It is urgent to expedite the process of bringing foreign investment to the country’s state-owned sugar mills against the backdrop of closure of these mills and shooting of sugar prices in the markets. There is no reason to think that any time soon the sugar price will come down. Therefore, the relevant policy makers have to try so that the price of this necessary food ingredient does not go any higher from the current selling price at Tk 100 per kg packet. The loose sugar is selling at Tk 80-90.
But the investment from foreign companies is not possible due to some problems. According to a report published in a national daily on Saturday, investment could not be materialised yet due to twin barriers that the foreign investors face: one, long standing large loans from state banks, and two, the requirement of sovereign guarantee from the government.
Presently, the state-owned sugar mills owe about Tk 79.46 billion to the public-sector banks and the government is a guarantor to this loan. But the government did not repay the loan in the stipulated tenure that expired in 2018. Moreover, the tenure of guarantee has not been renewed also. Because of this snag, Sugar International Co., a consortium of three companies from Japan, Thailand and the United Arab Emirates are not being able to invest their planned US$645 million to the country’s six closed state-owned sugar mills at Pabna, Shyampur, Panchagarh, Setabganj, Rangpur and Kushtia.
Now if the Bangladesh government provides guarantee to two banks, Japan Bank for International Cooperation (JBIC) and EXIM Bank, Thailand, this consortium can invest 70 per cent of the investment money with the rest 30 per cent as the equity of these two companies. As these foreign banks want the Bangladesh government to provide sovereign guarantee against their credits, the latter could not do it because of legal complexities. This is the only way to overcome these hurdles.
There is no reason why the lending foreign banks would not accept the bank guarantee provided by Bangladesh’s banks. If these banks give the required guarantee, the fresh investment into the stalled sugar mills by the foreign companies will indeed be possible. We think the sooner all these problems are overcome, the better for the country’s sugar industry.
In Bangladesh, like every state-owned enterprise, sugar mills have a history of deficit account books. If through foreign investment, stalled sugar mills are run, quality sugar is produced with prices of sugar remaining stable, policy makers need to ensure that foreign investors do not face any bureaucratic hurdles.
