Fiji Focus
What's The Future Of The Sugar Industry?
It could fold without a US$44m bailout plan
Fiji's sugar industry, the core of the country's economy for a century, is about to "collapse", according to Gerald Barr-ack, chairperson of the regulatory Fiji Sugar Commission. And Hafiz Khan, chairman of the 68 percent government-owned Fiji Sugar Corporation, the now heavily loss-making operator of the country's four sugar mills, says the company will fold without a bailout of around F$100 million (US$44 million).
Like those in other tropical producer countries, the Fiji sugar industry is a heavily politicised business. Some politicians rely for power on the sympathies of thousands of mainly Indian cane growers. The industry directly and indirectly supports 250,000 people, nearly one-third of Fiji's population.
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A survival plan has been prepared for government approval and implementation. But it is being resisted by the National Farmers' Union, in which Fiji Labour Party leader Mahendra Chaudhry is a dominating figure. Sugar no longer is the absolute dominant factor in the Fiji economy, its contribution having slipped to about 25 percent of GDP. But with no alternative crop in sight, the number of people dependent on it means that there has been little or no diminishment of its national significance.
Fiji was once one of the world's most efficient producers of high-grade cane sugar, but no more. Last year British refiner, Tate and Lyle, one of the main customers for a vital European Union sugar quota of 179,733 tonnes held by Fiji, said the quality had got so bad it would stop taking sugar from Fiji unless there was a quick vast improvement. Without the European subsidy, the industry would have collapsed years ago.
The industry decline is due to a combination of factors: worsening sugar cane quality, deteriorating farming practices, land lease problems, deteriorating harvesting methods, the breakdown of cane transport system, costly mill breakdown caused in part by the heavy migration of skilled mechanics and managers, and world market trends. Another worry is the prospect from 2006 or 2008 of a drop in the value of European support price by about 15 percent.
Barrack told a recent seminar on Fiji affairs that a "human tragedy" was growing as thousands of mainly Indian cane growers moved from their land because of the refusal of Fijian landowning clans to renew expiring leases. In recent months the number of growers had dropped from about 23,000 to about 20,000.
"It is a human tragedy taking place in our country and it is not just for the tenants, but also for the landowners," he said.
The industry was on the "verge of collapse". It had sent a rescue plan to the government nearly a year ago, but this had run into bureaucracy. The idea was to make each of the four sugar mills, operated by separate companies owned by canegrowers, millworkers, the Fiji Sugar Corporation, and government. Most of the money needed for reviving the industry would need to come from the government.
Ratu Sakiusa Tuisolia, head of the Prime Minister's policy analysis unit, says the government realises the urgency of giving attention to the ailing industry. But since the rescue plan called for cutting sugar output by 100,000 tonnes or about 25 percent of the present normal production, there was a huge social problem to deal with in terms of farmers who would have to leave the industry. The cost of saving the industry could reach F$300 million (US$132 million), he says, and entails the resettlement with alternative livelihoods for thousands of people.
