Sweetening agricultural development in the Western Balkans
EU lifts ban on sugar imports from Serbia and Montenegro
7 September 2004, Rome - Serbian sugar producers will once again benefit from preferential access to the European Union market, following the EU's recent lifting of a 15-month ban on duty-free sugar imports from the country.
The restoration of special trade concessions means that Serbian sugar producers will now be able to export sugar at around 600 euros (US$724) per tonne, up from 200 euros (US$241) per tonne. This could mean an additional 80 million euros (US$96.5 million) in annual export revenues.
Lifting of the ban came soon after a workshop hosted by FAO and the European Bank for Reconstruction and Development in Belgrade, which brought together representatives of the Government of Serbia and Montenegro, the European Commission and regional sugar producers and processors to discuss policy options to address problems in the Serbian sugar sector.
Political and economic upheavals in the 1990s seriously affected the domestic sugar market in Serbia and Montenegro. Sugar beet acreage halved from 100 000 hectares a year in the 1980s to around 50 000 by the mid-1990s, and sugar output decreased not only in terms of tonnes produced but also in value.
This situation began to turn around in late 2001, when the European Commission introduced a policy abolishing all EU import duties on products originating from the Western Balkans, which included Serbia and Montenegro, in order to boost the political and economic integration of the region.
Imports of sugar originating in the Western Balkans, which previously had been nonexistent, reached 320 000 tonnes in the 2002/3 marketing year, with Serbian sugar production rocketing during the first quarter of 2003 to 84 000 tonnes.
But the import duty waiver on Serbian sugar was suspended in May 2003 after it was discovered that much of the sugar entering the EU from the country did not originate from Serbian production. Large quantities of imported sugar were being repackaged and exported to the EU.
The EU allows countries with preferential access to import sugar for domestic consumption when these countries have production shortfalls. However, countries with preferential access may only export their own domestically produced sugar.
European market is crucial
A recent FAO study on the state of the sugar sector in Serbia and Montenegro, presented during the workshop, reveals the extent to which Serbia's sugar industry depends on the EU quota market.
"Serbia is highly unlikely ever to become a competitive exporter on the world market," says the report.
"By the end of the decade, with EU access restored, we estimate that Serbia could produce around 400 000 tonnes of sugar in five factories, with beet production covering around 60 000 hectares. Without EU access sugar production is likely to stagnate around the level of domestic consumption, with four factories producing some 270 000 tonnes of sugar, and with beet acreage of around 40 000 hectares," says the report.
"Investors have shown interest in the Serbian sugar sector, but the viability of such investments is linked to the trade regime between Serbia and Montenegro and the EU," said FAO Investment Officer Vlaho Kojakovic. "That's why this decision is so important."
Good news for sugar producers
"FAO's role has been as honest broker, bringing all the parties together to discuss the issues in a neutral forum," said Kojakovic. "The Government has demonstrated that it is serious about resolving this situation, and the EU has decided to give them a chance. We are very pleased to have been involved in finding a solution."
According to Goran Zivkov, Deputy Minister of Agriculture, the Government of Serbia and Montenegro is committed to meeting the EU's request for a full investigation of the affair and punishment of those responsible.
"The Ministry is working closely with the customs and judicial authorities in order to uncover individual perpetrators and single out specific contracts involved in the export of non-Serbian sugar to the EU," he said. "At the same time, we are instigating better monitoring, record keeping and controls together with the customs authorities. These systems will greatly improve the traceability of all future exports of sugar in the EU."
Agro-industry accounted for almost ten percent of Serbia's total gross domestic product in 2001, with total revenues of 3 billion euros (US$3.6 billion) - of which 0.6 billion came from the sugar industry.
"The EU's decision is good news for the economic development of Vojvodina province, where the majority of Serbian sugar beet is produced and where four of the eight private sugar processors are located," added Kojakovic. "As much as 150 000 tonnes of Serbian sugar could be exported to the EU this year."
Information Officer, FAO
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