Fiji to privatise sugar mills

The sugar industry is vital to Fiji's economy

The Fijian government has announced a radical restructuring of its 120-year-old, state-controlled sugar industry, transferring its sugar mills into private hands and predicting job cuts.

Fiji enjoys high international prices for sugar because of European Union subsidises, but they expire in 2008.

Laisenia Qarase plans changes

"If the upgrading of the (sugar) mills does not start next year then there is little or no point in continuing with the sugar industry in Fiji," Prime Minister Laisenia Qarase told the parliament on Wednesday.

Mr Qarase announced that four state sugar mills will be turned into companies owned by cane growers, mill workers and indigenous Fijian landowners, while the government will retain a small stake.

The heavily subsidised sugar industry forms the backbone of the Pacific island nation's economy, accounting for 7% of gross domestic product (GDP) and 18.5% of foreign currency earnings.

About 200,000 people, a quarter of Fiji's population, depend on the industry.

The restructuring is due to take place before 1 April, the end of the fiscal year.

Subsidies to end

"We have a national crisis on our hands and it is about time we got on with it," John McFadden, managing director of Fiji Sugar Corporation (FSC) said recently.

The industry has lost F$37m (£11.3m; $17.4m) in the last two years, and FSC operations have been underwritten by government loans and guarantees, which expire on 31 March.

"The pressure is on, time is short. We have to proceed with the utmost urgency to prepare the industry for international competition," Mr Qarase said.

Fijian sugar costs about 30 US cents a kilogramme to produce while market prices are about 12 US cents per kilogramme.

Farmers quitting

"Farmers ... no longer see sugar as a viable industry and mostly importantly, want something secure ... something sugar is not going to provide," Mahendra Chaudhry, general secretary of the National Farmers Union said recently.

"It doesn't look like we can compete with countries like Brazil, and Australia," he warned.

Mr Chaudhry was prime minister of Fiji until he was overthrown in a coup in 2000.

More than 2,000 FSC employees would be transferred to the four new companies.

Mr Qarase said the government was "very much aware" that there could be big job losses.