by Dimitrije BOAROV
The scandal did not explode suddenly, because warnings from the EU Commission that the privileges for free export of sugar to the EU had been "abused" had arrived in Belgrade several times over the last year, so that a suspension along the lines of the suspension announced in early May was actually expected in early March. True, in our case the European Commission did not (as in the case of Croatia or Macedonia) justify its (hopefully temporary) restriction with some specific illegal speculation with sugar that was not actually produced in Serbia, which would make sense and is to be expected, but instead issued a very generic suspension "because of inadequate system for certifying the origin of goods", which on the other hand gives credence to the assertion by Slobodan Milosavljevic, Minister for Trade and Tourism in the government of Serbia, that the abovementioned suspension was motivated largely by large amounts of sugar exported under preferential conditions from Serbia and Montenegro (implying a price differential between the whole market price of sugar of between 200 and 300 Euros and the price that can be obtained in the EU, in excess of 600 Euros). The EU Commission granted the abovementioned privileges only to the countries of the Western Balkans, reckoning that roughly 500,000 tons of total production of sugar (mostly in Serbia and Croatia) and another 150,000 tons of surplus production [production in excess of local consumption] would not significantly affect other exporters to the EU (with overall quota of about 12 million tons). Obviously, the Commission is now trying to set the scene to cancel that privilege, so that the assertion of Miodrag Kostic, owner or lessee of four sugar production facilities in Vojvodina (out of eight), that suspension is the consequence of "strong pressure by the economic lobby in Brussels on European politicians", cannot be rejected outright as unfounded.
Traders and Government: Naturally, this does not mean that this "sweetest guy" in Serbia (as the Government of Serbia ironically refers to him) can a priori be acquitted of any wrongdoing in this whole business, nor can the sugary fickleness of Brussels be blamed for everything. However, in connection with sugar and "the struggle" of the economic and political lobby in Brussels we have reasons to believe him. As one of the biggest sugar exporters (his trade company MK Komerc) he definitively knows well all roads in the "sweet trade". Given his inclination to seek best friends among Prime Ministers and Presidents (so that he is obliged to present their parties with numerous fax machines, as Nenad Canak explained on TV Pink in the program "Trap") - he probably knows even better how economical lobbies in Brussels exert pressure on politicians. One expects that Belgrade isn't ahead of Brussels in that respect.
Export-import figures regarding Serbian sugar (there is quite a lot of confusion in our public in connection with them) have allegedly shocked both local and European observers. Namely, according to the data presented by Belgrade publication "Pregled" (May 5, 2003 issue) in Serbia and Montenegro sugar processing plants produced 210,000 of sugar in 2001, the local consumption was estimated at 210,000 and 170,000 tons of sugar were exported, which implies that 170,000 tons of sugar were imported that year. The following year, 2002, according to these data the commonwealth of Serbia and Montenegro produced 273,000 tons of sugar, consumed again 210,000 tons, and exported 200,000, which again implies that 137,000 tons were imported.
Before turning to these or similar data from other sources, we should mention that export of sugar to EU under preferential conditions was extremely important for the local sugar industry. For example, according to the Serbian statistical yearbook, the production of sugar in Serbia (there is no production in Montenegro) in the mid-nineties fell to about 150,000 tons per year, and in 2000 it bottomed out at 115,000 tons. Therefore, as soon as the preferential conditions were approved the production doubled in a year and nearly tripled after two years, while this year (if it weren't for the drought) we could have expected four times larger production than in 2000. Thus, 100,000 farmers and workers whose livelihood depends on sugar again secured a source of decent income (ignoring for the moment members of the infamous Association of those who always do well) - and now they fear that European preferential import quotas may be suspended.
Salinity of Adriatic Sea: In all that, it should be noted that as early as 1985 Serbia produced 650,000 tons of sugar in one year in sugar processing facilities with capacity of 900,000 tons per year (and out of all those facilities only the one in Pec [in Kosovo] is today "outside the jurisdiction" of the government of Serbia). Did leading politicians in the EU, when they approved sugar import privileges for our country miss this production capacity of our factories and fields? Were their experts naïve and assumed that production could not be ramped up that quickly? Did they fail to guess that it would occur to our people to export sugar at twice the normal prices and to import sugar from abroad (even from the EU) for local consumption (with European export subsidies, that sugar is very cheap)? All these questions are typically asked by economists. All traders and all sugar producing plants in Serbia had the right to export as much sugar as possible and earn as much as possible, provided they did not break any rules. Therefore, we cannot blame traders and producers, but must seek blame in the Governments of Serbia and Montenegro and their customs services. These institutions are obliged to make sure that rules are observed and that traders and producers to not excessively abuse privileges approved by the EU and make sure they are not lost. Our state institutions pretend to be "uninformed" that there are bad guys on the market who pursue easy profits and do not care much about "Serbia's standing in Europe", while all of this is actually about incompetence and corrupt nature of those officials who are obliged to put a stop to "illegal greed".
Essentially, as far as Serbia and Montenegro is concerned, the key of the scandal is not in export business (at least no one has offered any evidence for something like that, except that the non-existent quota was allegedly surpassed, which sounds very silly), but on the import side. The first interesting fact is that some of the biggest importers of sugar in the last year are companies that normally have nothing to do with this business. For example Vocar Lutka from Prijepolje or Jurina petrol etc. Then, it is also striking that the list of importers includes numerous companies based in Montenegro, which together with "sister" companies form Serbia skillfully exploited "lack of harmonization" of the two customs systems according to which import of sugar was taxed (according to Blic, May 6, 2003 issue) $150 per freighter truck, compared to $5000 in Serbia (250 tons). According to some sources, due to that "lack of harmonization" last year Montenegro imported about 78,000 tons of sugar, which most likely ended up in the Serbian food industry or in Serbian cookies (as one expects that it wasn't used to reduce the salinity of the Adriatic Sea). Naturally, this clearly explains why Montenegrin interests in connection with customs policies obviously tremendously differ from those of Serbia and why the reformers in Podgorica are so loath to increase import customs.
Fear of Future: Everything mentioned here is based on the information that so far the investigation in Serbia and Montenegro has not found any indication that any of allegedly 199,000 tons of sugar imported from the European Union (according to a statement given by Vladan Begovic, customs chief, as reported by Danas on May 5, 2003) was again re-exported to the European Union with profit of at least $100 per ton.
According to some sources, there was no "re-packaging" of goods, but it is difficult to definitively dismiss the possibility of "re-packaging" of documentation that crisscrossed borders instead of goods. However, if something like that happened, our clever minds had to cooperate with "masters" from the European Union (and their envoys in various European customs services). Although it is not difficult to guess that within European Union there are people inclined to tempt Balkan traders into illegal business speculations, so far the possibility that papers were forged seems least likely of all.
By the way, our experts assess that the imposition of the three-months suspension at this moment will not result in much damage, as within the country there are hardly any hoards of sugar left, and the planting of 100,000 hectares with sugar beets has, naturally, been completed. However, the same experts emphasize that if this suspension becomes permanent, damage will be enormous.