There are many other examples of policy inconsistencies. One of them concerns the market separation between consumption and industrial sugar. While they can replace each other, the two markets are compartmentalized. However, the government is often not consistent. For example, since 2016 the government has allowed refined sugar factories, BUMNs with no sugar factory, and cooperatives to process raw sugar into white crystal sugar. In fact, reined sugar factories don’t have distribution channels for consumption sugar. This resulted in a hidden stockpile of unsupervised white crystal sugar which was estimated to amount to between 0.6 to 0.9 million tons in the period of 2016-19. Then, new sugar factories (which has grown to 10 since 2014) were allowed to produce refined sugar.
Another example: since 2014 there has been Law 30/2014 on plantations that requires sugar processing companies to prepare self-managed land to meet a minimum of 20 percent of raw materials. But, again, the implementation has been haphazard. Surprisingly, through Government Regulation (PP) 26/2021 on implementation of the agricultural sector – which is the implementing regulation of Law 11/2020 on job creation – that obligation was abolished. How can regulation that has existed for decades be easily changed? Whose interests are the government trying to accommodate and advance?
These issues show that Indonesia’s sugar Industry is likely to continue facing a bumpy road in the future. The refined sugar issue will continue to resurface every time an import decision is taken. This controversy arises due to low policy credibility. Letting the market mechanism works would be ideal but it requires some preconditions – most importantly, a level playing field between the refined sugar and consumption sugar industries which at the moment is still skewed. This should become the government’s focus.
The ultimate question becomes is it still possible for Indonesia to be self-sufficient in sugar production? If yes, what should be improved? The sugar Industry urgently needs a long-term roadmap. This is if the state recognizes that the Industry is facing serious problems that need to be addressed in a comprehensive, integrated manner. The roadmap would serve as a blueprint for all ministries/agencies/stakeholders to guide planning, implementation and evaluation. Currently there are many conflicting policies. The fate of sugarcane farmers as the vanguard of the industry has yet to receive serious attention. If in other countries’ farmers are guaranteed to make a profit, here they have to demonstrate every year just to demand that the state is present.
Following the roadmap, the sugar Industry also needs a clearing house such as the Indonesian Sugar Board which President Jokowi dissolved in 2014 because it was considered wasteful. This institution will coordinate and synchronize all sugar policies, including a unified database to provide accurate reference in policymaking. So far, there are different versions of data due to entrenched vested interests within the ministries/agencies. Whether we acknowledge it or not, the problems that beset the sugar Industry is partially due to the vacuum of these functions.
The development of a competitive sugar Industry must be guided by research. For decades, there has been a lack of consequential research that can transform the Industry. This happened because the research institute inherited from the Dutch, the Sugarcane Plantation Research Center (P3GI) in Pasuruan, East Java, is no longer considered vital by the state. P3GI’s innovation in the 1930s was able to turn the sugar Industry in Java to become the most efficient in the world, even outpacing European competitors. In fact, the Dutch East Indies was the second-largest sugar exporter in the world, after Cuba. The only transgenic sugarcane variety in the world, developed by the University of Jember, is also considered unimportant, despite it being cultivated by other countries.
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Finally, it’s worth looking at the potential of other sugar not derived from sugarcane such as palm sugar. Of the current 16.38 million ha of oil palm plantation, assuming a planting cycle of 25 years, this means that every year there are 0.65 million ha that need to be replanted. Felled palm trees can produce up to 5-10 liters of sap every day per tree for two months. If there are 330 trees per hectare, there is potentially 64.87 million liters of sap per year, equivalent to 12.87 million tons of brown sugar. The need for industrial and consumption sugar is only 6-7 million tons. This potential has been largely overlooked. This could be the focus of future research.
Whatever the government’s policy is in the future, it must always prioritize the welfare of sugarcane farmers, who are rational economic actors. They will respond positively or negatively to each policy. The experiment with reimbursed price in 2000-08 provided an important lesson (Pakpahan, 2017). Because the profit was guaranteed, sugarcane plantation areas grew from 343,000 hectares in 2002 to 434,000 hectares in 2008. Sugar production also increased, from 1.6 million tons in 2003 to 2.57 million tons in 2008. After the policy was discontinued, replaced by benchmark and reference price, the areas began to shrink and production declined. Without a willingness to guarantee profits for business actors, especially farmers, we’d better forget about achieving sugar self-sufficiency. And as a result, Indonesia will remain the largest sugar importing country in the world. (Khudori)