* Private sector expected to help lower production costs
* Sale of five factories to be completed in 16 months
* Investors from Brazil and Mauritius showing interest
By Duncan Miriri
NAIROBI, June 26 (Reuters) - Kenya expects privatisation of five sugar factories to cut inefficiencies in the industry and boost its regional competitiveness ahead of the end of trade safeguards, a top government official said on Friday.
Experts blame high costs of production for making the Kenyan sugar industry uncompetitive compared with other producers in the region.
"We believe that when the private sector comes in, it will be able to look at each and every line and may cut costs to the tune of 30 percent. If they do that, then we will be home and dry in terms of competition," Romano Kiome, the Agriculture Ministry's permanent secretary or top civil servant told Reuters.
The east African nation has a deal with the Common Market for Eastern and Southern Africa (COMESA) trade bloc that allows it to restrict sugar imports from the bloc to 200,000 tonnes per year to protect its industry.
It is selling shares in five sugar factories in a privatisation round that also involves sale of stakes in other enterprises. [ID:nLH656661]
Kiome said it was hard to tell if the industry is ready for the lifting of the trade safeguards.
"We expect that privatisation will be achieved in the next, maximum, 16 months. Until it is in the hands of the private sector... it would be premature for somebody to say we are ready for the removal of the COMESA safeguards," he said.
Investors from Brazil, Mauritius and Turkey have shown interest in bidding for the factories, Kiome said, adding bids would be opened next Tuesday.
Successful bidders will be met by high costs of production that compare poorly with other producers.
In the western Kenya sugar belt, it costs $570 to produce a tonne of sugar compared with $240-$290 in Sudan and Egypt, according to data from the Southern and Eastern Africa Trade information and Negotiations Institute.
"There are a lot of inefficiencies of both labour and money in the sector," said Kiome.
Kenya has an annual sugar deficit estimated at 200, 000 tonnes.
It is filled by imports from COMESA countries but illicit imports also make their way into the country, to the chagrin of local producers, whose processed sugar is far more expensive. (Editing by James Jukwey)