The government has secured a commitment for US$60 million in concessional financing for the modernisation of the sugar industry and President Bharrat Jagdeo hopes that the tender process could be reopened next month.

Briefing reporters yesterday on his Washington visit, Jagdeo said that the restructuring of the sugar industry will continue to be one of the fundamental reforms to be included in the new three-year programme with the World Bank and International Monetary Fund.

He said that the World Bank, the UK Department for International Development and the Caribbean Development Bank (CDB) were helping with concessional financing for the project and the government had some time to secure the rest of the funds.

"Let me make it clear. We have given no commitment to privatise the industry, to reduce the staff or to close any estates," the President re-emphasised yesterday. He said that the project in later years was expected to increase the level of employment.

The President also noted the benefits of having concessional funding for the project. He underscored that the primary reason for the modernisation was to make the sugar industry internationally competitive because if this was not done the country was putting at risk 16 per cent of its gross domestic product and a fifth of its foreign exchange earnings.

The government and the World Bank last year agreed on a scaled-down version of the corporation's US$200 million plan with heavy emphasis on the Berbice Estates, particularly Skeldon, where a new factory is to be built. This project is tagged at US$110 million.

Jagdeo yesterday reiterated that this did not mean that the Demerara Estates were to be ignored but improvements in their operations would be made. After the World Bank opposed the project last year on the grounds that it was not economically feasible, lengthy discussions were held and both sides agreed that the expansion at the Skeldon Estate would proceed.

Investment in the Demerara estates, which the World Bank had said, should be closed or privatised, is now limited to routine upgrading and maintenance and field expenditure to achieve agreed agricultural productivity gains.

The plan to modernise the Albion Estate is to be revisited after the completion of the Skeldon estate's modernisation/expansion and following a detailed and comprehensive review of the industry, market and progress against the strategic plan's objectives.

Financing of the new factory at Skeldon will be met from the US$60 million in concessional financing, proceeds from asset sales and retained earnings from the corporation. However, the value of the last named resource is subject to the value of the Euro against the US dollar. The Guyana Sugar Corporation (GUYSUCO) expected to realise US$25 million from the disposal of assets.

This means that a further US$25 million is to be secured from concessional sources and the President is spearheading discussions on this front with the multilateral agencies.

The World Bank and the government had agreed to proceed with the tender for the new factory at Skeldon as soon as financing is secured. The corporation had already started to resuscitate tender documents to move ahead with the project.

The modernisation exercise is geared to lower GUYSUCO's cost of production and whilst this was hit by a setback, the company had started work on improving its yields from the current 70 tonnes of cane per hectare to the range of 90 tonnes per hectare.

The corporation is aiming to bring down the cost per pound of sugar from US0.18 cents to US0.11 cents in the next five years. Getting the Skeldon investment off the ground this year is crucial for the corporation to achieve this plan.

The investment in Skeldon is expected to see private sector led co-generation. The government had agreed with the World Bank that private cane output would increase to 30 per cent of total agriculture output and a study is to be done on the potential and policies required to increase production from private cane farmers.

Among the other agreements reached between the government and the World Bank in a memo signed on June 25, 2001 were for the sugar levy to be replaced by a dividend payment scheme and for the management contract with Booker Tate to be restructured with performance-based benchmarks introduced. The World Bank was to provide expertise to start the process in the case of the latter. The contract was to be restructured in two phases introducing technical, cost and profitability benchmarks into the management contract with the requisite management autonomy. Other agreements reached included profitability targets for GUYSUCO to be monitored annually; an analysis of cost recovery policies and actions for non-commercial and drainage and irrigation services provided by GUYSUCO and to further discussions with the unions to link wages and bonuses to productivity and profitability indicators.

The President was in Washington for talks with the IMF, World Bank and other funding agencies on the new three-year programme for Guyana, as well furthering the process for Guyana to obtain enhanced debt relief under the Cologne Initiative before May.