For a long time, Astra International, one of Indonesia's largest diversified conglomerates and present in almost every sector of the country's economy, was the leading company regarding the highest market capitalization on the Indonesia Stock Exchange (IHSG). Now, however, Astra has been overtaken by HM Sampoerna, Indonesia's largest tobacco company that controls 30 percent of the Indonesian tobacco market and is majority-owned by Philip Morris.

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Shareholders of the largest cigarette manufacturer of Indonesia, Hanjaya Mandala Sampoerna (HM Sampoerna), approved the company's plan to execute a 25-for-1 stock split. The move, aimed at making shares more affordable for retail investors thus boosting liquidity, will raise the company's total outstanding shares to 116.3 billion pieces. Since 2005 HM Sampoerna has been owned by international tobacco giant Philip Morris. The US-based company controls a 92.5 percent stake in HM Sampoerna.

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Indonesia's slowing economic growth, weaker purchasing power and an 8.7 percent increase in excise on tobacco products (in early 2015) had a relatively small impact on the financial performance of Indonesia's listed tobacco companies HM Sampoerna, Gudang Garam, Bentoel Internasional Investama and Wismilak Inti Makmur. Whereas companies active in various other sectors of the Indonesian economy were plagued by falling revenue and profit figures, these tobacco firms still posted solid gains in revenue and - to a lesser degree - net profit growth. This shows that Indonesian smokers are faithful to their "death stick".

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One of the last decisions of the Susilo Bambang Yudhoyono administration before being replaced by the new Joko Widodo-led administration was to raise the tobacco excise by an average of 8.7 percent per 1 January 2015. This excise will be applied to all tobacco-related manufactured products. The higher excise, stipulated by a Finance Ministry decree, will boost state income and will also help to curb smoking. About 65 percent of Indonesian men smoke, supported by the cheap price of a package of cigarettes.

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Widespread cigarette consumption among Indonesians (especially men) can have a negative impact on the country’s current demographic bonus. One of Indonesia’s strongpoints in terms of economic make-up is that it has a large and young, thus potentially productive, population. Indonesians in the productive age (15 to 64 years) outnumber those that are categorized as youth (below 15 years) and elderly (over 65 years). This large productive group should provide a boost to Indonesia’s economy in the next two decades.

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