Government mulls raising import duty on sugar

JAKARTA (JP): Coordinating Minister for the Economy, Finance and Industry Kwik Kian Gie said on Wednesday the government was considering increasing the import duty on sugar in response to demands from the country's sugar industry.

"Basically we're flexible with the import duty policy," Kwik said during a break in a business gathering.

"We discussed this at the Cabinet meeting," he said, adding that he did not attend the entire meeting because he had to speak at the business luncheon.

"The main intention of the import duty is to protect the producers as well as the consumers ... so we'll find the optimum level," he said.

The government imposed a 25 percent import duty on sugar and a 30 percent import duty on rice late last year to protect local farmers and producers against cheaper imports, which benefited from the weakening of the rupiah against the U.S. dollar.

But the Indonesia Sugar Association said the 25 percent import duty would not prevent the market from being flooded by imports.

"The 25 percent import duty offers very weak protection compared to duties imposed by other countries," the association said, adding that the domestic sugar industry was on the brink of bankruptcy.

The association met with President Abdurrahman Wahid on Tuesday. It has recommended an import duty of around 95 percent, a level which the government had previously agreed to with the World Trade Organization.

However, under pressure from the International Monetary Fund (IMF), the previous government agreed to cut the import duties on sugar and rice to zero percent. But the new administration of President Abdurrahman Wahid renegotiated the policy with the fund and agreed to the 25 percent and 30 percent import duties.

The government earlier proposed higher import duties, an idea which was rejected by the IMF, which is providing the country with billions of dollars in loans. The IMF champions open markets in the country.

Kwik said there were many factors to take into account in the revision of the import duty policy, including the domestic and international price of sugar and the exchange rate of the rupiah against the U.S. dollar.

"There are many variables to be considered, so we have to find the optimum level that will satisfy the interests of various groups.

"We will not ask for the permission of the IMF, but we'll discuss it with them," he said.

IMF representatives are scheduled to visit the country later this month.

According to the sugar association, Indonesia is the world's eighth largest sugar consumer, with annual consumption of about 3.36 million tons per year and an annual increase in consumption of 2.5 percent.

Some 1.86 million tons of this sugar is imported, making Indonesia the second largest sugar importer after Russia. (rei)