119 Impacts of Sugar Import Policy on Sugar Production in Indonesia (Agustinus Suryantoro, Albertus Magnus Susilo dan Supriyono) IMPACTS OF SUGAR IMPORT POLICY ON SUGAR PRODUCTION IN INDONESIA Agustinus Suryantoro Albertus Magnus Susilo Supriyono Faculty of Economics Universitas Sebelas Maret E-mail : tinus_surya@yahoo.com Abstract Production of sugar unfullled consumption of Indonesia society. The lack of consumption and production have fullled by import. Assumption national consumption 2,7 million ton, Indonesia will import sugar in 2013 predicted about 300.000 ton (Tempo.co, August, 21, 2012). The aims in general of this research are to understand the impact of sugar import policy on sugar production. Especially (1) to understand the factors that inuence sugar import price, (2) to understand impact of sugar import price on sugar domestic price and (3) to understand the impact of sugar domestic price on sugar production. Model analysis of this research is Simultaneous Error Correction Model. This model can estimate the structural parameter exactly (unbiased parameter) (Gujarati, 2010). Policy made on this research can be responsibly. The results of this research are shown that price of sugar import inuenced by world sugar price and the quantity of sugar imported and tariff is not. Price of domestic sugar inuenced imported sugar price. And domestic sugar price has inuence the sugar production. Import policy in sugar to fulll lack of consumption and production will make decreased sugar domestic price. The decrease of sugar domestic price will impact on decrease of sugar production. That policy have dilemma on consumption and production. Keywords: sugar imported, price of sugar imported, sugar domestic price, sugar production and policy dilemma. 1. BACKGROUND ISSUES Indonesian sugar industry faces a variety of interrelated issues, such as the placement of sugar as one of the basic needs. Consequences are distribution and prices intervention by the government; producer of sugarcane as raw materials and sugar factory that process raw materials into sugar and its distribution is a separate organization. Also inefficiency both at the farm and the factory is still going on, the bias of government policy, as well as the high trade distortions in the international market. As a result, productivity and yield tends to decrease, which in the long run will threat the existence of the sugar industry in Indonesia. Sugar is one of the agricultural products and basic commodities that Indonesia needs can not be met by domestic production. Consumption of sugar in Indonesia continued to increase, from 3.15 million tons in 1997 and reached 4.30 million tons in 2007 and in 2010 reached 4.6 million tons. From the production side, since 1995, has decreased to the lowest continue in 2000 to 1.60 million tons. The following year, 2001, production began to increase so as to achieve 1.95 million tons in 2007. In 2010 production of sugar is 2.3 million tons. With increasing consumption is not accompanied by the production, the imports also increased.