Lay-offs and closures hit tobacco firms

JAKARTA. The declining cigarette market and the implementation of tighter regulations have led to the loss of tens of thousands of jobs in the cigarette industry in East Java, a trade associations says. 

The Association of Cigarette Employers (Gapero) said that currently there were 1,970 small-scale cigarette factories, down from 3,000 in 2007. Of this figure, 563 are located in East Java, a significant drop compared to that of 2007 with 1,100 factories.

Jhony, chairman of the Malang branch of Gapero, said there were some 400 cigarette companies operating in Greater Malang in 2009 but the figure plunged to 77 in 2013, adding that only 40 companies had a “healthy” financial status. 

“The [financially] healthy cigarette companies still have routine production, while others are under-performing. Today, the cigarette business in Malang is sluggish, making it impossible to recruit new workers,” he said on Tuesday. 

Meanwhile, Cigarette Factory Association coordinator Said Abubakar Lutfi said various cigarette companies were likely to downsize the number of employees in an effort to save their businesses. 

“Cigarette companies in Malang will cut some 20 percent of employees on average. These efficiency measures are being applied not only to contract-based workers, but also to regular employees. This is being done to prevent business closures,” he said. 

Lutfi said besides declining sales, another factor that would threaten the industry was the increase in tobacco excise in 2015. 

One of the employers that has reduced its number of staff is the Bentoel Group, the fourth-largest cigarette manufacturer in Indonesia. The company has offered voluntarily redundancy to 1,000 of its 8,000 employees. 

The Bentoel Group’s head of corporate and regulatory affairs, Shaiful Bahari Mahpar, said the voluntary redundancies had been on offer since Monday. He said they would not affect the company’s production volume.

Cigarette companies having to cut staff to save their businesses Bentoel has offered voluntarily redundancy to 1,000 of its 8,000 workers Bentoel says cuts will not affect production volume in remaining factories Shaiful said the company would work with only three to four factories to produce the same amount of cigarettes as previously produced by its 11 factories.

He said, however, the company had set a target to produce more than 20 billion cigarettes of all types this year, which is more than were produced in 2013.

“The voluntary redundancy program has nothing to do with a decrease in cigarette production. We can still produce the same amount of cigarettes in fewer factories,” Shaiful said.

The program, he said, was offered as a consolidation measure following a decline in the national cigarette market and production, as well as an increase in production costs due to the implementation of new regulations regarding cigarette packaging.

“Other influencing factors include inflation, higher fuel prices and changes in city or regency minimum wages,” Shaiful said.

Head of the East Java Manpower, Transmigration and Population Agency, Edi Purwinarto, said the provincial administration had prepared a special retraining program for cigarette factory workers such as training in entrepreneurship and transfers to other types of work.

“Governor Soekarwo has also sent a letter to the finance minister to ask for postponements in the imposition of some regulations considered as burdens on tobacco companies in East Java with regard to the fate of laid off tobacco workers,” Edi said. (Indra Harsaputra)