Lao PDR

Tobacco is harmful the population of Lao PDR. 7,300 in the country die as a result of tobacco-related diseases every year.[1] The tobacco industry in Lao PDR is mainly controlled by the Lao Tobacco Company Ltd. which is partly owned by the government of Lao PDR.[2] The total number of current smokers in Lao PDR is 0.8 million adults aged 15 years and over (27.9% of the population); 0.7 million are male and 0.1 million are female.[3] 

Smoking Prevalence

Smoking prevalence in Lao PDR is particularly high among adult males, at 50.8% in 2015[4] which increased from 43% in 2012.[5] Regarding the smoking prevalence among young people, it is as high as 6.4% of which smoking prevalence among boys (10.7% is higher than girls (2.1).[6] 

Sale of Cigarettes

The sales of cigarettes in Lao PDR increased from LAK 936,972.5 million in 2011 to LAK 735,192.6 million in 2016.[7] The volume has increased from 1,927 million pieces in 2001 to 3,400 million pieces in 2017.[8] Cigarettes market is expected to be expanded. It is estimated that the duty paid market will reach 4.48 billion pieces by 2027 (31.6% above 2017 levels), while per capita consumption will increase by 14.9% (548 pieces per person).[9]

Tobacco Farming

Tobacco farming is valued at approximately USD 50 million a year in Lao PDR; it is the third largest agricultural product produced in the country. The tobacco industry has introduced the contract farming in Lao PDR which serves as the substitute farming for tobacco farmers. The tobacco companies (particularly, Lao Tobacco Co. Ltd. and Lao-China Lucky Co. Ltd. have contracted many farmers in Khammouane, Bolikhamxay and Savanhnakhet provinces which considered to be the three largest provinces that produce tobacco leaves in Lao PDR.[10]

Tobacco Leaf Production

According to Food and Agriculture Organization (FAO)[11] the information of tobacco leaf production in Lao PDR in 2018 as presented in the table below;

Element Value
Area harvested5,670.00 ha
Yield95,247.00FC hg/ha
Production54,005.00 tonnes

FC: Calculated data

Who Dominates the Market?

In November 2001, a 25-year Investment License Agreement (ILA) was signed between the Committee for Investment and Cooperation (CIC) of Lao PDR, Coralma International and S3T Pte Ltd. This contract placed tobacco company Lao Tobacco Limited (LTL) in a joint venture with the government. [12] As a consequence, LTL has earned the majority of the tobacco market share in Lao PDR since 2001, at 72.3% as of 2017. 

Tobacco Industry Market Share in Lao PDR (% Share) 2017[13] 

Roadmap to Tobacco Control

Lao PDR ratified the WHO FCTC on 6 September 2006 and became a Party to the treaty on 5 December 2006.[14] Since then the country has enforced domestic legislation such as the National Tobacco Control Law which was enacted in 2009 to enforce measures to manage, monitor and inspect the production, importation, distribution and sale-purchase of tobacco products, and to establish smoke-free areas.

Tobacco Control Legislation in Lao PDR[15]

1994Official notice from the Prime Minister’s Office on tobacco advertising ban, covering billboards and all direct tobacco-related advertising, but excluding indirect advertising.
2005Tax Law No 04/NA, was enforced. The excise tax is applied on the factory price or the imported price that includes customs tariffs. The ceiling rate was 55%.
2006Lao government ratified the WHO FCTC.
The Ministry of Health adopted text health warnings with 6 rotating warning messages on tobacco product packages.
2009The National tobacco control law (TC Law No. 07/NA) was enforced, with measures to manage, monitor and inspect the production, importation, distribution and sale-purchase of tobacco products, and to enforce smoke-free areas.
2010TC Law (12/2009) and Decree to Implement the Tobacco Advertising Ban (8/2010) on tobacco advertising ban were enforced.
Tax Department collected tobacco specific tax of LAK 100 per pack.
2011The Tax Department increased tobacco-specific taxes from LAK 100 to LAK 500 per pack.
2012The Amended Tax Law (No.05/NA, 20 December 2011) came into force. The excise tax rate increased from 55% to 60% where a special profit tax rate of 26% was applied to companies engaged in the manufacture, import and sale of tobacco.
2013The Prime Minister’s Decree on Tobacco Control Fund was approved with two income sources: 2% of industry profit and 200 LAK per pack.
2014The Minister of Finance approved the transfer of revenue (from 2% of the company’s profit tax and LAK 200 per pack) to the Tobacco Control Fund (health tax).
2016Pictorial health warnings (PHWs) law (Agreement No. 1067/MPH) enforced on all tobacco products (top 75% of tobacco product packages, front and back). Decree to Implement the Tobacco Advertising Ban (8/2010) that included banning all corporate social responsibility activities of tobacco companies.
Excise tax law passed; rates at 30% (2016-2017); 45% (2018-2019) and 60% (2020 onwards) of retail price.
Prime Minister’s ‘Regulation on Tobacco Control Law Implementation’ requires the tobacco industry to report (once a year) on ingredients in cigarettes.
2018Government’s order to stop other tobacco companies who are not the Parties to the ILA benefitting from the Agreement.
Minimum Price Policy (increase minimum price from LAK 3,000 to LAK 4,000 per pack) and specific tax increased from LAK 500 to LAK 600 per pack.
Excise tax law to increase specific tax per pack from LAK 500 to LAK 600.

Tobacco Industry Interference

Tobacco tax

In 2001, the Lao government signed a 25-year Investment License Agreement (ILA) with an international tobacco company and granted them tax incentives to grow their business investment in the country. The ILA offered the tax incentive for the industry by requiring the ILT to pay the excise tax rate of 15% of the “production cost”; if the production cost is less than LAK 1,500 per pack of 20 units and 30% of the “production cost”; if the production cost is either equal to or more than LAK 1,500 per pack of 20 units. This clause is against the tax law as all tobacco companies are required to pay the excise tax rate of 30% of retail price (2016-2017), 45% (2018-2019), 60% (2020 onwards), plus LAK 600 additional specific tax, including 2% of profit tax and 200 LAK/pack of local and import tobacco for Lao PDR Tobacco Control Fund.[16] Due to this reason the Government of Lao PDR has lost the revenue of USD 144 million from 2002 to 2017 due to the ILA.

Tobacco Tax Revenue and Tobacco Tax Revenue Loss in Lao PDR[17]

The International Tax and Investment Center (ITIC) and Oxford Economics (OE) has released the annual Asia Illicit Tobacco Report since 2012, describing illicit trade concerns in Asia including in Lao PDR.[18] The reports claim that the illicit trade incident is high in Asia, particularly in countries that have high tax rates such as Malaysia, Philippines and Singapore.  The methodology is biased and flawed resulting in exaggerated figures that were used to scare the governments in Asia including Lao PDR into delaying or pausing tobacco tax increases. The ITIC and OE research from 2011-2017 was funded by Philip Morris International (PMI). The PMI has provided their own data and methodology in the development of mentioned research which showing that the industry has the ultimate control of research and its result.[19]  

Pictorial health warnings

In May 2016, Lao PDR’s Ministry of Health issued the Pictorial Health Warnings (PHWs) Regulation requiring all tobacco companies to print health warnings covering 75% of cigarette packs. The country’s Ministry of Industry issued a deadline for tobacco companies to print the PHWs on cigarette packages: 1 January 2018. However, monitoring conducted of the market showed that the most popular cigarette brands produced by LTL and Lao-China Hongta Good Luck Co. Ltd., A Deng and Dok Mai Deng, violated the law by not having printed PHWs on their cigarette packs. These two companies control over 80% of the cigarette market in Lao PDR.[20]

In February 2018, Imperial Brands (LTL is the subsidiary of Imperial Brands) held an annual shareholders meeting in Bristol and Southeast Asia Tobacco Control Alliance (SEATCA) published an open letter[21] to the shareholders of Imperial Brands the s demanding that they respect the Lao people by complying with the tobacco control law to apply PHWs across 75% of cigarette packs immediately. Ultimately the sustained push from NGOs and the WHO successfully made LTL and Lao-China Hongta Good Luck Co. Ltd. comply with the PHWs Regulation in Lao PDR.

Tobacco Advertising Promotion and Sponsorship (TAPS)

In Lao PDR, tobacco advertising promotion and sponsorship including corporate social responsibility (CSR) activities are banned. However, the law allows cigarette pack display at point of sale (POS).[22] In the past, tobacco companies have also attempted to promote their products by printing on parasols (outdoor umbrellas). [23] However, in present, the promotion of products on parasols was removed. A survey on POS showed that tobacco companies devised a new advertising strategy by placing oversized cigarette stickers on display shelves to increase cigarette pack visibility in order to attract customers.[24] In addition, according to SEATCA’s surveillance in 2009, it is observed that the tobacco companies would sponsor festivals, concerts and other public activities targeted at young people in Lao PDR.[25]

 

[1] https://tobaccoatlas.org/country/lao-pdr/
[2] https://tobaccowatch.seatca.org/index.php/2015/06/23/lao-pdr/
[3] Ministry of Health Lao PDR. (2015). National Adult Tobacco Survey Country Report: Lao PDR.
[4] http://aseantobaccocontrolatlas.org/chapters/ch2/
[5]https://seatca.org/dmdocuments/The%20ASEAN%20Tobacco%20Control%20Atlas_Latest.pdf
[6] http://aseantobaccocontrolatlas.org/chapters/ch2/
[7] Euromoitor International. (2017). Tobacco in Laos
[8] Global Data (2018). Laos Cigarettes,2018.
[9] Ibid
[10]https://seatca.org/dmdocuments/Livelihood%20in%20Tobacco%20Farming%20and%20Cigarette%20Consumption%20in%20Lao%20%20PDR.pdf
[11] Tobacco Production Quantity by Country, FAO Data: Food and Agriculture Organization <http://data.un.org/Data.aspx?d=FAO&f=itemCode%3a826>
[12] https://seatca.org/dmdocuments/AsianStateOwnedTobaccoEnterprises_Report_web.pdf
[13] Global Data (2018). Laos Cigarettes,2018.
[14] https://www.who.int/fctc/reporting/party_reports/lao/en/
[15] https://seatca.org/dmdocuments/AsianStateOwnedTobaccoEnterprises_Report_web.pdf
[16] https://seatca.org/?p=6515
[17] https://seatca.org/dmdocuments/AsianStateOwnedTobaccoEnterprises_Report_web.pdf
[18] https://www.oxfordeconomics.com/asia-illicit-tobacco
[19] To be inserted (Waiting for the release of  latest SEATCA critique report)
[20] https://medium.com/@ASH_LDN/tobacco-companies-violate-lao-tobacco-control-law-4fa02b94cb83
[21] https://seatca.org/?p=12052
[22] http://aseantobaccocontrolatlas.org/chapters/ch10/
[23] http://origin.who.int/fctc/implementation/needs/factsheet-na-fctc-lao-pdr.pdf
[24] https://seatca.org/dmdocuments/POS%20ASEAN_Nov2014.pdf
[25]https://seatca.org/dmdocuments/surveillance%20of%20tobacco%20industry%20activities%20toolkit.pdf