By Al Edwards, Business Co-ordinatorTHE JAMAICAN sugar industry should be treated as a serious viable business and not as social welfare, said the executive chairman of the Sugar Industry Authority, Ambassador Derick Heaven.
Speaking on the 'The Future of the Sugar Industry in Jamaica', he said the industry netted the country US$80 million per year but that in light of the Europeans' decision to review its sugar regime in 2006, Jamaica had to consider new markets and the viability of an industry that is over three hundred years old. He was speaking yesterday in an address to the Rotary Club of St. Andrew at The Jamaica Pegasus Hotel, New Kingston.
"The industry is at a crossroads. Yesterday a sub committee of Cabinet chaired by the Prime Minister has been deliberating on sugar with a view to taking some decisions that take into consideration changes that are taking place globally that is going to impact on us here in Jamaica.
CHANGE AND A
MOVEMENT FORWARD
"The industry has to go forward but not in its present form. If sugar is to go forward and survive it cannot do so as a social welfare project. It has to go forward as a business and herein lies the problem-it means taking some decisions to ensure it proceeds as a business. In some parts of rural Jamaica sugar is the only show in town."
Ambassador Heaven said for a long time, the sugar industry has focused solely on raw sugar. He added that there was one entity that produced brandied rum but by and large, the sugar industry had not taken advantage of its situation to be able to focus on value added market streams.
"We have been relying on the raw sugar market which has been protected and we have benefited from European price and quota protection. We were led to believe that the agreement in existence was for an indefinite duration but that is no longer so."
He drew attention to a number of factors in Europe that will impact the Jamaican industry and stressed that the country must now make preparations.
CHANGES TO COME
As of April next year, the EU will increase from 15 nation states to 25. Many of the new entrants such as Hungary, Czech Republic and Poland, are large sugar producers. As such there will be they will be able to supply more of the European demand.
Brazil (the world's largest producer of sugar), Australia and Thailand have challenged the established sugar regime in Europe and are looking for changes in the way it conducts business. They contend that Europe pays the highest prices in the world for sugar but at the same time it has put 6 million tons of surplus sugar on the world market at a price way below what other countries contend it costs to purchase and produce.
"Now does this constitute dumping and is it in contravention of the rules and regulations of the WTO? That is for you all to consider. The Brazilians and Australians have a strong case and if there are changes it will have a significant impact on us here in Jamaica."
The imposition of the EBA System means that the 49 poorest countries in the world will be allowed to export anything to Europe except firearms duty free and quota free. Many countries including Jamaica will use this to supply Europe with sugar.
This comes into effect in 2008 and means that the 126,000 tons per year to that market will still be available.
CURRENT EXPORTS
Jamaica currently exports 11,000 tons to the United States but that is reviewed annually and it currently gets prices slightly below what the Europeans pay. The country now has an export market of 137,000 tons plus some residual from the special allotment which is declining.
"On the domestic front we use 60,000 tons of raw sugar. If you add that to what we have guaranteed on the international export market, it works out to be approximately 200,000 tons per year. We utilise 70,000 tons of refined sugar which is largely used by 6 manufacturers that use 80 per cent of that 70,000 tons. This means we can look forward to the year 2006 and a little beyond that of a guaranteed demand of 200,000 tons of sugar and hope if there is an extension of time that the price that will then prevail will allow us to take advantage of the access that is there. One thing is for sure is that whatever change is going to take place, there will be a significant reduction in the price of sugar."
Ambassador Heaven said the first challenge that faces Jamaica is how to reduce the cost of producing a pound of sugar to a level that will allow it to take advantage of the access that is available to the country.
He made it clear that at this point in time we are not producing 200,000 tons of sugar a year but that we have seven production outlets and that if they performed at the bare minimum, the country could produce that figure annually.
