Dateline Southeast Asia

Soda tax could cost 120,000 Indonesian jobs

By RJ Whitehead

- Last updated on GMT

Photo: iStock
Photo: iStock
Sweetened drinks shouldn’t even be subject to excise duty, never mind an elevated sugar tax, according to the Indonesian drinks industry.

The chairman of the Soft Drinks Industry Association said such a move would result in massive job losses across the value chain and have little impact on public health in Indonesia, where the consumption of soft drinks is low.

The country’s finance ministry last month said it was considering plans to impose new taxes on sugar-sweetened beverages. These would apply to carbonated drinks and energy drinks in a bid to curb excessive consumption of sugar. 

Ministers have not yet set any time frame for when the measure could be in place, if at all. 

Sweetened beverages should not even be taxed as consumption remains very low. They only account for 6.5% of the total calories consumed by residents of big cities in Indonesia,” ​said Triyono Prijosoesilo, referring to industry estimates that per-capita soft drinks stands at 2.4ml per day.

Up to 120,000 industry workers would stand to lose their jobs if a sugar tax were introduced, outweighing any health gains from the proposal, he added.

Research by the University of Indonesia's Institute for Economic and Social Research  suggests that an excise tax would raise IDR590bn (US$42m) annually.

Yet the same study also predicts it would lead to a 64.9% drop in demand for soft drinks, leading to a net annual loss of around IDR673bn.

There is no reason from health or fiscal perspectives [to introduce the tax]​,” said Adhi Lukman, chairman of the Indonesian Food and Beverage Association.

In the end, we’ll only become a market. Indonesia will no longer be attractive as a production base​.”

Beverage companies are wrestling with an economic slowdown in southeast Asia’s biggest economy, where their industry was until recently seen as a growth market.

Among them, Australia’s Coca-Cola Amatil, has seen slowing volume growth in the first-half of this year despite having earlier reaffirmed a US$500m investment in the country.

The tax, which would make soft drinks eligible for an excise list of high-bracket tax items comprising tobacco and alcohol, “could be crippling for an industry that’s just getting started​”, Martin Gil, head of Coca-Cola Indonesia, told The Australian​.

A previous attempt to tax sweetened beverages failed in 2004 after it crippled manufacturers and resulted in job losses.

At US$6bn, Indonesia’s soft drinks industry is relatively small, especially for a market of 250m people, according to Euromonitor International.

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Thai seafood companies must ‘wake up’ practices that will stop slavery

Allegations of slave labour at one of the world’s biggest shrimp companies should be a “wake-up call​” to the industry, said the man whose company has been at the centre of an investigation into the practice.

Slavery

Thiraphong Chansiri said Thai Union will now spend millions of dollars to end its reliance on poorly regulated contractors that have been responsible for much of the abuse.

A report by Associated Press earlier this week claimed that poor migrant workers could end up being sold into factories where they are forced to work 16-hour days with no time off and little or no pay.

The report named Thai Union along with other Asia-based prawn companies whose produce is sold by major retailers around the world.

Pervasive human trafficking has helped turn Thailand into one of the world's biggest shrimp providers​,” it said. 

Despite repeated promises by businesses and government to clean up the country's $7bn seafood export industry, an Associated Press investigation has found shrimp peeled by modern-day slaves is reaching the US, Europe and Asia​.

The wire also claimed that more than 2,000 fishermen had been freed from slave conditions this year as a result of its ongoing investigative series into slavery in the Thai seafood industry.

Thiraphong, chief executive of Thai Union, said that his company had been powerless to prevent labour suppliers from providing slave labour for its factories. 

Despite “great efforts​”, the company had been unable to keep labor abuses out of its supply chains. Despite imposing spot checks by third-party auditors and having regular meetings with external suppliers the problem would not stop, he said.

Next year, the company will cease working with all external pre-processors and bring all shrimp processing operations in-house at a cost of around US$5m.

From January 1 onwards, all processing work will be directly controlled by Thai Union, ensuring that all workers, whether migrant or Thai, are in safe, legal employment and are treated fairly and with dignity​,” the company said in a statement.

This is a positive step towards our goal of ridding the Thai seafood sector of illegal labour practices. the abuse of human rights must not be tolerated​,” said Thiraphong.

Panisuan Jamnarnwej, honorary chairman of Thai Frozen Foods Association, said the move was encouraging for the industry in Thailand.

“By bringing pre-processing operations in house, Thai Union will be able to monitor and promote the welfare of their workers directly,” Dr Panisuan said.

Finding Malaysian labour hard to come by, Berjaya holds off on acquisitions

Malaysia’s biggest food and beverage company said a shortage of retail labour is behind its decision to hold back on new acquisitions.

Berjaya

The decision has been made despite there being no shortage of acquisition candidates for Berjaya, which operates Kenny Rogers Roasters, Starbucks and Jollibean chains in Malaysia.

Being the largest F&B player in the country, we are always approached by parties for M&As​,” Francis Lee Kok Chuan, chief executive of Berjaya’s food division, told The Edge Financial Daily​ in an interview.

Nowadays, it is not easy to get people. We have to hire a lot of people. People are now looking for an easy job, and they think [working in] the F&B [sector] is tiring​,” he said.

The company’s focus is now on reducing debt after seeing its net profits drop 92.7% to RM12.31m for the six months ended October 31, despite revenue more than doubling over the period.

However, the group expects to see its “star performer”, Starbucks, maintaining revenue growth to drive the group's financial performance.

It will continue to open at least 25 new stores a year over the next five years based on the sale and purchase agreement with Starbucks Corp. 

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