Indonesian manufacturers shed workers ahead of 2015 cigarette excise hike

Ismanu Soemiran, chairman of the Joint Association of Indonesian Cigarette Manufacturers, has objected to the cigarette excise hike set by the Finance Ministry to come into effect next year, according to an en.tempo.co story.

Many factories had closed already, Ismanu said, and the remaining ones would be forced to cut their costs.

“There will be workforce reduction in companies that stay in business,” Ismanu told Tempo on Monday.

Ismanu said he was disappointed by the Finance Ministry’s decision to overlook the protests of about 700 national cigarette industry players that were being crushed by market reductions.

“The most affected ones are definitely medium and small scale industries,” he said.

However, bigger companies are also shedding workers. In May, Sampoerna laid off about 5,000 employees, Tempo reported, while last month Bentoel offered early retirement to 8,000 employees, and, two weeks ago, Gudang Garam, fired 4,288 workers.

Meanwhile, Ismanu predicted that the excise hike would trigger the circulation of illicit cigarettes. “That would be counterproductive to the government’s objective to raise tax revenues, right?,” he said.

Finance Minister Muhammad Chatib Basri said last week that he had signed the new Minister of Finance regulation on the excise increase. Cigarette excise would be raised by an average of 8.72 percent in 2015, he said.