It also announced that it would be seeking investors for a 49% stake in the company to help transform its obsolete sugar production capabilities. If this is successful, it will be welcome news as PTPN is the most significant domestic sugar producer, and this transformation has been discussed for many years. It seems we are maybe finally moving forward.
But will this alone allow Indonesia to achieve sugar self-sufficiency in the medium term? Probably not.
For several years, Indonesia has been one of the world's largest sugar importers and imported over 5 million tonnes in 2020 to serve its domestic sugar demand of around 7.1 million tonnes. Economic growth has seen imports steadily grow to meet the increasing domestic market and stabilize prices, while local production volumes have been stagnant at around 2 million tonnes per annum. Without a significant structural change in the domestic sugar production sector, imports will reach 7.5 million tonnes over the next ten years.
Given the abundant agricultural land on the surface, it seems odd that national production has not been able to keep up with the growth in demand locally. What's going on? How can countries such as Brazil and Thailand, which along with Australia represent the three leading exporters of sugar to Indonesia, continue to grow their production? At the same time, Indonesia seems to be stuck. Three critical factors are at play, which, taken together, are essentially creating an uneconomic national sugar production ecosystem.
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