Be clear on what your company wants, Ms Liu

THIS NEWSPAPER is not inclined to picking winners or the preservation of businesses out of sentiment or for the delivery of social welfare. It’s a presumption that the hand of the bureaucrat is better than that of the market and holds the danger of misallocating resources, most often belonging to taxpayers.

That is why, even as we sympathise with Liu Chaoyu’s lament over the losses suffered by Pan Caribbean Sugar Company (PCSC) during its decade-long foray in Jamaica’s sugar industry, we must insist on further and better particulars on what she means when she calls on the Government “to be clear on their intentions for the industry”.

We hope that Ms Liu, PCSC’s CEO, isn’t appealing for subsidies for her business or some form of renationalisation, whether wholly or partially, of the sugar industry. In the event of an assurance that this isn’t the case, we support the idea of new, honest national dialogue on the future of the sugar industry in Jamaica.

PCSC’s parent, China’s COMPLANT group, spent US$9 million in 2009 to acquire three Jamaican sugar factories – Frome in Westmoreland, Bernard Lodge in St Catherine, and Monymusk in Clarendon. It also leased thousands of acres of lands associated with the factories.

LOOKING FOR RECOUP

Like two other companies that bought into the industry at the time and have since thrown in the towel– Everglades Farms at Long Pond, Trelawny, and the Seprod Group at Duckenfield, St Thomas – the Chinese have shuttered two of their factories and now only operate the Frome facility. They have lost billions of dollars in plant upgrades and operational costs in a decade without, as Ms Liu suggested is the situation with PCSC, seeing a way to recouping their money from the sugar industry as currently structured.

“... It is impossible for our shareholders to see our company in the red for such a long time,” she said. “… If we continue with sugar only, then we will have no future. We are considering the diversified way.”

Ms Liu also wanted to know whether the Jamaican Government has “given up on the sector” or was in “support of the industry. If they have no interest, then we will close our doors,” she said.

It is not clear what are the views of the two other companies that continue to run sugar factories in Jamaica, Worthy Park Estate in St Catherine, which recently sold a stake in the operation to the Wisynco manufacturing and food processing group, and Appleton Estate, now owned by the Italian drinks company, Campari.

Appleton, presumably, has brand, and possibly some production, value to Campari, given its operation as a sugar estate for more than 300 years and the suite of rums distilled there under the Appleton name. It, perhaps, contributes in a limited way to the molasses from which those rums are distilled. In the case of Worthy Park, the tie-up with Wisynco provides, we expect, a secure market for some of its sugar, while a line extension into rums opens another use for its raw material.

INEFFICENT PRODUCTION

But the more fundamental problem for Jamaica’s sugar industry, however, is that it operates on small acreage with limited use of technology in sugar cane harvesting. The bottom line is that Jamaica is an inefficient producer of sugar, a fact that was laid bare when the island lost its preferential market in Europe.

In that context, it is not clear what precisely Ms Liu would intend the Jamaican Government to do, especially with regard to having more people growing sugar cane, and at a cost that is competitive for manufacturers.

That ought not to be on the basis of subsidies. If, indeed, as she seems to imply, that uncustomed sugar is on the domestic market, or sugar legitimately imported for industry is being siphoned off for other purposes, that is a matter for the police. Other than that, diversification is a matter for individual players, although what these possibilities are can be discussed – as has happened many times over.