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Fiji Sugar industry faces bleak future

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Image source: youtube.com

Auckland, New Zealand: The sugar industry of Fiji degrades due to damage from Cyclone Winston in February and an impending expiry of crucial low-tariff exports deal with the European Union.

Winston, one of the strongest cyclones ever in the South Pacific, slammed into Fiji on February 20. The storm claimed 44 lives in Fiji and caused damage valued at $226 million, including $48.4 million to the sugar industry, according to preliminary estimates by the Fiji National Disaster Management Office.

A village destroyed by Cyclone Winston on Fiji's Koro Island. Image source: asia.nikkei.com
A village destroyed by Cyclone Winston on Fiji’s Koro Island. Image source: asia.nikkei.com

The industry, the country’s largest employer, employs about 40,000 people, with up to 250,000 of the country’s 881,000 population relying on it when extended families are included. About 80% of the current crop was destroyed, and two of four crushing mills run by the state-owned Fiji Sugar Corporation were damaged.

Fiji Prime Minister Voreqe Bainimarama said the cyclone was a terrible blow, coming just after a glowing economic report on Fiji from the International Monetary Fund. “Now all of that may be in doubt,” he told diplomats.

The IMF report, released on February 5, said Fiji was “enjoying strong growth momentum, due to higher investment, robust tourism and strong remittances, supported by an improvement in the terms of trade.”

More presciently, the IMF noted that significant risks to growth were “largely related to external developments, including Fiji’s exposure to natural disasters.” The rains brought by Winston followed two years of drought.

Praveen Singh, the leader of a cane producers’ association, said the combination of the drought and Winston had created a bad situation ahead of the harvesting season between June and September. “We may have to forego the 2016 harvest and plan for a bigger harvest next year,” he said.

Last year’s crop of 1.84 million tons of cane produced 222,000 tons of raw sugar, one of the country’s lowest harvests. In 1996, a record 4.4 million tons of cane was crushed. Around 75% of Fiji’s arable land is planted with sugar cane and the crop is Fiji’s biggest export, valued at $52 million in 2015.

A sugar cane train in Fiji delivers the crop to the mill. Image source: asia.nikkei.com
A sugar cane train in Fiji delivers the crop to the mill. Image source: asia.nikkei.com

Most of Fiji’s sugar exports go to the UK, where it has preferential access to EU support measures, and prices are up to four times the global sugar price. The EU is due to scrap the measures next year, leaving Fiji to compete for head on with sugar producing giants such as Australia, Brazil, India, and Thailand.

EU-Pacific ambassador Andrew Jacobs has hinted that Brussels might develop proposals to help Fiji. “The EU recognizes that the sugar industry is very important to Fiji,” he said, without offering specific measures.

However, Fijians appear divided about whether the industry has a future, and what its long-term impact will be on the economy, relations between the country’s indigenous Fijian and ethnic Indian population groups, and stability in the coup-prone political system.

About 16,000 cane growers are Indian, according to the Fiji Bureau of Statistics.

Addressing the International Sugar Organization in November, Bainimarama said the future for Fiji sugar after the end of the EU deal would lie in extracting “the maximum sugar possible from every stick of cane.”

“We must extract every economic advantage we can from the sugar cane plant and the more productive and resilient varieties we continue to develop,” Bainimarama said. India has provided Fiji with a $70 million line of credit to build a co-generation plant, but a small pilot plant was affected by Winston.

Bainimarama said the industry was irreplaceable. “It cannot and must not be allowed to decline… [despite] the odds that are stacked against us; we do not intend to give up on sugar cane in Fiji,” he said.

Institutional analysts said the industry faced major structural problems. The IMF report also said that “modernization of the industry is urgently needed to improve international competitiveness.”

Padma Lal, an economist who has specialized in studying the Fiji sugar industry, said the damage to mills, irrigation and drainage systems, roads and rail links made it imperative for Fiji to diversify its rural economy away from sugar by increasing production of vegetables, poultry, ducks and goat meat.

“I would use this opportunity to rationalize the industry, however painful it may be,” said Lal.

(The article was first published in asia.nikkei.com)

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At 7.4%, India Will be the Fastest Growing Major Economy in 2018

"The current account deficit in fiscal year 2017-18 is expected to widen somewhat but should remain modest, financed by robust foreign direct investment inflows," the report said.

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However, it added a note of caution:
Indian Economy is growing at the rate of 7.4%, Pixabay

The International Monetary Fund (IMF) reaffirmed on Wednesday that India will be the fastest growing major economy in 2018, with a growth rate of 7.4 per cent that rises to 7.8 per cent in 2019 with medium-term prospects remaining positive.

The IMF’s Asia and Pacific Regional Economic Outlook report said that India was recovering from the effects of demonetisation and the introduction of the Goods and Services Tax and “the recovery is expected to be underpinned by a rebound from transitory shocks as well as robust private consumption.”

Medium-term consumer price index inflation “is forecast to remain within but closer to the upper bound of the Reserve Bank of India’s inflation-targeting banda of four per cent with a plus or minus two per cent change, the report said.

However, it added a note of caution: “In India, given increased inflation pressure, monetary policy should maintain a tightening bias.”

The International Monetary Fund (IMF) reaffirmed on Wednesday that India will be the fastest growing major economy in 2018, with a growth rate of 7.4 per cent that rises to 7.8 per cent in 2019 with medium-term prospects remaining positive.
IMF declares Indian economy growth fastest among all, IANS

It said the consumer price increase in 2017 was 3.6 per cent and projected it to be five per cent in 2018 and 2019.

“The current account deficit in fiscal year 2017-18 is expected to widen somewhat but should remain modest, financed by robust foreign direct investment inflows,” the report said.

After India, Bangladesh is projected to be the fastest-growing economy in South Asia with growth rates of seven per cent for 2018 and 2019; Sri Lanka is projected to grow at four per cent in 2018 and 4.5 in 2019, and Nepal five per cent in 2018 and four per cent in next. (Pakistan, which is grouped with the Middle East, is not covered in the Asia report.)

Overall, the report said that Asia continues to be both the fastest-growing region in the world and the main engine of the world’s economy.

The region contributes more than 60 per cent of global growth and three-quarters of this comes from India and China, which is expected to grow 6.6 per cent in 2018 and 6.4 per cent in 2019, it said.

The report said that US President Donald Trump’s fiscal stimulus is expected to support Asia’s exports and investment.

The Asian region’s growth rate was expected to be 5.6 per cent for 2018 and 2019.

However, in the medium term the report said that “downside risks dominate” for the region and these include a tightening of global financial conditions, a shift toward protectionist policies, and an increase in geopolitical tensions.

Also Read: Hero Cycles to Grow 60% by 2022 and UK Will Help It 

Because of these uncertainties the IMF urged the countries in the region to follow conservative policies “aimed at building buffers and increasing resilience” and push ahead with structural reforms.

“While mobile payments are expanding sharply in such economies as Bangladesh, India, and the Philippines, on average Asia is lagging sub-Saharan Africa,” the IMF said, adding that the region should take steps to ensure it is able to reap the full benefits of increasing digitalisation in the global economy. (IANS)