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The fourth largest market in the world
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  1. CATHERINE REYNOLDS
  1. University of New South Wales, Australia; c.reynolds@unsw.edu.au

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The rich aroma of kretek clove cigarettes is one of the most evocative scents of Indonesia. But behind this redolent smoke haze few people contemplate the economic aspects of Indonesia’s tobacco industry. Tobacco is the Indonesian government’s largest source of revenue after oil, gas, and timber,1recouping around US$4 billion in excise in 1996,2 about 10% of the Indonesian government’s total tax revenue.3Tobacco tax is an easy, reliable form of taxation, a steady, internal revenue, unlikely to suffer from any external shocks, and unlikely to create any sudden crisis, in contrast to the instability of oil revenue and other exportorientated products which are subject to the vagaries of international markets.

As the second largest employer after government,3 direct and indirect employment estimates for the Indonesian tobacco industry range from 4.3 million2 to 17 million workers4 in farming, trading, transportation, and advertising, as well as those directly involved in manufacturing.5 The Indonesian government is critically dependent on the industry, as a means of sustaining employment levels, and for taxation revenue. As a result, opposition to the industry is discouraged and cigarette advertisers have free reign: “If NGO’s [non- government organisations] get too verbal, they get warned that tobacco industries are vital to the nation’s development.”6

Young smokers

Any visit to Indonesia will reveal the huge number of Indonesians, particularly men, who smoke. Male participation estimates range from 50% to 85%,3 ,7 and “since 1970–72, per adult consumption of cigarettes (all forms) has more than doubled, from 500 to 1180 per adult”.3 In the short to mid-term these rates are only likely to increase because, as a report produced with the assistance of the Indonesian government enthusiastically noted in 1991: “Prospects for further market growth are considered good. Consumption levels per head …

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