‘Raising cigarette prices will fuel illegal trade further’

KUALA LUMPUR: Any increase to the current minimum cigarette price (MCP) will only hurt the businesses of industry retailers even more and serves no real health agenda for the country, says JT International Bhd (JTI Malaysia).

JTI Malaysia managing director Cormac O’Rourke said while the country grapples with an increasingly out-of-control illegal cigarette trade situation, there were concerns that the government is planning to add yet more regulations, such as increasing the MCP, which would only fuel illegal cigarette trading further.

“We were recently made aware of the ministry of health’s (MoH) plans to amend the existing Control of Tobacco Products Regulations 2004 and were dismayed to learn that one such amendment proposes to increase the MCP from RM10 to RM15,” he said at a media briefing to share the latest findings of the Illicit Cigarettes Study.

O’Rourke said given that over half of all cigarettes in the country are currently consumed illegally and sold below the current MCP, Malaysia cannot afford to have further regulations imposed on the legitimate tobacco industry by the MoH as this will only serve to exacerbate the situation.

“Policy proposals of this nature are reckless and serve no genuine purpose considering that 65% of cigarettes sold and consumed in Malaysia do not adhere to the current MCP. To raise it by 50% is an attack on legitimate retailers and law-abiding consumers alike. It is clear that no benefit or impact assessment has been conducted by the MoH, nor has there been any proper consultative process put in place,” he added.

When asked, O’Rourke said the impact is definitely being felt on legitimate retailers. “The industry is now reaching a breaking point which affects retailers, margins, and investments across the board. This will only deteriorate unless the government takes this problem seriously.

“Our lowest brand price is RM11.90, but we simply don’t make money from that price point. We’ve been doing our best to hold prices at that level. But should the government increase the minimum price point, we will certainly see an impact especially on the investment side in Malaysia. Already JTI and British American Tobacco [(M) Bhd] have closed their manufacturing facilities and we’ve seen a reduction in headcount across the board so there is pressure on investments,” he said.

O’Rourke added that there seems to be divergence at the cabinet level on this matter and stressed on the need for a holistic solution.

“On one hand you have MoH wanting to increase the minimum price of cigarettes, then you have the ministry of finance, who acknowledge that to do so or to further tax the product would be detrimental,” he said.

Earlier, O’Rourke went through the survey findings for the June to August period, which highlighted a sharp increase in the illegal cigarette incidence by 4.9% to 64.6% compared with 59.7% recorded in the previous study between March and May.

The survey, commissioned by the Confederation of Malaysian Tobacco Manufacturers, is conducted three times annually by collecting 51,000 discarded cigarette packs nationwide and verifying their security features, absence of local tax stamps and signs of non-authentic packaging.

Source: TheEdgeMarkets