Indonesian Tobacco Import Restrictions May Cause Havoc

Source from:  ACN Newswire 02/16/2016

The discussion currently surrounding the Draft Bill on Tobacco Affairs (RUU Pertembakauan) is seen as a fateful matter for the cigarette industry by multiple parties. The notion of a 20% import limitation on the total requirements of the tobacco industry, a 60% import duty for imported tobacco, and a triple excise on cigarettes that utilize imported tobacco is seen as lethal by the industry.

Director of Beverages, Tobacco Products and Materials Industry Ministry, Willem Petrus Riwu, stated that solutions to addressing this matter must be formulated soon. Willem also added chapters on the Tobacco Draft Bill which address import limitations must be thoughtfully considered. "We must evaluate such needs from the perspective of the industry."

Currently, according to Willem, many parties have yet to understand the actual condition of the domestic tobacco supply. "As a matter of fact, the total availability of national tobacco is not yet able to fulfill the needs of the industry. We must not neglect such a situation, but rather try to find a proper solution," he then added.

The Chairman of the Association of Indonesian Cigarette Manufacturers (Gappri), Ismanu Soemiran, explained that currently domestic tobacco is only able to fulfill less than 50% of the total cigarette industry's needs. Hence, the Parliament's agenda of limiting tobacco imports through the Tobacco Draft Law will significantly raise the cost of import duty and will certainly hurt the industry.

In line with Gappri, the Chairman of the Indonesian White Cigarette Manufacturers Association (Gaprindo), Muhaimin Moeftie, asked the government to pay closer attention to some points while discussing the Draft Bill.

The discourse which restricts imports of tobacco is one important thing to note. "The current production of cigarettes today is more than 300 billion, thus requiring more than 300 thousand tons of tobacco per year. On the other hand, the production of national tobacco is still less than 200 thousand tons per year. Which suggests, if the government wanted to limit the use of imported tobacco, such a plan will require a long transition period, and a concrete effort to improve the productivity of national tobacco production," he said.

According to Moeftie, during this transitional period the government must conduct series of efforts to ensure the domestic supply's ability in meeting the needs of the industry. Aside from the quantity, Moeftie also highlights quality problems, particularly in terms of the variety of tobacco available in Indonesia.

"Production of cigarettes does not merely require a singular type of tobacco; there are several types which are utilized. The problem is, not all kinds of tobacco can be optimally cultivated in Indonesia," he explained.

The plan for the imposition of triple excise duty for cigarettes which use imported tobacco was also seen unwise, and could kill the industry. "Keep in mind, this time almost all players in the industry use imported tobacco, both small and large factories," said Moeftie.

He was concerned, if these regulations were to be implemented, the industry, especially small industry, may be affected. Enditem