(Adds comment from industry minister, fixes typo in 14th
By Eveline Danubrata and Agustinus Beo Da Costa
JAKARTA, March 15 Indonesia's parliament has
proposed a draft law that could lead to a sharp increase in
tobacco output in a country that is already a top producer with
one of the heaviest rates of smoking in the world.
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
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.
Indonesia's industry minister, Airlangga Hartarto, said the
government has to assess how the tobacco bill would affect
existing regulations for the industry.
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 in 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.
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.
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", she
"Partnership programs, not risky restrictions, would be the
solution to bridging this gap and increasing farmer prosperity,"
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;
Editing by Ed Davies and Bill Tarrant)