[Intl-tobacco] Cigarette producers capitalise on ASEAN free trade plan

[Robert Weissman]

Agence France Presse
December 7, 2001 

Cigarette producers capitalise on ASEAN free trade plan to expand
P. PARAMESWARAN


   Manila - Cigarette manufacturers are finding a new haven in Southeast
Asia as
   they take advantage of a regional free trade plan which shields them
   from steep tobacco taxes and high production costs.

   Faced with shrinking Western markets, top tobacco firms are relocating
   to Southeast Asia to keep prices low, maximise access to nations in
   the region with underdeveloped tobacco-control measures and cuddle up
   to enticing markets, including China, health officials say.

   "I know of companies that really want to develop tobacco industries in
   this region but I don't have specifics as to how many but I am sure
   they are increasing," Shigeru Omi, the World Health Organisation's
   (WHO) regional director for the Western Pacific, told a media briefing
   in Manila this week.

   With smokers making up more than half of Southeast Asia's 500 million
   population, the WHO is concerned about a continued rise in tobacco use
   and aggressive marketing and lobbying by cigarette producers, he said.
   In the Philippines, a 300-million-dollar cigarette production facility
   was launched recently by Philip Morris, the world's largest tobacco
   manufacturer.

   British American Tobacco, the world's second largest tobacco company,
   has also clinched the right to form a 40-million-dollar joint venture
   in Vietnam with a local state-owned tobacco firm.

   The tobacco processing plant will be the most modern factory of its
   kind in Vietnam, which has one of the world's highest tobacco
   consumption rates among males.

   "Finding new customers in developing countries in Asia and the Pacific
   is an attractive option for the industry, particularly as it adjusts
   to shrinking North American and Western European markets," Omi said in
   a report released to the media.

   A free trade agreement of the 10-nation Association of Southeast Asian
   Nations (ASEAN) commits member countries to lowering import tariffs to
   between zero and five percent on products traded among themselves
   beginning 2003.

   For example, cigarettes now manufactured in the Philippines will
   become a local ASEAN product if at least 40 percent of the tobacco
   used is from that country. The cigarettes will be exempt from customs
   duties when traded among other ASEAN member countries.

   "This lowers or maintains the low cost of cigarettes and makes it more
   enticing for current and would-be smokers, particularly the young, to
   buy," Omi said.

   ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar,
   the Philippines, Singapore, Thailand and Vietnam.

   ASEAN officials argue however that while tobacco firms may escape
   heavy import tariffs through the ASEAN free trade plan, they can still
   be hit with heavy domestic taxes by individual nations.

   Robert Teh, the director for economic cooperation at the ASEAN
   secretariat, said that although the free trade pact required member
   countries to lower import tariffs, they were free to set "appropriate
   domestic or internal taxes" on such products as alcohol, tobacco or
   automobiles.

   "You may wish to note that many ASEAN countries slap high domestic
   taxes on cigarettes because together with alcohol, these products
   generate a fair amount of tax revenues for the government," he told
   AFP in reply to written queries.

   Tobacco use is one of the greatest public health problems in Southeast
   Asia, a key component of the WHO's larger Western Pacific region where
   one person dies every 32 seconds from tobacco-related causes.

   Cigarette lobbyists argue that the tobacco trade creates jobs and
   benefits economies "but if you look at the real cost, this is a myth,"
   said Annette David, technical officer for the tobacco-free initiative
   at the WHO regional office in Manila.

   For example, she said, in 1999 the Philippine tobacco industry netted
   26 billion pesos (520 million dollars) in profits but the health care
   costs for tobacco-related illnesses was 46 billion pesos.

   "So, who is winning here and who is paying the bigger price?" David
   asked.