BAT asks Habibie to review cigarette excise ruling

BAT asks Habibie to review cigarette excise ruling

JAKARTA (JP): Publicly listed cigarettemaker PT British
American Tobacco (BAT) Indonesia asked President B.J. Habibie on
Tuesday to review the Ministry of Finance's decision to raise
excise taxes on the production of regular cigarettes.

"We do hope the President will review the regulation," company
president Mark Anthony Jennings said following a meeting at
Habibie's private residence in Patra Kuningan, South Jakarta.

Jennings claimed the regulation would harm the profitability
of the country's regular, or non-clove, cigarette producers and
could force them to lay off workers.

In late March finance minister Bambang Subianto issued a new
excise regulation setting minimum retail prices for regular
cigarettes and raising excise rates by between 20 percent and 36
percent.

Previously the price limit was only imposed on clove-blended
kretek cigarettes, with regular cigarette producers free to set
their selling prices.

Despite the domination of the market by clove cigarettes,
regular cigarette producers were able to survive by selling their
products at far cheaper prices.

Giant clove cigarettemaker Gudang Garam, for instance, sells
its products at an average of Rp 2,500 per pack; regular
cigarettes for the same market segment sold at between Rp 1,000
and Rp 1,500 per pack.

Under the new regulation, regular cigarette producers have to
increase their banderole prices to the level set by the
government, which is about the same level of clove cigarettes.

Listed on the Jakarta Stock Exchange, BAT is one of the
country's oldest cigarette producers, commencing operations in
1917. It remains one of the market leaders in the regular
cigarette sector with brands including Lucky Strike, State
Enterprise, Express 555, Kent, Benson & Hedges, Ardath and
Commodore.

Company chief commissioner Selo Soemardjan, who accompanied
Jennings, said the new regulation was the most burdensome during
its long history in the country.

"If the government insists on implementing the regulation, we
are afraid it would not only harm BAT but the national economy,"
Selo said.

Selo said the company earlier discussed the matter with
concerned governmental officials, including Bambang and Director
General of Custom and Excise Permana Agung.

Selo said Habibie promised to handle the company's concerns.

Another cigarette producer, PT Rothman of Pall Mall Indonesia,
with brands including Kansas, also complained over the increase
in excise taxes and fixed prices. (prb/jsk)