JAKARTA (TheInsiderStories)—Indonesia’s government need to set up incentives for the sugar industries to cut import. Recently, the Ministry of Trade has open to import the raw sugar of at least 1.1 million tonnes (MT).
The import is needed because the local production does not secure the national demand. Trade Minister Enggartiasto Lukita has said the import quota permit will be issued gradually.
Furthermore, he said, the government considered starting to import next month when the Ramadan entered, followed by the Eid Al-Fitr, that when sugar consumption usually increase.
According to the ministry data, the sugar production and the current stock only 2.9 MT in 2018, while the demand reached 4 MT and dominated by industry of 3.6 MT.
In 2010 and 2011, Indonesia imported 2.8 MT and 2.6 MT raw sugar. It decreased to 2.3 MT and 2.2 MT in 2012 and 2012, but it significantly increased to 3.2 MT in 2016.
The number of imported sugar increase because of the progressive growth in the food and beverages industries. According to the Statistic of Indonesia, food and beverages industry projected to the growth of 8 per cent annually.
INVESTMENT IN SUGAR INDUSTRY
Currently, the existing sugar production of the country around 2.5 to 2.9 MT annually. The government has revitalization program to increase the capacity of state-owned sugar factories. One of them is the revitalization of three sugar factories owned by PT Perkebunan Nusantara (PTPN) XII.
The sugar factory in Asembagus in Situbondo East Java increase from 3,000-ton cane per day (TCD) to 6,000 TCD, the sugar factory in Jatiroto, Lumajang, East Java increase to 7,000-10.000 TCD, and a sugar factory in Magetan increase to 3,000-4,000 TCD.
By this planning, the government plans to increase the sugar production up to 2 MT in 2018. In 2019, the government plans to increase the sugar production to aroun 3 MT.
However, the sugar demand reached around 6 MT per year. It means the imported sugar could not be cut until 2019. According to TheInsiderStories views, to secure the national demand and cut the imported sugar, the government must boost investment in this industry.
The Ministry of Industry actually offered an incentive to boost investment in this sector such as providing incentives for the development of sugar factories integrated with sugar cane as mandated by Government Rule no. 2 year 2017 on the Development of industrial Facilities and Infrastructure.
But the incentive is not enough to improve investment in the sugar industry. There are many obstacles faced by the investor in the sugar industry. First, the difficulties to find the proper land for the cane plant.
In addition, the investment in the sugar factories needs long-term return with the high value of the investment at least Rp2 trillion (US$146 million) for the 10,000 TCD. Furthermore, the investors also suffer the high risk of cane pest and there is no guaranteed price.
The government needs to be seriously set up some breakthrough to overcome these obstacles for securing the sugar demand.