WHO Framework Convention on Tobacco Control calls for global track and trace system

South Asia’s struggle against tobacco

In the 1990s, smoking advertisements were plastered across cities in India and Pakistan and tobacco companies were putting out multi-million-rupee TV adverts. Today, governments are ostensibly cracking down, with even electronic cigarette manufacturer Juul being blocked from entering India. But although the tobacco industry’s visual presence has decreased, South Asia is far from fighting Big Tobacco effectively. The lobbying efforts of powerful international tobacco companies to secure market share continue unabated.

Indeed, South Asian markets remain a mainstay for companies like Philip Morris International (PMI) and British American Tobacco (BAT), as laws pertaining to reducing the consumption and smuggling of cigarettes are becoming more difficult to circumvent in developed countries. The problem is exacerbated by the weak regulatory environments of these developing economies, which makes clamping down on the illicit and subversive activities of tobacco companies an extraordinary challenge.

The tobacco lobby’s machinations

It’s not surprising, then, that tobacco consumption remains high in countries like Bangladesh.

As Bangladeshi oncologist Golam Mohiuddin Faruque recently wrote in the Guardian, nearly a quarter of Bengalis use some form of tobacco. Three of Bangladesh’s five most common cancers are strongly linked to this habit. The culprit? The lobbying power of big tobacco, and a local tax structure that makes evasion very easy and nullifies the power of increased prices to reduce consumption.

One of the biggest cases exposing the industry’s power in South Asia is that of PMI using an undercover arrangement to circumvent India’s ban on foreign direct investment (FDI) in the tobacco sector. According to Reuters, PMI struck a deal with India’s Godfrey Phillips to manufacture Marlboro cigarettes in India a year before the FDI ban. Godfrey acted as the public manufacturer for Marlboro, while PMI’s majority-owned local unit filled the role of a wholesale trading company. It’s unlikely that PMI will be held accountable, however, on account of a weak regulatory framework; Indian regulations only restrict direct foreign investments into a company and don’t offer clear guidance on indirect payments for machinery.

In 2018, PMI and BAT also successfully lobbied Islamabad against implementing larger health warnings on cigarettes. After lobbying the office of the Prime Minister, they were able to ensure health warnings would only cover 50 percent of the pack, rather than the proposed 85 percent. The government was evidently swayed by the sector’s $550 million contributions in excise taxes to the state. Yet Islamabad – and other governments in the region – should also ask how much it’s losing from the sale of illicit cigarettes as opposed to legal ones.

Tobacco majors opposing effective solutions

 After all, tobacco companies regularly point to smuggling as an argument against higher taxes in markets as diverse as South Asia, sub-Saharan Africa, and the European Union –  while being implicated in smuggling themselves since the 1990s. Because smuggled tobacco is largely untaxed, it is cheaper to buy than legal tobacco and so sells more regardless of the distributor. This holds true for South Asia too, where smuggled and untaxed tobacco is cheap and easily accessible.

Although attempts to counter illicit cigarettes exist in the region, they have thus far gone nowhere. Case in point: Pakistan, where the Federal Board of Revenue (FBR) has had plans to implement a track and trace system for each cigarette pack since 2017 in order to combat tax evasion from smuggling and non-duty locally manufactured cigarettes. The tracking system was supposed to be introduced in 2018, but when this failed, the blame fell on a lack of clear rules on how to operate a licensing system. Such rules were finally established last month, following growing concern that “the delay in the implementation of Track & Trace System in the tobacco industry is causing massive revenue loss of Rs 40-50 billion per year.”

This has revived hopes that a tracking system may finally see the light of day within this year. Even so, hopes should not run too high. A FBR official admitted early last year that resistance against track and trace comes from within the FBR itself. According to the unnamed official, the lack of progress was the result of “some FBR officials” blocking the proposal, which does not bode well for swift implementation this time around. Of course, there is also the possibility that the tobacco industry will try to take advantage of the agency’s lack of expertise in implementing such solutions – and need for assistance from outside consultants – to place its own allies in key advisory positions during the process, as it has often managed to do in other markets.

Moving forward

Track and trace as a means to fight tobacco smuggling and tax evasion are considered a globally accepted solution. It is enshrined in the World Health Organisation (WHO) Framework Convention on Tobacco Control (FCTC), which calls for a global track and trace system. As such, India, Pakistan, and Bangladesh have a ready guidebook to fight the smoking.

Sadly, Big Tobacco’s tentacles reach far, working to undermine T&T applications in South Asia and the world. For example, the tobacco industry has found support from over 106 free-market think tanks in two dozen countries, India and Pakistan included. These organizations have accepted donations from, or are wholly funded by tobacco companies. They often argue against WHO tobacco control policies, arguing they were “’ineffective, regressive or increased smuggling” despite experts proving the contrary. All have opposed anti-smuggling reforms and taxation.

While tobacco companies are solely fixated on selling more tobacco products, many governments lack the money and manpower to fight these companies. With the WHO’s framework providing a ready-made toolkit to overcome the scourge of smoking, tobacco firms are pouring untold millions into efforts to undermine the FCTC’s provisions for precisely one reason: because they know those provisions work.