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Fiji Times Opinion: Another view of the sugar industry by NFP Leader, Hon Prof Biman Prasad

FT feature - another view of the sugar industry

THE prime minister’s so-called roadshow — better called a political circus — led him through the eight cane growing districts on Viti Levu and Vanua Levu last week talking about his so-called sugar industry reforms.

As in most circuses, the PM produced some magic tricks, promising to immediately fix a road here or a water supply there.

Alas, the PM’s audience will soon find that, like most magic tricks, they look good for a short time before they fizzle out.

His court jesters carried breathless headlines like “Farmers Sing Praises of PM” and “PM’s sugar visit a huge success”.

What is most amazing is that they reported there weren’t any problems at all.

It is nice to be able to hear about a problem, get on your mobile phone and order civil servants around. But this is like ordering a nurse to bring a Panadol to a heart patient. These circus tricks may win the FijiFirst party some votes in the 2018 election but they do not solve the deep structural problems of the sugar industry.

A few more farmers may vote for the Government but in a few years’ time their children will leave the land. By then they would have realised that the sugar industry promises nothing for them.

The reality is that without a decent sized cane crop averaging 3.5 million tonnes a year and producing a minimum of 350,000 tonnes of sugar even at a modest TCTS of 10 (tonnes of cane required to make one tonne of sugar), the mainstay of our economy for more than a 100 years until the turn of the century will suffer a painful death.

This will not just see the end of the Fiji Sugar Corporation (FSC) — already technically insolvent — but more tragically cause a major economic upheaval and lead to social decay and destroy the livelihood of the tens of thousands of people directly or indirectly dependent on the industry.

Not a word was said by either the PM or the AG on what plans they had to boost cane production and rejuvenate the confidence of our growers.

And of serious concern is the fact this roadshow usurped the role and work of the Parliamentary Standing Committee on Economic Affairs tasked to scrutinise Reform of the Sugar Cane Industry and Sugar Cane Growers Fund (Amendment) Bills. The Bills are still before the committee, which has two rounds of public consultations and is yet to deliberate and finalise its report.

Apart from usurping the role of the committee, Government is also pre-empting the recommendations of the committee. If the FijiFirst party wanted to make submissions on what it wanted, it should have made submissions on the Bills to the committee instead of spending taxpayers’ money on a prime ministerial circus jaunt. Once again the parliamentary process has been undermined.

Who is to blame?

The PM accused the Opposition of spreading lies and misinformation amonge growers on the Reform of the Sugar Cane Industry and Sugar Cane Growers Fund (Amendment) Bills.

His principal target was me, as the leader of the National Federation Party, and honourable Prem Singh. What can he blame us for? The NFP has never held political power. It has not made any decisions about how the sugar industry is to be managed.

Who, for the past 10 years, has been making those decisions? It is Mr Bainimarama himself. In fact, one of his first acts in December 2006 was to sack Jagannath Sami, the then chief executive of the Sugar Cane Growers’ Council (SCGC). This was apparently to improve the sugar industry. But for the next 10 years, he did nothing.

The industry statistics are published in the table below. They are not all bad.

In some years production is up and for some production is low. There is a general improvement in the TCTS ratio (which is good) in the last two years. Cane production is improved for 2014 and 2015 (but it will collapse again in 2016 because of the effects of weather).

However, there is no question that in the past 10 years, all the production indicators have fallen badly. We now produce 220,000 tonnes of sugar in 2016, down from 310,000 in 2006 — 30 per cent less. We are growing 1.8m tonnes of cane in 2016, down from 3.2m in 2006 — 44 per cent less. The number of active growers has fallen by 5674 from 18,636 to 12,872.

The only reason for the Prime Minister’s anger with the NFP is that we are the only party that is questioning the value of his Government’s so-called reforms. We are doing so not to bring down the Government. We are doing so because long experience has told us what will work in the industry and what will not.

We have asked the Government to join hands with us and work together to save the industry. But the Government, as usual, wants to do things its way. It believes that it will get it right and claim all the political credit. It does not see the value of co-operation of a dissenting view. And it does not care if it is wrong — it will just think of another circus trick instead to cover up its mistakes.

The sugar industry is made up of thousands of growers. If they do not actively participate in it, there is no industry. The 1984 sugar industry reforms were designed to ensure farmers had a say in how their industry was run.

Why was this? Because those who framed these reforms recognised that if farmers do not have a say in their own industry, they will not stay in it.

When one looks at the so-called reform laws, there are very few things in the new laws that are different from the old laws. Many of the inefficient things in the old laws are left unchanged. The key differences are:

* Minority shareholders in the FSC have had their shares confiscated from them;

* Increased fines and jail sentences are imposed for breaching the laws (the only draconian provision that Government has indicated it wants removed);

* The right of farmers to elect their own representatives to the SCGC is removed; and

* The Master Award can be changed any time the Government feels like it.

It is a mystery why this Government, which forever talks about “true democracy”, is denying farmers a democratic voice.

The easy answer to this question is for the Government to say “we must take politics out of the sugar industry”. But at least if farmers elect their representatives, all farmer viewpoints are heard.

Now, the only farmers’ representatives will be yes-men from one political party. The politics will still be in the industry — just one party’s politics!

$85m bungle

The PM claimed the SDL Government he deposed bungled the $85m loan from Exim Bank of India.

He said this resulted in more than 50 per cent of it being wasted and 50 per cent of it being used in failed upgrading works.

The truth is PM Laisenia Qarase negotiated the loan in 2005 during his State visit to India. But by the end of 2006 he was no longer PM. Almost all of the money was spent by FSC under the stewardship of the PM’s military regime. FSC’s annual reports clearly show this.

In FSC’s 2007 annual report the then chairman, Bhoo Gautam (appointed in February 2007 two months after the coup), said $28m worth of equipment was acquired for the mill upgrading project. He said: “The project will be implemented over the next two years”

The next two years were 2008 and 2009 when Mr Bainimarama was the PM. Two years later, FSC reported the project had to be accelerated so it could be completed by April 2010. So the bulk of the $85m bungle happened on Mr Bainimarama’s watch. He was the head of Government as well as Sugar Minister.

Both The Fiji Times and the Fiji Sun reported in May and July 2012 respectively that Mr Bainimarama wanted the Indian Government to write off the loan or convert it into a grant because the mill upgrading project was unsatisfactory and increased inefficiencies.

This is a similar story to the construction of the Public Rental Board flats in Rawaiqa, Suva, by Chinese contractors. The funds were sourced from Chinese Government. The cost of the project ballooned, incredibly, from $9m to $22m — again when Mr Bainimarama ruled.

The only politicians Mr Bainimarama can blame for these bungles are himself and his party members.

SCGC and Master Award

The PM is not doing any favour to growers by increasing the size of his appointed council to include one representative from each of the eight cane growing districts. They will not be elected but also appointed. This is making the SCGC a toothless tiger.

Currently, the undemocratic council comprises nine appointees including six from the three cane producers’ associations, two divisional commissioners (North and West) and a representative of the Sugar Ministry. The chairman is also appointed by the sugar minister who is the PM.

The new proposed SCGC will therefore have a total of 17 members. They will all be beholden to the PM because they are his appointees. Even if the six cane producers’ representatives disagree with any proposal, they will be outnumbered and outvoted.

Therefore it will be easy to change the Master Award. The PM says the Master Award can only be changed if both the council and FSC agree to the changes. That will not be hard because both are controlled by Government.

It may well be part of FSC’s strategic plan to change the current formula by which proceeds from sale of sugar are shared 70/30 in favour of growers. FSC’s plans have not been revealed. Growers are the largest stakeholders in the industry. They should work in partnership with FSC. But they have been left totally in the dark.

FSC appointees

Former ANZ chief executive Vishnu Mo­h­an’s naming as FSC chairman seems strange. He is a career banker, has no agricultural, engineering, industry or manufacturing experience and lives in Canada.

At the time of the events of 2006, Mr Bainimarama criticised the way the deposed government gave numerous board positions to only a few people. He solemnly said this would end. And yet now, all over Fiji, a chosen few appear on multiple boards. So it is with Mr Mohan, who is also chairman of the Public Service Commission.

Abdul Khan, the former executive chairman has suddenly become FSC chief executive officer. He became CEO without any advertisement seeking other candidates or any kind of wide search for a CEO that normally takes place. One hopes he will be able to understand how a company operates since he did not hold the corporation’s AGM for four years until May last year.

Land leases

The PM also blamed some Opposition politicians for inciting landowners not to renew leases. We agree with him that the land issue was politicised by both representatives of the landowners and the farmers from 1998. But exploitative politics is not the sole cause of land leases not being renewed.

The PM could have redressed this issue when he was in charge after the coup. In his 2009 New Year’s message, he said 77 per cent of the land leases that had expired would be renewed. But official statistics from the iTaukei Land Trust Board show otherwise. The statistics show that:

* From 1997 to 2014 8151 cane leases expired. A further 1373 leases have and will expire in the three years from 2015 to 2017 bringing the total to 9524. Only 5105 or 53.6 per cent of leases have been renewed so far;

* Between 2007 and 2014, when there was no democracy, 2899 cane leases expired. Out of this 1722 leases or 59 per cent were renewed;

* Between 1997 and 2006, 5252 cane leases expired. 3001 cane leases or over 57 per cent leases were renewed; and

* Under this Government’s stewardship from 2007 to 2018, 4272 leases will expire until 2017. And from 2007 until 2017, 2104 leases will be renewed.

The 49.25 per cent rate of renewal under Mr Bainimarama’s leadership is worse than those of previous governments. It is almost 28 per cent below the PM’s pronouncement on 1st January 2009.

If the PM is serious about renewal of sugarcane leases, he should have imposed a moratorium on expiring leases and then negotiated lease renewal with landowners. But he did not do this.

Real alternative

The only realistic solution to boost cane production, improve the livelihood of growers and increase income for FSC is to inject $50m per year for the next three years towards growers following the loss of the European Union grant of $350m as a result of the coup.

$150m for the next three years is not a lot of money. It will be money well spent in terms of improving the livelihood of growers and generating economic growth. No growers means no FSC or the industry.

The cost of producing, harvesting and delivery of one tonne of cane averages $45-$50. With the price averaging $75 per tonne, some 9200 growers who produce less than the average 150 tonnes of cane earn a net income of $4500 in a season. This income, in annual terms, is less than the $2.32 per hour minimum wage. That is why growers are in debt in perpetuity.

We have even outlined how the $50m per year should be used.

It is absolutely necessary to provide growers a minimum guaranteed price of around $90 per tonne to give them confidence to boost production. With the abolition of European Union sugar production quotas on September 30, 2017 our industry will be doomed unless cane production is significantly boosted.

Even if we were to produce two million tonnes of cane for the each of the next three years, $30 million will be needed each year to guarantee a price of $90 per tonne. The remaining $20m can be used for cane planting programs and be provided as premiums to landowners to renew land leases of arable sugarcane land as well as supporting landowners themselves to enter sugarcane farming.

Mr Bainimarama’s military regime failed to resuscitate the industry and his FijiFirst Government does not have much idea either of how to do it. We reiterate, our, the Opposition’s offer, to help revive the industry in the national interest through bipartisanship.

This means the establishment of a joint parliamentary committee on sugar to find long-term and permanent solutions. This is vitally important because the absence of such a committee, in which critical issues are resolved through consensus and dialogue, has crippled the industry.

This is the only sound and sensible solution for a way forward. Mr Bainimarama can continue with his circus tricks or he can stop being afraid of differing views and work with others who care about this vitally important national industry.

* Professor Biman Prasad is the NFP leader. The views expressed are his and not of this newspaper.


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