EU needs to take a firm stand on sugar

[PHNOM PENH POST]

JUNE 4, 2010 was supposed to represent a milestone for Cambodian exports. Taking advantage of zero tariffs in Europe under the Everything But Arms scheme, Thai company Khon Kaen Sugar (KSL) and its Cambodian partner Koh Kong Sugar Industry shipped 10,000 tonnes of sugar to the United Kingdom, the first in 40 years.

But a system the European Union has designed to help least-developed countries enhance “their export earnings, promote their industrialisation and encourage the diversification of their economies” has instead had a negative overall impact in Cambodia’s case. Not only has the development of Cambodia’s sugar export industry led to serious human rights abuses, all evidence suggests it has proven hugely unprofitable for almost everyone involved – except for one man, CPP Senator Ly Yong Phat.

Investigations by the likes of Bridges without Borders and EU officials themselves, among others, have led to identical conclusions – that people have lost their homes and their livelihoods following forced evictions by businesses owned by Ly Yong Phat, including Koh Kong Sugar Industry and Kampong Speu Sugar Company.

After establishing plantations and a factory in Koh Kong Province with KSL, Ly Yong Phat’s joint venture hired locals to cut sugar cane for 10,000 riels (US$2.44) per day, workers told The Post in December. So if a worker was cutting cane every day during a 31-day month they would earn just over $75 per month, or about the same as a garment worker. Except the sugar-cane cutting season only lasts a few months and garment workers usually get one day off per week.

This might all make some sense if Khon Kaen Sugar was profiting from their Cambodian venture, but it is not. In the company’s 2010 report, KSL said it hoped to breakeven on its Cambodia and Laos operations this year and reported increased losses from these operations for 2010.

More worrying was the statement that operating results “will improve after the cane plantations areas expand”.

Meanwhile, although companies in Europe are benefitting from cheaper sugar supplies due to zero tariffs from LDC countries including Cambodia, is the PR fallout worth it? Tate and Lyle, for example, has been the subject of damaging allegations in relation to Cambodian sugar even though it sold its sugar business to American Sugar Refining in July last year.

We will likely never know the extent to which Ly Yong Phat may have profited from this arrangement given the highly opaque nature of his businesses, but from farmers reported testimonies they were offered well below market value or in some cases nothing at all for land, we can assume the CPP senator has made money.

If the EBA is to be a success, and Cambodia’s government is to learn it has to address grave injustices associated with doing business here, then the EU must take a firm stand.

If the government’s reported investigation into this issue does not produce tangible results then the EU must take similar action as it did against Burma previously for grave forced labour abuses that resulted in the abolition of EBA privileges. Anything less would be an unprofitable embarrassment for almost everyone concerned.