Sampoerna to produce cigarettes in Vietnam

JAKARTA (JP): HM Sampoerna, cigarette maker listed on the Jakarta and Surabaya stock exchanges, has become the first Asian firm to produce two brands of cigarettes at a US$2 million factory in Vietnam, a news report says.

The Singapore-based Business Times reported on Saturday that Sampoerna has teamed up with Vietnamese state-owned firm Can Tho Food and Export Enterprise to produce two brands, Golden Eagle and Rave, in Can Tho City in southern Vietnam.

The joint venture of the two firms is called Vinasa Joint Venture Tobacco Co., in which Sampoerna holds a 75 percent stake.

Sampoerna plans to set Golden Eagle production is about 15 million sticks a month and Rave about 10 million sticks a month in Vietnam, its first foreign production base.

The news report, however, said that Vinasa will most likely face serious obstacles which include an import tax of 30 percent for tobacco and cigarette-making materials.

Vietnam also levies a second-tier tax of 70 percent on the cost of producing cigarettes made in that country by foreign firms.

Vinasa now imports about half of its cigarette-making materials, the report said.

In the meantime, the only other foreign cigarette maker in Vietnam is Rothmans, whose Dunhill, Craven A, White Horse and Virginia Gold brands are being produced under a licensing agreement.

Other multinational cigarette makers such as Phillip Morris, R.J. Reynolds and British American Tobacco, however, are already set to enter the Vietnamese market in spite of the levies.

Phillip Morris has signed a joint venture to produce Marlboro, while R.J. Reynolds has linked a contract to make Salem, Winston and More.

British American Tobacco, the report says, is negotiating with state-owned tobacco giant Vinataba to produce 555, but there has been no outcome so far. (hdj)