New sugar policy not so sweet for producers

JAKARTA (JP): The government's move to impose new restrictions on sugar imports will not bring much help to local sugar producers, according to the association of Indonesian sugar producers.

Indonesian Sugar Association chairman Farukh Bakrie said allowing sugar producers to import the commodity would not help local sugar compete with the less expensive imported sugar.

"What the industry needs is for the government to reimpose import duties in order to protect the sugar industry and farmers," Farukh was quoted by Antara news agency as saying.

He said imposing import duties on sugar was easier and more effective than the new restrictions in reducing sugar imports.

"By imposing a high import tariff on sugar the government would gain additional revenue, while the government could save the money it uses subsidizing sugar factories," Farukh said.

Under the new sugar policy enacted by the Ministry of Industry and Trade late last week, certain types of sugar will only be allowed to be imported by Java-based sugar producers which hold import and production permits. The amount of sugar the mills will be able to import will be decided by the ministry.

The new policy, which will remain valid until December this year, regulates eight categories of sugar which are allowed to enter the country, including cane sugar, beet sugar, packaged sugar and double refined sugar.

The new policy states sugar importers/producers must submit a written report on their sugar imports to the Directorate General for Foreign Trade, which issues sugar import licenses.

According to the ministry, the new import restrictions are intended to protect the domestic sugar industry and sugarcane farmers from a further fall in sugar prices.

The government removed import duties on sugar late last year in compliance with economic reform programs agreed upon with the International Monetary Fund (IMF), which is organizing a US$40 billion bailout for Indonesia.

Indonesia, which produces about 1.7 million tons of sugar a year, has to import the commodity to meet local demand, which reaches about 3.1 million tons.

The liberalization of sugar imports has severely damaged local sugar producers, particularly after the rupiah strengthened against the U.S. dollar over the past few months. This has made local sugar more expensive than imported sugar.

Meanwhile, Minister of Industry and Trade Rahardi Ramelan defended the new sugar import restrictions, reiterating that the new policy was aimed at helping the local sugar industry and sugarcane farmers.

Rahardi said under the new policy, sugar producers/importers would be obliged to buy a particular amount of sugar from local farmers. However, he did not specify the amounts.

The minister also said the new sugar policy did not violate the economic programs agreed upon with the IMF.

"We have the right to issue regulations to cure our ailing sugar industry. This is an emergency case," Rahardi said, adding that the new policy would end before the IMF letter of intent came into effect in 2000.

Director General for Foreign Trade Djoko Moeljono said reimposing import duties on sugar would be complicated because the government would first have to notify the World Trade Order and Association of Southeast Asian Nations ministers.(01)