Jakarta, CNBC Indonesia - PT HM Sampoerna Tbk (HMSP) has strengthened its position as one of the companies with significant investment value and workforce absorption. This is realized by creating long-term and sustainable value for society and business partners.

Sampoerna President Director Vassilis Gkatzelis said that the company, which has been operating for 110 years in Indonesia, continues to adhere to Sustainability Principles which are in line with the Environmental, Social and Governance (ESG) concept.

"This framework is integrated into every aspect of our business and activities through the 'Sampoerna for Indonesia' umbrella program to ensure our role in implementing programs that have a real impact on the economy, environmental conservation and society at large," he said in a written statement, Wednesday (22/11/2023).

As a company with an investment value of more than US$6.3 billion since 2005, Sampoerna realized additional investment in early 2023 with a new production facility for innovative smoke-free tobacco products in Karawang, West Java with a focus on exports to the Asia Pacific Region and the domestic market.

Sampoerna then introduced the latest science and technology-based innovation for smoke-free tobacco products, namely IQOS ILUMA. In the third quarter of 2023, along with its new production facilities, Sampoerna also completed the construction of a world-class Testing and Analysis Laboratory with state-of-the-art facilities, especially for innovative smoke-free tobacco products.

"These achievements are an important step in providing smoke-free products developed based on science and technology. Although not risk-free, these smoke-free tobacco products are a better alternative for adult smokers who decide to continue smoking," said Vassilis.

The realization of this investment is Sampoerna's effort to support the government's priorities in encouraging investment, increasing exports of high-value finished goods, and industrial downstreaming.

"Sampoerna's long-term investment is proof of our confidence in the certainty of the investment and business climate in Indonesia. Sampoerna is realizing its commitment to creating added economic value and social impact by increasing research capacity, developing smoke-free products based on science, absorbing workers with high skills, purchasing supplies local tobacco, empowering MSMEs, operating digital service centers, and increasing export performance," said Vassilis.

Dynamics of the National Tobacco Products Industry

Furthermore, Sampoerna is trying to maintain its competitive position and overcome pressure in the tobacco industry as a result of the increase in excise rates which is far above inflation, the widening gap in excise rates between Group 1 and the Group segments below which have lower excise rates, as well as the increase in cigarette circulation. illegal. Overall, in the period January to September 2023, cigarette industry volume fell by 5.0% compared to the same period last year.

Meanwhile, the Hand-rolled Kretek Cigarette (SKT) segment is starting to show signs of recovery with an improvement in market share, which as of the third quarter of 2023 reached around 27%.

"Improvements in SKT's performance have begun to be seen in the last few years after this segment experienced a continuous decline in market share, namely from 37% in 2006 to 17% in 2019," he said.

The recovery of the SKT segment is driven by the Government's policy for excise on tobacco products, especially since 2021, which takes into account aspects of labor absorption in the SKT segment.

Absorption of Tens of Thousands of New Workers

In line with the recovery trend of the SKT segment, Sampoerna as an SKT producer with the Dji Sam Soe and Sampoerna Kretek trademarks, announced plans to absorb tens of thousands of new workers spread across the provinces of East Java, Central Java, Yogyakarta Special Region and West Java for SKT production facilities. . This absorption of labor directly opens up new jobs while creating a multiplier effect for the local community.

Vassilis explained that the realization of this plan began with the opening of SKT Sampoerna's new production facilities in Blitar City, East Java, and Tegal Regency, Central Java, which are scheduled to operate in Semester I 2024. Currently, location selection and preparation processes are being carried out in both areas, including employee recruitment plan.

"As a company that has been operating for 110 years in Indonesia, the addition of Sampoerna's SKT production facilities through an investment of IDR 638 billion (around US$42 million) will strengthen Sampoerna's SKT portfolio which started in 1913. With the opening of SKT production facilities and the addition of new workers, we "I am optimistic that Sampoerna's steps will increase employment opportunities in the formal sector for local communities while creating a multiplier effect for economic growth and becoming one of the drivers of growth in these regions," he said.

"We appreciate the Government's efforts to maintain a conducive and predictable business and investment climate in Indonesia, including policies that encourage the performance of the SKT labor-intensive sector. These efforts have a direct positive impact on job creation in the formal sector and regional economic turnaround which in turn helps improve the economy national," continued Vassilis.

He also explained that Sampoerna had reported this plan to the regional head and local related agencies. He hopes that regional and central government support will continue in the form of policies that support the SKT labor-intensive industrial sector.

"We express our gratitude for the positive response and support from the local government for our plans to increase workforce absorption in Blitar City and Tegal Regency," Vassilis added.

Currently, Sampoerna operates 4 SKT production facilities in Surabaya, Malang and Probolinggo; 2 machine-made cigarette production facilities in Pasuruan and Karawang; as well as 1 innovative smoke-free tobacco product production facility in Karawang. Apart from that, Sampoerna partners with 38 Cigarette Production Partners (MPS) spread across 28 districts/cities on the island of Java.

MPS is owned and operated by regional entrepreneurs and/or local cooperatives to produce SKT Sampoerna brands. Sampoerna's total workforce currently reaches more than 76,000 people, directly and indirectly, of which around 90% are workers at SKT production facilities.

Apart from the opening of SKT production facilities, he said, there will be additional employment of tens of thousands of new workers carried out by MPS in the provinces of East Java, Central Java, DI Yogyakarta and West Java, as well as the addition of 5 new MPS which will be located in East Java and Java. Middle in Semester I-2024.

"In 2024, our partners in producing SKT Sampoerna will be 43 MPS spread across the island of Java. The addition of Sampoerna and MPS production facilities will increase partnerships with regional entrepreneurs/local cooperatives, total employment, as well as increase the absorption of tobacco and clove raw materials "from Indonesian farmers. As is known, using raw materials for handmade cigarettes requires twice as much tobacco and cloves as machine-made cigarettes," explained Vassilis.

Vassilis said that Sampoerna consistently supports the welfare of SKT employees. Where currently SKT employees are dominated by women, the majority of whom carry out dual roles as the backbone of the family.

"We are proud of the value creation carried out by Sampoerna for 110 years," said Vassilis.

He also explained that the continuity of the national tobacco industry depends on a predictable framework. Includes excise policies, tobacco product regulations, and other policies that play a role in encouraging science-based innovation and technology to offer alternative tobacco products for adult smokers.

This will have a direct impact on producers, employment, use of tobacco and clove raw materials, and the entire value chain thereby creating economic value at regional and national levels

"We hope that the addition of tens of thousands of employees through the opening of the Sampoerna factory in Blitar City and Tegal Regency, the addition of 5 new MPS, as well as the addition of employees to the existing MPS will increase labor absorption in the formal sector and contribute to the regional and national economy. This is "one form of Sampoerna's commitment to the broader value chain ecosystem," said Vassilis.

(SOURCE)