Exclude cigarettes, says Thai tobacco monopoly/Foreign competitionharms local brands (fwd)

[Robert Weissman <rob@essential.org>]

Exclude cigarettes, says Thai tobacco monopoly/Foreign competition harms
local brands
by Wichit Sirithaveeporn
Source: Bangkok Post, Thursday, 11/4/99

Cigarettes should be excluded from the Asean Free Trade Area scheme to
help protect Thai cigarettes from being pushed aside by foreign
competition, says Somchainuk Engtrakul, chairman of the Thailand Tobacco
Monopoly.

Ironically, the monopoly is joined by local health groups concerned that
cutting import tariffs and liberalising the market could lead to more
smokers in Thailand.

Under the Afta programme, members must cut import tariffs for 85% of trade
goods to 0-5% starting from January 1 next year.

The remaining items must have tariffs cut by 2003.

Cigarettes imported from within Asean now carry import tariffs of 15-22%,
with those imported from outside the region taxed at 60%.

When added with other charges, including excise taxes, stamp duties and
value-added taxes, the overall charge for imported cigarettes within Asean
rises to between 331% and 367%, or 510% for cigarettes from outside the
region.

Mr Somchainuk, also the Customs Department director, said the share of
foreign cigarettes in Thailand had grown from 3% three years ago to about
12% now.

Without some measures, officials are concerned that the market share of
the Thailand Tobacco Monopoly will erode steadily, given the stronger
marketing power and higher production efficiency of foreign companies.

The Customs Department recently increased the CIF (cost, insurance and
freight) reference prices for imported cigarettes by between 20% and 50%,
resulting in higher tariff burdens for foreign manufacturers.

Still, retail prices for many foreign brands have increased only slightly,
as producers devise various marketing schemes to raise market share.

To help check the growth of foreign brands, the Customs Department has
launched an investigation into whether companies are using transfer
pricing to distort prices. The Finance Ministry has also announced plans
to investigate whether imported cigarettes from within Asean complied with
Afta local content regulations.