Friday, March 09, 2007

EU Talks To Decide Fiji Aid

Much at stake in EU talks

The Interim Government has been given a chance to present its case to the European Union (EU). On January 19, the European Commission (EC) proposed the opening of consultation under Article 96 of the Cotonou Agreement, the Agreement between the EU and 76 countries in Africa, the Caribbean and the Pacific. This move reflected continuing concern about the situation in Fiji regarding human rights, democratic principles and the rule of law. In a press release dated March 6, the EU reiterated its strongest possible opposition to actions that undermine the democratic process in Fiji. The release said, three months on, the EU continued to maintain that the coup had not been in the best interests of the people of Fiji and it called for the urgent and full restoration of democracy and the return to civilian government as soon as possible. As a result of the takeover, the EU considers that there has been a violation of the essential elements of the ACP-EU Partnership Agreement (also known as the Cotonou Agreement), to which both the EU and Fiji are signatories. Where provisions of the essential elements of the agreement - concerning democratic principles, rule of law and human rights - have been breached, a process is provided for under Article 96 of the agreement whereby the authorities of the country concerned are invited for consultations, with a view to seeking solutions acceptable to both parties.
If, following such consultations, acceptable solutions are not found, appropriate measures are taken. Such measures can include the suspension, or partial suspension of EU-funded aid programmes, including, in the case of Fiji, suspension of the assistance to the sugar sector that, prior to the coup, the EU had committed itself to providing. In the context of this process, a letter was sent by the EU on February 27, addressed to the President of the Republic of the Fiji Islands, stating that it wished to conduct formal consultations with the Interim Government before any such measures were taken. The consultations are designed to give the Interim Government the opportunity of setting out its plan for the return to democracy, as well as its future intentions in respect of human rights and the rule of law. The Cotonou Agreement provides for the consultations to begin no later than 30 days after the issuing of the letter of invitation, and the consultation procedure should last no longer than 120 days. A first meeting is currently expected to take place, in Brussels, in late March, although the exact date is yet to be confirmed.
The measures to be taken with regard to aid suspension will be decided by the EU only at the conclusion of the consultation. The EU development aid funding, including its substantial sugar funds is at stake. Trade has been the cornerstone of the 20-year relationship between the EU and Fiji. Fiji benefits from the preferential trade provision on the EU market. Under the terms of the 1975 Sugar Protocol, the EU bought more than 165,000 tonnes per annum of Fiji's sugar, at three times the world market price. This accounts for 45 per cent of the country's total sugar exports and equates to an estimated $F120 million per annum, most of which benefits small farmers.In terms of the development corporation relationship, the relationship between the EU and Fiji is well established and highly beneficial to the country. This relationship continues to expand and to date, Fiji has received over $F460 million from the EU in development cooperation funds, focused primarily on agriculture, rural development, trade promotion, infrastructure, education and the social sector. The EU has funded major infrastructure projects such as the Rewa Bridge (total; EU contribution: $F22.5m), the Naboro Landfill ($F10.6m), the Lautoka Teachers College ($F8.5m), the Fiji School of Medicine ($F8m and the Kinoya Outfall ($F8.2m).
Under the 9th European Development Fund (9th EDF), Fiji was allocated over $F46m, the bulk of which has been allocated to the Fiji Education Sector Program. The 10th EDF (2008 - 2013) will focus primarily on the EU's "blue-green" theme of the environment and the sustainable management of land and sea resources. Under the 10th EDF, Fiji has been allocated approximately $F30m. The removal of the Laisenia Qarase-led democratically elected government by the military has been universally condemned and it has also affected the relationship between Fiji and the EU. After the May 2000 political upheaval in Fiji, the EU suspended its cooperation programme and it was only resumed on November 17, 2003 after EU was mindful of the efforts made by the Laisenia Qarase-led Interim administration in support of a sustainable national reconciliation process and ensuring a return to the rule of law and constitutional conformity. The military was well aware of the suspension of funds before the takeover. Now it has to face the reality and the Interim Government has been given a chance to present its case. It will be tough as the Interim Government is going to the meeting as a guilty partner. To make things worse, two civilians have died. Human rights violations have been reported to the FHRC and investigations are continuing.
The sugar industry will be drastically affected if the EU suspends its development cooperation funds. Interim Minister of Finance Mahendra Chaudhry has confirmed Government will continue with restructuring and reform of the sugar industry by focusing on four critical areas. Firstly, to upgrade mill facilities, which should increase mill capacity and operational efficiency. Secondly, to improve the transportation system to the mill, which should reduce the cost of carting cane. Thirdly, to modernize farming methods, which should improve, cane farming productivity. Lastly, to diversify into value-adding opportunities, such as co-generation of electricity and ethanol production. Government intends to continue with its sugarcane crop rehabilitation program through its current restructuring while the EU support to the sugar industry is awaited. The EU has indicated its support in this transition phase in the form of a grant funded by the National Adaptation Strategy (NAS) and also through other trade arrangements such as the Economic Partnership Agreement (EPA), which are being negotiated. The future of the industry will depend heavily on the inculcation of commercial values in all aspects of operation, from farming and harvesting, to transportation and milling. With the ceasing of preferential treatment in the EU market, the merits of the industry will be weighed against other sugar-producing countries on the highly competitive world market. Improving farm level productivity is an additional area crucial to establishing the industry's competitiveness.
With Government support, the FSC has secured an $86m loan from EXIM Bank of India to upgrade the machinery and equipment in its mills. The recapitalisation program should improve the milling efficiency of FSC, reducing breakdown and improving sucrose extraction rates. The support provided by the EU, through its share in the cost of the NAS, will be a pivotal role, particularly in addressing the production side of the industry. The NAS identifies measures totaling $750 million over an eight-year period and proposes the use of EU donor funds to finance $350 million. As grants, these funds cannot be set for commercial activity except when there is a particular social need as in micro-finances or when confined to technical assistance for feasibility studies, as with co-generation and studies of commercial agriculture. The EU grants will focus on those parts of NAS, which support cane farming rather than mill operations. They will particularly support cane replanting and research and extension for cane farming systems. Rural infrastructure will be strengthened through community development to sustain drainage system and development of farm access roads as well as emergency repairs to the bridges and classified access cane roads. Grants will also be used to address the social impacts of restructuring on the poor through housing construction programs and micro-finance. In addition to the sugar cane and social components, the NAS will promote diversification. Now the $350m from the EU is at risk. While the precise impact of the military takeover on EU aid funds has yet to be determined through consultation, suspension or partial suspension of all aid funds is a clear possibility. Already the country is feeling it, as EU funding has not proceeded as planned. The suspension of funds now hinges on the presentation by the Interim Government.

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