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"There are two strategic reasons why we are making this investment now," explains Martin G. King, president director of Sampoerna. "First, the new factory will complement our existing SKM (machine-made kretek) factory in Sukorejo, East Java, and will ensure more timely and efficient supply of finished product to our distribution network in West Java. Second, it will provide additional capacity to adequately supply raw materials to our 33 third-party hand-rolling operations."
Analysts say the new factory, expected to be operational in 2008, could up Sampoerna' machine-rolled cigarette output by roughly 9 billion sticks per year. It will be located on 58 hectares of land and include a primary processing plant to process cloves and tobacco; a secondary plant to produce SampoernaÆs machine-made kretek or clove brands, including its premiun brand "A Mild"; a cut-filler storage facility, and warehouses to store non-tobacco material, finished goods, tobacco and cloves. The project is expected to be funded internally.
"This Rp2.8 trillion investment is a vote of confidence in the country and our business. We hope it will send a positive signal to other potential investors that the time to invest in Indonesia is now," adds Sampoerna-Indonesia's Managing Director Angky Camaro.
Not surprisingly, Sampoerna, which is a major employer and tax payer in Indonesia, garnered support from key Indonesian officials. At its groundbreaking ceremony on July 27, Muhammad Lutfi, head of IndonesiaÆs Investment Coordinating Board (BKPM), said in a speech: "Phillip Morris InternationalÆs Investment in Indonesia, by acquiring almost 98% of shares in PT HM Sampoerna Tbk., is a strategic initiative to regain trust from potential foreign investors. Therefore, we feel strongly positive about supporting this further investment by Sampoerna to stimulate economic growth in Indonesia."
Lutfi added that foreign investment is on the rise again. In the first six months of 2006, total foreign direct investment and in-house investment in Indonesia increased by $45.24 billion, or 12% over last year.
"This shows an improvement in the investment climate in Indonesia, which hopefully will attract more foreign investors," says Lufti.
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