Cigarette too easy to tax: Putera
The Jakarta Post, Jakarta
Breaking a weeklong silence, the Sampoerna family has spoken out about the historic sale of 92-year-old cigarettemaker PT Hanjaya Mandala Sampoerna to Philip Morris International Inc.
Putera Sampoerna, the head of the Sampoerna family and chief commissioner of the company, said his family would not take the money from the sale out of the country, but would reinvest it in infrastructure and other projects in Indonesia.
In an exclusive interview published by The Asian Wall Street Journal on Monday, Putera explained the reasons behind the sale, saying the cigarette industry in Indonesia -- the fifth largest in the world after China, the U.S., Japan and Russia -- would get tougher in the future.
The cigarette industry is "too easy to tax," which constrains profit, he said in Singapore.
The 57-year-old executive said the cigarette industry "is not getting any easier" and excise tax rates on tobacco "are always going to go up".
"If we didn't sell (Sampoerna), we'd have to 'conglomeratize' at some time," he said.
A report in the Financial Times on Monday quoted Vice President Jusuf Kalla as saying the country would increase the tobacco excise due to health concerns and a need for more government revenue.
Kalla said the largely unfettered cigarette industry would soon face increased levies to increase government revenue and reduce consumption levels that make Indonesia one of the world's heaviest smoking nations.
His statements might worry U.S.-based Philip Morris, the maker of Marlboro cigarettes, which announced on March 14 that it had sealed a deal to buy a 40 percent stake in Sampoerna, the country's second largest cigarette producer after PT Gudang Garam, for Rp 48 trillion (US$5.2 billion).
The deal itself, according to Tempo magazine, was signed in The Dorchester, a plush hotel near Hyde Park in London.
The Asian Wall Street Journal quoted the media-shy Putera as saying he became teary when the agreement with Philip Morris was signed. Until that moment, he said, "I didn't think I was going to sign."
He signed the deal and said that it was "the right thing to do".
Putera also dismissed talk that his family might pull its money out of the country as "nonsense".
"Sampoerna is an Indonesian family and will always have a major presence in Indonesia," he said. "I'm Indonesian, I know the environment, I know Indonesian investment. Where do you want me to go? Go to China? I don't even speak Chinese. Go to America? And do what?"
Putera hinted that he was considering investing in agriculture and infrastructure projects in Indonesia, which he said was "what the country needs". He said Indonesia "is moving in the right direction, now is the time we can reinvest".
Putera referred to political and economical stability, and President Susilo Bambang Yudhoyono's focus on infrastructure projects.
He said his family would maintain a stake in Sampoerna and that he had agreed to stay at the company as a senior adviser to the board "for as long as they want me".
The cigarette company bears my name, he said, and he "just can't abandon it".