Sugar row erupts- Guyana disputes EU stand

Guyana Chronicle top story, Sunday 24 May 2009

http://www.guyanachronicle.com/topstory.html

Sugar row erupts- Guyana disputes EU stand

THE Guyana Government is challenging a claim by the European Union that a late submission of a plan for some six million Euros in support of the local sugar industry led to the loss of the crucial aid.

In a statement issued late Friday, it argued that the Guyana Sugar Corporation’s business plan was submitted to the European Commission within an extended deadline of March 31 last year and that the community should proceed with the aid.

The government said it was concerned about the EU’s public pronouncements on the issue last week and outlined its position.

“The undisputed fact of the matter is that GuySuCo did prepare its business plan by the extended deadline, and the plan was approved by its board on 29th March 2008. This fact was communicated to the EC Delegation by the government in its application for the release of the variable tranche,” it said.

Upon the request of the delegation, the government said it subsequently submitted further evidence that the business plan was approved by GuySuCo’s board, via a letter of certification from GuySuCo’s Company Secretary.

“There is, therefore, absolutely no doubt that the condition, as spelt out in the financing agreement, was met,” the government stated.

It added that in response to the EC Delegation’s indication that they also required a copy of the plan, it explained to them that the document that had been approved by the GuySuCo Board of Directors was under review by Cabinet, so as to ensure consistency with national macroeconomic objectives.

“Following completion of the Cabinet review, the plan was provided to the EC Delegation in June 2008. The EU subsequently took the position that the submission of the business plan in June 2008 rather than by 31st March 2008 constituted non-achievement of the indicator.”

The government said it challenged this interpretation of the EC that the indicator was not met at the level of the local delegation as well as the EU headquarters via letter from the Ministry of Finance and through Guyana’s Ambassador in Brussels.

According to the government, it made the case for the reversal of the commission’s decision to withhold funding since its considered position is that the conditions as described in the financing agreement were met.

The government argued that its assertion in this matter is simple.

“The fact that the EC Delegation received the plan in June 2008, after Cabinet had completed its review, does not alter the fact that the condition was met by virtue of the plan having been approved by the GuySuCo Board of Directors by 31st March 2008. The EU continues to disagree and has withheld the funding,” it reported.

It also contended that there is “absolutely no requirement” in the sugar accompanying measures financing agreement for the Poverty Reduction Strategy Programme (PRSP) to be submitted for the purpose of qualifying for sugar sector budget support.

“The PRSP cannot therefore be used by the EC as a basis for withholding sugar sector budget support,” it said.

It added that there is, however, a requirement related to the PRSP under the General Budget Support Programme, which states: “Satisfactory progress should be made in the establishment of a second generation poverty reduction strategy drawing from lessons learnt from the first PRSP.”

“Clearly, from this language, there is no requirement for the PRSP to be completed and approved by Cabinet or by any other authority for satisfactory progress to have been made and for the condition to be met.

“Nevertheless, for the purposes of supporting Government’s application for disbursement under the general budget support programme, the Cabinet-approved draft of the PRSP was submitted to the EC Delegation with a confirmatory letter from the Cabinet Secretary, Dr Roger Luncheon. The fact therefore is that, with regards to the general budget support programme, Government has submitted a second generation PRSP approved by Cabinet and has therefore demonstrated satisfactory progress. At the same time, Government shared the document with the joint donor group for their consideration and comments. Because of this further consultative process of the Government, the EC Delegation has determined that this indicator is not met and that the Delegation is not in receipt of the ‘final version’ of the PRSP.”

The government said it has consistently reaffirmed that there is no requirement for a final version, and that the requirement of satisfactory progress has been adequately demonstrated by the submission of a draft approved by Cabinet to the Delegation.

Its case is that there are, therefore, three simple points to be made in this matter.

** Firstly, there are two separate financing agreements, one for general budget support and one for sugar sector support.

** Secondly, the PRSP is not a prerequisite for the release of the sugar sector support because it is not a condition in that financing agreement.

** Thirdly, in any event, satisfactory progress has been made on the PRSP and this progress is in full compliance with the condition stipulated in the general budget support financing agreement.

According to the Guyana Government, it should be added that these developments on the part of the EC represent a fundamental departure from the principles of the budget support mode for delivering aid.

The understanding, it said, has always been that budget support emphasises the achievement of certain specified results, and is disbursed when these results are achieved.

“If the results are achieved early, i.e., before any timeline that might be specified, then the disbursement is made early. If the results are achieved later, then the disbursement is made at that later time. The current position of the EC on this matter, suggesting that funds are lost because certain deadlines were not achieved in their interpretation, departs significantly from this principle.”

The government said it will continue to assert that the conditions discussed above were achieved, for the reasons outlined above, and that the disbursements should be made to Guyana as soon as possible.

It said it has also noted that during the early rounds of provision of budget support by the EU to Guyana, disbursements were made promptly and in full.

“It is a striking coincidence that most of the difficulties encountered in the implementation of EU budget support came shortly after Government adopted a position that was critical of the Economic Partnership Agreement (EPA) that was concluded between the EU and negotiators for CARIFORUM. Government would hope that the difficulties currently being experienced in securing delivery of promised budget support is not somehow connected with the critique of the EPA, and will continue to argue that the anticipated budget support must be delivered in accordance with the financing agreements.”

The small Alliance For Change party yesterday claimed that the loss of the EU support vindicates its charge about the ineptitude and incompetence of those in charge of the sugar industry.

“This utterly casual and lackadaisical performance by the Government and its surrogate company will break the back of this most important industry,” it stated.