Analysis of sugar import policy effects on sugar cane farmer’s income in East Java: A system dynamic approach

Abstract

Besides rice, sugar becomes a national strategic agricultural commodity in Indonesia. Until 2019, since local sugar production has not been able to meet national needs, import is required. However, the uncontrolled entry of imported sugars could hit the presence of the local sugar. This can smite particularly the traditional sugar cane farmers who are the backbone of national sugar production. Based on the observation in East Java as a province with the largest sugar production in Indonesia, in recent years, when they are depressed with the increase of living and farming costs, the entry of imported sugar in large volumes will make their conditions worse. This study develops a system dynamics model that can evaluate the impact of sugar import policies on the fluctuations in the welfare of traditional sugar cane farmers in East Java. After the validation process, the result of simulation shows that if there are imported sugars in volume 10% of local productions, sugar cane farmers’ incomes decrease 38% on average per year. When imported sugars reach 60% of local production, sugar cane farmers’ annual income dropped drastically tends to go bankrupt. When there are no imported sugars, the income crept up an average of 4.35% per year. The Model could be used by policy makers as an early warning mechanism on this issue.