THE government announced yesterday that it will close two sugar factories – Bernard Lodge in St Catherine and Long Pond in Trelawny – as part of a major overhaul of its sugar cane industry in the face of the planned big cut in the price paid for sugar in Jamaica’s preferential European market.

It has been well-known for a long time that the re-focused industry would centre on the production of about 200,000 tonnes of sugar a year to meet domestic (62,000 tonnes a year) and export requirements, and the production of molasses for rum and ethanol to displace the chemical MBTE used in gasolene.

But in Parliament yesterday, Prime Minister P J Patterson filled out some of the details, particularly placing on notice those communities which will lose factories, and although he did not dwell on it, jobs.

“This means that two of the current government-owned plants, Long Pond and Bernard Lodge, will be closed as far as sugar production is concerned,” Patterson said.

The closures would not be immediate, but would be phased. Patterson did not, however, give a timetable.

The EU – under pressure from developed countries to cut its farm subsidies, and its preferential sugar arrangements for the African, Caribbean and Pacific group of countries challenged by large developing countries at the WTO – has announced plans to slash the price it pays to domestic and ACP producers by 37 per cent over a five-year period.

Jamaica and ACP partners have warned that such a drastic cut would wipe out their industries – which in Jamaica’s case employs more than 40,000 people. At the same time, they have been scrambling to reorganise the sector, hoping to make it more efficient.

Patterson conceded yesterday that the new sugar regime would require substantial investments in both public and private sugar companies.

He, however, denied a suggestion by Opposition Leader Bruce Golding that the policy unveiled yesterday was based primarily on recommendations in a report prepared by former director-general of the Planning Institute of Jamaica (PIOJ) Marjorie Henriques in 2001 – the clear implication that the government has been slow to act. In that report, it was estimated that $3 billion (inflated 2005 figure) would be required to restructure the factories.

Patterson said that while the PIOJ considered previous reports on the industry, the current recommendations and policy options could not be “pigeon holed” in any one category of any of the various reports over the years.

“It is extremely clear that for the modernisation and the retooling to take place, substantial investments are going to have to be made both within the publicly-owned factories and the privately-owned factories,” Patterson said.

He said that in respect of the Sugar Company of Jamaica (SCJ) – which operates the Bernard Lodge, Duckenfield, Frome, Long Pond and Monymusk factories – instructions have been given for it to factor into its presentation to finance ministry, to which they are accountable, what will be required for the modernisation of factories that will be kept.

Funding would have to be sought from a combination sources – including any compensation from the EU for the loss of preferences, soft loans from EU institutions, perhaps from savings on the country’s oil bill under Venezuela PetroCaribe arrangement.

“The simple answer to the question raised by the leader of the Opposition (regarding funding) is that, now that we have identified clearly what are the policy options that we accept, we then have to do the detailed studies and analyses, including the preparation and consideration of the financial plan that will enable the positive production levels to be met,” the prime minister said.

Patterson said that the government would also be looking at areas private investment in respect of the publicly owned factories. There would also have to be collaboration with the private sector estates in helping them to source of capital for the transformation.

He said that it is proposed to produce as much molasses as is feasible to support the rum industry and some 70 million litres of ethanol for the local gasolene market.

The basis for all these plans going forward is, however, dependent on an adequate supply of cane, approximately three million tonnes per annum produced efficiently.

It is also proposed to lease lands to two private operators to enable them to expand their facilities to a combined production of 75,000 tonnes per annum. It is also expected that they will make the necessary investments to improve productivity, Patterson said.