When sugar imports become a crime: Putting trade policy on trial
By Vid Adrison and Meuti Mohsin
This is an op-ed written by guest writers. Opinions and analysis are the writers’ and do not necessarily reflect the views of The Reformist editorial room.
Charges brought against Tom Lembong for the sugar import policy he implemented during his tenure as Trade Minister (2015–2016) have raised serious concerns about how public policy decisions and regulations are being (mis)interpreted in legal processes. The widely-publicized case appears to rest on questionable interpretations of economic rationales and regulatory facts.
As academics and food policy experts, we would like to highlight some key points that need to be clarified in the charges against Tom Lembong, focusing on the food policy aspects while setting aside the legal, administrative, and political dimensions, which are also loaded with anomalies. This is not just for the sake of Tom Lembong’s good name, but also common sense, public trust towards our legal institutions, and the future of the country’s public policy and policy making.
It’s important to note that in 2014–2016, Indonesia and many other countries were impacted by the worst El Niño in two decades. This extreme weather disrupted food production including paddy and sugarcane and caused food prices to surge.
In 2015, the price of sugar soared along with poverty and social anxiety. The government responded with a range of emergency measures, including allowing food imports to stabilize supply and prevent prices from exploding.
But Indonesia’s food policies have long been reactive instead of proactive. For example, when rice prices spiked in 2015 and 2018, the government waited too long until stocks were already very low and distributions were disrupted before taking action. They ignored early signs like depleting national stocks at Bulog, delays in distribution of rice for the poor (‘Raskin’), and difficulties in procuring paddy from farmers. Poor quality and overlapping data and slow institutional response partly due to the absence of necessary early warning systems made things worse.
The same pattern happened with sugar. In 2015, stocks dropped and prices jumped. Lembong decided to import raw sugar (GKM) to secure supply. This was a reasonable and legitimate decision, yet now it’s being questioned in court as if it were a crime.
The seven charges brought by prosecutors against Tom Lembong are riddled with inconsistencies. This piece will focus on three of them:
Granting an import license even though domestic sugar production was supposedly enough.
Assigning the state-owned company PT PPI to stabilize sugar prices by importing raw sugar (GKM) instead of refined white sugar (GKP), and allowing PT PPI to then buy GKP at prices higher than the Government Purchase Price (HPP).
Failing to control how the sugar was distributed, which the prosecutors argue should have been done only by state-owned enterprises, not private distributors.
Here are some key problems with these accusations:
First, the claim that domestic production and national stock were sufficient and therefore imports were unnecessary is factually wrong. Indonesia has consistently produced less sugar than it consumes. According to official data from Statistics Indonesia (BPS), even at its highest level of production in 2012 (2.59 million tons), production didn’t meet demand, and imports were still needed. Since then, production has declined, making imports not only reasonable but necessary.
Second, prosecutors say Indonesia had 834,000 tons of sugar stock in early 2016, implying there was no shortage. But that number includes leftover imports and production from 2015, after accounting for what had already been consumed. With monthly consumption around 250,000 tons, this stock would only last 3.5 months, barely enough until April 2016. The next sugar milling season wouldn’t start until June that year. Without imports, Indonesia would run out of sugar. Lembong’s decision to import was meant to prevent this, especially considering the El Niño impact that could delay or shrink the next harvest.
Third, the prosecutors are confusing these two types of government price controls:
HPP (Harga Pembelian Pemerintah or Government Purchase Price) is the floor price at which the government will buy from and pay farmers, used to protect them if market prices drop too low.
HET (Harga Eceran Tertinggi or Maximum Retail Price) is the maximum price allowed for retailers to charge consumers in retail stores.
Prosecutors accused PT PPI of misconduct for buying sugar above the HPP or the floor price. But that makes no sense; it’s like accusing a company of breaking the law for paying employees more than the minimum wage.
Fourth, the prosecutors misinterpreted the rules that regulate raw and refined sugar imports. According to the Industry and Trade Ministry Decree No. 527/2004, the GKP (refined sugar) imports are restricted right before and after the milling season, but GKM (raw sugar) imports are not regulated. And according to the Trade Regulation No. 117/2015, GKP imports are only allowed when needed to stabilize domestic stock and prices but the regulation says nothing about banning imports of GKM.
In fact, importing raw sugar when national stock is depleting supports local industries and adds value by allowing domestic processing, consistent with Indonesia’s industrial goals.
Fifth, Lembong is accused of causing losses to the state because GKM has a lower import tariff than GKP. But this ignores the basic goal of food policy. The Food Law (Law No. 18/2012) says food policy is about making food available, affordable or accessible, and stable. Judging a decision purely by how much import duties were collected rather than whether it helped stabilize food supply is a fundamental misunderstanding of what food policy is for.
If we follow this logic, then importing any raw food products (like soybeans or wheat) would be considered harmful just because they have lower import duties than finished products.
Sixth, prosecutors argue that only state-owned companies should distribute sugar in market operations (‘operasi pasar’) to stabilize food prices. But in reality, market operations involve a mix of players: state firms like Bulog, private wholesalers, markets, and modern retailers. There’s no regulation banning non-state-owned enterprises from participating in market operations.
These flawed assumptions led prosecutors to accuse Lembong of causing state losses of IDR 578 billion. The audit report from the Financial and Development Supervisory Agency (BPKP), which is Indonesia’s internal audit agency, used as the basis for this claim, points to two things:
A loss in import duties and taxes (PDRI), and
PT PPI’s purchase of sugar at prices above the Government Purchase Price (HPP).
On the first point: To calculate the gap in import duties and taxes, which was claimed to have caused a state loss, BPKP applied the higher GKP tariff even though the imports were clearly GKM, which has a lower tariff. This is flawed because imports of GKM should be charged with the corresponding import duties and taxes for GKM, not GKP. Otherwise, it would be considered a product misclassification.
Moreover, customs can easily tell the difference between GKM and GKP so it was unlikely that anyone could have misclassified GKM for GKP (or vice versa). Reference prices for GKM are also widely available/accessible, making it hard to misreport by underinvoicing the import values.
On the second point: as explained earlier, HPP is a floor price to protect farmers. It’s not the binding maximum retail price at which buyers like sugar mills or distributors buy. Saying PT PPI overpaid because it bought above HPP shows a complete misunderstanding of the regulation.
Most importantly, the sugar import decision was not made by Lembong alone. It came from an inter-ministerial coordination meeting and was approved by President Joko Widodo. It was part of a coordinated effort to stabilize food prices during a crisis. Calling it a crime means criminalizing normal, lawful government decision-making.
The indictment isn’t just flawed, it’s dangerous and disastrous for Indonesia. If policy decisions based on data, urgency, and national interests can be criminalized, future policy makers will be too afraid to act and make the right decisions. Meanwhile, those with bad intentions could use vague or populist rhetoric to escape accountability.
Why this matters
If the prosecutors’ charges are accepted by the judges, the consequences will be severe:
First, all industries that import raw materials could be accused of harming the state just because imports of raw materials are taxed less than imports of finished goods. This is absurd, our entire manufacturing sector relies on such imports of raw materials.
Second, if buying sugar above the government’s floor price is treated as illegal, no business will take the risk of buying above that floor price (akin to: no employer will pay above the minimum wage). This will hurt farmers who want to sell at market rates, which are often times higher than the floor price. Over time, this reduces farmers’ motivation to grow crops, leading to less food production, higher food prices, more food imports, and weaker food security.
Third, the private sector will be afraid to participate in government programs due to legal risks. That means the government would be left alone to manage food supply and prices, placing a heavy burden on the national budget.
Fourth, no future trade minister will dare to approve raw food imports even during an emergency.
By treating Lembong’s import policy as a crime when it was a measured response to a food crisis, we undermine the entire logic of good food policy and policymaking.
If the court accepts Tom Lembong’s indictment, it will appear that political interests trump national interests. It distorts the truth, creates public confusion, and blunts the intuitive judgement of our society. It is time to return to reason and truth while defending public policies that serve the interest of the people.