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Thai Tobacco Monopoly Corporatized – What is different?

28 July 2018:

As of May 2018, the Thailand Tobacco Monopoly (TTM) has been corporatized and is now known as the Tobacco Authority of Thailand (TAOT). The TAOT was established through the Tobacco Authority of Thailand Act B.E. 2561 announced in the Royal Thai Government Gazette brings it a new identity.

The Thailand Tobacco Monopoly was established in 1939, under the jurisdiction of the Ministry of Finance. How different is the corporatized TAOT compared to the previous monopoly?

The TAOT is still wholly controlled by the Ministry of Finance and has several advantages in its business operation such as being able to conduct legal transactions on its own, expand its tobacco business, enter into new joint ventures and produce cigarettes for export. It can conduct research in improving tobacco production standards in line with industry developments and cooperate with governmental agencies.

The act also allows TAOT to set up limited companies or public companies related to its business. These companies can have foreign shareholders holding up to 49% of the total company shares. TAOT can also hold shares in other companies relevant to TAOT’s tobacco business.

TTM corporatisation seems to be following the route the other tobacco monopolies in Asia – Japan, Taiwan and Korea – took when they corporatized. Of these, JTI and KT&G have become powerful transnational tobacco companies after corporatization.

What does this mean for Thai tobacco control? Being a part of the government previously, the TAOT would be well versed with the government’s international reputation for its achievements in tobacco control – first in Asia to ban pack display at points of sale, applying the largest pictorial warnings (85%) on cigarette packs, and now preparing for plain packaging.

The new TAOT however is moving fast in the opposite direction to increase cigarette production and sell more sticks. It plans to introduce Chinese cigarettes in Thailand this October, targeting the increasing number of Chinese tourists to the country. TAOT announced they signed an MOU with two Chinese companies, Shaanxi Jinye Science Education Group and Yunnan Reascend Tobacco Technology to produce cigarettes.

Although TAOT’s goal to increase cigarette sales is opposite to the government’s objective to reduce tobacco use, according to a news report, TAOT feels it is in a better position to help the government in its efforts to control cigarette consumption. This conflicts with the government’s obligations under the WHO Framework Convention on Tobacco Control (FCTC).

The TAOT is no longer a government agency and it needs to be reminded that FCTC Article 5.3 requires the government to protect health policies from the interference of commercial vested interest – this applies to TAOT. 

TTM had about 16 cigarette brands and was producing about 65 billion sticks per annum, which it described as less than half its actual production capacity. Lee and Eckhardt note TTM’s operations have remained largely domestic while a small volume is exported to regional markets.

Previously, the TTM purchased local tobacco leaves. However after corporatisation, TAOT is now complaining that it has to pay farmers THB22 (US$0.70) per kilogram, which is higher than the market price, and will be buying 40% less tobacco this year. This may cause problems for Thai tobacco growers.

Thailand passed stringent Tobacco Products Control Act last year which requires the tobacco manufacturer or importer of tobacco products to report the volume of production or importation into the Kingdom, market share, marketing expense, income and expense. This is in line with the requirements in Article 5.3 guidelines.

With TTM’s corporatisation, the only remaining tobacco monopoly in the ASEAN region is Vietnam’s tobacco monopoly, VINATABA. Will it be next?