Merchant of Death Eyes Pakistan

[Riaz Haq]

Philip Morris International, the international unit of the US tobacco giant often described as a merchant of death, is building a new massive cigarette plant in Pakistan.
Philip Morris is expected to spin off PMI as an independent company to be unconstrained by the U.S. tobacco regulations and out of reach of American litigators. Importantly, its practices would no longer be constrained by American public opinion, paving the way for broad product experimentation.

While smoking rates in developed countries have slowly declined, they have shot up dramatically in some developing counties, where PMI is a major player. These include Pakistan (up 42% since 2001), Ukraine (up 36%) and Argentina (up 18%).

The World Health Organization's Framework Convention on Tobacco Control, an international public-health treaty, has 152 participating countries, including China, Brazil and Pakistan. While it has led to greater regulation in many of the world's markets, countries such as Indonesia and Russia haven't signed on.

In addition to targeting Pakistan, India, Brazil and Russia, one of PMI's immediate goals is to harness the huge potential of China's smoking population, as well as some of that country's own brands, reports the Wall Street Journal.

After more than three years of negotiations with the Chinese government, PMI is expected this year to begin marketing three Chinese brands. The smokes -- selected from hundreds of varieties produced by state-run China National Tobacco Corp. -- will be sold in Central Europe, Eastern Europe and Latin America, according to PMI.

The launch is slated for sometime in the next six months. It is part of a December 2005 deal in which Philip Morris agreed to market Chinese brands internationally in exchange for the right to produce its own Marlboro brand at state-owned factories. At the moment, Philip Morris is limited to importing its cigarettes for sale in China and is restricted by stringent quotas.

While Philip Morris investments in Pakistan, Brazil, Russia, India and China are expected to bring in much-needed capital and create thousands of new jobs, the proven health risks posed by smoking will also cause widespread disease and death in future years. This does not appear to be a good bargain for these emerging economies with young populations.

[Riaz Haq]

Here's an ET report on exploding tobacco profits in Pakistan:

KARACHI:

Pakistan Tobacco Company has announced its profits for the year ended December 31, 201, declaring a net profit of Rs1.73 billion rupees, compared to only Rs363.79 million in the previous year. This translates into a growth in profitability of a staggering 375% over the preceding year.

The entire growth of the company can be attributed to the growth in its top-line, with gross profits growing from Rs6.24 billion to reach Rs8.45 billion. Breaking that up, the company’s gross turnover for the year stood at Rs75.53 billion (12% higher than the previous year), out of which it paid a whopping Rs39 billion in excise duties (Rs35 billion in the previous year) and an additional Rs11 billion in sales taxes (Rs10 billion in the previous year).

Meanwhile, its selling and distribution expenses increased only 12% and administrative expenses by 4.5%; while its other operating expenses declined by 23% and other operating income increased by 67%. This effectively meant that almost all the increase in the company’s top-line went directly towards its net profits, as it also cut its net finance costs in the same period by 28%.

The company’s earnings per share clocks in at Rs6.77 per share, and it has announced a final dividend of Rs3.25 per share in addition to two interim dividends (already paid) at Rs3.05 per share.

Pakistan Tobacco Company is part of British American Tobacco, “the world’s most international tobacco group,” according to its website, with its brands sold in 180 markets around the world. Their operations began in Pakistan in 1947, making the company one of Pakistan’s first foreign investments.

The company is involved in every aspect of cigarette production, from cultivation to packaging. Its brands include Dunhill, Benson & Hedges, John Player Gold Leaf (the largest urban consumer goods brand in Pakistan), Capstan by Pall Mall, Gold Flake and Embassy.

Pakistan Tobacco is the single-largest taxpaying unit in Pakistan. The company pays more taxes than all salaried individuals in the country combined.

http://tribune.com.pk/story/510298/pakistan-tobaccos-profits-375-hi...

[Riaz Haq]

Nielsen report on illicit #cigarette trade in #Pakistan launched: Over 80 billion sticks sold each year. #tobacco http://www.pakistantoday.com.pk/?p=449709 

A recent report published by Nielsen Pakistan and titled “The challenge of Illicit Trade in Cigarettes: Impact and Solutions for Pakistan” was launched at a seminar on” illicit trade in Pakistan” held on Thursday in Lahore.

Speaking at the event, the Nielsen representative shared the findings of the report with a wide range of participants including high ranking officials from Federal Board of Revenue, Police, Punjab Government as well as industry and civil society representatives.

According to the report nearly 1 out of every 4 cigarettes in Pakistan is illegal. The share of the illegal cigarettes in the total market is estimated to be 23.7% which means that around 19.5 billion sticks sold per annum are illegal.

The report discloses that the illicit cigarette sector has witnessed a growth of 43.5% over the last 6 years and all this has been at the expense of the tax compliant industry. This phenomenal growth has also caused a huge dent in the national exchequer in the form of loss of duties and taxes. The report estimates this loss to be above Rs. 24 billion per annum.


http://www.who.int/tobacco/en/atlas8.pdf

[Riaz Haq]

#Pakistan #tobacco #tax rise hits BAT cigarette biz. Sales drop 5.6% worldwide, down 2.5% excluding Pak https://www.ft.com/content/2915081a-ac8d-35e0-b4ca-cada589cda53 … via @FT


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https://www.ft.com/content/2915081a-ac8d-35e0-b4ca-cada589cda53

British American Tobacco, which this week completed its merger with its US peer Reynolds, sold 5.6 per cent fewer cigarettes in the first half of this year mainly because of a tax rise in Pakistan that led to a big increase in illicit sales.

Reporting half-year results, BAT said volumes excluding Pakistan were down 2.6 per cent, a milder decline than in the industry as a whole. It said its market share in its main markets grew by 0.3 percentage points.

Revenues rose 15.7 per cent or 3.5 per cent at constant currencies to £7.7bn. Operating profits rose 16 per cent to £2.6bn.

Chairman Richard Burrows said “the combustible business continued to perform well, against the backdrop of a strong volume comparator”.

[Riaz Haq]

#Pakistan to impose ‘sin tax’ on #cigarettes, sugary #beverages. #Tax revenue to be used to boost #health budget. 
https://www.dawn.com/news/1449578

After continued lobbying by civil society, Minister for National Health Services (NHS) Aamer Mehmood Kiani announced on Tuesday that soon a ‘sin tax’ will be imposed on cigarettes and sugary beverages.

Speaking at a public health conference at the Health Services Academy, Mr Kiani said that the PTI government was committed to increasing the health budget by five per cent of GDP.

“Various routes will be used to increase the health budget,” he maintained, “and one of them is imposing a sin tax on tobacco products and sugary beverages. That sum will be diverted to the health budget.”

Currently, the government spends a mere 0.6pc of GDP on health. It has been suggested several times in the past that sin taxes be imposed on products that cause health-related issues as a result of which the state pays heavy penalties in the shape of healthcare spending and lowered human productivity.

Talking to Dawn, the director general of the NHS Ministry, Dr Asad Hafeez, said that tax on tobacco and sugary beverages was being charged in some 45 countries.

“A sin tax is an internationally recognised term and is specifically levied on certain goods deemed harmful to society, for example tobacco, candies, soft drinks, fast foods, coffee and sugar,” he said.

“The United States charges about $1.5 (approximately Rs200) per pack of cigarettes, while the UK charges 40 pence (around Rs100) per litre of sugary beverages as sin tax. Thailand, as well as a number of other countries, has similar taxes that are earmarked for healthcare services.”

Replying to a question, Dr Hafeez explained that India imposes a sin tax on gutka and paan masala, and the sums thus collected are spent on the healthcare sector since these products cause illnesses that become a burden on the public exchequer.

“We have not yet decided on the exact amount for a sin tax [in Pakistan],” he clarified, “but it will certainly be a handsome sum. Because of the new tax, the price of cigarettes will increase, making it more difficult for young people to buy them. Some 1,500 youngsters start smoking in Pakistan every day, and we want to reduce that number.”

The general secretary of the Pakistan National Heart Association (PANAH), Sanaullah Ghumman, told Dawn that his association had for many years been demanding the imposition of a sin tax.

“Recently, during a meeting with President Dr Arif Alvi, we again raised the issue of such a tax,” he elaborated. “The minister for health was also present at the meeting, and the president assured us that he would do what was possible. The proposal was floated during the tenure of the former government as well, but was unfortunately not implemented. And even now, I fear for its fate since it is difficult to take such a decision in the face of an influential tobacco industry.”

To contextualise, according to a report of the NHS Ministry that was published a few years ago, tobacco is the single largest cause of preventable illness and death. In Pakistan, it causes some 108,800 fatalities every year, ie 298 per day. The report emphasises that the consumption of tobacco will continually increase the country’s healthcare expenses, in addition to imposing huge costs in terms of human resource.