RI called on to raise import tariff on sugar

RI called on to raise import tariff on sugar

SINGAPORE (Dow Jones): The Indonesian government needs to
alter its soft stance on national sugar policy and raise the
import tariff in order to protect the crisis-ridden domestic
industry, Faruk Bakrie, chairman of the Indonesian Sugar
Association, said on Thursday.

While the Indonesian government is considered by the local
industry too obedient in adhering to the International Monetary
Fund's call to reduce its already low sugar import tax, it has
insufficient consultation with the private sector on policy
issues, Bakrie told Dow Jones Newswires in an interview.

Besides tougher trade barriers, Indonesia also needs to
establish an independent decision-making body to help revive its
sugar sector, he said.

Bakrie was speaking on the sidelines of the three-day Asia
International Sugar Conference in Singapore, which ends on
Friday.

At the start of the year, Indonesia imposed import duties of
20 percent and 25 percent for raw and white sugar, respectively.
The IMF agreed to these duties in a letter of intent but said
these measures should be temporary and revised lower in August.

According to Bakrie, however, instead of reducing the tariff,
Indonesia should strive for much higher levels because the
current import duties are way below those imposed by other
producing countries.

Sugar producers such as Thailand and India have import duties
as high as 90 percent, he added.

"Every country needs to protect its own industry," he said,
adding that it had been "crazy" for the Indonesian government not
to impose any import duties before.

In fact, "we have the right" to adopt higher import tariffs
under the World Trade Organization terms, he said.

While Bakrie declined to provide a target for a higher import
tariff, Indonesian sugar producers have asked the government to
shield the industry by raising the duty to 95 percent.

Indonesia is the world's second largest sugar importer after
Russia.

October raw sugar futures closed Wednesday at 10.48 U.S. cents
a pound on New York's Coffee, Sugar & Cocoa Exchange, compared
with 10.62 cents/lb Tuesday.

However, the Indonesian government always "follows" the advice
of the IMF and the World Bank on its sugar policy, he said.

While the IMF claims it "has never pressed the Indonesian
government regarding the sugar business," the latter says it
"always has pressure from the IMF," said Bakrie in a paper
presented at the conference.

Despite industry appeals for more protection, "they (the
government) understand, but they don't listen," Bakrie said in
the interview.

Bakrie said that he will continue to "fight for" a higher
import tariff for the Indonesian sugar industry and that his
ideas have gained support from the European Union countries as
well as the International Sugar Organization.

Because of a depressed market, "everybody (in the Indonesian
sugar sector) is suffering," he said, adding that "only traders
are happy," because they dominate the market and take advantage
of low prices.

Indonesian growers are losing the incentive to plant sugar
cane, he said. As a result, the country may have to import more
sugar this year, he added.

But Bakrie declined to provide a specific forecast for the
rise in sugar imports this year.

Indonesia imported a total of 2 million tons of sugar in 1999.

"Everybody wants to sell sugar to our country," said Bakrie,
pointing to a small bag of refined sugar he received from another
conference delegate.

Instead of continuing to rely on the government for shaping
the industry's future, Indonesia should set up a new and
independent policy-making institution, such as a national sugar
board, consisting of both the private sector and government
representatives, he said.

The new institution would oversee the development of the
national sugar industry, reducing the influence of the government
to a minimum, according to Bakrie.