News from Thailand (fwd)

[Robert Weissman <rob@essential.org>]

(Articles from Tobacco Free Asia News produced by ASH Thailand)

THAILAND
'Thai Tobacco Monopoly Told to Sell Part of Retail, Print Units'

Bangkok, June 9 (Bloomberg) -- Thailand said it plans to sell a portion of
its tobacco monopoly's retail and printing units as the country privatizes
some state-owned companies.

The Thailand Tobacco Monopoly now controls all domestic tobacco cultivation,
cigarette production and distribution. It sold about 2.4 billion packs of
cigarettes last year, a 90 percent market share.

The Committee on State Enterprise Policy recommended the distribution unit
be turned into a separate company, with an unspecified stake sold to private
investors and the public. The TTM's printing unit and a hospital in Bangkok
which serves staff of the monopoly should also be sold, it said.

The committee, chaired by Deputy Prime Minister Supachai Panitchpakdi,
didn't give an answer to the timing or extent of the privatization. ``The
major activities such as tobacco production and social and agricultural
functions will (remain) under state enterprise,'' the committee said.

TTM was the government's most profitable company in 1997, the latest year of
published results, earning 4.5 billion baht ($121 million), down a tenth
from 1997.

The state enterprise has been in talks about various ventures for more than
a year with several international tobacco companies, including Philip Morris
Co., RJR Nabisco Inc.'s R.J. Reynolds Tobacco International Inc. and British
American Tobacco Pcl. Thailand levies a 60 percent tax on cigarette imports.

A broad requirement of Thailand's $17.2 billion credit arranged in August
1997 by the International Monetary Fund was that the government privatize
some of its state companies.

Among agencies the government has said it plans to sell shares in are the
Petroleum Authority of Thailand, Bangchak Petroleum Pcl, Thai Airways
International Pcl and the Electricity Generating Authority of Thailand.
Recent efforts to sell part of the petroleum and electricity agencies have
met with protests by workers amid concern about potential layoffs.

Finance Minister Tarrin Nimmanahaeminda said the aim of selling shares in
state companies is to make them more competitive, not to fill the
government's coffers. He said sales will be done only if the price is right.
``The kind of money we will be getting is too little and too late to
stimulate (economic) recovery,'' he said last week. ``What we don't want to
do is to sell public assets at distressed prices.''

SOURCE: 'Thai Tobacco Monopoly Told to Sell Part of Retail, Print Units',
Bloomberg Press, 9th June 1999.

THAIALND
'Monopoly seeks foreign partner to beat rivals'
If you can't beat them, join them. The Thailand Tobacco Monopoly, alarmed by
the rapid growth in market share of imported cigarettes, is moving to slash
costs and form a partnership with a foreign producer.

High taxes currently make foreign brands more than twice as expensive as
local cigarettes. Even so, foreign manufacturers have boosted their market
share in the past decade to 13% from 2%.

At the start of 1998, imported brands had an 8.7% market share, double that
of the year before, according to the TTM.

Last year, the state enterprise, faced with a steady erosion in its customer
base, announced plans to seek a partnership with a foreign producer.

Early plans called for privatisation of the TTM, with a one-third stake sold
to a foreign partner, one-third to local investors and the remainder held by
the finance ministry.

Industry giants, such as Philip Morris, British American Tobacco, RJ
Reynolds and Japan Tobacco have expressed interest in bidding for a stake.

But privatisation has come under fire from an unlikely alliance between
tobacco monopoly employees and health groups opposed to smoking, who claim
that foreign producers are looking to expand their presence in developing
countries to compensate for increased resistance in the West.

TTM executives say that regardless of the outcome of privatisation, changes
in their business model are required now to survive increased competition
from overseas.

Greater incentives to retailers will be offered to encourage stronger
promotion of local products.

If the monopoly's 275-strong distribution network fails to expand sales in
line with targets, a separate company could be set up to handle marketing
directly.

Production costs, stamp duty, value-added taxes and distribution costs total
24.23 baht per packet of cigarettes. Overall, the TTM reaps a gross profit
margin of 3.77 baht.

Foreign cigarettes such as More and L&M, face similar costs but sharply
higher profit margins.

SOURCE: Sirithaveeporn, W., 'Monopoly seeks foreign partner to beat rivals',
Bangkok Post, Business Section, 21st June 1999, p1.