Vietnam’s lucrative tobacco market is strongly attracting foreign investors to penetrate in and expand their production, VietNamNet quoted the Vietnam Tobacco Association as saying.
The country will open its market for foreign tobacco producers. However, no 100 per cent foreign owned entities will be set up in Vietnam, only joint ventures are allowed.
The association said the tobacco industry can bring in VND6 trillion (US$375 million) every year to the state budget. Foreign investors are eager, while local producers still want to maintain the policies beneficial for them.
Vietnam will not allow investment in new tobacco projects, expansion or raising capacity of workshops already operational in the country. The production of new foreign brand products for domestic consumption must be approved by the Prime Minister.
In the past, Vietnam prohibited foreign investment in tobacco industry, just accepting specific projects. Now it only can list tobacco production among the “conditional investment fields”.
Under the WTO commitments, Vietnam will have to allow importing cigarettes from 2007, and a lot of new brands will appear on the market on the near future.
From 2006, the luxury tax on cigarette has increased from 45 per cent to 55 per cent, putting a heavy burden on tobacco producers.
Currently, Vietnam has 17 state-owned cigarette production businesses; three business cooperation contracts with three foreign investors, namely British American Tobacco, Phillip Morris and Japan Tobacco International; a franchising contract with UK Imperal Tobacco Overseas Holdings and two joint ventures.
The tobacco sector produced 4.03 billion packs of cigarettes in 2006, of which foreign-invested entities made up a small slice of 40 million packs. In 2007, the sector plans for a production volume of 4.23 billion packs with 58 million from foreign-invested entities. (VietNamNet)
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