Sugar policy in place until 2007: Mari

The Jakarta Post, Jakarta

The government will maintain the sugar policy of the previous administration until 2007, despite criticism the policy is responsible for the rampant smuggling of the commodity.

Minister of Trade Mari E Pangestu said on Thursday that rather than putting together a stopgap policy to provide short-term solutions for current problems in the sugar industry, she would rather work on a comprehensive policy that would establish medium-term direction for the industry.

She said she was gathering input from various parties on the policy, which is expected to be issued in 2007.

"We will make a comprehensive medium-term policy that will be able to accommodate the interests of producers, growers, industry and the public," Mari was quoted by Antara as saying after a meeting with Japan's Minister of Economy, Trade and Industry Shozo Nakagawa.

According to existing regulations, issued by former minister of industry and trade Rini MS Soewandi, only five companies are allowed to import sugar: state-owned plantation firms PPTN IX, PTPN X and PTPN XI, and state-owned trading firms PT Rajawali Nusantara Indonesia and PT Perusahaan Perdagangan Indonesia.

The policy was meant to protect local sugar growers from a massive inflow of cheaper imported sugar.

Indonesia, which at one time during the Dutch colonial era was the world's largest sugar exporter, is now among the world's largest sugar importers. In 2002, Indonesia produced 1.8 million tons of sugar, while demand reached 3.2 million tons.

Domestic sugar production has declined over the past several decades due to the failure to upgrade sugar factories and sugarcane plantations. Inefficient factories and the declining productivity of sugarcare plantations are blamed for the higher price of local sugar compared to imported sugar.

The limitations placed on sugar imports have led to rampant smuggling of the commodity.

Several parties have urged a review of the country's sugar policy, including the Business Competition Supervisory Commission, which believes the policy creates unfair competition and could lead to the formation of a cartel.

The administration of president Megawati Soekarnoputri introduced in September 2003 a program to improve the nation's sugarcane plantations.

Under the program, Megawati's administration planned to provide Rp 68 billion in grants and Rp 1 trillion in soft loans per year until 2005 to help sugarcane growers plant their fields with new high-yield seeds.

"With that money, growers can replace their old sugarcane with new high-quality seeds to increase output. We hope this program will help Indonesia become a sugar exporter by 2007," said then minister of Agriculture Bungaran Saragih.

However, some industry players and analysts argued that the main problem in the sugar industry was the old machinery still being used in sugar mills and the mills' inefficient labor force.

However, Bungaran claimed the government did not have enough money to spend on both seeds and machinery at sugar mills.

"There are over 56 sugar factories in Indonesia. We would need a large amount of money to upgrade them. We can't do it now, but maybe in the next two or three years we can. So we have to prioritize sugarcane seeds," said Bungaran.