Four Java sugar plants to be closed down

JAKARTA (JP): The government will close down four sugar factories in Java next month, the first of 26 plants recommended for closure because they were inefficient or too small, an official of the Ministry of Industry and Trade said.

M. Yamin Rachman, Director for the Agro Industry, said the closures were part of a restructuring program in line with Indonesia's commitment to the International Monetary Fund to increase competitiveness of the local sugar industry.

Yamin said the government would announce details of the closure, including the financial arrangements, next month, Bisnis Indonesia quoted on Friday.

One of the factories to be shut down is owned by the country's biggest sugar producer, state-owned PT Perkebunan Nusantara XI, he said. He did not identify the other three.

The government has long considered closing down inefficient factories but delayed because of lack of funding, he said, adding that closing a factory would cost about Rp 20 billion ($2.2 million), including paying off the workers.

"The Minister of Finance insists the costs of closure be paid by the companies themselves," he said.

Yamin said the Directorate General of Plantations had recommended the closure of 26 of 57 existing sugar factories on Java because they were inefficient.

"That means there are 22 more factories to be either merged or shut down," he said, adding that plants with a processing capacity of less than 2,000 tons of sugar cane per day could be merged instead of being shut down.

State Minister of Investment and State Enterprises Development Rozy Munir said earlier that the government would need $307.5 million to close inefficient sugar factories and strengthen the competitiveness of the sugar industry.

Separately, an official from the Office of the State Minister of Investment and State Enterprises Development, said it was impossible to relocate the factories outside of Java because of the large investment involved.

"To relocate a sugar factory with a capacity of 8,000 tons of sugar cane a day, an investment of Rp 1 trillion is needed," B.S.M. Hutabarat, who heads a team for sugar industry development, said. (10)