Closures expected in Indonesian tobacco industry

As much as 15 percent of the workforce at tobacco-related companies in East Java, Indonesia—or more than 23,000 workers—are at risk of being laid off this year, according to a story in the The Jakarta Post.

Based on 2014 data, the number of people working in East Java’s tobacco and tobacco products industrial (IHT) sector was 159,117, according to East Java Chamber of Commerce and Industry (Kadin) vice chairman Dedi Suhajadi. The sector’s workforce also decreased by 21,300 workers in 2014 from 180,466 workers in 2013.

“Many IHT entrepreneurs are affected,” Dedi said. “This is attributable to the annual increase in tobacco tax, government regulations and groups that interfere with the concentration of IHT entrepreneurs in meeting tax obligations.”

The government raised the IHT tax target to IDR141.7 trillion in 2015 from IDR111.21 trillion in 2014. Over the past five years, the average increase in IHT tax was 16.09 percent.

Data from the East Java Manpower and Transmigration Office indicated that 790 IHT companies were still operating in 2014, however, only about 200 were producing on a regular basis. In 2011, there were about 1,100 cigarette factories, according to Dedi.

“Those that have gone out of business are small- and medium-scale factories. Only the large-scale companies are surviving,” said Dedi.

Between 2009 and 2013, approximately 4,900 cigarette factories closed their doors.