Impact of Domestic Policies on Indonesia’s Sugar Competitiveness

Abstract

Indonesia as one of the most populous countries has high sugar consumption rate. Indonesia sugar consumption rate is continue to surging. In contrast, domestic production could not satisfy the demand and Indonesia need to import sugar. In 2020, Indonesia is predicted to proceed import 4400 thousand MT raw sugar. Indonesia will continue to import sugar because sugarcane output is predicted to fall in 2019/20 due to dwindling land availability. In addition, the majority of Indonesia’s sugarmills is over than a hundred year and lead to low sugar’s extraction rate to only 6.9%. This research examines Indonesia’s sugar competitiveness using Policy Analysis Matrix. Indonesia’s Domestic Cost Ratio is 2.04. The number means that Indonesia’s domestic sugar production, compared to foreign country, is twice costly. Social price of sugar in Indonesia was half of retail sugar price in domestic market. The total social loss of the Indonesian sugar sector was 16 128 thousand rupiahs per hectare per planting season. Farmers, consumers, and the government all have to subsidize the production of domestic sugar. If the domestic price of sugar is equal to world price, consumers do not have to pay 11 772 thousand rupiahs more to meet their sugar needs. Policy scenario of sugarmills revitalization which could increase sugar extraction rate up to 10%, compared to usual rate at 6.9%, could double both private and social revenue of a sugarcane plantation.