Building the Sweetener Industry

SEKRETARIAT PRESIDEN

President Joko Widodo looks at the sugarcane plantation which will be used as raw material for a new sugar factory in Bombana Regency, Southeast Sulawesi, Thursday (22/10/2020).

Indonesia had a glorious history in the sugar industry until the beginning of the last century. However, the present condition is so at odds with that history that there must be a new effort to revive it.

The sugar industry needs a new way to develop. So far, various policies have failed to increase domestic production. The Indonesian sugar industry began around 1650. Between 1830 and 1890 Indonesia developed modern sugar factories (PG). In 1930 production reached a total of 2.9 million tons, 2.2 million tons of which were exported.

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Our current production rate is only 69 tons of sugarcane per hectare with an average yield of 7.77 percent, or the equivalent of 5.36 tons of sugar, far below the production level a century ago, which reached 14 tons of sugar per hectare.

The latest data from the Agriculture Ministry’s directorate general of plantations shows that national sugarcane production continued to decline from 2015 to 2019. Sugar production is expected to increase slightly to 2,236,045 tons in 2020 from 2,227,046 tons last year, all of which will be used for household consumption.

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On the consumption side, Indonesia needs 5.8 million tons of sugar for households and industry per year. The shortage will be imported, making Indonesia the biggest sugar importer. The establishment of 10 new factories in the last five years has failed to boost sugar production.

There are many problems in the domestic sugar industry. In essence, we have failed to develop sugarcane through technology and innovation from upstream to downstream.

KOMPAS/BAHANA PATRIA GUPTA

A worker carries freshly harvested sugar cane to a truck in Waru District, Sidoarjo, East Java, Saturday (11/7/2020).

The construction of new factories and the revitalization of old state-owned sugar factories must be followed by innovation in smallholder sugarcane plantations. Sugarcane is the main raw material for the sugar industry. As a result of the failure, the sugar industry, both in the upstream and downstream sectors, remains inefficient.

To achieve self-sufficiency in sugar production, especially for consumption, the solution must be comprehensive: the integration of the upstream and downstream sectors, comprehensive policy involving interministerial groups and institutions and holistic approaches covering all aspects of technical, economic and social production.

The problem of inefficiency occurs not only on the technical side but also in the economic, business and social aspects.

In its effort to increase sugar production for consumption, the government plans to increase the productivity of state-owned sugar factories. These technical improvements must still be based on economic and business efficiency by taking into account their operational costs.

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One thing that has not been touched is the interests of sugarcane farmers. The sugar price should be increased in order encourage the millions of farmers and workers involved in sugarcane. The government needs to review the retail price ceiling of sugar, which is not set at Rp 12,500 (US$0.85) per kilogram because, in practice, the price ceiling does not provide farmers with sufficient profit margins.

Raising the retail price ceiling for sugar to a certain extent and ensuring sugarcane farmers can benefit from the price will enable to increase farmers’ productivity. There is another advantage: encouraging the growth of the overall domestic sweetener industry.

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Indonesia is very rich in raw materials for natural sweeteners, such as sugar palm, coconut, palm, sorghum, stevia and cassava. Now is the time to thoroughly evaluate our sugar industry by issuing a new policy for the sweetener industry.