Indonesia produced 152,319 tonnes of tobacco leaf in 2017, making it the sixth-largest tobacco leaf producer in the world. However, outdated technology pushes productivity in the tobacco farming industry far below levels of the other tobacco leaf producing countries and Indonesian farmers continue to struggle to make a living from these labor-intensive crops.
The cigarette industry in Indonesia is a significant contributor to employment, economic growth, and tax revenue collection. However, smoking cigarettes remain the leading cause of death and serious diseases in Indonesia. The cigarette industry is responsible for the enormous public health and economic costs. Health expenditures directly related to smoking cigarettes in Indonesia amount to approximately USD 1.2 billion per year, and it is also responsible for another USD 6.8 billion in indirect economic costs.
Indonesian policies targeting the tobacco farming and cigarette industries appear uncoordinated. Excise revenues from tobacco products reached IDR 143.66 trillion or USD 10.33 billion in 2019 and were responsible for 95.5% of all excise revenues. This makes cigarettes an important source of government revenue. Moreover, the Ministry of Industry reported that 1.7 million people worked in both tobacco leaf and cloves production in March 2019. Tobacco farmers receive support from local governments, funded through a 2% share of tobacco excise revenues. The Indonesian government has responded to the costs of cigarette consumption with Regulation No. 109/2012, which restricts the advertisement and promotion of tobacco products, prohibits sales of cigarettes to U-18, and mandates graphic health warnings on the packets. Chapter VI of the regulation also stipulates public awareness programs aimed at discouraging consumers from smoking, but smoking prevalence in Indonesia remains at almost 50% above global levels. To make matters worse, a significant increase in underage smoking reveals serious enforcement problems.
The following recommendations respond to the dilemma between policies to reduce the prevalence of cigarette consumption in Indonesia and the importance of cigarette production for employment and excise revenue collection.
1. Ministry of Health to more effectively execute its duties and responsibilities under Chapter VI of Regulation No. 109/2012. In particular, it needs to reevaluate and improve its public awareness campaigns, which have so far not achieved its objectives.
2. Ministry of Health to undertake more enforcement campaigns against retailers who sell cigarettes to minors. Moreover, the Ministry of Finance must assess the effect of increased prices and tariffs on smoking prevalence and on sales of illicit, cheaper, and potentially more harmful tobacco products.
3. The Ministry of Health to evaluate the potential health effects of harm-reducing alternatives. In response to positive experiences in the United Kingdom (UK), the Indonesian government should study whether consumers should be encouraged to switch from inhaling harmful tar to using electronic nicotine delivery systems (ENDS). The government should also research ways to reduce risks associated with ENDS products and to restrict their use to adult consumers. A total ban of electronic cigarettes is not recommended as it would eliminate harm reduction options.
4. Finally, tobacco farmers need technical support. Upgrading their skills and technology would allow them to grow tobacco used for renewable sources of energy or to extract nicotine for ENDS products rather than for use in cigarettes. Financial support for tobacco farmers could be secured through measures such as earmarking taxation proceeds to fund tobacco transition programs, where needed.