PSC proposal for Enmore

 The disclosure that the Private Sector Commission (PSC) has tendered a proposal to take over the running of the Enmore Sugar Estate is most welcome. There is a long road still to travel before any of this can come to fruition as there will likely be multiple bidders for the estates and a rigorous evaluation will have to be undertaken  by the Special Purpose Unit (SPU) that has been established by the government holding company, NICIL.

On the face of it, the PSC is most likely responding to the dire circumstances facing the sugar industry, the thousands of  jobs expected to be lost and the follow through on spending which will directly impact its members. The proposal must, however, also be seen as a sign of private sector self-confidence that it could take on this challenge and that it is prepared to take a significant risk.

Speaking about the PSC decision, its Chairman Eddie Boyer said that the organization still feels that the sugar industry in Guyana is a viable one if properly managed and it is for this reason that it had proposed to take over a privatised estate.

“We are hoping that government  would see value in this, (the PSC’s proposal) and not go the route of closing the estate as was the route prior  with Wales and for which the private sector had objected to. We and other sister organizations have already stated our views on this and it remains,” Boyer said.

“We believe that all estates can be viable if they are managed properly,” he said.

He added “We will take that proposal to interested parties and I mean local PSC businesses to more or less finance and give a full perspective. We can’t give values because they have not yet given us that. We can make this work and we need the opportunity to demonstrate this.

“We are totally against closure of estates and the sugar industry but not privatization. We are definitely supportive of privatization or private-public partnerships which we know if managed correctly will most definitely prove viable,” he added.

It is vital that NICIL and the SPU ensure that consideration of the proposals in this very important process is fully transparent and fair. The public must be kept fully aware of all developments and the evaluation of the proposals must comply completely with the procurement rules that apply.

The SPU invitation of expressions of interest in the estates is the latest unsteady step by the government in trying to come to terms with the crisis facing the local sugar industry. The government’s own Commission of Inquiry into GuySuCo advised against the closing of any estate. Yet, the government went completely against this.   For months, the government has also prevaricated and failed to live up to commitments in relation to workers of the now shuttered Wales estate. In the nearly 11 months since the Wales estate has been closed, neither the workers who were laid off nor the community which was harshly hit has seen any semblance of alternatives or succour from the government. The heady talk about diversification options on the estate has yielded nothing. The qualms of concern are now being felt across the other estates that are being targeted for closure.

It is not an easy dilemma for the government but given the importance of the sugar industry to the country, the APNU+AFC administration could surely have done a better job of relieving the plight of the retrenched workers and their battered communities if its spending priorities were judicious. There shouldn’t be a single government official who could defend the wasting of $1.5b dollars on the D’Urban Park ground when considered against other pressing needs.

The privatization/divestment of estates also coincides with the dire crisis that the regional sugar industry now faces. In his November 5th column in the Sunday Stabroek two weeks ago, trade expert David Jessop pointed out that on October 1, the industry lost the last element of its longstanding preferential market in the European Union which abolished national sugar production quotas in Europe. He said that according to industry analysts the result will be that the price paid for African, Caribbean and Pacific (ACP) cane sugar will “very rapidly reduce and, as Europe becomes self-sufficient in beet sugar and begins to export, cane sugar imports into Europe will fall to zero”.

Further, the experts also suggest that the new European sugar regime will depress world market prices.

“Once EU production rises to more than 3m tonnes per annum, they say, the price of its sugar will converge with, and depress already low world market prices, reducing global demand for cane sugar from high-cost producers in the ACP and the least developed by around 1m tonnes per annum.

“This, and the expected return of the global sugar market to surplus next year means that CARICOM will, before long, cease to have any significant export market”, he warned.

Given that Guyana’s cost of production has been woefully above the world market price particularly due to the PPP/C government’s disastrous failure with the Skeldon expansion project, time is of the essence in reorienting the local product mix and the target market. Mr Jessop is of the view that regional producers will have to depend significantly on the Caribbean market and that new tariff arrangements may have to be instituted.

Mr Jessop said that in a belated response to what is an existential threat, the industry in the Caribbean has developed recommendations on the way in which CARICOM can now address the issue, avoiding the likely crisis that will occur if nothing is done.

He said that their thinking largely stems from a sugar industry workshop held in Jamaica earlier this year which assessed the future for sugar in the four remaining CARICOM sugar-exporting countries: Barbados, Belize, Guyana and Jamaica.

Mr Jessop said that at this workshop all participants agreed that without some form of remedial action at a regional level, the revamping of the EU market would eventually result in an end to the production of raw sugar in CARICOM, unless nearly all of its future production can be sold into the regional market.

He said that at present, some 0.2m tonnes of the 0.3m tonnes of the CARICOM market for food grade sugars and white sugar is met from external sources. This is despite there being a common external tariff which, in theory, is meant to offer a high degree of protection to the region’s sugar producers.

“There is a surplus of regional supply available and as one recent unpublished independent study suggests, up to 99% of the refined sugars presently imported into the region could easily be substituted by regionally produced ‘plantation white’ with no or low-level investment by industrial users”, Mr Jessop stated.

To protect and give a future to the regional sugar industry and the 200,000  people who depend on it, Mr Jessop said that the industry is proposing that the CARICOM Committee on Trade and Economic Development agree to apply on a uniform basis, a common external tariff (CET). This, it is suggested, should be fixed at 40 per cent on all imported raw and brown sugar and refined sugar from outside the Caribbean single market. He said that the industry also believes that the time has come for the regional market to be managed and policed rigorously.

However, he said that key to the future success or failure of development of such a protected market, will be achieving a wider understanding of the likely price impact on soft drinks, confectionary, sweetened milk, and bakery products, and the consequent reaction of the industries concerned and their consumers.

Not known for efficiency in its decision-making, CARICOM will have to urgently consider the way ahead and act decisively.

Comments  

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