Rini mulls options to protect sugarcane farmers

Adianto P. Simamora, The Jakarta Post, Jakarta

Minister of Industry and Trade Rini M. Soewandi said on Friday that her office was currently evaluating alternative policies to protect local sugarcane farmers against the impact of cheaper imported sugar.

She said that the alternatives were either to impose an import quota system or to adopt a "ceiling price and floor price" mechanism.

"We'll make a decision soon," she told a media conference.

Rini did not provide details.

But the Ministry of Industry and Trade's Director General for International Affairs Sudar SA said that a decision was expected "within two weeks."

He said that the ministry was studying which alternative would be more effective in protecting local farmers, and which did not violate the World Trade Organization (WTO) ruling.

Local sugarcane farmers have intensified pressure on the government to boost import duties to as high as 110 percent on sugar to protect them from cheaper imported products, which have forced sugar prices down at home.

Indonesia, Southeast Asia's largest sugar importer, currently applies a 20 percent import tax on white sugar and 25 percent on raw sugar.

Minister of Agriculture Bungaran Saragih has also called for a higher import tariff.

Rini has so far rejected the higher tariff demand.

Her office initially responded by announcing a plan to adopt a ceiling price and floor price mechanism. Under this policy, the government would purchase farmers' sugar output if the price went below the floor price, and resell it to the market when the price moved above the ceiling price.

The policy is aimed at protecting both the interest of farmers and consumers.

But the plan was criticized by Bungaran, who argued that such a policy would be costly for the cash-strapped government.

Rini explained that raising the import tax would boost sugar prices at home, and create a heavy burden on consumers.

She said that Indonesia need imported sugar products due to the lack of domestic production.

Indonesia produces approximately 1.5 million tons of sugar annually, while domestic consumption stands at around three million tons a year.

Indonesia imported around 2.1 million tons of sugar in 1999 and 1.2 million tons in 2000.

Under the WTO ruling, the government is allowed to impose high import tariffs on agriculture products.

Rini said that her office would only move to raise import tax on sugar as well as on other agriculture commodities such as rice and soybean if they were treated as "strategic commodities" that must be protected by the government to ensure food security in the country.

The Ministry of Agriculture has started a campaign to implement a food security program, but it has yet to disclose which particular agriculture commodities will be included in the program.

"Until now, we don't have any clear food security program," Rini said.

The government has also been under pressure to limit rice and soybean imports by raising tariffs. The current import tax on rice is Rp 430 per kilogram, or about 30 percent of the value.