Western Balkans set to tap into EU sugar market

- Last updated on GMT

Related tags: Sugar, European union, Eu

Sugar producers from Serbia and Montenegro 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 - a move that is expected to win the small
country additional export revenues of €80 million.

The restoration of special trade concessions means that Serbian sugar producers will now be able to export sugar at around €600 per metric tonne, up from €200 per tonne, the UN-backed Food and Agriculture Organisation​ (FAO) said.

Lifting of the ban followed a workshop hosted by the 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 effectively halved sugar beet acreage to around 124,000 (about 50,000 hectares) by the mid-1990s, and sugar output decreased not only in terms of amount produced but also in value, making the crop economically unviable to farm.

Favourable sugar duties not new

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 non-existent, reached 320,000 metric tons in the 2002/3 marketing year, with Serbian sugar production rocketing during the first quarter of 2003 to 84,000 tons.

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. It transpired that 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.

EU market crucial for investment in the Western Balkans

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 metric tons of sugar in five factories, with beet production covering around 148,000 acres (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 tons of sugar, and with beet acreage of around 99,000 acres (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."

FAO acts as 'honest broker'

"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 the authorities responsible for agriculture in Serbia and Montenegro, they are doing everything they can to prevent non-domestic produced sugar being exported out of the country and avoid a repeat of the events which led to the last ban on sugar exports.

The agro-industry accounted for almost 10 per cent of Serbia's total gross domestic product in 2001, with total revenues of €3 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 metric tons of Serbian sugar could be exported to the EU this year."

Related topics: Commodities, Cocoa & Sugar

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