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Is Indonesia, one of big tobacco's last frontiers, closing?

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The tobacco industry remains very powerful in a country with one of the world’s highest smoking rates and one where consumer companies are scrambling to boost profits from a growing middle class eager to spend growing disposable incomes. Cigarette taxes contribute about $8 billion to the government budget a year and the industry is a major employer, with a quarter of a million Indonesians involved in growing tobacco and manufacturing cigarettes.

In the past decade, with Indonesia one of the few growth markets for tobacco, international heavyweights have poured into the market, buying out the founders of some of Indonesia's top cigarette brands. Indonesian smoking culture is dominated by the distinctive local kretek cigarette, which are heavily flavored with cloves.

In 2005 Philip Morris, maker of Marlboro, acquired one of Indonesia’s  top two cigarette companies, PT HM Sampoerna, for $5 billion. British American Tobacco, the maker of Lucky Strike, entered the market in 2009, when it bought a controlling stake in Bentoel for $500 million. Djarum has resisted overtures from foreign buyers and remains in Indonesian hands.

But despite that all Indonesian tobacco companies, foreign or locally-owned, continue to pump out cigarettes and profits, there are signs that this frontier of opportunity for big tobacco is closing. Recent efforts by anti-tobacco groups and Indonesia’s health ministry appear to be making some progress.

Smoke free Indonesia?

A 2009 law health law includes tobacco in its list of addictive substances and requires public places to establish smoke free zones. New tobacco control regulations signed by President Susilo Bambang Yudhoyono last December require picture warnings to cover up to 40 percent of cigarette packets, prohibit the sale of tobacco to children under 18 and ban tobacco logos at industry-sponsored events.

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