Cover Report
Sugar Must Reform Radically...Or Die
But it's still a powerful influence on Fiji's stability
The business of making sugar dominated Fiji's economy and politics for more than a century. While the industry is in sharp decline, and could collapse within a few years, it remains a powerful influence on Fiji's stability, politics and economy.
Should the industry collapse entirely, up to a quarter of the entire 840,000 population would be completely or partially thrown out of jobs and business, with grave national social, economic and political consequences.
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On April 1, the 125-year old industry was supposed to have begun "restructuring".
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The plan for this was delayed due to resistance from it by the National Farmers' Union, which is led by Labour Party leader Mahendra Chaudhry and represents many but by no means all of the 22,000 mainly Indian sugarcane growers, and other sections of the industry.
The plan was that the Fiji Sugar Corporation (FSC), more than 60 percent owned by the government, should have its four mills set up as separate businesses owned jointly by growers, sugar mill workers and the government.
Numerous other reforms for the growing and harvesting of cane and transporting it to the mills are entailed and about 8000 small, inefficient growers would move out of the industry and be re-established in other occupations.
Before the April 1 date, the FSC had warned that as it was insolvent because of years of losses now exceeding F$40 million (US$20 million, it was unable to carry on with this year's harvest unless the government guaranteed finance for it.
This government has done, and with the backing from the European Investment Bank and Asian Development Bank, prepared a F$264 million rescue plan for the industry.
But the two international banks insist that support from this is conditional on the now highly inefficient industry becoming a genuinely profitable business.
The FSC and government warned last year that restructuring could not be delayed any further since it had to be completed by the end of 2006.
In 2007, a subsidy from the European Union, which has bolstered the industry by F$2000 million (US$1000 million) in the last 20 years will expire, leaving the industry unable to compete on the open world sugar market.
Fiji's sugar industry, which in past years has had export earnings of about F$240 million (US$120 million), generates about seven percent of national Gross Domestic Product.
Formerly one of the world's most efficient tropical producers, the industry has been crippled by a combination of intense local sugar politics, poor management accentuated by the immigration of skilled workers after the 1987 military coups, a plunge of farming standards caused partly by the uncertainty thousands of Indian growers face about the renewal of expiring leases of Fiji land and world market forces over which Fiji has no control.
In the last few years the annual cane crop has plunged from around four million to three million tonnes.
It is just one of about 20 such industries which are dead or dying in other countries.
In May, Prime Minister Laisenia Qarase said the rescue plan had been postponed until the end of December for more consultations with the growers and other interests.
But the crisis before the industry was so great, he warned that there could be no more delay beyond December.
"Our collective focus must be on rebuilding the entire industry to become commercially viable and profitable on its own."
Chaudhry supports the restructuring plan, but with reservations. His National Farmers Union wants the government to drop a 10 percent sugar export tax intended to partly finance the rescue plan. It says the tax will chip F$5 a tonne off the price growers get for cane, a deduction it claims they can't afford.
Chaudhry also says there's no point in becoming more efficient growers unless tired old sugar mills are first transformed back to efficiency.
The FSC has its own bitter criticisms of the growers' attitudes.
Late in May, Foreign Minister Kaliopate Tavola reported that some hope had arisen that the European Union would agree to another sugar price support scheme to run from 2008.
But whatever further assistance might be, there's no doubt that sugar must reform radically or die.
