Economics of Tobacco Control: The Role of Tobacco in the National
Economy
Ayu Aulia
Faculty of Public Health, Universitas Airlangga, Mulyorejo, Surabaya, Indonesia
Keywords: FCTC, The role of tobacco economy, Negative impact.
Abstract: The tobacco control regulations in Indonesia are faced with a dilemma in relation to its role in the national
economy and its health impact. This can be seen from the intention of the Indonesian government to ratify
the Framework Convention on Tobacco Control (FCTC). Such conditions make Indonesia a potential
market for the tobacco industry. This research has used the descriptive research methodology with a
literature study approach and secondary data. The results show the role of tobacco in the national economy
as can be seen from its role as the source of state excise revenue, sources of employment and income for
society. The main contribution of the tobacco industry is the source of excise revenue, while the related
employment and income sources are relatively small. This is not comparable with the negative impact that
Indonesian society receives, namely the decrease in health status and the large health expenditure from the
associated negative impact. The biggest beneficiaries of the tobacco industry is the large-scale cigarette
industry and multi-national cigarette companies. Firm policies from the Indonesian government are needed
to minimise the negative impact of smoking. Given the greater negative impact compared to the positive
impact of tobacco, the government must immediately sign and ratify the Framework Convention on
Tobacco Control (FCTC) as a legal umbrella for tobacco control.
1 INTRODUCTION
The tobacco industry in Indonesia is growing rapidly
from the original home industry into a national and
multi-national industry. Tobacco companies are
actively promoting their cigarette products through
various means. Multi-national cigarette companies
have sought to penetrate the monopoly and
dominance of the national tobacco companies in
many developing countries to enter and develop
their own markets. Indonesia is a potential cigarette
market for national and world cigarette producers
due to the large population, high population growth
rate and population participation rate, especially
when it comes to young smokers.
Similarly, the cigarette industry has also played a
role in the national economy as a contributor to state
revenues through excise duty. The growth of the
tobacco industry is also followed by the
development of tobacco cultivation in many regions
and has served as employment and the source of
regional economy. The development of the tobacco
industry and the increasing number of smokers
causes opposition among health care groups and for
those associated with the environment. Opposition to
cigarettes occurs in almost all countries. A lot of
evidence shows that cigarettes trigger various
diseases and adversely affect health. This situation
makes the tobacco industry into a controversial
industry; on the one hand, it is a national asset that
plays a role in the national economy and on the other
hand, it has a negative impact on health.
The purpose of this research is to know how the role
of tobacco in the national economy.
2 METHODS
This research uses the descriptive research method
with a literature study approach and secondary data.
This research therefore emphasises the collection of
facts and data identification. The components in this
research method are descriptions, analysing and
interpreting the findings in clear and precise terms.
The study was compiled based on the secondary data
collected from various sources. The data was
collected as much as possible and is relevant to the
presence of the tobacco processing industry to the
best extent possible to provide an overview of the
current developments. The literature/desk review
78
Aulia, A.
Economics of Tobacco Control: The Role of Tobacco in the National Economy.
In Proceedings of the 4th Annual Meeting of the Indonesian Health Economics Association (INAHEA 2017), pages 78-81
ISBN: 978-989-758-335-3
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

study is derived from the results of previous studies
or research on the tobacco industry and excise
policy, the cigarette price development dilemma and
quality of life, the effect of excise tariff on tobacco
consumption, cigarette consumption and poverty in
Indonesia. The secondary data collection is derived
from BPS (Susenas), TNP2K (poverty) the World
Bank, Customs DG, the Ministry of Industry and the
Ministry of Health Republic of Indonesia.
3 RESULTS
3.1 Overview of Smokers in Indonesia
Indonesia is the third country in the world with the
highest prevalence of smokers after China and India,
which is 4.8% of the population or about 65 million
smokers (WHO, 2008 in Tobacco Support Center,
2012). By age group, the highest percentage of
smokers was in the productive age group (15-64
years). By sex, the prevalence of smokers in relation
to men is greater than that of women. The number of
smoking in certain age groups increases in the age of
adolescents in relation to those aged 10-14 years old
and those aged 15-19 years old. The result of
Riskesdas (basic health research) in 2007, 2010 and
2013 showed that the age of smoking was highest in
the 15-19 age group.
Table 1: Proportion (%) of age starts smoking
Age
(years)
Riskesdas
2007 (%)
Riskesdas
2010 (%)
Riskesdas
2013 (%)
5-9
0,1
1,7
1,6
10-14
9,6
17,5
18
15-19
36,3
43,3
55,4
20-24
16,3
14,6
16,6
25-29
4,4
4,3
4,6
>30
3,2
3,9
3,8
Source: Riskesdas 2007, 2010,2013, Badan Penelitian dan
Pengembangan Kesehatan
Table 2: Proportion (%) habit of cigarette consumption
based on sex
Category
% Total
Genders (%)
Male
Female
Cigarette smokers for
the last 30 days
18,3
33,9
2,5
Electric cigarette holder
for last 30 days
2,1
3
1,1
Smoked although only
1-2 suction
32,1
54,1
9,1
Source: GYT, 2014, World Health Organization
The Global Youth Tobacco Survey (GYTS)
declared Indonesia as the country with the highest
teen smoking rate in the world. According to GYTS,
in 2014 out of the teenagers surveyed, 18.3% of
teens had smoked cigarettes during the last 30 days.
In the adolescents surveyed, 33.9% of boys and
2.5% of adolescent girls were surveyed. The total
recorded teenagers in the survey found that 2.1% out
of the electric smoking teenagers in the last 30 days,
3% were teenage boys and 1.1% were adolescent
girls. The total number of adolescents in the survey
showed that as many as 32.1% had never smoked.
3.2 The Role of Tobacco in the National
Economy
The role of tobacco in the national economy can be
seen from several indicators such as the contribution
of state revenues in the form of excise, employment
and income sources. The role of the tobacco
commodity that is quite real in the national economy
is as a source of state revenue from excise. The
value of tax revenue continues to increase from year
to year. The tobacco industry as an employment
source has absorbed 6.1 million people directly and
indirectly, including 1.8 million tobacco and clove
farmers.
Source: Ditjen Beacukai 2013
Figure 1: Cigarette excise revenue in 1996-2013
Source: Ditjen Beacukai 2016
Figure 2: Excise tobacco excise revenue trends
Economics of Tobacco Control: The Role of Tobacco in the National Economy
79

The pattern of revenue in 2014 is relatively
stable. The increase in revenues in December 2014
is due to the change of design of the excise bands
and tariff increases that came into effect at the
beginning of the following year. The pattern of
receipts in 2015 saw a significant spike in
December. The pattern of acceptance in early 2016
means that January and February is lower than the
same month’s revenue in 2014 and 2015. However,
from the next month after that, it continued to
increase every month.
3.3 Impact of Smoking for Health
Tobacco is a plant generally consumed for
cigarettes. The World Health Organisation reports
that smoking is the number one killer in the world.
In the appropriate WHO report, it stated that in the
20th century, about 100 million people have died
from cigarettes. Tobacco mortality rates are much
higher than deaths due to tuberculosis, HIV/AIDS
and malaria.
Various diseases can arise from cigarettes and
attack almost all parts of the human body. The
negative effects of cigarettes are felt directly for
smokers (active smokers) and non-smokers (passive
smokers). The World Lung Foundation and the
American Cancer Society estimate that the cost of
tobacco worldwide is $500 billion per year in the
form of direct health spending, reduced productivity
and environmental degradation.
Table 3: Total Medical Costs of Tobacco Related Diseases, Indonesia 2013
Disease
Total Case
Cost per episode
Cost Biaya (Rp)
Low Birth Weight Babies
216.050
6.185.362
1.336.347.460.100
Tumour of Mouth and Throat
6.670
3.733.141
24.900.050.470
Neoplasm of Oesophagus
1.710
3.733.141
6.383.671.110
Neoplasm of Stomach
10.440
3.733.141
38.973.992.040
Neoplasm of Liver
13.400
3.733.141
50.024.089.400
Neoplasm of Pancreas
2,910
3.733.141
10.863.440
Neoplasm of Lung, Bronchus and Trachea
54.300
3.733.141
202.709.556.300
Neoplasm of Cervix
28.940
3.733.141
108.037.100.540
Neoplasm of Ovary
7.690
3.733.141
28.707.854.290
Neoplasm of Gall Bladder
10.160
3.733.141
37.928.712.560
Coronary Heart Disease
183.950
6.017.579
1.106.933.657.050
Cerebrovascular Disease/Stroke
144.780
7.726.946
1.118.707.241.880
Chronic Obstructive Pulmonary Disease
284.310
4.551.951
1.294.165.188.810
Total
5.353.829.437.990
Tobacco control measures have been supported
by research in to the impact of tobacco consumption
on health by the WHO. It is estimated that by 2020,
it will be the biggest health issue. Predictably,
tobacco consumption practices cause 8.4 million
deaths each year. It also estimated that an increase in
tobacco consumption in Asia could increase deaths
fourfold from 1.1 million people (1990) to 4.2
million people (2020).
Another person's smoke (AROL) - also called
second-hand smoke (SHS) – makes the non-smoking
individual known to be a passive smoker. Second-
hand smoke is estimated to cause 600,000 premature
deaths every year in the world, with 31% of the
deaths being children and 64% being women.
Another study, published in the January 2013 in an
issue of the New England Journal of Medicine, said
that female smokers are more likely to die of lung
cancer than they did decades ago. In the 1980s,
women who smoked were 12.6 times more likely to
die of lung cancer. While in the 2000s, that
possibility jumped sharply to around 25.7 times.
4 DISCUSSION
The tobacco industry has become part of the history
of the nation and culture of society, especially
cigarettes which are a commodity based on tobacco
and cloves and are rooted in cultural heritage. The
large potential of Indonesia as a cigarette market
makes Indonesia the target of production and
markets for multi-national cigarette companies. This
is reflected in the entry of multi-national
corporations Philip Morris International (PMI) and
British American Tobacco (BAT), who bought large
cigarette factories in Indonesia; PT HM Sampoerna
and PT Bentoel.
Tobacco products also contribute significantly to
the national economy. The contribution of this sector
INAHEA 2017 - 4th Annual Meeting of the Indonesian Health Economics Association
80

includes the absorption of manpower, state income,
and has become an important commodity for
farmers. Excise receipts from tobacco products from
year to year has always increased and in 2013
reached about 88.20 trillion. The industry provides a
livelihood for 6.1 million people working in the
tobacco industry directly and indirectly, including
1.8 million tobacco and clove farmers. Based on its
role in the national economy, Indonesia's policy
towards tobacco tends to maintain the tobacco and
cigarette industries as the nation's assets. This is
evident from the lack of intention of the Indonesian
government to ratify the Framework Convention on
Tobacco Control (FCTC). In the control of the
cigarette hazard, the existing policy in Indonesia is
more about compromise with the cigarette industry.
The new steps taken by the government of Indonesia
is at the stage of improving the knowledge of the
public about the dangers of tobacco and cigarettes in
the form of the obligation of applying a warning on
cigarette packaging about the dangers of smoking on
health.
The World Health Organisation reports that
smoking is the number one killer in the world.
Tobacco mortality rates are much higher than deaths
due to tuberculosis, HIV/AIDS and malaria. Various
diseases can arise from cigarettes and attack almost
all parts of the human body. The negative effects of
cigarettes are felt directly for smokers (active
smokers) and non-smokers (passive smokers).
Another person's smoke (AROL) - also called
second-hand smoke (SHS) - is estimated to cause
600,000 premature deaths every year in the world,
with 31% of the details being children and 64%
being women. The World Lung Foundation and the
American Cancer Society estimate that the cost of
tobacco worldwide to be $500 billion per year in the
form of direct health spending, reduced productivity
and environmental degradation.
Given the large impact of cigarettes on health,
long-term monetary policies are required. One effort
to minimise the negative impact of smoking is by
reducing the number of smokers and the level of
cigarette consumption. Some policies can be
implemented through increasing cigarette prices,
increasing the cigarette excise tax on cigarette
promotion and non-smoking area restrictions.
5 CONCLUSION
Tobacco industry and smoking culture have long
been a part of Indonesian society. There are benefits
from the smoking industry is one of the role of the
national economy in Indonesia. The role of tobacco
in the national economy can be seen from several
indicators such as the contribution of state revenue
in the form of excise, employment source and
income source of society. The role of tobacco
commodity which is quite real in the national
economy is as a source of state revenue from excise.
Excise revenue from tobacco products from year to
year always increases and in 2013 reached about
88.20 trillion. But on the other hand can cause
negative impact on health. About 100 million people
died from cigarettes. Tobacco mortality rates are
much higher than deaths due to tuberculosis, HIV /
AIDS and malaria.
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