It was just last November that Cambodia’s most famous smoker warned his fellow tobacco aficionados of an imminent rise in the price for a pack of cigarettes.
“I would like to appeal to consumers…of cigarettes not to be upset because there will be an increase in taxes,” Prime Minister Hun Sen said in a Phnom Penh speech. “I will pay this duty, too, as I am a smoker.”
Known to chain-smoke even at some public events, Hun Sen’s rationale for the tax hike was to raise revenue for road improvements, a major priority for the government. Several months later, the tax increase has yet to be implemented, health officials said.
Whether or not the extra cigarette tax money is used to pave national highways, health experts are hopeful that the call for higher taxes on tobacco will eventually be enforced. “Regularly raising taxes is the single most effective way to reduce smoking,” said Greg Hallen, technical officer for tobacco control at the World Health Organization’s Phnom Penh office.
A World Health Organization study released in February found that price increases, whether they come in the form of domestic taxes or import tariffs, would reduce the 8.4 million deaths from smoking-related illnesses expected in the world in 2020.
The study looked at 80 countries and found that in many developing countries that do not have effective government efforts to control tobacco, prices tend to be low and smoking rates high. The study did not look at Cambodia, where updated smoking statistics are difficult to get.
But health officials know that Cambodia has one of the lowest tobacco tax rates in the world. They also know there is a concerted effort by local and multinational tobacco companies to advertise and sell their products here. A 1999 national social-economic survey found that 70 percent of Cambodian men are regular smokers.
“Cambodia is not yet treating tobacco-related illnesses, but it will be,” Hallen said.
A new government tobacco control committee—formed with the prime minister’s approval—is working to reduce tobacco use. Two committee members were in Geneva last week for talks on the WHO’s Framework Convention on Tobacco Control, which may push for a ban on tobacco advertising worldwide and make tobacco tariffs exempt from trade agreements.
But at the same time, another group of government officials is working to prepare Cambodia for entry into the Asean Free Trade Area by 2015, a move that could make cigarettes here cheaper and more accessible to the poor.
As a member of Asean, Cambodia is required to gradually reduce to zero tariffs on approximately 7,000 items, including tobacco products.
The core agreement of AFTA states that each member nation will be able to import commodities from other Asean countries without taxes.
Currently, there is a 7 percent tariff on cigarette imports, said Chap Sotharith, an economic adviser to the Council of Ministers. More than 900,000 cartons of cigarettes were legally brought into the country in 2001, he said. Value-added tax adds 10 percent to the price of pack of cigarettes and a special tax adds another 10 percent, he said. Depending on the brand, a pack costs $0.25 to $1.05.
Because of shrinking markets in North America and Europe, and inadequate tobacco control efforts in many Southeast Asian nations, large tobacco manufacturers are looking to take advantage of AFTA to improve their profit margins.
In the Philippines, US tobacco manufacturing giant Philip Morris recently opened a $300 million cigarette production facility, according to Agence France-Presse.
In Vietnam, British American Tobacco has signed a deal to form a $40 million joint venture with a state-owned tobacco firm, AFP reported. In 1996, BAT signed a $25 million joint venture deal with Cambodia Tobacco Co.
Cigarettes manufactured by multinationals in the Philippines, or any other Asean country, would qualify as a local Asean product if at least 40 percent of the tobacco used is grown in that country. The cigarettes would then be exempt from tariffs under AFTA.
“This lowers or maintains the low cost of cigarettes and makes it enticing for current and would-be smokers, particularly the young, to buy,” WHO regional director Shigeru Omi told AFP in December.
Domestic taxes on tobacco products could be raised higher. But investors may put pressure on Cambodia to keep its tobacco tax rate steady, Chap Sotharith said. “Otherwise, importers can’t make a profit and the government won’t get its revenue,” he said.
An Asian Development Bank report found that 15.9 percent of the revenue in Cambodia in 1995 and 1996 for major goods came from tobacco taxes and tariffs. Tobacco taxes still account for a large share of national revenue, according to Chap Sotharith.
Higher taxes could encourage more cigarette smuggling into and out of Cambodia—already a major problem for border authorities.
“But there are a lot of countries with high taxes and low tobacco use,” Hallen said. “What is needed is better enforcement against smuggling.”