Association calls for higher duty on sugar

Association calls for higher duty on sugar

Adianto P. Simamora, The Jakarta Post, Jakarta

The Indonesian Sugar Association has renewed calls on the
government to raise the import duty on sugar imports to protect
local producers as many other countries do including European
countries and the United States.

Association chairman Farukh Bakri asked the government to
raise the import duty to at least 65 percent.

This was still much lower than the import duties imposed by
many countries, Farukh said, citing that the European countries
imposed a 240 percent import duty on the commodity, the United
States 150 percent. Neighboring countries, Thailand and the
Philippines imposed an import duty of between 95 and 100 percent.

"Indonesia is one of the countries with the lowest import duty
on sugar," Farukh said.

The country's import duty on sugar now stands between 20
percent and 25 percent -- a level agreed upon in 2000 by the
government and the International Monetary Fund (IMF), which has
provided billions of dollars to Indonesia to help it recover from
the economic crisis.

In 1998, the government set a zero duty on the commodity at
the request of the IMF, which seeks to impose a free-market
system in the country's economy. The move was welcomed by many
analysts who believed the policy would force the local industry
to improve its efficiency.

The country's sugar industry is dominated by state-owned firms
that mostly use antiquated machinery.

According to Farukh, at least 12 sugar mills have stopped
operation since in 1998 mainly due the high production costs and
the influx of cheaper imported sugar.

Such conditions have made Indonesia Southeast Asia's largest
sugar importer, he said.

The country's total production now reaches 1.7 million tons
with an annual consumption of about 3.3 million tons. Indonesia
imported around 2.1 million tons of sugar in 1999, 1.2 million in
2000 and about 1.6 million last year.

Farukh said the country's sugar industry was now on the brink
of bankruptcy and that the government should move to help it.

Farukh suggested that the proposed 65 percent import duty
collected by the government be used to help the industry and
build new plants to enable the country to become self-reliant in
sugar in the future.

Using the funds, the country would be able to build about 20
new sugar plants within eight years, each of them with a capacity
of 12,000 million tons a day.

Farukh said the association had talked with the IMF and the
Fund was not opposed to the proposal of raising the import duty
on sugar as long as the duty earnings were used for programs to
boost the country's sugar production.

Pressure on the government to raise the sugar import duty also
came from local sugarcane farmers, who launched a demonstration
last month, during which they dumped tons of sugar at the
Ministry of Industry and Trade. They demanded the government
impose an import duty of 110 percent.

Minister of Industry and Trade Rini M. Soewandi, however,
rejected the call, saying that raising the import tariff would
boost sugar prices at home and create a heavy burden on
consumers.