Monday 4 April 2011

On Beer, Waste and Sugar

Reading the news today, two articles caught my eye in Kathimerini:

The first is that the Athenian Brewery, the brewer which produces Heineken and Amstel in Greece, and the company which the New York Times improbably cast as the villain in a recent article on entrepreneurship in Greece, was voted the best place to work in Greece in a survey implemented by the ALBA Business School. Re-reading the NYT article, I was struck again by how outlandish the claims are. Evrypides Stylianides, a former ND minister, is quoted as giving the example of a Greek law giving donkeys the right of way on Greek roads.

Memo to Mr. Stylianides, and to the NYT: I have never seen a donkey claiming the right of way on Greek roads. If you do, I suggest you use your own considerable good judgement on how to proceed.    

The second is the order given by the Interior and Environmental Ministries to regional administrations to—once again—close 63 illegal landfills by June. The story of landfill closure is a recurring one, since a modern integrated waste management system based recycling of organic and inorganic waste does not exist anywhere in Greece. The result is that landfills are “buried”, but then new sites started in remoter areas. We see this quite often driving through Boetia and Fokithas Prefectures.

Reading this article, I had to ask myself, given these headlines, how this new order, together with the continuing chaos in Keratea over the waste disposal site there, reflected on Prime Minister Papandreou’s plans for the Mediterranean Climate Change Initiative

“But change will be difficult,” I hear his supporters admonishing me. “Rome wasn’t built in a day. The journey of a thousand miles begins with a single step.” This is no doubt true. But the fact of the matter is that even today, there are no steps being taken for an integrated waste management / waste disposal site anywhere in Greece. Such a site would include:

·         A medium-scale recycling facility, which would serve industrial customers by selling waste paper, glass, plastic and various metals (mainly aluminium). There is sufficient industrial demand within Greece for these products; there is also major demand among export customers.

·         An organic waste treatment facility, which would turn organic household waste into compost and energy through biogas. This energy would either be sold into the municipal grid, or used to power the recycling facility, depending on output.

·         A municipal-based recycling collection network, enabling the recycling plant to be located in close geographic proximity to the waste production and collection points.

The main problem, of course, is that household and municipal recycling remains a government monopoly, and remains based on inorganic waste. There is only one state-owned recycling company in Athens, for instance, which has signed exclusive contracts with most municipalities. Yet there is no economic reason for this, particularly when we see just how inefficient the waste collection and treatment system is.

The number of “green” garbage skips which are for general garbage, for instance, far outnumber the “blue” ones which are for general recyclable materials. (There is no primary separation at the point of collection on a wide scale; there are very limited collection points for glass bottles, paper and aluminium, which do not begin to meet demand). On several occasions, I’ve seen municipal garbage trucks adding the recyclable skips to their loads, together with the organic refuse. The recycling truck rarely comes by most neighbourhoods: the skips are constantly full and overflowing.

All this points to a latent demand for recycling. The quickest and surest way of meeting it is not to expand yet another inefficient public enterprise, but to license private sector operators for municipal recycling on a planned basis, allocating a number of operators per specific geographic areas in a first phase, and then allowing proper competition in a second phase. This would require a change in zoning laws, as well as the possible provision of public land. But there is no reason this could not take place within 6 months, if the political will were in place. This would not only create employment and attract investment, but would go a long way towards allowing Greece to comply with EU environmental regulations–which it has signed, but never implemented.

Perhaps after the first baby steps towards modern waste management have been taken, the Prime Minister could return to the Mediterranean Climate Change Initiative and purport to give other countries a lesson in how to save the environment.

On the other side of the ideological spectrum, To Vima reported on Sunday that the Hellenic Sugar Industry (EBZ) was finally being put up for sale by the state-owned Agricultural Bank of Greece. According to “Vima”, EBZ has seen losses of EUR 84.05 mln since 2005, and this year faces a further loss of EUR 10 mln in the best case scenario. It employs 424 staff (far more than would reasonably be expected) and purchases sugar at EUR 41/tonne, versus EUR 32 in the “rest of Europe.” Part of this cost difference comes from the fact that it grants seeds and pesticides at 20% below cost to its network of 6,000 families involved in sugar beet cultivation. EBZ apparently sells refined sugar at EUR 800/tonne, versus a European market price of EUR 600 per tonne.  

EBZ appears to be yet another one of hundreds of inefficient state enterprises and organisations which remain funded or subsidised by the Greek government, and thus the taxpayer (as well as various international creditors). It would really be better for all involved if both the primary production of beets were restructured (or the fields replanted), and domestic refining stopped entirely, at least at current commercial practises.

The domestic market price of refined sugar at EUR 600/tonne is a protectionist measure for European farmers established by the EU’s Common Agricultural Policy. The 2010 average world price for white refined sugar, Europe FOB using spot prices, was about $ 609/tonne, or EUR 470 per tonne. But import tariffs meant (and still mean) that that same sugar which you buy at EUR 470/tonne could not be sold at less than EUR 600/tonne in the European market. And EBZ doesn’t produce it for less than EUR 800/tonne, nearly twice the market rate.

If Greek sugar beet producers are producing at EUR 41/tonne versus a European price of EUR 32/tonne, and if the cost of refined sugar is EUR 200 more per tonne than the EUR 600 market price, then there is no way this boondoggle is every going to make money.

The sale of EBZ should be done as soon as possible: alternatively, it should be liquidated. The sale of the Agricultural Bank of Greece should occur as soon as possible as well.

I am sure some people will ask: but what about the 424 staff at EBZ? What about the 6,000 families producing sugar beets? My answer is that we—the taxpayers and consumers in this country—are already paying for their lack of competitiveness through a high sugar price and Common Agricultural Subsidies and who knows what other direct or indirect subsidies. In the previous 6 years, EBZ has run up EUR 84 mln in debts—nearly EUR 200,000 per worker.

If they can’t survive despite all this aid, then they should find another job to do, and fast. One would hope that the job of the government isn’t to bankrupt a country on behalf of a series of small special interest groups. This is precisely the type of industrial logic which has led Greece into a EUR 340 bln debt, and we can no longer afford it.

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