tobacco initiative indonesia country profile 10 nov07

8/8/2019 Tobacco Initiative Indonesia Country Profile 10 Nov07

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Indonesia Report Card:Status of Tobacco Use andIts Control

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Key organization

Non-Governmental Organization

1. National Committee for TobaccoControl (KOMNAS PT)

2. Indonesia Tobacco ControlNetwork (ITCN)

Government Organizations

1. Coordinating Ministry of SocialWelfare

2. Ministry of Health3. Ministry of Education4. Ministry of Religious Affairs5. Ministry of Internal Affairs6. Ministry of Foreign Affairs7. Ministry of Environment8. Ministry of Communication and

Information9. Ministry of Sports10. Coordinating Ministry for

Economics and Industry11. Ministry of Manpower12. Ministry of Agriculture13. Ministry of Trade14. Ministry of Industry15. State Ministry of Women

Empowerment16. Ministry of Law and Human Rights

Tobacco Control in Indonesia

Abbreviations and Acronyms used in this report:

ASEANFCTCGYTSHJEPPSKTSKM

SPMVAT

Framework Convention On Tobacco ControlGlobal Youth Tobacco SurveyEffective retail price (Harga jual eceran)Government Decree (Peraturan Pemerintah)Hand-rolled clove cigaretteMachine-rolled clove cigarette

Machine-rolled white cigaretteValue added tax

Acknowledgements: This project was supported by The Rockefeller Foundation and Southeast Asia Tobacco Control Alliance (SEATCA).

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WHO FRAMEWORK CONVENTION ON TOBACCO CONTROL (FCTC):

WHERE INDONESIA CURRENTLY STANDS Article Indonesias current status

6 Price and tax

measures toreduce thedemand fortobacco

No price or tax regulation

(Note price and tax are covered in Law 39/2007 (amendment of Law 11 onexcise tax) under the Ministry of Finance line authority)

8 Protection fromexposure totobacco smoke

Public places, health facilities, work places, places for teaching process,child activity arena, worship places and public transport are declared nonsmoking areas.

Authorities of public and work places who designate a special smoking roomshould provide air ventilation to avoid health hazards to non smokers.

Public transport may provide a special place for smoking that is physicallyseparated and is equipped by air ventilation which complies withrequirements stipulated by Ministry of transport.

9 Regulation of thecontents of tobacco products

Do not need to disclose ingredients and emission of tobacco products togovernment authorities,

Industry has to provide clear and readable information on nicotine and tarlevels on every cigarette pack

11 Packaging andlabelling of tobacco product

Textual health warning must be written: Smoking can cause cancer, heartattack, impotence, and harms pregnancy and foetal development.

Textual health warning is printed on the back panel of each cigarette pack with about 1 mm border with contrasting color between the front and basecolor, with minimum size of 3 mm.

No regulation on misleading terms such as low tar, light, ultra light, mild.13 Tobacco

advertising,promotion andsponsorship

Cigarette can be advertised and promoted by those who produce and/orimport it.

The advertisement can be in electronic, printed or outdoor media. All advertisements must include health warning. Advertisement in the electronic media is prohibited during the day from

05.00hrs 21.30hrs. The advertisement must not show cigarette pack, someone smoking, with

picture or words associated with children, teenagers and pregnant womenand display the product brand.

Sponsorship is allowed by those who produce and/or import cigarette inaccordance with advertising and promotion regulations

Free samples or gifts in the form of cigarettes or other products that carrycigarette brand names are prohibited.

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Tobacco use in Indonesia has grown over the last fourdecades. From 1960 - 2004, cigarette consumption hadincreased 6.2 folds from 35 billion to 217 billion sticksper annum 1. Based on National Socio-economic Survey2004, the smoking prevalence among adults 15 years andolder increased from 31.5% in 2001 to 34.4% in 2004 (or

more than 50 million adults are smokers)2

. Adult malesmoking prevalence was 63.1%, a 1.4% increase from theyear 2001. There was a three fold increase in adult femalesmoking from 1.3% in 2001 to 4.5% in 2004. Smokingprevalence is higher in rural (36.5%) than urban (31.7%)population.

53.4

62.2

1.7 1.34.5

63.1

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31.5

34.4

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1995 2001 2004

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Tobacco Use

Smoking Prevalence among adults15 years and older by genderIndonesia, 1995, 2001 and 2004 3

North Maluku reported the highest smoking prevalence (42%), far exceeding the nationalfigure (34.4%) in 2004. Three in four (76.6%) male smoke and 4.3% females smoke. Thehighest prevalence of female smoking (10%) was reported in Papua 4. The smoking rate islower among the older age group and among those with a higher education (university

graduate)5

.

The percentage of current smoker that reported to have started smoking before the age of 19 years increased from 68% in 2001 to 78% in 2004. It was noted that the highestincrease occurring in 5-9 years age group from 0.4% to 1.8% 3.

The smoking trend was reported to be higher among the poor as compared to the rich.The poorest households spent about 11% of their monthly expenditures on cigarette andbetel nut, while the richest spent 9.7% 6. The average cigarette consumption amongsmokers was 28 packs of 12 sticks per month and it is higher among the adult malesmokers 5.

According to the Indonesia-national Global YouthTobacco Survey (GYTS) 2006 7, one in three (37.3%)youth had ever smoked cigarettes and 30.9% had smokedtheir first cigarette before they reach the age of 10. About12.6% of youth are current smoker; that is 24.5% amongboys which is significantly higher than girls (2.3%).Among the current smokers, 3.2% reported that they wereaddicted to cigarette because it is the first thing they e in the morning.

ost of smokers with tobacco attributed diseases was US$ 221 million .

consum

Inevitably tobacco is the most common risk factor forvarious illness (chronic respiratory, cardiovascular, cancer, reproductivity andimpotency) and deaths. In 2005, it was estimated about 400 thousand or 23.7% of thetotal death in Indonesia (1.7 million) caused by tobacco related diseases. In view of this,the economic loss due to premature mortality, morbidity and disability was estimated tobe at least US$ 13.84 billion (Rp 125 trillion), much larger than the tobacco tax revenuesof US$ 2.94 billion (Rp 32,65 trillion) or about 4.7 times more. The health care c

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Youth take up smoking beforethe age of 19.

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Tobacco Industry

In January 2003, the market share for cigarettesin Indonesia was dominated by three largecompanies: Gudang Garam (32%), Djarum(23%) and HM Sampoerna (19%). After PhillipMorriss acquisition of Sampoerna in mid 2005,

its market share increased to 26% by July 2006,taking over Djarum as the second biggesttobacco industry in the country. Recently, itsmarket share continues to increase to 28.2% (iGaram (23.6%). With this, Sampoerna become the biggest tobacco industry player in thecountry.

Cigarette Market Share by C ompanies, July 2006

22.331.7

3.1

17.225.9

Gudang Garam HM Sampoerna DjarumPhilip Morris Bentoel Other

National Market Share by Industry, July 2006 9

n October 2007), taking over Gudang

In 1960-2005, cigarette production increased by 6.3 fold from 35 billion to 220 billionsticks 10. The most popular type of cigarette, clove cigarette (kretek) has increased itsproduction ten-fold between 14.3 billions sticks in 1969 to 156 billion sticks in 1994. Thewhite cigarette production also doubled from 11.0 billion to 21.2 billion sticks. As the

demand increased year by year, the cigarette production of machine and hand made cloveas well as white cigarettes reached 197.7 billion sticks in 2002 11.

There are 225 large (28%) and 585 medium (72%) tobacco related industries in 2004. Of these, 60.9% were involved in drying and processing tobacco leaf, 29% engaged inproducing clove (kretek) cigarettes and 1.2% manufacturing of white cigarettes. About258,678 workers are employed in tobacco manufacturing, accounting for 6% of the totalindustry workers in 2004 12. The Excise Bureau reported that 6 million sticks or less hand-rolled cigarettes are produced annually. The demand for hand-rolled cigarettes hasresulted in an additional 155 very small companies since 2002 13. There are 684 000tobacco farmers in 2005 or 1.6% of total agriculture labour force who worked seasonal in

4 months a year14

.Proportion of arable land devoted to tobacco cultivation relatively stable at 1.2% for 40years (1961-2001) 15. However, since 2002 the proportion tends to decrease from 1.16%(260,738 hectares) to 0.86% (198,212 hectares) in 2005 16. It was observe that there was asharp decreased from 224 thousand hectares in 1961 to 198 thousand hectares in 2005.However, the cigarette production was increased from 35.5 billion sticks in 1961 to 220billion sticks in 2005 resulting from imported tobacco leaf 10.

Majority (96%) of tobacco production comes from three provinces including East Java(56%), Central Java (23%) and West Nusa Tenggara (17%). Other provinces such as

Yogyakarta, North Sumatra, West Java and Bali also contributed 4% of total tobaccoproduction 17.

To date, tobacco industries in Indonesia have an almost absolute freedom to advertisetheir products in any form and through almost all communication channels 18. Themarketing strategies transcend direct advertisement, promotion and sponsorships andresulting in creating smoking as a social norm to children and adolescents. The tobaccoindustry also promotes their good image through the corporate social responsibilityactivities.

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Advertising ban

Under the existing PP19/2003government regulation, anybody whomanufactures or import tobaccoproducts are able to advertise theirproducts. These advertisements canbe in the form of electronic, printed or

outdoor media and health warningmust be incorporated. They are alsopermitted to sponsor events but aresubjected to the advertising andpromotion regulations. Free samples orgifts in the form of cigarettes or otherproducts that carry cigarette brandnames are prohibited.

Direct advertisement of A Mild and Marlboro cigaretteswith gigantic billboards.

Advertising that appeals toyouth sponsored by DJARUMCOKLAT.

Prior to 1990, Indonesia banned all TV advertisements. It was lifted in 1990 and as thecurrent regulation permits, almost no restriction exists on tobacco advertising. However

there are some restrictions. Images of cigarette packs, someone smoking, pictures orwords associated with children, teenagers and pregnant women and display of the productbrand are banned in the advertisements. TV tobacco advertising isprohibited from 5.00a.m to 9.30p.m, but proven to be ineffective.

The tobacco industry contributed only 7% of the estimated Rp 21trillion spent on TV advertisement from the top 10 advertisers 19. In1996, the revenue of cigarette advertisements in outdoor mediawas 6.9% of the total advertisement income 20. Revenue fromcigarette advertising increased after decentralization laws wereimplemented in 2001 as taxes on billboards became a significant

part of local government revenues.Children are very much influencedby advertisements that associatetobacco use to success and beingtrendy. The GYTS 2006 7 revealed that over 9 in 10students aged 13 to 15 years old were exposed to cigaretteadvertisements. Although the distribution of free samplesof tobacco products is banned by the existing regulation,14.4% of the respondents had been offered free cigarettes

exposure to cigarette advertisements hasinfluenced youth smoking uptake. This isindicated by the decreasing age in smokinginitiation over the period 1995 to 2004. Theaverage age of first cigarette uptake declinedfrom average 18.8 years of age in 1995 to 18.3years in 2001 and became 17.4 years in 2004

Television is still a breeding groundfor the industry in the guise of talkshows and reality games

A freecigarette isgiven awayin a freeconcertsponsoredby theindustry.

by tobacco company representatives. The

5.It is obvious that over the years, the industry

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has been blatantly violating government regulations because promoters have been givingout free cigarettes to attendees of concerts or events sponsored by the industry.The industry has been aggressively using all availablechannels to advertise including billboards, banners,posters, and lampposts. Apparently youth was one of itstarget groups because direct advertisements can be found

near schools, malls, sport arenas, and places where youthusually hangout.

Slogans were also used as part of advertising and thesewere changed once every threeto four months. Children areexposed to many indirectadvertising in the form of publicservice announcements on eventssponsored by the industry. This isdespite a ban on direct advertising on

television daily until 9.30pm.

A giant billboard of Raflesia Park issponsored by DJARUM SUPER.

Sponsoring youth events is a dominantstrategy where the industry usuallydistributes free cigarettesamples and gives discountprices. The industry alsosponsored music, sports,

movies and cultural events, starting from thecommunity to national levels. The industry capitalisesto sponsor significant events: Indonesia Independence

Day and religious holidays (Idul Fitri, Ramadhan, IsraMiraj (The Ascension of Prophet Muhammad), andMaulid Nabi (The Birth of Prophet Muhammad).

Corporate Social Responsibility (CSR) programmesare conducted under both brand and company names.These CSR activities are aimed to build goodcorporate image and to enhance their network with

government officials and public. Low income groupsare the industrysprimary targets as they

are given educational,emergency response (fornational disasters) and

environmentalprogrammes.

Movie, music andsport eventssponsored by theindustry.

Captivating slogans areused by the industry toappeal to youth lifestyle

Aid was given to earthquake andtsunami victims by the industry.

Sampoerna sponsored entrepreneurexcellence for university students.

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Smoke-free Environment

In 2005, the Governor of Metropolitan Jakarta issued a Local Act on Air PollutionControl No 2/2005 on outdoor pollution with one article on Smoke Free Area (article 13)among 45 other articles. The law was further elaborated in the subsequent GovernorDecree No 75/2005 on Smoking Ban. The smoking ban includes public places, health

facilities, work places, educational institutions, children playground, places of worshipand public transport. This current regulation is under the responsibility of localgovernment.

The clean air law has the least resistance as it provides a room for smokers in indoorpublic and workplaces as long as the room has air ventilation. Authorities of public andwork places who designate a special smoking room should ensure that the smoking roomis equipped with air ventilator to protect non-smokers from secondhand smoke. Publictransport may provide a place for smoking, which is physically separated and is equippedby air ventilator, complying with Ministry of Transports requirements.

Localities that recently passed regulations on Smoke Free Policy are Bogor and CirebonMunicipalities and there are others that have not publicly announced.

Despite existing regulation that has, since 1999, banned smoking in some places,enforcement is still lax. Based on the GYTS 2006 7, more than 80% of students aged 13-15 years were exposed to secondhand smoke in public places as well as 64% wereexposed in their homes.

According to the National Socio-Economic Survey 2004, about 31% or more than 45million people were exposed to secondhand smoke at home. More than 80% of adultsmokers (15 years and above) reported they smoked inside their homes with other family

members present. Women were accounted for 36.7 million or 4 times higher than menhave been exposed to secondhand smoke.

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Taxation

According to the Ministry of Finance Decision No. 118/PMK.04/2006 and No.406/KMK.04/2000, three types of taxes are imposed on tobacco products: value addedtax (VAT), advalorem excise tax and specific tax. The value added tax is 8.4% of theeffective retail price (HJE -Harga jual eceran ). It is a flat rate tax that does not depend onthe size of the industry and the type of tobacco product.

The advalorem excise tax is imposed on each stick of cigarette produced whose ratedepends on the type of tobacco product and scale of production. This tax rate varies from3 percent to 40 percent. In the existing tobacco taxation policy the excise tax rate rangesbetween 26% and 40% for machine-made clove (kreteks) and white cigarettes. As forhand-made kreteks, it ranges from 4% to 22%. The variation in rates depends on the typeof cigarette (machine or hand-rolled) and the production scale.

While specific tax is a flat rate imposed on each stick of cigarette and on cigarettes only.Non-cigarette tobacco products are excluded. The amount of tax imposed varies with thesize of the industry. The tax rates range from Rp 3/stick for small size industry

(producing less than 500 million sticks), Rp 5/stick for medium size industry (producingbetween 500 million and 2 billion sticks) and Rp 7/stick for large industry (producingmore than 2 billion sticks) 23. A same amount is imposed on all three types of cigarettes:hand-rolled clove cigarettes (SKT), machine-rolled clove cigarettes (SKM) and machine-rolled white cigarettes (SPM). This is the newest type of cigarette tax and wasimplemented effective July 1, 2007.

The average current cigarette tax is 31% of the total retail prices. It was perceived as thelowest tax rates in the region next toCambodia 24. It is clear that the cigarette pricesin Indonesia have always been lower than the

neighbouring countries.The revenue from tobacco excise taxincreased 11 folds from Rp. 2.65 trillion (USD294 million) in 1994 to Rp. 32.65 trillion(USD 3.63 billion) in 2005. It was 6.7% of total domestic revenue in 2005 25.

7.4510.11

16.49

22.88

25.9328.67

32.65

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1999 2000 2001 2002 2003 2004 2005

Tobacco Excise Tax Revenue (1999-2005)

The excise taxes for tobacco products should not exceed 55% of the retail sales priceunder the Law No 11/1995. The new draft law prepared by the Ministry of Finance

proposes to increase the tobacco excise tax to 65% was withheld at the parliament,pending approval for further process. Similarly, the tobacco draft bill that suggested a65% increase of cigarette tax with 10% earmarked for tobacco control related activitiesfailed to be included in the 2007 National legislation Agenda.

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References

1 http://www.fas.usda.gov/psd/complete files/TOB-1222000.csv in Tobacco Source Book 2004, Ministry of Health, Republic of Indonesia.2 National Socio-Economic Survey 2004. 3 National Socio-Economic Survey 1995, 2001, 2004. (Aceh and Maluku not included in 2001).4 National Socio-Economic Survey 2001 and 2004.5

National Socio Economic Survey 1995, 2001, 2004.6 Kemiskinan, Pola Konsumsi dan Kecenderungan Merokok, Puguh Irawan, Seminar Rokok danKemiskinan Lembaga Menanggulangi Masalah Merokok (LM3) Hotel Santika, Jakarta, 25 Mei 2004.7 Tjandra Y.Aditama at al. Global Youth Tobacco Survey Indonesia, 2006.8 Kosen S, 2007. Health and Economic Impact Of Tobacco Use In Indonesia. MOH, Center for HealthServices and Technological Research & Development National Institute of Health Research &Development, Jakarta, Indonesia.9 http://www.wartaekonomi.com/indikator.asp?aid=8208&cid=2510 Directorate General of Agro and Chemical Industry, Ministry of Industry, July 200711 http://faostat.fao.org/site/408/DesktopDefault.aspx?PageID=40812 Central Board of Statistics, Indicator of large and medium enterprise, various years (the latest publicationwas in 2004)13 Stephen Marks, July 2003. Cigarette excise taxation in Indonesia, an economic analysis. Partnership for

economic growth, Bappenas and USAID in Tobacco Source Book, 2004. MOH, Republic of Indonesia.14 Ministry of Agriculture. Tree Crop Estate Statistic of Indonesia (Clove), 2004-2006, Jakarta, December2006.15 http://faostat.fao.org16 http://faostat.fao.org and Ministry of Agriculture (various years)17 Processed from the DG of Farming Development, Ministry of Agriculture, 2002 in Tobacco Source Book 2004, Ministry of Health, Republic of Indonesia.18 Philip Morris Document, Smoking and Health in Indonesia, 1998.19 AC Nielsen Media Research, 200720 Catherine Reynolds 1999. Tobacco Advertising in Indonesia: the defining characteristics for success.Tobacco Control 8:85-88 http://tc.bmjjournals.com/cgi/content/full/8/8521 The Sampoerna Investors Newsletter 26 April 2004: First Quarter Sales by Brand 2003, 2004.22 Pusat Penelitian Kesihatan, Universiti Indonesia, Yayasan sJantung Indonesia and SEATCA, PeringatanBahaya Merokok Pada kemasan Rokok dalam Upaya Peningkatan Kesehatan, 2007.23 MOF Decree No 118/PMK.04/2006, December 2006 to begin into effect 2007.24 MOH, 2004. The Tobacco Source Book: Data to Support a National Tobacco Control Strategy. p.72.25 The Government of Indonesia Budget for Several Years and Custom and Excise Directorate General.

Contributors:

Widyastuti SoerojoSetyo Budiantoro

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http://www.fas.usda.gov/psd/complete%20files/TOB-1222000.csvhttp://faostat.fao.org/site/408/DesktopDefault.aspx?PageID=408http://faostat.fao.org/http://faostat.fao.org/http://tc.bmjjournals.com/cgi/content/full/8/85http://tc.bmjjournals.com/cgi/content/full/8/85http://faostat.fao.org/http://faostat.fao.org/http://faostat.fao.org/site/408/DesktopDefault.aspx?PageID=408http://www.fas.usda.gov/psd/complete%20files/TOB-1222000.csv


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tobacco initiative indonesia country profile 10 nov07

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