KPPU Reveals Two Sources of the Sugar Business Problem

The first being efficiency in sugar factories. The second is import policy.

Syarkawi said that many government-owned sugar factories are still inefficient. The proof of this being that the cost of production per kilogram of sugar can reach Rp 8,500 to Rp 9,000.

In fact, Syarkawi says, some privately owned sugar factories can be more efficient. The cost of producing one kilogram of sugar can be only Rp 4,000.

"Private industry is incredibly efficient. The problem is with the government sugar factories. They are not competitive when compared to the international sugar price of around Rp 6,500," Syarkawi said during the Coordiantion Meeting for Industry and Trade of the Indonesian Chamber of Commerce and Industry (Kadin Indonesia) in Jakarta on Tuesday, 20/9/2016.

According to Syarkawi, one of the causes of inefficiency in government-owned sugar factories is their condition due to old age.

Meanwhile, another source of the sugar problem is the import policy set by the government.

"Why does the government always limit the food commodity business in the upstream sector? Even though, as we know, we cannot meet domestic demand," he said.

Together with the high price disparity between domestic and imported sugar, Syarkawi added, this opens up the opportunity for bribery practices.

"Why? Because the profit margin is large, so that various means are used to secure an import allocation. I think, why don't we just liberalize it in the upstream sector?" Syarkawi added.

If the government argues that it must protect farmers, according to Syarkawi, it should do this not by restricting imports, but rather by using a direct protection system.

"To do this, farmers must be helped to increase their productivity and efficiency," Syarkawi said.