Reopened sugar estates may not be profitable – Jagdeo

Jan 28, 2019 News

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… But says cost of closure outweighs cost of subsidy

Explaining the People’s Progressive Party’s plan to reopen three sugar estates, if the party wins the next General Election, Bharrat Jagdeo said that the cost to close the sugar estates is far greater than the cost to leave them open and subsidise them.
The PPP general secretary said that, prior to the government’s decision to close the estates, the International Monetary Fund (IMF) had indicated that several studies should have been done, and that the PPP had advocated for those studies to be conducted.

“Irfaan Ali led our team that met with the government in the short time; they said they wanted to consult [with the opposition]. [Although] they had already made the decision, they [met with the opposition] for PR purposes.”
He said that the opposition had advocated for a feasibility study, a social impact study, and a diversification study on the estates.
“We said this is not closing a small shop. Thousands of people’s lives are involved. The wellbeing of our economy is involved because sugar is so integrated into so many other aspects of our lives that we sometimes don’t see.”
“Had they [conducted the studies], they would have recognized that the cost of closure is greater than the continuation, the transitional subsidy, and I say transitional [because it is until you can] find more jobs. Use the oil and gas money in the future to find other alternative jobs and then you can move out, or you bring in private participation into the sugar industry. Eventually, you can, without losing the sugar industry, shutting it down, you get a new owner. That was our approach to the whole matter. And it’s still a viable one.”
Benefits of the estates
He stated the importance of the estates to certain communities, including that they were keeping canals open through proper drainage and irrigation, which was beneficial to the populations in Berbice and on the East Coast of Demerara.
“[Secondly, it helped the farmers tremendously, because they got water to their lands, who were farming, not necessarily sugar cane, but other crops. So you had to factor that in.”
“Look at the National Insurance Scheme, if you took several thousand workers out of making contributions to NIS, so they now become a beneficiary but not a contributor, you can help to bankrupt the scheme by taking away seven thousand subscribers almost immediately.”
He said that sugar workers also contributed significantly to taxation from personal income tax, and foreign currency earnings, which he said is important for macroeconomic stability, balance of payments, and the exchange rate.
Lastly, he said the social impact of the industries on communities, and the jobs. This, he said, is not just confined to the 7,000 laid off sugar workers, but would also be extend to another 7,000-10,000 by the multiplier effect their spending creates.
“And [by closing the industries], you lose those jobs too because their spending creates the demand for the fisherman, for the taxi driver, for the hairdressing person, all of that. When they lose that, they can’t use those services anymore.”
He said that the government should judge itself, not just on how it handles the fiscal deficit but whether it can provide jobs.
But the estates were haemorrhaging billions…
Despite the benefit of the sugar estates to communities, they were haemorrhaging billions of dollars before they were closed. Asked how he would make the estates profitable, he said, “You may not. You may have to do subsidies for a while.”
“If you help people through a difficult period, the bottom line may not be profitable immediately but at least, you’re getting these multifunctional benefits from sugar. It keeps the country buoyant and growing, and people working and sending their kids to school.”
He said that it would be affordable if the government had not been spending so much money on administrative costs, referring to a report from the Federation of Independent Trade Unions of Guyana (FITUG) that found the APNU/AFC government spending $12B of $17B in new taxes it collected, to shore up the bureaucracy, “instead of better aligning public investments with social and economic needs.”
Jagdeo said “… it’s affordable because, if you can spend a billion dollars more on that rental, and $1.6B more on dietary needs, and over a billion dollars more on domestic travel, that alone could have kept the [thousands of jobs lost because of the closure] – [those expenses that the government uses.]
“So let’s say, they didn’t have money. How can they borrow $30B at 4.75% interest now? That could have kept the entire sugar industry going for nearly five years without closure of any estates if you kept the production up. That was the level of subsidy that they needed, and they borrowed it already. And they’re sitting on it.”
He questioned the government’s motive to privatise the estates at this time, and whether any foreign company would want to sign a deal with the government, just after a motion of no-confidence was carried against. He said that a PPP government would not consider such a deal valid.

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