Home ›› 17 Feb 2023 ›› Front
Hope for the revival of the government’s loss-making sugar mills is fading away fast as multiple big foreign investment deals have expired and there are no new proposals in sight.
Officials of the state-run Bangladesh Sugar and Food Industry Corporation (BSFIC), which is responsible for sugar production in the country, said the mills are failing to return in the black because of old machinery and non-profitable traditional production methods. The government had taken initiatives on several occasions to convert the mills into more profitable establishments but they are failing as it could follow through with the plans.
Once, BSFIC used to produce more than 2.5 lakh tonnes of sugar from sugarcane through 15 factories annually. But only nine factories are now operational and in FY2021-22, they produced a meagre 25,000 tonnes.
Officials said at least three initial agreements with foreign companies have recently expired due to a lack of proper initiatives and there is little chance of getting those back on track.
At the same time, no new offers of foreign investment are coming in.
In 2018, Prime Minister Sheikh Hasina directed authorities concerned to set up profitable establishments using the land of financially weak industries. Afterwards, initiatives taken by the Industries Ministry attracted several companies from Saudi Arabia, Thailand, China, United Arab Emirates and Japan that wanted to invest in the country’s sugar industry.
Eventually, three memorandums of understanding (MoUs) were signed between the BSFIC and the companies but none of them bore any fruit.
Failure after headway
The biggest of the three deals was the MoU inked with a consortium formed by Sutech Engineering Co of Thailand, Sharkara International of the UAE and Sojitz Corporation of Japan.
The Sugar International Consortium had offered to produce alcoholic beverages and beer in the mills in addition to producing and refining sugar. BSFIC signed the deal with it in October 2019.
According to the MoU, the joint venture was supposed to establish an environment-friendly, energy-efficient and modern technology-based sugarcane, liquor and beer industry in Bangladesh.
The Japan Bank for International Cooperation (JBIC) and Exim Bank of Thailand were supposed to finance 70 per cent of the project while the consortium would provide the remaining 30 per cent.
However, JBIC officials during a meeting with Industries Minister Nurul Majid Mahmud Humayun this month still expressed interest in providing funds for the sector individually. Nurul welcomed the intention.
Under the project, Sugar International Consortium aimed to produce high-quality sugarcane and use those to produce high-quality alcohol for use in perfumes and medicines. It also had plans to set up three factories with a capacity to process 14,000 tonnes of sugarcane per day.
Soon after the signing of the MoU, a joint delegation of Japanese and Thai companies visited the sugar mills in Pabna, Natore, Rajshahi, Joypurhat, Dinajpur and Rangpur and the agricultural farms under them on November 14-19 in 2019.
The following month, a delegation from Bangladesh led by the industries minister was then invited to visit Thailand by Sutech Engineering to discuss the financing. As part of this, a BSFIC technical team visited sugar and beer factories in Thailand from December 9-14.
In January 2020, another eight-member delegation led by the minister visited Thailand. They also visited sugar mills in Cambodia during that trip.
According to BSFIC sources, following negotiations with the consortium, the ministry sought the prime minister’s approval for further discussions. Later, in 2021, the ministry also wrote to the consortium’s representative Dr Terapal Pruksathorn asking whether they were agreeable to implementing the project with 50:50 sovereign guarantees.
In April last year, a meeting chaired by the cabinet secretary was held on the sovereign guarantee and other related issues. It decided that the project should be implemented with a state-owned bank’s guarantee instead of a sovereign guarantee. But the project saw zero development afterwards.
When the MoU was signed, the consortium’s local representative Md Emdad Hossain had said that they planned to get the investment returned from the mills in eight years and help save the industry and farmers.
But BSFIC officials said the MoU has expired due to a lack of government initiatives despite making some headway.
More failures
Another MoU was signed with VSS Consultancy and Management BV of the Netherlands more than half a decade ago. Its deadline was extended for a second time after the prime minister’s directives even though the deal had seen no progress after it was signed. This MoU finally expired on December 31, 2022, BSFIC sources said.
The company said it was forced to stop the process of finalising the feasibility study due to various reasons and that is why BSFIC did not extend the MoU again.
The third MoU was signed between BSFIC and Al-Hasa Automatic Bakery of Saudi Arabia on September 29, 2019. A delegation of the company visited several sugar mills here in January 2020 and showed interest in installing solar power sources at the mills.
Over three years have passed, but this deal has not made any significant headway since then.
Apart from the lack of government initiatives, the Covid-19 pandemic and the subsequent economic and communication catastrophe had also impacted the execution of MoUs.
Moreover, in December 2019, a delegation of Chinese investors visited some sugar mills and proposed to fund various projects to increase sugar production.
Apart from them, BSFIC at the time had also received investment proposals from several companies from Germany, Malaysia and the UK to modernise the country’s old sugar mills. But none of the proposals has seen the light of day despite multiple attempts by BSFIC.
BSFIC pessimistic
BSFIC officials say that the investment proposals are failing to materialise due to various complications.
“The hope of receiving foreign investment is slim now. The sugar mills were supposed to be modernised through a joint venture of three countries. But it’s not happening anymore,” BSFIC Secretary Chowdhury Ruhul Ameen Kaiser told The Business Post.
“Besides, the MoUs with Saudi and Dutch companies also saw no progress. Now all three MoUs have expired. There is no possibility of investment in line with those MoUs,” he said.
“After screening all the investment proposals before Covid, we have found none that is implementable. No good proposals came even after the pandemic eased,” he noted, adding he does not see any possibility to facilitate foreign investment soon.
The senior official also said that BSFIC is currently trying to increase sugar production at the mills on its own. if they receive any new good foreign investment proposals, they will consider them, he added.
Meanwhile, initiatives taken by the Industries Ministry and BSFIC to improve the sugar industry are not doing well also.
The ministry and BSFIC had sent project feasibility proposals for Thakurgaon Sugar Mill and North Bengal Sugar Mill to the Planning Commission for a new project to develop the mills into profitable establishments.
