On 31 May, World No Tobacco Day (WNTD) is commemorated to raise awareness of the deadly effects of tobacco use and second-hand smoke exposure and to discourage tobacco use in any form.
This year’s WNTD is a good opportunity to highlight the trends in tobacco use and related disease burden in Indonesia, which with 85 million smokers, has one of the highest prevalence of cigarette consumption globally.
An estimated 68.1 percent of adult Indonesian men smoke, the highest rate in the world (see Figure below). Indonesian youth are starting to smoke younger and younger. While smoking among women is low, exposure to second-hand smoke is common, posing health risks to non-smokers. Easy access and low cigarette prices fuel tobacco use. A package of cigarettes in Indonesia can be bought for less than a US$ 1, among the lowest and more affordable prices in the world.
Indonesia’s five leading causes of death are all tobacco-related, including ischemic heart disease, cerebrovascular disease, tuberculosis, diabetes, and chronic respiratory diseases (IHME, 2017). Morbidity from smoking-related diseases accounts for more than 21 percent of all cases of chronic disease in the country. As show in the graph below, Indonesia is also a High Burden Tuberculosis (TB) country, which is one of the top ten causes of death worldwide.
In Indonesia, paternal smoking is a predictor of increased probability of short-term and chronic child malnutrition. In households where the father was a smoker, tobacco accounted for 22 percent of weekly per capita household expenditures, with less money spent on food compared with households in which the father was a non-smoker (Semba et al., 2007). This is troubling as Indonesian children suffer from high rates of malnutrition with a prevalence of stunting of 37 percent and of wasting of 12 percent. Stunting in the first two years of life can lead to irreversible damage, including shorter adult height, lower schooling attainment, reduced adult income, and increased incidence of morbidity in later life, which undermines human capital development.
The economic cost of smoking in Indonesia is high. Smoking-attributable health expenditure in Indonesia is estimated at about US$ 1.2 billion per year (Goodchild et al., 2017; Barber et al, 2008). This represents about 8 percent of total public expenditures on health (including government budgetary and social insurance expenditures) and about 3.3 percent of total health expenditures (including government budgetary and social insurance expenditures, out-of-pocket, and other private). The indirect economic costs are estimated to amount to about US$ 6.8 billion (Kosen,2009). The economic burden of smoking falls hardest on low-income smokers who risk impoverishment due to loss of income and high out-of-pocket payments for the treatment of tobacco-related diseases--but they stand to gain the most from reducing consumption.
If the tobacco use pattern now observed in Indonesia is not controlled, the country risks a future “public health and fiscal tsunami” due to increasing rates of chronic diseases that are costly to treat and that will strain government and household budgets. Decisive tobacco tax reform is therefore required by the new government in Indonesia to rapidly raise prices and swiftly cut smoking rates. Higher tobacco taxes can also increase domestic resources for investments that benefit the entire population, for example pursuing universal health coverage, which is one of the country’s priorities.
Policymakers in Indonesia are often concerned about impacts on employment. The results of recent World Bank Group assessments show that tobacco manufacturing represents only a small share of Indonesia’s economy-wide employment (0.60 percent) and a relatively low percentage of jobs in the manufacturing sector (5.3 percent). This compares to the food (27.43 percent), garment (11.43 percent), and textile (7.90 percent) sectors. The productivity of tobacco manufacturing workers is also quite low relative to that in other comparable sectors, and tobacco manufacturing is geographically concentrated in East and Central Java (76 percent) and West Nusa Tenggara (18 percent). Only a few districts are substantially dependent on tobacco sector employment.
Simulations done by the World Bank suggest that raising cigarette taxes by an average of 12 percent would increase cigarette prices by an average 5 percent and simplifying Indonesia’s cigarette tax structure to 6 tiers will reduce cigarette demand by 1.89 percent, increase government revenue by 6.41 percent, and reduce gross employment in tobacco manufacturing by 0.43 percent. These estimates do not consider the creation of jobs in other sectors due to the shift in consumers’ spending away from tobacco. And, the estimated total household income loss from reduced employment in the handmade kretek industry amounts to only 0.16 percent of the revenue gain that Indonesia will obtain by increasing cigarette taxes (Rp 10,916 billion in one scenario).
So, on this WNTD, it would be appropriate for the new government in Indonesia to act boldly and swiftly to reform tobacco taxation for health and fiscal gains, as well as to promote human capital development — in 2017, Indonesia’s Human Capital Index (ICI) was lower than the average for its region. Priority action should center on (i) reducing the number of cigarette tax tiers with the goal of adopting a uniform rate for all cigarettes; and (ii) removing the 57 percent tax burden ceiling, rapidly raising tobacco excise taxes for all categories of cigarettes, and aiming for WHO’s recommended tax level of 70 percent of retail price within three years.
Visit the World Bank Group Global Tobacco Control site for global and country assessments, blogs, videos.