[Intl-tobacco] Korea: State Monopoly on Cigarette Business Poised to Be Lifted as Early as July

[Robert Weissman]

State Monopoly on Cigarette Business Poised to Be Lifted as Early as July
by Park Yoon-bae  / Staff Reporter
Source: Korea Daily  (Hankook Ilbo), Tuesday, 5/8/01

State monopoly on cigarette production is expected to be lifted in the
latter half of this year as the government has come up with a revision
draft for related regulations.

  The Ministry of Finance and Economy said yesterday that it is holding
consultations with other government agencies on the revision bill designed
to put an end to more than 50 years of state monopoly on cigarette
manufacturing.

  Under the draft, the government plans to allow companies to advanced to
the cigarette-making business if they meet minimum requirements of
production capacity and capital.

  A ministry official said that the government has tentatively set the
minimum capital requirement at 30 billion won (about $23 million) and the
minimum annual production capacity at 250 million packs of cigarettes.
Each pack contains 20 cigarettes.

  He said the ministry plans to get approval for the amendment within the
first half of the year so that the nation can enforce the liberalized
regulations as early as July.

  The state-run Korea Tobacco & Ginseng Corp. (KT&G) has monopolized
cigarette production since 1948. Its capital stands at 955 billion won. It
produces 5 billion packs of cigarettes annually. The company recorded 270
billion won in net profit last year over a turnover of 1.7 trillion won.

  The envisaged minimum capital requirement for a cigarette business is
about one 30th of KT&G's capital base, while the minimum production
capacity equals one 20th of monopoly's capacity.

  The amendment, if approved, will clear the way for multinational
cigarette makers to set up their production base in Korea.

  KT&G demanded the requirements for the entry into the cigarette business
should be strengthened out of fears about fiercer competition following
the liberalization.

  However, foreign cigarette manufacturers have urged the government to
ease the requirements so that they can more easily set up production lines
in Korea.

  The ministry official said foreign companies would find it easy to meet
the requirements.

  The revision bill calls on newcomers in the cigarette industry to hire
at least five researchers in order to promote research and development
activities.

  Under the bill, computer game rooms and karaoke parlors, which are
frequented by the youth, would be banned from selling cigarettes.