Tag: Indonesia

  • Tobacco Workers to Protest in Jakarta

    Tobacco Workers to Protest in Jakarta

    Photo: Taco Tuinstra

    Tobacco workers represented by the Federation of Tobacco Cigarette Food Beverage Trade Unions planned to protest outside the Ministry of Health in Jakarta today to denounce a proposed government regulation of tobacco sales.

    Security risk management consultancy Crisis24 anticipated “hundreds” of participants and warned of the possibility of transport disruptions and minor clashes with police.  

    Indonesian lawmakers have been reevaluating the country’s tobacco control laws, including those on packaging.

    In September, more than 20 industry organizations signed a joint statement against plans to require plain packaging for tobacco and vaping products. The signatories included groups representing manufacturers, tobacco and clove farmers, labor unions, traders/retailers, creative industries, broadcasters and advertisers.

  • KT&G Steps up Investment in Indonesia

    KT&G Steps up Investment in Indonesia

    Photo: KT&G

    KT&G will invest KRW600 billion ($454 million) and hire about 1,000 people in Indonesia. The company’s local operations will serve not only Indonesia but also the Middle East and other markets in the Asia-Pacific region.

    “KT&G chose Indonesia as the company’s center of production for the Asia-Pacific market,” KT&G Indonesia’s president director, Jeong Yun-sig, told JoongAng Daily. Indonesia is KT&G’s biggest market outside Korea, accounting for 22.6 percent of the tobacco company’s total exports as of 2023.

    KT&G entered Indonesia in 2011, when it bought a local tobacco company. As of 2023, the company had sold 9.55 billion cigarettes in the country, propelling it to the No. 4 spot among tobacco manufacturers in Indonesia, ahead of multinationals such as British American Tobacco and Japan Tobacco International.

     In April, KT&G broke ground for two additional Indonesian factories. Upon completion, company will have a production capacity in Indonesia of 35 billion cigarettes annually.

     “We have consistently invested in the Indonesian market, building a local R&D center and hiring experts for localization efforts,” Jeong Yun-sig said. “The localized version of Esse and new brands for the Indonesian market worked well for the company.”

  • Activists Slam Indonesia’s Failure to Raise Taxes

    Activists Slam Indonesia’s Failure to Raise Taxes

    Photo: Taco Tuinstra

    Indonesia’s decision to keep cigarette excise tax levels at 2024 levels next year has drawn fierce criticism from health advocates, reports The Jakarta Post.

    Hasbullah Thabrany, head of the National Committee on Tobacco Control, said the failure to increase taxes represents a major step backward in the effort to reduce tobacco consumption in the country.

    He noted that a previous 10 percent increase in cigarette tax had failed to decrease smoking rates among minors and low-income families.

    “Yet, despite that situation, the government decided not to raise the excise for next year,” Hasbullah said in a discussion on Thursday, 3 Oct 2024.

    On Jan. 1, Indonesia increased the tax on electronic cigarettes by 10 percent. In late 2022, the government announced an increase in taxes on machine-made clove cigarettes and white cigarettes of between 11 and 12 percent, as well as a 5 percent rise for hand-rolled cigarettes.

    Indonesia is in the Top-10 of countries with the highest smoking rates, according to the World Health Organization.

  • Indonesia Keeps Tax Rates

    Indonesia Keeps Tax Rates

    Photo: Taco Tuinstra

    Indonesia’s finance ministry confirmed that the country’s tobacco excise rate will remain unchanged for 2025, reports Tempo.

    “Pending the finalization of the 2025 State Budget, the government has decided to maintain the current policy,” said Askolani, director general of customs and excise at the finance ministry, during a press conference on Sept. 23.

    According to Askolani, the government will continue to explore alternative policy options, including potential price adjustments at the industry level, to discourage smoking. Furthermore, the government will evaluate the price discrepancies between the three main cigarette categories—hand-rolled kreteks, machine-made kreteks and “white cigarettes”—which have contributed to downtrading.

    As of Aug. 31, 2024, Indonesia has collected IDR138.4 trillion ($9.1 billion) in excise revenue, representing a year-on-year growth of 5 percent. This increase was fueled in part by increased production of hand-rolled kreteks and machine-made kreteks.

  • Indonesia Urged to Raise Tobacco Taxes

    Indonesia Urged to Raise Tobacco Taxes

    Photo: Taco Tuinstra

    An Indonesian health ministry official has recommended higher cigarette taxes to deter consumption, reports the Antara news agency. Cigarettes are cheaper and more easily accessible in Indonesia than they are in many comparable countries.

    “The urgency of increasing the excise is to prevent the public from easily obtaining cigarettes with a cheap price in Indonesia,” Benget Saragih, a member of the ministry’s working team for tobacco disease control, was quoted as saying.

    Nearly 38 percent of Indonesia’s 270 million people smoke—a much higher share than in neighboring countries such as Singapore. With this figure, Indonesia ranks 13th in the world in terms of cigarette consumption, Saragih said.

    The number of deaths caused by cigarette consumption has reached 8 million per year, according to Saragih. Seven million of the deaths are due to active smoking and the remaining 1.2 million due to passive smoking, he added.

  • Industry Groups Push Back on Plain Packaging

    Industry Groups Push Back on Plain Packaging

    Photo: Taco Tuinstra

    More than 20 industry organizations signed a joint statement against Indonesia’s plans to require plain packaging for tobacco and vaping products, reports The Jakarta Post. The signatories included groups representing manufacturers, tobacco and clove farmers, labor unions, traders/retailers, creative industries, broadcasters and advertisers.

    Franky Sibarani, vice chairman of the Indonesian employers’ association Apindo, noted that, given the significance of the tobacco business in Indonesia, the regulatory pressures were likely be felt in other sectors as well. The tobacco industry, he pointed out, supports millions of jobs, including farmers, workers, traders and retailers, along with professionals working in the creative industry.

    “Policymakers should be cautious in issuing regulations that could threaten prolonged contractions,” said Sibarani.

    Henry Najoan, chairman of the Indonesian kretek cigarette manufacturers association Gappri, emphasized that the tobacco industry is not just a business but a significant economic and cultural chain.

    “The proposal for plain packaging […] will have serious impacts, as it exacerbates already excessive policies and could lead to a contraction in state revenue and employment,” he said. “Therefore, we firmly reject this regulation.”

    Benny Wachjudi, chairman of the Indonesian white cigarette producers association Gaprindo, highlighted the tobacco industry’s contributions to the national economy. The industry, he said, accounts for up to 10 percent, or more than IDR200 trillion ($12.99 billion), of Indonesia’s annual excise duty collections. Plain packaging, Wachjudi warned, would boost the illicit cigarette trade.

    Kusnasi Mudi, secretary-general of the National Tobacco Farmers Association, noted that tobacco cultivation alone supports 2.5 million livelihoods in Indonesia. “Tobacco is one of the national strategic commodities, but our existence is continually suppressed,” he said. “We request government protection for the 2.5 million farmers who are also struggling for their livelihoods and facing various other issues.”

    Tutum Rahanta, chairman of the advisory council of the Indonesian Retailers and Shopping Center Tenants Association, said that the plain packaging proposals are impractical for all parties involved. “This regulation seriously undermines the tobacco industry at a time when the sector, from upstream to downstream, has adhered to previous regulations,” he said. “The government should focus on combating illegal cigarettes rather than interfering with legal cigarettes that comply with the law.”

    Fabianus Bernadi, chairman of the Indonesian outdoor media association AMLI, said the proposed legislation would significantly impact his members’ economic viability. A recent survey suggested that in some regions, the organization’s companies derived up to 79 percent of their business from tobacco products.

  • ‘Excessive Tax Hike Could Spur Illicit Trade’

    ‘Excessive Tax Hike Could Spur Illicit Trade’

    Photo: Taco Tuinstra

    Indonesia’s above-inflation tax hike could fuel illicit trade and depress government revenue collections, according to Apindo, a leading employers association, reports Tempo.

    To discourage smoking, the government last year approved a 10 percent increase in excise taxes on cigarettes for 2023–2024.

    Despite the tax hike, the number of cigarette factories has increased significantly in Indonesia. Data from the Directorate General of Customs and Excise revealed a surge from 1,214 factories in early 2022 to 1,723 factories in June 2024.

    Meanwhile, Statistics Indonesia (BPS) reported a 28.62 percent smoking rate among Indonesians aged 15 and above in 2023. The largest number of smokers was reportedly in the 35–39 age group at 35.21 percent while the youth group (15–19 years) had a rate of 9.62 percent. The Health Ministry’s 2023 Indonesian Health Survey found 70 million active smokers, including 7.4 percent aged 10–18 years.

  • Indonesia Tightens Tobacco Rules

    Indonesia Tightens Tobacco Rules

    Photo: Taco Tuinstra

    Indonesia has tightened controls on tobacco sales and distribution, according to The Jakarta Post.

    The new rules prohibit sales of cigarettes and electronic cigarettes to people under 21 and pregnant women. They also ban cigarette and e-cigarette sales within 200 meters of an educational institution as well as on digital platforms that do not have an age verification system. Retailers are also barred from selling individual cigarettes, and all machine-rolled cigarettes must be sold in packs of 20 cigarettes.

    Observers have previously noted that selling individual cigarettes tends to attract younger consumers, largely because they are sold without packages carrying warning labels and cost less up front.

    With more than one-third of Indonesian adults (35.4 percent) smoking, Indonesia ranks among the world’s largest cigarette markets, according to the World Health Organization. And bucking the global trend, where tobacco use among individuals aged 15 years and above is projected to drop to 18.1 percent in 2023, tobacco prevalence in Indonesia is expected to increase to 38.7 percent in 2030.

  • Sampoerna Profit Dips

    Sampoerna Profit Dips

    Photo: Sampoerna

    Sampoerna sold 39.9 billion cigarettes in the first semester of 2024, 3 percent less than in the comparable 2023 semester. Net income increased 3 percent to IDR57.8 trillion, but net profit was down 11.6 percent to IDR 3.3 trillion.

    Sampoerna President Director Ivan Cahyadi cited a challenging operating environment. “Although economic growth is relatively stable, the purchasing power of adult consumers tends to weaken,” he said in a statement. “The challenges of the tobacco industry are also added by the pressure of double-digit excise rate increases far above the inflation rate, and the widening gap in excise rates between segments.”

    Rising taxes combined with declining consumer purchasing power has prompted many Indonesian smokers to shift to lower-taxed cigarettes or illicit offerings. According to Sampoerna, the “Below Volume Tier 1” segment has doubled since 2017 to claim 44 percent of the cigarette market.

    “Moving forward, we hope that the government continues to issue a multi-year tobacco excise policy based on clear economic parameters, like inflation rates, as well as considering adult consumers’ purchasing power, to create a conducive and sustainable business and investment climate combined with the continuous effort to combat illicit cigarettes,” said Cahyadi.

    “In addition, the government is also hoped to continue implementing policies that will support the continuity of the labor-intensive segment such as hand-rolled kretek cigarette (SKT) and halt the acceleration of downtrading to optimize government revenue from tobacco excise.”

    Cahyadi also emphasized the importance of a balanced excise policy based on risk profiles to support innovation in the tobacco industry.

    In 2023, Sampoerna invested more than $300 million in smoke-free products factory in Karawang, West Java.

    Earlier this year,  the company opened third-party operator factories in Jaten, Central Java and Dander, East Java.

    Throughout the first semester of 2024, Sampoerna employed, directly and indirectly, more than 90,000 people, of which around 90 percent are working in the labor-intensive SKT segment.

  • Indonesia Bans Single Stick Sales

    Indonesia Bans Single Stick Sales

    Photos: Taco Tuinstra

    Indonesia has banned the sale of individual cigarettes and raised the minimum purchase age to 21 from 18, reports Reuters. Its new rules also mandate restrictions on tobacco and e-cigarette marketing; large, pictorial warning labels on tobacco products; and bans on the sale of tobacco and e-cigarettes near schools and playgrounds. In addition, it includes new restrictions on social media sales.

    Single stick sales make cigarettes more accessible to vulnerable populations, according to health activists.

    The rules are intended to reduce smoking prevalence and prevent young people from taking up the habit. With 70 million smokers in a population of 270 million, Indonesia has one of the world’s highest smoking rates. The country also struggles with a high level of underage smoking. A 2023 survey revealed that 7.4 percent of smokers are between the ages of 10 to 18, with 15-19 being the age group with the most smokers.

    Health Minister Budi Gunadi Sadikin emphasized that the new rules represent a significant step forward in strengthening Indonesia’s health infrastructure.

    “We welcome the issuance of this regulation, which will serve as a foundation for us to jointly reform and build the health system down to the farthest corners of the country,” he was quoted as saying by Xinhua.

    The Campaign for Tobacco-Free Kids too welcomed the new rules. In a statement, the organization urged the Indonesian government to dramatically raising tobacco prices, simplify the tobacco tax system and ban smoking indoor public places.

    Henry Najoan of the cigarette factory association was quoted by news web site Kumparan as saying that the rules would destroy the tobacco industry.

    According to the Ministry of Industry, Indonesia’s cigarette industry employs 5.98 million people, including 4.28 million workers in the manufacturing and distribution sector, and 1.7 million in tobacco cultivation.

    Indonesia is one of the only countries in the world that has not signed the World Health Organization’s Framework Convention on Tobacco Control.