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                       Quote of the Week : "Hopefully, the demonization oan end or af /easf fall on increasiriply deaf ears, and we wi9 have
                           he/ped set a positive, enduring crourse for the future of Philip Morris for many years to celrAtsenior vice president
                                                                     of corporate affairs Steven Parrish

                                                                        EUROPE
                      PhIIIpMorris Addresses Investment Community                      Mr. Bible seid PM has rulcd out major "structural
                      At a Juue 28 getheriug of over 400 investors, bankers, and       changes" or spin-offs, as the company has seen "uo
                      security analysts in New York, Philip Monis Cos . (PM)           compelling evidence" that they would be worthwhile .
                      exeeutives outlined Uie company's expectations and plaus                  Addressing litigation issues slateside, vice
                      for the future . Chainnau and CH(l Oeoffruy Bible                chaimiau and general eounsel Murray Bring said that
                      estimated that PM's goal for 1999 camings is $3 .30 per          based upon significant losses in California and Oregon the
                      share. He acknowledged that earnings would be                    company is planning "to make significant chauges in our
                      negatively impacted by a transitional ycar for both the          litigation strategy to address juror anger . We may lose a
                      domestic and international businesses, as wcll as                case from time to time," said Mr . Bring, "but ifthese
                      unfavorable currency impacts. The international cigarette        strategies work, we should see a dramatic decline in the
                      business will probably see a full year volume decline of          uumber ofcases filed"
                      about 4 percent, largely due to a weak euro, the impact of                Senior vice president of corporate affairs Steven
                      duty-free sales and a reduction in volume . BAT' shares fell      Parrish also indicated that the <ompanyill respond rnore
                      18p to 593p (USS 9 .35) on June ,18ie of the worst                swiftly to critics . Credit Suisse First Boston analyst
                      showiny' in the FfSE 100 as 2 .56 million shares changed          Bonnie Zoller predicted, "'I'he company's going to show
                      hands . Shares in Imperial aud (lallaher were also slightly       that it's not going to lie down enymore" in the face of
                      weakened by the annomtcement .                                    public criticlsm . The rrust extrerue detractors, said Mr .
                               Mr . Bible assured investors that "the future long-      Paaish, "willbe seen by the public as unreasonable .
                      term health of our brands is our top priodty ." In fact, once     Ilopefully, the demonization can end or at least fall on
                      the tobacco anns "emerge from this transition yeu'," Bible        increa<ingly deaf ears, and we will have helped set a
                      said, "we are aimiug for eamings per share growth of 11 .         positive, enduring course for the future of Philip Morris fur
                      13 percent for 200o through 2003 - clearly, a robust target       many years to come ."Thc effort is a significant part of thc
                      for the largest consumer packagelfoods company in the             company's detenninetion "to show the public who we
                      world . Add to this ou' anticipated dividends and share           really are : a company made of good people and cowmnittcd
                      repurchases, aid you will see that we are delivering on our       to doing business responsibly," added Mr . Hib&sttl
                      two principal financial gosls : building our businesses   and     Fxuminer 629, WSJ 6/29, Bloomberg News 6/28,
                      increasing value for sharetmldem ." The compauy            .      Business Wire 6/29, AP 6/29, Reuters 6/28, 629) .
                      estimated that from 1999 through 2003, its businesses will
                      likely generate approximately $55 billion in cumulative
                                                                                                               HIGHLIGHTS
                      operating cash flow, which will then be used to guard the
                      company's credit ratings, grow the business and enhance              ~~ 1 . R1RllSOlganahak 1:aunchCerna/s . . . . 4
                      value for shareholders . f-or the time being,                       . 2. ~ : ACCC Pulla ~Professlonala . . . . . . . . .. A
                                                                                          ~ . 3. Zimbabwe ~ Ikfaults . . : . . . . . . . . . . . . . 6
                                                                                          :~.4. .~ PM~Hxlts~~lmports~To~(blombw .~. : . :9 ~ .




                          TOBACCO MERb1tANTS                           Founded 1915                              P .o . BOX 81119
                           ASSOCIATION, INC .                                                              PNINCE'fON, N.J.9958 :t-fI019
                            TEI. : (609) 27CrQ9nn                                                              fAX : (609) 475fi3T9




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                                                                                    a portion of the duty or selling certain iterns in certain
                  UK : Imperlal's Cost Cutting Efforts Earn It High                 countries through the journey . Brinany Ferries
                         Ratings                                                    rematkrod, "Replacittg duty-ftee with duly-paid is a
                  Analysls recently took a trip lo Imperial '1'obaccti s            bit of a nonsense because not all countries have the
                  opcrations in the Netherlands . After observing the               same rate of duly . We have a ship thal in one week
                  company's cost cutting efforts at VarNclle Tabak,                 goes front Plymouth toRoscoff twice, Plymouth to
                  which Imperial acquired last year, West [.B'anmwe                 Santander in Spain twice and from Ireland to France
                  gave the company a'buy' rating . An Imperial                      once, which means an awful lot of price-changing ."
                  spokeswoman further stated that by mid-2000, Van                           However, the new duty-paid regulations
                  Nelle Tabak's cosl base will be cut by nn 40 million              change the amount of alcohol and lobacco passengers
                  (US$ 18.5 million) . The company's operaling profit               are allowed to bring into a country . Whereas under
                  is 9percenl higher in the first half of 1999than it was           duty-free rules a passenger could carry only two liters
                  in the same period last year IGxtel Examiner 6/24) .              of wine, one liter of spirits and 200 cigarottes, the
                                                                                    duty-paid mles allow passengers to bring any amount
                  UK : Tobacco Foe Appeals To Scottish Parliament
                                                                                    identified as for personal consumption . Customs
                  Anti-tobacco advocate Professor Peled3oyle of
                                                                                    officers have been notified Ihat this amount should
                  Milan called on the Scouish Parliament to implement
                                                                                    not exceed IOliters of spirits, I101iters of beer and
                  a lotal Iobacco ad ban . The Roy Castle Fbundalion
                                                                                    800 cigarenes . Consumption of products in bars and
                  hosted a conference at the Glasgow Royal Concert
                                                                                    restaurants on ferries will remain tax and duty-free .
                  hall, where Boyle, who is also the Head of                                The only members of the EU not fully
                  Prevention and Control for the Imperial Cancer                    affected by the abolition of duty-free are the
                  Research Fund, criticized the UK governmenl's
                                                                                    European Commissioners who drafted the rules .
                  recent proposal to ban cigarette ads on billboards and
                                                                                    These individuals are able lo purchase 1 :166 (US$
                  newspapers in six tnonths . Boyle suggested lougher
                                                                                    261) of laz-free goods every year (Financial Times
                  measures, and proposed that the government aim to
                                                                                    6126, Daily Telegraph 6/26) .
                  reduce the number of people who smoke by 50
                  percent in the next 10years . "A 50 percent reduction              Spaln : SpeculatlonOf Tabacalera/SEITA Merger       .
                  in the number of people smoking in the next ten years                      Resurfaces
                  is achievable . It can be done with an adveuising ban,            Talk of a merger between Spain's Tahacalera and
                  price increases, health scares and laking away                     France's SFiITA causedTabacaleta's stock lo rise on
                  vending machines" lle further slated that since                   June 25. Rumor of a possible merger between the
                  France banned tobacco ads in 1991,sales oftobacco                 two companies began in March, but was
                  products had dropped by eight percent (Uaily Record                subsequently denied by both firms (WA99-12) . A
                  6/29) .                                                           source at a leading Spanish bank commculed, "The
                                                                                    ramor . . .is that they i'1'abacalera] are going to
                  UK : Duty-Free Alternatives
                                                                                    announce sonre kind of deal with SCTTA in the next
                  With the abolition of duty-frec sales in the Huropean             few days . Talk of a merger has been on the table in
                  Union fast approaching on July ],ferry operators are              the pasl/' He qualified, however, "With the AGM
                  in the process of detennining how they will conduct               being held June 29 people may just be heating the
                  sales on board . In lemu of alcohol and tobacco,                  stock u(s ."
                  passengers within the European Union (6U) will pay                        However a11he company's annual press
                  VAT at 17 .5 percent as well as duty, which together              conference on June 28,president Cesar Alierla
                  accounl for 80 percenl of the British retail price of             commented only that "studies are cunently taking
                  cigarettes . The VAT rate for goods on fenies will be             place between companies in the Huropean market,
                  Ihal of the country the ship depaned from . However,              but there are many possible combinations ." Aliena
                  Ihere will be two rates of excise duly throughout the
                                                                                    also announced Ihallhe company intends to bolster
                  journey. It is expected that due lo different duly
                                                                                    its competitiveness by closing certain factories.
                  regulations in different countries, ferry operators will          Since 1993, Tabacalera has cul its workforcc three
                  set a fixed price for goods on ship by either absorbing
                                                                                                                  (Continued next page)




                  2               •t=TP.O. Box an19 ;Princeton, N .J . 08543 ;609-275-090P, 609Q75-8379 (fax) ; mm@mia .org   WA   9927




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                      tirncs. Ile said that in July, "he would sit down with
                      Ihc Spanish trade unions in order lo discuss Ihe last               France: Unlons Reject SEITA 35-Hour Week
                      and final cut in the company's workforce" Factories                 Three French trade unions rejected SeitSA's
                      affected by the closings will most likely be the ones               proposal for a 35-hour workweck claiming that the
                      on the 1beAan peninsula . The company has eight                     proposed agreement is 'less attractive' than thc one
                      cigarette factories on the peninsula, four cigar                    currently in place . The proposal was opposed by the
                      factories, m•o tobacco mixing factories, three                      Confederation Francaise des Travaillcurs Chretiens
                      factories in the Canary lslands and five abroact8l                  (CFCC), ForceOuvriere (p0) and Confederation
                      I'ais 6/29, Iz Figuro 6/29, I?xpansion 6/29, AP7f                   Generale du Travail (COT) trade unions, which
                      News 625).                                                          represented 54 percent of the company's etnployecs'
                                                                                          votes during the lasl works council election . The
                       Spain : Tabacalere First Half 1999 Estlmates                       current agreement was approved on June 18, 1991
                       In Ihe first half of 1999, Tabacalera estimates a 0 .1             (Ia Tribune 6J28).
                       perccnt drop in sales to 145 .707 billion pesetas (USS
                       897 .4 million) cornpared with 145 .911 billion pesetas            Russia ; Western Manufacturers AccusedN
                       (CSS 898-6 million) in the first half of 1998 .                           Aiding Health Decline
                                                                                          Doctors , health and science researchers from around
                       linrnings forthc 1999 period are believed to have
                       riscn In 4 .591 billion pesetas (USS 28 .2 million) from           the world met in Russia to discuss the country's
                       3 4" hillion pesetas (US$ 21 .2 million) in 1998 .                 failing health care system. Of particular concern is
                       I 'hc comparqalso eslinsates one-lime gains in III                 the increasingly high Russian death rate An increase
                       1999 of 567 million pesetas (US$ 3 .49 million)                    in cigarette consumption was cited among a number
                       compared xilh 111 19981osses of 213 million pesetas                of other reasons as a contributing factor . Doctors
                       (l :S$ 1 .3 million) . Tabacalera's Spanish cigarette              further stated that since the entrance of Western
                       market share during the first half of 1999 is believed             tobacco manufacturers into the country following the
                       to hare increued to 48 percent from 47 .5 percent in               fall oflhe Soviet Union in 1991,tobacco sales have
                       the brs half of 1998 . Other results am as follows :               skyrockeled .
                                                                                                 The new markel in the early 1990's anracted
                                                                                          many international companies, which invested in
                                                                                          producYion factories and retail outlets . American and
                                                                b
                                                                                          British cigarette brands currently outsell most other
                       1`el proln             .                1 .220
                                                                                          products in the eountry . American researcher Fred
                                           (US$ 82 .1 min)     (USS 69 min)
                                                                                          Kelly commented, "I am, quite frankly, blown away
                       Pretax I'rofit      20 .264             15 .940
                                                                                          by the smoking rate in this country . Everyone
                                           (US$ 124.7          (USS 98 .1 ntln)
                                                                                          smokes. ]t's epidemic . I have to buy aspirin on the
                                           min)
                                                                                          black market, but cigarelles are practically mining
                       )\et Revenuc        204 .053            203.260
                                                                                          down from the skies ." Canadian physician Dr.
                                           (US$ 1 .256         (USS 1 .25 bin)
                                                                                          William Piker is attempting to launch an anti-tobacco
                                           bin)
                                                                                          campaign in the country . However, he cites
                       Opcratsng Cosls     182 . 95                 .                     insufficienl funds and a wcak government as
                                           (US$ 1 .12 bin)     (US$ 1 .14 bin)
                                                                                          obstacles to his crusade (CTROn-I .inc 6/30) .
                       Depreciation         .114               6 .858
                                           (USS 37 .6 min)     (US$ 42 .2 min)            Russia : Plant Completion Projected
                       fAFX Tcws 3 ) .                                                    Philip Morris will complete construetion of its PM
                                                                                          Izhora plant in the St . Petersburg Region at the end of
                       Switzerland :Oettinger-Davidoft Posts 1998                          1999 or beginning of 2000, according to project
                             Results                                                      director Guy Gocffers . The US$ 330 million factory
                       Ckttinger-Davidoff recorded an increase in turnover                will produce 25 billion cigarettes per year, primarily
                       of 13.8 pcrcem to SPr 2 .207 billion (US$ 1 .4 billion)            L&M and ChasteHiefdbr the Russian market
                       in 1998 . The company invested SAr 20 million (US$                 IKarcra Kapital 6e30] .
                       13million) in Iwo hand-rolled cigar plants in the
                       Dominican Republic in 1997, rnising production
                       capacily to 47 million cigars per year lpeue ZUrcher
                       Zcitung 6/18] .




                       WA    99-27      -9y„iP .O. aox 8019;Princeton, NJ . 08543; 6nB275-090n; 6P7-275-8379 (fax) ; Ima(Itniaorg              3




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                                                                                      hike is expected to gencrale an additional 150 billion
                  Russia : Successful Cigarette Trademarks                            lire (US$ 80 million) in tax receipts in 1999 and 400
                  Thc market researohunripany Russian puMic                           billion lire (US$ 213 .4 million) iu 2000 . Italy's 1998
                   Rclalions Group (RPR(i) reported that in ihe first                 inflation rale was twice as high as the average rate of
                  quancr of 1999, 45 Russian lrademarks, including                    the II countries using the euro currency [Bloomberg
                  tobacco trademarks, were wnsistenlly advertised on                  6/291 .
                   all-Russian television channels. RPRG mted two
                   cigarette Iradenurks as particularly successful : R .J .           Bulgaria : RJR And Bulgartabak Launch Camel
                   Reynolds' (,1'1')Potrl, wilh its 6 percent national                      Cigarettes
                  markel share and British Aruerican 7bbaccuUBVa                      RI Reynolds Inlemational, recently acquired by
                  Zolotayawith its 3 percent market sharelt4i 6122].                  Japan Tobacco, announced Ihawillbegin
                                                                                      production ofCamef cigascttes in the Bulganabak
                   Russla :Sawa UniversalAnd Vunekt Distributors                      Sofia factory, under a licensing agreement between
                        To Merge                                                      the Iwo companies signed in December 1998 .
                  Tobacco wholesalers Savva Universal an&'unekl                       Bulgarlabak CFABoyko Kishkov stated,
                   are planning a US$ 8 milliomcrga which would                       "produclion ofCamelcigarelles has already stanrd
                  give the new group 20 percent of ihe Russian tobacco                and we hope lo reach annual output of 1,500 tons of
                  market . The merged entity would fonn a single                      cigarettes iu three yeArs" Tl6amel; to be
                  distribution nctwork wilh 12 centers in ihe country's               launched on the Bulgarian market, contain 75 percent
                  largest cities . Currently Ihe two companies distribute             of RJR's basic tobacco mix and 25 percent Oriental
                  tobacco products for British American Tobacco                       tobacco Icaf grown in Bulgaria .
                  (BAT), RJR andLiggctl-Duca1 Kommcrsant-Daily                                The Bulgarlabak monopoly has 22 factories
                  6I23] .                                                             in Bulgaria and five in Romania and the fonner
                                                                                      Soviet Republics. It is anticipated Ihat the company's
                   ItalyCigarette PricesTo Increase                                   Camellicensing agreernenl will increase
                  La Repubbfieareponed that for the first tilne since                 Bulganabak's value when it offers its shares to the
                  March 1998, Italian cigarctte pdcorill increase on                  public later this year . The monopoly produced 70
                  July 1, 1999 to malch the inflation rate . While the                cigarelle brands in 1998 and sold 34 billion pieces
                  prices of somc brands will rernain the same, most                   (Reuters 6/29).
                  others including Philip Monis'Marfborowill
                  increase by 100 lire (USS 0 .05) per pack . The price

                                                         ASIA AND OCEANIA
                  Australia : ACCC Orders Brand Pulled                                Malaysla : Government Accepts JT OfferFor RJR
                  '1'he Australian Competition &Consumer                                    Malaysia
                  Comntission (ACCC) ordered l .ay and Sons to                        Iast nwnlh Malaysia's Rt Reynolds lntemational

                  withdraw the cigaretle brandiudangGaram                             Bhd announced that Japan Tobacco (J'1') had made an
                  Plofe991ortal;on the grounds Ihat they do not fulfill               offer of US$ 163 million for a 60 pcrrcnl stake in the
                  the requiremenls of thEonsumer Produel                              company . On June 23, the Ministry of International
                  Information Standard(or Tobaom . Infonnation                        Tradc and lndusuy granted IT pennission to buy the
                  concerning 'tar' and nicotine content, as well as                   rest . However, ifTP does decide to purchase 100
                  health warnings are not included on their label . The               percent of the company, then R .1 Reynolds will have
                  cigarettes reportedly contain an average 'tar' level of             until December 31, 2000 to reslructure its stakes so
                  50.3 mg, average nicotine of 2 .11 mg and produce                   ethnic Malays, olBurnipulras, control 30 pemenl of
                  average carbon monoxide of 33 .1 mg per cigarette                   the company as required by law (Reuters 6/23) .
                  [Foodweek & Liquor Week 5/241 .




                  4                .~P .O . aox 8019 ; Princcton, RJ . 08543 ; (-09-275-49nP, 609-275-8379 (fax) ; tmasttme.org   WA 99-27




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                       Malaysla : Minlatry To Extend Smoking Bens                       Japan : JT FInallzesAsahl Acqulsltlon
                       Deputy Minister Ualuk W'ira Mohd Sli Rustarn                     Japan Tobacco (JT) announced on June 301he1 il had
                       announced that Ihe Health Ministry hopes lo expand               officially signed the agreement to acquireAsahi
                       current sntoking regulations to include bans in all              Chemical Industry's food unit for 24 billion yen
                       public places as well as some private premises . In              (USS 198 .4 million) on July 1 . J'1' president Masaru
                       addition, Ali said, "°1'hc ministry will also                    Mizuno staied, "Since our entry inlo the processed
                       recommend a ban on any type of tobacco                          food industry last year, we have investigated how
                       advcdiscmcnt ." The new proposals rvill be drafted              best to strengthen our fields of operation, our
                       by the disease control division of the ministry and             technical base and our business base . Today's
                       submilled to the Cabinet for review . The increased              acquisition is an ideal step in Ihat directiori" [Iktw
                       tobacco cuntrol measures follow the governments'                Jones 6/301 .
                       finding that despite anti-tobacco campaigns since the
                       1970's, a number of people still cominue to smoke                South Korea : Foreign Cigarette SaleDn The Rise
                       including a significanl numbclof youth . He                      Sales of foreign cigarettes increased 16 .1 percent in
                       remarked that "Ironically, Ihe promotion of cigarettes          the first five months of 19991o 10]million packs as
                       by manufacturers appeared to be better and far more             domestic cigareuc sales dropped 15.3 percent lo 1 .64
                       successful Ihan the [govemmenl's anti-lobacco]                  billion packs . Due to this phenometwn, foreign
                       carnpaigns" Ile added, however, 'The ministry will              brand market share grew to 5 .8 percent from 4 .3
                       continue with its campaigns relentlessly" (Slar 6/26) .         percent in Ihe same period of 1998 . 7op selling
                                                                                       foreign cigarettc brands in the counlry are, in order,
                       Indonesla :Sampoerna Records 1099 ProfLAnd                      Mild Seven Light, Virginia SlJms, PM Super Light
                               Reschedules Debt                                        and Dunhl7l . Market share for domestic brands
                       Hka Dhannayanlo Kasih, finance director of PT HM                breaks down as follows;
                       Sampocma, announced that Ihe company recorded a
                       profit in 1Q99 as sales reached Rp 1 .6 trillion (US$                   a~                    4
                       235 .2 million) . Ncl profit climbed taRp 273 .83
                       billion (US$ 40 .2 million) comparcd to a nct loss of                 mpe
                       Rp 642 .76 billion (US$ 94 .5 million) in the same                              t       °k
                       period of 1998 . Sampocma incurred an overall net
                                                                                           This JuS                4 .5 %
                       loss in 1998 of Rp 121 .7 billion (USS 17 .89 million) .
                                                                                             msr        rii        4 .4%
                       The company also announced that as of June 14,
                                                                                             anaro         g   /    3 .2°h
                       1999, its lotal detrl was reduced lo US5 244 million
                       from l1S$ 372 million at thc end of 1998 due lo debt
                                                                                                                     2 .8%
                                                                                              aC
                       restructuring and bond buyback exercises .
                                The company also announced thal it intends                   a asan                      . ~
                       to expand its markct by openingkretek factories in
                       Brazil and India in the beginning of 2000 .Kasih
                                                                                       Indla : Swedish Match To Investin Wimco
                       stated Ihat Satnpocma will invesi l1S$ 20 mi]lion in
                                                                                       Swedish Match has received approval frotn the
                       each new facnxy, which will each produce 30million
                                                                                       Poreign Investment Promotion Board ([lPB) lo
                       cigarettes per week, According to MrKasih, there is
                                                                                       invest Rs3l .3 crores (US$ 7 .2 tnillion) in Wimco of
                       a demand forkretek in the two countries, and
                                                                                       India . The move will increase Swedish Match's
                       establishing factories Ihere will eliminate the cost of
                                                                                       share in Ihe company to 52 percent from 38 .61
                       high impon duties . The Indian governmenl,
                                                                                       percent. Jatias of India controls the remaining 48
                       however, has yet to approve the move . Currently
                                                                                       percent [Times of India 6l15] .
                       Sampoema has cl ov e cigarette factories in Ihe
                       Philippines, Malaysia andMyanmar [Dow Jones 7/1,
                       Bisnis Indonesia 6/19, Jakana Post 6118, Asian Wall
                       Street Journal 6121].




                       WA     99-27         aax       Bm9;Yrinceton, N .J . 08543 ;(A9475-09W; 6098758379 (tax); tma@tnu .org                5




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                   India : PM SubsldlaryProposal Met With
                          ObJectlon                                               subsidiary, the KFQVIodi Group, panner oGodfrey
                  On June 29, the Forcign Investmenl Prnmotion                    Philips, objected to the proposed subsidiary . The
                  Bureau mci lo discuss a number of proposal foreign              govcmntent requires that all companies looking lo
                   direct investments (FDI) in the country, including the         establish a wholly owned subsidiary in the country
                   applicalion for Philip Monis (PM) subsidiary PI'R              must first receive approval from their joint ventrvc
                   Holdings to establish a 100 percent subsidiary .               counterparts . This recent objection, therefore, may
                   Despite an earlier promise that I'M's foreign                  cause problcros for PIR Holdings (ticonornic '1'iures
                   investment pannerGodfrey Philips would supply thc              6l28) .
                   company with a"no-objection" certificate for the

                                              MIDDLE EAST AND AFRICA
                   Morocco : Rogle DesTabacs Announces 1998                       Zimbabwe Defaults Due To Foreign Currency
                          Results                                                      Shortfall
                   R€gie des'1'ahacs announced that ilmadeMFJh                    For the first time in 20 years Zimbabwe is unablc lo

                   661 .4 million (US$ 66 .4 million) opcraling profit in         pay 9s extemal debt, which stands a1 78 90 .2 billion,

                   1998, 2 .8 percent higher than 1997 . The company's            due to a shortfall in foreign currency . The foreign
                   1998 tumover rose 3 .5 perccnt from 1997NJUh 7 .9              currency reserve this ycar has bcen depleted by the
                   billion (USS 793 .2 million) . Rdgie des Tabacs paid           counlry's weakened economy and the poor

                   MDh 5.75 billion (US$ 577 .5 million) in tobacco               perfonnance of lobacco and gold, its primary exports .
                   taxes in 1998 I{Tdconomistc 6/291 .                                      World Bank president Jame4Volfensohn
                                                                                  wrote a letter of appeal to ]ntemalioual Monetary
                   Zimbabwe : TussleOver Payment To "Destitute"                   FLnd (IMP) headMichel Camdessus asking him to
                        Boke Workers                                              release 7$ 53 million (USS 1 .4 million) into the
                   Zimbabwe's Sfandardreponed that fomwr workers                  country . Wolfensohn asserted that the country's
                   of Boka Tobacco Auction Floors (BTAF), the                     foreign loans had not been serviced on time, and thai
                   company owned by late tobacco and banking lycoon               the cenlral bank didn't have the funds to defend the
                   Roger Boka, claim they are destitute becnBoke's                country's currency . fkonomists say the release of the
                   daughter Rudo refuses to pay them their salaries and           IMF funds will impel other donor agencies to deliver
                   retrenchnront packages . BTAF chainnfdondai                    over ZS 800 million (USS 21 .2 million) into Ihc
                   Chitombo said the company owed the workers almost              economy . However the IMF has delayed balance-of-
                   $3 million . Minutes from a labor ministry meeting             payment support due lo political concerns (US$ 2 .4
                   indicate thatRudo promised to pay the nioney, but                        .imbabwc Standard 6/29) .
                                                                                  billion) (7
                   then reneged . '1'he workers instituted legal
                   proceedings, which resulted in their winning the right         Zimbabwe : Rothmans 1099 Results
                   to auction off B'1'AF property . Howe,e4Rudo                   In the first quarter of 1999, Rothmans (Zimbabwc)
                   successfully got the auction suspended until a June            recorded an increase in ne1 profil of 114 percent to
                   15 hearing . Arguing that the workers had no money             US$ 142 .8 million fronr US$ 66.7 million in the same
                   for basic necessities and school fd6hilombo made               period of 1998 . Gross lumover rose 70 percent from
                   an urgent application for the hearing to be held               USS 753 .3 million to US$ 13 billion . The company
                   earlier . On June 9, Magistrale fl+inyika lifted the           experienced a 47 .4 percenl increase in domestic sales
                   order for the auction suspension . Details of the fiual        and a concurrent rise in market share. Devaluation of
                   outcotne were not immediately available (Standard              Ihe Zimbabwean dollar cut the domestie cigarette
                   6f27) .                                                        margin, however. A rise in the cigarette price was
                                                                                  countered by a rise in the cost of raw materials
                                                                                  [Africa News on Line CJ24] .




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                                                                                      Obstacles    are manifest as well, however . "f.ow
                       Zambian Minister Champions Tobacco Industry,                   producer prices and inadequate input and crop
                             Calls For Expansion                                      marketing system and limited credit facilities arc, to
                       Zambia's tobacco industry has a champion in                    mention     a few, the major problems slowing down
                       agriculture , food and fisheries minisleRuresh Dcsai .         agricultural development," said MDesai . TA7,
                       Al the annual rnccling of the Tobacco      Associalion of      president PalrickDanckwen added that high fuel and
                       7ambia (PA7.), Mr .Uesai said the country should               electricity costs also hamper the industry, as well as
                       increase tobacco production to enhance foreign                 pressure from intemalional anti-tobacco movements .
                       exchange carnings . Potential is certainly there to            Addressing the latter, Mf)esai said that 7nmbia's
                       position 7~unbia as a serious competitor with regional         tobacco sector needed to be ever mindful of its social
                       producers Zimbabwe and Malawi, he said . Por one               responsibilities and must actively protect the
                       thing, 7nmbia's sizc lends itself to large-scale               environment in order to head off such criticistn
                       production, he maintained .                                    (Africa News Online 6/25) .


                              Country Cornparisons (in Square Miles)                  Saudi Arable : Antl-Smuggling Package
                                                                                      Though details were sparse, it was reported thal
                                                                                      Saudi Arabia adopted a series of anti-smuggling
                                                                                                                          e
                                                                                      measures to counter the illegal Irade from
                                                                                      neighboring Yemen . The government says Ihat 90
                                                                                      percent of cigarettes consunrcd in the country's
                                                                                      soulhem provinces, up the eastern Red Sea coast to
                                                                                      Jeddah, are smuggled in from that country . Those
                                                                                      cigareues can be gotten for about 35 percent below
                                                                                      the ordinary price in Saudi Arabia. With tbc 100
                                                                                      percent tax the Saudis impose to curb consumption,
                                                                                      50 packs of legal cigarettes cost l,gQgals (US$
                                                                                      504), while the same number of illegal Yernenn
                                                                                      imports cost only 1,25triyals (US$ 333) (AlAlarn
                                                                                      AI Yom G/27).


                                                      WESTERN HEMISPHERE
                       Canada : Toronto Restaurants Cause Stiln Etfort                business rather than a Iotal ban because smoking
                            To Prevent Smoking Ban                                    patrons would not be affected, and business would
                       In an effort to thwan a complelc smoking ban in                not be lost .
                       '1'oronto restaurants by May 2001, the Ontario                           The groups' delay of the report caused
                       Reslaurant Association (ORA) and the Greater                   controversy, as board member l .laslofsky
                       Toronlo Hotel Association presented a 49 page report           remarked, "The tactic they've adopted is to
                       on the success of a recently tested air ventilaiion            repeatedly bring in lasl-minuta suggestions in an
                       system to the Toronto city council ihe day before the          effort to divert (legislators) from the real issue, which
                       council was to vote on the proposed ban . At a public          is the simple solrrlion of going 100 percent smoke-
                       hcaring on June 28, the two associations assened that          frec ." Board of health chair councilor 7oli§Ilion
                       the quality of air tested a1 ttRcarborough pub which           criticiaDd the Iwo associations for obsttucting the
                       used the new ventilation system malched the quality            board's efforts to control IiI'S exposure . }le also
                       of air at the non-smoking Riclmtond-Adclaide Cenler            accused the ORA of undermining health talks he
                       food couri downtown . ORPpresidem TerryMUndell                 organized lasl year . Director of the Ontario
                       claimed that a smoking ban was no1 necessary                   Campaign for Action on Tobacco Michadlerlcy
                       because the new systetn would practically elirninale           also contended that air from the Richmond-Adelaide
                       the environmental tobacco smoke (BTS) in                       Center tested in Ihe study was contaminated by
                       restaurants . The associations argued Iha1 a                   smoke from n neighboring restaurant (I'oronto S1ar
                       ventilation system would be more effective for                 6/29, Globe & Mail 6/29) .




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                   Canada : RCMP Busts Illegal Tobacco Ring                                    Canada : BAT's AcqulsitlonOf Imasco Pending
                   The Royal Canadian Mounted Police (RCMP) have                                    Tax Approval
                   charged 16peopte, including seven from Montreal,                            Speculation that British American Tobacco (13AT) is
                   with involvement in illegal tobacco operations .                            set to make an offer forlmasco lAd . in the near future
                   Constable Brian Read stated that four tobacco famts,                        is rising as rumors spread that Toronto-Dominion
                   Iwo in the Township of fklhi and two in the                                 Bank is willing to pay CS 9.5 billion (US$ 6.4
                   Township of 1Corfolk, grew surplus crops and sold                           billion) for Imasco's CT Financial unit . However Ihe
                   Ihe excess tobacco to illegal manufacturers in                              company's director of corporate and reguiatory
                   Mascouche, Quebec. According to the RCMP, 30 to                             affairs Michael Pridcaux quieted the tunwrs when he
                   401imes a year a cuhe van would anive at the farms                          said, "The plain faot is that we're not ready to bring
                   and load up with 701o 80 bales of tobacco . The van                         an offer lo shareholders yet and may not be able to do
                   would remm with largc amounts of cash . The                                 so . I don't want to give you the impression that
                   fammrs allegedly made C$6,000 (US$ 4,094) to                                things arehotting up." Howevex an investment
                   CS7 .000 (USS 4,776) per load, or CS2 (USS 1 .36) per                       banker whose firm is involved in the situation
                   pound . (lnce Ihe shipment reached Quebec, it was                           commented, "My understanding is the BAT offer is
                   allegedlc manufacturcd and sold to convenience                              waiting on a favorable lax mting." It is expected that
                   slores and Iwn factories in Montreal . Police                               Ihe deal will go through if Revenue Canada grants the
                   confiscalcd (SI?0.000 (US$ 81,894) from the                                 company a tax approval for Ihe acquisition and sale
                   fanucr, and are in Ihc process of detemiining how                           of the non-lobacco units olmasco . Such a move
                   rnuch ol that mmmcy was generated from the illegal                          would leave BAT with ]mperial Tobacco, Canada's
                   opcratiom tlemdon Frcc Press 6/25) .                                        largest cigarctte manufacturer . HowevetBAT's
                                                                                               primary concern is that the transaction be fair to both
                   Canada : Anti•Tobacco Campaigns InfringeOn                                  its own shareholders as well aslmaseo's
                                                                                               shareholders, and that the non-tobacco assets of the
                         IndividualChoice On the samc dac that the Federal government         . acquired company find "good homes" M@ridcaux
                   introduced its newanti-smoking television ads                               remarked, "We've had approaches for Canada Trust
                   (WA99-26). communily leaders met at a conference                            and we've had approaches for Shoppers," although
                  to discuss the inipacl antilobacco campaigns have on                         he declined to mention any specifics as to the
                  freedom of choico On June 16,Senior editor from                              interesled panics (Globe & Mail 7/1) .
                   Reasonmzgaxinc           .lacobSullum, Reform MPRahim
                  Jaffer, Frase.r Inslitmc representative Owed .ippen                          Argentina : Massalin Particulares Gelns Market
                   and Jocl-Ucnis Rcllavancc of the National Post                                    Share In 1099
                   convened at the InstimleHcononuque de Montreal to                           In the first quarter of 1999, Philip Monis (PM)
                  consider the issuc . The general opinion was that                            subsidiary Massalin Paniculams markel share grew
                  banning tohacco advertisements and imposing sales                            to 65 percent on a rise in sales . A decline in
                  restrictions limits an individual's freedom of choice                        production costs caused a 5-percentage point increase
                  on a legal producl . Sullum argued that tobacco is not                       in operating profit . The company's net profit in
                   a"public health" issue which requires Federal                               1Q99 rose to US$ 27 .4 million from US$ 19million
                  regulations . lie asserted that sruoking is "something                       in Ihe same period of 1998 . Massalin intends to pay
                  that people choose to do . Unlike typhoid or cholera,                        cash dividends on June 29 totaling US$ 30 million,
                   il is not Itansmille(i to other people against their will,                  US$ 10million of which will entne from first quarter
                   which is the aspect of connounicable diseases that                          profil . An increase in cigarette taxes, a recession and
                  justifies governmenl intervention .°                                         a rise in contraband in Ihe country hindered the
                         Conversely, the Ontario Medical Association                           company front perfomting even better in the first
                   (OMA) held a news conference on June 29 calling for                         quarter of 1999 [Buenos Aires Bconomico 6/22,
                   "improved access" to smoking cessation nwthods .                            623] .
                  The OMA has asked the provincial and Federal
                  governments to increase Iheir efforts to combat
                  smoking and announced that it aitns to establish "a
                  tobacco-frcc society" (London Free Press 6129,
                  Ottawa Citizen 6(26) .




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                       Colombia : PM Halts Marlboro Imports                                 stop all legal imports of the bmnd . PM Colombia
                       Philip Monis (PM) announced that ivill no longer                     said in a statemem, "'fhe customs criteria adopted by
                       import its Madboro brand inlo Colombia due to high                   DIAN . . .would inctcase the amount of duties The
                       tariffs "bascd on inflxled vaiues" which were                        company had to pay to levels that would cause losses
                       originally imposed in 1996 . The govetnrnem                          for the company across The board ;" and further
                       responded to the company's withdrawal with the                       essertcd that the actions of the DIAN were a violation
                       accusation that PM was pricing the brand five times                  of international trade agreeurenls atrd countcrcd the
                       lower Ihan its United States price . According to                    country's interest in controlling contraband and
                       llenry Ouarin of The country's customs agency                        promoting foreign investntent . PM stated that its
                       DIAN, PM valued a 20-piece pack oANarlboro's at                      decision concerning Madboro would not affect other
                       US$ 0.24 while DIAN contended that a pack should                     PM products sold in the country .
                       cost USS 1 .27, the US Depanrnent of Agriculture's                            The company began imponingMarlboro
                       refcrencc price for the brand .                                      cigarettes in 1991, and has since gained a 6 percent
                               Ciuarin furlher stated that The company has in               share of the country's cigarette markroL However,
                       fact been withholding imports for the past month to                  Ouarin asserted that about 70 percent aMarlboro's
                       protest a claim put forlh by the country's provincial                sold in Colombia are contraband, and therefore a
                       governors that PM and British American Tobacco                       withdrawal of the brand's legal sales will not affect
                       have been evading tax payments of nearly USS 306                     the products' consumption much (Financial Times
                       million annually (WA99-20) . However the recent                      7/1, Reuters 6/29, Ap 690) .
                       failure of the two sides to agree on a tariff
                       compromise prompted the company to permanently



                                                                             OF NOTE . . .


                          • Moldova : T'he govcnmment wiil sell iu 90 .8 percent stake iflmun-KTK, the counuy's largest cigarette plant . 7he
                        factory includes a fcrrnentation plant and ISleaf storage facilities*ldavskie vedomosti 6l127 .


                          • Georgia : Acceplauce of the country into the World 7iade Organization in September will result in an increase in                e
                        import taritY on tobacco from 12 percent to 30 percent (Russia Today 6729) .


                          • Italy: In Genoa, church and State-spommmd youth centers have banned smoking on their premises and the city's
                        school system is said to be close to e similar bau in a few weeks OPN Online 6/22) .


                          • India : Consumption ofgutka has crossed aikocio-economic boundaries, as the average age of its consumers has
                        dropped to l6-years-old (Timea of India 6l24) .


                          • Now Zealand : By the end of the year Wellington Airport will house three duty-free shops ; two in a new termiual
                        being built and one in the departure lounge (Dominion 6/2R) .


                          • Japan : Japau Tobacco will work withNicca Chemical Co . to develop new plant snaius for certeiti fruits and
                        vegetables through tissuc culturing, starting with tomatoes . Once developed, the plants will be marketed nationally
                        [Nikkei Net Interactive 6.23] .


                         • Argentlna : The national statistics bureau INDEC reported a-I percent drop in the produclion of cigarettes in thq' fimt
                        livc           months . of                      19991la                    Oaceta                 627]            ~


                          • South Attica: The Anti-Countwieit Coalition reported that since April 1997, over R360 million (1155 59 .6 million)
                        worih of illegally imported goods including cigarettes have been confiscated by authorities . Most counterfeit product                  are
                        believed to comc front China and Taiwau [Africa News On Line 7/I] .

                                                                                                                                        e s wsslcr
                                                                                                                                         Issues Analyst
                                                                                                                               E-mail:rebecca Catrrw .oig




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