Monday May 18, 2005

Dear Prime Ministers,

As former Executive Officers and Technical Directors of the banana industries of the Windward Islands and Jamaica, with extensive experience in banana research, development, production and marketing worldwide, we are pleased to submit to you the attached proposal directed at the resuscitation of the Windward Islands banana industry.

We were motivated to make this presentation after extensive analysis of the present predicament of our industry and reports from some quarters that our banana industry "now faces extinction."

This paper is meant to supplement initiatives by WIBDECO, the island banana companies, and you, our leaders, in the interest of our banana industry and our many citizens whose livelihoods still depend on it.

We sincerely hope that our preliminary suggestions will be given due consideration as part of an integrated program for the resuscitation of our industry.

We remain available to assist in this process with emphasis on what can be done in the islands to sustain our industry through improved labour productivity and quality and decrease in cost of production.

Yours sincerely,

Dr.Joseph E. Edmunds                                                                Dr. Clayton A. Shillingford

INTRODUCTION

This presentation to the Heads of Government of the Windward Islands (Windward Is) is put forward by the authors in a genuine desire to assist in the resuscitation of the industry and to contribute to its sustainability in world trade. Growth in the island economies and relief of poverty in the rural sector is largely dependent on developments in agriculture and more particularly bananas. As can be seen from the attached qualifications and experience of the authors, they have in the past played a pivotal role in the industry of the Caribbean and have considerable experience in advising other banana industries worldwide.

BACKGROUND

Production and Market Perspectives

The banana industry of the Windward Is. was once the economic backbone of the islands, when they enjoyed specific quotas and duty free import into the UK. With the introduction of the tariff-only EC Common Organization of the Market in Bananas (COMB) in 1993 there began a steady decline in export value from the peak levels of the 80’s and the early 90’s. Since then the erosion of preferences has had a devastating effect on the island economies. In 1991, bananas contributed US$130 million to export earnings, US$32 million in Dominica, US$60 million in St.Lucia, US$34 million in St.Vincent, and US$4 million in Grenada. The trend since then has been progressively downward (Table1). The share of bananas in export revenue from the Windward Is was estimated as a third in 1993 but was much higher in earlier years.

Table 1: FOB Export Values in US$ million, 1994-2004,

Source: WIBDECO[1]; quoted in National Economic Research Associates (NERA) Report, 2003 and other WIBDECO sources. For Grenada (-) signifies less than 1.0 million tonnes.

The banana industry was the principal employer of the populations of the islands. The Oxford Policy Management Report asserts that in 1993-2001 banana sector employment (transportation, operations etc) was as high as 67,000 or 18% of the working population (age 15 to 60 years). From 1994 to the present there has been a steady decline in sector employment as well as the number of growers who deliver bananas for export, falling from 23,000 in 1994 to less than 5000 in 2003 (Table 2). The result has been, in general, a significant decline in the island economies, increased migration and in particular, increased rural poverty.

Table 2: Number of Active Growers in the Windward Islands in ‘000, 1994-2003

Source: WIBDECO, as quoted in the NERA Report, 2003 and other WIBDECO sources

NA, Not available

The decline in number of growers, which is estimated at more than 60% compared with pre-1994 levels, has been matched by a significant fall in area under banana cultivation. Among the three largest exporters, the biggest proportionate fall occurred in Dominica. Grenada was down to only 10% of its previous area but the recent hurricane Ivan has now completely decimated the production in that island.  With these trends the income level per farmer is estimated at an average of US$5000-6000 per year, barely enough to sustain a family.

Export production of Windward Is bananas almost doubled to 260,000 tonnes in the period 1981 to 1990/2 but thereafter began a very steep decline. By 1994, export production was down to 157,000 tonnes and now stands at 84,000 tonnes in 2004, a drop of 46% (Table 3).

Table 3.Production of Bananas in the Windward Islands in ‘000 tonnes, 1994 to 2004,

Source: WIBDECO; quoted in IMF Country Report 03/29 ibid, NERA Report and other WIBDECO sources

In 1993 a total of 470,000 tonnes of bananas were imported into the UK from all sources rising to 833,000 tonnes in 2002. By that time, Windward Is producers had lost significant market share to other ACP and dollar sources even while there was significant growth in the UK market.

Evaluating the Viability of the Industry

We should examine carefully the two main factors, low productivity and high cost of production, in the reduced viability of the Windward Is industries. Comparison with other African, Caribbean and Pacific States (ACP) and Dollar sources is instructive. Some estimate of the comparative costs of production can be gained from the FOB unit values of their exports (Table 4)

Table 4: Comparison of FOB Unit Values of Banana Exports in 1999

Source: WIBDECO, other ACP sources, FAO Yearbook as quoted in the NERA Report

These data are only indicative because actual production costs are not readily available since Windward Is. farmers hardly keep records until recently following EUREP-GAP, a system of UK supermarket traceable requirements on pesticide use, waste disposal and labour standards.

Receiving and loading costs are also high as indicated by Table 5

Table 5. Receiving and Loading Costs in US$/tonne, 1994-1997

The contrast of conditions of production is often cited for the large gap in productivity between the Windward Is. and competitive producers. (Table 6