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.