Tobacco Industry Meeting in Hong Kong (fwd)

[Robert Weissman <rob@essential.org>]

South China Morning Post - Wednesday, December 8, 1999

Smoking not yet a burning issue in Asia

Profits up in smoke, lawsuits, a battered public image. Never in its
history had the annual tobacco trade fair been such a sombre occasion.

In between the wound-licking and morning coffee, delegates at the recent
conference in Hong Kong gave an outline of the tough times faced by the
industry.

Anti-tobacco campaigners should be thrilled to hear their crusading is
considered a major impediment, along with regulatory restrictions, legal
action and World Health Organisation initiatives.

They would be less enamoured to hear the industry's projections for growth
despite these setbacks.

Over the next three years, "modest" global growth of 0.2 per cent is
anticipated. In real terms, this is equivalent to a new market the size of
Chile every year. Moreover, while long-term decline is anticipated in
Western Europe and the US, strong increases have been seen in Asia, Africa
and the Middle East.

The Hong Kong market has remained fairly static, with a smoking rate of 15
per cent of the population, that is about 805,100 people.

Philip Morris takes the lead in market share (Marlboro being the most
popular brand), followed by British American Tobacco (HK) with its Kent
and Hilton brands, and RJ Reynolds. On average, Hong Kong smokers get
through 16 a day.

However, all eyes are increasingly on the mainland - the world's largest
tobacco market, with 300 million smokers. Globally, there are 1.1 billion.

The State Tobacco Monopoly Administration accounts for 98 per cent of the
market, and World Trade Organisation entry could open the mainland market
to foreign firms, although this is unlikely in the short-term.

"Potential is the word," said British American Tobacco [BAT] public
affairs director Brenda Chow, "even with the World Trade Organisation.
Don't have any fantasies about it, it's [the market] still highly
regulated."

The mainland has more than 2,400 industrial and commercial enterprises
involved in the tobacco industry. The chances of penetrating this
difficult market comes down in part to foreign firms'
"relationship-building" with the state.

Mainland demand reflects an increasing trend of consumption generally
shifting to developing countries. These countries now account for 800
million of the world's smokers.

The trend can also be seen in the prevalence of smoking-related deaths.

The habit kills one in 10 adults worldwide. By 2020, seven out of 10
people killed will be in low and middle-income nations, according to the
World Bank.

Pressure is thus mounting for these nations to adopt a policy of tobacco
control. The World Bank recently released a report focusing on the
economics of control for policy-makers, the most obvious method being a
tax increase.

More worrying to the tobacco companies however is the bank's link with the
World Health Organisation, which recently developed a Tobacco Free
Initiative.

This calls for a worldwide ban on all tobacco advertising and promotion,
regular and sustained tax increases, wider access to tobacco substitutes
and the establishment of tobacco-control coalitions.

BAT's Ooi Wei-ming told delegates at the symposium that the initiative
"brings the spectre of global tobacco control frighteningly close".

He considers it as "the unambiguous threat that strikes at the very heart
of our business".

Asia has so far been behind North America and Europe when it comes to
restricting tobacco firms' advertising and promotions, along with other
"non-economic" factors, such as bans on smoking in public places.

Moreover the tax approach has been piecemeal. For example the Hong Kong
Government landed a bombshell in 1991 by imposing a 200 per cent increase
in excise duty, swiftly reduced to 100 per cent three months later.

By the time of the financial secretary's budget speech in March, the
Government's pursuit of an anti-smoking policy was relinquished in favour
of the economic interests of the tobacco companies.

Donald Tsang Yam-kuen said in his speech: "For many years the Government
has been pursuing an anti-smoking policy in the interest of public health.
However, statistics reveal that the sale of duty-paid cigarettes has been
on a falling trend since 1992 without a corresponding decline in the total
number of smokers.

"The smuggling and illegal sale of contraband cigarettes account for this
gap. I believe that increasing tobacco duty will only enhance the
attractiveness of contraband cigarettes and provide further impetus to
smuggling and illegal sale."

There was no increase in excise duty, and a similar freeze is being
pursued this year by the tobacco industry, if not a decrease following
deflationary trends.

The lack of a strong political will is in stark contrast to recent moves
by the US Government which filed a civil lawsuit against the industry in a
bid to recoup billions of federal dollars spent on smoking-related health
care.

However, tobacco companies are not being complacent in Asia.

At the recent tobacco symposium, Philip Morris vice-president for
corporate affairs in the region, Ellis Woodward said as much: "In this age
of globalisation, the Internet and CNN, the tidal wave of tobacco issues
is coming to Asia and the rest of the world, faster than you may think.

"Tobacco companies in Asia will surely become more controversial - not
less - as time goes on. And we cannot ignore that."

The industry had to learn from past mistakes and be more prepared to deal
with public concerns.

"Our research has shown that the general public in Asia is not 'out to
get' tobacco companies - but we know that opinion can easily change," he
said.