Why should we care about Indonesian sugar when we can purchase cheaper imported sugar? We may say the statement is correct, if it were stated five years ago.
However, now most analysts and businessmen are worried about the future price of sugar, especially if everybody shifts their energy source to ethanol. What can we say about the fact that sugar prices have doubled within 18 months?
Let us look around the world. What lessons can we learn? There are almost no countries that do not implement policy interventions on sugar. In fact, the richer the country, the stronger the state’s intervention tends to be.
The European Union, the third largest sugar producer and second largest exporter, is an example. Even Brazil and Thailand, the first and fourth largest exporting countries respectively, have applied heavy state intervention on sugar to protect their sugar production systems.
Indonesia ranks 12th in worldwide sugar production. However, the country is still dependent on imports, mostly in the form of raw sugar. Indonesia was once historically a global sugar champion in the early 1930s. Indonesia adopted a strong sugar policy under president Soeharto in 1975 through Presidential Instruction No. 9/1975 on Farmers’ Sugarcane Intensification.
Current world sugar champions, such as Brazil, Australia and Thailand, opted for similar strategic choices in the 1970s. For them, sugar is not only money, but also a source of pride — just like palm oil is for Indonesia now.
Unfortunately, after 25 years of sugarcane development under the presidential instruction, Indonesia, unlike successful countries, experienced the worst outcome.
“The sugar industry in Java must be revitalized, while outside Java new sugar industries should be expanded. ”
The outcome was not only worse in terms of sugar production achievement, which stood only at 1.5 million tons in 2000, but Indonesia was also forced by the IMF to close sugar mills in Java. Our sugar policy enacted in 1975 was deemed a failure and we were forced to enter free market competition.
The results were obvious. Sugar flooded Indonesian markets, including raw sugar, which was directly marketed to local traditional markets. Sugar production and distribution systems were chaotic. By 2000, no one could predict what the situation would turn out to be.
The end results were fortunate. The movement of domestic sugar communities, especially that spearheaded by sugarcane farmers, had resulted in a new opposing direction from that suggested by liberalization policy. It was formulated in Industry and Trade Ministry Decree SK No. 643/2002.
There are several distinct properties of SK No. 643.
First, the import of white sugar was integrated with domestic white sugar production.
Second, sugar import licenses were given to sugar corporations that process at least 75 percent of sugarcane produced by domestic farmers, and import permits would therein be based upon Sugar Cane Growers Association concerns.
Third, refined sugar was limited to supply for fulfilling the needs of the food and beverage industry.
Fourth, agreed minimum sugar prices received by farmers would be based on the results of independent academic studies conducted by teams from IPB, UGM and UB, the results of which would be made public by the Government.
Fifth, sugar cane farmers’ associations would be free to choose their private partners for ensuring income.
We understand that the above policy process and its outcomes not only follow a bottom-up, democratic and transparent process, but is also unique for Indonesia — it was made in Indonesia.
The major result was that sugar communities evolved with the above policy. The outcome of the policy was, among others, stabilization of the domestic sugar market. White sugar production in Indonesia increased from approximately 1.5 million tons in 2000 to around 2.8 million tons in 2008. Sugar self-sufficiency for direct household consumption was achieved. Farmers’ incomes were increased, along with increasing employment opportunities, especially in rural areas.
For domestic sugarcane farmers and processors, freeing refined sugar was just like freeing the pike — meaning death for the minnow. So, what is the wise and right thing to do?
We have to give priority, meaning we cannot trade between death now and an uncertain future. By making us dependent on imports given the uncertain future situation of sugar, we risk dying twice. The chosen solution is to continue our sugar industry revitalization. The sugar industry in Java must be revitalized, while outside Java new sugar industries should be expanded.
The competition in refined sugar and white sugar can be relaxed by exporting refined sugar to international markets, following the classic philosophy — as from import to export.
We must adapt Indonesia’s sugar policy to ensure our sugar production’s sustainability.
The writer is a researcher and chairman of the Union of the Association of Indonesian Farmers (Gapperindo).