Today’s Bekaa farmers feel alienated by a government that does not prioritize agriculture and are unable to make ends meet. They are demanding the government reconsider its decision to phase out sugar beet subsidies. Meanwhile the owners of the Lebanese Sugar Factory, who claim they stand to lose millions by the decision, also claim they have been let down by a heartless state. The government believes the system to be rotten and corrupt, one that does not help small farmers in the way it should and if it were up to the state, subsidies would be abolished today rather than in three years. EXECUTIVE takes an in-depth look at both sides of this increasingly divisive dispute, one that threatens to pierce the very fabric of Lebanon’s agricultural heart.
The sour state of Lebanese sugar
On October 13, 2005, the Lebanese Sugar Beet Cooperative, the national association of sugar beet growers, planned to lay siege to Beirut. Thousands of farmers from all over the country were ready to seal off the capital with tractors and trucks to demand a return of sugar beet subsidies. In 2000, and again in 2004, the government had decided to pay for just one more year and then abolish the subsidy system in an attempt to cut expenses.
Faced with the farmers’ anger and the prospect of an embarrassing blockade of the capital, the Seniora government quickly promised three more years of sugar beet subsidies. Until now however, nothing has been put on paper and the conditions upon which subsidies can be obtained are not clear. March is the month for planting and farmers are growing nervous, while the owners of the National Sugar Factory, which buys the beet from the farmers, fear subsidies will be based on 2004 figures and will not be sufficient for their operation to be profitable.
Lebanon’s agricultural subsidies for tobacco, wheat and sugar beet have been a thorn in the country’s side for many years. Sugar beet subsidies were introduced by the government of President Fouad Chehab in 1958. The idea was for the state to pay a minimum price for sugar beet and impose import tariffs in an attempt to encourage the domestic production of sugar. The same year, a consortium of 10 businessmen established the National Sugar Factory (NSF) in Majdal Anjar to process beet into sugar. The NSF was one of the first factories in the Bekaa valley and one of the first attempts to industrialize Lebanese agriculture.
According to Antoine Khoury, Director General of the Sugar Beet and Wheat Office at the Ministry of Economy, which is responsible for execution of the subsidy system, the aim was to “secure a strategic level of self sufficiency in terms of food supplies and legally protect poor farmers making a livelihood.”
On a national level, it appeared to be a perfect ménage trios between the government the factory and the farmer all working for the national good. Sugar however, is a global commodity with a long and violent history, which unfortunately can not be separated from events on a domestic level (see box). Global production of sugar increased, Europe and America protected their markets and prices plummeted.
In 1958, Lebanese farmers planted a modest 1,600 dunum with sugar beet, which gradually increased to over 30,000 dunum by the early 1970s, yielding 190,000 tons of sugar beet, which in term could produce 22,000 tons of sugar. With the outbreak of hostilities in 1975, production was interrupted, but quickly picked up again to reach an average annual yield of some 70,000 tons of sugar beet, making around 6,000 tons of sugar. However by 1985, civil war had virtually destroyed the state and production stopped.
From hashish to sugar beet
After Lebanon’s civil war ended in 1990, President Elias Hrawi, himself a land owner and a powerful voice within the Lebanese Sugar Beet Cooperative took the initiative to reintroduce subsidies. Hrawi’s argument was that the initiative would encourage farmers to move away from growing hashish, the cultivation of which had exploded during the war. In fact, according to the United Nations program for Integrated Rural Development in Baalbek and Hermel, by 1990, some 30,000 to 40,000 hectares were planted with the illicit crop, representing annual revenues of some $80 million for farmers and $500 million for the global drug market. After the war, political pressure, especially from the United States, saw cultivation vanish by 1994.
“It’s a lie that sugar beet subsidies were reintroduced to replace hashish production,” said Khoury. “Just look at the map. Hashish was grown in the Baalbek-Hermel region. Over 75% of sugar beet however, is grown in the south and mid Bekaa. Sugar beet needs a lot of water which the north just doesn’t have. The real reason to re-introduce the subsidy system was to please the electorate of certain politicians, as so often in Lebanon, even if such a system is illogical and harmful to the country.”
In 1992, the government introduced an average price of $80 per ton of sugar beet and agreed to pay the factory for the sugar refining process. Domestic production was protected from cheaper imports by forcing the country’s sugar importers to buy Lebanese sugar for $500 per ton. Lebanon’s total needs are some 100,000 tons per year, while by 2000 only 40,000 tons of sugar was produced locally.
The elaborate safety system made sugar beet a highly desirable crop within no time. Everyone wanted sugar beet. In 1992, some 10,000 dunum were planted with the sweet beet. By 2000, the planting had extended to 70,000 dunum, while total production of sugar beet had increased from 40,000 tons to 360,000 tons. As a consequence, the cost for the Lebanese government increased from some $3 million to almost $30 million.
“To realize to what imbalances the system produced by the late 1990s, it important to point out that most farmers in the Bekaa rent the land,” explained Khoury. “A consequence of the run on sugar beet was that the price of land soared from $40 to $50 per dunum to $200 per dunum by 2000. As 1.5 dunum produces about 1 ton of sugar, by 2000, the rent cost more than the import cost of 1 ton of the best quality sugar, which at that time stood at some $250.”
“As a comparison,” Khoury added, “in France, you pay between $200 and $250 per hectare. In the United States, you pay between $45 and $75 per hectare and in Romania you buy a hectare for $200.”
Not only did the government pay the farmers, it also paid the factory to produce the sugar. “It cost on average $300 to produce 1 ton of sugar in Lebanon while, it cost $250 per ton to import,” said Khoury. “By 2000, it was cheaper for the government to import sugar and distribute it for free, than to maintain the subsidy system. You should thereby realize that most subsidy money did not go to the small farmers as was intended, but went into the pockets of the factory and the 20 to 40 families that could afford to rent and plant land and exploit the subsidies."
At the 1998, Paris I donor conference, Lebanon was given $500 million in soft loans to offer the Hariri government some financial breathing space, in which it could tackle the ever increasing national debt. The government was expected to, among other measures, privatize the telecommunications and electricity sectors, as well as cut down on public spending, which included abolishing agricultural subsidies.
In 2000, the Cabinet decided to stop sugar beet subsidies, while maintaining the ones on tobacco and wheat, worth an annual $65 million and $15 million respectively. As a compensatory gesture, it offered to pay for one more year to all farmers who had already rented land and planted sugar beet. The sugar factory however, received no compensation. “By law we have an obligation to the Lebanese farmer,” said Khoury, “not to the factory.” Every year since 2001, Bekaa farmers, MPs, the sugar cooperation and factory called for the subsidy system to be reintroduced. Under pressure, the government in 2004 again agreed to pay for one more year. As the decision was taken quite late, only a limited area was planted producing over 52,000 tons of sugar beet, for which the government paid some $70 per ton, a total of $3.7 million. Farmers were not obliged to sell it to the factory, but could sell it on the free market, for example as animal fodder.
“The farmers actually made more money doing this as the price for fodder was much higher than what the factory was willing to offer,” explained Khoury, adding, “I realize Lebanese agriculture is suffering, as it is suffering all over the world. I’m not saying we should not help farmers, but we should consider changing the method, so that a crop is grown that has a market, so that small farmers are helped. That however, requires a sound agricultural policy, something Lebanon hasn’t had ever since the country became independent.”