The Guyana Government and the European Commission (EC) delegation yesterday signed a financing agreement for 5.6 million euros ($1.45B) to support the national sugar action plan.
And Acting Head of the EC Delegation to Guyana Helen Jenkinson said there is going to be a mid-term review of the Commission’s Res-ponse Strategy, which could see adaptations in view of changing needs.
Minister of Finance Dr Ashni Singh and Jenkinson signed the agreement in the boardroom of the Ministry of Finance in the presence of Minister of Agriculture Robert Persaud, President of the Guyana Agricultural and General Workers Union (GAWU) Komal Chand and British High Commissioner Fraser Wheeler among others.
The financing is meant to alleviate the negative effects Guyana would experience from the 36% cut in the price of sugar on the European market over the next three years. The price cuts began in July last year.
The current financing, which would be in the form of budgetary support, would contribute to the upgrading of the Enmore sugar factory and the first instalment of a packaging plant there. It would also finance a study of the social impact of the sugar action plan. The findings of the study would guide the activities in the social sector in action plans for the sugar sector for the next seven years.
The financing, which is intended to enhance competitiveness and profitability in the sugar cane sector, agricultural diversification, and measures to cushion the social impact of the plan, is part of a wider allocation of 40 million euros allocated for 18 sugar protocol countries of the African, Caribbean and Pacific (ACP) group of countries for 2006. The sum announced for 2007/2008 is 165 million euros.
In brief remarks, the Agriculture Minister said the allocation from the EC would be invested specifically to upgrade the factory at Enmore as a precursor to the construction of a packaging plant and warehouse. The upgrading process entails among other activities, syrup clarification and filtration, automation of the flow of the factory, additional pan capacity for producing lower colours of sugar and the installation of a sugar dryer.
The reason for investing in processing and packaging, Persaud said was because the market has responded favourably to the introduction of packaged sugar. Apart from Demerara Gold, he noted that Demerara Brown was introduced last year and the initial volume of 500 tonnes of packaged sugar in 2003 increased to 6,000 tonnes last year and is expected to increase to 10,000 tonnes this year.
Noting that plans are in train to process up to 80,000 tonnes of sugar, Persaud said the location of the packaging plant as an annexe to the Enmore factory was based on a feasibility study conducted last year.
He said over the past decade, the government had been preparing for the EU price cut in the sugar industry and the reduction in the loss of billions of dollars in revenue annually with the main elements of the preparation being a new state-of-the-art factory at Skeldon being built at a cost of US$169M. Other features include a co-generation plant and ethanol production, diversification, adding value through branded sugars and expanding markets in Caricom and further afield. The Skeldon project is due for completion by the first quarter of next year.
Nationally, too, he said, the Guyana Sugar Corpora-tion was seeking to undertake a US$51 million factory upgrade programme to ensure the reliability of the factories in the future. For this year, $11.9 billion will be spent in capital investment across the entire sugar industry.
He said yesterday’s signing was a signal of government’s commitment to the survival of the Demerara sugar estates and the long-term viability of the industry.
In her remarks, Jenkinson said the first contribution, which should be disbursed by mid-year for the period 2006/2007 would be followed by annual action plans for the sugar sector for the following seven years, from 2007 to 2013.
She said EU assistance for this year would be delivered by means of direct untargeted sector budget support, which entails the release of two tranches, a fixed one and a variable one.
The fixed tranche depends on meeting already established macro-economic criteria; satisfactory progress in the implementation of credible reform to improve public finance management; and satisfactory progress in the implementation of the national action plan.
The variable tranche would be released on the achievement of specific performance indicators spelt out in the financing agreement.
Up to 2010, Jenkinson said, the EC’s focus would be on the sugar sector and the possible social impact of the restructuring reforms. There would be a mid-term review, which might lead to a revision of the national policy of the Commission’s Response Strategy and of the financial envelope. “So, this EU aid is not set in stone but, rather after 2010 it can be adapted to changing circumstances and needs,” she said.
She said some general instruments that guide the allocation of EU aid include the Paris Declaration on Aid Effectiveness and the Euro-pean Consensus on Develop-ment of 2005, which advocate a reduction in transaction costs entailed in their development cooperation and broadening leadership and ownership in decision-making.
