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					                                        Economics of Tobacco in Vietnam

Tobacco Production and Trade

   Raw tobacco production in Vietnam has been increasing in the 1990s. In 1999,
    Vietnam produced 35,300 metric tons of raw tobacco, with 32,500 hectares land used
    in the growing of tobacco.


                            Raw Tobacco Production in Vietnam, 1965-1999

                       45,000
                       40,000
                       35,000
         Metric Tons




                       30,000
                       25,000
                       20,000
                       15,000
                       10,000
                        5,000
                            0
                                 1965    1970     1975    1980    1985    1990     1995     1999

Source: FAO

   In 1999, Vietnam manufactured 30 billion pieces of cigarettes, three times its 1970
    production. There are 26 cigarette factories in Vietnam at present.

                                Cigarettes Production in Vietnam, 1970-1999

                                35000
                                        Million Pieces
                                30000
                                25000
                                20000
                                15000
                                10000
                                 5000
                                    0
                                         1970    1975    1980    1985    1990    1995     1999


Sources: UNSD and USDA
   In 1994, foreign tobacco companies were allowed to contract with local factories to
    produce their international brands, using imported tobacco. Since cigarette imports
    are banned in Vietnam, this was the only way for the foreign companies to legally
    enter the market. According to IMF, the 1999 cigarette material imports comprises
    around 0.8% of Vietnam’s total imports value.


                         Cigarette Material Imports and its % of Total Imports
                                        in Vietnam, 1995-1999

                       120                                      1.0%

                       100    1.0%                   0.7%                   0.8%
                                         0.7%
         Million US$




                       80
                       60
                       40
                       20
                        0
                              1995        1996       1997       1998        1999

Source: IMF

   Smugglers reportedly bring between 300 and 350 million packets of cigarettes into
    Vietnam each year, which is around 20% of the country’s annual cigarette production.
    In April 2000, Vietnam began to require all legitimate domestic cigarette makers to
    seal their packets with an official stamp in order to distinguish them from fake and
    smuggled goods.

Cigarette Consumption and Smoking Prevalence

   Cigarette consumption per adult has been rising until 1995. In 1998, the per adult
    consumption was 42 packs, still higher than 1992 figure.
                    Cigarette Consumption Per 15+ Adult in Vietnam,
                                     1992-1996
               70                                                                      0.104
               60                                                                      0.102
               50




                                                                                               US$/pack
                                                                                       0.100
       packs



               40
                                                                                       0.098
               30
               20                                                                      0.096
               10                                                                      0.094
                0                                                                      0.092
                       1992         1993         1994         1995           1996
                    Cigarette Consumption Per 15+               Cigarette Price (US$/pack)


Sources: IMF and The World Bank

   Due to the low income level in Vietnam(monthly income is $46 for a typical worker
    in the state sector in 1999, according to IMF), smoking expenditure accounts for a
    quite large portion of a typical smoker’s budget.


                     Smoking Expenditure as % of Total Income for a
                      Typical Smoker working for the State Sector,
                                    Vietnam 1999
        20%
                                                                                       15%
        15%
                                                           9%
        10%

           5%                  4%

           0%
                      If smoke domestic low -    If smoke domestic premium     If smoke foreign brands
                     medium brands ($0.2/pack)        brands ($0.5/pack)             ($0.8/pack)


Sources: IMF, WHO and The World Bank


   Smoking incidence is around 40% among adult population, one of the highest in Asia.
    Although the female smoking rate is extremely low, about 80% men are regular
    smokers. Manufactured cigarettes were the most popular form of tobacco use among
    men, followed by water pipe and roll-your-own cigarettes.
Tobacco Taxes

   Cigarettes are subject to excise taxes in Vietnam. The tax rates are 25% on cigarettes
    without filters, 45% on filtered cigarettes with domestic materials, and 65% on
    filtered cigarettes with imported materials and cigars.

                Cigarette Consumption Tax in Vietnam, 1995-1996

        45%             41%
        40%
        35%                          % of excise tax
                                                                    30%
        30%                          % of total tax revenue
        25%
        20%
        15%
        10%
         5%                          2%                                           2%
         0%
                              1995                                         1996

Source: IMF and WHO

   VAT was imposed on cigarette products in early 1999 and the tax rate is 10%. The
    total cigarette taxes (Excise plus VAT) as a percentage of average retail price in
    Vietnam is around 36%.


                    Tobacco Tax Share in Average Retail Price
                for Selected East and Southeast Asian Countries
       70%                                                    60%         60%   62%     63%
       60%
       50%                                           38%
                                     33%    36%
       40%           30%    30%
       30%    20%
       20%
       10%
        0%
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Source: The World Bank
Tobacco Control Measures

   In 1991, a partial ban on tobacco advertising on TV, radio, newspaper and billboards
    was implemented. Point-of –purchase advertising and product sampling are common.

   According to a study by Research for International Tobacco Control (RITC) in 1998,
    Social tolerance to smoking is high and most people are not fully aware of the health
    and economic problems caused by smoking. There are bans on smoking in health
    facilities and hospitals, however, compliance with the ban is not universal.