Act Now or Risk Being a Nation of Smokers

Without government initiatives to curb tobacco use, Indonesia’s legion of smokers could double from 74 million last year to 140 million by 2020, new research by the University of Indonesia estimates.

While 27 percent of the adult male population in Indonesia were smokers in 1995, the figure jumped to 67 percent in 2011, data compiled from the National Socio-Economic Survey, the Basic Health Care Survey and the Global Adult Tobacco Survey indicate.
From 1995 to 2011, the number of female smokers rose to 4.5 percent from 1.7 percent.
The university’s Demography Institute attributed the rapidly swelling ranks of smokers to increased spending power among the country’s growing middle class, which made cigarettes more affordable.
The researchers noted that cigarette producers are still not required to place graphic warnings on their cigarette packs, as required in many countries.
They also criticized weak implementation of those few policies that are aimed at curbing smoke exposure, such as no-smoking zones, noting that cigarette advertisements and sponsorship had meanwhile become ubiquitous.
The researchers also investigated the booming small-scale cigarette sector, which is concentrated in Kudus in Central Java and Malang in East Java. They nominated several factors for the surge in the small-scale cigarette industry’s growth.
Small-scale manufacturers being required to pay less tax than their large-scale competitors was one factor, while another was the fact that the educational levels of producers was higher than the Indonesian average.
Out of 109 small-scale manufacturer respondents, 80 percent had achieved an educational level of high school graduate or higher. The researchers surmised that the producers’ higher education had led to better innovation and business growth in the small-scale cigarette industry.
The study found that the “small-scale” cigarette industry players in Kudus and Malang were not necessarily so small after all. While some outfits manufactured only a few thousand cigarette sticks per year, others had an annual output of up to 600 million.
Production capacity at that scale should not be categorized as small-scale, the researchers said.
The Demography Institute concluded that strict measures were needed to ensure appropriate levels of tax or excise was paid on tobacco products.
Higher cigarette prices would make cigarettes unaffordable for some people, in particular school children and lower-income adults, the report said.
In a 2012 report “Affordability of Cigarettes and the Impact of Raising Tobacco Excise Taxes in Southeast Asia” published by the Southeast Asia Tobacco Control Alliance, the Indonesian death rate from smoking in 2001 was estimated at 200,000 people per year.
That rate was the highest in Southeast Asia, and medical care for smoking-related illness then accounted for Rp 125.9 trillion ($13.9 billion in 2001), a cost mostly borne by the public, 7.5 times higher than the value of tobacco tax revenue collected by the state.
The Seatca report also showed that cigarette prices had became cheaper and more affordable throughout Southeast Asia in 2012.
“Nowadays, schoolchildren no longer face problems in buying cigarettes. Not only are the prices affordable for them, we also don’t have strict enough regulations to prevent children from buying cigarettes freely,” Sonny Harry B. Harmadi, a director at the Demographic Institute, told a news conference in Jakarta on Monday.
Seatca found that countries that had pushed up cigarette prices by increasing tobacco excise were able to slash tobacco consumption while increasing state income.
Higher tobacco taxes eventually made tobacco products unaffordable for young people and low-income earners, forcing them to quit smoking and in the long term reducing the government’s burden in covering expenses for smoking-related medical care, Sonny said.
“As tobacco products become more affordable in developing countries, governments must ensure that they increase cigarette prices significantly, by at least 70 percent from the retail price, and adjust it with inflation,” Abdillah Ahsan, a member of the Institute research team, said on Monday. “The fact is that current tobacco excise only covers 46 percent of the retail cigarette price.”
Nawir Messi, from the Commission for the Supervision of Business Competition (KPPU), on Monday called for the implementation of a 2013 Finance Ministry regulation adjusting categories and excise tariffs on tobacco products.
Aside from increasing income from tobacco taxes, he said, the government should think about raising public awareness of the dangers of smoking. This could be partially achieved by stricter anti-smoking law enforcement, he said.
Nawir said Indonesia could take up overseas initiatives such as increasing the visibility of warnings on cigarette packs about the dangers of smoking, increasing the legal smoking age and banning people from smoking in certain locations. Currently a small warning appears on the back of cigarette packs sold in Indonesia.
“Basically we agree with the government’s regulation to increase tax income. But the government must also think about the impacts of smoking on people’s health. This must be followed by other regulations. The law enforcement has to be strict,” Nawir said.
He added that the cigarette industry in Indonesia is controlled by a few families, a situation that could lead to price fixing.
“There are two or three buyers [cigarette companies] that control the market and that makes competition relatively low. This will open an opportunity for cartels,” he said.
Customs and Excise Office spokesman Haryo Limanseto said the new Finance Ministry regulation was issued to encourage healthy cigarette industry competition and to increase state income.
“So that cigarette companies can compete on their own level, the large ones can compete with large ones and the medium- and small-scale producers can also do the same,” Haryo said on Monday.
For its part, the Jakarta administration is considering a provincial cigarette tax increase to reduce the number of smokers in the capital.
Jakarta Deputy Governor Basuki Tjahaja Purnama recently said that the tax might be implemented to steer poor people away from spending large chunks of their income on cigarettes.
“We’re mulling over increasing the cigarette tax and regulating it through a bylaw. It’s to end this pathetic situation in Jakarta,” Basuki said.
The deputy governor said many of Jakarta’s poor spend much of their money on cigarettes when they should be using it to provide for their families.
He cited as an example people living in the city’s public housing. Public housing residents are not required to pay rent, but have been complaining about the required daily payment of Rp 5,000 to Rp 6,000 to finance their apartment block’s environmental maintenance costs.
However, he said, residents spend up to Rp 20,000 per day on cigarettes rather than using that money to maintain the apartment complex or assist their families.
“Smoking is considered a need,” Basuki said. “But if they don’t have money, they should not buy cigarettes. They should pay for their family’s expenditures.”
Jakarta Tax Service Agency head Iwan Setiawandi said the new tax could become effective in 2014 and added that the tax would support the central government’s policy on cigarettes.
But the well-heeled tobacco industry has many supporters in the House of Representatives.
Nusron Wahid, a member of House Commission XI, which oversees financial affairs, said the government should increase the alcohol excise instead of raising cigarette taxes.
Nusron said the government rarely increased the excise on alcohol, adding that he felt increasing alcohol taxes would not be controversial.
Nusron said the tax and excise on alcohol was last increased in 2010, following a previous increase in 2006.
“It’s clear that alcohol ruins the morality of the country but the government still protects it,” Nusron said in Jakarta last week.
“Which one between alcohol and cigarettes is more dangerous? The cigarette [price] increases by 8.5 percent on average every year, but the alcohol price never goes up.
“Why is the government protecting alcohol which clearly ruins health?
“What exactly is the real national interest here and which side is the government on? Alcohol is clearly a foreign product.”