Market oriented solution to sugar problem

By Cheng Xizhong | China Economic Net Jul 18, 2021

Editor's note: Cheng Xizhong, Visiting Professor at Southwest University of Political Science and LawSenior Fellow of the Charhar Institute, former Defense Attache in South Asian countries. The article reflects the author's opinions and not necessarily the views of China Economic Net.

by Cheng Xizhong

Beijing, July 18 (China Economic Net)-In the fiscal year 2020-2021, the price of sugar in Pakistan rose by about PKR 20 per kilogram, and the price of sugar in major cities soared to PKR98-110 per kilogram. Despite the increase in sugar production and imports, consumers had to pay PKR20-25 more.

In recent years, the sugar problem in Pakistan has been prominent. In the past, Pakistan was a big sugar producer and exporter. Since the second half of the year 2020, Pakistan's sugar production has not met its domestic needs, so Pakistan has imported sugar from abroad.

There are three main reasons for the soaring sugar prices in Pakistan. First, the supply has not been able to keep up with the consumption. Second, it is closely related to the high inflation rate. Third, it is affected by the rise of international sugar prices.

Recently, India's sugar export has stagnated, sugar production in Thailand, the European Union and other major sugar producing regions is declining and the supply in the international sugar market is generally tight, which has pushed up the international sugar price.

The ecological environment in Pakistan is very suitable for sugarcane cultivation, and the sugar produced in Pakistan is of high quality. There shouldn’t have been any sugar crisis in Pakistan. The current sugar problems, including insufficient production and supply, and soaring sugar prices, are mainly caused by human factors.

For a long time, sugarcane purchasing and sugar production have been monopolized by family enterprises, and even the government subsidies to farmers mostly go to the pockets of family business owners, which seriously affects the enthusiasm of farmers to grow sugarcane. I have noticed that the government of Pakistan has recently been seriously dealing with some major cases and severely cracking down on criminals in sugar production and supply chain.  Prime Minister Imran Khan at a federal cabinet meeting once said that “we should find out the reasons for the rise in sugar prices, and investigate and expose all the facts”.

About how the government and the market will adjust the sugar price, I have three suggestions. First, we should completely liberalize the sugarcane and sugar market, and adhere to the market orientation. Second, we may introduce foreign advanced management to break the monopoly of family business. Third, the government should be only responsible for the formulation and promulgation of relevant laws, regulations and policies, and stop intervening in the market too much. If the government intervenes in the market too much, it will inevitably lead to collusion between officials and businessmen, resulting in serious corruption.

Besides, having worked in South Asian countries for so many years, I know that people in South Asian countries excessively  enjoy sugar. They feel that when entertaining guests, the more sugar they put into milk tea, the more hospitable the hosts will be. On this issue, I would like to advise Pakistani friends that the sugar content in rice, flour and various fruits we eat every day is enough for our body's nutritional needs. It may be good for our health to consume less sugar.

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