The Indonesian government is preparing a new regulation to curb the spread of illegal cigarettes, particularly those sold without excise bands, Deputy Minister of Industry Faisol Riza announced today (September 29). The plan will be accompanied by an expansion of Tobacco Products Industry Zones (KIHT) to more regions, an initiative that aims to attract illegal cigarette producers into these zones, encouraging them to operate legally under the tax-paying system.
Data from the Ministry of Industry shows illegal cigarettes rose from 3% of total cigarette volume in 2019 to 6.9 percent in 2023, with machine-rolled clove cigarettes (SKM) making up the bulk of untaxed products. Riza warned that the illegal trade is hurting the domestic tobacco industry, causing idle machinery, reduced production, layoffs, and a negative impact on workers’ welfare.
Indonesian smokers’ sensitivity to price has fueled demand for cheaper, untaxed cigarettes, the minister said. “A conducive business climate can only be realized if all parties, including the public, work together to eradicate the circulation of illegal cigarettes,” Riza said. The government emphasized that tackling illegal trade is essential to protecting legal producers and sustaining jobs within the sector.
