Indonesia's Kretek Giant Lays off 2,000 Workers  

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  • TEMPO/Achmad Budi

    TEMPO/Achmad Budi

    TEMPO.CO, Kediri – Clove cigarette (kretek) producer PT Gudang Garam Tbk decided to lay off over 2,000 employees with an early retirement scheme. The company was forced to reduce the number of its workers due to financial efficiencies following strict government regulations about smoking.

    Gudang Garam spokesman Iwhan Tricahyono said the retirement program was devoted exclusively to the employees from the company's hand-rolled clove cigarettes, which division is considered the most labor intensive and costly. "[The layoff] is done to avoid worse possibilities," Ihwan said in Kediri, yesterday.

    In the last few months, Ihwan said, Gudang Garam's cigarette sales dropped significantly after the government issued rules that are less favorable to the national cigarette industry. Restrictions on advertising, especially for television, and the mandate to include graphic warning images in cigarette packages are touted as the main cause for the sales decline.

    Previously, the Finance Ministry's fiscal policy chief Andin Hadiyanto said the government is finalizing the plan to increase cigarette excise by 10 percent. The plan, according to Deputy Trade Minister Krisnamurthi, is something worth doing. "Cigarette consumption must be reduced. I can see how [raising] excises can control the consumption," he said in Jakarta yesterday.

    On a year-to-date basis, state revenue from customs and excise reached Rp108.45 trillion, with tobacco and cigarette excise contributing the most with Rp103.53 trillion.

    This year the government has targeted to book Rp170.2 trillion from tobacco excise revenue, with 353 billion cigarettes produced. In the 2015 State Budget, the excise target was pegged at Rp127.5 trillion, of which Rp120.55 trillion is expected to come from tobacco.

    HARI TRI WASONO (KEDIRI)| ABDI PURMONO (MALANG)| PINGIT ARIA | JAYADI SUPRIADIN | RACHMA TRI WIDURI