Between labor strikes and low tar and nicotine requirements<\/p>\n
SURABAYA (JP): A labor strike is not considered a major
\nobstacle for the operation of cigarette companies in East Java.
\nAt least that is what HM Sampoerna feels. There are, however,
\ndiffering opinions among other East Java companies who have
\nexperienced numerous labor strikes this year. It was said by some
\nthat the scale and the nature of the strikes scared investors
\naway from East Java.<\/p>\n
HM Sampoerna Corporate Communications Manager Yudhi Rizard
\nsaid: \"I don't think labor strikes become an obstacle.\" HM
\nSampoerna produces the A Mild and Dji Sam Soe brands among many
\nother famous brands. Maybe they are just lucky. During 2000, HM
\nSampoerna, which operates six factories in East Java with a total
\nlabor force of 27,455, experienced one strike, in January. And
\naccording to the company, the strike had no base; the laborers
\nfailed in their case.<\/p>\n
HM Sampoerna said it had a smart strategy in dealing with
\nlabor strikes. \"We always follow the rules. We operate according
\nto the laws and regulations. If their demands are outside the
\nregulations, we do not give in to them.\" Indeed, most labor
\ndemonstrations nowadays are for demands which are not regulated.
\nAt Sampoerna for instance, employees' wages are already higher
\nthan the average minimum wage decided by the government, basic
\nfacilities are fulfilled, and yet, the company said, they still
\ndemand other things. So, in Sampoerna's case, \"In that January
\nstrike, we didn't give in to what they demanded. We were on the
\nright track. They finally gave up,\" said Yudhi.<\/p>\n
However, other cigarette companies would not give any comments
\non this matter. They even refused to meet or talk with The
\nJakarta Post. Gudang Garam, the biggest cigarette company in
\nIndonesia, and the one which seems to experience the most
\nstrikes, refused to comment. \"Our director is very busy right
\nnow,\" said a secretary, after the Post tried to approach the
\nexecutives through telephone calls and faxes.<\/p>\n
However, there is a legendary love story between the company
\nGudang Garam and the city of Kediri, the site of Gudang Garam's
\nworks. The physical development of the city, located about 140 km
\nsouth of Surabaya, has the Gudang Garam touch on it. Gudang Garam
\nnot only helped the local government by providing jobs for the
\nlocal people, but it also built the infrastructure necessary for
\nthe city. It was recognized as a dream place to work.<\/p>\n
But this changed dramatically when a labor strike started
\nalmost four years ago. It was the beginning of many strikes until
\ntoday. An elderly woman who lives beside one of the factory once
\ntold the Post that the Gudang Garam owners were very generous
\npeople. At Idul Fitri, almost everybody in the neighborhood
\nreceived a parcel from them. So, nonworkers would never
\nunderstand why the laborers go on strike with such a generous
\nemployers!<\/p>\n
Toward healthier products<\/p>\n
What has become a concern among cigarette company owners is
\nthe PP38, a government regulation on the obligation to reduce the
\nnicotine and tar level in cigarettes. This regulation will affect
\nmany cigarette companies, especially those producing Sigaret
\nKretek Tangan (SKT -- hand-rolled clove-flavored cigarettes). The
\nprocess of reducing tar and nicotine levels is not a simple one.
\nIt needs sophisticated technology, which is not owned by middle-
\nto lower-level companies producing only SKT cigarettes.<\/p>\n
\"Sampoerna began producing such low-tar cigarette 10 years
\nago,\" said Yudhi Rizard, referring to its A Mild brand. \"But to
\nput the regulation in effect, it will take some time. Cigarette
\ncompanies need to carry out technological adjustments on
\nequipment.\" Even though this regulation threatens the existence
\nof many cigarette companies, Yudhi admitted that it was good for
\nhealthier cigarette products.<\/p>\n
Filtrona, a British-based company producing cigarette filters,
\ncan see a bright future because of the strict government
\nregulation. Filtrona Indonesia President Director Hamish A.M.
\nPitt said, \"Filtrona's key ability, which is famous in the world,
\nis in the low tar and low nicotine cigarette processing business.
\nWe are very experienced in this matter.\"<\/p>\n
But he understands why it is difficult to implement the
\nrequirement of PP38. \"To reach a certain degree of tar in a
\ncigarette, it needs a long process. It starts from the way the
\ntobacco grows, how long the tobacco leaves are stored and dried,
\nthe way they blend with other materials, and other things. It
\nchanges the way cigarette production is usually run, and it takes
\na sophisticated production technology,\" explained Hamish.<\/p>\n
The 50-year-old Filtrona company is now spread throughout 10
\ncountries, operating 12 factories. One of the companies was
\nestablished in Surabaya, Indonesia, in 1988. They produce a large
\nrange of cigarette filters as their core business, self-adhesive
\ntear tape (used for\/as cigarette packing seals), and other
\nproducts such as fiber for air fresheners and ink reservoirs for
\npens. The company also functions as the agent for cigarette-
\nmeasuring instruments.<\/p>\n
There are two kinds of cigarette-measuring instruments: the
\nphysical and the chemical. The physical instrument measures
\nlength, hardness, roundness, weight, resistance, etc., of
\ncigarette products. The chemical instrument measures tar and
\nnicotine levels in a cigarette and analyzes how a cigarette
\naffects the health of a human being.<\/p>\n
Among the several kinds of measuring instruments that Filtrona
\nsupplies to cigarette companies is a smoking machine. \"It is a
\nmachine which mimics a human's reaction after a cigarette is
\nsmoked by it. If the machine is coughing badly, the product needs
\nto be improved. It does not fulfill the health standard
\nrequired,\" said Hamish. These kinds of machinery are used to
\nprovide the best products for consumers, especially in protecting
\nthem from unnecessary damage.<\/p>\n
Asked about its customers, Hamish said that almost all
\ncigarette companies in Indonesia buy filters, self-adhesive tear
\ntape and measuring instruments from them. \"Some big companies
\nhave their own machines. They are able to produce what they need
\nthemselves. But still, for their exports, they buy the necessary
\nelements from us. Even though it is only a small purchase.\"<\/p>\n
If bigger companies buy small amounts from Filtrona, middle-
\nto lower-level companies depend entirely on them for such
\nadditional elements.<\/p>\n
Bright future<\/p>\n
Cigarette companies seem to have a bright future, especially
\nif the low tar and low nicotine requirement is implemented.
\nSampoerna has just opened a branch in Brazil in October, adding
\nto its international branches which are spread throughout
\nMyanmar, Vietnam, the Philippines and Malaysia.<\/p>\n
Budi Handoyo, one of the directors of Bentoel, which is based
\nin Malang, refused to comment on the company's future plans. \"We
\nare very busy right now. We experienced many problems this year.
\nWe are concerned in dealing with our internal problems,\" Budi
\nexplained.<\/p>\n
Hamish is optimistic that the future of East Java cigarette
\ncompanies is good. \"East Java is the center for cigarette
\nproduction in Indonesia. It has the raw materials and it has the
\nhuman resources. On top of that, it has the biggest market.\" It
\nwas for this reason that Filtrona, which was first established in
\nMedan in 1977, moved to Surabaya 11 years later. It has proven
\nthat the monetary crisis did not affect people's habit of
\nsmoking.<\/p>\n
Hamish, as well as Yudhi Rizard, gave a similar observation,
\nthat in time of crises, people still smoked, or even smoked more.
\nThey might change their brand of cigarette -- to a lower priced
\nones -- but they still smoke. \"To keep away the stress,\" said
\nYudhi jokingly.<\/p>\n
If the changing of brands affects big companies like
\nSampoerna, it does not affect a filter producer like Filtrona.
\n\"Middle- to lower-level cigarette companies demand filters. And
\nwhen their sales go up, their purchase of our products go up
\naccordingly. The worst is when people change their brand to a
\nlowest priced one -- the sigaret kretek, which does not require
\nfilters.\"<\/p>\n
But according to Hamish, with the PP38 regulation, eventually
\nall cigarette companies in Indonesia should obey the tar and
\nnicotine level requirements. \"Sooner or later, all companies will
\ndemand filters to fulfill that requirement.\" (Sirikit Syah)<\/p>",
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