exchanges, and has historically  been the main hub for Egyptian cotton –  playing a major role in the booming cotton trade in the region.

Bassal Port Cotton Exchange (BPCE) is one of the world’s oldest cotton exchanges, and has historically  been the main hub for Egyptian cotton –  playing a major role in the booming cotton trade in the region.

The BPCE was set up near the warehouses of Bassal (onion) Port where different types of cereals, legumes and vegetables, especially onions, were stored and exported. Built by Muhammad Ali of Egypt in 1810 on the Mediterranean coast, the port flourished as an industrial zone par excellence. Ruling Egypt from 1805 to 1848, Muhammad Ali connected the port to a sub-canal from the Nile, called the Mahmoudiyah Canal, which flows through Alexandria and connects its parts and also the city to other Egyptian governorates. It was through that waterway that most of Egypt’s agricultural crops came to be stored at Bassal Port warehouses for import and export purposes.

Cotton cultivation

In the early 1820s, Muhammad Ali, realizing the importance of the textile industry for providing clothing to his army, received Monsieur Jumel, an enterprising French textile engineer. Jumel suggested the cultivation of a cotton strain called tree cotton he had seen in the garden of an Egyptian notable named Mahou Bey who had been planting it as an outdoor ornament. This strain was soft and easy to spin. Jumel believed that its cultivation suited the Egyptian climate and could improve its yield, smoothness, and staple quality.

Given that India was the origin of the strain, Muhammad Ali asked Jumel to travel there to select the finest cottonseeds. Upon his return, Jumel conducted experiments to see which areas in Egypt best suited cotton cultivation. Based on Jumel’s findings, Muhammad Ali expanded the cultivation of that strain which was then came to be known as Jumel cotton.

As a result of the introduction of cotton cultivation in Egypt, the existing irrigation systems used from the days of the Pharaohs changed from flood irrigation to permanent irrigation, leading to increased area of cotton-cultivated land. Large industrial projects were built on the banks of the Nile, such as Kharanfash textile factory – the first government factory in Egypt – and the broadcloth factory, which provided military clothing for the Egyptian army.

Muhammad Ali never imagined that cotton would achieve that unprecedented success, which caused him to change the agricultural land ownership system and approve a monopoly policy to protect cotton and the then nascent textile industry.

Export boom

That policy, however, did not last long. In 1858, Muhammad Sa’id Pasha (1854-1863) issued the Saidia regulations that gave farmers the right to own agricultural land, dispose of their crops, and plant whatever crops they wanted. As a result, cotton cultivation and ginning boomed in Egypt and the amount of cotton stock and the number of cotton merchants increased.

When famous American Pima cotton became a rarity as a result of the American Civil War (1861-1865), Egypt’s exports, according to New York Times statistics published on June 26, 1864, increased from 600,000 quintals in 1861 to over 1.25 million quintals (257 bales) in 1863. Britain’s share alone of these exports reached 196,422 bales.

“Egypt was a farm for Manchester’s spinning mills,” says Zaki Abdulhamid Edkawi, Chairman of EDCO, a cotton export company. “Cotton is considered Egypt’s fourth pyramid, and the alleged claim that its cultivation in Egypt is already extinct is void. Cotton is a highly valued strategic commodity, like oil. It has gained special fame thanks to its long staple and distinctive quality. American Pima cotton was known as American-Egyptian cotton.”

As imports of Egyptian cotton increased in the 1860s, the BPCE was founded in 1872. It soon became a major exchange thanks to its strategic location near the port, the storing area and Mahmoudiyah Canal through which cotton crops used to reach from different governorates of Egypt, where the governorates of Kafr el-Sheikh and Faiyoum were and still are the most productive in Lower Egypt and Upper Egypt respectively. The BPCE was also close to Qabbari railway, which connected it to the Cairo-Suez railway – constructed in 1858 – and eventually to the Suez Canal, which was opened in 1869.

Cotton futures exchange

The BPCE was not the first exchange in Egypt. It was preceded by a futures exchange that was established in 1861 in Alexandria and was one of the oldest in the world. Trading in this exchange was informally done through calendar bonds, the first known securities in Egypt.

In that golden period, cotton transactions were based on supply and demand according to cotton varieties and staple lengths. Cotton traders used to make deals, including on various kinds of cottonseeds. On December 21, 1883, the first cotton futures exchange was established in Alexandria at the same place where the Italian Commercial Bank was located at the Old Stock Avenue. The first registered local cotton deal was concluded in 1885 at Alexandria Europe Café at Des Consuis Square, which was later named Muhammad Ali Square or present Manshiya Square.

An elevator operator working for the Egyptian Company for Cotton Pressing (ECCP) says the ECCP has presses in Bassal Port: the Nile Press, Egypt Press, Tareekh Press and the Vacuum Fumigation Station.

The ECCP is a subsidiary of the Cotton & Textile Industries Holding Company – a Ministry of Investment company. It replaced the Public Authority for Spinning and Weaving formed under Public Business Sector Company Law No. 203 of 1991, a law that many believe was the first knell of a series of death knells of textile industry in Egypt.

Golden age

The road to Bassal Port is as old as history. Now crowded with cars, trams and hawkers, this road, during the golden age of Bassal Port in the late 19th Century, was filled with the hustle and bustle of workers, porters, drivers and cotton traders from 7 am as freight trains arrived at the port with loads of goods. Workers would be seen hurrying to unload goods and then load them into ships to transfer them abroad. Other ships carrying equipment from overseas would await their turn to have their goods unloaded then transported to workshops and factories. The cotton stores are now controlled by ex-convicts selling second-hand items.

According to a brochure ‘Cotton Sorting in Bassal Port Exchange’ authored in 1928 by Jadallah Abu Al Ela Effendi, a senior specialist in the Giza Plant Breeding Directorate at the Ministry of Agriculture, reviewed by A. A. Carver, a cotton expert and a broker at the National Bank of Egypt (former Lloyds Bank) in the BPCE, and published by Amiria Press in Cairo, the BPCE was “Egypt’s final cotton spot market where exporters buy their need of cotton for overseas export.”

At the time, each bank or commercial house selling cotton on behalf of its customers or buying it for export purposes used to have an office, a room for sorting cotton inside the BPCE, a cotton expert broker and some employees assigned to help him. Banks and commercial houses, through their representatives in various governorates, used to receive cotton bought from farmers. The cotton would first be sorted and then dispatched to the BPCE in Alexandria where it would be kept in warehouses.

According to the brochure, cotton-sorting rooms must be sunny, but not directly exposed to the sun. Their windows were painted black at the bottom, and could slide up and down to control the amount of light. To facilitate the distinguishing of fine differences in specimen colors, the sorting table was painted in black and was provided with a small brass device to measure staple length.

From each cotton dispatch, a five-pound sample would be taken for inspection and classification by the broker who would then take the samples to the BPCE. After approving the samples by the expert of a bank or commercial house, he would then negotiate the price with the broker.

Every morning, a notice would be placarded outside showing the exchanged goods and their quantity and prices, in addition to all other data buyers needed. Transactions started at the BPCE square at 11:30 am where traders, brokers and sellers gathered to fix a price for cotton bales. Price negotiations would stop at 1 pm and settle at the last quoted price, which was considered the closing price to be adopted when the BPCE opened the following day.

Closed exchange

“The BPCE has been closed since 2007,” says Edkawi. “The offices still working in the BPCE are technical offices that only identify cotton variety.”

BPCE regulations were amended a number of times after the 1952 revolution to regulate the liberalization of cotton trade, handling and export and also regulate the BPCE. Agriculture Law No. 53, issued in 1996, increased state control over the cotton market and vested in the Minister of Agriculture the power to identify the areas allocated for cotton cultivation, production, trading and ginning, in addition to dealing with seed variety. In 1967, Law No.39 was issued under which the activities in the BPCE were stopped.

At that time, the public sector in Egypt under Gamal Abdel Nasser strongly controlled the textile business and sought that cotton crops be used to meet the needs of local textile factories and entrench the national textile business initiated by Egyptian millionaire Talaat Harb, the founder of Banque Misr in 1927.

That policy, however, soon changed when the export of readymade garments was started under the economic openness policy of 1974. The process of replacement and modernization in textile plants was delayed, causing El-Mahalla Textile Factory workers to stage a strike in 1986.

In 1991, the government restructured the state-owned textile sector, but later stopped its investment in the upgrading of mechanization and production system in the public sector, which was named the ‘public business sector’ under Law No. 203 of 1991. In 1993, the government embarked on implementing the privatization scheme.

In preparation to join the World Trade Organization (WTO) and sign the final document of the Uruguay Round of multilateral trade negotiations and Egypt’s undertakings in commodity and services under the Marrakesh Agreement signed on April 15, 1994 and developed out of the General Agreement on Tariffs and Trade (GATT), Egypt liberalized cotton prices and raised the costs of textile products. BPCE Law No. 141 was issued in 1994.

“The BPCE boomed in the late 1990s,” says Sayed Moussa, a 38-year-old worker at Zanqit Essittat market and a resident of the Bassal Port district. “Widows, divorced women, and old and young people worked in the BPCE. Friends of mine worked as daily laborers for L.E. 10 per day, which was quite a good amount at the time. And it was a permanent wage. Pressing machines were fully operational.”

In 2001-2002, Egypt produced 59 percent of the total global cotton production, according to the Public Local Cotton Trade Regulation Committee. That percentage sharply fell to 34 percent during 2003-2004.

“The GATT agreement only served the interests of great powers which possessed technologies,” says Edkawi. “Developing countries like Egypt were placed in situations exceeding their industrial capacities, which caused a failure to meet the least WTO conditions and consequent liquidation of the industry. This is what made Egypt be considered an agricultural country.”

In 1994, Law N. 210 regulating local cotton trade and Law No. 211 regulating the Egyptian Cotton Exporter Union (ECEU) were issued. Law 211 plays the most effective and influential role in the activities of the Egyptian cotton market. It regulates the export policy and rates every September.

These laws made cotton marketing more complicated than ever due to the entrance into the market of a new party, the private sector which had its own problems and had the right to work in freedom through an oriented market. Shockingly, the creation of a public cotton exchange was not a liberalization of cotton; it rather led to an imposed non-liberalized system from which only traders close to decision-makers benefited.

Amid government confusion and imprudent policies with respect to the BPCE, Law No. 75 of 2007 was issued amending certain provisions relating to cotton and ECEU Law, in addition to the abolishing of the BPCE Law, leading to the closure of the BPCE.

BPCE fate

“There is no BPCE management here,” says a security officer at the BPCE Management Office. “This is Misr Cotton Export Company – MCEC.”

The MCEC is engaged in the export-import business of cotton and its products, waste and supplies on its own, for other companies or through partnership with others. It also carries out all commercial, industrial, financial and service activities related to cotton transaction.

“We are in a fierce war,” says Edkawi. “Our markets have been taken away from us and there is a conspiracy to eliminate the cultivation of Egyptian cotton.”