Economist Tips Smuggling Boom if Cigarette Prices Raised 365%

The cigarette industry in Indonesia appears to be increasingly targeting children by highlighting cheap cigarette prices in its advertising. (Reuters Photo)

By : Amal Ganesha | on 10:03 AM August 29, 2016
Category : Business, Commodities

Jakarta. A plan touted by some in the government to increase cigarette prices is likely to have a disastrous affect on tobacco farmers and encourage counterfeit and smuggling in the local market, a researcher has said.

Rumors of a price hike were sparked after research from the University of Indonesia's center for health economics and policy studies found rising prices lowers cigarette consumption.

The research found that 71 percent of smokers would quit entirely if the price reached Rp 50,000 ($3.75) per pack.

Dzulfian Syafrian, an economist at the Institute for Development of Economics and Finance (Indef), said any price hike would substantially affect the industry, pointing firstly to laborers and farmers who would likely lose their jobs.

"The public might find a substitution product, probably electronic cigarettes, which are also dangerous to the body," Dzulfian told the Jakarta Globe.

"And the most predicted one, I believe if the 50,000 price occurs, there will be lots of cigarette smuggling in the country. The demand for that illegal cigarette will exceed the legal one," he said.

"I'm afraid [smuggling] will grow enormously, like illegal drugs."

Last year, cigarette prices increased by 11 percent. The touted Rp 50,000 price tag will be an increase of 365 percent.

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