Wednesday, July 25, 2007

The Never-Ending Sugar Saga

Running up to the recent Parliamentary elections the media was filled with all manner of impressive new investment projects for Armenia; oil exploration, a new oil refinery, a new atomic power station, production of high-tech products, and the return of the Armenian sugar industry.

The latter is of particular interest because in 1999 a serious effort began to determine the possibility of re-establishing the Armenian sugar industry. Armenian sugar production ended in 1988 when the Spitak earthquake destroyed the sugar factory.

In 2000 the U.S. Trade Development Agency (USTDA) signed an agreement to part-finance a study to determine the feasibility of re-establishing the sugar industry and for the next eighteen months more than a dozen international specialists studied every aspect of re-establishing the Armenian sugar industry. They were a team of sugar technologists, supported by agro-technologists, meteorologists, seismologists, and marketing and finance experts.

The data from the study was passed on to an internationally recognised auditing firm, whose experts developed a comprehensive financial model, to determine which parameters would be needed for a sustainable sugar industry. The result was that, with minimal support from the Armenian government, a very sustainable Armenian sugar industry could be developed, assuming a ‘Strategic Sugar Industry Partner and Investor’ could be found.

In January 2002 a Government Commission was established, Headed by Mr Hovik Abrahamyan, Minister for Territorial Administration and in response to a directive from president Kocharyan. The project was selected out of three projects as being most suitable for Armenia and the Minister Abrahamyan committed the Government’s support to the project.

A company was established as a vehicle to develop the project and a search began for a suitable Strategic Sugar Industry Partner and Investor. More than 8 companies applied and after a selection process, agreement was reached with ‘Sudeco International Limited’ (Sudeco), one of the most prominent internationally recognised sugar industry specialist companies. Sudeco made a formal proposal to the Armenian Government, committing more than $20 million to the project and to managing the project for the first 5 years of production.

Sudeco designs and manufactures the latest sugar technology machinery and equipment, which was included in a totally new sugar factory and refinery, to be built on a 62-hectare site at Akhuryan, fully approved by the regional and local authorities.

Numerous Ministers, including Karen Tschmaritian (Trade & industry) David Lokian (Agriculture) Hovik Abrahamyan (Territorial Administration), Serge Sargsian (Co-Chairman for Armenian – Russian economic development), provided letters of support to the project, which all turned out to be worthless. In March 2003, President Kocharyan wrote to the Prime Minister of the Russian Federation, asking him to look at the possibility of Russian finance for the project. That was later understood to be the con of all cons.

Armenia imports more than 100,000 tons of sugar each year and the Armenian sugar industry is worth more than 100 million dollars, with profits in excess of 30 million dollars. A new Armenia sugar industry would provide work places for some 20,000 farmers and factory workers in the devastated northern earthquake zone. Moreover, sugar beets add valuable soil nutrition and their re-introduction into the northern agricultural Shirak and Lori plains would be a tremendous help in halting the soil deterioration that has been going on for the past nearly 20 years, during which time the soil has been bombarded year in and year out with the single potato crop.

In November 2004, it became evident that, despite a number of very attractive financing opportunities for the project, the Armenian authorities simply will not allow a new Armenian sugar industry. The authorities will not support a project that will improve the lives of thousands of the Armenian working class for fear of sacrificing their millions of dollars of yearly gains.

And it would be foolhardy to believe the recent stories about 'Sugar Sam's' new sugar factory. Even though he may personally want to develop sugar production in Armenia; and that possibility should not be disregarded - They will not let him!

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