A review of the impacts of tobacco industry privatisation: Implications for policy

Abstract

State owned tobacco monopolies, which still account for 40% of global cigarette production, face continued pressure from, among others, the International Monetary Fund (IMF), to be privatised. This review of available literature on tobacco industry privatisation suggests that any economic benefits of privatisation may be lower than supposed because private owners avoid competitive tenders (thus underpaying for assets), negotiate lengthy tax holidays and are complicit in the smuggling of cigarettes to avoid import and excise duties. It outlines how privatisation leads to increased marketing, more effective distribution and lower prices, creating additional demand for cigarettes among new and existing smokers, leading to increased cigarette consumption, higher smoking prevalence and lower age of smoking initiation. Privatisation also weakens tobacco control because private owners, in their drive for profits, lobby aggressively against effective policies and ignore or overturn existing policies. This evidence suggests that further tobacco industry privatisation is likely to increase smoking and that instead of transferring assets from state to private ownership, alternative models of supply should be explored.

Change in tobacco excise policy in Bulgaria: the role of tobacco industry lobbying and smuggling

“…A PMI document from 1975 speaks of cigarette imports for both the duty-free and the domestic market, when imported cigarettes could only be legally sold via duty-free or hard currency shops 22. This document mentions ‘transit’ business from Bulgaria to Italy and Turkey,22 both of which were closed markets with state-owned tobacco monopolies at the time,42 and discusses company plans to ‘follow up closely development of transit in order to continue increasing (PMI) market share’ 21. A BAT document from 1992 reflecting on illicit trade in Bulgaria states that:

Due to the high duties on imported cigarettes and spirits there is nothing such as totally legal imports, most importers use the duty-free facade to import goods and get around paying full duties 32

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Tobacco Control in Turkey

“…On the other hand, evaluating the other countries other than Turkey within the same frame, it is observed that tobacco consumption has been increased, age of onset for smoking has been decreased and, moreover, an additional demand has arisen among smokers in the countries in which tobacco production has been denationalized and left to tobacco industry due both to cheapened tobacco products and widened and activated distribution network and to the effective and aggressive lobby activities conducted against tobacco control policies by tobacco companies [5]. However, unfortunately, despite these unfavourable outcomes for individual and public health, it is conspicuous that International Monetary Fund (IMF) continues to put pressure in terms of denationalizing the governmental tobacco production units [5].…”

“…However, unfortunately, despite these unfavourable outcomes for individual and public health, it is conspicuous that International Monetary Fund (IMF) continues to put pressure in terms of denationalizing the governmental tobacco production units [5].…”

Epidemiology and Public Health Policy of Tobacco Use and Cardiovascular Disorders in Low- and Middle-Income Countries

“…93,[104][105][106] The tobacco industry has used direct investment in many LMICs (eg, Philippines, Indonesia, Cambodia) where it was perceived and often welcomed as a source of economic development. [107][108][109] In many LMICs where such direct economic access was restricted because of bans imposed by the government (eg, Malawi and Uganda) or complexity in bureaucracy (eg, China), [110][111][112] smuggling was used an alternative route to create demand and set a foothold; it was further used as a leverage for negotiations with the government for tax concessions and licensing permissions. Such economic interventions were coupled with marketing and promotion of tobacco products to create demand in LMICs.…”

“…104,109,113 Products such as mild, light, and low-tar cigarettes have been introduced especially to attract young adults and women. 107,113,114 Marketing strategies such as associating tobacco use with youth and glamor…”