Big tobacco dangles big bucks – but at a high cost

Jakarta. Tobacco control activists have urged the Indonesian government to turn down a $2 billion investment plan from one of the world’s biggest tobacco companies, citing public health concerns.

President Joko Widodo is scheduled to visit the United States next week where he will sign several agreements with the US government and American businesses, among them Philip Morris International, which has a 98 percent stake in H.M. Sampoerna, Indonesia’s biggest cigarette maker.

The deal with PMI will reportedly see the tobacco company invest $2 billion in Indonesia.

There has been no official word on what the money will go toward, but a confidential letter from Foreign Minister Retno L.P. Marsudi to President Joko Widodo, obtained by the Jakarta Globe, states that $500 million will be in the form of capital expenditure for H.M. Sampoerna.

The remaining $1.5 billion, the letter indicates, will apparently be raised through a share divestment, with proceeds going to the Investment Coordinating Board (BKPM) and the Health Ministry – the very same government institution tasked with enforcing tobacco-control measures.

Health Minister Nila F. Moeloek is known to be among the officials joining Joko when he kicks off his US trip this Sunday.

Neither the minister nor a spokesperson for the Health Ministry were immediately available for comment on the reported funding from the tobacco company. The Globe was unable to reach any PMI officials for comment.

‘Poisoning Indonesians’

Kartono Mohamad, the chairman of the government-funded National Commission on Tobacco Control (NCTC), said any investment by PMI in Indonesia would do more harm than good over the long term.

“Accepting the investment offer from Philip Morris means the president is poisoning Indonesians and selling out public health over mere investment,” he told the Globe.

Indonesia, where two-thirds of the adult male population smokes and two-fifths of boys aged 13 to 15 also puff, remains one of the few bright spots for international tobacco companies amid crackdowns by governments the world over. It is the only country in the Asia-Pacific region that has yet to sign the World Health Organization’s Framework Convention on Tobacco Control (FCTC).

PMI’s global net revenue in 2014 was $8.7 billion, down 16.9 percent from the previous year, and with countries in the region, such as Australia and Malaysia, tightening controls on tobacco sales and marketing, there is more of an incentive than ever for big tobacco to invest in Indonesia, Kartono said.

“Once Philip Morris has planted its $2 billion here, it will certainly look for a profit, and so long it still sees the benefits, we won’t be able to oust it from the country,” he said.

No political will

The government has shown little political will to act tough on cigarette sales and advertising, including to children. Last month the House of Representatives announced plans to recognize kretek, the traditional Indonesian clove-flavored cigarette, as an item if cultural heritage – thereby making it harder for the government to impose restrictions on kretek sales and advertising, and in fact obliging the state to support the manufacture and promotion of the cancer sticks.

Kartono said any measure to support the tobacco industry would have a massive public-health impact. The death toll from smoking-related illnesses in 2010, the last time the Health Ministry carried out such a census, was 190,000, and a surge in smoking-related ailments will stress an already overburdened public health infrastructure, Kartono warned.

“When a smoker gets sick, who will pay for the treatment? Certainly not Philip Morris,” he said.

He argued that most smokers would rely on the government’s BPJS Kesehatan health insurance program, which is already Rp 5 trillion ($369 million) in deficit despite only being launched earlier this year with Rp 21 trillion in state funding.

Targeting the young

“The meeting with Philip Morris will not help develop the nation and its people, but instead destroy the future of Indonesians,” said Hery Chariansyah, the executive director of Lentera Anak Indonesia, an NGO that advocates for child-friendly government policies.

He said tobacco companies in general tended to target young people, and that in Indonesia’s case this could have a devastating effect because the country’s demographic skews under 30.

“Any business-related agreement led by the government must prioritize the welfare of the people and the nation. And the meeting with Philip Morris definitely doesn’t do this,” Hery said.

He also noted that in 2009, 2010 and 2011, PMI had lobbied the House to prioritize deliberation of a contentious bill on the tobacco industry, on the pretext that it was meant to protect the interests of tobacco farmers.

With the planned signing of the $2 billion investment, and a trip to the United States last month by Indonesian legislators during which House Speaker Setya Novanto met with executives from PMI, Hery said it appeared almost certain that the bill would finally go to the House floor this time around.

Workers at risk

The tobacco lobby in Indonesia has long thwarted any attempt to more stringently regulate cigarette sales and advertising by claiming that those who would suffer the most would be the tens of thousands of Indonesians employed in cigarette factories.

The reality, however, is that greater investment in factory automation – including a transition from hand-rolled kretek production to a machine-rolled process at an H.M. Sampoerna factory in Karawang, West Java – is having the same effect of putting workers out of a job, Hery said.

According to filings, PMI’s operating profit from Asia plunged 31 percent to $3.2 billion in 2014 from the previous year, due to higher manufacturing costs, primarily in Indonesia.

With half a billion dollars in capital expenditure expected for H.M. Sampoerna, Hery warned of “even more tobacco industry workers getting fired.”

‘Blinded by cash’

Kartono of the NCTC said he was optimistic that Joko would reject PMI’s investment offer, but also warned that the president’s advisers could cloud his judgment.

“Hopefully Jokowi will not be blinded by the amount of cash being offered and fall into this investment trap set by Philip Morris,” he said.

A spokesman for the president did not respond to requests for comment from the Globe.

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