John Gledhill, President Director, HM Sampoerna: Interview

John Gledhill, President Director, HM Sampoerna

Interview: John Gledhill

Do you think international investors are aware of the ease of doing business in Indonesia?

JOHN GLEDHILL: There is a misperception about the level to which barriers to investment exist, and these obstacles are often overstated. The fact is that there has been a lot of foreign investment in Indonesia, and it is steadily increasing. Most of the major international oil and gas companies already have a significant presence, and long-term investors such as us, Unilever and Proctor & Gamble have been successfully operating in the country for years. I think when people fully comprehend the size of this market from an economic, population and consumption perspective, they realise that this is a market that cannot be ignored. Also, a notion exists that there are a limited number of professionally run companies. The reality is that there are a vast number of extremely large, well-organised local companies with the potential to be great partners for any international organisation that wants to enter the market.

In general people tend to overestimate the complications associated with bureaucracy and the ease of doing business. And while some challenges do exist, any company that is serious about doing business here can easily overcome them. So, while potential investors continue to ask basic questions about the country’s economic position and political stability, organisations that are not easily swayed by existing misperceptions are already making sizeable forays into the market and taking advantage of an immense opportunity for growth.

To what extent has tobacco been able to bring employment and economic stimulus to rural areas?

GLEDHILL: The Indonesian tobacco industry is very different from other tobacco industries around the world in that it is comprised of two types of products rather than one: machine-made white cigarettes and kretek (cigarettes made with a blend of tobacco, cloves and other flavours). A large quantity of kretek cigarettes are hand rolled and this makes Indonesia one of the only countries to manufacture hand-rolled products in great quantity, providing thousands of jobs for its citizens. Additionally, kretek is made up of a tobacco called rajangan and is supplemented by clove. The tobacco and clove is grown mostly by small-scale farmers. As a result, the tobacco industry employs more than 6m people, the majority of whom are in the agronomy and manufacturing and distribution sectors. While most tobacco industries around the world only contribute roughly 1% to the national budget in various forms of tax revenue, the Indonesia tobacco sector contributes close to 7%. Additionally, it has been growing steadily at 3% per year, providing a sustainable employment base for Indonesia’s rural communities. That is why the tobacco industry has been designated by the government as one of the 10 priority industries.

How do you respond to claims that the industry is avoiding dealing with impending regulations?

GLEDHILL: We in the tobacco industry often get accused of avoiding questions dealing with the regulatory environment, but the truth is that we are totally in favour of regulation so long as it is fair, balanced and impactful. We fully support any measures that will have a significant impact on reducing youth smoking and which increases the awareness of the dangers of smoking. What we do not support is regulation for the sake of regulation. There are varying interpretations of the legislation governing tobacco across each region.

This makes it very difficult from an industry standpoint to manage what is a national business.

As an industry we have put forth recommendations to the Ministry of Health and the People's Representative Council for the adoption of a national tobacco control law. These recommendations include a minimum age to purchase tobacco, restrictions on tobacco marketing, larger health warning requirements and sponsorship restrictions. There is common ground between the tobacco industry and the government, and I am confident together we can continue to develop a balanced and enforceable framework for the industry.

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The Report: Indonesia 2012

Industry and Retail chapter from The Report: Indonesia 2012

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The Report

This article is from the Industry and Retail chapter of The Report: Indonesia 2012. Explore other chapters from this report.

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