Cigarette makers capitalize on ASEAN free trade, plan to expand
Cigarette makers capitalize on ASEAN free trade, plan to expand
P. Parameswaran, Agence-France Presse, Manila
Cigarette manufacturers are finding a new haven in Southeast Asia as they take advantage of a regional free trade plan which shields them from steep tobacco taxes and high production costs.
Faced with shrinking Western markets, top tobacco firms are relocating to Southeast Asia to keep prices low, maximize access to nations in the region with underdeveloped tobacco-control measures and cuddle up to enticing markets, including China, health officials say.
"I know of companies that really want to develop tobacco industries in this region but I don't have specifics as to how many but I am sure they are increasing," Shigeru Omi, the World Health Organization's (WHO) regional director for the Western Pacific, told a media briefing in Manila this week.
With smokers making up more than half of Southeast Asia's 500 million population, the WHO is concerned about a continued rise in tobacco use and aggressive marketing and lobbying by cigarette producers, he said.
In the Philippines, a 300-million-dollar cigarette production facility was launched recently by Philip Morris, the world's largest tobacco manufacturer.
British American Tobacco, the world's second largest tobacco company, has also clinched the right to form a 40-million-dollar joint venture in Vietnam with a local state-owned tobacco firm.
The tobacco processing plant will be the most modern factory of its kind in Vietnam, which has one of the world's highest tobacco consumption rates among males.
"Finding new customers in developing countries in Asia and the Pacific is an attractive option for the industry, particularly as it adjusts to shrinking North American and Western European markets," Omi said in a report released to the media.
A free trade agreement of the 10-nation Association of Southeast Asian Nations (ASEAN) commits member countries to lowering import tariffs to between zero and five percent on products traded among themselves beginning 2003.
For example, cigarettes now manufactured in the Philippines will become a local ASEAN product if at least 40 percent of the tobacco used is from that country. The cigarettes will be exempt from customs duties when traded among other ASEAN member countries.
"This lowers or maintains the low cost of cigarettes and makes it more enticing for current and would-be smokers, particularly the young, to buy," Omi said.
ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
ASEAN officials argue however that while tobacco firms may escape heavy import tariffs through the ASEAN free trade plan, they can still be hit with heavy domestic taxes by individual nations.
Robert Teh, the director for economic cooperation at the ASEAN secretariat, said that although the free trade pact required member countries to lower import tariffs, they were free to set "appropriate domestic or internal taxes" on such products as alcohol, tobacco or automobiles.
"You may wish to note that many ASEAN countries slap high domestic taxes on cigarettes because together with alcohol, these products generate a fair amount of tax revenues for the government," he told AFP in reply to written queries.
Tobacco use is one of the greatest public health problems in Southeast Asia, a key component of the WHO's larger Western Pacific region where one person dies every 32 seconds from tobacco-related causes.
Cigarette lobbyists argue that the tobacco trade creates jobs and benefits economies "but if you look at the real cost, this is a myth," said Annette David, technical officer for the tobacco- free initiative at the WHO regional office in Manila.
For example, she said, in 1999 the Philippine tobacco industry netted 26 billion pesos (US$520 million) in profits but the health care costs for tobacco-related illnesses was 46 billion pesos.
"So, who is winning here and who is paying the bigger price?" David asked.