1 Sugar Transformation Programme. 2 Background ► In 2003 Australia, Brazil and Thailand submitted a complaint to the World Trade Organization (WTO) challenging.

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Sugar Transformation Sugar Transformation ProgrammeProgramme

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BackgroundBackground

► In 2003 Australia, Brazil and Thailand submitted a In 2003 Australia, Brazil and Thailand submitted a

complaint to the World Trade Organization (WTO) complaint to the World Trade Organization (WTO)

challenging the legality of the subsidies applied to challenging the legality of the subsidies applied to

European Community sugar. Arising from the European Community sugar. Arising from the

WTO ruling in favour of the three countries, the WTO ruling in favour of the three countries, the

European Union (EU) in November 2005 agreed to European Union (EU) in November 2005 agreed to

reform its sugar regime.reform its sugar regime.

► This resulted in the decision to reduce the price This resulted in the decision to reduce the price

paid to ACP countries by 36% over the period paid to ACP countries by 36% over the period

2006 to 2009. 2006 to 2009.

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Background Cont’dBackground Cont’d► The EU agreed to provide a package of assistance The EU agreed to provide a package of assistance

to assist ACP countries to adapt to the changes in to assist ACP countries to adapt to the changes in

the sugar regime, contingent on the preparation the sugar regime, contingent on the preparation

by these countries of Country Strategies. by these countries of Country Strategies.

► Reform of the Sugar Industry had also become a Reform of the Sugar Industry had also become a

priority for the Government, as the industry was a priority for the Government, as the industry was a

significant charge on the Budget.significant charge on the Budget.

► The change in the EU trading arrangements The change in the EU trading arrangements

therefore provided the necessary impetus to drive therefore provided the necessary impetus to drive

the much needed transformation of the industry.the much needed transformation of the industry.

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Jamaica Sugar Country Jamaica Sugar Country StrategyStrategy

► The Planning Institute of Jamaica lead the process The Planning Institute of Jamaica lead the process

of preparing the Jamaica Country Strategy for the of preparing the Jamaica Country Strategy for the

Adaptation of the Sugar Industry, 2006-2015 (JCS I). Adaptation of the Sugar Industry, 2006-2015 (JCS I).

► Preparation of the Country Strategy involved the Preparation of the Country Strategy involved the

participation of stakeholders in the island’s sugar participation of stakeholders in the island’s sugar

industry, as well as representatives of public sector industry, as well as representatives of public sector

agencies, the private sector and civil society. agencies, the private sector and civil society.

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Jamaica Sugar Country Jamaica Sugar Country StrategyStrategy

The JCS I was prepared in 2005 and approved by The JCS I was prepared in 2005 and approved by

Cabinet in January 2006. The Strategy had three Cabinet in January 2006. The Strategy had three

objectives, to :objectives, to :

Develop a Sustainable Private Sector-Led Sugar Develop a Sustainable Private Sector-Led Sugar

Cane Industry;Cane Industry;

Strengthen the Economic Diversification, Social Strengthen the Economic Diversification, Social

Resilience and Environmental Sustainability of Resilience and Environmental Sustainability of

Sugar-Dependent Areas;Sugar-Dependent Areas;

Maintain Progress toward Macro-Economic Goals.Maintain Progress toward Macro-Economic Goals.

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EU assistance to ACP sugar producing EU assistance to ACP sugar producing countries is provided under a facility countries is provided under a facility known as “the Accompanying known as “the Accompanying Measures for Protocol Countries” Measures for Protocol Countries” (AMS).(AMS).

Accompanying Measures for Sugar Accompanying Measures for Sugar Protocol CountriesProtocol Countries

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Accompanying Measures for Sugar Accompanying Measures for Sugar Protocol CountriesProtocol Countries

The core of the reforms supported by the EC AMS as The core of the reforms supported by the EC AMS as specified in the annual Financing Agreements, are specified in the annual Financing Agreements, are aligned with the JCS objectives and are as follows:aligned with the JCS objectives and are as follows:

► To develop a sustainable private sector led sugar To develop a sustainable private sector led sugar cane industry by promoting investment in industry cane industry by promoting investment in industry modernization and in the diversification of modernization and in the diversification of production towards higher value-added goods such production towards higher value-added goods such as rum, ethanol, refine sugar and electricity from as rum, ethanol, refine sugar and electricity from bagasse co-generationbagasse co-generation

► To strengthen the economic diversification, social To strengthen the economic diversification, social resilience and environmental sustainability of sugar resilience and environmental sustainability of sugar dependent areas.dependent areas.

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Accompanying Measures for Sugar Accompanying Measures for Sugar Protocol CountriesProtocol Countries

►Having prepared its Country Strategy, Having prepared its Country Strategy, Jamaica was allocated in 2006, an Jamaica was allocated in 2006, an indicative amount of €82,765,000 in indicative amount of €82,765,000 in grant assistance for the period 2006 to grant assistance for the period 2006 to 2010. This was subsequently increased 2010. This was subsequently increased to €86,634,000. to €86,634,000.

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AMS allocations to JamaicaAMS allocations to Jamaica

YearsYears Indicative Indicative Allocations Allocations (€)(€)

Confirmed Confirmed Allocations Allocations (€)(€)

20062006 5,218,000 5,218,000 5,218,000 5,218,000

20072007 25,000,000 25,000,000 25,000,000 25,000,000

20082008 18,000,000 18,000,000 18,804,000 18,804,000

20092009 16,699,000 16,699,000 16,816,000 16,816,000

20102010 17,848,000 17,848,000 20,796,000 20,796,000

TotalTotal 82,765,00082,765,000 86,634,00086,634,000

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Accompanying Measures for Sugar Accompanying Measures for Sugar Protocol Countries cont’dProtocol Countries cont’d

► In agreement with the Government, the EU In agreement with the Government, the EU has separated the resources for AMS 2007, has separated the resources for AMS 2007, 2008 and 2009 to support two budget support 2008 and 2009 to support two budget support programmes. programmes.

► A total of €56.78 million is allocated to the A total of €56.78 million is allocated to the Sugar Transformation Programme of which Sugar Transformation Programme of which €1.97 million is for audits, evaluation, studies €1.97 million is for audits, evaluation, studies and technical assistance. and technical assistance.

► €€29.85 million is linked to the Debt Reduction 29.85 million is linked to the Debt Reduction Growth Enhancement Programme (DRGEP), Growth Enhancement Programme (DRGEP), which is a general budget support programme which is a general budget support programme aimed at the macro economy. aimed at the macro economy.

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Accompanying Measures for Sugar Accompanying Measures for Sugar Protocol Countries cont’dProtocol Countries cont’d

► Budget support provides for the Budget support provides for the disbursement of resources directly to disbursement of resources directly to the Consolidated Fund.the Consolidated Fund.

►Funds are released to the Consolidated Funds are released to the Consolidated Fund on the achievement of previously Fund on the achievement of previously agreed conditions, which are detailed agreed conditions, which are detailed in the Financing Agreements between in the Financing Agreements between the Government and the EU.the Government and the EU.

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Agreed Conditions for Release of EU Agreed Conditions for Release of EU funds under the Annual Action funds under the Annual Action

Programme of AMSP Countries in Programme of AMSP Countries in favour of Jamaica-Support to Sugar favour of Jamaica-Support to Sugar

Cane SectorCane SectorThe conditions assessed by the EU for the release of The conditions assessed by the EU for the release of

funds are both eligibility and negotiated conditions, funds are both eligibility and negotiated conditions, and include:and include:

Eligibility ConditionsEligibility Conditions – Satisfactory progress on – Satisfactory progress on implementation of JCS; Satisfactory progress in implementation of JCS; Satisfactory progress in maintaining a policy of macroeconomic stability maintaining a policy of macroeconomic stability and sectoral policy; and Satisfactory progress on and sectoral policy; and Satisfactory progress on implementation of the programme to improve and implementation of the programme to improve and reform public finance management.reform public finance management.

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Conditions for the Release of EU Conditions for the Release of EU fundsfunds

Negotiated conditionsNegotiated conditions – i) Progress – i) Progress towards the towards the development of a sustainable private sector led development of a sustainable private sector led sugar cane industrysugar cane industry which includes privatization which includes privatization and establishment of a Cane Expansion Fund; ii) and establishment of a Cane Expansion Fund; ii) PPolicy and regulatory framework conducive to a olicy and regulatory framework conducive to a market for locally produced ethanol and bagasse-market for locally produced ethanol and bagasse-fuelled cogeneration is in place; iii) Strengthened fuelled cogeneration is in place; iii) Strengthened economic diversification, social resilience and economic diversification, social resilience and environmental sustainability of sugar-dependant environmental sustainability of sugar-dependant areas which includes Access to basic social areas which includes Access to basic social services for displaced Sugar Company of Jamaica services for displaced Sugar Company of Jamaica workers is maintained; workers is maintained;

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Implementation of the JCS I 2006-2015 Implementation of the JCS I 2006-2015

► An important achievement under the JCS I An important achievement under the JCS I was the preparation of a Sugar Area was the preparation of a Sugar Area Development Programme (SADP), approved Development Programme (SADP), approved by Cabinet in September 2008by Cabinet in September 2008

► The initial period of the SADP is 5 years The initial period of the SADP is 5 years starting fiscal year 2008/2009starting fiscal year 2008/2009

► Aspects of the SADP related to the provision Aspects of the SADP related to the provision of basic health and educational facilities of basic health and educational facilities became urgent with the termination of all became urgent with the termination of all Sugar Company employees.Sugar Company employees.

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Implementation of the JCS I Implementation of the JCS I 2006-20152006-2015

Implementation of the JCS I encountered delays due Implementation of the JCS I encountered delays due to :to :

► Protracted privatization process because of Protracted privatization process because of - lengthy procurement (the tender process - lengthy procurement (the tender process

commenced in May 2006 and ended in failure in commenced in May 2006 and ended in failure in January 2009.) January 2009.)

- Change in administration in September 2007- Change in administration in September 2007 - The global financial crisis- The global financial crisis► The process for valuation of assets and ownership The process for valuation of assets and ownership

resolution resolution ► Delays in amending the legislative framework for Delays in amending the legislative framework for

the use of ethanol the use of ethanol

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Implementation of the JCS I Implementation of the JCS I 2006-20152006-2015

The following conditions were not The following conditions were not achieved under the AMS 2007 which achieved under the AMS 2007 which resulted in a suspension of the release resulted in a suspension of the release of associated amounts :of associated amounts :

►Privatisation of sugar factoriesPrivatisation of sugar factories► Issuing of Issuing of Regulations to mandate the Regulations to mandate the

use of ethanol, E10, as a replacement use of ethanol, E10, as a replacement for MTBE in gasolinefor MTBE in gasoline..

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Implementation of the JCS I Implementation of the JCS I 2006-20152006-2015

► The EU agreed to re-assess the conditions at a The EU agreed to re-assess the conditions at a later date in 2009, and in 2010 approved later date in 2009, and in 2010 approved release of resources based on the privatisation release of resources based on the privatisation of one estate and the passing of legislation of one estate and the passing of legislation mandating the use of E10 in gasolinemandating the use of E10 in gasoline

► However implementation of the JCS I continued However implementation of the JCS I continued to encounter delays due to the privatisation to encounter delays due to the privatisation issue and other factors. issue and other factors.

► It was recognized that these delays could It was recognized that these delays could potentially result in the loss of resources to the potentially result in the loss of resources to the country.country.

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Implementation of the JCS I Implementation of the JCS I 2006-20152006-2015

► With the agreement of the EU, in 2009 the With the agreement of the EU, in 2009 the Government decided to carry out a review of Government decided to carry out a review of the JCS I, resulting in the preparation of a JCS the JCS I, resulting in the preparation of a JCS II 2006-2020.II 2006-2020.

► The JCS II takes the reform of the Sugar Cane The JCS II takes the reform of the Sugar Cane sector through to 2020 continuing the sector through to 2020 continuing the transformation of the industry into a fully transformation of the industry into a fully private, internationally competitive sector private, internationally competitive sector along with the development of the sugar along with the development of the sugar dependent areas. dependent areas.

► JCS II takes greater account of the current JCS II takes greater account of the current realities and seeks to establish a more realistic realities and seeks to establish a more realistic timetable to achieve the transformation. timetable to achieve the transformation.

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► The overall objectives of the JCS II The overall objectives of the JCS II are similar to those of JCS I which are similar to those of JCS I which are: are:

i)i) to develop and maintain a to develop and maintain a sustainable private sector led Sugar sustainable private sector led Sugar Cane industry; Cane industry;

ii)ii) to strengthen the economic to strengthen the economic diversification, social resilience and diversification, social resilience and environmental sustainability of sugar environmental sustainability of sugar dependent areas; and dependent areas; and

iii)iii) to support progress towards to support progress towards macroeconomic goals. macroeconomic goals.

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► JCS II identifies three phases: JCS II identifies three phases: Phase I: Transition (2006/7-2009/10) Phase I: Transition (2006/7-2009/10) - covering the - covering the

transition to full privatisation and operating without the transition to full privatisation and operating without the

framework of the EU Sugar Protocol. Commencement of framework of the EU Sugar Protocol. Commencement of

implementation of the SADP to support the recovery of the implementation of the SADP to support the recovery of the

sugar dependent areas; sugar dependent areas;

Phase II: Transformation (2010/11-2014/15) Phase II: Transformation (2010/11-2014/15) – The – The

transformation of the sector to commercial competitiveness. transformation of the sector to commercial competitiveness.

On the social side, the enhanced economic and social On the social side, the enhanced economic and social

development of the communities in the sugar dependent development of the communities in the sugar dependent

areas, supported by the recovery of the Sugar Cane sector. areas, supported by the recovery of the Sugar Cane sector.

The benefits of privatization and sector recovery have a The benefits of privatization and sector recovery have a

positive impact on macroeconomic parameters, as does the positive impact on macroeconomic parameters, as does the

realization of sectoral support for the realization of national realization of sectoral support for the realization of national

energy and environmental goals; andenergy and environmental goals; and

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Phase III: Consolidation (2015/16-2019/20) Phase III: Consolidation (2015/16-2019/20) - -

covering the consolidation of earlier reforms to covering the consolidation of earlier reforms to

achieve commercial, economic, social and achieve commercial, economic, social and

environmental sustainability. The vibrancy of the environmental sustainability. The vibrancy of the

SDA communities is expected to act as a SDA communities is expected to act as a

counterweight to the drift to urban and tourism counterweight to the drift to urban and tourism

centres and reinforces their balanced centres and reinforces their balanced

demographic development. Continued economic demographic development. Continued economic

strengthening of the sector supports macro strengthening of the sector supports macro

economic growth and poverty reduction economic growth and poverty reduction

objectivesobjectives. .

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JCS II 2006-2020JCS II 2006-2020

► The JCS II recognizes the activities undertaken under The JCS II recognizes the activities undertaken under the JCS I and extends the period from 2015 to 2020 the JCS I and extends the period from 2015 to 2020 with a Phase III for consolidation of the reforms in the with a Phase III for consolidation of the reforms in the sugar cane sector, implementation of the SADP and sugar cane sector, implementation of the SADP and continued macroeconomic stability continued macroeconomic stability

► The new strategy has also taken full account of the The new strategy has also taken full account of the most recent national and sector policy environment most recent national and sector policy environment such as the Medium Term Socio-Economic Policy such as the Medium Term Socio-Economic Policy Framework (MTF), 2009-2012 and the Vision 2030 for Framework (MTF), 2009-2012 and the Vision 2030 for Jamaica adopted in 2009; the updated Energy Green Jamaica adopted in 2009; the updated Energy Green Paper of 2009; the Ethanol Policy Options Paper of Paper of 2009; the Ethanol Policy Options Paper of 2008; the Multi-annual Action Plan (2008) and The 2008; the Multi-annual Action Plan (2008) and The Sugar Areas Development Programmes (2008).Sugar Areas Development Programmes (2008).

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JCS II 2006-2020JCS II 2006-2020

► The JCS II 2006-2020 was approved by Cabinet The JCS II 2006-2020 was approved by Cabinet on 7th September 2009 by Cabinet.on 7th September 2009 by Cabinet.

► Preparation and approval of the JCS II paved the Preparation and approval of the JCS II paved the way for more positive assessments by the EU.way for more positive assessments by the EU.

► However all EU budget support was suspended However all EU budget support was suspended in FY 2009/10 pending a successful outcome of in FY 2009/10 pending a successful outcome of the negotiations with the IMF.the negotiations with the IMF.

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►At the end of May 2010, of the total At the end of May 2010, of the total amount allocated to Jamaica, €23.6 amount allocated to Jamaica, €23.6 million has been disbursed to the million has been disbursed to the countrycountry. . BasedBased on positive on positive assessments by the EU, under JCS assessments by the EU, under JCS IIII, a, an additional amount of €20.685 n additional amount of €20.685 million is currently being processed million is currently being processed by the EU and is expected to be by the EU and is expected to be disbursed to the Consolidated Fund disbursed to the Consolidated Fund before the end of June 2010, before the end of June 2010, bringing the total to €44.285 million bringing the total to €44.285 million (about J$5.1 billion). (about J$5.1 billion).

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Progress in Implementation of Progress in Implementation of JCSJCS

Despite delays encountered to Despite delays encountered to date, primarily as a result of date, primarily as a result of privatization, some progress privatization, some progress has been madehas been made

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Objective 1(Develop a sustainable Objective 1(Develop a sustainable private sector led sugar cane private sector led sugar cane

industry)industry)

► the settlement of land tenure issues on the public the settlement of land tenure issues on the public estate lands;estate lands;

► the payment of severance and redundancy the payment of severance and redundancy payments to all former SCJ workerspayments to all former SCJ workers

► the establishment of an operational cane expansion the establishment of an operational cane expansion fund for productivity improvement;fund for productivity improvement;

► on-going senior level discussions on the nature of on-going senior level discussions on the nature of any future regulatory framework; any future regulatory framework;

► the introduction and mandating of E10 (10% the introduction and mandating of E10 (10% blended ethanol gasoline) across the country;blended ethanol gasoline) across the country;

►

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Objective 1(Develop a sustainable Objective 1(Develop a sustainable private sector led sugar cane private sector led sugar cane

industry)industry)cont’d.cont’d.► a general policy and regulatory framework for a general policy and regulatory framework for

the development of renewables, including the the development of renewables, including the adoption of the Energy Green Paper and adoption of the Energy Green Paper and specific regulations that provide incentives for specific regulations that provide incentives for the production of electricity from renewable the production of electricity from renewable sources ;sources ;

► the privatisation of two of the public estates the privatisation of two of the public estates (Long Pond and Duckenfield); and(Long Pond and Duckenfield); and

► the restructuring of SCJ Holding that for the the restructuring of SCJ Holding that for the first time will not drain public resources for first time will not drain public resources for recurrent expenditure as it is expected to recurrent expenditure as it is expected to breakeven in FY 2009/2010.breakeven in FY 2009/2010.

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Objective 2 (Strengthen the economic Objective 2 (Strengthen the economic diversification, social resilience and diversification, social resilience and

environmental sustainability of sugar environmental sustainability of sugar dependent areas):dependent areas):

►reinforcement of the Sugar reinforcement of the Sugar Transformation Unit (STU), both within Transformation Unit (STU), both within MoA and on the SCJ estates, with staff MoA and on the SCJ estates, with staff increased to 31 people;increased to 31 people;

►registration and survey of the workforce registration and survey of the workforce having been declared redundant;having been declared redundant;

►hiring of livelihood advisors and hiring of livelihood advisors and counselling services for redundant counselling services for redundant workers;workers;

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Objective 2 (Strengthen the economic Objective 2 (Strengthen the economic diversification, social resilience and diversification, social resilience and

environmental sustainability of sugar environmental sustainability of sugar dependent areas) cont’d :dependent areas) cont’d :

►the introduction of re-housing schemes the introduction of re-housing schemes for those previously living in the estate for those previously living in the estate barracks;barracks;

►making arrangements for continued making arrangements for continued social services and utilities provision; social services and utilities provision; andand

►the introduction of a mechanism for the introduction of a mechanism for funding diversification schemes.funding diversification schemes.

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Challenges going forwardChallenges going forward

►Protracted privatization Protracted privatization process process

►Possibility of budgetary Possibility of budgetary shortfall to implement all shortfall to implement all activities.activities.

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ENDEND