Sugar can be profitable if focus is on Domestic, Caribbean markets – GuySuCo Chairman

Aug 01, 2015 News

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– says Guyana simply can’t compete on the world market

By: Kiana Wilburg
The Commission of Inquiry (CoI) into the state of the Guyana Sugar Corporation (GuySuCo) is revealing some realities. At the same time, it is becoming clearer to the Commissioners that policymakers will be faced with making tough decisions in the industry which employs over 16,000 Guyanese.

The recently appointed Chairman of GuySuCo, Dr. Clive Thomas, said that one of these realities is that Guyana simply cannot compete on the world market with the giant sugar producers. The economist said that Guyana needs to stop trying to compete, and to do so fast.
However, there seems to be, as the old maxim goes, “a silver lining in the cloud”. Dr. Thomas said that sustainability and profitability of the industry can be had if focus is given to production for the domestic and Caribbean markets.
The Economist said, “I believe that we can save the industry from further problems if we scale down production. Sugar would be profitable if we focus on the domestic market as well as the Caribbean. We have some protection in the Caribbean due to Caricom. We also have some protection within the European Market but that is only up to 2017. I hope the Commission agrees with my position. I don’t see a difference with regard to it.”
Dr. Thomas currently sits as one of the Commissioners on the Commission of Inquiry into GuySuCo. He is tasked with Financial and Economic Analysis. Others involved include Mr. Vibert Parvatan who serves as the Chairman, and John Dow and Joseph Alfred who are looking at Factory Operations.
Chartered Accountant, Chris Ram, recently challenged the capacity of the CoI into GuySuCo, stating that its approach is unlikely to fix the problems facing the sugar industry.
Ram noted that there are four critical challenges facing the industry. On his blog, www.chrisram.net, he identified these troubles to be whether Guyana can become competitive in sugar, given that its current cost of production is approximately US$0.40 per pound while the world sugar price is approximately $0.14 per pound; whether, how much, and for how long taxpayers should be asked to subsidise GuySuCo; whether, and to what extent, GuySuCo and Guyana should remain in sugar; and finally, if so, whether GuySuCo should remain in state ownership, alone or with private investors.
He said that these issues not only seem beyond the scope of the Commission, but appear to have been presumed as answered for them. Quoting a Government Information Agency (GINA) report, Ram said that the Commission is required to “develop a 15-year plan which is expected to bring the industry back to profitability and ensure long-term environmental and economic sustainability.”
He emphasized, “Every day of GuySuCo in its present form costs the taxpayers millions of dollars. There is no luxury of time.”
Dr. Thomas stressed that the CoI is indeed taking those issues into account. In fact, he expressed that he has even made presentations to the Commission on those matters.
The Presidential Advisor on Sustainable Development said that the Commissioners have visited several estates and conducted various interviews. He said that the Commissioners have also taken evidence from various persons so as to properly address the challenges affecting GuySuCo and the industry as a whole.
He added, “Guyana cannot become competitive in sugar especially with the major players on the world market. Our cost of production is just too high. This was acknowledged and accepted during the CoI. However, I can’t say at this point if taxpayers would have to continue sustaining GuySuCo with subsidies. Government has already given a commitment on monies for the company already.”
Cabinet in mid-June gave its approval for the release of $3.8B to GuySuCo. This was part of a request for $16.8B made through the Minister of Agriculture, Noel Holder for the rest of the fiscal year.
Minister of State, Joseph Harmon, had insisted however that government “is not pouring money down a dark hole.”
Harmon had said that the Agriculture Minister briefed Cabinet that the $3.8B will be used for the payment of wages and salaries, current payments to the National Insurance Scheme, payments owed to the Guyana Revenue Authority and the urgent need to purchase fertilizers, fuel and lubricants and spares for equipment.
He had said that the purchase of fertilizers to secure the first crop of 2016 cane as it is already late for the application. Harmon had said that the $3.8B approved also takes into consideration, payments overdue to suppliers. The Minister had said that this is necessary to reduce the backlog of debt created by the Corporation.
As for the remaining $13B which is the balance of the $16.8B request, Harmon asserted that Holder will return to Cabinet to indicate when more funds would be needed and he will of course have to justify his requests.
Harmon had said that Government has already mentally prepared for the likelihood of additional requests coming before year end.
He said, however, that the money was granted on condition that it would be returned to the government’s coffers.
Further, the Attorney-at-Law, in his article pointed out that one of the major concerns about sugar and GuySuCo must surely be to break the cycle of subsidies into which the country and taxpayers have been trapped.
He asserted that the country will not move forward if it has to treat economic entities as if they were social services.
Ram said that no taxpayer can or will be happy with an endless flow of subsidies.
“It seems to make more economic sense to spend the money on termination benefits and re-training rather than annual subsidies. The days for treating sugar patronizingly must surely be over by now.
“Sugar in Guyana is more than GuySuCo. There are large private cane farmers in West Demerara, as there are in the Skeldon and Albion areas of Berbice. Not only are these operators not represented among the persons appointed by the Minister of Agriculture, but this “Commission of Inquiry” is not required to take evidence.
“It is almost inevitable then that important voices and views may be excluded. It does not even meet the minimum requirements which leading economist Professor Clive Thomas advocated a mere month ago.”
He recalled that Dr. Thomas had written extensively on sugar and GuySuCo. In a series he did, he had identified two preconditions for charting the way forward. One was the establishment of a National Task Force leading widespread consultation, and the other, a professionally executed forensic audit.
He concluded that the scope of the CoI, its composition and its methodology are too restrictive to solve the fundamental, existential problems facing the industry. Ram said that even if the CoI were to demonstrate out-of-the-box thinking, the more controversial of its recommendations would have to be put to the country for wider discussion.

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