Warehouse workers arrange sacks of refined sugar at a food factory in the Mekar Jaya Industrial Zone of Tangerang, Banten, Monday (25/9). The government’s plan to sale domestic refined sugar by auction may extend the supply chain for the commodity, raising fears of increased prices among businesses and industries that use refined sugar as raw material. The government’s sugar auction plan is intended to support more equitable pricing and access for small to medium businesses.
The government’s plan to auction domestic refined sugar was delayed to early 2018in response to objections from industry players.
The Trade Ministry had said earlier that the government planned to sell refined sugar for the domestic food and beverage industry through auction starting in early October. The auction would be managed by PT Pasar Komoditas Jakarta.
The reason was to establish transparency in the refined sugar trade and to give fair access to small and medium business players and entities.
However, ahead of the auction, business players and users of refined sugar objected to the plan. According to them, an auction system would only add to the supply chain of the domestic refined sugar industry, which means more bureaucracy and higher transaction costs.
Meanwhile, Trade Minister Enggartiasto Lukita said that businesspeople who were comfortable with the old ways and did not want others to know the amount of their real needs and the taxes they should pay would certainly reject the plan, as reported by Kompas on Tuesday (26/9/2017).
The statements from business players, the government and observers show a condition of mutual distrust. The situation is worrying. Trust is social capital that brings a community toward collective prosperity, as political scientist Francis Fukuyama once commented through his observation of a number of rich countries. A sense of mutual trust creates flexibility in the relationship among business players. Mutual trust is also necessary between the government and the people.
Indonesia imports 3.5 million tons of raw sugar for processing into refined sugar to fulfill the demands of small and big food and beverage companies. Import licenses are given because local farmers’ sugarcane harvests cannot meet the needs of domestic households and the F&B industry.
We wish to remind the government of its pledge to achieve sugar self-sufficiency. This is possible, as Indonesia was once one of the world’s biggest sugar exporters during the colonial era. The statement that things are different now, especially because fertile lands have decreased in Java, is unreasonable. Technology can increase productivity, including in improving sugar yields, cultivation methods and sugar factories. The problem is that a single management does not exist for the national sugarcane and sugar agribusiness that tackles both upstream and downstream processes.
Farmers’ sugarcane productivity is low and many sugar factories are old and inefficient. Here, there is also mutual distrust between the farmers and the sugar factories. Farmers are reluctant to properly care for their sugarcane, because of the sugar factories’ low purchasing price as a result of their inefficiency.
It is the duty of the government to revive the glory of the national sugar industry – not by importing raw sugar, but by increasing domestic productivity.
