Vietnam: Bad news for public health as TI set to grow

2 April 2016

The tobacco industry ranks Vietnam among the top 15 tobacco users in the world. With more than 15 million smokers, the tobacco industry considers Vietnam to be one of the more smoker-friendly countries in the region as well as the world.

Vinataba claims that despite a restrictive tobacco control environment, its business is doing well and expanding. It had a 16% increase in domestic output of cigarettes which resulted in a 56% increase in cigarette market share. According to a survey by Vietnam’s Health Strategy and Policy Institute, Vietnamese smokers spend about VND22 trillion (US$985 million) a year on tobacco.

The Law on Prevention and Control of Tobacco Harms, which came into effect in May 2013, requires 50% graphic health warnings on all cigarette packs, bans on advertising of tobacco products, smoking in public places and the sale of cigarettes to minors. However these measures have not hurt the tobacco business.

The doom and gloom the tobacco industry raised when it fought tobacco control did not materialise. Instead in 2015 Vinataba’s revenues and profits were 13% higher than its earnings for 2014. International exports continued to make up about a third of Vinataba’s total output of 1.2 billion packs.

Vinataba’s plans for 2016 include continuing with restructuring and expanding its growth and increase market competitiveness for its cigarettes. Vinataba and BAT together control the bulk of the tobacco business in Vietnam.

Tobacco tax in Vietnam is 41.6% as percentage of retail prices and considered to be very low compared to other ASEAN countries. In 2014, the National Assembly approved tobacco excise tax rate increased from 65% to 70-75% which will be effective in 2016 and 2019 respectively.However this small tax increase will not cause a dent in the tobacco business. Clearly Vietnam needs a higher tax increase on tobacco.

The tobacco industry fights tax increases by claiming it will increase smuggling. However the Vietnamese government improved enforcement of anti-smuggling measures last year and this helped decrease smuggling by 30% in 2015, compared with the previous year. This should provide impetus to the government to raise excise taxes to make tobacco less affordable.

For information on TI denormalization, see SEATCA’s Tobacco Industry Watch website

Previous ASEAN Tobacco Watch updates can be found here.