Recovery of the Sugar Industry in Indonesia

Abstract

V yICISSITUDE and catastrophe have been of fairly frequent occurrence in the world sugar industry, whose history has seen many remarkable fluctuations of fortune. Indonesia, successor to the Netherlands Indies, has been a sugar producer of the first importance for a considerable time, a low cost producer whose efficiency made it a strong competitor in the contracting free market of the interwar period. But not even its efficiency could protect it from the Great Depression, the planted area of estate cane falling catastrophically from 200,000 hectares in 1931 to 27,600 in 1935. By 1939 the planted area had climbed again to 94,900 hectares; then in the Second World War, Indonesia, the second largest cane sugar exporter in the world, was eliminated, together with a large part of the European beet industry, and the way was open for the enormous expansion of cane sugar production in the western hemisphere, an expansion which continued in most producing countries of that part of the world until 1953. In this post-war phase of expansion Indonesia was denied a part, for what remained of the sugar industry after the Japanese occupation was largely destroyed in the struggle for independence in 1948 to 1949. Though the time is long distant when sugar provided almost a quarter of the export income, as it did before 1930, the destruction of the sugar industry would have been a heavy blow to the new Republic had it not been for the boom in rubber prices with the outbreak of the Korean War. In the period between the post Korean drop in prices and the great resurgence of American business activity in the latter half of 1954, a period during which rubber never rose above 22-24 cents a pound, the real nature of Indonesia's economic position became obvious. For a country with problems of development as great as those anywhere in Asia, and faced with chronic balance of payments difficulties, the resuscitation of the sugar industry, which had exported well over a million tons of sugar annually before the war and contributed almost 7 per cent of the export income, was an obvious and desirable course of action. Moreover, though cane is grown in almost every part of Indonesia, the sugar industry is confined to Java, an island which, while absorbing the greater part of the national income, earns only about one quarter of the foreign exchange; Java needs to expand its foreign earnings to help refute the charge which is frequently made in the other islands that it is a parasite which is appropriating the national resources for its own exclusive benefit. The Indonesian Government, however, has taken little positive action itself to assist the recovery of the sugar industry. The difficulties confronting the reestablishment of the industry after 1949