Fiji Sugar Turns Sour

For over a century a political war has waged around Fiji sugar cane with combatants set apart by race and culture. Founding Prime Minister Ratu Sir Kamisese K.T. Mara first labeled the sugar industry "a battleground" but it is the current office-holder, Laisenia Qarase, who faces a March 31 showdown.

Simple economics could end sugar production this year. Hard decisions were supposed to have been made by March 31, 2003, but they proved too difficult and the deadline was extended a year.

Fiji sugar was born in a Faustian deal: Cheap indigenous land and low cost "girmit" indentured workers from India. It started as a plantation operation but moved to individual farmers who, under the Agricultural Landlord and Tenant Act (ALTA) got long and cheap leases. A century on and the leases are expiring and indigenous owners want their land back. After generations Indians are leaving the land and the indigenous Fijians, for the most part, are not keen on growing sugar, threatening the future of the industry and creating new squatter settlements of rural people around the urban areas.

Qarase says it is the Indians of the Fiji Labor Party (FLP) who politicized sugar and land, giving birth to party politics. "Before the Fijian masses were educated about politics, Indian leaders were using the cane farmers and leasing issues as election fodder," he told Parliament recently. "Politicians came to power on the backs of the growers. Sadly, the farmers and their families are still treated as a vote bank and land remains a propaganda weapon to serve a communal cause."

Indigenous Fijians resent this. "They do not like it when their land is exploited in this way," the prime minister said referring to politically based harvest boycotts. "Is it any wonder that over the years resentment set in and attitudes hardened?"

Sugar is among the most complicated globally traded items around. It is produced, from cane or beet, in 110 countries; many of them keen to provide protection to their local crop and special access to big markets.

The Fiji Sugar Corporation's Lautoka Mill is on Viti Levu, the main island in the group. Photo: Michael Field

Fiji can produce around four million tons per annum of cane, yielding 420-440,000 tons of sugar, but only manages three million tons of cane currently. Sugar provides around 7 percent of gross domestic product (GDP) and is Fiji's biggest single export at 22 percent of export earnings. Around 50,000 people in a population of 840,000 work in sugar. Sugar's average yearly income between 1980-2001 was valued at F$200.8 million or about 11 percent of GDP against tourism's F$300 million or 16 percent GDP.

The 22,000 individual growers each farm an average 3-4 hectares (7-10 acres), most producing less than 200 tons per annum. Each farmer's total income from sugar is around F$2,891 per annum, below the poverty line. Farmers survive by substituting family labor for hired labor and by engaging in off-farm employment. Cane farming survives because it is extended family-based.

Fiji sugar gets preference from the European Union that inherited a 1950 British Commonwealth sugar preference. Under the current deal Fiji gets to sell 190,000 tons to the EU at 300 percent of the world price. The preferences are to end over the next few years, bringing into question the viability of the whole operation.

Australia's Colonial Sugar Refining Company Limited commenced operations in Fiji in 1882 and eventually built the four mills still in operation today. The Dickensian mills, now owned by the state controlled Fiji Sugar Corporation (FSC) are old, over-manned, not automated and expensive. They cannot produce quality sugar and would require extensive capital to do so.

The Lautoka mill is one of the worst offenders, plagued by daily breakdowns, that has seen crushing capacity fall from a norm of 50,000 tons to an average of 33,000 tons a week. Critics claim the FSC's monumental management failures in its mill operations are the core of the industry's problems.

While tourism has sex appeal and high profile in Fiji (despite around 62 percent of the tourist expenditure leaking out of the country immediately), the grim reality is Fiji needs sugar and sugar cannot survive in its current form.

"The significance of the industry to the country's rural economy is still immense," academics Paresh Kumar Narayan and Biman Chand Prasad wrote in the latest issue of the Fiji Institute of Applied Studies' Fijian Studies: A Journal of Contemporary Fiji. "The industry dominates the rural landscape and the economy of a large part of Western Viti Levu and large areas of Vanua Levu."

Despite a nominally high-performing economy which has produced some impressive basic economic numbers, Qarase and his Finance Minister Jone Kubuabola know sugar is a black hole that threatens all the gains made since the rescue operation they staged following the May 2000 coup.

They created the Sugar Industry Restructure Steering Committee, which tried to develop consensus among the industry stakeholders but missed its self-imposed deadline of March last year and now faces the next deadline this March.

"We have no more time," says Qarase. "We have no choice in this because the European Union, the biggest market for our sugar, will begin to phase out its preferential price for ACP (Africa, Caribbean and Pacific) sugar three years from now."

Qarase says land is crucial and his government is standing firm on offering 50-year leases "with fair terms and condition. Unfortunately, those who exploit land for their own political self-interest have sown the seeds of suspicion on this issue. The poor farmers, as always, are caught in the middle, pushed and pulled and exploited and, when it suits, they are abandoned."

Landowners who are not granting new leases had had enough of the "never-ending cycle of politics in the cane fields," he adds. They had suffered under ALTA that, he says, saw landowners effectively paying the cost of making their land available for the benefit of others.

"No one should be surprised that with the expiry of ALTA leases, many of the owners want to use their land themselves. They also want to see whether they can make the plough mint money. What is surprising and unfortunate is that so many of the tenants did not seem to think leases would be ending. It is a shock to them when this happens because the landowners want to get access to their property."

Small-gauge sugar trains are still a common site in Fiji. Photo: Michael Field

He told of a former tenant complaining his lease had not been renewed, claiming the owners were lazy and greedy people. The tenant "does not see the contradiction and the oddness of what he is saying," says Qarase. "He had had the use of his lease for 30 years, he had done fairly well out of it. Yet, he felt the Fijian owners were greedy for wanting their land back. It is a one-sided and blinkered attitude."

Most of the sugar leases will have expired by 2009; of those leases 83.2 percent are held by Indo-Fijians. The National Farmers Union (NFU) says on the continued viability of the industry "hangs the health of the entire national economy and the livelihood of close to one-fifth of the population either directly or indirectly."

The fact that FLP's Mahendra Chau-dhry, deposed as prime minister in the 2000 coup, heads the NFU inevitably politicizes its position, which is particularly critical of the FSC. "Management appointments based on political affiliation and ethnicity rather than merit have given rise to financial mismanagement and abuse, technical incompetence and a lack of corporate discipline," the NFU says, adding that FSC is technically insolvent and has been running at a loss since 1997.

In the year to March 2003 it scored a loss of F$16 million, taking accumulated losses to F$70 million. NFU says the non-renewal of land leases has also taken a heavy toll.

Finance Minister Kubuabola in November was able to tell Parliament the economy had grown 3.2 percent in 2003 and would score 5 percent this year. However, further growth is dependant on resolving the sugar problem.

It "is imperative that we give priority to the reform of our sugar industry," says Kubuabola, adding the industry in its current form is not viable. "The message to all the stakeholders is clear. Unless we put aside our differences and act now, all will be lost."

Narayan and Prasad say unlike other export-oriented industries, most factors in sugar production are domestic. "The industry has a much stronger linkage to other sectors of the economy and a large multiplier effect," they say. "Farmers have also been losing confidence in the industry due to the state's inability in solving the land lease problems."

Narayan and Prasad say the problem in sugar is clearly one "where different parties have different perceptions of the 'problem' within the industry. The millers blame the farmers while the farmers blame the millers." But the two say the FSC, with its failure to improve efficiency and provide leadership, is the core of the problem.

Early in 2003 Japan rejected a shipment of Fiji sugar on grounds of poor quality. FSC blamed the farmers for burning cane before harvesting but the academics say the problem was not the burnt cane but the inability of the FSC to develop its milling capacity to mill cane within 24 to 48 hours of it being burnt and harvested.

In another study, economist Mahendra Reddy says the rush to harvest all crops by individual farmers is due to a harvesting deadline set by the sugar mills, which send panic signals. "Rational farmers aim to get their entire crop harvested before the end of the season to avoid losses and wet weather. One way this could be possible is to jump the queue." Burning the cane can do this and this accelerates in the latter part of the season, becoming a major concern to the industry. In 1970, Reddy says, burnt cane approximated 10 percent of the total cane crushed and now it's around 58 percent.

No one knows what the problem is costing, says Reddy, underscoring the profound difficulties of reforming Fiji's warring sugar industry.