Anticipating Sugar Regulations
Regulation guaranteeing the availability of basic material for the sugar industry has yet to be issued. Plans to limit importers remain a big question mark.
THE draft of Industry Minister Regulation titled Assurance of Sugar Industry’s Basic Material Availability to Cover National Sugar Needs has been languishing for three months at the Ministry of Justice and Human Rights. Supriadi, Industry Ministry’s Director for Food, Seafood, and Fisheries, said the draft regulation is still in the harmonization stage. “We’re waiting for government regulation drafts, the derivation of the new Job Creation Law,” said Supriadi on Friday, February 5.
The government is in the midst of composing a Government Regulation Draft (RPP) about industrial management, deriving from Law No. 11/2020, regarding job creation, or more widely known as the omnibus law. Although not specifically regulating the sugar industry, some of the RPP’s 141 articles are about making it easier to obtain basic materials and components.
Supriadi further said that guaranteeing raw materials for the food industry is one focus of the regulations in the RPP. In the future, the availability of raw materials for sugar and salt, both domestically and from imports, will be discussed based on commodities balance sheets. These discussions will involve all related ministries and institutions, with upstream until downstream industries under the coordinating ministry for the economy. “Verification must be made both from the supply and demand sides in order to obtain accurate and accountable data about materials needed,” said Supriadi.
Data accuracy has been a big problem in Indonesia’s food commodity management. Sugar, for example, is the subject of big outcries every year as there are severe shortages at times, and a flood of supply at others. This befalls refined sugar, used by the food and beverage industry, as well as crystal sugar, which is consumed by the public.
In March 2020, when the Covid-19 pandemic started rearing its ugly head in Indonesia, there was public indignation over the shortage of consumer sugar. Until the middle of April that year, prices of consumer sugar shot up 25 percent to some Rp18,000 to Rp20,000 per kilogram. This condition forced the government to order some refined sugar factories, which usually supply industrial needs, to process raw sugar into consumer sugar.
This, in turn, caused new problems as the industry was short of sugar. Supply went down as import permits were not issued on time. Several large food and beverages companies then sent a letter to the coordinating ministry for the economy, urging the government to quickly issue raw sugar import permits for factories which usually supply refined sugar.
In the midst of these worries among food and beverage producers, a cabinet meeting was held to specifically discuss the import of industrial sugar and salt. After the meeting, Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan announced the government’s plans to give sugar import permits only to industrial users. “Sugar will be imported only by the food industry, those who need it. It will not be done by other parties, so that it won’t be meddled with,” Luhut said at the time. The technical regulations, he continued, would be prepared by the industry ministry and other related ministries.
Later, the industry ministry prepared a regulation draft regarding the guarantee of sugar industry’s basic material availability to cover national sugar needs. This draft became the subject of discussion among industrial players, as instead of opening possibilities for industrial users to directly import its raw materials, the draft would limit import licenses only for existing importers.
FOOD and beverage industrial players can breathe more easily now, as the government is said to have approved the import of 1.9 million tons of raw sugar, to be realized in the first semester of this year.
Adhi S. Lukman, Chairman of the Indonesian Food and Beverage Association (Gapmmi), said his organization has met with the industry ministry to discuss the industry’s needs this year. “The import mechanisms have not yet been discussed,” said Adhi on Friday, February 5.
Adhi further said that Gapmmi has not had specific talks about the Industry Ministerial regulation draft, which would stipulate that sugar imports can only be done by refined sugar companies. The association, Adhi said, is still waiting for the end result of the draft regulation from the Job Creation Law. “There it will be based on commodities balance sheet.”
Article 5 of the Industry Ministry’s regulation draft on guarantee of sugar industry’s basic material availability to cover national sugar needs says that recommendations for raw sugar imports to produce refined sugar can only be given to refined sugar companies that have licenses prior to May 25, 2010. The draft does not regulate plans for direct import licenses by users industry as mentioned in the cabinet meeting decision on October 5, 2020.
That article had sparked a lot of back-fence talk among sugar industry players. The May 25, 2010 license limit is based on the issuance of Presidential Decree No. 36/2010 on lists of business fields that are closed to investment and business fields that are conditionally open for investment. This regulation is better known as the negative investment list.
Refined-sugar user industry are worried that the article would only give import rights to 11 companies grouped into the Indonesian Refined Sugar Association (AGRI). Based on the number of its members, AGRI companies are often dubbed “the Eleven Samurai” of refined sugar. They dominate the industry because they are not just active in the refined sugar business, some of them have actually started setting up sugarcane-based sugar factories.
Dwiatmoko Setiono, Chairman of the Cross Forum for Refined Sugar Industry Users Association, said the decision of the cabinet meeting on October 5, 2020, was the correct one. Procurement would be done directly by the user industry. “It would be much more efficient, both from the procedural side as well as cost wise,” he said.
Meanwhile, Danang Girindrawardana, Executive Director of the Indonesian Businesses Association, questions the plans to limit import executors. These regulations would bar new factories from importing raw sugar. “This will be even further away from the cabinet’s decision, and will further reaffirm the practices by the 11 established players,” said Danang on Thursday, February 4.
Accusations are pointed towards the AGRI. The association has suggested that raw sugar import regulations should be differentiated between refined sugar for industrial use and crystal sugar for household use.
AGRI Chairman Bernardi Dharmawan denied accusations that his association has lobbied the government in the preparation of the new draft regulation. Bernardi said the AGRI only conveyed its complaints to the industry ministry regarding differentiating between sugar commodities for industrial and consumer use.
Bernardi pointed out that refined sugar production capacity from the 11 AGRI members is already more than enough, reaching 5.5 million tons per year. Meanwhile, industrial demand is around three million tons. “If new sugar companies enter, they will fill the deficit for consumer needs. The industrial needs are already covered by the AGRI,” he said.
Mufti Anam, member of the House of Representatives’ Industrial Commission, agreed with the content of the draft law. He said that importing raw materials for sugar through the refined sugar industry would provide added value to the economy.
Even so, Mufti urged for an improvement in the sugar trade system. Import licensing, for example, can be applied annually to maintain supplies. By doing that, user industry will have no difficulty in accessing refined sugar, which has happened frequently in the past. Also, the import trade system must be transparent, punctual, with the proper amounts, and equipped with tight monitoring systems. “Monitoring has not been optimally done. There have been many cases of refined sugar getting into consumer or traditional markets,” said Mufti on Thursday, February 4.