Out of control smuggling has tobacco farmers worried

Thursday, Oct 16, 2014 08:19

Illegal cigarettes are not controlled by Vietnamese law. — Photo mot.gov.vn

by Pham Hoang Nam

HCM City (Biz Hub) — Farmer Nguyen Van Sau in the southern province of Tay Ninh's Ben Cau District is relieved that it has been a profitable year for tobacco farmers, as the crop has fed his family and hundreds of others for decades.

Still, Sau and other farmers are increasingly concerned about the rapid increase in cigarette smuggling along Tay Ninh's long border with Cambodia.

"Smuggled cigarettes are bad for our business, and they lower our tobacco prices," he told Viet Nam News.

Pham Kien Nghiep, general secretary of the Viet Nam Tobacco Association (VAT), said the number of smugglers had risen greatly due to the huge profits.

In fact, the smuggling of cigarettes in Viet Nam is far worse than most people realise.

In a survey conducted in 2012 by the Oxford Economics Department and the US-based International Tax and Investment Centre, the country ranked second in Asia in the number of smuggled cigarettes.

Last year, the figure in Viet Nam rose to 850 million packages, from 600 million in 2010.

Ninety per cent of the packages were Jet and Hero cigarettes, which have been available in Viet Nam for more than 30 years and are sold mostly in southern and central provinces. The producer of Jet and Hero cigarettes is the Indonesian Sumatra Tobacco Trade Company, which transports them to various locations, including Laos, Bangkok, and Sihanoukville, Cambodia.

In Bangkok, they are moved to storage in Shavannakhet, Laos, and then to the town of Carol on the banks of the Sepon River near the border of Laos and Viet Nam.

From there, the cigarettes are illegally transported through the Lao Bao border gate in the central province of Quang Tri in Viet Nam. Ten per cent of illegal cigarettes enter the country through this border.

In Cambodia, from Shihanoukville, the cigarettes are transported to a storage warehouse on Norodom Boulevard in Phnom Penh.

From there, they are moved to the Cambodian-Vietnamese border, via border gates such as Svayrieng in Long An Province; Bavet and Moc Bai in Tay Ninh Province; and Ta Mau Kirivong and Xa Xia, also in Tay Ninh. Ninety per cent of illegal cigarettes pass through these border gates.

Economic impact

The cigarettes are illegally transported through Vietnamese border, via border gates such as Svayrieng in Long An Province; Bavet and Moc Bai in Tay Ninh Province; and Ta Mau Kirivong and Xa Xia, also in Tay Ninh, Lao Bao border gate in the central province of Quang Tri.— Photo cand

The Oxford Economics Department estimates that the country loses around US$309 million or 42 per cent in tax revenue due to cigarette smuggling.

"Cigarette smuggling costs us 18,000 tonnes of tobacco or 10,000 hectares a year. Five million farmers could lose their jobs and 600,000 workers could be jobless within a year," Nghiep said.

Illegal cigarettes are not controlled by Vietnamese law, so the lack of information about tar and nicotine levels in the cigarettes could potentially lead to serious health problems for users.

Smugglers, however, prefer these cigarettes because they don't carry health warnings.

"It's hard to refuse a 30 – 50 increase in profits. There are too many unemployed people, all too ready to transport illegal cigarettes, despite the risks," Nghiep said.

Smuggling bosses often bribe authorities and hire local residents on the border to transport cigarettes by boat and motorbike day and night.

The situation could become worse, as legal cigarettes will soon be subject to a tax of 55 to 65 per cent, which will make smuggled cigarettes even more appealing.

In a bid to curb illegal trade, since September 2013, the Ministry of Industry and Trade's Market Watch Department has been supervising and controlling the wholesale cigarette markets of Hoc Lac and Tran Quoc Toan in HCM City and Can Tho City.

Over the last four months, the market share for illegal cigarettes has fallen by more than 1 per cent (equivalent to 4 million packages) thanks to tighter control.

However, there is a much more work to be done.

"We suggest the government amend the law to reduce the number of cigarettes that can be smuggled without facing criminal charges from 1,500 to 1,000," said Nghiep of the Viet Nam Tobacco Association.

He also asked the Ministry of Finance and Ministry of Industry and Trade to terminate the pilot programme in which smuggled cigarettes are re-exported to certain countries.

"Only Viet Nam uses Jet and Hero cigarettes. If we agree to re-export smuggled cigarettes, where can we export them? Will they just return to Viet Nam?" a representative of VAT said.

The association also suggested that financial support for the fight against cigarette smuggling should be increased, from VND1,100 to VND3,500 per confiscated package.

"The current fee of VND1,100 per package has been the same since 2007, but in line with rising prices, we need to readjust the level of support," he added.

In Viet Nam, tobacco is cultivated in the northern provinces of Cao Bang, Lang Son, Thai Nguyen, Bac Giang, the central highlands provinces of Dak Lak and Gia Lai, and the southern province of Tay Ninh.

The country produces 4.5 billion packages a year, and exports around 20 per cent of that amount, equivalent to the percentage of cigarettes smuggled into the country. — VNS

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