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.