Smoke and mirrors
August 22nd, 2010
Those involved in tobacco smuggling find it easy to circumvent the efforts of authorities.
Despite a concerted effort by authorities in inspections and control the illicit tobacco trade continues to grow and has become more sophisticated. An absence of mechanisms and policies to prevent and restrict the illicit trade is one of major reasons it continues to flourish.
In the first six months of this year there were 4,870 illicit tobacco trade cases uncovered by market management agencies and police in Vietnam, 2.1 per cent less than in the same period last year. Packets seized totalled 4.423 million, a fall of 2.9 per cent over the same period of last year, and the number destroyed was 2.321 million, down nearly 20 per cent.
According to Mr Tran Thai Sinh, Chairman of the Vietnam Tobacco Association, illicit tobacco has been flooding into Vietnam since 1980, totalling some 300-400 million packets each year. But in recent years it’s increased considerably, to 630 million in 2007, more than 700 million in 2008 and 800 million last year. The 2009 number accounted for 20 per cent of domestic consumption. Illicit tobacco accounts for very large shares of the total tobacco sold in some provinces, such as 70 per cent in the Mekong Delta’s Can Tho, 46 per cent in Ho Chi Minh City, and 41 per cent in southern provinces. Figures from the Lao Bao border gate with Laos in central Quang Tri province show that in 2008 there were 500,000 cigarette packets smuggled into Vietnam each day and the number is increasing.
There are 185 brands with illicit cigarettes in the market, primarily “Jet” and “Hero”, which account for 90 per cent of the total. According to Cambodian Customs, more than 22.5 million packets of Hero and 13.5 million packets of Jet were imported legally into the country in the first six months of the year. The two brands are produced in Indonesia and imported legally into Cambodia and Laos at a low level of tax, and then Vietnamese traders import them illegally and earn large profits. Provinces such as Quang Tri, An Giang, Long An, Hau Giang, and Tay Ninh share a border with Laos and Cambodia so are fertile ground for smugglers.
The illicit tobacco drains VND3,500 billion from the State budget and more than $200 million goes to other countries. It also means the tobacco industry is starved of raw material supplies, of 17,000 tons, and more than 50,000 workers have lost their jobs in the last four months.
Meanwhile, authorities have strengthened and improved their inspection and control activities over the illicit tobacco trade and have seen some good results. In 2007 there 4.8 million packets seized and destroyed, 8.8 million in 2008 and 7.3 million in 2009. But the numbers just account for 1 per cent of all tobacco imported illegally into the country and consumed in the market. Importantly, their origin and quality remain unknown.
The main reason why the illicit tobacco trade is flourishing is the absence of policies and sanctions. Sanctions against those who illegally transport and trade tobacco are so slight they have no effect at all. Hot spots for smuggling include the Moc Bai border gate with Cambodia in An Giang province, which makes up 30 per cent of all illicit tobacco, and Lao Bao border gate with Laos in Quang Tri province, with 20 per cent of the total. At a conference on the illicit tobacco trade and measures to address the problem, held by the Association and British American Tobacco (BAT), some participants said that smugglers are becoming much more sophisticated. They divide the total into smaller quantities and employ old people and children to transport them through border gates.
Spending on activities to seize and destroy tobacco is low and do not encourage authorities to fight the trade. Implementing regulations on trading, transporting, concealing and receiving illicit tobacco has proven to be difficult. Some believe that authorities have slackened off in their control and inspection tasks and that existing sanctions are no deterrent at all.
Decree 76/2010/ND-CP was approved on July 12 by the Prime Minister, amending Article 11 of Decree 06/2009/ND-CP on fines for administrative offence in wine and tobacco production and trade. It will prevent smugglers from doing business and the increasing quantities of illicit tobacco coming into Vietnam, according to the Association. Trading, transporting or concealing forbidden goods such as illegally imported cigarettes, of 1,500 packets or more, will now result in criminal prosecution. Smuggling of less than 1,500 packets, for first time offenders, will result in criminal prosecution or a fine of VND100 million ($5,260).
Many consider this to be a breakthrough by the government in tackling the smuggling of alcohol and tobacco. But the sanctions are still not enough to effectively implement anti-smuggling activities, which require strict inspection and control by authorities in border areas and in the market, especially in hot spots like An Giang, Long An, and Quang Tri provinces.
The Association has also asked the government to consider and approve legal documents to put cigars and other types of cigarettes illegally imported on to the list of goods and services forbidden, limited or conditional.
In addition, tobacco should be removed from preferential policies for border residents. Mr Sinh was quoted as saying that “the provisions for border residents should not allow them to purchase, transport, and trade cigars across borders, and we hope that we can prevent those who take advantage of the preferential policies to smuggle tobacco.”
Source vneconomy
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