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Tag: Indonesia

  • New Indonesian Factory Fuels KT&G’s Expansion

    New Indonesian Factory Fuels KT&G’s Expansion

    KT&G told Hankooki.com today (November 12) that its Indonesian factory is scheduled to be completed within the month and should begin full-scale operations in February 2026. The 190,000-square-meter facility, which will produce cigarettes and capsule products for export across Southeast Asia and beyond, is expected to boost KT&G’s annual production capacity in Indonesia to 35 billion cigarettes, making it the company’s largest overseas manufacturing base.

    The move follows the launch of KT&G’s Kazakhstan plant in April, which can produce 4.5 billion cigarettes annually and serves as a key export hub for the Eurasian market. With both sites operational, KT&G aims to produce over half of its total output overseas in the medium to long term, improving global supply efficiency.

    The company also plans to expand into new markets like Jordan and Bangladesh, while growing its next-generation product (NGP) segment and nicotine pouch business through a strategic partnership and joint acquisition with Altria.

  • ASEAN Could Lose $11B to Illicit Tobacco Trade by 2028

    ASEAN Could Lose $11B to Illicit Tobacco Trade by 2028

    A policy brief by the Center for Market Education (CME) warns that Southeast Asian governments may lose more than $11 billion to illicit tobacco trade by 2028, averaging $3.7 billion annually.

    Key national losses include:

    • Malaysia: $770 million/year, nearly matching projected petrol subsidy savings.
    • Philippines: $440 million/year, exceeding its $370 million disaster preparedness fund.
    • Thailand: $560 million/year, with illicit products making up 28% of the market.
    • Indonesia: $5 billion lost across three years, with illicit trade above 10% of the market.

    CME notes these figures are conservative due to underreporting and uneven enforcement. CEO Dr. Carmelo Ferlito called for stronger cross-border collaboration, policy alignment, and transparency to reclaim lost revenue. Hayley van Loon, CEO of Crime Stoppers International, highlighted the link between illicit tobacco and organized crime, including narcotics, human trafficking, and counterfeit goods.

  • Indonesia Incentivizing Illegal Cigarette Makers to Go Legit

    Indonesia Incentivizing Illegal Cigarette Makers to Go Legit

    Indonesian Finance Minister Purbaya Yudhi Sadewa announced plans to implement a special tax aimed at curbing the circulation of illegal cigarettes, particularly from China and Vietnam, and supporting domestic legal producers. The policy will include the establishment of a Tobacco Industry Zone to encourage illegal domestic producers to legalize operations under certain tariffs, and potentially be operational by December 2025.

    Purbaya acknowledged that high cigarette taxes inadvertently fueled the black market, so that while tax revenue decreased, smoking prevalence—and the health problems associated with it—remained unchanged. 

    “If that’s the case, then what is the policy for?” said Purbaya. “We are killing the domestic legal cigarette industry, but reviving illegal cigarettes from abroad. In that case, I lose. I don’t want to lose.”

    The government will offer assistance to small illegal producers to help them enter the legal market while maintaining strict enforcement against those who continue illicit operations. Purbaya stressed that the approach balances enforcement with opportunities for legalization, ensuring domestic producers are protected while creating a more transparent and regulated cigarette market.

  • Indonesian DM Calls for Worker Protection Amid Tobacco Industry Regulation

    Indonesian DM Calls for Worker Protection Amid Tobacco Industry Regulation

    Indonesia’s Deputy Minister of Manpower, Afriansyah Noor, said the country needed new regulations in the tobacco industry that prioritized the welfare of workers and farmers. Speaking today (October 22), Noor said the industry must deliver tangible benefits to the nation and its workforce, rather than serving only business interests.

    Highlighting the sector’s labor-intensive nature, Noor pointed out that millions of workers are involved, from farmers to factory employees. He stressed that any policy changes causing layoffs must guarantee workers’ rights, severance pay, and social protection. Noor also proposed allocating a portion of cigarette excise tax funds to create a social protection scheme for tobacco workers affected by industrial shifts.

    Addressing emerging products like e-cigarettes, Noor emphasized that regulations must ensure workers are not sidelined by market changes. He called for inter-ministerial coordination in drafting tobacco industry policies that balance economic, health, agricultural, and labor considerations, ensuring the sector remains sustainable while safeguarding livelihoods.

  • Indonesia Offers Amnesty to Bring Illicit Tobacco Makers into Fold

    Indonesia Offers Amnesty to Bring Illicit Tobacco Makers into Fold

    Indonesia’s government dropped plans to raise tobacco excise taxes and is instead offering amnesty to illegal cigarette manufacturers, signaling a major policy shift away from years of punitive enforcement. Finance Minister Purbaya Yudhi Sadewa said the new strategy aims to bring unregistered producers into the formal economy, where their output can be monitored and taxed. The move comes as the government acknowledges that repeated excise hikes and raids under the previous “Gempur Rokok Ilegal” campaign failed to meaningfully reduce demand, while pushing small manufacturers underground.

    The policy rethink reflects a more pragmatic response to weak purchasing power and slow job creation, with officials noting that tobacco remains Indonesia’s single largest source of excise revenue and a vital employer across the supply chain—from farmers to factory workers and small retailers. Purbaya emphasized that the industry’s economic role must be balanced with health goals, warning that overregulation during a fragile labor market could trigger widespread job losses.

    By formalizing more players in the industry, the government hopes to expand its tax base, stabilize employment, and strengthen oversight—marking a strategic pivot from symbolic crackdowns toward sustainable regulation and fiscal recovery.

  • Indonesian Cigarette Industry Shifting Toward Exports

    Indonesian Cigarette Industry Shifting Toward Exports

    Indonesia’s white cigarette manufacturers are increasingly turning to exports to sustain operations as domestic demand softens under the weight of excise hikes and weakened purchasing power, industry officials say. According to Benny Wachjudi, chairman of the Indonesian White Cigarette Entrepreneurs Association (Gaprindo), many domestic consumers are shifting to cheaper illicit products, forcing legal producers to allocate up to 30% of output for export to keep machines running and avoid layoffs. Despite regulatory risks abroad, cigarette exports rose more than 20% in the past three years, reaching $1.9 billion in 2024, Gaprindo said.

    Indonesia ranks as the world’s fourth-largest tobacco exporter with a 6.08% global share, driven largely by sales to ASEAN markets led by the Philippines, according to the Indonesia Business Post. Deputy Industry Minister Faisol Riza stressed that exports are vital for sustaining nearly 6 million domestic jobs and maintaining foreign exchange contributions.

  • Posturing Continues as Indonesia Considers Scrapping Tobacco Excise Hike

    Posturing Continues as Indonesia Considers Scrapping Tobacco Excise Hike

    News that Indonesia’s Finance Ministry is considering canceling next year’s planned cigarette excise increase following consultations with the tobacco industry has drawn sharp backlash from health groups, academics, and child advocates, who warn it threatens public health and undermines anti-smoking efforts. Critics urge the government to instead pursue higher annual increases—at least 25%—along with reforms to simplify excise tiers, narrow tariff gaps, and reduce cigarette affordability.

    Last week, citing the current 57% rate as the legal tax ceiling under Law No. 39/2007, Finance Minister Purbaya Yudhi Sadewa said cleaning up the illegal tobacco market and protecting jobs was more prudent. Industry players agreed, arguing that further tax hikes would strain manufacturers, farmers, and workers.

  • Indonesia’s Tobacco Excise Policy is Public Health Puzzle

    Indonesia’s Tobacco Excise Policy is Public Health Puzzle

    Indonesia’s tobacco excise system is generating record revenue but struggling to curb smoking, highlighting a policy at odds with itself, wrote Hafiz Arfyanto for The Jakarta Post. The government employs a complex nine-tier excise structure designed to balance four national goals: reduce cigarette consumption, maximize revenue, protect tobacco industry jobs, and combat the illegal cigarette trade. While well-intentioned, this multilayered approach has led to unintended consequences, undermining health objectives and limiting revenue growth, he said.

    Last year, tobacco excise brought in Rp 215.3 trillion ($12.9 billion), accounting for nearly 96% of total excise revenue, yet the country still has one of the highest numbers of smokers worldwide. A major challenge is “downtrading,” where smokers switch from premium brands to cheaper cigarettes in lower excise tiers instead of quitting. This behavior keeps consumption high despite higher prices and creates wide price gaps between products, weakening the excise system’s ability to improve public health.

  • Indonesia Working Against Illegal Cigarettes

    Indonesia Working Against Illegal Cigarettes

    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.

  • Indonesia Won’t Raise Tobacco Tax

    Indonesia Won’t Raise Tobacco Tax

    Reuters reported that Indonesia will keep its excise tax rates on tobacco products unchanged next year, after considering the impact such taxes have on employment in the tobacco industry, Finance Minister Purbaya Yudhi Sadewa told a press conference today.

    “We decided not to increase excise tax rates for tobacco products next year, but we will clean up the market of illegal tobacco products,” Purbaya said, adding his decision has put consideration to avoiding layoffs.