16 cigarette factories in Surabaya stop operation

Oleh Bisnis Indonesia; Rabu, 28 September 2011

SURABAYA: Sixteen small, medium and large cigarette factories in Surabaya, East Java, have shut production since 2007, due to anti-smoking regulation and the excise tariff increase.

According to the Coordinator of Clove Cigarette Community in Surabaya Aryo Yudanto, there were 27 cigarette factories in 2007 but in the end of last year, only 11 factories left.

“Those remaining factories are mostly large and foreign-owned cigarette factories,” he said yesterday.

Massive anti-smoking regulations issued by central and local government along with the rising excise tariff led to massive shutdown of cigarette factories, particularly small-scale factory.

Currently, people use health issues as an excuse to combat cigarette like the World Health Organization’s FCTC (Framework Convention on Tobacco Control).

“Such argument threatens the sustainability of tobacco industry in East Java. Moreover, several Islamic community organizations proclaimes that smoking is religiously forbidden,” he said.

Based on  Surabaya’s Cigarette Entrepreneurs Association (Gaperos) data, nine companies joined the association had absorbed more than 180,000 labors or 60% of the total labors in that sector nationally, which reached 360,000 labors.

The data also showed that the cigarette industry in East Java contributed IDR40 trillion of excise revenue in 2010 from the national excise around IDR66 trillion.

Earlier, Indonesian Cigarette Industry Community Forum (Formasi) Heri Susianto said that there are only 147 small-medium cigarette factories in Greater Malang (Malang City, Malang Regency, and Kota Batu), drastically dropped from 503 factories in 2008.

“About 40% of the factories are suspended, its operation depend on new orders,” Heri said.

Such condition was caused by several factors such as government regulations, high price of raw materials, and competition with subsidiaries of large cigarette companies playing in small-medium market.