ayda a. yurekli - whoayda a. yurekli coordinator, tobacco control economics tobacco free initiative...
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DI RECT I NVES TM ENT & P RI VAT I ZATI ON OF S TATE- OWNED
TOBACCO ENTERP RI S ES
Ayda A. Yurekli Coordinator, Tobacco Control Economics
Tobacco Free Initiative WHO
World Conference on Tobacco or Health Singapore, March 23, 2012
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D I R E C T I N V E S T M E N T & P R I VAT I Z AT I O N
Opening of markets resulted in increased openness to
direct investment
• Investment in new production facilities • By far the most widespread
• Privatization of former government owned/operated tobacco companies
• Joint ventures between local monopoly and multinational tobacco companies For example, PMI , BAT and Vietnam, Cambodia, Laos
2 Source, Yurekli, Shin &Chaloupka, in press
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State-Owned Tobacco Monopolies or Significant State Ownership in Tobacco Enterprises, by Region, 2010
Region Countries Europe Belarus, Bosnia-Herzegovina, Bulgaria, Moldova , and Tajikistan Western Pacific Cambodia , China, the Democratic Republic of Korea, Japan , Laos, Myanmar, Taiwan ,
Thailand , and Vietnam Eastern Mediterranean Algeria, Egypt, Iran , Iraq, Jordan , Lebanon , Libya, Syria, Tunisia, and Yemen Americas Bolivia and Cuba Southeast Asia None Africa None
Source, Yurekli, Shin &Chaloupka, in press
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GLOBAL TOBACCO INDUSTRY
STRUCTURE
4
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S HARE DI S TRI BU TI ON OF THE GL OBAL TOBACCO M ARKET, 2 0 1 1
Source: Euromonitor 2012
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D I R E C T I N V E S T M E N T & P R I VAT I Z AT I O N
Public health concerns about Foreign Direct Investment
(FDI) and privatization
• government won’t adopt higher taxes, strong tobacco control policies
• widespread use of sophisticated marketing practices • Tobacco use will be higher than it would be otherwise
Public health benefits of privatization
• Eliminates conflict of interest between revenues generated from production/sale of tobacco and health/economic benefits of tobacco control
6 Source: Yurekli, Shin & Chaloupka, in press
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Can be good or bad for public health –
depends on
how it’s done
&
how committed the governments are for tobacco control
7 Source, Yurekli, Shin &Chaloupka, in press
DIRECT INVESTMENT & PRIVATIZATION
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PER CAPITA CONSUMPTION IN SELECT COUNTRIES OF FORMER SOVIET UNION 1990-2008
Source: ERC 2009 and authors' calculation
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PER CAPITA CONSUMPTION IN COUNTRIES WITH STATE-OWNED TOBACCO ENTERPRISES 1990-2008
Source: ERC 2009 and authors' calculation
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P e r C a p i t a C o n s u m p t i o n i n c o u n t r i e s w i t h s t a t e - o w n e d e n t e r p r i s e s 1 9 9 0 – 2 0 0 8
Source: ERC 2009 and authors' calculation
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CI GARETTE CONS U M P TI ON I N P RI VATI ZED COU NTRI ES
Source: ERC 2009 and authors' calculation
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C A S E S T U DY - U K R A I N E
P R I VA T I Z A T I O N O F D O M E S T I C M O N O P O L Y A F T E R T H E T H E C O L L A P S E O F T H E S OV I E T U N I O N
12
Cigarette Consumption in Ukraine
0
20,000
40,000
60,000
80,000
100,000
120,000
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Millio
n P
ieces
Source: BI Economics of tobacco control Ukraine by Ross et et.al., 2008
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DI RECT I NVES TM ENT & P RI VATI ZATI ON
13
Nominal & Real Retail Price of Branded (Marlboro) Cigarettes in UAH
0.00
1.00
2.00
3.00
4.00
5.00
6.00
2000 2001 2002 2003 2004 2005 2006
UAH
Nominal Retail Price
Real Retail Price
Cigarette Prices, Ukraine, 2000-2006
Source: BI Economics of tobacco control Ukraine by Ross et et.al., 2008
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D I R E C T I N V E S T M E N T & P R I VAT I Z AT I O N
Cigarette Prices, Ukraine, 2000-2006
14 Source: BI Economics of tobacco control Ukraine by Ross et et.al., 2008
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D I R E C T I N V E S T M E N T & P R I VAT I Z AT I O N
Cigarette Prices, Ukraine, 2000-2006
15 Source: BI Economics of tobacco control Ukraine by Ross et et.al., 2008
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TURNING AROUND GOVERNMENT'S COMMITMENT
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Jan. 2008
Sept 2008
Feb 2009
May 2009
Jan 2010
June 2010
Jan 2011
rate of growth 2010 to
2008 Filter cigarette
Specific tax, $/ 1000
cig.
1.8 3.8 4.7 7.5 8.7 11.3 12.1 687%
Ad valorem, %
12.5 16 16 20 20 25 25 200%
Minimum tax $/ 1000
cig.
2.3 5.0 5.9 12.5 14.4 18.8 20.1 891%
Ave.Price/ pack, $
0.3 0.4 0.5 0.7 0.8 0.9 1.0 311%
Dynamics of changes in rates of excise tax on tobacco 2008-2011
U KRAI NE EXCI S E TAX P OL I CY
Source: Krasovsky 2012
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January 2008
Sept 2008
Feb 2009
May 2009
Jan 2010
June 2010
Jan 2011
rate of growth 2010 to
2008 Non-filter cigarette
Specific $/1000 cig.
0.6 1.6 2.0 4.4 5.1 5.1 5.4 861%
Ad valorem,
%
12.5 16 16 20 20 20 20 160%
Minimum tax $/ 1000
cig.
1.0 2.3 3.1 6.3 7.2 7.2 7.7 768%
Ave.Price / pack, $
0.1 0.1 0.2 0.4 0.5 0.5 0.5 449%
Dynamics of changes in rates of excise tax on tobacco 2008-2011
UKRAINE EXCISE TAX POLICY
Source: Krasovsky 2012
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DYNAMICS OF EXCISE TAX CHANGES IN UKRAINE 2008-2011
Source: Krasovsky 2012
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U KRAI NE
Source: Krasovsky 2012
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Price, $
Source: Krasovsky 2012
MAXIMUM RETAIL PRICES OF CIGARETTES IN UKRAINE 2008-2011
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Ukraine 2011
Russia 2011
Russia 2012
Moldova 2011
Poland 2011
Filter cigarette: specific tax, $/ 1000
12.1 8.9 11.4 0.9 47.2
ad valorem, % 25 7 7.5 18 31.41 minimum tax $/1000 20.1 11.4 14.6 х 87.3
Non-filter cigarette: specific tax, $/1000 5.4 7.9 11.4 0.9 47.2 ad valorem, % 20 7 7.5 х 31.41 minimum tax $ /1000 7.7 9.8 14.6 х 87.3
Source: Krasovsky 2012
UKRAINE AND ITS NEIGHBORS' TAXES
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S U CCES S S TORI ES AF TER P RI VATI ZATI ON
Source: Yurekli et al 2011, ERC 2009
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TOBACCO TAXES IN TURKEY, 2002-2011
EXCISE TAXES Year Ad valorem Minimum
Specific/pack Total Excise
Rate on Retail Price
VAT Rate on Retail Price
Total Tax Rate on Retail Price
2002 49.5 % 49.5% 15.25 % 64.8 % 2003 55.3 % 55.3% 15.25 % 70.6 % 2004 28.0 % AND 0.35 YTL -
1.00 YTL 56.3% 15.25 % 71.6 %
2005** 58.0 % Or 1.20 YTL 60.2% 15.25 % 75.5 % 2006 58.0 % Or 1.20 YTL 59.4% 15.25 % 74.6 % 2007 58.0 % Or 1.55 YTL 58.2% 15.25 % 73.5 % 2008 58.0% Or 1.55 YTL 58.1% 15.25 % 73.3 % 2009*** 58.0% Or 2.00 YTL 58.6% 15.25% 73.9% 2010 63% Or 2.65TL 63.0% 15.25% 78.25% 2011 65% Or 2.90TL 65.25% 15.25% 80.3%
Source: Yurekli, et al., 2010, and MoF Turkey official Gazette 2011
TAX I NCREAS ES I N TU RKEY
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N O C L E A R R E L A T I O N S H I P B E T W E E N C O N S U M P T I O N A N D T H E P R I VA T I Z A T I O N
O F T O BAC C O I N D U S T R I E S
Consumption has declined in some countries that have adopted strong
tobacco use prevention and control measures after privatization.
However, consumption is rising in other countries that have not adopted
such measures, particularly those in which taxes and prices have remained
low, no matter whether cigarettes are produced by Multinational Tobacco
Companies or state-owned cigarette manufacturers.
Source: Yurekli, Shin & Chaloupka, in press
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DIRECT INVESTMENT & PRIVATIZATION
“Best Practices” for public health • Make no agreements with multinational tobacco companies that
would inhibit government’s ability to adopt strong tobacco control policies
• Become a Party to the WHO FCTC, adopt comprehensive tobacco control policies Regular tax increases that reduce the affordability of tobacco products Strong, comprehensive smoke-free policies Comprehensive ban on tobacco product marketing Other effective policies/programs
26 Source: Yurekli, Shin & Chaloupka, in press