Philip Morris Indonesia, Philip Morris International's affiliate in Indonesia, will invest USD $174 million to increase production capacity of white and clove (kretek) cigarettes. About USD $78 billion will be used to enhance production capacity at its two existing factories in Karawang (West Java), while the remaining USD $96 million will be used to establish a new factory, specifically for the production of Marlboro-branded cigarettes. This new factory will be located next to its other two factories in Karawang.

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HM Sampoerna, Indonesia's largest tobacco manufacturer and the country's second-largest company based on market capitalization, will pay out dividend amounting to IDR 2,269 per share (USD $0.23) as agreed in today's shareholders' meeting (18 April 2013). The company will use its full net profit of 2012 for the dividend payout. Last year, HM Sampoerna recorded net profit of IDR 9.95 trillion (USD $1.02 billion), a 23.3 percent increase compared to 2011.

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PT Hanjaya Mandala Sampoerna Tbk (HM Sampoerna), Indonesia's largest tobacco company, posted a 23.32 percent increase in net profit to IDR 9.95 trillion (US $1.03 billion) in 2012. Net profit per share increased to IDR 2,269 from a previous IDR 1,840 per share. Based on a financial report that was published on Friday (15/03/2013), the company's growth in net profit was largely due to a 26.05 percent increase in sales to IDR 66.63 trillion (US $6.90 billion).

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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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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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