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Development of sugar plantations toward sugar self sufficiency.

Backgrounds

Indonesia's sugar industry and sugar plantations have supported each other in development. Sugar plantations in Indonesia have continued to expand from year to year marked with expanding areas for cultivation. Until 2009, Indonesia's sugar plantations totaled 473,000 hectares or an increase of 2.9% from 460,000 hectares in 2008. Sugar plantations have been expanded not only in Java, but also in other islands.

In the past sugar plantations were concentrated in Java, but now plantations have been opened in other regions such as North Sumatra, South Sumatra, Lampung, South Sulawesi and Gorontalo. In Java plantations are found mainly in West Java, Yogyakarta and East Java. Expansions now are planned to West Kalimantan, West Sumatra, Riau, Merauke, South Sulawesi and Southeast Sulawesi.

With the expanding sugar plantations, production grew. In 2009, production grew 2.8% to 2.85 million tons from the previous year's 2.66 million tons. The increase in the production of sugar was boosted by rising sugar prices that encouraged farmers to grow sugarcane.

Currently a problem faced by the country's sugar industry is insufficient supply of sugarcane from plantations. The problem is feared to obstruct the government's program to create self sufficiency in sugar supply in the country in 2014. In order to reach self sufficiency in sugar, the industry needs the support of 600,000 hectares of sugar plantations. Additional plantations of 157,000 hectares, therefore, are needed. Currently the forestry ministry is offering 500,000 hectares of idle lands in various areas considered suitable for sugar plantations.

Under its short term plan to meet sugar supply, the government has decided to expand sugar cultivation by as much as 150,000 hectares in 2010 with the first phase 41,705 hectares. The plan will need 1.25 billion seedlings valued at Rp 563 billion. The expansion of sugar cultivation will be focused in Lampung, South Sumatra, Bengkulu, Jambi, Southeast Sulawesi and Merauke. The new cultivation will be in cultivation areas and conversion forest and would not need clearing of forest trees. The project will be financed with state budget and by private investors.

The new cultivation is expected to increase production of sugarcane to feed sugar refineries to produce consumer sugar and industrial sugar. Dependence on import is also expected to be reduced. The country has continued to need import to make up for shortfall in domestic supply. An import of sugar is allowed only when domestic supply falls short of requirement. A month ahead and after milling season normally in May-January, when harvest takes place, the government will not import sugar.

Total areas of sugar plantations

In the past 10 years, a sugar plantation in Indonesia has continued to expand growing 3.75% per year from 340,660 hectares in 2000 to 473,841 hectares in 2009.

In 2008 and 2009 the expansion was slower by only 2.9% from 460,000 hectares to 473,000 hectares, because of shrinking sugar prices that discourage the farmers. In 2009, plantations reached 473,000 hectares, with cane production at 2.85 million tons, and cane productivity of 5.1 tons per hectare, sugar content 7.83%, sugar crystal production of 2.6 million tons and sugar crystal productivity of 5.96 tons per hectare.

500,000 hectares of lands ready for development

In 2010, the sugar plantation areas are estimated to expand to 478,206 hectares, or an expansion of 4,365 hectares. The expansion is boosted by sugar price hike both on the domestic and international markets and to increase the country's sugar production.

Starting 2010, expansion will begin of sugar cultivation by 150,000 hectares to be carried out by phases in several areas especially in Java and Lampung, which have been the center of sugar plantations. The expansion is estimated to cost Rp 4.2 trillion. The project will begin in 2010 in Riau, South Sumatra, Central Sulawesi, Lampung, and Papua.

Altogether the government will prepare 500,000 hectares of lands for additional sugar cultivation. The lands are needed to expand cultivated areas from 422,935 hectares at present to 766,613 hectares in 2014. The land will be made available from production forest lands, idle lands or by using lands of state forestry company PT Perhutani under intercropping system. The expansion of smallholder sugar plantations will need an investment of Rp5 trillion. The fund is expected to come as bank loan through the Food and Energy Resilience Credit Program with subsidized interest.

Areas considered having land suitable for sugar plantations are Lampung, South Sumatra, Riau, Southeast Sulawesi, Maluku and Papua. Sugarcane grows well are with rainfalls not too heavy. Opening new plantations, however, would not be that easy as it will need land clearing which often is obstructed by disputes or rejection by land owners.

Expansion of the cultivation will need an increase in fertilizer supply. This year, fertilizer requirement is estimated to reach 14.5 million tons or an increase of 4%5% from 13.8 million tons in 2008. Around 1.8 million tons of the requirement are subsidized by the government, and the rest imported by the plantation companies. In order to economize on fertilizer, especially nitrogen, phosphor, and kalium, the agriculture ministry has developed the technology called hipernano.

A hectare of sugarcane plantation will cost around Rp 28 million not including the cost for the procurement of processing factory and transport infrastructure. The plantations are developed over cultivation areas and conversion forests. The fund will be provided by the government, and private investors. Currently many investors have indicated interest in developing sugar plantations but land clearing still often becomes the bottleneck.

Plantations by ownership

Plantations are owned by smallholders and large plantation companies. In the beginning smallholders plantations were developed under nucleus plasma farm cooperation scheme with large plantation companies either private or government companies as the nucleus. Later plasma farms expanded outside the scheme.

Currently smallholder sugar plantations have dominated sugar plantations in Indonesia. In 2009, smallholder plantations (PR) made up 57.6% or 255,513 hectares of the country's total plantations of 443,832 hectares with private plantation companies (PBS) making up 24.4% or 108,450 hectares and state plantations (PBN) 80,069 hectares or 18% of the total .

In the period of 2000--2009, PBS expanded only slightly--by 0.9% annually on the average as against an expansion of 4.5% for PR and 3.3% for PBN.

Large Sugar Plantations

Before 2000, large plantations were dominated by state companies (PBN) under PT Perkebunan Nusantara (PTPN) X and PTPN XI in East Java. Another state plantation company having large sugar plantations is PT Rajawali Nusantara Indonesia (RNI). RNI was formerly owned by the first conglomerate in Indonesia Oei Tiong Ham Concern, which was taken over by the government in 1964.

Later large private plantation companies grew faster ending the domination of state companies. Currently PT Sugar Group Companies emerged as the largest sugar plantations company in Indonesia with plantations totaling 94,000 hectares.

Other large private companies having large sugar plantations include PT. Kebon Agung and PT. Gunung Madu Plantation with plantations in Java and Lampung.

Profiles of Main Players

PT Sugar Group Companies (SGC)

SGC has three sugar production-based companies PT Gula Putih Mataram, PT Sweet Indo Lampung, and PT Indo Lampung Perkasa. SGC operates in sugar processing industry. This group produces the first branded sugar in Indonesia. The brand is Gulaku, entirely from sugarcane. Its sugar factories are integrated with sugar plantations totaling 94,000 hectares in Lampung.

PT Perkebunan Nusantara XI (PTPN XI)

PTPN XI was established in 1996 through a merger of PT Perkebunan XX (Persero) and PT Perkebunan XXIV-XXV (Persero). PTPN XI operates sugar plantations and factory in East Java. Sugar cultivations are in areas including rice field area and dry lands totaling 69,516 hectares made up of 27,946 hectares of own plantation and 41,570 hectares of plasma farms. Its end products include granulated/refined sugar, molasses, alcohol and spirit.

PTPN XI cooperates with sugar farmers to supply its factory with sugarcane. More than 81% of the basic material needed by PTPN XI is supplied by farmers. PTPN XI also operates own sugar plantations to help feed its factory.

Altogether in the milling season in 2008, PTPN XI produced 414,641.3 tons of sugar, and 309,796.1 tons of molasses. The production came from the milling of 5,714,729 tons of cane including 1,680,560.2 tons from own plantations and 4,034,168.7 tons from smallholder canes. The sugarcanes n came from 81,123.1 hectares of plantations including 23,504 hectares of own plantations and 58,619.1 hectares of farmers' plantations. The plantations expanded 1.8% compared with in 2007 but the cane milled fell 10.7% in volume and sugar produced declined 4%, and molasses dropped 4.6%.

Productivity fell by 20% on the average from 5.33 to 5.04 tons of sugar crystal/hectare with the sugarcane production down sharply in volume from 79.2 to 69.6 tons/hectare with content rising only from 6.73 to 7.24%. Productivity in 2008 was 8.37 tons of crystal/hectare, 93.1 tons of cane with content 8.05% from own plantation and 5.76 tons of crystal/hectare with cane 68.8 tons and content 6.90% from smallholder plantations.

PTPN XI has 17 units of plantations integrated with sugar factories as follows:
PG. Soedhono
PG. Poerwodadie
PG. Redjosarie
PG. Pagottan
PG. Kanigoro
PG. Kedawung
PG. Wonolangan
PG. Gending
PG. padjarakan
PG. Djatiroto
PG. Semboro
PG. D Maas
PG. Wringin Anom
PG. Olean
PG. Panji
PG. Asembagoes
PG. Pradjekan


In addition to core business, PTPN XI has no core assets producing alcohol, spirit and bags and hospitals.

PTP Nusantara X (PTPN X)

PTPN X was established in 1996 through a merger of state plantations in Central Java and East Java formerly PTP XIX, PTP XXI-XXII and PTP XXVII.

PTPN X produces sugarcanes, tobacco and fiber plants. Sugarcane is produced from plantations in rice field areas and dry land totaling 65,320 hectares including 2,857.10 hectares of own plantations and 62,462.90 hectares of smallholder plantations. Tobacco is produced from TBN/VBN plants grown over 2,210 hectares, including 960 hectares of TBN/VBN and 1,250 hectares of N.O. tobacco. Fiber plants are grown over 1,200 hectares of land.

PTPN X has 16 unit's plantations with 12 sugar factories, 3 tobacco plantations and a fiver plant plantation as follows:

1. PG. Kria

2. PG. Watoetoelis

3. PG. Toelangan

4. PG. Kremboong

5. PG. Gempolkrep

6. PG. Djombang Baru

7. PG. Tjoekir

8. PG. Lestari

9. PG. Meritjan

10. PG. Pesantren Baru

11. PG. Ngadiredjo

12. PG. Modjopanggoong, etc.

In addition, PTPN X operates 3 units of tobacco processing plants with the TBN/VBN types 1,053. 3 tons and NO type 1,336.2 tons per year. It also has a fiber processing unit with a production capacity of 2.79 million pieces of gunny sacks per year

PT Rajawali Nusantara Indonesia (RNI)

RNI, which was established in 1964 was formerly Oei Tiong Ham Concern taken over by the government.

RNI operates in agro industry, pharmaceutical & medical instruments and trade. It is a holding company (Investment Holding), having 15 subsidiaries. RNI has 35 branch offices, 10 sugar factories, 2 alcohol plants, 1 pharmaceutical factory, 2 health equipment factories, an oil palm plantation and a tea plantation.

RNI has real sugar plantation 52,461 hectares in West Java, Yogyakarta and East Java.

PT. Kebon Agung

This company was established in 1905 in Malang, East Java. Currently PT PG Kebon Agung is managed by PT Tri Gunabina as the operator of the Kebon Agung sugar factory in Malang and Trangkil sugar factory in Pati.

Currently PT. Kebon Agung operates sugar plantation 57,923 hectares in Malang, East Java. The sugarcane form the plantation is used to feed its sugar plants in Malang and Pati.

Locations of sugarcane plantations

Based on data from the plantation directorate general, sugar plantations are located only in nine provinces in Sumatra, Java and Sulawesi. In 2008, Java has the largest plantations totaling 301,343 hectares or 65.5% of the total areas of the country's sugar plantation of 460,406 hectares. In Java, East Java has the largest plantations totaling 213,914 hectares and followed by Central Java with 60,616 hectares of plantations.

Sumatra has 141,228 hectares (30.7%). Most or 116,360 hectares of the sugar plantations are located in Lampung, followed by South Sumatra's 12,502 hectares.

Sulawesi's sugar plantations total only 17,835 hectares or 3.8% of the total. The locations of the plantations are in South Sulawesi 12,760 hectares and Gorontalo 5,075 hectares.

Kalimantan has no sugar plantation. The soil in this region is more suitable for oil palm plantations. Papua is a potential area for investment in the plantation sector in the future. There are already plans to build sugar plantations and factories in Papua.

Bi company groups like Bakrie Group, Medco Group and Wilmar Group have indicated strong interest in building sugar plantations and factories in Papua. They plan to open food estates in that region. Companies having a sugar factory in Kendal, Central Java, Sugar industry Nusantara (IGN) also have indicated interest in expanding operation to Papua. In general the lands in Papua are good for sugar plantations, oil palm plantations to be built integration with sugar or palm oil processing factories. The difficulty is lack of infrastructure.

South Papua is especially good for sugar plantations. There is a plan to build two sugar factories and a bio ethanol plant in Papua with production partly to be exported to the United States, Japan, Europe and South Korea.

Plantation areas by condition of plants

Cultivated lands growing 4.6% per year

Sugar plantation areas expanded 4.6% a year on the average in the 2006--2009 periods. In 2006, cultivated areas totaled only 396,441 hectares, up 4.4% to 438,040 hectares in 2007. In 2009 cultivated area expanded again 4.7% to 473,841 hectares from 460,406 hectares in the previous year. The increase followed rise in sugar prices that encouraged farmer to grow the crop.

Harvest areas grow 4.9% per year

In the period of 2000--2009 harvest areas grew 4.9% per year. Harvest areas in 2000 reached only 340,660 hectares, up to 443,832 hectares in 2009 or 93.6% of the cultivated areas.

In 2010, the whether is not as favorable as in 2009 causing a delay in harvest in some areas such as Cirebon, West Java? Heavy rains forced a delay in harvest from May to June. Transport would be a problem if harvest was to be made in rainy days of May, and the result would a decline in sugar content. Transport of sugarcane to factories must not be delayed longer than 36 hours otherwise the sugar content would decline.

Normally 61,700 kg of sugar could be produced from a hectare of sugarcane with a content of 8.04%.

Condition of sugar cultivation by areas

In 2009, cultivated areas of sugar plantations in the country totaled 459,498 hectares, with harvest area totaling 429,489 hectares or 93% of the cultivated plantations.

In Sumatra cultivated areas totaled 134,864 hectares all producing good harvest. In Java cultivated area reach 311,817 hectares of sugar plantation with harvest areas totaling 281,80 hectares or 90%. In Sulawesi cultivated areas total only 12,817 hectares all producing good harvest

Increase in the cultivated areas was recorded mainly in Java and Lampung the country's largest sugar production centers.

The country has 8 sugar producing provinces. Regencies/municipal city areas having more than 1,000 hectares of plantations with production of more than 1,000 tons a year are called sugar production centers of the provinces.

Production of sugarcane

In the period of 2004-2008, the country's production of sugarcane grew 5.7% per year. The growth was not enough to meet the domestic sugar requirement.

In 2008, the country had sugar plantations totaling 436,505 hectares, producing 32,960 thousand of sugarcane. In 2009, the plantations expanded to 443,832 hectares, with production up 34% to 44.210 thousand a year.

In 2010, the sugarcane production is predicted to rise further to 2.93 million tons despite unfavorable whether. The agriculture ministry has taken steps to expand sugar plantations, improve productivity and built new sugar factories.

Production of sugarcane by plantation owners

Smallholder plantations (PR), which are the largest in area, produced 791,000 tons of sugarcane in 2000, up 1.1% annually to reach 1,547,000 tons in 2009.

Large plantation owned by private companies (PBS) reported an annual growth of 5.4% in sugarcane production in the 2000-2009 periods--up from 655,000 tons to 892,000 tons.

The production recorded by large plantations owned by the state (PBN) in the 2000-2009 periods grew 2.8% per year. Their sugarcane production rose to 411,000 tons from 234,000 tons in that period.

One of state plantation companies is PT Pabrik Gula Rajawali Nusantara II located in Cirebon, West Java. The company is set to boost its production to meet the government target to make the country self sufficient in sugar supply in 2014. In harvest early this year the company succeeded in doubling its sugarcane production from harvest last year. The company has 12,000 hectares of sugar plantation producing 47,800 kg of sugarcane per hectare with sugar content of 6.99% in 2009. This year, the production rose to 76.900 kilograms per hectare with sugar content of 8.55%.

Productivity

According to the Association of Sugar Farmers (APTRI) the revitalization program for sugar industry aimed at reaching sugar self sufficiency in 2014, could be implemented successfully by improving productivity of the plantations and factories without expansion of plantations.

The productivity of the country's sugar plantations has fluctuated over the past years. PBS plantations reported the highest productivity with production of 8.4 tons per hectare in 2009 up from 6.8 tons per hectare in 2006.

The productivity PR plantations rose from 5.7 tons/hectare in 2006 to 6.1 tons/hectare in 2009. Meanwhile, the productivity PBN plantations fell from 5.2 tons/hectare in 2006 to 5.1 tons/hectare in 2009.

In 2009, Central Java had 59,825 hectares of sugar plantations in 26 regencies with productivity of 53.62 tons of sugarcane per hectare, sugar content of 7% and sugar production of 227,200 tons. In order to achieve self sufficiency in sugar Central Java needs 67,000 hectares sugar plantations with productivity of 75 tons of sugarcane per hectare and sugar content of 8% to turn out 402,000 tons of sugar. Ideally a sugar factory needs the support of sugar plantation of at least 4,000 hectares of sugar plantation to guarantee regular feedstock.

In 2010, the productivity of PBS rose to 8,403 kg/hectare, but the productivity of PBN and PR fell to 5,097 kg/hectares and 6,053 kg/hectare respectively.

New Investment

The government, which has a target to achieve sugar self sufficiency for the country in 2014, has granted license for a number of investors to develop sugarcane plantations from 12 to 40,000 hectares of land each in Java, Sumatra, Sulawesi, and West Nusa Tenggara. Among the investors are PT. Rosan Kencan Perkasa, PT Market Indo Selaras and PT. Laju Perdana Indah. They plan to build sugar plantations and sugar factories expected to start operation in 2010-2012. At least Rp28 million will be needed for the procurement of a hectare of land. There are still costs to build the factories and infrastructure.

PT Rosan Kencana Perkasa Indonesia (RKP) in cooperation with Invelt Group from the Czech Republic plans to build a sugar factory with a processing capacity of 6,000 tons of cane per day--8,000 tcd to cost around US$100 million. The Invelt Group will support by providing 85% or US$ 85 million of the investment fund in buyer credit. The factory, to be operational in 2012, will have the capacity to process surplus in sugarcane in Mojokerto, East Java, and nearby areas. The sugar factory will have the support of 46 sugar farmers' cooperative (KPRT). The cooperative has 70,000 members managing fund more than Rp170 billion.

Singapore-based Wilmar International Ltd. This is known as a large CPO producer in Sumatra, plans expansion to Papua to build sugarcane plantations and sugar factory with an investment of US$ 2 billion. Wilmar teams up with Kuok Oils and Grains, which has long experience in sugar industry.

Four state plantation companies--PTPN IX, PTPN X, PT XI, and PT Rajawali Nusantara Indonesia (RNI) also plan to build sugarcane plantations and sugar factories Merauke, Papua. The factory will have a processing capacity of 10,000 tons of sugarcane per day.

Source of sugarcane seedlings

In a bid to achieve its target of sugar self sufficiency in 2014, the government will provide support in the procurement of high yield variety of sugarcane seedlings. The government seeks to reduce the number of sugarcane varieties to be developed to make it easier in controlling selection of the best variety in productivity. In the past several years, Indonesia's sugar plantations have decline din productivity because of the use of varieties with low productivity. Pruning is repeated more than 10 times even up to 15 times in the same land, while ideally pruning must not be more than three times.

PT Perkebunan Nusantara XI on East Java is growing new sugarcane variety called R-579. The new variety could yield around 10.07 tons of sugar/hectare or more than twice as high as the country's average in productivity of 4 tons of sugar/hectare. The production also exceeds the figure of 8.5 tons/hectare in the program of production acceleration launched in 2007.

The variety is grown in the plantation of PG Djatiroto, Lumajang with productivity varying from 8 to 15 tons of sugar per hectare. With that level of production, the cost of production could be cut by phases from Rp 3,100/kg at present to less than Rp 2,200/kg.

Another variety called POJ 3016 is grown in the plantation of PG Kanigoro, Madiun, yielding 11 tons of sugar /hectare. PTP Nusantara XI also has sugarcane varieties called R-579, PS 90-1428 and JT 26.

The use of high yield varieties is expected to support the program to achieve sugar self sufficiency in 2014. Currently 75% of sugarcane for sugar factories in Java is supplied by smallholder sugar plantations.

The country is seeking to improve the productivity of its sugarcane plantations not only through the use of high yield variety seedlings but also through the application of biotechnology. Development of biotechnology is expected to increase the sugar content of sugarcane to 20% . So far more than 10 new varieties have been used but the content has never been more than 12% . Now the content is only 7% on a number of factors.

Sugarcane varieties in Indonesia are known in three categories Genjah Variety, which is harvestable earlier, ripe in less than 12 months; Sedang Variety, which is ripe in 12-14 months and Dalam Variety, which is ripe in more than 14 months.

The best variety now used in the country is BL, which is similar to POJ-2878. The two varieties are resistant to plant diseases, but BL is more sensitive to pohkabung and insects eating the shoot. The productivity of BL is high up to 121.4 quintals of sugar per hectare with highest production of crystal up to 169.2 quintals per hectare.

With BL variety in irrigated field, the production of sugarcane averages 1,504 quintals per hectare (highest 2,093 quintals), with sugar content of 8.07 percent (highest 8.86 percent) and crystal production averaging 121.4 quintals per hectare (highest 169.2 quintals).

Experiment in dry land showed that sugarcane production averages 1,250 quintals per hectare (highest 2.112 quintals), with sugar content of 7.58 percent (highest 8.25 percent), and crystal averaging 97.3 quintals per hectare (highest 172.3 quintals).

Even under trimming system, the BL variety shows promising productivity. An experiment showed that sugarcane production averages 1,222 quintals per hectare (highest 2,012 quintals), with sugar content of 7.81 percent (highest 8.74 percent), and crystal averaging 94.5 quintals per hectare (highest 152.1 quintals).

Exports of sugar by products up

Exports of sugar by products especially molasses have fluctuted depending on the availability of surplus in domestic supply. Molases is used mainly as feedstock for food sweetenerMonosodium Glutamate. In 1999, esports of sugar by products totaled only 195,979 tons valued at US$ 8,070,000, up to 526,685 tons valued at US$ 48,649,000 in 2007 and to 947,402 tons valued at US$ 73,199,000 in 2008.

Exports of sugar by products are dominated by molasses, which accounted for 99.8% or 945,859 tons of the total exports in 2008.

Increase in the molasses price to around US$ 120 per ton at present boosted exports in the past years.

Molasses is a by product in the process of producing refined sugar. Its 45% content of sucrose could be used to produce alcohol through fermentation. It is also used as feedstock for monosodium glutamate (MSG) and for ethanol.

Vietnam the largest export destination

The largest export destination for Indonesia's molasses is Vietnam to which exports totaled 335,471 tons valued at US$ 24,850,000 in 2008, followed by Taiwan to which exports totaled 219,287 tons valued at US$ 15,850,000 and Spain 157,715 tons valued at US$ 13,396,000.

Other export destinations include South Korea, japan and the United States.

Imports fluctuating

Imports of sugar by products reached 1,181,397 tons, valued at US$ 358,820,000 in 2004, up to 3,027,423 tons valued at US$ 1,048,269 in 2007 or the largest in 10 years.

In 2008, imports fell to 1,044,000 tons valued at US$363,504,000. Imports remained high as the country exports most of its production.

Thailand the largest supplier for Indonesia

Indonesia has imported molasses from a number of countries. In 2008, Thailand was the largest supplier from which imports totaled 824,934 tons valued at US$ 294,488,000, followed by Taiwan from which imports totaled 42,401 tons valued at US$ 13,394,000, and India from which imports totaled 39,101 tons valued at US$ 12,507,000.

Sugar Prices

In 2005-2009, the price of cane sugar grew 10% per year--from Rp 5,531/kg in 2005 to Rp 7.94/kg in 2009.

In 2008, the price fell to Rp 6,192 from Rp 6,342/kg in 2007, but in 2009 it surged to Rp 7.940/kg as a result of shortage in supply on the domestic market.

The prices of sugarcane from the farmer are determined through auction handled by cooperatives, farmers associations, and sugar factory.

Government policy

--Expansion of sugar plantations

The government is set to expand the country's sugar plantations and for which 500,000 hectares of land will be provided for new plantations until 2014 when the country is to achieve self sufficiency in sugar supply. The projects will use idle lands in Lampung, South Sumatra, Jambi and Sulawesi.

The expansion of the plantations is to reduce dependence on imports. The government also plans to build at least 10 new sugar factories in short term.

--Issuance of Rights to Cultivate

As part of the program to achieve sugar self sufficiency the government will expand the country's sugar plantations by 500,000 hectares until 2014. In 2009 the country had 473,841 hectares of sugar plantations.

The government will simplify the process of securing HGU and HGB for 25 sugar factories. The new sugar factories will have a milling capacity of 6,000 to 15,000 tons of cane per day.

--Preparing Infrastructure for sugar plantations

The government will also build infrastructure including roads, bridge and irrigation systems for sugar plantations and factories outside Java.

--Incentives

The government offers incentives in the form of tax facilities including exemption of income tax and import duty and subsidy on credit interest to increase investment in sugar sector.

--Export tax on molasses

The government plans to slap progressive export tax on molasses to better guarantee domestic supply. The export tax is based on the prices of molasses

The export tax will be 0% if the price of molasses is US$ 80 or higher per ton.

The increase in the prices of molasses in international market, the farmers and producers chose to export their molasses resulting in shortage on the domestic market and problem for domestic producers of MSG and ethanol. In 2008, molasses production in the country totaled 1.4 million liters. Around 600,000 liters of the stocks were used by ethanol producers, 600,000 liters by animal feed industry and the remaining 200,000 liters exported.

Conclusion and prospects

A sugar plantation in the country has expanded but the growth was not enough to catch up with the growing demand for sugar in the country. The plantations expanded only around 3.75% per year--from 340,660 hectares in 2000 to 473,841 hectares in 2009 or an addition of only 133,181 hectares in 10 years.

Increase in the price in international market would encourage farmers to grow sugarcane. In 2010, sugar plantations are predicted to rise to 478,206 hectares or an expansion of 4,365 hectares from 2009.

In order to achieve the self sufficiency target in 2014, the government plans to expand the country's sugar plantations. Currently the plantations would not be enough to produce sugar to meet domestic requirement. The government plans to provide 500,000 hectares of land for the expansion of sugar plantations that will bring the country's total plantations from 473,841 hectares in 2009 to 766,613 hectares in 2014. The new plantations will be opened in Lampung, South Sumatra, Riau, Southeast Sulawesi, Maluku and Papua.

The prospects are encouraging for investment in sugar industry. A number of investors have indicated interest in venturing in the sector. So far there are 40 companies seeking the license to open new sugar plantations. Among them are big corporations like Wilmar Group and Bakrie Group and a consortium of state companies (PTPN) planning to build sugar plantations in 2012-2014.

In 2010, the country's sugarcane milled production is forecast to reach 45,536 thousand tons and will rise to 53,200 thousand tons in 2014.
Table--1
Sugar plantations in Indonesia, 2000-2009

Year Area (hectares) Growth (%)

2000 340,660
2001 344,441 1.1
2002 350,722 1.8
2003 335,725 -4.3
2004 344,793 2.7
2005 381,786 10.7
2006 396,441 3.8
2007 438.040 10.0
2008 460.406 5.1
2009 473.841 2.9
Average growth 3.75

Source : Plantation directorate general

Table--2
Expansion of sugar plantations by ownership, 2000-2009

 Area (hectares)

 PR / Growth
Year Smallholders (%) PBN / State

2000 171,279 ... 64,133
2001 178,887 4.4 87,687
2002 196,509 9.9 79,975
2003 172,015 -12.5 87,251
2004 184,283 7.1 78,205
2005 211,479 14.8 80,383
2006 213,876 1.1 87,227
2007 249,487 16.7 81,655
2008 252,783 1.3 82,222
2009 255,313 1.0 80,069
Average growth 4.7

 Area (hectares)

 Growth Growth
Year (%) PBS / State (%)

2000 -- 105,248 --
2001 36.7 77,867 -26.0
2002 -8.8 74,238 -4.7
2003 9.1 76,459 2.9
2004 -10.4 82,305 7.6
2005 2.8 89,924 9.3
2006 8.5 95,338 6.0
2007 -6.4 96,657 1.4
2008 0.7 101,500 5.0
2009 -2.6 108,450 6.8
Average growth 3.3 0.9

Source : Plantation directorate general

Table-3
Owners and status of large sugar plantations, 2009

 Areas
Name of companies (hectares) Locations

State owned :

PTPerkebunan Nusantara II 16,046 North Sumatra
PTPerkebunan Nusantara VII 20,400 Bandar Lampung
PTPerkebunan Nusantara IX 7,422 Semarang
PTPerkebunan Nusantara X 65,320 East Java
PTPerkebunan Nusantara XI 69,516 East Java
PTPerkebunan Nusantara XIV 14,312 Ujung Pandang
PT Rajawali Nusantara 52,461 West Java,
 Indonesia (RNI) Yogyakarta and
 East Java

Private companies :

PT Kebon Agung 57,923 East Java
PT Gunung Madu Plantations 36,000 Lampung
PT Sugar Group Companies 94,400 Lampung
Total 433,800

Source: ICN processed

Table--4
Production of Non Core Business

No Description Units 2007 2009 %

1 Alcohol liters 6,725,400 6,864,200 102.1
2 Spirit liters 1,655,750 1,691,900 102.2
3 Plastic bags pieces 10,039,182 10,141,902 101.0
4 Gunny sacks pieces 87,291 85,982 98.5
5 Rope and gunny cloth kg 130,824 101,157 77.3
6 White Sugar imported tons 98,620 0 0
7 Raw Sugar tons 40,225 0 0
8 Hospital: % 64,10 60,45 94,3
 BOR hari 78.115 79.697 102,0
 Treatment days unit 324 334 103,1

Source: PTPN X

Table--5
Sugar plantations areas by regions, 2008-2009
(Hectares)

Province 2008 2009

Nasional 436.505 443.832
Nanggroe Aceh Darussalam -- --
North Sumatra 12.366 11.556
West Sumatra -- --
Riau -- --
Riau Islands -- --
Jambi -- --
South Sumatra 12.502 15.962
Bengkulu -- --
Lampung 116.350 116.608
Bangka Belitung -- --
Sumatra 141.228 144.126
West Java 23.255 23.932
Banten -- --
Central Java 60.616 59.825
DI Yogyakarta 3.528 5.085
East Java 213.944 222.975
Banten -- --
Java 301.343 311.817
West Kalimantan -- --
Central Kalimantan -- --
South Kalimantan -- --
East Kalimantan -- --
Central Sulawesi -- --
Gorontalo 5.075 5.081
Southeast Sulawesi -- --
South Sulawesi 12.760 12.817
Sulawesi 17.835 17.899
Maluku -- --
Papua -- --
West Irian Jaya -- --

Source: Plantation directorate general

Table--6
Areas of cultivated plantation, 2006-2009

 Cultivated areas
Year (hectares) Growth (%)

2006 396,441 --
2007 438,040 4.4
2008 460,406 4.6
2009 473,841 4.7
Average Growth 4.6

Source : Plantation directorate general

Table--7
Harvest areas, 2000-2009

 Harvest area
Year (hectares) Growth

2000 340,660 --
2001 344,441 3.4
2002 350,722 3.5
2003 335,725 3.4
2004 344,793 3.4
2005 381,786 3.8
2006 396,441 3.9
2007 428,799 4.3
2008 435,505 4.4
2009 443,832 4.4
Average growth 4.9

Source : Plantation directorate general

Table - 8

Sugar plantation areas by condition of plant, 2009

No Provinces Area cultivated (hectares)

 PR PBN PBS Total

1 North Sumatra 2,294 9,262 11,556
2 South Sumatra 475 11,574 3,913 15,962
3 Lampung 16,168 5,740 94,700 116,608
 Sumatra 18,937 17,314 98,613 134,864
4 West Java 12,014 11,918 23,932
5 Central Java 54,483 831 4,511 59,825

6 DI Yogyakarta 5,085 5,085
7 East Java 193,077 29,653 245 222,975
 Java 264,659 42,402 4,756 311,817

8 South Sulawesi 1,726 11,091 12,817
 Indonesia 285,322 70,807 103,369 459,498

No Provinces Harvest area (hectares)

 PR PBN PBS Total

1 North Sumatra 2,294 9,262 11,556
2 South Sumatra 475 11,574 3,913 15,962
3 Lampung 16,168 570 94,700 116,608
 Sumatra 18,937 17,314 98,613 134,864
4 West Java 12,014 11,918 23,932
5 Central Java 48,497 831 4,511 53,839

6 DI Yogyakarta 5,085 5,085
7 East Java 169,054 29,653 245 198,952
 Java 234,650 42,402 4,756 281,808

8 South Sulawesi 1,726 11,091 12,817
 Indonesia 255,313 70,807 103,369 429,489

Keterangan:

PR: Smallholder

PBN: State

PBS: Private

Source: Plantation directorate general/Data Consult

Table - 9

Production of sugarcane milled, 2004 - 2008

Year Production Growth
 (000 tons)

2004 26,743 -
2005 31,242 16.8

2006 30,233 - 3.2

2007 33,289 10.1

2008 32,960 - 0.9

Average growth 5.7

Source: Plantation directorate general

Table - 10

Sugarcane production by plantation owners, 2000 - 2009 (000 tons)

Year PR Growth PBN Growth PBS Growth
 (%) (%) (%)

2000 791 234 665
2001 814 714 311 211 601 501
2002 967 867 298 198 491 391
2003 839 739 370 270 422 322
2004 1,029 929 384 284 639 539
2005 1,194 1,094 423 323 625 525
2006 1,029 929 384 284 639 539
2007 1,515 1,415 425 325 685 585
2008 1,536 1,436 396 296 736 636
2009 1,547 1,447 411 311 892 792

Average growth 1.1 2.8 5.4

Source: Plantation directorate general

Table - 11

Productivity of sugar plantations, 2006 - 2009

Year Productivity (kg/hectares)

 PR PBN PBS

2006 5.721 5.196 6.844
2007 5.278 5.201 7.119
2008 4.910 4.818 7.366
2009 6.057 5.129 8.363

Note:

PR: Smallholder

PBN: State

PBS: Private

Source: Plantation directorate general

Table - 12

A number of new investment projects in sugar plantations, 2010 - 2014

Companies Location Area
 (hectares)

PT. Rosa Kencana Perkasa Mojokerto, East Java 19,000
PT. Sugar Labinta Lampung 16,800
PT. Semesta Berjaya West Sumatra 18,000
PT. Bakrie Sumatra Plantation Merauke, Papua 50,000
PT. Laju Perdana Indah South Sumatra 21,500
PT. Gumilang Unggul Luhur Abadi Tuban, East Java 21,000
PT. Tripanca Group Lampung 7,500
PT. Wilmar Merauke, Papua 10,000
PT. Cipta Agung Manis Southeast Sulawesi 18,000
PT. Gula Manis Tinaggea Konawe, Southeast Sulawesi 10,000
PT. Source Mutiara Indah Perdana North Sulawesi 36,000
PT. Sukses Mantap Sejahtera Dompu, West Nusa Tenggara
PT. Permata Hijau Resources Sambas, West Kalimantan 5,000
PT. Nurindo Trading Riau 5,000
PT. Market Indo Selaras Konawe, Southeast Sulawesi 12,000
PT. Santos Jaya Abadi Southeast Sulawesi 7,000

Companies Processing Investment
 cap. (tcd)

PT. Rosa Kencana Perkasa 6,000- 8,000 US$ 100 million
PT. Sugar Labinta 5,400
PT. Semesta Berjaya 8,000
PT. Bakrie Sumatra Plantation 12,000
PT. Laju Perdana Indah 8,000 Rp 2 trillion
PT. Gumilang Unggul Luhur Abadi 8,000
PT. Tripanca Group 4,000
PT. Wilmar 8,000 US$ 2 billion
PT. Cipta Agung Manis 10,000
PT. Gula Manis Tinaggea 8,000
PT. Source Mutiara Indah Perdana 5,000 Rp1.4 trillion
PT. Sukses Mantap Sejahtera 12,000
PT. Permata Hijau Resources 4,500 Rp 1.8 trillion
PT. Nurindo Trading 2,000
PT. Market Indo Selaras 8,000
PT. Santos Jaya Abadi 5,000

Companies Operation plan

PT. Rosa Kencana Perkasa 2010-2012
PT. Sugar Labinta 2012 - 2014
PT. Semesta Berjaya 2012
PT. Bakrie Sumatra Plantation 2012
PT. Laju Perdana Indah 2012-2014
PT. Gumilang Unggul Luhur Abadi 2014
PT. Tripanca Group 2014
PT. Wilmar 2012-2014
PT. Cipta Agung Manis 2012-2014
PT. Gula Manis Tinaggea 2012-2014
PT. Source Mutiara Indah Perdana 2012-2014
PT. Sukses Mantap Sejahtera 2012
PT. Permata Hijau Resources 2012-2013
PT. Nurindo Trading 2012
PT. Market Indo Selaras 2012
PT. Santos Jaya Abadi 2012- 2014

Source: ICN processed

Table - 13

Types of sugarcane variety in Indonesia

Types of Genjah, ripe in Sedang, ripe in Dalam, ripe in
Sugarcane <12 months 12-14 months >14 months

BZ 132 [check] [check]

PS 57 [check] [check]

PS 59 [check] [check]

PS 58 [check] [check]

PS 56 [check]

BZ 148 [check]

POJ 3016 [check] [check]

Source: PTPN XI

Table - 14

Productivity of BL variety

Type of land Average production of Average content
 sugarcane (quintals
 per hectare)

Irrigated 1,504 (max, 2,093) 8.07 % (max. 8.86 %)

Dry land 1,250 (max, 2,112) 7.58 % (max. 8.25 %)

Trimming system 1,222 (max, 2,012) 7.81 % (max. 8.74 %)

Type of land Average production of
 crystal (quintals per
 hectare)

Irrigated 121.4 (max. 169.2)

Dry land 97.3 (max. 97.3)

Trimming system 94.5 (max. 152.1)

Source: PTPN XI

Table - 15

Exports of sugar by products, 1999 - 2008

Year Volume (tons) Value (000 US$)

1999 195,979 8,070
2000 136,753 5,926
2001 94,572 6,288
2002 125,137 8,089
2003 81,659 4,613
2004 195,570 11,396
2005 228,669 19,914
2006 554,728 50,391
2007 526,685 48,649
2008 947,402 73,199

Source: BPS

Table - 16

Exports of sugar by products by countries of destination, 2008

Countries of destination Volume (tons) Value (000 US$)

Vietnam 335,471 24,850
Taiwan 219,287 15,850
Spain 157,715 13,396
South Korea 144,038 10,613
The United States 30,030 2,502
Japan 24,170 12,357
Germany 15,000 1,470
Malaysia 934 248
Canada 197 162
Hong Kong 179 102
Other 20,411 650
Total 947,402 73,200

Source: BPS

Table - 17

Imports of molasses and other sugar by products, 2004 - 2008

Year Volume (tons) Value (000 US$)

1999 1,583,957 358,820
2000 1,677,611 290,099
2001 1,469,244 254,217
2002 1,113,777 216,341
2003 1,079,592 223,778
2004 1,181,397 269,490
2005 2,033,348 593,301
2006 1,452,956 544,431
2007 3,027,423 1,048,000
2008 1,044,000 363,504

Source: BPS

Table - 18

Imports of molasses by products by countries of origin, 2008

Countries of origin Volume (tons) Value (000 US$)

Thailand 824,934 294,488
Taiwan 42,401 13,394
India 39,101 12,507
Malaysia 34,424 13,931
Egypt 27,900 4,967
South Korea 24,593 11,227
Russia 20,250 3,486
Ukraine 11,831 2,600
Singapore 7,500 2,337
Other countries 11,066 4,567
Total 1,044,000 363,504

Source: BPS

Table - 19

Prices of cane sugar, 2005 - 2009

Year Prices (Rp/kg) Growth (%)

2005 5,531 2006
5,980 8.1
2007 6,342 6.1
2008 6,191 - 2.4
2009 7,940 28.3

Growth rata-rata 10.0

Source : KPB PTPN Nusantara

Table - 20

Forecast of sugarcane milled production, 2010 - 2014

Year Production
 (thousand tons)

2010 45,536

2011 46,902

2012 49,247

2013 51,709

2014 53,200

Source: ICN processed
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Title Annotation:INDUSTRY PROFILE
Comment:Development of sugar plantations toward sugar self sufficiency.(INDUSTRY PROFILE)
Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:May 1, 2010
Words:7100
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