Sugar industry in Indonesia.
The country's sugar industry has declined in the past decade both in production and plantation areas despite improvement in the past two years.
The country's sugar production in the past decade shrank by 1,8% annually on the average and the plantations have not changed from 340,000 hectares in the past five years, The sugar content is also declining--with productivity down from 76.9 tons per hectares in 1990s to 62.7 tons in the 2000s.
Hoping to improve the performance of the industry, the government has announced plan to revitalize the industry with a production target set at 1 million tons in 2009.
Revitalization is aimed at increasing the production capacity of sugar factories, productivity and content of sugarcane and expansion of plantation.
At least 20 sugar factories have been proposed by industrialists to be included in the revitalization program, which is expected to have support from the banking industry. Revitalization of the 20 factories also including expansion of plantations is estimated to cost Rp 4.13 trillion.
Meanwhile the country's products of doubled refined sugar as a basic material for food and beverage processing industries are facing imported products, which are more competitive in prices.
Large imports of cheaper in price doubled refined sugar also have impact on the market of consumption sugar in the country.
Structure of sugar industry
Acreage of sugar plantations expanded
The biggest problem faced by the country sugar industry is shortage in supply of basic material as a result of shrinking plantation areas and the productivity of plantations.
Data at the Directorate General of Plantation Produciton Development show that in the past nine years, sugar plantations and productivity have declined significantly.
Many sugar factories, therefore, have operated below their installed capacity leaving large idle capacity. The industry, therefore, has low efficiency. A number of sugar factories in Java have a milling capacity of 23.8 million tons of cane a year but they have only a supply of 12.8 million tons of cane a year. As a result they operate only at around 53.8% of their capacity.
Sugar factories outside Java have a processing capacity of 14.2 million tons of cane but annual supply of basic materials averages only 8.6 million tons leaving idle capacity of 39.4%.
Sugar plantations in areas are still dominated by smallholders plantations accounting for 50% of the total plantaiton areas.
Expansion of sugar plantations began in 2004 to 344,793 hectares up from 335,725 hectares in 2003. The plantations expanded further to 422,734 hectares in 2005 after the government set a target to achieve self sufficiency in 2007.
Sugar content of cane remains low
The sugar content of canes or the productivity of plantations has remained low in the past several years.
In 2000, cane sugar content was 7.04% down to the lowest level of 5.85% in 2001. In 2002, it began to rise to reach 7.57% in 2004, before declining slightly to 7.60% in 2006.
More than 50% of sugar factories older than 100 years
It has been a long known fact that the country's sugar industry has been outdated in technology using old machines, therefore, no longer efficient. The cane content fell to only around 6%-8% from 12% when the country was known as the world's largest sugar producer during the Ducth colonial time. Revitalization, therefore, has been too late. Around 30 units of 59 sugar factories in the country have been more than 100 years in age.
The oldest is the Gending sugar factory in East Java coming on line in 1830 now having a milling capacity of 1,300 tons of sugarcane a day.
Most sugar factories in the country use the process of carbonization and treatment with sulfite turning out sugar with color of IU (ICUMSA) around 110-370.
The country's sugar production has tended to decline in the past 13 years--from 2,453,881 tons in 1994 to 1,488,269 tons in 1998 before rising to 2,051,645 tons in 2004 and to 2,314,712 tons in 2006.
The previous target of achieving self sufficiency in 2007, however, failed. The government postponed the target year to 2009.
PTPN X and PTPN XI, largest producers
Sugar industry is dominated by state companies. There are six state companies producing sugar. They are PT Perkebunann plantationsNusantara (PTPN)--PTPN II, VII, IX, X, XI, and XIV.
The six companies contributed 70% to the country's total production of sugar in 2003. PTPN X and XI in East Java are the largest accounting for 35% of the country's total production.
In 2004, sugar production of PTPN, which operates 17 factories totaled 353,760 tons. The production increased as a result of replanting with new seedlings.
Produksi PTPN X 's produciton also increased substantially from 287,000 tons in 2003 to 350,358 tons in 2004. Increase was recorde dby both state and private companies.
Sugar production of Rajawali Nusantara Indonesia (PT Rajawali Nusantara Indonesia I) in Surabaya rose from 106,698 tons in 2003 to 126,694 tons in 2004. The increase was attributable to expansion of plantations.
Increase in the sugar production recorded by RNI helped offset losses suffered by two of its sugar factories operated by Rajawali II in Cirebon--PG Karang Suwung and PG Jati Tujuh.
PT Gunung Madu Plantation and PT Gula Putih Mataram in Lampung also posted sharp increases of 22.3% and 62% respectively in 2004.
Imports of sugar, 2002-2006
The country's imports of sugar has tended to increase since 2002 to follow growing demand on the domestic market. In 2002, imports reached 970,926 tons, up to 1,119,790 tons in 2004 and to a peak of 1.98 million tons in 2005 before falling to 1,543,284 tons, valued at US$ 589,976,000 in 2006.
Imports 2007 only 47% of plan
The government allows imports up to 2.91 million tons this year but realization has only reached 47% or 1.38 million tons.
Based on data at the Trade Ministry, by Sept. 1, 2007, imports of refined sugar reached 99.71% of the import quota of 450,000 tons.
Imports of double refined sugar totaled only 552,650 tons or 48% of the quota set for it.
Imports of raw sugar has also been not yet up to target. Raw sugar import is needed to utilizie idle capacity of sugar factories in the country. Raw sugar is divided into three categories--as basic material for white crystal sugar, as basic material for double refined sugar and for MSG industry. See the following table.
Sugar exports have increased in the past several years to peak at 9,933 tons in 2004 after declining to 695 tons in 2003 from 816 tons in 2002.
Replanting and good prices in international market contributed to the surge in the exports in 2004. See the following table.
The government has issued series of regulations on sugar trade and industry including import duties as it is categoriuzed as a strategic commodity in the country.
It is not easy to issue regulations on sugar sector as it concerns growers and consumers representing large groups of people with conflicting interests. See the following table.
World's sugar industry and trade
In general, the world's sugar production has continued to increase since 2003. Brazil is he world's largest producer with production rising from 26.4 million tons in 2003, to 28.175 million tons in 2005 and 28.7 million tons in 2006--or 19.42% of the world's total production.
The European Union has recorded a decline in production lagely because of shrinking plantation areas and consumption. Similarly a decline has been recorded by the United States and Australia.
The United States recorded a decline in production from 7,146 million tons in 2005 to 6,824 million tons in 2006 and Australia from 5,388 million tons to 5.2 million tons. India, which is the second largest producer of sugar in the world has a 14.37% share of the world's total production increased its produciton from 14,2 million tons in 2005 to 18.4 million tons in 2006 and China from 9.8 million tons to 10.5 million tons. See the following table.
Sugar Consumption in developing nations tends to rise
Sugar consumption in India, China, Pakistan, Indonesia and other developing nations has increased to follow the population and economic growth.
World's sugar policy protective
Sugar producing countries in the world including Indonesia have their own policies to protect their sugar industry. Major producers and consumers provide heavy subsidy and protection causing market distortion in the the world. Sugar prices in the world averaged US$ 8.36/lb in he past decade far below the production cost of US$ 17.46/lb.
Subsidy in the Unted States accounts for 67% of income of sugar producers. The United State uses Farm Security and Rural Investment Act of 2002 (2002 Farm Act) as the legal basis for its subsidy policy. Among important policies used to protect sugar farmers include price support loan, tariff-rate quota, export subsidy, re-export programs, and payment-in-kind.
West Europe has worst distortion in sugar market. Government's interventions is found in almost all aspects in industry and trade. High import duties are slapped to protect domestic farmers.
The market size of sugar industry in Indonesia has expanded from year to year--from 2,725,543 tons in 2002 to 2,628,124 in 2003 and to a peak of 4,221,056 tons in 2005.
Sugar consumption low
Sugar consumers are households as direct consumers and industries as indirect consumers. Industries need sugar as basic material for their manufactured products such as food and beverage products.
Consumption of househod sugar in the country is low compared with in other neighboring countries. Per capita consumption in the country is only 13-14 kg a year as agains the world's average of 20 kg a year.
The low per capita consumption is attributable to weak purchasing power of the people.
Higher increase in sugar consumption in the country is recorded in the manufacturing sector. See the following table.
The prices of sugar in local market average Rp 6,500 per kg. The price is relatively expensive for the low income people. The high prices on the domestic market followed the prevailing prices in internaitonbal market when the price rose becasue of shortfall in supply.
The increase in the price of sugar in international market followed a decline in production in major producing countries like the Philippines, Thailand, China and India.
Long drought last year also caused a decline in domestic production. The trade director general of the home affairs ministry said the country's stock is sufficient until the end of this year despite a deficit of 600,000 tons including 200,000 tons for the industry.
In order to cover the deficit the government issued two decisions to import white sugar for buffer stock until May 2008. Stock by Sept. 1, 2007 totaled 700,050 tons, including 52% held by sugar factories, 34% held by traders and 9% held by farmers.
Sugar trade regulation maintained
Because of the strategic function of sugar, the government always intervenes in sugar marketing especially in imports. In the past the government's intervention was even greater by giving the monopoly of sugar imports to state-run Board of Logistics (Bulog).
Since 1998, the government launched a series of deregulation measures such as abolition of sugar subsidy and the use of sugar basic price.
In February 1999, the import duty on sugar was abolished at the same time with the abolition of Bulog's import monopoly.
In September 2002, the trade and industry minister issued a decision regulating again sugar trade by imposing import restriction.
Under the regulation, imports are allowed only by sugar producers and registered importers licensed by he trade minister. Importer producers are sate sugar factories and registered importers are companies needing sugar for basic material. The regulation was maintained with a new decision of the trade minister in September, 2007 that imports by sugar factories and registered importers are allowed only when the price of sugar on the domestic market exceeds Rp4,900 a kg.
Double refined sugar a threat to stability of consumer sugar market
Producers of cane based sugar repeated their opposition to entry of double refined sugar to the market of sugar consumption. The protest came with the marketing problem faced by local producers of double refined sugar because of imports of double refined sugar with low prices.
According to Corporate Secretary of PT Perkebunan Nusantara (PTPN) XI Adig Suwandi, the decline in the price of double refined sugar will likely result in penetration of imported double refined sugar to the market of consumption sugar.
Local products of double refined sugar utilizing the processing facility of imported raw sugar is fit only as basic material for food and beverage industries. However, as the price of sugar is low in the world market, food and beverage producers tend to import refined sugar directly from producers abroad especially as the quality of imported products is superior.
Currently domestic production of double refined sugar average 1.1 million tons a year exceeding domestic requirement. Therefore, even without import, the local producers have to compete tightly on the domestic market.
Sugar produced in the country is generally sent to the market via sugar distributors. Private sugar factories use their won distributors and state sugar factories hold tender to selec distributors.
Distribution is also made through networks of modern retail outlets such as hypermarkets, supermarkets and minimakets. Hero supermarket for example, which has 60 outlets, buys 80 tons of sugar every month to be distributed through its chain stores. Indomaret, which has 600 minimarts outlets buys around 200 tons a month, Carrefour Hypermarket needs or sells around 8 tons of sugar a month for each of its outlets. However, distribution via the modern market outlets is still much smaller than distribution by traditional retailers. See the following diagram.
As already said that the government has issued a regulation restricting distribution of imported sugar and bans interisland trade of sugar in a bid to prevent smuggling into the country.
Sugar factories owned by the state such as PTP Nusantara, which is licensed to import sugar are required to hold tender to select distributors for its imported sugar.
The state company often cooperates with whole traders in financing sugar imports. The compensation for the trader is the right to handle the distribution of imported sugar on the domestic market.
In 2004, PTPN IX and X cooperated with INKUD, and PT RNI cooperated with PT Citra Gemini Mulia. Other sugar distributors such as PT Kentjana Makmur dan PT Berlian Penta, often cooperate in importing sugar with state sugar factories.
Sugar price developments
Sugar is an important commodity in international market. Major sugar producers in the world include Brazil, India, the United States, West Europe, Australia, and Thailand.
Major consumers or importing countries include China, Indonesia, and svereal former Soviet republics. The prices of sugar in the world market tend to fluctuate. The prices fell to the rock bottom in 2002. Later with shortfall in supply the price scaled up to peak in 2005.
Deficit in production was recorded in three succeeding years until 2005 and growing demand from ethanol industry in Brazil was said to be the cause of the surge in the price.
FAO in 2004, predicted that until 2010, the price of that commodity will remain high at around US$ 17-21 per kg in international market.
Sugar price development on the domestic market
The condition in international market has strong impact on the domestic market despite government's attempt to control the price with a series of regulations. The policies are not effective enough to control the prices on the domestic market after the monopoly of Bulog was abolished in 1998.
The price of sugar at the level of farmers are often controlled by the government through a type of basic price.
Currently the basic price has been modified into a kind of minimum price guaranteed by private investors. If the price of farmers' sugar through an auction is higher than the minimum price, the excess is divided equally between the farmers and the investor.
In the milling season of 2005, the minimum price was set at Rp 3,800/kg. Meanwhile, the prices on the domestic market soared to exceed the government set price. For example, the retail price in 2005 was Rp 5,744 per kg.
Analysis of business in cane sugar industry
Construction of a sugar factory with a processing capacity of 4,000 to 10,000 tons of sugarcane per day (TCD) will cost around Rp 900 billion to Rp1 trillion with annual operating cost of Rp 45 billion--Rp 50 billion.
Construction of an ethanol factory with a production capacity of 60 kiloliters per day will cost Rp 133 billion to Rp 200 billion. Building a particle board factory with machines from Europe or China with a capacity of 72 square meters per hour will cost around Rp 95 billion to Rp 157 billion with operaitng cost of Rp 25 billion to Rp 34 billion a year.
Industry that also follows the growing trend is cogeneration (electricity) industry. Construciton of cogeneration plant with a capacity of 6,000 kwh, will cost Rp 45 billion with annual operating cost of Rp 9 billion.
Program to increase sugar production 1 million tons a year
In a bid to meet the target fo self sufficient in sugar supply in 2009, the government and sugar producers and consumers have drafted a plan to increase the country's sugar production by 1.3 million tons.
The additional production of 1.3 million tons is estimated based on the production capacity of the existing sugar factories, sugar plantations and sugar content.
The existing factories are expected to be able to increase production by 705,000 tons and new factories to be built will produce around 600,000 tons. In order to increase production, sugar plantations will be expanded from 409,000 hectares to 463,000 hectares or an addition of 54,000 hectares.
The expansion of plantations will include 33,000 hectares in Java and 21,000 hectares outside Java.
Investment requirement to increase productivity
Investment will be needed in the smallholder plantation, sugar factories and factories producing sugar derivatives and investment by the government.
Investment in the primary business sector is made by smallhodlers and companies. Investment by smallholders are expected in Java.
Based on a survey, Java has the potential to open 41,000 hectares of new sugar plantations mainly by smallholders with a total investment of Rp 599.4 billion.
Companies are expected to open plantations outside Java. The Sampoerna Group plans to build 40,000 hectares of sugar plantations in Merauke, Papua with an investment of around Rp 426 billion bringing the total investment in the primary business sector to more than Rp 1 trillion.
Total investment needed in sugar sector is estimated to reach Rp 6.817 trillion and the bulk or Rp 6.278 trillion of which are expected to be made by the corporate sector. The largest component of the investment is for two factories outside Java (likely in Merauke) to process cane produced from 40,000 hectares of plantation to be built by the Sampoerna Group with an investment of Rp 2 trillion.
Meanwhile, investment needed for the revitalization of 52 sugar factories in Java is estimated to reach Rp 2.163 trillion. Construciton of two ethanol plants, particle board plant and electric energy plant will need additional investment of more than Rp 1 trillion.
The investment needed by smallholders mainly for pumps and tractors, transport facility and procurement of seedlings will cost around Rp 538 billion.
Investment for infrastructure in roads and irrigation systems will be made by the government and companies totaling around Rp 208 billion and Rp 200 billion respectively or a total of Rp 408 billion.
Altogether, total investment needed will reach Rp 8.25 trillion. The largest part or Rp 6.9 trillion will be contributed by companies with smallholders contirbuting Rp 1.13 trillion and the government Rp 208 billion.
Largest investment potential in Papua
The largest investment of Rp3.437 trillion is more likely in Merauke, Papua to build 40,000 hectares of sugar plantation and two new sugar plants.
Considerable amount of investment is also needed in East Java for expansion of plantations by 29,235 hectares and construction of an ethanol plant, electric energy plant and particle board plant.
Investment for ethanol plant, energy plant and particle board plant is also potential in Lampung.
In West Java and Central Java investment will likely needed more for plantation expansion respectively 6,801 hectares and 3,964 hectares.
PTPN IX to restructure 4 factories
PT Perkebunan Nusantara IX(PTPN IX) plans to restructure four of its eight sugar factories in 2008. The restructuring is expected to increase the selling value of the shares of the state company when it launches initial public offering (IPO) planned in 2010, its president said.
The processing capacity of the Mojor sugar factory in Sragen and the Rendeng factory Kudus, Central Java, will be expanded to 4,000 tons of cane and 2,600 tons of cane per day respectively.
The two other factories will have their old equipment replaced to be more efficient.
Investment for the capacity expansion of the two factories will be around Rp 190 billion and investment for the modernization of the equipment of the two other factories is around Rp 410 billion.
The state company also plans to build four units of bioethanol processing plants with a capacity of 18,000 liters per day and facility to process raw sugar into white sugar with a capacity of 400 tons per day.
PT Gunung Madu Plantations (GMP) to expand production capacity
PT Gunung Madu Plantation plans to invest Rp 200 billion this year to increase its sugar production capacity. Expansion of its factory in Gunung Batin, Central Lampung, is to be completed in 2008.
The processing capacity of the factory will be expanded to 2.2 million tons of cane a year in 2008 or equivalent to 205,500 tons of white sugar. The expansion will contribute significantly to the government's program to reach sugar self sufficiency in 2009. In 2010, the company's sugar production capacity is projected to reach 224,250 tons per year, with annual cane production of 2.4 million tons.
PT Sumatera Tonggi to build sugar plant in North Sumatra.
PT Sumatera Tonggi has been licensed by the Capital Investment Coordinating Board (BKPM) to build a sugar plant in North Sumatra with an investment of Rp 1.2 trillion.
Construction is already in progress and it is expected to be completed and operaitonal in 2008. The factory will have an annual production capacity of 500,000 tons. The company also plans to build its own power plant to guarantee power supply for the factory. North Sumatra is known to have serious shortage of power supply.
The company plans to import raw sugar as basic material from Australia and Thailand, to produce white sugar. It production is expected to be enough to supply sugar for the nothern part of Sumatra.
Meanwhile a number of other companies such as the Astra Group, and the Sinar Mas Group, also plan to build new sugar factories. Astra Group and Sinar Mas group plan to build integrated sugar industry to be operational in 2009. See the following table.
Prospects and Conclusion
An increase in the productivity of sugarcane could sitll be made through improvement of cultivation system and expantion of plantation. The country still has ample lands suitable for sugar plantations. The country has even the potential to become a major supplier of sugar to the world market. A number of foreign sugar experts have said Indonesia has that potential.
Indonesia is one of 33 countries lying in the IOR (Indian Ocean Rim), which accounts for 34% of the world's sugar production, 29% of the world's sugar consumption and 33% of the world's sugar exports.
Among the 33 countries 14 are sugar exporting countries. They are India, Pakistan, Madagascar, South Africa, Malawi, Zimbabwe, Zambia, Sudan, Switzerland, Vietnam, Thailand, Mauritius, Australia, and Indonesia.
Indonesia, however, has become a major net importer of sugar. The climate in Indonesia is suitable for sugar plantation and the country is one of the richest in sugar genetic resources (germ plasm). The country, besides India, is believed to be the origin of the world's sugarcane.
According to the Indoensian Sugar Association (AGI), an initial study shows that the country has 2 million hectares of lands suitable for sugar plantations in its eastern regions. The lands include 800,000 hectares in Papua, 816,000 hectare sin Maluku and 198,000 hectares in Central Kalimantan.
Indonesia was once the world's second largest sugar suppliers to the world second only to Cuba.
The country also has a sugar factory in Lampung ranked among the most efficient sugar factiories in the world. The fact should encourage development of sugar industry in the country.
Table - 1 Sugar plantation areas by owners, 1999-2006 Year Plantation areas Ha Smallholders Government Private Total 1999 176,733 82,106 83,372 342,211 2000 171,279 64,133 105,248 340,660 2001 178,887 87,687 77,867 344,441 2002 196,509 79,975 74,238 350,722 2003 172,015 87,251 76,459 335,725 2004 184,283 78,205 82,305 344,793 2005 252,427 80,383 89,924 422,734 2006 262,093 80,593 90,636 433,322 Source: Agriculture Ministry Table - 2 Sugar content of cane in Indonesia, 2000 - 2006 Year Content (%) 2000 7.04 2001 5.85 2002 6.88 2003 7.21 2004 7.57 2005 7.65 2006 17.60 Source: Agriculture Ministry Table - 3 Sugar factories, milling capacity, processing system and operating start up No. Companies / Sugar Milling Start Processing Milling factories capacity -up systems start (Tons/ day) I. PTP NUSANTARA II 1. 1. PG Kuala Madu 4,000 1982 Treatment Jan/Feb with sulfite 2. 2. PG Sei 4,000 1983 Treatment Jan/Feb Semayang with sulfite Subtotal 18,000 II. PTP NUSANTARA VII 3. 1. PG Bunga 6,000 1984 Treatment Apr/May Mayang with sulfite 4. 2. PG Cinta Manis 5,000 1984 Treatment Apr/May with sulfite Subtotal 11,000 III. PTP NUSANTARA IX 5. 1. PG Jatibarang 2,050 1842 Treatment May/June with sulfite 6. 2. PG Pangka 1,830 1836 Treatment May/June with sulfite 7. 3. PG Sourceharjo 2,050 1861 Treatment May/June with sulfite 8. 4. PG Sragi 3,700 1836 Treatment May/June with sulfite 9. 5. PG Rendeng 2,850 1840 Treatment May/June with sulfite 10. 6. PG Gondang 1,620 1860 Carboni- May/June Baru zation 11. 7. PG Tasikmadu 3,650 1874 Carboni- Ma /June zation 12. 8. PG Mojosragen 2,950 1883 Treatment May/June with sulfite Subtotal 20,700 IV. PTP NUSANTARA X 13. 1. PG Lestari 3,750 1909 Treatment June with sulfite 14. 2. PG Mrican 2,750 1939 Treatment June with sulfite 15. 3. PG Pesantren 5,250 1976 Treatment June Baru with sulfite 16. 4. PG Ngadirejo 5,250 1912 Treatment June with sulfite 17. 5. PG Mojo 2,250 1882 Treatment June panggung with sulfite 18. 6. PG Watutulis 2,000 1839 Treatment June with sulfite 19. 7. PG Tulagan 1,250 1848 Treatment June with sulfite 20. 8. PG Kremboong 1,350 1847 Treatment June with sulfite 21. 9. PG Gempolkrep 5,250 1912 Treatment June with sulfite 22. 10. PG Jombang 2,000 1895 Treatment June Baru with sulfite 23. 11. PG Cukir 2,750 1884 Treatment June Subtotal 33,850 with sulfite V. PTP NUSANTARA XI 24. 1. PG Sudhono 2,200 1888 Treatment May/June with sulfite 25. 2. PG Purwodadi 2,000 1832 Carboni- Ma /June zation 26. 3. PG Rejosari 2,000 1890 Treatment May/June with sulfite 27. 4. PG Pagottan 2,300 - Treatment May/June with sulfite 28. 5. PG Kanigoro 1,650 1894 Treatment June with sulfite 29. 6. PG Kedawung 3,000 1898 Treatment June with sulfite 30. 7. PG Wonolangan 1,250 1832 Treatment June with sulfite 31. 8. PG Gending 1,300 1830 Treatment June with sulfite 32. 9. PG Pajarakan 1,200 1885 Treatment June with sulfite 33. 10. PG Jatiroto 7,000 1905 Treatment June with sulfite 34. 11. PG Semboro 4,800 1938 DNKS June 35. 12. PG Wringin 1,100 1881 Treatment June Anom with sulfite 36. 13. PG Olean 1,000 1846 SISJ June 37. 14. PG Panji 1,800 1886 Treatment June with sulfite 38. 15. PG Asembagus 2,400 1891 Treatment June with sulfite 39. 16. PG Prajekan 2,450 1883 Treatment June with sulfite Subtotal 37,450 VI. PTP NUSANTARA XIV 40. 1. PG Takalar 3,000 1987 Treatment Jul/Aug. with sulfite 41. 2. PG Bone 2,000 1975 Treatment Jul/Aug. with sulfite 42. 3. PG Caming 3,000 1986 Treatment Jul/Aug. with sulfite Subtotal 8,000 VII. PT RAJAWLI NUSANTARA INDONESIA (PT RNI) GROUP A. PT PG RAJAWALI I 43. 1. PG Krebet 3,000 1906 Treatment June Baru I with sulfite 44. 2. PG Krebet 4,000 1976 Treatment June Baru II with sulfite 45. 3. PG Rejo Agung 4,500 1894 Carboni- June Baru zation 46. 4. PG Candi 2,000 1832 Treatment June with sulfite Subtotal 13,500 B. PT PG MADU BARU 47. 1. PG Madukismo 3,500 1955 Treatment May/June with sulfite C. PT PGRAJAWALI II 48. 1. PG Sindanglaut 2,000 1896 Treatment May/June with sulfite 49. 2. PG Karang 1,400 1859 Treatment May/June suwung with sulfite 50. 3. PG Tersana 3,500 1896 Treatment May Baru with sulfite 51. 4. PG Jatitujuh 4,000 1975 Treatment May with sulfite 52. 5. PG Sindanglaut 3,500 1981 Treatment May with sulfite Subtotal 14,400 D. PT PG RAJAWALI III 53. 1. PG Tolangohulo 8,000 1988 Treatment August with sulfite VII. PT RNI GROUP 39,400 VIII. PT KEBON AGUNG 54. 1. PG Kebon Agung 5,000 1905 Treatment May/June with sulfite 55. 2. PG Trangkil 3,000 1835 Treatment May/June with sulfite Subtotal 8,000 IX. PT GUNUNG MADU PLANTATION 56. 1. PG Gunung Madu 12,000 1975 Treatment Apr/Car with sulfite boni zation X. PT GARUDA PANCA ARTA 57. 1. PG Gula Putih 10,000 1983 Treatment Apr/May Mataram with sulfite 58. 2. PG Sweet Indo 9,000 1995 Treatment Apr/May Lam un with sulfite 59. 3. PG Indo Lam- 8,000 1996 Treatment Apr/May pung Perkasa with sulfite Subtotal 127,000 Source: AGI Table - 4 Indonesia's sugar production, 1994 - 2006 Year Production Growth (tons) (%) 1994 2,453,881 - 1995 2,059,576 -16.06 1996 2,094,195 1.68 1997 2,191,986 4.66 1998 1,488,269 -32.10 1999 1,493,933 0.38 2000 1,690,004 13.12 2001 1,725,467 2.09 2002 1,755,433 1.73 2003 1,631,615 -7.05 2004 2,051,643 25.74 2005 2,241,742 9.26 2006 2,314,712 3.25 Source: Indonesian Sugar Council Table - 5 Sugar production by companies, 2002 - 2006 (Tons) Year 2002 2003 Java PG Rajawali II PT, 96,500 84,626 Jawa Barat PTPN IX, 89,606 121,953 Jawa Tengah PTPN X, Jawa 340,156 287,088 Timur PTPN XI, Jawa 358,562 320,599 Timur Kebon Agung, PT, 73,413 79,835 Surabaya Madu Baru, PT 35,706 24,681 Rajawali I, PT 99,087 106,698 Surabaya Subtotal 1,093,030 1,024,481 Outside Java PTPN II, 52,226 26,786 North Sumatra PTPN VII, Lampung 84,080 100,532 PTPN XIV, 34,646 29,161 South Sulawesi PG Rajawali III, 27,263 34,937 Gorontalo Gunung Madu 147,287 151,737 Plantation, PT Gula Putih 108,872 93,230 Mataram, PT Sweet Indo 100,360 71,015 Lampung, PT Indo Lampung 107,669 99,736 Perkasa, PT Subtotal 662,403 607,134 Total 1,755,433 1,631,615 Year 2004 2005 2006 Java PG Rajawali II PT, 114,222 130.000 140,922 Jawa Barat PTPN IX, 135,602 148.000 170,869 Jawa Tengah PTPN X, Jawa 350,358 387.000 410,905 Timur PTPN XI, Jawa 363,760 390.000 415,292 Timur Kebon Agung, PT, 91,847 110.000 122,066 Surabaya Madu Baru, PT 23,690 27.000 31,500 Rajawali I, PT 126,694 137.917 145,655 Surabaya Subtotal 1,206,173 1,456,554 Outside Java PTPN II, 13,456 42.000 70,465 North Sumatra PTPN VII, Lampung 134,933 165.000 174,487 PTPN XIV, 27,614 32.000 36,292 South Sulawesi PG Rajawali III, 185,644 30.000 47,085 Gorontalo Gunung Madu 151,294 185.000 197,000 Plantation, PT Gula Putih 37,970 60.000 91,886 Mataram, PT Sweet Indo 148,652 120,470 Lampung, PT Indo Lampung 145,908 120,472 Perkasa, PT Subtotal 845,470 975,329 Total 2,051,643 2,241,742 2,314,712 Source: AGI Table - 6 Imports of refined sugar, 2002-2006 Year Sugar Volume Tons Value (US$ 000) 2002 970,926 198,638 2003 997,204 215,777 2004 1,119,790 262,813 2005 1,980,487 585,263 2006 1,543,284 589,876 Source: BPS, Plantation Directorate General of Agriculture Ministry Table - 7 Imports of sugar, 2007 Type Import quota Realization (%) White sugar 450,000 448,681 99.71 Double refined sugar 552,650 269,222 48 Raw sugar for * White sugar 292,563 97,441 33.31 * Double refined sugar 1,419,700 510,113 35 * MSG industry 194,500 56,900 29 Subtotal 1,906,763 664,454 34.5 Total 2,909,413 1,382,357 47.5 Source: Various official sources Table - 7 Exports of sugar, 2002 - 2006 Year Sugar Volume Value (tons) (US$ 000) 2002 816 503 2003 695 561 2004 9,933 1,922 2005 1,173 602 2006 1,480 982 Source: BPS, Plantation Directorate General Table - 8 Government's policies on sugar industry SK/Keppres/Kepmen on Goals Presidential decree Sugar procurement, To keep price No, 43/1971, 14 July distribution, and stability of the 1971 marketing essential product Letter of minister/ Controlling, Details about state secretary No, supervision and Oresidential decree B, 136/ABN distribution of No, 43/1971 covering SEKNEG/3/74, 27 refined sugar state company sugar March 1974 produced by non state companies Presidential Sugar intensification To increase in sugar Instruction No, (TRI) production and income 9/1975, 22 April 1975 of farmers Decision of trade and Sugar domestic trade To guarantee cooperative minister procurement and No, 122/Kp/III/81, 12 distribution of sugar March 1981 and increase in income of farmers Decision of finance Determination of To guarantee price minister No. 342/KMK, price of domestic and stability, foreign 011/1987 imported products of exchange and refined sugar adjustment of farmers' and factory income Law No, 12/1992 Plant cultivation To give freedom for farmers to grow crops with good market prospects. Presidential Program to develop Providing role for Instruction No. smallholders sugar business players in 5/1997, 29 December plantations free trade 1997 Presidential Termination of Freedom for farmers Instruction No. implementation of to select crop in 5/1998, 21 January Pres. Instruction No, line with the law No, 1998 5/1997 12/1992 Decision of trade Commodities of Improving efficiency min. No, which imports are and distribution of 25/MPP/Kep/1/1998 regulated goods Decision of forestry Determination of To prevent losses to and plantation min. price of farmers' farmers and boost No. 282/Kpts-IX/1999, share of sugar production 7 May 1999 production Decision of trade Import regulation Reducing government's minister No, budget through 363/MPP/Kep/8/1999, imports by sugar '5 August 1999 producers Decision of the trade Revoking decision of Abolition of import min. No. 230/MPP/ the trade min. No. duty on sugar to Kep/6/1999, 5 June 363/MPP/Kep/8/1999 protect domestic 1999 industry Decision of finance Change in import Improvement of minister No, duty effectiveness of 324/KMK,01/2002 import duties Decision of trade Sugar import Import restriction by minister No. Regulation allowing only 643/MPP/Kep/9/2002, producers and '23 September 2002 registered importers to import that commodity Decision of the trade Improvement of Registered importers min. No. sugar import required to forer- 527/MPP/Kep/9/2004 regulation stall the market and imports allowed only when the price is no less than Rp 3,410/kg Source: Agriculture ministry, industry ministry Table - 9 Production, share and production growth recorded by main producers, 2004-2006 Production (000 tons) Countries 2003/04 2004/05 2005/06 Brazil 26,400 28,175 28,700 European Union (EU) 17,132 21,825 21,233 India 15,150 14,210 18,430 China 10,734 9,826 10,500 USA 7,847 7,146 6,824 Thailand 7,010 5,187 4,330 Mexico 5,330 6,149 6,000 Australia 5,178 5,388 5,200 Pakistan 4,047 2,937 2,890 Cuba 2,300 2,100 2,300 World 14,100 142,500 147,800 Share Growth (%) 2003/04- 2004/05- Countries (%) 2004/05 2005/06 Brazil 19.42 6.7 1.9 European Union (EU) 14.37 27.4 -2.7 India 12.47 -6.2 29.7 China 7.10 -8.5 6.9 USA 4.62 -8.9 -4.5 Thailand 2.93 -26.0 -16.5 Mexico 4.06 15.4 -2.4 Australia 3.52 4.1 -3.5 Pakistan 1.96 -27.4 -1.6 Cuba 1.56 -8.7 9.5 World 100.00 1.0 3.7 Source: USDA Table - 10 Sugar consumption, share and growth in major consuming countries, 2004 - 2006 Countries Production (000 tons) 2003/04 2004/05 2005/06 India 18,810 19,500 19,800 EU 14,358 17,626 17,525 China 11,600 11,600 11,700 Brazil 10,400 10,600 10,800 USA 8,971 9,269 9,267 Russia 6,100 6,300 6,450 Mexico 5,600 5,424 5,482 Pakistan 3,600 3,750 3,850 Indonesia 3,400 3,550 3,800 Japan 2,247 2,263 2,250 World 143,300 145,100 148,000 Countries Share Growth (%) 2003/04- 2004/05- (%) 2004/05 2005/06 India 13.38 3.7 1.5 EU 11.84 22.8 -0.6 China 7.91 0.0 0.9 Brazil 7.30 1.9 1.9 USA 6.26 3.3 0.0 Russia 4.36 3.3 2.4 Mexico 3.70 -0.3 1.1 Pakistan 2.60 4.2 2.7 Indonesia 2.57 4.4 7.0 Japan 1.52 0.7 -0.6 World 100 1.3 2.0 Source: USDA Table - 11 Policy in sugar industry in several countries Countries Basic policies Policy essence Brazil Domestic/price Support Price support (1998) (US$ 743 million/year) India Essential Commodities ACT 1,955 Production Allocation and produciton control i (levy sugar) Distribution Priceds within reach of consumers (ration card) Partial Price Control Cane and sugar price guarantee (levy price and market price) Thailand Price support Price support Production management Production control/quota Japan Price guarantee (Y 71 billion) High import duty Restricting imports West Europe CAP Price support Price guarantee Production Production control/quota TRQ Import control Safe guards Mechanism Import control Export Subsidy Reducing offer on domestic market United States 2002 Farm Act and FAIR ACT of 1996 (US$ 1.9 billion) Price Support Price guarantee & credit Tariff-Rate Quota Import control Export Subsidy Re-export program Compensation for industry using sugar basic material Payment-in-Kind Reducing distortion in policy Source: Agriculture Ministry, Industry Ministry Table - 12 Market size of sugar, 2002 - 2006 Year Production Imports Exports (Tons) (Tons) (Tons) 2002 1,755,433 970,926 816 2003 1,631,615 997,204 695 2004 2,051,643 1,119,790 9,933 2005 2,241,742 1,980,487 1,173 2006 2,314,712 1,543,284 1,480 (Tons) Year Market size (Tons) * (US$ 000) 2002 2,725,543 1,678,934 2003 2,628,124 2,120,896 2004 3,161,500 2,213,050 2005 4,221,056 2,165,402 2006 3,856,516 2,556,870 Source: Industry ministry * equivalent to export price Table - 13 Estimate of consumption by sectors, 2006 (000 tons) Description 2006 Direct consumption by household/ people 2,695,705 Consumption by industry --Food and beverage industry 898,568 --Other industry 262,243 Consumption by industrial sector 1,160,811 Total consumption of sugar 3,856,516 Source: Data Consult Table - 14 Average retail prices of sugar in Indonesia (Rp/kg) Year Sugar prices on the average 2000 3,027 2001 3,822 2002 3,636 2003 4,319 2004 4,243 2005 5,744 2006 5,975 Source: Agriculture Ministry Table - 15 Analysis of several cane-based industries Industries Capacity Cost (Rp billion) Investment Operating cost Sugar plant 4,000-10,000 TCD 900 - 1000 45 - 50 Ethanol 60 kl/day 133 - 200 39 Particle Board (Ex 72 m3 per hour 95 - 157 25 - 34 Europe or China) Cogeneration 6,000 kWh 45 9 (electricity) Source: Agriculture ministry Table - 16 Targets for expansion of plantation, increase in production and productivity, 2007-2009 Description Java Outside Indonesia Java Harvest area (Ha) Year2007 264,532 144,353 408,885 Year2009 297,754 165,097 462,851 Cane milled (Tons) Year2007 20,250,182 10,060,359 30,310,541 Year2009 25,103,950 12,072,886 37,176,836 Addition 4,853,768 2,012,527 6,866,295 Plantation productivity (Tons of cane /Ha) Year2007 76.6 69.7 74.1 Year2009 84.4 73.1 80.3 Addition 7.8 3.4 6.2 Sugar content (%) Year2007 7.53 8.25 7.77 Year2009 8.31 8.44 8.23 Addition 0.60 0.19 0.46 Crystal production (Tons) Year2007 1,524,479 830,375 2,354,854 Year2009 2,040,849 1,019,281 3,060,130 Addition 516,370 188,906 705,276 Crystal productivity (Tons/Ha) Year2007 5.76 5.75 5.76 Year2009 6.85 6.17 0.85 Addition 1.09 0.42 0.85 Source: Agriculture Ministry Table - 17 Estimate of investment needed in Java and Papua, 2005 - 2010 Sectors Small- holders Companies Government Total 1) 2) 2) (Rp billion) 1. Business investment a. Land 205.0 200.0 0.0 b. Farm equipment 6.6 6.4 0.0 c. Buildings 0.0 100.0 0.0 d. Working capital 387.9 120.0 0.0 Total 599.4 426.4 0.0 1,026 2. Investment in business areas 2.1 Business in farm equipment a. Pumps 41.5 40,5 0,0 82 b. Tractors 150.3 146,7 0,0 297 2.2 Breeding of 61.5 60,0 0,0 121,5 seedlings 2.3 Post harvest 284.7 277,8 0,0 562,5 business--trucks 2.4 Processing business a. New sugar 0.0 2,000,0 0,0 2,000 factories (2 units) b. Rehabiliation 0.0 2,163,7 0,0 2,163,7 of factories (52 units) c. Ethanol plant 0.0 500,0 0,0 500 d. Electric Energy 0.0 500,0 0,0 500 e. Particle Board 0.0 200,0 0,0 200 2.5. Marketing and distribution Source: Agriculture ministry Table - 18 Investment needed in sugar industry, 2005-2010 Province By By companies By Total smallholders government (Rp billion) East Java 831,4 2,259,4 0,0 3,090,8 Central Java 193,4 445,8 0,0 639,2 West Java 112,7 292,4 0,0 405,2 Papua 0,0 3,229,4 208,0 3,437,4 Lampung 0,0 678,0 0,0 678,0 TOTAL 1,137.5 6,905 208 8,250.6 Table - 19 Expansion and new investment in sugar industry Companies Planned Cane investment processing (RP billion) capacity PTP IX 410 2,800 tons cane/day PT Gunung 200 2.2 million tons Madu cane/year Plantation PT Sumatera 1,200 500,000 tons Tonsggi sugar/year (prod. cap.) Group Sinar 700 7,000 tons/day Mas Astra Agro 1,000 10,000 tons/day Lestari Locations Construction/ completion PTP IX Sragen & Construction to Kudus, Central start in 2008 Java PT Gunung Central Lampung Operational in Madu 2008 Plantation PT Sumatera North Sumatra Operational in Tonsggi 2008 Group Sinar Sinjai, South Operational Mas Sulawesi in 2009 Astra Agro Goa and Operational Lestari Takalar, South in 2009 Sulawesi Source: Investment Coordinating Board
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|Title Annotation:||INDUSTRY PROFILE|
|Publication:||Indonesian Commercial Newsletter|
|Date:||Sep 1, 2007|
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