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 Indonesia's tobacco industry employs millions of workers and
contributes almost 10 percent to government revenues through taxes,
but has faced a backlash from the health ministry and anti-smoking
organizations.
Health Minister Nila Moeloek said her ministry "definitely" opposes
the tobacco bill as it has the responsibility to "safeguard the
health of the people".
The bill, which covers production, distribution and excise taxes,
has to be approved by President Joko Widodo.
Firman Subagyo, the parliament member who initiated the bill, played
down health concerns, saying tobacco is a "strategic" commodity that
can increase the prosperity of Indonesian farmers and state
revenues.
"Health should not be used as an excuse to destroy people's
livelihood," Subagyo, who comes from Indonesia's second-biggest
political party, Golkar, said an interview on Wednesday.
Under the draft law, manufacturers of tobacco products have to use
locally sourced tobacco for at least 80 percent of their production,
while imports of ready-to-use cigarettes may be subject to an excise
tax of 200 percent.
'RATIONAL PRICING'
Abdus Setiawan, a board member at the Indonesia Tobacco Growers'
Association, said he welcomed the draft law as it could help to
protect farmers. But an increase in production should be balanced
with "rational pricing", he said.
Indonesia was the world's fourth-biggest cigarette producer with an
output of 269.2 billion sticks in 2015, according to the latest data
from research firm Euromonitor International. The market was valued
at 231.3 trillion rupiah ($17.3 billion).
Nearly two-thirds of men are smokers in Indonesia, where an average
pack of cigarettes costs less than $2.
Major cigarette companies operating in the country include Phillip
Morris-controlled PT Hanjaya Mandala Sampoerna Tbk, Djarum Group and
PT Gudang Garam Tbk.
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Sampoerna, through its tobacco suppliers, has partnered with about
27,000 tobacco farmers in Indonesia and gets almost three-quarters
of its tobacco domestically, said Elvira Lianita, Sampoerna's head
of fiscal affairs and communications.
However, the industry's total tobacco requirements have outpaced the
domestic growth in tobacco output, Lianita said. Restricting access
to raw materials through import regulations or taxes would disrupt
the "overall economic stability", he said.
"Partnership programs, not risky restrictions, would be the solution
to bridging this gap and increasing farmer prosperity," she added.
Gudang Garam and Djarum declined to comment.
($1 = 13,368.00 rupiah)
(Reporting by Eveline Danubrata and Agustinus Beo Da Costa;
Additional reporting by Cindy Silviana and Jakarta Newsroom; Editng
by Ed Davies and Bill Tarrant)
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