Fri, 25 Feb 2000

Unchanged import duty signals death of sugar mills

JAKARTA (JP): At least 50 local sugar mills, or more than two- thirds of the country's 70 mills, will go under if the government does not raise the import duty on the commodity, a sugar mill executive warned on Thursday.

The general manager of the Madukismo sugar mill in Yogyakarta, Slamet Darsosoeprapto, said the government should raise the import duty on sugar to 65 percent from 25 percent at present to save the country's sugar industry.

He said eight sugar mills had stopped operation.

Of the remaining 57 mills in Java, 39 were now on the skids, while 11 of the 13 mills outside Java were near bankruptcy for failing to compete with the prices of sugar imports.

He warned that closure of the mills would lead to the layoff of 12 million people working in the industry and have repercussions on people working in areas that were related to the sugar industry.

"Aside from sugar, the mills also produce material for the making of cooking spices, paper and the cultivation of mushrooms," Slamet was quoted by Antara as saying.

Thereby, the government should do its utmost to protect the country's sugar industry, Slamet said.

The government imposed a 25 percent import duty on sugar late last year to protect local farmers and producers against cheaper imports which benefited from the weakening of the rupiah against the U.S. dollar.

During former president Soeharto's era, the government set a high import duty on the commodity and only authorized the State Logistics Agency (Bulog) to do the importation.

However, under pressure from the IMF, the previous government agreed to cut the import duties to zero percent. But the new administration of President Abdurrahman Wahid renegotiated the policy with the fund and agreed to the 25 percent duty for imported sugar.

The government earlier proposed a higher import duty, an idea which was rejected by the IMF, which is providing the country with billions of dollars in loans. The IMF champions open markets in the country.

The Indonesian Sugar Association has proposed to raise the import duty to 95 percent.

Coordinating Minister of Economy, Finance and Industry Kwik Kian Gie recently said they were considering increasing the import duty in response to demands from the country's sugar industry.

Slamet speculated that the International Monetary Fund (IMF) conspired with international sugar producers to eliminate the country's sugar industry.

He said sugar prices in Indonesia were one of the lowest in the world. It now costs only Rp 2,369 per kilogram (kg) (32 US cents), compared to Rp 6,419 per kg (at the exchange rate of Rp 7,000 per dollar) in the United States, Rp 15,895 per kg in Japan and Rp 5,044 per kg in Canada.

Indonesia's import duty on sugar was also one of the lowest in the world, he said.

In comparison, he said, European countries set an import duty of between 240 percent and 288 percent, while in South Africa the duty was 124 percent, Thailand 104 percent and the Philippines 133 percent.

Meanwhile, sugar cane farmers in Central Java and Yogyakarta said on Thursday they would give the government until April to review the sugar import duty policy.

Otherwise, they said, they would travel to Jakarta to hold a rally against the policy.

"At least 5,000 people are ready to go," Abdul Wahid, coordinator of the Association of the Central Java-Yogyakarta Sugar Cane Farmers, warned.

The government data says Indonesia is the world's eighth largest sugar consumer, with an annual consumption of about 3.36 million tons per year and an annual increase in consumption of 2.5 percent.

Some 1.86 million tons of this sugar is imported, making Indonesia the second largest sugar importer after Russia. (jsk)