Cigarette too easy to tax: Putera

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".