British American Tobacco back in Philippines

British American Tobacco (BAT) is again active in the Philippine market after pulling out in 2009, this time in league with the Department of Finance (DoF) in pushing for “sin tax” reforms.

BAT general manager James Lafferty said Monday that the company is raring to take on a “monopoly,” referring to PMFTC, which combines local tobacco giants Philip Morris Philippines Manufacturing Inc. and Fortune Tobacco.

PMFTC claims to have cornered 90 percent of the domestic market since combining their operations a year ago, but BAT puts the number at 94 percent.

“We support (Cavite) Rep. Joseph Abaya’s bill (pending at the House committee on ways and means) that we think will level the playing field,” Lafferty said, referring to the proposed law that the DoF itself is pushing.

He said another bill, drafted by Ilocos Sur Representative Eric Singson, would not bring meaningful change to the industry as it retains the contentious provision of an amendment to the Tax Code that exacts lower taxes on cigarette brands that were already in the market as of 1996 than those imposed on new entrants.

The London–based company carries the brands Dunhill, Kent, Lucky Strike and Pall Mall, which are post-1996 brands.

Last week, PMFTC president Chris Nelson said the Abaya bill would encourage illicit trade while “ravaging” legitimate business, citing DoF projections of a 50-percent drop in industry revenues if the proposal becomes law.

Lafferty, on the other hand, said that the Abaya bill “will not necessarily result in massive loss of jobs and devastation to livelihood of tobacco farmers, as alleged.” “Competition is good—it generally results in more jobs and more income opportunities.”

The BAT chief also countered Nelson’s warning about the threat of rampant illegal trade, saying that “smuggling (will not prosper) because cigarette prices in the Philippines are the lowest in the region.”

“Smuggling thrives when (black market) prices are lower (than legal prices),” Laffery said. “How can you go even lower when prices here are already very low?”

He said that BAT is back in the Philippines in support of President Aquino’s call for foreign investments and is encouraged by the government’s reform agenda.

“We left because (the market) is unfair,” he said. “Now, we believe that change is in the air.”