Subsidies - Egypt - Indonesia - How to solve this problem in sustainable way.

How Egypt can
save on subsidies
up to 5 billion USD
a year and still
eliminate poverty
via interest free
payment system
Creating a system of
sustainable subsidized food-efficiency,
within limited cost
while creating additional
liquidity and economic growth,
while reducing imports.

Content
› Who we are?
› Existing System used in Egypt
› Our Proposal
› Why we are different?
› Technical Structure : hardware and software
› How much it cost?
› How long it will take to implement?
› References in other countries
› Next steps?
› Contact
Geoplutonic Energi Ltd

Who we are?
› Principal: Geoplutonic Energi Ltd
› Business Developer and Project Manager
› Lead by Adam F. Khan
› Profile: www.earth-energy.eu and www.ecmg.pl/en_EN
› Supporting Parties:
› Social Trade Organization
› Dutch Foundation and Cyclos Software Developer
› Lead by Henk van Arkel
› Profile: www.socialtrade.org and www.cyclos.org
› Potential Supporting Parties
› Flopsar Solutions
› IT Service Provider (APM)
› Profile: www.flopsar.com/en/zalety
› Dutch Government (TBC)
› Profile: www.government.nl

Social Trade Organization
History
› The Network of Social Trade Organization contains a mix of Latin American initiatives
supported by research and funds of several European organizations, the oldest of which is
Social Trade Organization, STRO-Holland.
› STRO's office in Utrecht.
› The Dutch STRO was established in 1970 with a strong focus on environmental issues from a
socio-economic perspective. The research led STRO in the 1980s to advocate proposals that
were very innovative for their time such as an eco-tax and carbon dioxide emission rights.
Over the last 20 years, the Dutch STRO has focused its research and interventions in the
monetary arena, driven by the evidence that the economic structure is the key determinant
in the organization of all aspects of modern society. From 1995 onwards the Dutch STRO
research and development team connected with initiatives and initiators in Latin America,
where the debilitating effects of the dominant monetary structure were such that many
people were trying to develop initiatives within the economia solidaria movement. Social
Trade has the same objectives as this movement and provides the market place with
practical solutions that create new possibilities for small enterprises and sustainable
community initiatives.
› Today STRO has initiatives in Uruguay, Brazil, Honduras, Costa Rica and El Salvador and has
research and support groups in Holland, Spain, Norway, Austria and Portugal.

Motivation
› The purpose of the Social Trade Network of projects is: "To develop and promote sustainable
economic models for a world full of development opportunities, high quality of life, cultural and
environmental diversity, based on sustainable production and consumption.”
› Innovative monetary methods can help to lessen poverty and underdevelopment, both in the North
and in the South. Renowned economists such as Silvio Gesell, Irving Fisher and John M. Keynes
pointed out that lack of money (or liquidity) and the high cost of borrowing money (interest) lead to
the persistence of poverty and inequality. Unequal access to scarce money and interest based
money creation favor those people or countries which have (too much) money, at the expense of
those that have too little. In other words: the rich get richer, while the poor get poorer. This is illustrated
by the huge debts of many developing countries, which only seem to grow bigger no matter how
much they repay. Relatively huge interest payments (direct and hidden inside the price of imported
goods) prevent economies from developing and make it very difficult for poor groups to break free of
their debt dependency.
› Budget cuts caused by financial obligations to service the debt burden lead to reduced
expenditures, unemployment and reduced purchasing power, thus reinforcing recessionary
tendencies and obstructing measures to promote an economic recovery. This can lead to a vicious
downward spiral, in which (local) governments spend less, receive fewer revenues and spend even
less, etc. In order to break out of this vicious cycle, Social TRade advocates the introduction of local
exchange systems that create additional purchasing power and credit for low-income groups and
small enterprises with limited working capital. Social TRade brings about conditions within the local
market place in which purchasing power shifts its preferences towards locally produced goods and
services that are produced by unemployed and underemployed micro-entrepreneurs or SMEs (Small/
Medium sized Enterprises) with ‘spare capacity’.

More info
Read more about what STRO does in:
› Brazil, Central America, Uruguay on
http://www.socialtrade.org/index.php?
option=com_content&view=article&id=10&It
emid=30&lang=en

What was done yesterday?
Existing system : Subsiding providers
› Egypt, the world's largest importer of wheat, purchases around 10
million tons a year, draining its hard currency reserves to provide the
poor with a disc-shaped loaf.
› The government spends around $5 billion a year on food subsidies,
which also cover items such as rice, oil and sugar. A slide in the
Egyptian pound's value since December 2012 is pushing up the bill, as
much food has to be bought for dollars on international markets.
› Bakers producing state-subsidized loaves siphon off flour provided by
the government and make a killing in the black market.
› The government's flour is then baked into loaves sold at private
bakeries at prices beyond the reach of the poor.
› Bakers have long been able to cheat authorities because
consumption data is hard to come by.

Step 1: What is present today?
Providing vouchers through smart cards
› A device resembling a credit card swiper is revolutionizing some of Egypt's
politically explosive bread lines.
› SMART kicked off a pilot project to distribute the subsidized bread electronically
through the use of the family card.
› On Jan 2013 SMART started the live pilot to distribute the subsidized bread via the
use of the family smart card. The project is now running in Port Said. His Excellence
Dr. Bassem Ouda - The Minister of supply launched the project during his visit to Port
Said.
› The automation of bread subsidization process project runs through the installation
of an application on the family smart cards and the equipping of bakeries and
distribution outlets by POSs. This is in parallel to the automation of the supply offices
and flour warehouses.
› More info: http://www.egyptsmartcards.com/en/announcements/SMART-kicked-off-a-pilot-
project-to-distribute-the-subsidized-bread-electronically-through-the-use-of-the-family-
card/29.html

Impact of existing SMART
system
› At the moment 135 thousand families are
getting their subsidized bread through
SMART’s automated process via 84
bakeries and 68 distribution outlets.
› The cards create a more controllable
distribution of the subsidies. It does not
touch elements as production, efficiency
etc.

Step 2: What will be done tomorrow:
Next Generation Cyclos Smart Cards
› Pay money to beneficiaries instead of rights to
buy specific amounts of commodities
› Using the card with prepaid amount of
money per family instead of subsidies to
wheat sold to bakers
› Allowing people to optimize their choices

Step 3: Ultimate Goal
Debt Free Local Currency
› Debt Free Local Currency – more liquidity and less poverty
› Further improving the effectiveness and reducing the
overall costs of the program
› Introducing Egyptian Term-Pound Unit using new
technologies that can tag and track the age of money
› Introduction of Egyptian “term”-pounds backed by future
budget of the government

Problem: ineffectiveness of
governmental food subsidies programs
› PRO’s: the good thing is that an attempt is
made to make food available even for the
poorest
› CONs: Often with lost of imports and buying in
bulk with a negative effect on local food
production, with governmental expenditures
that disrupt economy, introducing risks of
corruption and waste of food
› Governments are being confronted with rising
budgets and switching to market prices
would ask for a revolt.

Alternative Solutions
› SMART: digitalization of vouchers
that give a right on a defined
quantity of subsidized food
In some cases the distribution is
being digitalised. (Uruguay by
Edenred using Cyclos, and Egypt
using SMART)
› PRO’s:
› More effective distribution
› Better control
› Less corruption
› CONs:
› Local production is not stimulated
› No opportunities to make easy
personal optimisation of choices
› Purchasing power delivers limited
additional a tax income
CYCLOS: innovation to tag and
track money: the introduction of a
payment system with accounts that
are disconnected from the national
currency for a defined period of
time and only usable with likewise
accounts
The government supplies money/
futures on digital accounts of the
beneficiaries instead of rights-digital
vouchers to buy specific amounts of
commodities

Why Cyclos is different: time factor
attached to units of currency
› Within this payment environment the use and the flow of
this money is guided by specific sets of rules that can be
enabled through specific Cyclos functionalities.
› The main condition is that the money can only be liberated
to cash and normal current accounts after at a certain
date defined for that specific slot of money.
› This becomes possible because of the STRO-innovation that
enables Cyclos to tag and track the number of days the
money is still away from the money will be liberated from
the special conditions and becomes normal money instead
of money futures.
› This approach allows people to optimize the allocation of
their scarce resources

Benefits in Case of Cyclos Smart
Cards for:
› Government
› Business
› People
› Banks
› IT and Telecom
› Economy

Benefits for Government 1
› The growth in economic efficiency will lead gradually to less need
for subsidies. By fixing the amount of term pounds supplied to
beneficiaries over time inflation will reduce the costs, while food
availability is still taken care of.
› The government will receive 10% back because of the negative
interest that is implemented to stimulate the circulation of units.
› the program will lead to additional liquidity in the lower ends of the
market, pushed effectively through the economy by the negative
interest: GDP will grow, which enhances the tax income
› ecause the term-pounds can only be used to import after one year
the local farmers are incentivized to creating more food which
reduces imports

› Fair dealing with people that properly register
› Transactions are all digital: decrease of black markets – increase
of tax income
› Transactions are all digital - better statistics
› Transactions are all digital - less options for robbery
› People who gather lots of units either pay this 1% a month or will use
it to pay taxes early on
› Because the terms-pounds are becoming pinfs after one year,
while in that year they have been acting as money, there is a one
time saving of subsidy budget for one year for example – 5 billion
USD. It might be advisable to spend part of this to create additional
income to the poor during the introduction and invest in the efforts
for people to get accustomed and positive about this
modernization

› fair dealing with people that properly register
› possibly rich people who gather lots of units will pay their taxes
earlier to avoid the 1% negative interest
the payments are being made with claims on money that can only
be exchanged for cash after a certain period of time, while the
claims function as money in the local economy, the government
only has to deliver the money itself at that defined moment in time.
This makes a one time saving of subsidy budget. It is advisable to
allocate part of this profit with the poor users to create additional
income during the introduction to popularize the program and also
invest in the efforts for people to get accustomed and positive
about the e-money
› options to make payments to alcohol and gambling more difficult

Benefits for Business Community
› more demand locally resulting in more
turnover and sales
› potential interest free loans in futures only
against the costs of risk-insurances
› Equal consideration of market players

Benefits for People
› liberty to optimize spending resulting in better allocation of
resources
› efficient allocation in production of goods and services, local
entrepreneurs will get additional chances to produce
› creating incentives for new and alternative choices
› intermediate spending increase growth of economy, which also
mean more jobs
› people get used and react to market prices and price fluctuation
› the digital money creates less risk on robbery

Benefits for Banks
› More bankable sort of people within society
› Getting used to card payments rather then cash – thus
eliminating cash based transactions which are costly and
insecure
› Poor people get accustomed to e-banking, so when they
want more complex producs than only a e-purse they know
their way
› reimbursements for the management of accounts
› reimbursement for credit evaluation and options to earn on
insurances

Benefits of IT and Telecom
› Electronical transactions will create more
demand for IT and Telco infrastructure
› Administration of existing and future IT and
Telco infrastructure
› Management of payment software in
case of maintenance and services need.

Benefits of Economy
› Liquidity into market - periof of usage - in our system we can define
up to which moment money could be exchanged
› The growth if economy will create new jobs – directly labor
indirectly - new consumers
› Optimisation of resources
› Provocation of local production
› Economic growth because of enhanced liquidity
› New jobs

Technology behind the
Solution
› Structure of the system
› Server Applications
› Cyclos Suites
› Security Servers
› Blind Copy
› Flopsar Suites
› Hardware

Possible Impact of Cyclos
Solutions in Egypt
› joining10 million people a 1 year after 1st
year of pilot operation
› Pilot project prepared for 1 million families
and 10 thousand point of sales

Core of technology:
Cyclos and Flopsar Suites
› Cyclos payment innovations: the e-purse with a time calculator.
› Cyclos was successfully implemented in more then 10 countries
including Uruguay and Greece. It is a payment system that can act via
specific type of accounts in banks in which the money that is transferred
between individual current accounts has an age that indicate when
that money can be transferred to normal current accounts or be
cashed
› The special type of account is being used to transfer welfare payments
or food subsidies effectively and in a way that they accelerate and
dynamise the economy including the local production of food
› Software and its use is designed to allow governments to create
effective subsidies for the poor – or even equally for all members of
society, against the minimal costs and the best overall effect on the
economy

Communication in Cyclos
› Possible ways of communication:
› www
› Sms
› Ussd
› Apps
› Magnetic cards reader
› IRIS scan - finger and eyes
voice over

Cost of the Cyclos Solution
› Cost of the system setup:
› Implementation basic cost: 500.000 USD
› In addtion to basic, cost of:
Terminal - 200-300 USD per terminal
› Personal Chip Card - 0.50-1 USD per card
› Training of local stuff and education
› Yearly cost and maintenance cost: 500.000 USD
› Possible Dutch Government Subsidies to the Project

Time Frame of Implementation
› Initial Set up - 3 months
› Training of the Stuff - 1 month
› Marketing and Public Relation - 3 months
› Arabization – 1 month
› Testing – 1 month

References of Cyclos Payment
System
› Uruguay
Ministry of Labor - food subsidies for students
Ministry of Welfare
Ministry of Interior www.stro.org.uy/
› Brazil www.instrodi.org
› Greece
www.nytimes.com/2011/10/02/world/europe/in-greece-
barter-networks-surge.html?_r=0

Next steps
› Letter of Interest from Ministry of Supply
› Meeting and Presentations
› Agreement
› Implementation

Contact
Adam F. Khan + 31 626 105 745
lowcostenergi@gmail.com

Subsidies - Egypt - Indonesia - How to solve this problem in sustainable way.

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