Local buying ‘encouraged’

Indonesia is planning to make the import of unmanufactured tobacco costlier than it has been to date, and to make it conditional on the importer’s buying local tobacco, according to a story in Indonesia Investments.

The country’s Co-ordinating Minister for Economic Affairs, Darmin Nasution, has confirmed that the government plans in 2018 to raise the import tariff on unmanufactured tobacco from its current level of five percent, though it is not known what the new rate will be.

Besides the higher import tariff, a number of new rules are being formulated that, in part, will require ‘importers/distribution centers’ to absorb a certain amount of locally-produced tobacco. Only those importers that obtain a recommendation letter from the Agriculture Ministry will be able to import tobacco, and this letter will be issued only to those companies that purchase ‘enough’ tobacco from local producers.

These regulations are reportedly aimed at improving the welfare of Indonesian tobacco producers and raising government revenues.

Currently, with a five percent import duty in place, Indonesian cigarette manufacturers are said not to be ‘encouraged’ to absorb locally-produced tobacco.

Based on data from Statistics Indonesia (BPS), the value of unmanufactured-tobacco imports into Indonesia during January-July 2017 was US$318.49 million, up 16.11 percent from that of the equivalent period of 2016.

Meanwhile, Indonesia’s cigarette production is thought to have risen to about 360 billion in 2017, from 342 billion during 2016.