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12 April 2010

Buyers’ anti-smoking policy hurts Indonesian tobacco exports

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The government is expecting a slower annual growth in exports of tobacco and its products from average 18 percent in the past three years to an average of 15 percent growth in the next five years, reported the Jakarta Post.

Industry Ministry director for beverage and tobacco industries Warsono said Friday the government expected a slower rate of growth as the main cigarette export destinations had introduced stricter controls on smoking.

“It will be good enough if we can make cigarette exports grow by 15 percent — slower than the 18 percent realized in the past three to five years – because it is becoming harder to export cigarettes nowadays,” he said.

“For example, the United States has banned [clove] flavored cigarettes [to be sold in its domestic market], with the issuance of a new bill, while the European Union (EU) has further limited smoking areas available to the public.”

The US Food and Drug Administration has banned cigarette flavorings, including clove or kretek, cherry and chocolate, since last year as sweet flavors are considered to encourage young people to smoke.

Indonesia is among the world’s five largest cigarette makers, besides China, India and the US, and the world’s largest kretek cigarette producer. Indonesian cigarettes make up 99 percent of the US market for the kretek product.

Indonesia also exports tobacco and tobacco products to the EU (tobacco and cigars) and former Soviet Union countries, as well as other developing countries in Africa and Asia.

According to the ministry’s latest data, in 2008 unprocessed tobacco exports were worth $151.02 million, while cigarette and cigar exports stood at $357.8 million.

The ministry has forecast tobacco exports will reach $401.7 million and cigarette and cigar exports will reach $1.06 billion by 2015, the data shows.

Warsono said he had yet to receive data on exports of tobacco and its products in 2009.

Meanwhile, the government is limiting the production of domestic cigarettes — only for sale in the domestic market — to promote public health over dangers of smoking.

The government’s limit on domestic cigarette production is set at 240 billion sticks by the end of this year — a decline from 245 billion sticks produced last year.

The limit will eventually reach 260 billion sticks by 2015.

The government also has increased excise tariffs on cigarettes from 65 rupiah per stick to a maximum of 320 rupiah per stick, depending on whether they are hand-rolled or machine-rolled, to discourage people from smoking. The regulation came into force on Jan. 1 this year.

The government also has increased import duties to 40 percent and has imposed 40 percent excise tariffs on imported cigarettes for the same reason.

Indonesian cigarette companies employ about 600,000 people with total sales revenues of more than 800 trillion rupiah (about $8.8 billion) a year.


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