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)