"PT HM Sampoerna, one of the largest Indonesian tobacco company, shut down two of its hand-rolled clove cigarette plants in Lumajang and Jember (East Java) because the government is less protective to foreign pressures exerted through the Framework Convention on Tobecco Control (FCTC), Agus Dono, Commission B chairman of the East Java Legislative Council (DPRD)," said on Sunday.
Cigarette maker PT HM Sampoerna plans to stop production at its hand-made clove cigarette plants in Jember and Lumajang, East Java, on May 31 and lay off 4,900 workers there.
Agus Dono expressed concern over the closure of the two factories as it would affect the fate of the companys workers.
"I have predicted since the beginning that there will be many cigarette factories which will go bankrupt as a result of the central governments policy to accede to the FCTC," the East Java councilor said.
Based on the convention on tobacco control, all cigarette factories are banned from using local tobacco raw materials on ground that they have high tar contents. In fact, he said, there is technology which could convert the high tar content to a lower level.
"Indonesia has many experts who can create technology that can regulate high tar content to low one," he said. Since the beginning, he said, his side has asked the government to reject the ratification of the FCTC because it could kill hundreds of thousands of tobacco farmers and factory workers.
He said that one of the proof of the ill effect of the convention was the plan of the PT HM Sampoerno to shut down its factories in Lumajang and Jember.
The East Java legislative councils commission chief said that hand-rolled clove cigarettes were cultural product of the Indonesian people that should be preserved.
The chairman of Commission D of the DPRD, Ayub Juanidi, meanwhile, expressed concern over the closure of the plants because it will not only affect workers, but also the economy of the areas around the plants.
He called on the local administration to closely monitor the fulfillment of the rights of the workers in connection with the mass lay-off so that no one is neglected.
The largest cigarette company by market value said that it has been hurt as its share in the hand-rolled cigarette market continues to wear out, with adult consumers now shifting to machine-rolled cigarettes with filters.
"We have made this tough decision because our [hand-rolled cigarette] market share continued to drop from 30.4 percent in 2009 to 23.1 percent in 2013," Sampoerna corporate secretary Maharani Subandhi was quoted by the Jakarta Post as saying on Friday.
In contrast, the company earlier reported a much lower market share. It said earlier this month that its share in the hand-rolled cigarette market dropped to 8.3 percent in 2013, from 11.2 percent in 2012.
"The 2013 decline was so big and had never been experienced before that it significantly affected Sampoernas [hand-rolled cigarette] brands."
Ahmad Guntur, chairman of the Indonesian Cigarette Industry Forum (Formasi), said hand-rolled clove cigarette producers had underwent bankruptcy as a result of governments wrong policy.
"Basically, hand-made cigarette industries have gone bankrupt over the past five years due to governments policies which are not pro-cigarette industries," Ahmad Guntur said in press statement. The government should preserve hand-rolled cigarette industry because it constitutes the products of the countrys local wisdom.
After all, cigarette is one of the biggest tax contributors to the state budget. In 2011, cigarette industries contributed Rp75 trillion in taxes to the state budget, exceeding taxes from the mining sector.
Guntur cited government policies which discouraged the development of cigarette industries such as the imposition of high taxes, imposition of taxes based on cigarette piece, campaign on the banning of smoking and the banning on cigarette advertisement.
Foreign pressures also have impact on cigarette industries at home such as the discourse on the ratification of the FCTC and regulations set by other countries such as the requirement to use plain packaging for cigarette products by Australia.
According to Nielsen Ritail Audit Estimates surveys, the Indonesian hand-rolled cigarette segment in 2013 underwent a downward trend by six to seven million pieces from those in the previous year.
A bitter pill has to be swallowed by two of PT Sampoernas seven hand-rolled clove cigarette plants. The company has announced it will shut down its Lumajang and Jember factories on May 31 and lay off 4,900 workers.
The company decided to restructure its business and shut down two of its factories in an effort to safeguard the whole operations of its hand-rolled cigarette plants and to ensure the fate of the remaining 33,500 workers. They are working in the five remaining plants.
PT HM Sampoerna corporate secretary Maharani Subandhi said earlier that her company would think of the fate of workers it would lay off. The company is providing an opportunity to the workers to join entrepreneurship training programs.
"We hope it would help them develop new skills as a means of seeking new jobs," said Maharani.
The chief of the manpower office in Jember, Ahmad Hariyadi, said to deal with the situation his office will conduct a job fair on June 4-5 to allow the laid-off workers to find new jobs.
He said that the company had met the procedures with regard to the closure and mass lay-offs. "The reason is that the owner has gone bankrupt because the companys product has no buyers," he said. (*)
(T.A014/INE/O001)
Reporter: Andi Abdussalam
Editor: Fardah Assegaf
Copyright © ANTARA 2014
