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.