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Logo of Phnom Penh Post newspaper Phnom Penh Post - Where there's smoke there's smuggling

Where there's smoke there's smuggling

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This way to the border. Industry documents reveal that Cambodia has long been a center of organized cigarette smuggling in Southeast Asia.

Profligate international tobacco companies are putting a lot of money into spreading

a corporate message of philanthropy and social responsibility.

But confidential industry documents show that the tobacco giants have been major

players in the global smuggling trade, and have actively lobbied the Cambodian government

to ensure tobacco markets remain open.

Internal corporate documents were made publicly available as part of the US tobacco

court settlements in the late 1990s and many have only recently come to light as

groups of analysts work through the screeds of company papers.

The documents reveal that Cambodia has long been the centre of organised tobacco

smuggling for the Southeast Asian region and companies have pushed their position

in Cambodia in order to access markets they could not legally enter.

A 1994 document from tobacco company Brown and Williamson stated: "Each major

company [is] seeking to establish a foothold [in Cambodia]. The motivation factor

behind this is often not the domestic market itself, but more for the cross-border

benefits."

A 1992 document shows British American Tobacco (BAT) planned contraband routes through

Cambodia to counteract the Vietnamese ban on tobacco imports in place between 1990

and 1994. The company's Cambodia Business Plan states: "Cambodia will continue

to service the Vietnamese market until the ban is lifted".

It is also clear that efforts to tighten up border controls were strongly resisted.

A Brown and Williamson report mentions the need for "sufficient motivation for

the traders" in order to counteract the tightening of Cambodia's border controls.

The corporate documents suggest the tobacco companies worked hard to lobby the government

to resist the tightening of tobacco controls. A 1993 BAT document states: "During

1994, it is intended that STC's Corporate Affairs manager will visit Cambodia, Myanmar

and Laos to ... make informal contacts with key government officials. BATCo needs

to be prepared for defensive action once the anti-smoking movement begins to gather

momentum."

The smuggling of cigarettes is clearly a big business. Internal BAT documents estimated

that nearly 6 percent of the total world sales of 5.4 trillion cigarettes in 1993

were contraband.

And industry commentators say while there are no statistics measuring the level of

smuggling activity today, Cambodia remains a major route for contraband cigarettes.

A report by Thailand's Chulalongkorn University last year showed Cambodia remains

a major entrance point for contraband cigarettes entering Thailand and is also one

of the largest producers of counterfeit Thai cigarettes.

The smuggling continues to Vietnam too. Luk Joossens, an expert in global tobacco

smuggling, reported last year that 555 cigarettes (a BAT brand) are still being smuggled

into Vietnam. A 1995 BAT document shows the activity was being actively pursued by

the company at the time, and Joossens wrote, "[the] policy revealed in the internal

BAT documents seems to continue today."

"There is continued wide-scale smuggling of tobacco products worldwide. It is

happening with the clear knowledge of major cigarette companies," Joossens reported.

WHO tobacco control officer Greg Hallen said it was estimated that 10 - 20 percent

of products consumed in Vietnam today are smuggled from Cambodia. "BAT must

be well aware that a large part of the product that they import into Cambodia is

not consumed in Cambodia," Hallen said. "They must also know that [smuggling

is] going on at the same time they claim to be responsible."

BAT has never commented on the corporate documents other than to say that the company

is cooperating with UK investigations into allegations of its involvement in smuggling.

But John Nelson, General Manager of British American Tobacco Cambodia, denied the

company endorses smuggling in Cambodia. "Smuggling damages our business,"

he said.

Nelson said BAT has significantly reduced the quantities of imported products entering

Cambodia in order to restrict illegal exports. "The quantities sold here are

for domestic consumption," he said. "We do not sell in quantities we do

not believe are consistent with domestic markets."

BAT also uses tax stamps and printed Khmer health warnings in an attempt to restrict

the smuggling.

Nelson agreed there needed to be more tobacco controls in Cambodia, and said the

company had put proposals to the government. "There needs to be some changes.

There needs to be more control in the market place, more control of what's in the

products. Overall we're looking for something sensible in an environment where we

can work together."

But so far, the government appears to have made few attempts to restrict the smuggling

activity.

Cigarette imports remain exempt from Pre-Shipment Inspections (PSI) so it is up to

the importer or Customs office to determine and declare the tax payable on cigarettes

entering Cambodia.

SGS is the company responsible for carrying out PSIs on most goods. An SGS official

confirmed the company carries out PSIs on tobacco but not cigarettes. "This

is a government regulation," he said.

Sources point out that there are many winners in the smuggling game. As one commentator

stated: "Given the benefits to some individuals through smuggling, those individuals

will tend to resist regulation of the industry."

Cambodia's somewhat relaxed attitude to law enforcement also makes it fertile ground

for smuggling and WHO research shows that there is a direct link between corruption

and smuggling. (See graph.)

Smuggling lowers cigarette prices and increases sales. Cambodian prices remain some

of the lowest in the world, with local brands as little as 200 riel a packet, and

premium imports often under $1.

In such an environment, it is perhaps not surprising that Cambodia's smoking rate

is extremely high, particularly in the rural areas where a study in 1999 found that

over 65 percent of men smoke regularly.

Anti-smoking campaigners say the lack of tobacco control laws, which allows for cigarette

smuggling, low prices and unimpeded tobacco promotions creates huge challenges to

their work.

Campaigners hope the government will soon sign an international tobacco treaty, adopted

by the World Health Assembly in May last year, that aims to regulate the industry

by combating smuggling, increasing taxes, and banning advertising.

The Framework Convention for Tobacco Control (FCTC), has been signed by 91 countries,

including Malaysia, China, Thailand, Vietnam and India. Cambodia has not yet signed.

Commentators believe the regulations imposed by the FCTC would offer major steps

to restricting smuggling and reducing smoking in Cambodia.

Until that time, Cambodia's laissez-faire policies and porous borders allow the continued

free-flow of illegal cigarettes.

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