Indonesia Report Card: Status of Tobacco Use and Its Control

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Key organization

Non-Governmental Organization

1. National Committee for Tobacco Control (KOMNAS PT)

2. Indonesia Tobacco Control Network (ITCN)

Government Organizations 1. Coordinating Ministry of Social

Welfare 2. Ministry of Health 3. Ministry of Education 4. Ministry of Religious Affairs 5. Ministry of Internal Affairs 6. Ministry of Foreign Affairs 7. Ministry of Environment 8. Ministry of Communication and

Information 9. Ministry of Sports 10. Coordinating Ministry for

Economics and Industry 11. Ministry of Manpower 12. Ministry of Agriculture 13. Ministry of Trade 14. Ministry of Industry 15. State Ministry of Women

Empowerment 16. Ministry of Law and Human Rights

Tobacco Control in Indonesia

Abbreviations and Acronyms used in this report:

ASEAN FCTC GYTS HJE PP SKT SKM SPM VAT

Framework Convention On Tobacco Control Global Youth Tobacco Survey Effective retail price (Harga jual eceran) Government Decree (Peraturan Pemerintah) Hand-rolled clove cigarette Machine-rolled clove cigarette Machine-rolled white cigarette Value 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 Indonesia’s current status

6 Price and tax measures to reduce the demand for tobacco

! No price or tax regulation (Note price and tax are covered in Law 39/2007 (amendment of Law 11 on excise tax) under the Ministry of Finance line authority)

8 Protection from exposure to tobacco smoke

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

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

! Public transport may provide a special place for smoking that is physically separated and is equipped by air ventilation which complies with requirements stipulated by Ministry of transport.

9 Regulation of the contents of tobacco products

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

! Industry has to provide clear and readable information on nicotine and tar levels on every cigarette pack

11 Packaging and labelling of tobacco product

! Textual health warning must be written: “Smoking can cause cancer, heart attack, 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 base color, with minimum size of 3 mm.

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

advertising, promotion and sponsorship

! Cigarette can be advertised and promoted by those who produce and/or import 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 women and display the product brand.

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

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

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Tobacco use in Indonesia has grown over the last four decades. From 1960 - 2004, cigarette consumption had increased 6.2 folds from 35 billion to 217 billion sticks per annum1. Based on National Socio-economic Survey 2004, the smoking prevalence among adults 15 years and older increased from 31.5% in 2001 to 34.4% in 2004 (or more than 50 million adults are smokers)2. Adult male smoking prevalence was 63.1%, a 1.4% increase from the year 2001. There was a three fold increase in adult female smoking from 1.3% in 2001 to 4.5% in 2004. Smoking prevalence is higher in rural (36.5%) than urban (31.7%) population.

53.4

62.2

1.7 1.34.5

63.1

27

31.5

34.4

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10

20

30

40

50

60

70

1995 2001 2004

Year

% o

f adu

lts th

at s

mok

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gula

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5

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15

20

25

30

35

40

MaleFemaleAll

Tobacco Use

Smoking Prevalence among adults 15 years and older by gender Indonesia, 1995, 2001 and 20043

North Maluku reported the highest smoking prevalence (42%), far exceeding the national figure (34.4%) in 2004. Three in four (76.6%) male smoke and 4.3% females smoke. The highest prevalence of female smoking (10%) was reported in Papua4. The smoking rate is lower 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 highest increase 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 and betel nut, while the richest spent 9.7%6. The average cigarette consumption among smokers was 28 packs of 12 sticks per month and it is higher among the adult male smokers5.

According to the Indonesia-national Global Youth Tobacco Survey (GYTS) 20067, one in three (37.3%) youth had ever smoked cigarettes and 30.9% had smoked their first cigarette before they reach the age of 10. About 12.6% of youth are current smoker; that is 24.5% among boys which is significantly higher than girls (2.3%). Among the current smokers, 3.2% reported that they were addicted 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 for

various illness (chronic respiratory, cardiovascular, cancer, reproductivity and impotency) and deaths. In 2005, it was estimated about 400 thousand or 23.7% of the total 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 to be at least US$ 13.84 billion (Rp 125 trillion), much larger than the tobacco tax revenues of 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 before the age of 19.

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Tobacco Industry In January 2003, the market share for cigarettes in Indonesia was dominated by three large companies: Gudang Garam (32%), Djarum (23%) and HM Sampoerna (19%). After Phillip Morris’s acquisition of Sampoerna in mid 2005, its market share increased to 26% by July 2006, taking over Djarum as the second biggest tobacco industry in the country. Recently, its market share continues to increase to 28.2% (iGaram (23.6%). With this, Sampoerna become the biggest tobacco industry player in the country.

Cigarette Market Share by Companies, July 2006

22.331.7

3.1

17.225.9

Gudang Garam HM Sampoerna DjarumPhilip Morris Bentoel Other

National Market Share by Industry, July 20069

n October 2007), taking over Gudang

In 1960-2005, cigarette production increased by 6.3 fold from 35 billion to 220 billion sticks10. The most popular type of cigarette, clove cigarette (kretek) has increased its production ten-fold between 14.3 billions sticks in 1969 to 156 billion sticks in 1994. The white 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 clove as well as white cigarettes reached 197.7 billion sticks in 200211. 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 in producing clove (kretek) cigarettes and 1.2% manufacturing of white cigarettes. About 258,678 workers are employed in tobacco manufacturing, accounting for 6% of the total industry workers in 200412. The Excise Bureau reported that 6 million sticks or less hand-rolled cigarettes are produced annually. The demand for hand-rolled cigarettes has resulted in an additional 155 very small companies since 200213. There are 684 000 tobacco 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 40 years (1961-2001)15. However, since 2002 the proportion tends to decrease from 1.16% (260,738 hectares) to 0.86% (198,212 hectares) in 200516. It was observe that there was a sharp 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 220 billion sticks in 2005 resulting from imported tobacco leaf10. 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 tobacco production17. To date, tobacco industries in Indonesia have an almost absolute freedom to advertise their products in any form and through almost all communication channels18. The marketing strategies transcend direct advertisement, promotion and sponsorships and resulting in creating smoking as a social norm to children and adolescents. The tobacco industry also promotes their good image through the corporate social responsibility activities.

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Advertising ban

Under the existing PP19/2003 government regulation, anybody who manufactures or import tobacco products are able to advertise their products. These advertisements can be in the form of electronic, printed or outdoor media and health warning must be incorporated. They are also permitted to sponsor events but are subjected to the advertising and promotion regulations. Free samples or gifts in the form of cigarettes or other products that carry cigarette brand names are prohibited.

Direct advertisement of A Mild and Marlboro cigarettes with gigantic billboards.

Advertising that appeals to youth sponsored by DJARUM COKLAT.

Prior to 1990, Indonesia banned all TV advertisements. It was lifted in 1990 and as the current regulation permits, almost no restriction exists on tobacco advertising. However there are some restrictions. Images of cigarette packs, someone smoking, pictures or words associated with children, teenagers and pregnant women and display of the product brand are banned in the advertisements. TV tobacco advertising is prohibited from 5.00a.m to 9.30p.m, but proven to be ineffective. The tobacco industry contributed only 7% of the estimated Rp 21 trillion spent on TV advertisement from the top 10 advertisers19. In 1996, the revenue of cigarette advertisements in outdoor media was 6.9% of the total advertisement income20. Revenue from cigarette advertising increased after decentralization laws were implemented in 2001 as taxes on billboards became a significant part of local government revenues.

Children are very much influenced by advertisements that associate tobacco use to success and being trendy. The GYTS 20067 revealed that over 9 in 10 students aged 13 to 15 years old were exposed to cigarette advertisements. Although the distribution of free samples of tobacco products is banned by the existing regulation, 14.4% of the respondents had been offered free cigarettes

exposure to cigarette advertisements has influenced youth smoking uptake. This is indicated by the decreasing age in smoking initiation over the period 1995 to 2004. The average age of first cigarette uptake declined from average 18.8 years of age in 1995 to 18.3 years in 2001 and became 17.4 years in 2004

Television is still a breeding ground for the industry in the guise of talk shows and reality games

A free cigarette is given away in a free concert sponsored by the industry.

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 giving out free cigarettes to attendees of concerts or events sponsored by the industry. The industry has been aggressively using all available channels to advertise including billboards, banners, posters, and lampposts. Apparently youth was one of its target groups because direct advertisements can be found near schools, malls, sport arenas, and places where youth usually hangout. Slogans were also used as part of advertising and these

were changed once every three to four months. Children are exposed to many indirect advertising in the form of public service announcements on events sponsored by the industry. This is despite a ban on direct advertising on television daily until 9.30pm.

A giant billboard of Raflesia Park is sponsored by DJARUM SUPER.

Sponsoring youth events is a dominant strategy where the industry usually distributes free cigarette samples and gives discount prices. The industry also sponsored music, sports,

movies and cultural events, starting from the community to national levels. The industry capitalises to sponsor significant events: Indonesia Independence Day and religious holidays (Idul Fitri, Ramadhan, Isra Mi’raj (The Ascension of Prophet Muhammad), and Maulid Nabi (The Birth of Prophet Muhammad). Corporate Social Responsibility (CSR) programmes are conducted under both brand and company names. These CSR activities are aimed to build good corporate image and to enhance their network with

government officials and public. Low income groups are the industry’s primary targets as they are given educational, emergency response (for national disasters) and

environmental programmes.

Movie, music and sport events sponsored by the industry.

Captivating slogans are used by the industry to appeal to youth lifestyle

Aid was given to earthquake and tsunami victims by the industry.

Sampoerna sponsored entrepreneur excellence for university students.

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Health Warning PP 19/2003 government regulation stipulates a health warning to be placed on and comprises at least 15% size of the outdoor advertising media. Currently, there is only one authorized textual health warning that states “Smoking can cause cancer, heart attack, impotence and harms pregnancy and foetal development”. It is printed on the back of each cigarette pack with about 1 mm border with contrasting colour between the front and base colour, with minimum size of 3 mm. The same health warning also applies to any forms of advertisements including billboards. The government regulation does not include a ban on misleading descriptors such as ‘mild’ or ‘light’. This has created an increasing number of brand names using ‘mild’ and ‘light’ over recent years. A report indicated a 20 per cent increase in the domestic sale of “Sampoerna A Mild” in the first quarter of 2004, the highest among hand-rolled and machine-made brands compared with the same quarter in 200321. The increase is believed to be related to consumers’ perception that ‘light’ or ‘mild’ cigarettes are safer products.

Textual health warning placed at the back panel of the pack

A recent study showed that a higher percentage (76.3%) of respondents chose both graphic and text health warning to be incorporated on a cigarette pack. About 9% prefer only textual health warning and 15.3% prefer only graphic health warning. A large majority (78.2%) indicated that the health warning should cover 50% of the cigarette pack. About two in three (68%) respondents stated that the graphic health warning should use horror and specific pictures22. Even with the textual health warning, the cigarette pack is still not considered a means of advertising. As a result the pack is used by the industry as their marketing tool by continually introducing new creative pack designs and promotional text to distract smokers from the health warning and to make them appealing to the youth.

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PROMOTIONAL TEXT AESTHETIC DESIGN

Tobacco industry reduces the impact of the health warning by distracting smokers with either aesthetic designs or promotional texts. The aesthetic designs are used to cover 85% of the pack.

Smoke-free Environment In 2005, the Governor of Metropolitan Jakarta issued a Local Act on Air Pollution Control 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 Governor Decree No 75/2005 on Smoking Ban. The smoking ban includes public places, health facilities, work places, educational institutions, children playground, places of worship and public transport. This current regulation is under the responsibility of local government. The clean air law has the least resistance as it provides a room for smokers in indoor public and workplaces as long as the room has air ventilation. Authorities of public and work places who designate a special smoking room should ensure that the smoking room is equipped with air ventilator to protect non-smokers from secondhand smoke. Public transport may provide a place for smoking, which is physically separated and is equipped by air ventilator, complying with Ministry of Transport’s requirements. Localities that recently passed regulations on Smoke Free Policy are Bogor and Cirebon Municipalities 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 20067, more than 80% of students aged 13-15 years were exposed to secondhand smoke in public places as well as 64% were exposed in their homes. According to the National Socio-Economic Survey 2004, about 31% or more than 45 million people were exposed to secondhand smoke at home. More than 80% of adult smokers (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 men have 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 added tax (VAT), advalorem excise tax and specific tax. The value added tax is 8.4% of the effective retail price (HJE-Harga jual eceran). It is a flat rate tax that does not depend on the size of the industry and the type of tobacco product. The advalorem excise tax is imposed on each stick of cigarette produced whose rate depends on the type of tobacco product and scale of production. This tax rate varies from 3 percent to 40 percent. In the existing tobacco taxation policy the excise tax rate ranges between 26% and 40% for machine-made clove (kreteks) and white cigarettes. As for hand-made kreteks, it ranges from 4% to 22%. The variation in rates depends on the type of 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 the size 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 (producing between 500 million and 2 billion sticks) and Rp 7/stick for large industry (producing more 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 was implemented effective July 1, 2007. The average current cigarette tax is 31% of the total retail prices. It was perceived as the lowest tax rates in the region next to Cambodia24. It is clear that the cigarette prices in Indonesia have always been lower than the neighbouring countries. The revenue from tobacco excise tax increased 11 folds from Rp. 2.65 trillion (USD 294 million) in 1994 to Rp. 32.65 trillion (USD 3.63 billion) in 2005. It was 6.7% of total domestic revenue in 200525.

7.4510.11

16.49

22.8825.93

28.67

32.65

0

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35

Trill

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iah

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 price under 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 a 65% increase of cigarette tax with 10% earmarked for tobacco control related activities failed 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 dan Kemiskinan” 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 Health Services and Technological Research & Development National Institute of Health Research & Development, Jakarta, Indonesia. 9 http://www.wartaekonomi.com/indikator.asp?aid=8208&cid=25 10 Directorate General of Agro and Chemical Industry, Ministry of Industry, July 2007 11 http://faostat.fao.org/site/408/DesktopDefault.aspx?PageID=40812 Central Board of Statistics, Indicator of large and medium enterprise, various years (the latest publication was 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, December 2006. 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, 2007 20 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 Investor’s Newsletter 26 April 2004: First Quarter Sales by Brand 2003, 2004. 22 Pusat Penelitian Kesihatan, Universiti Indonesia, Yayasan sJantung Indonesia and SEATCA, Peringatan Bahaya 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 Soerojo Setyo Budiantoro

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