Indef Criticizes Indonesia's Health Regulations, Warns of Economic Losses

According to Tempo.Co on September 23rd, the Institute for Economic and Financial Development (Indef) in Indonesia has harshly criticized Government Regulation No. 28 of 2024 (PP) and the draft regulation from the Ministry of Health. Indef has warned that if the government does not revise Government Regulation No. 28 of 2024 and revoke the Ministry of Health's regulations regarding tobacco and e-cigarettes, Indonesia could potentially lose up to 308 trillion Indonesian Rupiah (203 billion USD).

Indef executive director Tauhid Ahmad stated at a meeting in Jakarta that the "Government Regulation No. 28 of 2024" must be amended, particularly to eliminate provisions involving national revenue and the economy. He said, "If these regulations are not modified or eliminated, or if their implementation is delayed, Indonesia's economic conditions will continue to fall below the expected growth rate of 5% in the third quarter.

At the meeting, Indef specifically mentioned the proposal in the draft regulation from the Ministry of Health regarding plain packaging for tobacco products, stating that this would result in economic losses of up to 182.2 trillion Indonesian rupiah (120 billion USD). Plain packaging for tobacco products would not only accelerate the shift of consumers to illegal tobacco products, but also reduce the demand for legal tobacco products by 42.09%, thereby impacting over 1.22 million workers in related industries.

Additionally, Indef also mentioned the provision in the regulation that prohibits the sale of tobacco within 200 meters of schools. This measure will affect 33.08% of retail tobacco sales, potentially resulting in a loss of 435 billion Indonesian Rupiah (287 million USD) in national revenue and impacting 734,000 workers.

Furthermore, with regards to the regulations restricting tobacco advertising, Indef predicts that this will lead to a 15% decrease in demand for advertising services, resulting in a loss of 215 billion Indonesian Rupiah (141 million US dollars) in national revenue and an economic loss of up to 418 billion Indonesian Rupiah (275 million US dollars), impacting over 337,000 workers.

If all three scenarios mentioned above were to occur, Indonesia would face an economic loss equivalent to 1.5% of its Gross Domestic Product (GDP), totaling 308 trillion Indonesian rupiah (203 billion US dollars). The country's tax revenue would also decrease by 160.6 trillion Indonesian rupiah (106 billion US dollars), approximately 7% of the total tax revenue.

Indef suggests that the government coordinate dialogue with relevant departments such as the Ministry of Economic Coordination, Ministry of Industry, Ministry of Trade, Ministry of Finance, Ministry of Labor, Ministry of Health, and Ministry of Agriculture. They also recommend that the government seek alternative sources of income and create new employment opportunities for affected workers.

The Minister of Health of Indonesia, Budi Gunadi Sadikin, stated that the policy regarding plain cigarette packaging is still under consideration and will be discussed further with relevant stakeholders to balance the need for public health and industry development.

In a breaking news update, Merrijantij Punguan Pintaria, Director of the Beverage, Tobacco, and Stimulant Industry at the Indonesian Ministry of Industry, emphasized the need to carefully consider the impact of the plain packaging policy on tobacco products, especially on the more than 1,300 tobacco industry enterprises and approximately 540,000 employees involved.