Investors To Build Sugar Factories in Indonesia

Thirty-two investors have committed to build new sugar factories over the next four years as part of the government’s plan to become self-sufficient in sugar by 2012.

“The 32 investors will start construction in the middle of this year,” Industry Minister MS Hidayat said after addressing a seminar on the revitalization of the sugar industry on Monday.

The 32 factories will eventually be able to process 163,000 tons of sugar cane per day, with 56,000 tons per day processed within Java and 107,000 processed elsewhere.

Hidayat did not say how much money was being invested.

However, it costs about Rp 1 trillion ($107 million) to build a sugar factory with a milling capacity of 5,000 tons per day, according to figures released by the Agriculture Ministry, and it costs Rp 50 million per hectare annually to manage a plantation.

The Industry Ministry said most of the investors will require government support in the form of subsidized bank loans and tax breaks as well as assistance with acquiring land and developing infrastructure.

Budi Perbawa Aji, public relations manager at state agricultural group PT Rajawali Nusantara Indonesia, said it was important for factory owners to be able to acquire and operate their own plantations.

“Factories can better fulfill their milling capacity if they own the plantations. But at present land ownership is really difficult,” Budi said.

Agus Pakpahan, the deputy for agro-industry, forestry, paper and printing at the State-Owned Enterprises Ministry, said the government must also improve the sugar-trading mechanism.

“The sugar-trading mechanism is important so that investment will be well-planned and there will not be over-production,” Agus said.

Through investment and the use of new machinery, producers should be able to drive production costs down from current levels of about Rp 5,350 per kilogram. “Ideally the cost should be only Rp 3,500 by 2014,” Agus said.

Last month, the government said the country needed at least 50 new sugar factories by 2014 to reach self sufficiency in direct consumed white sugar and refined sugar.

Annual sugar demand by 2014 was expected to be 5.7 million tons: 2.96 million tons of white sugar for direct consumption and 2.74 million tons for the food and beverage industries.

According to the Industry Ministry, eight of the new factories will be located in Java, five in North Sumatra and six in Merauke, Papua. The remaining factories will be in Jambi, Lampung, South Sulawesi and East Nusa Tenggara.

International sugar prices have more than doubled in the past year as unsuitable weather slowed output in Brazil and India — the two biggest sugar producing countries.

source: thejakartaglobe