Indonesia’s Institute for Economic and Financial Development warned that the new cigarette regulations could cost the economy up to $20 billion and called on the government to revise its policies. The Health Minister said the unbranded tobacco packaging policy was still under review.
Indonesia’s Economic Research Institute Warns New Tobacco Regulations
According to Tempo. On Sep 23, the Indonesian Institute for Economic and Financial Development reported (Indef) Government Regulation No. 28, 2024 (PP) and the relevant draft regulations of the Ministry of Health, which made harsh criticism. The news warned that Indonesia could lose 308 trillion rupiah ($20.3 billion) if the government does not amend the 28/2024 government regulation to remove the Health minister’s rules on cigarettes and vapes.
Indef Executive Director Tauhid Ahmad told a meeting in Jakarta that Government Regulation No. 28, 2024, must be amended, particularly by removing provisions relating to national revenue and the economy. “If this rule is not amended or removed, or even delayed, Indonesia’s economic conditions will continue to be below 5 percent in the third quarter,” he noted.
This new bill could cause $20 billion in losses
At the meeting, indef singled out the proposal on unbranded tobacco packaging in the Ministry of Health Bill, saying it would result in an economic loss of up to Rupiah ($12 billion) of 182.2 trillion. Unbranded tobacco packaging will not only accelerate the shift of customers to illicit tobacco products, it will also reduce the demand for legal tobacco products by 42.09%, thus affecting more than 1.22 million workers in related industries.
Economic losses and workers facing unemployment
In addition, indef also mentioned the prohibition of the sale of cigarettes within 200 meters. The measure will affect 33.08 percent of retail tobacco sales, potentially resulting in a loss of state revenue of 43.5 billion rupiah ($2.87 million), and 734,000 workers.
In addition, the Regulation on the Restriction of Tobacco Advertising predicts that this will lead to a 15% drop in demand for advertising services, a loss of state revenue of 21.5 billion rupiahs ($1.41 million), and property losses of up to 41.8 billion rupiahs ($2.75 million), affecting more than 337,000 workers.
To summarize the 3 scenarios
If all three scenarios play out, Indonesia will face an economic loss equivalent to 1.5 percent of its gross national product (GDP), totaling 308 trillion rupiah ($20.3 billion). State tax revenues will also be reduced by Rp 160.6 trillion ($10.6 billion), or about 7 percent of total tax revenues.
The Government recommended that the government engage in a coordinated dialogue with relevant departments such as the Ministry of Economic Coordination, the Ministry of Industry, the Ministry of Trade, the Ministry of Finance, the Ministry of Labor, and the Ministry of Health. The Ministry of Agriculture, etc., and recommended that the government find alternative sources of income to create new employment opportunities for the affected workers.
Budi Gunadi Sadikin, Indonesia’s Minister of Health, said the policy on unbranded tobacco packaging was still under consideration and would continue to be discussed with relevant stakeholders to balance the needs of public health and industry development.
Merrijantij Punguan Pintaria, industry director for Beverages, cigarettes, and refreshers at Indonesia’s Ministry of Industry, highlighted the impact of the unbranded tobacco packaging policy, particularly involving more than 1,300 companies in the tobacco industry and about 540,000 employees.
