Things go poorly for Coca-Cola project to grow fruit in Egypt

When it was formally launched in 1977, the project was expansively touted as a promising and profitable joint venture -- a mutually advantageous alliance of Egyptian and American capital.

For the Coca-Cola Company, the plan to harvest thousands of tons of citrus fruit from the Egyptian desert likewise offered a chance to bolster its public image in the developing world.

For Egypt, the project could have been the shining achievement in President Anwar Sadat's controversial opendoor economic policy, a scheme to involve massive amounts of foreign capital in fulfilling the country's critical development needs.

Today, though, after three years of bureaucratic roadblocks that defied even the intervention of President Sadat, Coca-Cola has reduced by half its financial investment and has withdrawn completely from the management of the project.

In some ways, the circumstances that provoked the company's decision are sadly illustrative of the ministerial inertia that has so far deterred many large US firms from doing business in Egypt.

Coca-Cola's story began in 1975 when it was negotiating its eventual return to the Egyptian soft-drink market from which it had been banned because of its operations in Israel. President Sadat suggested that Coca-Cola put its expertise to work in reclaiming a portion of the Egyptian desert. Making the desert bloom is one of Mr. Sadat's most compelling priorities.

In 1977, backed by a governmental decree, the newly formed Ramses Agricultural Company, of which Coca-Cola owned 50 percent, signed a contract with five other Egyptian businesses giving it access to 15,000 acres of desert east of Cairo between the capital and the Suez Canal city of Ismailia. Coca-Cola, having successfully grown citrus fruit in desert conditions in Arizona and Florida, contributed $5 million to provide both equipment and technical personnel. Work subsequently began to prepare the land to yield 30, 000 tons of fruit a year for both export and domestic consumption.

During the negotiations, however, no one thought to ask the Egyptian Army for permission to use the land, even though the area is adjacent to an old military airfield and a training academy for Egyptian pilots. Company officials, after they had signed the contract and begun to install their equipment, were thus dismayed when they found one day that the Army had appropriated almost 6,000 of their acres for use as a bombing range for trainee pilots.

Military authorities argued that the land had always belonged to them but later agreed to reduce their claim to about 3,000 acres. Coca-Cola, however, contended that what was lost deprived the project of its most productive acreage and threatened the viability of the whole venture -- since no one would want to work there when the bombing started.

There followed a dispute with the Ministry of Irrigation. The ministry contested Coca-Cola's assertion that approximately 7,500 cu- bic meters of water would be needed per acre and offered the project only 3,700 -- not enough, the company claimed, to make the project work. There were likewise disagreements, later resolved, with customs officials over the amount of duty to be paid on imported equipment.

Finally, by late 1980, its problems with the Army and the Irrigation Ministry still outstanding, Coca-Cola pulled out of the project, leaving the management entirely to its counterparts in the Ramses Agricultural Company.

The company's withdrawal came after a personal appeal for help last year by Coca-Cola president J. P. Austin to President Sadat, who apparently listened sympathetically but was himself unable to remove the obstacles. Lower level company representatives made similar approaches to other Egyptian authorities and in every case, laments one executive, they were assured the problems would be taken care of tomorrow.

"But," he says, "tomorrow never came."

That view is challenged by a senior official in Egypt's general authority for foreign investment. Too often, he says, foreign companies enter Egypt through the open door with a "take it or leave it" attitude and prove to be either unwilling or unable to adapt to local conditions.

Coca-Cola, the authority points out, would have been able to import its machinery and supplies completely duty-free and would have enjoyed both a tax holiday amounting to 17 years and a discount in the cost of electric power. The Army, it is asserted, had agreed to give up control over nearly half the acres it claimed and, assures one authority official, the amount of water could have been increased gradually once the pr oject got under way.