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Sunday, May 07, 2006 

EC nears agreement for Caribbean funds

published: Sunday May 7, 2006

David Jessop

THE LONG battle over the amount of money the European Commission (EC) will make available for restructuring the Caribbean sugar industry is slowly drawing to a close.

Notwithstanding, a second and just as vital new front may be opening. This relates to the rules that will govern the programmes for sugar and by extension, the speed at which the transition to competitive cane-based industries can be achieved.

On May 4, an EC spokesman revealed that there is now a basis for political agreement within Europe on the overall sum that will be proposed.


In 2007, this will amount to ¤165 million. Over the period 2007-2013, such support is expected to total ¤1.3 billion in all, averaging ¤184 million per annum and suggesting that in some years the figure for support may rise above ¤200 million.

Whether this will be augmented from other sources of development funding remains the subject of intense lobbying.

This latest figure, which still has to be discussed formally by EU member states and the European Parliament is less than the ¤190 million per annum indicated last year by the EC's Trade Commissioner, Peter Mandelson, and the Agriculture Commissioner, Mariann Fischer Boel.

Despite this, it is a significant improvement on figures known to have been previously under discussion between the various directorates of the EC.
But these numbers may not wholly be what they seem. Because the figures will be included in the EU's external affairs budget, the total sum over the seven years cannot easily be ring-fenced.

This could well mean that each year up to 2013, when the EU comes to agree its external budget, the amount proposed for sugar could be increased or cut on the basis of performance by all 18 ACP sugar industries or their take up of funds.

In practical terms, this means that even if the size of the overall envelope is agreed shortly, in future years it could be amended by the commission in relation to need, by the EU Council of Ministers in the context of the overall EU budget, or by the European Parliament if it feels Europe has more important development priorities.

Put another way, the manner in which the EC is taking forward the sugar financing proposals may result in the Caribbean and others in the ACP becoming involved in an open-ended annual lobbying exercise if they are to ensure that they get at least what it is promised.


Interestingly, the United King-dom believes that significant additional funding can with active lobbying still be leveraged from other EU resources.

At the U.K./Caribbean Govern-ment to Government forum held in Barbados on April 27-28, British Ministers explored with their Caribbean counterparts the possibility of the sums under discussion being augmented from unspent sums in the European Development Fund.

This, in theory, could mean amounts previously committed by European governments for development purposes, but not spent, might be transferred to sugar. The suggestion it seems is that this might bring the annual figure closer to the ¤250 million per annum that Britain estimated ACP sugar producers require.

Whether this is a viable proposition, given the many competing development interests, remains to be seen.

The window of opportunity is small with all parties having only until May 15 to make this case before such sums are returned to European capitals.

In recent technical presentations, EC officials have been suggesting that other potential sources of funding also need looking at.

While some of these, such as the 10th European Development Fund and the European Investment Bank, are politically or developmentally unattractive routes for support, it seems that EC research policy and the EC's energy facility for small island states might offer opportunities for additional sources of funding. But if the overall quantum of support is becoming a little clearer, the same cannot yet be said about the detail of how the sugar programme will operate.

Critical to success or failure of the industry's transition will be the criteria that determine which national projects are deemed eligible or ineligible and the procedures that will be adopted to determine the level and method by which support for the sugar sector is disbursed.


EC officials have already made clear that each national strategy for sugar will be funded on a multi-annual basis and that the approval procedure will be relatively long.

They have also indicated that to a significant degree they will determine the acceptability of any project and the pace at which it moves forward.

Previous experience suggests that this approach is particularly problematic when programmes involve a percentage of private sector or commercial money.

Financial caps on co-funded projects, special provisions on procurement and other European legal and procedural mechanisms all hugely complicate the ability of industries in economic transition to deliver change within the timescales envisaged.

These processes also raise questions about the willingness of commercial lenders to accept this way of working, as the EC's disbursement mechanisms may not be compatible with the type of security commercial lenders want.

Traditionally, such technical issues have not been looked at politically during negotiations.
However, there is a strong case for the region to take a much greater ministerial interest in how the transitional programme for sugar will work in practice.

Not only does the region's previous experience with delays to the EC-funded programmes for bananas, rum and rice suggest that this is necessary, but the domestic political consequences of a failed or too slow a transition in sugar argue for close attention to this level of detail.

Over the last few weeks, it has been widely recognised that most of the region's industries and Governments have done much to make their case and to lobby.

The next few weeks will determine the final shape of the financing package.
Despite this, industries and governments in the region cannot sit back. The hard part is yet to come.

Ensuring a viable framework that enables the practical and timely delivery of programmes will be as great a challenge as securing the funds to make the transition to a competitive and modern value-added sugar industry.

* David Jessop is the director of the Caribbean Council and can be contacted at david.jessop@caribbean-council.org Previous columns can be found at www.caribbean-council.org.

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