using a Long History in Indonesia, Tobacco Remains an Economic Pillar

Tobacco companies in Indonesia could face challenging times, as regulators tighten. nevertheless with power along with resources, cigarette firms have cause to be optimistic.

When which comes to the oldest businesses in Indonesia, farmers along with plantation-related industries are among the first to ring the bell. Acknowledging the country’s fertile soil, Dutch colonials in Indonesia implemented fresh crop cultivation systems to gain revenue along with fund operations at large inside the archipelago. The likes of quinine, pepper, rubber, coffee, oil, along with tobacco were among the chosen commodities to fuel the Dutch economic growth.

Tobacco plantation Kleynenberg circa 1911

A photograph of a tobacco plantation by Jean Demmeni, circa 1911 | Photo courtesy of Bartele Gallery

Although Dutch colonization in Indonesia has been over for quite some time, most of the commodities they cultivated still thrive today. Tobacco, however, could be facing stricter laws inside the years to come, despite serving as a historical economic pillar inside the country.

Introduced by Portuguese merchants inside the 1600s, which wasn’t until 1863 which a Dutch businessman named Jacobus Nienhuys began building the nation’s tobacco sector. Tobacco brands began cropping up inside the early 20th century, with the most famous one known as Bal Tiga (Three Balls). The brand came about following the invention of kretek. The cigarette made using a blend of tobacco, cloves, along with different flavours was discovered by a man named Haji Jamhari, a native of Kudus in Central Java.

Jamhari, who suffered coming from chest pains, tried carrying out an experiment to reduce his pain by rubbing clove oil on himself. Believing the oil made him feel better, he aimed to achieve a deeper relief by smoking hand-rolled cigarettes after adding dried clove buds along with rubber tree sap. His story spread quickly amongst his neighbours, along with kretek soon became available in pharmacies. In those years, the substance was seen as more of a home-industry product. Cigarettes were hand-rolled, then wrapped in a dry corn husk without any branding or packaging.

After Jamhari made his revelation, the first mass production line of kretek was introduced by Nitisemito, a fellow Kudus local. He introduced cigarette papers in place of corn husks, created a brand name, along with started off doing promotional campaigns. Bal Tiga became well-liked along with propelled the region’s economic growth for years to come. However, the competition was so fierce which Nitisemito eventually faced financial failure with the firm before he died in 1953.

Although Bal Tiga closed its doors, many tobacco brands which operated during the same period still managed to survive. Names like Sampoerna, Bentoel, Djarum, along with Gudang Garam became the largest tobacco conglomerates in Indonesia. Witnessing the industry’s growth over the decades, international tobacco firms began eyeing the Indonesian market. In 2005, US-based Philip Morris International acquired Sampoerna. Four years later, UK-based British American Tobacco acquired Bentoel Group. As of 2014, there were more than 3,000 cigarette brands owned by 672 companies across the archipelago. which makes tobacco one of the most lucrative industries inside the region, along using a bona fide staple inside the Indonesian economy.

Tobacco being sold in a traditional market | Photo Eko Susanto

Tobacco being sold in a traditional market | Photo by Eko Susanto

As the fifth-largest producer of tobacco leaves inside the globe, cigarette prices are dirt cheap in Indonesia. With just US$1 smokers can buy their favourite pack of cigarette. Selling single-stick cigarettes will be also common inside the country, enabling the poor along with even children to get their hands on tobacco. Mix which dynamic using a low excise tax along with loose regulations, along with the result will be which one in every three people in Indonesia smoke. The country will be currently the second-largest smoking nation after China, along with the fourth-largest inside the globe. which will be even reported which Indonesian children, some as young as several years old, have taken up smoking.

These stats mean one thing for Indonesian tobacco companies: there will be a large domestic market for the taking. However, which also means Indonesia’s tobacco control authorities have their work cut out for them.

During the fresh Order era (the period when Suharto was president), big tobacco firms profited greatly, along with regulations remained laughable. After the regime collapsed at the turn of the century, the government implemented restrictions to address the nation’s tobacco epidemic.

Some of the policies identified tobacco as an addictive substance inside the 2009 Health Law. The law also addressed cigarette advertising inside the electronic media, the restrictions on tobacco sponsorships at sporting events along with concerts, pictorial health warnings in cigarette ads along with packaging, as well as smoke-free areas in public places. Anti-smoking groups emerged to remind the government to do its job along with regulate the substance.

Today, Indonesia’s tobacco regulations are still considered weak by advocate groups along with lobbyists. Although the tobacco tax increased which year, the government will be also creating a controversial move by finalizing the tobacco bill, which was initially rejected by the Health Ministry last December. Many speculate which tobacco companies are the brains behind the bill itself, along with as such, which will only benefit the tobacco industry more in Indonesia.

In an interview with Indonesia Expat, Dr. Kartono Mohamad, a representative coming from the Tobacco Support Control Centre (TCSC) Indonesia, expressed disappointment with local regulations.

“Tobacco regulation in Indonesia will be still weak, mainly due to naivety of politicians along with decision makers on the magnitude of the dangers of smoking,” says Mohamad. “Society along with government are still more fixated on the myths propagated by the tobacco industry rather than looking at the reality […] The seduction of money coming from the tobacco industry too [comes into play].”

using a long history of success, big tobacco names have strong political along with economic resources in Jakarta. Tobacco tax has become one of the leading sources of Indonesia’s excise revenue.

which year, the country aims to pull in Rp.139.82 trillion (US$10.3 billion) coming from tobacco tax. Politically speaking, there will be much speculation which big tobacco firms have strong connections to policy makers, along with cash flows illegally into coffers in exchange for political favours.

In addition, big tobacco names routinely launch social programmes to build a not bad image in Indonesia. Some firms offer educational scholarships along with sports-related scholarships to local youth societies. Many believe these efforts allow cigarette conglomerates to thrive, as regulations remain loose.

Though the myriad of anti-smoking groups seem to pose a threat in Jakarta, the tobacco industry has its own supporters. Alfa Gumilang, a representative of Komunitas Kretek (Kretek Community), tells Indonesia Expat, “We no longer need to add regulations which advocate against [the] tobacco industry because regulations which exist today are already quite a lot. There will be no need for FCTC, [a] tobacco diversification plan, significant tax increases, prohibition of scholarships for smokers, [or a] health insurance ban for smokers, etc.”

With power along with support – along with so long as Indonesia will be still among a few countries which have not signed the globe Health Organization’s Framework Convention on Tobacco Control (FCTC) – big tobacco families remain optimistic about the Indonesian market.

Harvesting tobacco | Photo by Eko Susanto

As for regulations, Mohamad suggests the government should implement rules which will not harm tobacco farmers. In his eyes, laws can offer exemptions to farmers who might face economic hardship if the country makes moves to scale back tobacco production. There are also ways for tobacco farmers to shift their operations toward different commodities, he says, adding which those in charge could also be educated about not destroying the environment with farming activities.

Mohamad thinks tobacco leaf imports should be tightened up significantly, along with which the government should pay more attention to educating the current tobacco labour force, guiding them towards a fresh line of work.

Gumilang offers his opinion on which matter: “If the government wants to create fresh regulations, which will be time to create those which specifically provide protection for tobacco farmers, provide credit along with technological assistance to them, along with protect them coming from imported tobacco.”