Uncover the intricate layers of Indonesia’s tobacco industry, a sector that commands significant economic influence and fosters intriguing cultural narratives.

1. Introduction

The world of tobacco is as complex as it is intriguing. At the heart of it all, in the vibrant and diverse country of Indonesia, lies an industry that is as controversial as it is profitable. This article delves into the intricacies of the tobacco industry in Indonesia, unpacking its economic significance, societal impact, and the challenges it faces.

2. Overview of Tobacco Industry in Indonesia

The tobacco industry is a major force in Indonesia, ranking as one of the largest industries in the country. Cigarette consumption is particularly high, especially among Indonesian men, with an estimated 65 percent being smokers. Despite the health concerns associated with tobacco use, the industry continues to thrive, bolstered by the country’s significant market size.

3. Significance of Tobacco Industry to Indonesian Economy

After China, Indonesia is the second-largest cigarette market in Asia. This is largely due to Indonesia’s large population of over 255 million, with approximately two-thirds of Indonesian men consuming tobacco-related products. The high consumption rates imply a vast market, with the Tobacco Atlas revealing that there are 53.7 million active adult smokers and 2.6 million active youth smokers in Indonesia.

The tobacco industry is one of the largest industries in Indonesia. Two companies within the top ten of largest Indonesian companies (in terms of market capitalization) listed on the Indonesia Stock Exchange are cigarette manufacturers, indicating the scale of the tobacco industry in the country.

Statistics:

Indonesia is the second-largest cigarette market in Asia, after China. There are estimated to be 53.7 million active adult smokers and 2.6 million active youth smokers in the country, making Indonesia the third-largest cigarette consumer in the world, after China and Russia. An Indonesian smoker uses about 5 – 7 percent of his/her monthly income to purchase cigarettes or other tobacco-related products.

FAQs:

1. Who is the largest tobacco company in Indonesia?
   • The largest tobacco company in Indonesia is HM Sampoerna, which controls about 35 percent of the tobacco market in the country.
2. What are some of the popular cigarette brands in Indonesia?
   • Some of the popular cigarette brands in Indonesia include Marlboro, Sampoerna Hijau, Sampoerna A Mild, and Dji Sam Soe.
3. Where are cigarettes produced in Indonesia?
   • There are around 700 cigarette manufacturers registered in Indonesia. However, only 200 to 300 of these companies are active, indicating that cigarettes are produced across the country.
4. Why is the tobacco industry so big in Indonesia?
   • The tobacco industry in Indonesia is large because of high domestic cigarette consumption, especially among Indonesian men. It is estimated that around 65 percent of Indonesian men are smokers. Furthermore, cigarettes in Indonesia are relatively cheap due to low production costs and wide distribution networks.
5. How does the Indonesian government regulate the tobacco industry?
   • The Indonesian government has taken measures to discourage smoking, such as curtailing cigarette advertisements, making graphic warnings on cigarette packages mandatory, and raising excises on tobacco-related products. However, the country is yet to ratify the World Health Organization’s Framework Convention on Tobacco Control, which mandates strict limits on tobacco advertising, production, sale, and taxation.
6. Is cigarette smoking prevalent among Indonesian youth?
   • Yes, cigarette smoking is prevalent among Indonesian youth. The World Health Organization (WHO) reported that 20 percent of Indonesian youth were categorized as smokers.
7. Can cigarettes be easily accessed in Indonesia?
   • Yes, citizens have easy access to cigarettes in Indonesia, not just because of the wide distribution network that makes cigarettes available in all corners of the archipelago but also because of the relatively low price of cigarettes.
8. Does the Indonesian government gain revenue from the tobacco industry?
   • Yes, the tobacco industry is a great source of income for the government through excises and taxes.
9. Will the cigarette consumption rate in Indonesia continue to increase?
   • While it’s difficult to predict the future, the Indonesian Industry Ministry expected the nation’s cigarette production to rise to 524 billion cigarettes by 2020, indicating a likely increase in consumption.
10. What type of cigarettes are most popular in Indonesia?

• Kretek cigarettes, which consist of tobacco (70 percent) and ground cloves, clove oil, and other additives (30 percent), are tremendously popular in Indonesia. About 85 percent of all smokers in Indonesia prefer kretek cigarettes over white cigarettes.

11. What are the health consequences of widespread smoking in Indonesia?

• Widespread consumption of tobacco products in Indonesia has negative consequences for the general health of the population. Physical illnesses caused by smoking, such as heart diseases, cause economic costs that need to be carried by the government and society. Furthermore, cigarette smoke inhaled by active smokers contains about 4,000 chemicals and is associated with at least 25 diseases in the human body.

12. How does the tobacco industry impact other businesses in Indonesia?

• The tobacco industry impacts other businesses in Indonesia. For example, media institutions obtain a significant part of their revenues through tobacco advertisement. Several big media institutions in Indonesia are owned by politicians (or politically-linked businessmen), which may influence the government’s approach to regulating smoking in the country.

13. What is the government’s approach to managing the tobacco industry and public health?

• The Indonesian government seems to take a ‘middle-of-the-road approach’ regarding its stance toward cigarette consumption. On one hand, it has implemented measures to discourage smoking but on the other hand, it has refrained from implementing several key policies that would undermine consumption of tobacco in the nation. This is due to the dilemma of curbing tobacco consumption for health reasons versus missing out on additional tax income from the tobacco industry.

14. What are the main tobacco-related products consumed in Indonesia?

• The main tobacco-related product consumed in Indonesia is cigarettes, particularly kretek cigarettes, which are a type of clove cigarette. These cigarettes consist of 70 percent tobacco and 30 percent ground cloves, clove oil, and other additives. About 85 percent of all smokers in Indonesia prefer kretek cigarettes over white cigarettes.

15. How does the tobacco industry affect employment in Indonesia?

• The tobacco industry provides employment opportunities in the country. There are around 700 cigarette manufacturers registered in Indonesia, and 200 to 300 of these companies are active. The industry also contributes to employment in other sectors, such as media institutions that receive a significant part of their revenues through tobacco advertisement.

16. What impact does the tobacco industry have on Indonesia’s economy?

• The tobacco industry has a significant impact on Indonesia’s economy. It is one of the largest industries in the country, with two of the top ten largest companies listed on the Indonesia Stock Exchange being cigarette manufacturers. The industry also provides revenue for the government through excises and taxes and contributes to employment and other businesses in the country.

17. Are cigarettes in Indonesia domestically produced or imported?

• The majority of cigarettes in Indonesia are domestically produced. The raw materials required for the manufacturing process of cigarettes are mostly domestically-sourced, which means that foreign exchange volatility has limited impact on prices set by Indonesian retailers. There are around 700 cigarette manufacturers registered in Indonesia, with 200 to 300 of these being active.

18. What is the average cost of a pack of cigarettes in Indonesia?

• The average cost of a pack of cigarettes in Indonesia is around USD $1.4.

19. Is smoking socially acceptable in Indonesia?

• Smoking is more socially acceptable for men in Indonesia, with an estimated 65 percent of Indonesian men being smokers. For Indonesian women, the figure is much lower – around 3 percent – because it is less socially acceptable for women to smoke in Indonesia.

20. What measures has the government implemented to curb cigarette consumption?

• The Indonesian government has implemented measures such as curtailing cigarette advertisements, making graphic warnings on cigarette packages mandatory, and raising excises on tobacco-related products. However, it has refrained from implementing key policies that would significantly undermine tobacco consumption in the country, such as ratifying the World Health Organization’s Framework Convention on Tobacco Control.

Sources of information:

1. Indonesia Investments: Tobacco Industry Indonesia https://www.indonesia-investments.com/business/industries-sectors/tobacco/item687
2. Research and Markets: Tobacco in Indonesia https://www.researchandmarkets.com/reports/1945913/tobacco_in_indonesia
3. World Health Organization: WHO report on the global tobacco epidemic, 2019 https://www.who.int/teams/health-promotion/tobacco-control/who-report-on-the-global-tobacco-epidemic-2019