Indonesia Has Becoming an E-cigarette Manufacturing Base

Garindra Kartasasmita, Secretary General of the Indonesian Vapor Entrepreneurs Association (APVI), mentioned in his keynote speech at the IECIE Vape Show that the Indonesian vaping market has been growing since 2013 with an annual rate of 50%, except for the year 2021 when it shrank by 7% due to Covid. It is expected to rebound to 50% growth in 2022.

The cost factors such as land and labor costs make Indonesia the first choice for setting-up abroad for e-cigarette companies, but the country also has more to offer.

The ease of integration of production and sales brought by the large population is the country’s one huge advantage. Indonesia’s population is the fourth largest in the world, boasting 280 million, 40% of Southeast Asia’s total. Moreover, Indonesia has a world-leading smoking rate with the smoking population reaching 70.2 million. That is a smoking rate of 34%. The demographic structure of Indonesia makes it a great population to develop e-cigarettes. Forty percent of the Indonesian population is less than 35 years old, which also makes it a great market potential, since the younger population has a better acceptance of e-cigarettes. The e-cigarettes produced in Indonesia have the potential to be consumed domestically, cutting the cost of shipping to other countries.

Secondly, Indonesia has relatively loose regulations on the marketing of e-cigarettes. Indonesia is the only country in Southeast Asia that allows tobacco advertising on television and in the media. Indonesia also has a place for e-cigarette bloggers and cross-category blogging such as beauty and skin care. Indonesia has the second highest number of posts on Instagram sharing vaping and related devices among all countries.

E-cigarettes can only be sold and imported in Indonesia if they are recommended by the Food and Drug Administration (BPOM) of the ministry of health, and the ministry of industry. Additionally, it must be certified with the Indonesian National Standard (SNI) certificate. In general, the policies are still friendly to Chinese e-cigarette manufacturers.

Commenting on Smoore’s plant in the country, Bahlil, Indonesia’s investment minister and director of the Investment Coordinating Board, publicly stated “We need cooperation, we need jobs, we need opportunities that will make our brothers owners of our country.” And Clayton Shen, president of Smoore Indonesia, expressed his gratitude for the support of the Indonesian government, especially the tariff-free incentives granted by the ministry of investment for the company’s imported machinery.

Although the Indonesian market is a large pie for Chinese manufacturers, it is not easy to navigate this market.

A well-known Chinese e-cigarette manufacturer intending to build a factory in Indonesia revealed to 2FIRSTS that logistics is a problem for manufacturers, and currently no good solution is available. If the end products are filled and assembled in China and then sent to Indonesia, the time held at custom is unpredictable. “I had a batch of goods that arrived at customs the end of last month, but they are still in customs as of the 20th of this month. If it was assembled in Indonesia and sent from the Indonesian factory, the time difference in delivery is not much different from if it were delivered from China.”

Secondly, the lack of machinery. Another manufacturer told 2FIRSTS, “There’s a critical lack of tools and machinery to keep pace with the production lines. Should factories be built here, machinery must be transported from China, which is a critical problem to tackle. It’s a misconception that the only shortage we would face is raw materials.”

The workers’ gap is also not neglectable. In addition to overcoming cultural and geographical challenges when training local workers, it is difficult to have them adapt the Chinese style of working. An insider said, “Indonesians’ casual attitude to being late is a pain in the neck. I had to create a lot of incentives to stop them from being late for work and going [home] early. This is very different from the Chinese work habits.”