Tobacco Industry at a Crossroads: Apindo and Stakeholders Urge President Prabowo to Review Controversial Health Regulation

JAKARTA – The Indonesian business landscape is currently facing a significant tremor as the Indonesian Employers Association (Apindo), in collaboration with various associations within the Tobacco Product Industry (IHT), has issued a stern warning regarding the future of the nation’s tobacco ecosystem. The catalyst for this alarm is the enactment of Government Regulation (PP) Number 28 of 2024 concerning Health.

Industry leaders argue that the regulation, while aimed at public health, contains draconian measures that could trigger mass layoffs (PHK), decimate the livelihoods of millions of farmers, and inadvertently fuel a massive surge in the illegal cigarette trade. In a formal appeal, these stakeholders have called upon President Prabowo Subianto to intervene and review the policy to prevent what they describe as an "economic catastrophe" for one of Indonesia’s most significant manufacturing sectors.

Main Facts: The Three Pillars of Contention

At the heart of the dispute are three specific provisions within PP 28/2024 that the industry deems "existential threats." During a high-profile press conference held at the Apindo headquarters in South Jakarta, Sutrisno Iwantono, Chairman of Apindo’s Public Policy Division, identified these critical points of failure:

1. Standardization of Packaging (Plain Packaging): The regulation mandates the uniforming of colors and shapes of tobacco products, effectively stripping brands of their visual identity. This is often referred to as "plain packaging."
2. Strict Limits on Nicotine and Tar Content: The policy sets a maximum threshold of 1 milligram of nicotine and 10 milligrams of tar per cigarette.
3. Ban on Additives: The regulation prohibits the use of supplementary ingredients, including flavorings, cooling agents (such as menthol), and even sugar, which are integral to the production of traditional Indonesian cigarettes.

According to Apindo, these measures do not merely regulate the industry; they effectively dismantle the legal framework under which it operates. "The standardization of packaging, the tar-nicotine limits, and the ban on additives will de facto shut down the legal industry," Sutrisno Iwantono stated. He emphasized that while legal, tax-paying entities will be forced to close, the demand for tobacco will remain, inevitably being filled by unregulated, illegal producers who pay no excise tax and adhere to no safety standards.

Chronology: A Breakdown in Dialogue

The tension between the Ministry of Health (Kemenkes) and the tobacco industry has been simmering for years, reaching a boiling point with the signing of PP 28/2024. The regulation is an implementing rule of the 2023 Omnibus Law on Health, which sought to consolidate various health-related statutes into a single framework.

For the past two years, industry representatives from Apindo, the Indonesian Tobacco Farmers Association (APTI), and the Indonesian Tobacco Society Alliance (AMTI) have sought an audience with the Ministry of Health. Their goal was to find a "middle ground" that balances public health objectives with economic realities.

However, the industry claims that their voices were largely ignored during the drafting process. "We have grown tired of discussing this with health officials who do not seem to consider the economic ecosystem," Sutrisno remarked. This perceived lack of "meaningful participation"—a legal requirement for law-making in Indonesia—has led the industry to bypass the Ministry and appeal directly to President Prabowo Subianto. The industry views the transition to the new administration as a critical window to rectify policies they believe were pushed through without adequate cross-sectoral impact assessments.

Supporting Data: The Economic and Technical Reality

To understand why the industry is in such an uproar, one must look at the specific data regarding Indonesia’s tobacco landscape, particularly the unique nature of "Kretek" (clove cigarettes).

The Tar and Nicotine Paradox

Edy Sutopo, Chairman of the Indonesian Tobacco Society Alliance (AMTI), provided a technical breakdown of why the new limits are impossible to meet for local producers. Indonesian soil and climate produce tobacco leaves that are naturally rich in nicotine and tar. Furthermore, the inclusion of cloves—a hallmark of Indonesian heritage—inherently increases these levels.

"If we are forced to meet the limit of 1mg of nicotine and 10mg of tar per stick, it is simply impossible to achieve using local tobacco and local cloves," Edy explained. "This policy effectively bans Indonesian tobacco from its own market."

The data suggests that if these limits are enforced, manufacturers will be forced to switch to imported, low-nicotine "white" tobacco, leaving millions of Indonesian tobacco and clove farmers in Central and East Java without buyers for their crops.

The Additive Dilemma

The ban on additives is equally problematic. In the production of Kretek, sugar is often used in minute quantities to manage the moisture levels of the tobacco. Furthermore, flavorings like menthol or fruit extracts (in the case of electronic cigarettes) are primary drivers of consumer preference in the modern market. By banning these, the government is essentially outlawing the most popular products currently on the shelves, creating an immediate vacuum that illegal smugglers are eager to fill.

Economic Contribution and Employment

The tobacco industry is a fiscal pillar for Indonesia. In 2023, tobacco excise (Cukai Hasil Tembakau/CHT) contributed over IDR 213 trillion to the state budget (APBN). Beyond the revenue, the industry employs approximately 6 million people across the supply chain—from farmers and laborers in cigarette factories to retail workers in millions of small kiosks (warungs) across the archipelago.

Apindo warns that a sharp decline in the legal industry could lead to a significant shortfall in the APBN at a time when the Prabowo administration needs funding for its flagship social programs.

Official Responses: Where the Industry Stands

Despite their fierce opposition to the aforementioned points, Apindo and its affiliates were careful to clarify that they are not against health regulations in their entirety. They expressed support for several key measures within PP 28/2024 that they believe are reasonable and targeted:

• Age Restrictions: The industry fully supports the ban on selling tobacco products to minors, including the increase of the minimum age from 18 to 21 years.
• Health Warnings: The industry agrees with the requirement to place graphic health warnings (PHW) covering 50% of the packaging.
• Public Space Restrictions: There is general consensus on maintaining designated smoking areas to protect non-smokers.

"We are not anti-health," Edy Sutopo clarified. "But we are against policies that are disguised as health measures but are actually designed to kill an industry. If the goal is to reduce consumption, there are ways to do it without destroying the livelihoods of millions of farmers and workers."

The industry’s primary grievance is that the "plain packaging" and "additive ban" go far beyond consumption control and enter the territory of total industry eradication.

Implications: The Looming Crisis of Illegality

The most significant implication of PP 28/2024, as argued by Apindo, is the "perverse incentive" it creates for illegal trade. Currently, Indonesia already struggles with a significant market share of illegal cigarettes—products that are sold without excise stamps at a fraction of the price of legal brands.

If legal products are stripped of their branding (making them easier to counterfeit) and forced to change their flavor profiles (making them less desirable than illegal alternatives), consumers will naturally migrate to the black market.

The consequences of this shift are four-fold:

1. Health Risks: Illegal cigarettes do not undergo any quality control or lab testing for harmful chemicals, potentially posing a greater health risk than legal products.
2. Fiscal Loss: The government loses 100% of the excise and VAT on every pack of illegal cigarettes sold.
3. Law Enforcement Burden: The Customs and Excise Office (Bea Cukai) will face an uphill battle trying to police a market where legal and illegal packs look identical due to plain packaging.
4. Social Instability: Mass layoffs in manufacturing hubs like Kudus, Kediri, and Surabaya could lead to localized economic depressions and social unrest.

Conclusion: A Call for Balanced Policy

As Indonesia transitions into the presidency of Prabowo Subianto, the tobacco industry is looking for a "New Deal." They are calling for a suspension or a thorough revision of the specific clauses in PP 28/2024 that threaten the hulu-to-hilir (upstream-to-downstream) ecosystem.

The challenge for the new administration will be to balance the undeniable need to improve national health outcomes with the pragmatic necessity of protecting a multi-billion dollar industry that supports millions of citizens. For now, the ball is in the President’s court. As Sutrisno Iwantono concluded, "The industry is at its limit. We need a policy that is fair, evidence-based, and considers the survival of the people who depend on this sector."