Middlemen, smugglers, exorbitant tariffs in foreign countries and a dire need for agricultural reform are all leading Indonesian farmers to take drastic action to protect their livelihood, as highlighted by last week's mass demonstrations by sugar industry workers to mark National Farmers' Day.
Reports on the mass demonstrations held last week said an estimated 8,000 sugar farmers and industry workers took part in demonstrations in many major cities, from Lombok in the east to Palu, Central Sulawesi, in the north and Medan, North Sumatra, in the west.
At the national parliament in Jakarta, protesters broke through the main gates and stormed the grounds although they did not enter the parliament building.
Their demands were many and varied but centered on the need to raise returns on commodities to farmers, reform procesing and distribution networks and settle legal uncertainty on land ownership.
Massive task
The massive task laid at the government's door was evident from even the briefest perusal of the farmers' demands.
While some farmers complained that vast tracts of land are being left uncultivated leading to unemployment, others complained that rampant land exploitation and environmentally unfriendly practices were destroying natural resources.
Although the 1960 agrarian law recognizes traditional land rights, albeit in very vague terms, farmers' representatives uniformly stated that the vast majority of small holders had not obtained certificates, making their legal "ownership" of the land weak in the face of powerful developers.
Chairman of the Indonesian Farmers' Union (HKTI) Siswono Yudhohusodo revealed that over 6,000 land disputes involving around 1.2 million farmers remained unresolved across the country due to unclear regulations on land ownership.
Many of the land disputes involve state-owned plantation company PT Perkebunan Nusantara, which carried out massive land confiscation backed by the authoritarian regime of former president Suharto.
Piecemeal solutions
The fact that only piecemeal amendments to the agrarian law have been made in the last 40 years highlights the thorny nature of the issue.
In response to last week's protests, legislator Tumbu Saraswati proposed establishing a team comprising representatives from the National Land Agency (BPN) and the House of Representatives' Commission II on legal issues to settle agrarian conflicts and draft a better agrarian bill.
Sidestepping the need for comprehensive reform, President Megawati Sukarnoputri has endorsed a temporary plan to subsidize local sugarcane farmers, reported The Jakarta Post Friday.
Siswono also said he asked the President to increase the import tariff on sugar to Rp1,200 per kilogram from Rp700 per kilogram. No details on the form or the size of the subsidy were released.
The announcement came after Industry and Trade Minister Rini MS Soewandi announced a new regulation restricting imports. The new regulation allows the three Perkebunan Nusantara state companies to import sugar only when the price of that commodity exceeds Rp3,100 ($0.35) per kg and prohibits imports if the price falls below that level.
The regulation will be effective until 2004, starting three weeks after the date of issuance on September 23, reported Antara.
Cheap imports smothering farmers
Few industry pundits believe subsidies or import restrictions in the absence of comprehensive reforms will make much difference.
The influx of imports, both legal and illegally smuggled into the country, drew the greatest attention at the demonstrations.
Indonesia has been a net importer of sugar since the 1960s and now ranks as one of the world's biggest importers.
Imports have reportedly been falling in recent years: totaling 2.1 million tons in 1999, 1.2 million tons in 2000 and about 1.6 million last year.
Total sugar production currently stands at around 1.7 million tons and Indonesia's annual consumption of sugar is about 3.3 million tons.
But millers and food producers would rather buy cheap imports than the high-priced and low-grade sugar produced domestically.
The food, beverage and pharmaceutical industries, which account for around 10% of total sugar consumption, need a higher quality of refined industrial grade sugar than the plantation-grade raw sugar called 'SHS I' produced in Indonesia.
Although the SHS1-grade sugar is suitable for households, which account for the remaining 90% of consumption, cheap imports are squeezing Indonesian producers to breaking point.
This was never more evident than in the case of East Java. Although the province produces about 700,000 tons of sugar annually but needs only 396,000 tons a year, farmers have held regular and massive demonstrations over the last three months demanding the provincial government ban imports.
The ban was finally endorsed by Governor Imam Utomo, backed by the East Java military district command, the police and the public prosecutor's office, but East Javanese sugar farmers still turned out in droves last week to protest the cheap imports and smuggling that is choking their industry.
The import restrictions outlined in the new regulation simply cannot hope to curb the rampant smuggling – long established and incorporating corrupt elements of the national customs and security apparatus.
Tariff futility
Industry pundits maintain that tariff hikes will likewise prove of little use in the face of such endemic perversion of the country's import systems. Admittedly, Indonesia applies extremely low import tariffs – only 25% duty on white sugar and 20% on raw sugar.
At the demonstrations last week, farmers demanded a 110% import tariff increase on sugar, as allowed under World Trade Organization rules. However, many union leaders also agree that tariff hikes are of little use to sugar farmers.
Chairman of the Indonesian Sugar Cane Farmers Association (APTRI) Arum Sabil pointed out that the decision to raise import tariffs for sugar in July had failed to boost domestic prices.
Increased tariffs only function to increase smuggling, ironically lining the pockets of corrupt officials even more as pressure mounts.
While the arguments against tariff hikes are compelling, the fact remains that Indonesian farmers feel relatively "unprotected" while other countries impose staggeringly high tariffs.
Thailand and the Philippines, for example, impose import duties of almost 100%, while the European Union imposes a massive 240% import duty and the United States slaps a 150% duty on sugar.
In 1998, the Indonesian government was virtually forced to set a zero duty on sugar under pressure from the International Monetary Fund (IMF) but new rates were implemented in 2000.
The farmers' sense of injustice over the tariff situation is thus heightened by the perception that international actors – with their own agenda largely dictated by rich countries – are deliberately undermining their very existence.
In West Java, where the majority of the 26 million inhabitants derive a living from agriculture, farmers have 0.013 hectares of paddy fields on average and earn a daily income of Rp7,500 ($0.60), Pasundan Farmers Association chairman Agustiana told The Jakarta Post.
Reform
Farmers, millers and food producers with an interest in streamlining the sugar industry and obtaining some justice for Indonesia's millions of impoverished villagers are urging the government to make comprehensive reforms.
But reforming the corrupt customs service is perhaps only surpassed by the difficulties involved in reforming sale and distribution systems.
Around 70% of sugarcane areas are cultivated by farmers with small-to-medium-sized holdings and their arrangements with buyers and distributors are complicated, to say the least.
Most farmers work in cooperatives and many have production-sharing agreements with the state sugar mills whereby up to 65% of the sugar produced by the mill is returned to the farmers as payment in kind.
Others sell their cane and are paid based on the current official procurement price. Under this scheme, farmers can get 90% of their payment in cash and 10% in kind.
The government also subsidizes cane farmers by authorizing mills to pay the farmers based on the volume of raw cane they bring to the mill and on the extraction yields of their cane, reports Asia Times.
But while farmers complain of poor returns under these arrangements, most mills are in a decrepit state with little chance of improving efficiency, let alone upgrading to produce more lucrative forms of refined sugar.
Only 12 of the 59 sugar mills nationwide are operating efficiently and 12 more have already been shut down.
Private sugar mills, which routinely outperform state-owned mills in terms of yield and costs, account for only 35% of total sugar production.
Corruption in the industry, land disputes with traditional owners and other factors have worked to scare foreign investment away.
Meanwhile, demand is only growing and Syarifuddin Karama, expert staff to the Minister of Agriculture, has proposed a comprehensive upgrading of Indonesian mills as well as the development of seven to ten new sugar mills outside Java island.
Karama said Indonesian sugar consumption would reach 4 million tons in 2010 and 5.5 million tons in 2020. He predicted that imports could reach 2.3 million tons in 2010 and 3.8 million tons in 2020 if production capacity is not increased beyond 1.7 million tons, reported Antara.
Therefore, an extra 1 million tons of sugar produced outside Java would be needed per year or five to six new sugar mills with 25,000 ha of land each.
He also said Indonesia would need 8-9 liquid sugar mills, 5 to 6 low-grade crystal sugar factories, and 10 to 12 first grade crystal sugar mills, while raw sugar from outside Java island could be further processed by sugar mills in Java.
Karama said the new mills would reduce sugar imports and others maintain that tariff increases, subsidies and credit facilities will reduce imports and improve returns to farmers but this is far from self-evident.
Rapidly increasing domestic consumption and an equally fast-growing food-processing industry represent the main problems in terms of demand.
But increasing demand is not bringing greater returns for farmers while domestic product remains relatively expensive and of a low-grade and distribution systems are sub-standard.
The government will clearly have to step up its commitment to reform – of the basic law and the entire system -if it is to ward off massive upheavals in the countryside where 60-70% of the population live.