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Indonesia: Smoke, smoke, smoke that cigarette
By Tony Sitathan

JAKARTA - If you want to light up a smoke in Indonesia, you'll have plenty of company and plenty of encouragement. Visitors leaving Jakarta airport for the bustling metropolitan city of 18 million are greeted by a plethora of colorful billboards and lighted neon displays strategically placed opposite the pick-up zones hawking cigarettes.

Among the billboards is one for Marlboro, with its laid-back American cowboy in a scenic country outback. Just outside the airport are signs for local cigarette brands including Djarum Super and Sampoerna A Mild. In fact, in Jakarta or its outskirts, smoking is ubiquitous. The very air seems blue over most of the country with the scent of cloves from Indonesia's famed kretek cigarettes.

In fact, at a time when across the world smokers are reviled and hounded into stubbing out the butts in public places, Indonesians are happily bucking the trend, health concerns be damned. Beyond the usual health warnings and high taxes, there seems to be no serious government inclination to stop them doing so. Some 60 percent of adult males acknowledge smoking, according to Synovate Indonesia, a market research organization, although only 4 percent of females do.

If Synovate's figures are right, at a time when smoking is decreasing across most of the world, it is increasing in Indonesia. Some 53 percent of Indonesian males smoked in 1986, according to the World Health Organization (WHO). Female smoking has remained steady at 4 percent, although some women do regard smoking as women's liberation.

"Whenever you visit coffee chains like Starbucks or Coffee Bean, as long as it's not an enclosed building you find just as many female smokers as males, and in pubs and discotheques and other entertainment places you see female executives smoking hand in hand with their male counterparts," said Lisa Kustini, a media planner from Ace Advertising. "It's a sign that the female is equal to the male in a society where the male has always played the dominant role," she added.

As a 1980s advertisement for the Virginia Slims brand used to say in the now increasingly smoke-free United States, you've come a long way, baby.

Meanwhile, in nearby Singapore, which long ago cracked down dramatically on both smokers and those who advertise to them, only 31.9 percent of males smoke, and only 2.7 percent of females, according to the WHO. Across most of the developed world, as anti-smoking campaigns have gained headway and governments have raised taxes on cigarettes, smokers have dropped to less than 30 percent of the adult male population.

But in Indonesia, "Smoking cuts across all age groups, both the rich and the poor, and is part and parcel of the Indonesian lifestyle," said Juniadi Indrayuma, a social psychologist with a health institute based in Jakarta. "It's difficult to break the smoking habit that originates from young."

Certainly, Indonesians seem aware of the dangers of cardiac arrest, lung cancer and impotency caused by cigarette smoking, according to the Synovate survey. Almost all smokers queried say they know about government health warnings. They just don't quit, despite most of them having tried periodically. About two-thirds of smokers agree with the statement "I am addicted to smoking."

It appears difficult to break the viselike grip of the cigarette companies on their chain-smoking patrons, who start as early as 12 years old. Enforcing strict legislation and increasing cigarette sale taxes doesn't seem to deter smokers, nor do warnings of premature death. Weaning smokers away from the habit remains an uphill battle.

Unlike countries such as Singapore, Indonesia appears to welcome overt public displays of advertising messages in the various print media, radio and television stations. The revenue generated from cigarette brand advertisements and sponsorship of events has been estimated to gross more than US$250 million alone in 2002, a figure expected to increase by 20 percent in 2003.

The kretek remains dominant despite increasing inroads by multinational tobacco companies, with 83 percent of smokers preferring clove cigarettes to so-called white cigarettes (17 percent). Nonetheless, white cigarettes are increasingly popular among female smokers (27 percent) and in Jakarta (29 percent).

In the face of these increases, the dominant kretek brands are not resting. Manufacturers such as PT HS Sampoerna, PT Djarum and PT Gudang Garam are continually evolving and releasing different versions of kretek-based cigarettes. Milder brands such as Star Mild from Bentoel are starting to be popular among women.

Certainly, the state benefits as well. The so-called sin tax is a whopping 40 percent of the price of each cigarette pack sold in Indonesia. Mitra Adayani, a tax consultant for a state-managed enterprise, estimates that the Indonesian government collects as much as $2.3 billion in taxes on cigarette products alone. And it is no surprise that the highest individual taxpayer in the mid-1990s in Indonesia was HS Sampoerna, the heir to the Sampoerna business empire that deals in consumer goods, including the famed Sampoerna kreteks.

Danny Gunawan, a research analyst for Trimegah Securities, said that the most attractive stocks on the Jakarta Stock Exchange are those belonging to the cigarette companies. "Companies like Gudang Garam, Philip Morris and Sampoerna are considered 'blue chip' companies where their stocks are rated highly both by domestic investors as well as international buyers and investors," he said.

Sampoerna revealed plans in its recent annual general meeting for an approved shareholder payout of 75 percent of net profits of 2002. There are also plans to allocate up to Rp417 billion (about $51 million) for share buybacks over the next 18 months.

"At the current price of Rp4,125 per share, this buyback is equivalent to around 101 million shares, or equivalent to a 2.3 percent stake. This buyback is expected to enhance the company's earnings per share," Gunawan said.

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