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.
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.
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..........................
INDONESIAN COMMERCIAL NEWSLETTER
List of Contents
FOCUS: TIME TO REVITALIZE SUGAR PLANTATION 1
INDUSTRY PROFILE: SUGAR INDUSTRY IN INDONESIA 6
Current issue 8
Structure of sugar industry 9
PTPN X and PTPN XI, largest producers 13
Import of sugar, 2002-2006 15
Imports 2007 only 47% of plan 15
Sugar exports 16
Government's policy 16
World's sugar industry and trade 18
Sugar consumption in developing nations tends to rise 19
World sugar policy protective 20
Marketing aspects 21
Sugar price developments 26
Analysis of business in cane sugar industry 28
Program to increase sugar production 1 million tons a year 28
Investment requirement to increase productivity 29
Largest investment potential in Papua 31
New investment 32
Prospects and conclusion 34
COMPANY PROFILE: SGC (Sugar Group Company) GROUP 35
MSG INDUSTRY FACING DIFFICULTY RAW MATERIAL 39
Current issue 39
Indonesia's production capacity up 39
Supply of basic materials 45
Molasses exported 46
Distribution and marketing systems 47
Exports of MSG up 48
Conclusion and prospects 51
PROSPECTS OF BIOFUEL ENCOURAGES CONSTRUCTIONS OF NEW ETHANOL FACTORIES 53
Development of Biofuel 53
Development of Ethanol industry 50
Ethanol production capacity expanding 54
Producers Ethanol in Indonesia 55
Consumption of ethanol incresing 57
Investment in Bioethanol industry 57
CANDY INDUSTRY 61
Business model 62
East Java main production center 63
PT Anggel Langgeng (Relaxa) the largest 63
Producers Ethanol in Indonesia 55
Industry facing slump 65
DOUBLE REFINED SUGAR 67
Interest in investment strong 71
CORPORATE NEWS IN BRIEF:
Lippo property firms book solid Q3 profits 73
Six firms may bid for Medco's stake in unit 73
StarOne users slow to seek replacements 73
Wika Delays offering to Oct. 22 74
Aneka Tambang to Acquire 10% share of Newmont gold mine 74
Indah Kiat to import pulp from Finland 74
ECONOMIC NEWS IN BRIEF:
FDI doubled to US$ 8.54 billion 75
The ADB revised upwards its 2007 growth forecast for Indonesia 75
Wi-Max to be launched may 2008 75
RI intends to attract seven million tourist in 2008 76