At a conference on implementing plans on strengthening the check, control and piloting the burning of smuggled and pirated tobacco in An Giang and Can Tho, Phan The Rue, deputy minister of trade, said the result of the prevention of smuggled tobacco remained poor with a small number of smuggled tobacco seized by authorised agencies. As a result, local manufacturers have to join the fight against smuggled tobacco for their existence.
Difficulties of locally-made tobacco
The smuggling of tobacco has boomed in provinces sharing the border line with Cambodia after an adjustment of the special consumption tax for the goods in 2005. Apart from tobacco products under brands 555, Marlboro, Jet and Hero, which have been smuggled to Vietnam for years, other products under such brands as Elephant, Sunday, Golden, Eagle and Vegas have been smuggled from Cambodia at low price of between VND 1,300 and 1,850 per pack, which is much lower than prices of locally-made products. As a result, smuggled tobacco, priced between 70 and 80 per cent lower than locally-made products of the same kind, is often attractive to local smokers.
The widespread smuggling of tobacco in south-western provinces has produced a significant impact on the local tobacco industry. Accordingly, many manufacturers have had to cut their production output. This has impacted on employment and incomes of tobacco workers and farmers. Many tobacco companies, which manufacture cheap tobacco products, have had to cut their output by 50 per cent against the same period last year. Smuggled tobacco has poor quality but is sold a low price with a high volume of around 10 million packs per month. If there are no measures to prevent or stop the smuggling of tobacco, there will be a risk of forming a new smoking style, which will cause huge losses to State budget revenues. In eight months of 2006, the local industry’s output was cut by 177 million packs of tobacco, or 6.3 per cent against the same period last year, which has resulted to a cut of budget revenues by VND 162 billion, or 4.2 per cent against the same period last year.
No use preaching to a hungry man
Vietnam joined the World Trade Organisation in late 2006, which will result in a trade liberalisation and a great change in Vietnam’s policies and regulations. The Directive 278/CT dated August 2, 1990, stipulates that foreign-made tobacco is banned from being imported and sold in the local market. The Decree 12/2006/ND-CP dated January 23, 2006 provides concrete regulations on the import of foreign-made tobacco and cigar products. But it stipulates clearly that tobacco products will be officially allowed to be imported and sold in Vietnam after the country’s accession to WTO. Therefore, in the coming time, foreign-made tobacco will be no longer be a banned good. This implies that smuggled tobacco will be considered as goods of trade fraud and tax evasion. Thus, it will be more difficult to deal with the smuggling. The volume of 6.5 million packs which were seized and re-exported in 2005 was equal to between one and 1.5 per cent of the volume of smuggled tobacco.
According to experts, changes in a roadmap for increasing the special consumption tax within the Framework Convention for Tobacco Control, a big difference in tax policies of neighbouring countries has resulted in a lower price of smuggled tobacco than locally-made products of the same kind. The shortage of resources and a weak co-operation among authorised agencies have made it more difficult to fight the smuggling of tobacco. At the same time, the smuggling of tobacco has changed in forms and scale. For example, foreign-made tobacco will be officially allowed to be imported to Vietnam and prices may be declared lower than real prices. Also, counterfeit stamps will be used for foreign-made tobacco. Smugglers may buy a large volume of foreign-made tobacco to Vietnam as under the new regulations, people who store or transport smuggled tobacco valued less than VND 100 million will not be seized or charged any more.
Before the challenges, the Ministry of Trade has co-operated with many cities and provinces to take measures such as the building of methods for checking and preventing the smuggling of tobacco, providing guidelines for authorised forces to promote their examination and control along the border line. Also, police force will combat organised smuggling rings. However, a solution on re-exporting smuggled tobacco to earn incomes for supporting activities of anti-smuggling task forces will not be a complete solution to prevent smuggled tobacco. It is difficult to make sure that re-exported tobacco will re-enter Vietnam or not. Without a control and supervision of food hygiene and safety, it is impossible to make sure how smuggled tobacco will damage health of local consumers.
Le Viet Hung, deputy director of Can Tho Police, and Huynh Ngoc Son from the Borderguard Reconnaissance Department expressed their concerns that the seizing and treatment of those who store and smuggle tobacco difficult, it is more difficult for settling smuggled tobacco. Can Tho Police once burnt more than one million packs of smuggled tobacco. However, the method costs much money but it is impossible to burn out smuggled tobacco. The two methods of burning or re-exporting of smuggled tobacco seem ineffective.
Enterprises’ participation
Nguyen Thai Sinh, chairman of the Vietnam Tobacco Association, said anti-smuggling activities aimed at ensuring a healthy market, creating favourable conditions for business activities and protecting the interest of consumers. This is a responsibility of the State but the participation of enterprises in the fight against smuggled goods is needed. On July 31, 2006, the Prime Minister provided guidelines for the Vietnam Tobacco Association to provide financial support for the cracking down of smuggled and pirated tobacco, considering it cost for market protection.
This will be a favourable condition for the local tobacco industry in protecting the local market. Estimated budget of around VND 35 billion per annum will be mobilised from British American Tobacco Vietnam (BAT) and other member companies of the Vietnam Tobacco Association. The budget will be used for controlling, seizing and treating smuggled and pirated tobacco. Concretely, for smuggled tobacco branded Jet, Hero, Marlboro and 555, which is priced more than VND 6,000 per pack, cost for the seizing and burning will be VND 1,000 per pack. This figure will be VND 500 per pack of smuggled tobacco which is priced less than VND 6,000. Pirated tobacco will get the same treatment.
The Government has piloted allowing local manufacturers to provide support for burning low-end smuggled tobacco, which will be taken into account for their production costs. Proposals on treating and burning high-end tobacco made by the Vietnam Tobacco Association will be approved soon by the Government to make the combat against smuggled tobacco more effective. Promoting the prevention and treatment of smuggled tobacco is considered as a measure to protect the local market in the spirit of the Framework Convention for Tobacco Control.
Linh Ha
Vietnamese
