Sugar Industry Reform in Fiji, Production Decline and its Economic Consequences

In this paper we revisit the Fiji sugar industry with a fresh mandate. The century old industry, widely perceived as the backbone of the Fijian economy, is on the verge of collapse. Recognising this, the Fiji government and the Asian Development Bank have concocted a reform plan, envisaged to bail-out the ailing sugar industry. We concur with the reform plan but demur with the claim that sugar production will not be affected. We espouse the views of the Fiji Sugar Cane Growers Council, that given the non-renewal of sugar cane land leases, sugar production will fall by around 25-30 percent over the next three years. We use the Fiji computable general equilibrium model to simulate the economy-wide impact of a 30 percent reduction in sugar productivity. Amongst our key results we find that Fiji's gross domestic product will fall by around 1.8 percent and real welfare will decline by some 1.5 percent. We draw several policy implications from our empirical results.