HughesThe future of Jamaica's troubled sugar industry now hangs in the balance as changes under way in its main export market mean decisive measures are needed to ensure its survival.
Proposals by the European Union (EU) to change the terms under which it imports cane sugar have raised concerns about the capacity of the local sugar industry to survive the impending market upheaval. Europe and the United States are the two main export markets for Jamaican sugar, with most of the output going to Europe.
"Jamaica, along with other ACP, countries has been working with the assumption that we had a window of opportunity up to 2008," said Andre Nembhard, chairman of the Sugar Industry Authority. This "window" would have allowed the African Caribbean and Pacific (ACP) nations an eight-year time frame to make the transition to more open markets.
That window of opportunity now seems to be closing fast, Ms. Nembhard said at the recently held 53rd meeting of the Jamaica Association of Sugar Technologists at the Jamaica Grande Hotel in Ocho Rios, according to a Jamaica Information Service report on the gathering.
Two proposals now being considered by the EU would cut the transitional period to a minimum of only two to three years.
Without radical restructuring and refinancing, Jamaica's sugar industry may not survive beyond the next decade, Dr. Wesley Hughes, Director-General of the Planning Institute of Jamaica, told the Sugar Technologists. While plans by the Sugar Industry Authority are in place to cut local sugar production costs, he said this might not be enough to save the industry.
"The tide of change is upon us," Dr. Hughes said. Sugar prices in our main export market are expected to fall as the European Union (EU) opens up to more sugar beet and cane producers.
"We can be sure that in the future the volume of sugar sold at the international support price will change and the support price itself is likely to be lower," Dr. Hughes said.
International trade liberalisation, internal budgeting restrictions, and expansion of the EU could result in a decline in domestic support prices of between 20 per cent and 35 per cent by the year 2010, he said. The push for greater trade reform could ultimately lead to all forms of price support being abolished over the next 10 years.
Karl James, general manager for Jamaica Cane Products Sales has other views. "The European Union is not going to totally dismantle protection," Mr. James said on Tuesday. "They have developed an industry dependent on sugar imports from the ACP."
"There are large sugar refineries in Finland, France, Portugal and the United Kingdom, which depend on ACP sugar imports", Mr. James said. As well, a rapid opening of their market would undermine the local EU sugar beet industry.
The present trading arrangements with the EU "are not a give-away to us," Mr. James said. "It is a business from which both sides have benefited."
The industry can survive in this changing environment, Mr. James said, but it needs to improve production methods and promote the creation of larger and more efficient sugar estates. Examples of success include Belize, Guyana and Mauritius, which have created thriving industries, he said.
"The current recovery plan for the industry, as outlined by the Sugar Industry Authority, calls for the cost of production to be cut from the present US$0.30 per pound to US$0.20 per pound by 2004," Dr. Hughes said. This will require a huge investment and state subsidies. "Analyses I have seen suggest that if we get our production costs down to US$0.22 per pound, the industry will still not be profitable as there is every likelihood that average price for sugar will fall in the future," Dr. Hughes said.
Citing the Guyanese sugar industry as an example, Dr. Hughes outlined several pre-
conditions for survival of the sugar industry in Jamaica. Firstly, there is the need to start with a new and clear vision for the industry involving a decisive break with past bad practices.
The second requirement is for competent management, Dr. Hughes said. There is also the need to have timely and adequate injection of low cost capital, and the role of politics also needs to be eliminated from the running of the industry.
Finally, proper and timely agricultural practices must be maintained on the farms, Dr. Hughes said. Those five principles accounted for the turn-around of the Guyanese industry.
If the Jamaica Sugar Authority adopts a similar approach and is restructured, Dr. Hughes said "we would have not only have a good chance of saving the industry but of making it a prosperous one."
The challenge is to focus national capabilities on the methods of improving the industry, Mr. James said. "I am optimistic about the future."
