Indonesia is boosting sugar imports from Thailand following a free trade agreement between the two countries, but Australia could erode the Thai advantage if a similar deal is sealed. Indonesia is the world's second biggest importer of sugar behind China, and Thailand is the world's second biggest exporter behind Brazil.
Indonesia has seen an increase in raw sugar imports from Thailand since the raw sugar import duty from ASEAN producers was cut to 5 percent in 2015, said Faiz Achmad, executive director at the Indonesia Sugar Refineries Association. He told Reuters that he estimated the share of Thai raw sugar out of the total raw sugar imported to Indonesia, had risen to about 60 percent in 2015/16, from 30-40 percent in 2013/14.
"Thai sugar imports may be more dominant in the future, unless an economic partnership between Indonesia and Australia agrees to lower the raw sugar import duty for Australia," Achmad said. Negotiations are underway on a similar free trade agreement between Indonesia and Australia. "If the negotiations come through, the approximate $20-21/tonne duty differential the Thais currently enjoy could be eroded, cutting into the Thais' competitive edge," a European trade source said.
An executive at an Indonesian sugar refinery, who asked not to be identified, estimated that 2 million tonnes, or 63 percent, of 3.2 million tonnes that will be imported to Indonesia this year will come from Thailand. He said that raw sugar imports from Thailand could increase in future, especially due to expectations for growing demand from Indonesian industry.
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