Smuggling in Malaysia (fwd)

[Robert Weissman <rob@essential.org>]

The Star (Malaysia)
                                                 Monday, August 17, 1998
                   Focus

                   Tobacco industry hard hit by
                   smuggling

                   Stories by Dafizeck Daud 

                   THE increasing number of cigarette smuggling cases could
be an indication
                   of how much profits the illegal tobacco racket in
Malaysia is reaping. 

                   Reports of smugglers with contraband cigarettes being
arrested have
                   become very frequent. 

                   Although various measures have been taken by the
authorities to curb
                   smuggling so as to protect the tobacco industry, the
perpetrators do not
                   seem to be bothered. 

                   Instead, their activities are expected to rise with the
ever-increasing prices
                   of locally-manufactured cigarettes and to some extent,
the high number of
                   foreigners in Malaysia. 

                                   The most popular type among the smugglers
is clove
                                   cigarette, typically preferred by a large
section of
                                   imported labourers from Indonesia but has
also
                                   commanded a strong following among
Malaysians. 

                                   Local cigarette companies, which are
already feeling
                                   the squeeze from a lower-than-expected future
                                   growth, have been voicing their concerns
to the
                                   authorities on the rise of illegal
tobacco trade in the
                                   Malaysian market. 

                   The local tobacco industry has been adversely affected by
the rampant
                   smuggling activity which is believed to constitute
between 10% and 15% of
                   the total cigarette market annually. 

                   However, available figures show that the local tobacco
industry is set for
                   future growth after experiencing a three-year decline due
to the authorities'
                   discouraging policies on cigarette consumption. 

                   The production of tobacco products rose sharply last year
with the total
                   output increasing by a whopping 20.6% for the first seven
months of last
                   year compared with a rise of 8.4% in the previous
corresponding period. 

                   Output of cigarettes also rose strongly during the
period, underpinned by
                   strong external demand and a positive turnaround in domestic
                   consumption, encouraging some players to expand their
operations despite
                   the economic slowdown. 

                   The local tobacco industry is dominated by a few notable
players such as
                   Rothmans of Pall Mall (M) Bhd, Malaysian Tobacco Co Bhd
(MTC) and
                   R.J. Reynolds Bhd. 

                   Rothmans, for example, has embarked on an expansion
programme which
                   will increase its production capacity to 16 billion
cigarettes per year from
                   12 billion at present. 

                   The company said the expansion was to cater for its
growing market share
                   in the local cigarette market and would be completed by
the end of this
                   year. 

                   The plan involved the acquisition of additional equipment
to upgrade the
                   existing Rothmans production facilities with an
investment of RM34.5mil. 

                   The group's brands continue to dominate most segments of
the market with
                   the increased sales registered in the respective sectors. 

                   According to Rothmans managing director Nigel J.I. Buck,
the company,
                   which currently commands a 55% share in the local market
and sells nearly
                   1.7 billion cigarettes per month, is also taking steps to
enhance its domestic
                   market share. 

                   Buck said that although the economic downturn, to some
extent, was
                   expected to affect the company's revenue in the current
year, local
                   consumption of cigarettes was expected to grow further
albeit at a slower
                   rate. 

                   Prior to the slowdown, he said, the company had forecast
a 5% increase. 

                   However, the current conditions had caused the projection
to be lowered
                   to about 1% to 2% in tandem with the anticipated 2% to 3%
decrease in
                   the total cigarette market in Malaysia. 



                   The growth in the industry is also spurred by the
government's stand not to
                   pressure tobacco farmers to switch to other crops,
realising that tobacco
                   had contributed significantly to the economy. 

                   There are an estimated 24,000 tobacco farming families in
the country with
                   60% of them based in Kelantan. 

                   The industry also employs some 21,000 people in curing
factories across
                   the country. 

                   The government acknowledged that the tobacco industry
with the
                   monetary contribution and employment opportunities,
Deputy International
                   Trade and Industry Minister Datuk Hishamuddin Hussein
told a group a
                   tobacco farmers at a function in Kelantan recently. 

                   Hishamuddin said the economic activity was an important
component of
                   the economy which could help the country counter the
current economic
                   woes. 

                   As such, he said, the government would continue with the
development
                   programme as planned by providing the necessary
assistance to the
                   industry. 

                   The industry contributes RM1.2bil through various taxes
compared to the
                   development grant of RM7mil annually. 

                   The sterling performance is the result of the National
Tobacco Board's
                   effectiveness in managing and controlling the industry,
enabling the board to
                   distribute over RM148mil to the various sectors in the
industry last year. 
 Copyright © 1998 Star Publications (M) Bhd (No: 10894-D). All rights reserved