Tobacco lifeblood of Kediri economy

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The East Java town of Kediri has been named as one of the two cities considered as the most attractive investment destinations in the country for 2004, according to an annual survey conducted by the Regional Autonomy Watch, a non-governmental organization specializing in research on regional autonomy implementation.

The Jakarta Post's Indra Harsaputra went to the city to find out more. =================================================================

Every morning at 8 a.m. Ngasiran, a sidewalk vendor at the Ngadisimo market in Kediri, packs up his merchandise. He carefully puts his remaining fruit and vegetables into a box and mounts it onto his pedicab.

"I'm going home now. I'll be back this afternoon," he told The Jakarta Post.

Samino, a janitor at the market, said vendors were normally at their busiest at 5 a.m. and 5 p.m., the times when their main customers, workers at the local cigarette factory, returned home and stopped there to buy groceries.

The market, which was built by cigarette company PT Gudang Garam Tbk. for its workers, is far from fancy. The local supermarket in the area has a turnover of between Rp 500,000 (about US$55) and Rp 1 million a day and most of the other traders are micro businesses from the surrounding district.

It does, however, have plenty of potential customers. The market is located close to the cigarette plant, the biggest business in the city, which employs around 37,000 people.

Currently the market accommodates around 100 traders and Gudang Garam says it plans to renovate and expand it further as part of its commitment to improving Kediri's economy, factory spokeswoman Nita said.

Despite the market's dilapidated appearance, Kediri people reportedly have the highest purchasing power in the country. They are also the biggest producers, with the city having an average GDP per capita of Rp 87.3 million.

Data from the East Java's Central Statistics Bureau (BPS) showed Kediri's gross domestic regional product (GDRP) in 2003 reached Rp 21.62 billion, with the industrial sector listed as the biggest contributor with Rp 15.57 billion, followed by the trade, hotel and restaurant sectors with a combined Rp 3.38 billion.

Most of this is "clove money" -- Gudang Garam, which has been operating for more than 40 years in Kediri, contributed more than Rp 17 billion, about three quarters, of the GDRP.

The company was estimated to indirectly employ almost four million people in the country and contributed Rp 27 trillion in cigarette taxes to state coffers annually.

In 2003, Gudang Garam recorded an increase in sales of Rp 23.1 trillion or up 10.5 percent compared to the previous year's sales of Rp 20.9 trillion. Sales volumes increased to 62.6 million cigarettes in 2003 compared to 61.4 million in 2002.

Secretary to the Kediri municipality, Zaini, said Gudang Garam's contribution to the city was huge and the city had become a popular destination for migrant workers.

However, the increasing number of people moving to the city had led to more unemployment and the city still had problems trying to create new accommodation for its citizens.

In 2004, Kediri had 240,979 residents, an increase from 2000's figure of 238,536.

"To overcome the problem, we have encouraged a family planning program and we provide employment training programs," said Zaini.

The city processed investors' permits in a one-stop service in a professional manner and also involved citizens to help form public policies through an institution called the "City Forum", which made the administration more transparent and accountable, he said.

However, Kediri's geographic location, its lack of raw materials and its inadequate transportation infrastructure still meant it was difficult for the city to attract new investors, especially foreign ones, he said.

Data from the East Java Capital Investment Board (BPM) showed the total domestic investment in Kediri from January to August last year, stood at Rp 824.9 billion, while foreign investments accounted for only Rp 33.7 billion.