1.1 Tobacco Related Morbidity and Mortality

MALAYSIA

Despite the recent regional monetary crisis, Malaysia has shown good stability and strong economic growth. In 1996, GDP per capita was stated at being US$4,495.1 Malaysia is a confederation of 13 states spread across 330,000 square kilometers.2 Modern Malaysian culture is a melting pot of the many nations that have dominated it. Indigenous Malays constitute roughly 62 percent of the population, however, immigrants, especially Chinese (who make up 30 percent of the population), have a tremendous presence in the country. Indians constitute about 8 percent of the population. The rest are small numbers of Arabs, Indonesians, Filipinos, and Pakistanis.

1. Tobacco Use

1.1 Tobacco Related Morbidity and Mortality Cigarette smoking accounts for a massive 25% of all deaths in Malaysia,3 with smoking- related deaths comprising three out of five top killers in Malaysia.4 Cardio-vascular disease (CVD) has been the number one killer in Malaysia since 1980.5 Hospital data from Peninsula, Malaysia indicates that deaths from CVD increased from 15.6% in 1975 to 18.3% in 1991.6 Research by the Institute of Oncology, Radiotherapy and Nuclear Medicine in Kuala Lumpur Hospital, has found that the incidence of lung cancer is increasing rapidly at a rate of 17% per year.7

In addition to the human cost of tobacco consumption, according to State Youth Council vice-president Tan Yok Cheng, smokers are one of the main causes of the nation's cash outflow, spending about RM3 billion annually. Cheng was quoted as saying that the amount was estimated to reach RM7 billion by the year 2020.8

1.2 General Prevalence The most recent survey on smoking prevalence in Malaysia was conducted in 1996 by the Ministry of Health. It surveyed 32,991 people over the age of 18 and found a total smoking prevalence of 24.8%. Smoking rates amongst men were 49.2% compared to

1 Country Profiles on Tobacco or Health 2000, Malaysia, WHO, 2000 2 Malaysia Guide [web page](2000) http://msn.expedia.com/wg/Asia/Malaysia/P10442.asp 3 Press statement by the Minister of Health, the Hon Dato' Chua Jui Meng on tobacco control in Malaysia on 7 November 1996 4 th The Sunday Star, July 18 , 1999, pg 11 5 Nain G. ‘Tobacco: National programmes in its consumption and control’, delivered at the Persidangan Kajian Semula Rancangan Malaysia Ke-6 ke Arah Penyediaan Malaysia Ke-7, Epidemiology and Disease Control Unit, Health Services Division, Ministry of Health Malaysia, 1993. 6 National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997. 7 Press statement by the Minister of Health, the Hon Dato' Chua Jui Meng on tobacco control in Malaysia on 7 November 1996 8 'Smoking and cash outflow in Malaysia', New Straits Times, December 28, 1998 women's 3.5%.9 This was higher than the previous national survey which found a total smoking prevalence of 21.5%, with male smoking rates at 41% compared to women's 4%. These surveys also illustrated some of the social indicators of smokers in Malaysia, finding that ethnicity, region and occupation influenced smoking behaviour. Malaysian smokers consume an average of 13.3 cigarettes per day, with over 60% reporting to smoke over 10 cigarettes per day.10 Table 2 - National Health & Morbidity Survey - 1986 & 1996 National Health and Morbidity Survey National Health and Morbidity Survey 1986 1996 Studied Population Over 15 yrs Over 18 yrs Sample Size - 32,991 Coverage Peninsula Malaysia Malaysia All Smokers 21.5% 24.8% Male Smokers 41% 49.2% Female Smokers 4% 3.5% Source: National Health and Morbidity Survey 1986, 1996, Institute of Public Health, Ministry of Health Malaysia, 1997

1.3 Prevalence by Gender Approximately half of all men in Malaysia smoke, with indigenous Malay men most likely to smoke.

Although the National Surveys show a reduction in female smoking rates from 4% in 1986 to 3.5% in 1996, World Tobacco Marketfile11 estimated that smoking by women had climbed from 4% in 1985 to 5% in 1995. They also predicted that smoking amongst Malaysian women would climb in the coming years.

1.4 Prevalence by Age World Tobacco Marketfile12 describes teenage smoking in Malaysia as “an acute problem,” stating that approximately 12% of boys and 2% of girls smoke, up from 10% of boys and 1% of girls in 1985. This is much lower however than other studies which have found smoking rates amongst Malaysian youth ranging from 30% to 60% smoking prevalence. The Ministry of Health estimates that the smoking rate amongst adolescent girls, aged 12 to 19, is 4.8% and is 30.7% amongst adolescent boys between the same ages.13

Experimentation rates are extremely high; a study by the Ministry of Youth and Sports, conducted in 1994, showed that 71% of young people had experimented with cigarettes.14 Zulkifli et al suggest that prevalence studies may even underestimate the real prevalence, as smoking is a disciplinary offence for school students. The highest smoking prevalence was found amongst 'lepak' youth (young people who are unemployed and/or not in school.)

9 National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997 10 Haniza Mohd Anuar and Suraya Abdullah, 'Smoking among adults in Malaysia', NHMS2 Conference, Vol. 15, p 118- 125, 1996. 11 "World Tobacco File"[web page](2000) http://www.marketfile.com 12 ibid. 13 Rosemawathi, Dr (2000), Pers Comm. [e-mail] Disease Control Division of the Ministry of Health & [web page](2000) http://prn.usm.my/tobacco.html 14 The Star, January 4 1997

2 A Ministry of Culture, Youth and Sports survey on this group found a smoking prevalence of 80%, which was much higher than in school students.15

Though Malaysia introduced a ban on smoking in schools in 1997 its enforcement is uneven. There are reports that smoking in some schools is common and that no disciplinary action is taken. In addition there are high smoking rates amongst teachers. A small-scale survey, which showed a smoking prevalence of 40.5%16 amongst school teachers, illustrates the difficulties faced in enforcing the ban and of getting teachers to educate young people against smoking. Teachers who are themselves smokers may find it difficult to enforce the smoking regulations and tend to view smoking by students as a minor disciplinary offence.17

In addition, young people in Malaysia have been the target of massive promotional campaigns by many of the TTC's working in the country. The campaigns, described in section 3, are some of the world's most shocking examples of tobacco industry campaigns targeting young people.

Table 2.1 - Summary of Surveys of Smoking Prevalence among Malaysian youth Year Author Population Sample Size Prevalence of smoking 1967 Patrick E University students 401 30.0% 1984 Vimala T Form 4 Males = 2099 Males = 17.3% Females = 2007 Females = 1.9% 1987 Wong ML Medical students Males = 150 Males = 17.3% Females = 121 Females = 0.8% 1996 Vijaya TV Form 4 Males = 25.1% Females = 0.6% 1996 Second National Health 12 to 18 years Males = 30.7 and Morbidity Survey Females = 4.8% 1997 Naing NN Form 4 male 224 Males = 4.2% 1997 Haris AM Form 4 male 460 Males = 33.2% Source: Zulkifli Ahmad, Rogayah Jaafar, Razlan Musa, 'Cigarette smoking among Malaysian youth: problems and prospects', Proceedings of the Malaysian Society of Health 21st Scientific Symposium, Kuala Lumpur 6-7th December, 1997.

1.5 Prevalence by Region Smoking rates are highest in the state of Kelantan at 31.7%, which is Malaysia's primary tobacco growing state. Penang Island, which is home to two of the major anti-smoking groups in the country, had the country's lowest smoking prevalence of 20.7%.

Table 2.2 - Smoking Prevalence by Region (1996) Region Total (%) Urban (%) Rural (%) Johor 23.4 22.1 25.1 Kedah 27.5 22.7 30.0 Kelantan 31.7 25.0 34.7 Melaka 24.2 23.4 24.8 N. Sembilan 24.6 20.6 28.7

15 Zulkifli Ahmad, Rogayah Jaafar, Razlan Musa, 'Cigarette smoking among Malaysian youth: problems and prospects', Proceedings of the Malaysian Society of Health 21st Scientific Symposium, Kuala Lumpur 6-7th December, 1997. 16 Naing NN, Zulkifli A, Wan Maizurin WY, Zani WM. Smoking and discipline problems among rural secondary school students in Kelantan. Mal J Med Sc 1997;4(1):54-8. 17 Zulkifli Ahmad, Rogayah Jaafar, Razlan Musa, 'Cigarette smoking among Malaysian youth: problems and prospects', Proceedings of the Malaysian Society of Health 21st Scientific Symposium, Kuala Lumpur 6-7th December, 1997.

3 Pahang 29.8 24.7 32.4 Perak 22.4 20.6 24.9 Perlis 28.3 23.0 30.1 P. Pinang 20.7 18.5 26.5 Sabah 29.3 24.0 31.8 Sarawak 22.3 16.5 26.4 Selangor 22.1 21.0 26.1 Terenggann 27.3 25.5 29.0 WPKL 24.6 24.6 - Peninsula Malaysia 24.5 21.9 28.3 Malaysia 24.8 21.7 28.6 Source: National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997

Graph 2-Smoking Prevalence by Region (1996)

Rural 40 Urban 35 Total 30 25 20 15 10 5 0

r n n ak g k n o ta ila r n a a oh n b e a w g J la P in ra g e m P a en K e . S r . S P e N T

Source: National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997

Smoking rates are higher amongst rural Malaysians than amongst urban Malaysians, with nearly 7% more smokers in the countryside. This difference has increased since the 1986 survey. This pattern is similar throughout Southeast Asia and may be due to the higher socio-economic levels of urban people as compared to rural people and the tendency for public education campaigns to focus on urban areas.

Table 2.3 - Smoking Prevalence - Rural/Urban National Health and Morbidity Survey 1986 National Health and Morbidity Survey 1996 Rural 23% 28.6% Urban 19% 21.7% Source: National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997

1.6 Smoking Prevalence by Ethnicity and Religion Smoking is most prevalent amongst the Muslim Malay community and other indigenous groups. Chinese and Indian communities have considerably lower smoking rates. This is also illustrated when dividing smoking prevalence by religion, with Muslim Malaysians smoking at a much higher rate than other religious groups. This is ironic considering that smoking has been declared ‘haram’ since March 1995. Efforts to promote this ruling may be successful in reducing smoking amongst Muslim Malaysians.

4 Table 2.4 - Smoking Prevalence by Ethnicity Ethnicity National Health and National Health and Morbidity Survey 1986 Morbidity Survey 1996 Malays 24% 27.9 Other indigenous groups - 29.1 Chinese 18% 19.2 Indians 15% 16.2 Others - 32.4 Source: Haniza Mohd Anuar, Suraya Abdullah, NHMS2 Conference, Vol. 15, p. 118-125 and National Health and Morbidity Survey, Ministry of Health, 1986.

Table 2.5 - Smoking Prevalence by Religion, 1996 Religion Ever Smoked Muslim 35.0 Christian 29.6 Buddhist 23.4 Hindu 19.6 Source: Haniza Mohd Anuar, Suraya Abdullah, NHMS2 Conference, Vol. 15, p. 118-125.

1.7 Smoking Prevalence by Social Status The 1996 National Health and Morbidity Survey showed that smoking prevalence was highest amongst the least educated and lowest amongst the highest educated people in Malaysia. Those receiving a primary school education or less had a smoking prevalence of 28% whilst those who had reached tertiary levels of education had a smoking rate of 17.2%.

Table 2.6 - Smoking Prevalence by Education Level, 1996 Education Level Ever Smoked Current Smokers Nil 27.8% 21.7 Primary 35.1% 28.0 Secondary 30.5% 25.6 Tertiary 23.1% 17.2 Unclassified 23.2% 18.5 Source: National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997

In line with these findings, it was also shown that smoking rates were lowest amongst white-collar workers and highest amongst the blue-collar occupations such as agriculture, services and production. Tobacco advertising in Malaysia often uses images of wealth to promote their products using what it calls ‘aspirational’ images. Thus, it is not surprising to discover that despite the findings that smokers tend to be from lower socio-economic groups, about 80 per cent of the cigarettes sold in Malaysia are in the premium category.18

Table 2.7 - Smoking Prevalence by Occupation, 1996 Occupational Groups Ever Smoked Current Smokers Professional 25.5 19.4 Administration 41.2 32.8 Clerical 20.0 16.0 Sales 35.5 29.3 Services 44.4 37.0 Agriculture 56.4 46.4

18 Wendy Lim, 'Deal set to give MTC a bigger mart share', Business Times, February 2, 1999

5 Production 44.4 38.6 Others 43.4 35.7 Unclassified 33.8 25.3 Not applicable 12.9 9.1 Source: National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997

The National Health and Morbidity Survey 1996 found no significant difference in smoking prevalence by personal income, except in the lowest income group. This group earning less than RM400 had low smoking rates. However, when divided by household income, it was found that those households with incomes of RM2000 (US$500) or less had higher smoking rates than wealthier households.19

1.8 Cigarette Consumption Annual adult per capita consumption of cigarettes in Malaysia rose steeply from the mid- 1960s to the mid-1980s but it has since declined. These figures do not, however, include smuggled cigarettes and may therefore underestimate consumption.20

Table 2.8 - Cigarette Consumption 1981 - 1993 Year Cigarette Sales (Billion cigarettes) Per capita consumption (sticks) 1981 16.5 1,170 1989 18.2 1,047 1990 19.5 1,100 1991 18.8 1,037 1992 18.4 986 1993 17.6 920 Source: LTN referred to in Source: 'Statistics on Commodities', Ministry of Primary Industries Malaysia, July 1995.

Table 2.9 - Consumption (Billions) 1996, 1997 1996 1997 Cigarette Consumption (Billions) 19.0 18.3 Source: Tobacco Reporter, September 1999, pg 28.

Table 2.10 - Changes in Annual Tobacco Consumption (1970-1984) Year Percentage increase 1970 - 1978 6.0% 1978 - 1982 3.5% 1982 - 1984 0.03% Source: Chapman, S., and Wong, W., 'Tobacco Control in the Third World', International Organisation of Consumers Union, 1990, pg 164.

2. Tobacco Industry

2.1 Tobacco Growing

19 National Health and Morbidity Survey 1996, Institute of Public Health, Ministry of Health Malaysia, 1997 20 Haniza Mohd Anuar and Suraya Abdullah, 'Smoking among adults in Malaysia', NHMS2 Conference, Vol. 15, p 118- 125, 1996.

6 Malaysia is not a large tobacco leaf producer by world standards nor is tobacco production a major contributor to the Malaysian economy, however, tobacco farmers are used politically by the tobacco industry. The tobacco industry is constantly reminding Malaysians of how much money they are inputting into Malaysian society.

Table 2.11 - Tobacco Growing in Malaysia 1961 - 1999 Year Area Harv (Ha) Yield (Hg/Ha) Production (Mt)

1961 2,783 6,489 1,806 1962 3,192 7,024 2,242 1963 3,330 7,051 2,348 1964 3,753 6,579 2,469 1965 3,642 6,304 2,296 1966 3,237 6,509 2,107 1967 3,237 6,503 2,105 1968 2,428 7,677 1,864 1969 2,832 6,727 1,905 1970 3,237 8,109 2,625 1971 3,990 9,827 3,921 1972 8,041 8,950 7,197 1973 8,338 7,228 6,027 1974 9,870 7,720 7,620 1975 14,448 6,357 9,184 1976 8,249 5,660 4,669 1977 9,499 7,659 7,275 1978 12,372 7,840 9,700 1979 12,495 6,030 7,535 1980 13,243 7,155 9,475 1981 12,963 5,554 7,200 1982 12,744 6,764 8,620 1983 11,267 7,723 8,701 1984 10,568 6,772 7,157 1985 16,362 5,832 9,542 1986 16,344 8,712 14,239 1987 12,676 8,889 11,268 1988 9,621 7,735 7,442 1989 12,507 11,080 13,858 1990 10,168 9,986 10,154 1991 14,953 6,163 9,216 1992 11,905 9,446 11,245 1993 12,355 7,834 9,679 1994 10,219 5,957 6,087 1995 10,525 9,803 10,318

7 1996 10,982 10,675 11,723 1997 10,790 10,419 11,242 1998 14,200 7,865 11,169 1999 14,200 7,865 11,169 Source:"Food and Agriculture Organisation of the United Nations"[web page](2000) http://apps.fao.org/lim500/nph-wrap.pl?Production.Crops.Primary&Domain=SUA&servlet=1

Table 2.12 - Tobacco Production 1990 - 1999 Year Production Quota (MT) Actual Output (MT) Actual/Quota (Percent +/-) 1990 9,717 10,517 + 8.2 1991 10,473 9,849 - 6.0 1992 11,348 11,509 + 1.4 1993 11,403 9,942 -12.8 1994 9,764 6,172 -36.8 1995 12,399 10,467 -15.6 1996 12,561 11,988 - 4.6 1997 13,300 11,444 -14.0 1998 14,160 11,361 -19.8 1999 14,400 7,817 -45.7 Source: FAS Attache Report 2000

Graph 2.1-M alaysia: Tobacco Growing Data Area Harvested (Ha)

18,000 Yield (Hg/Ha) Production (Mt) 16,000

14,000

12,000

10,000

61 63 65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 Source:"Food and Agriculture Organisation of the United Nations"[web page](2000) http://apps.fao.org/ lim500/nph-wrap.pl?Production.Crops.Primary&Domain=SUA&servlet=1

8 Table 2.13 - Tobacco Growing in Malaysia 1990 1992 1997 1998 1999 Area used to grow 14,000 ha 11,905 ha 10,790 ha 14,200 ha 14,200 ha tobacco Production of dry 10.154 m kg 11.245m kg 11.241m kg 11.2m kg 14.5m kg tobacco leaf Production of 99,700 110,000 Green Tobacco ------tonnes tonnes ----- Leaf Revenue from RM146m RM150m RM200m tobacco ------Source: 'RM200m in revenue from tobacco this year', The Star, Feb 4th 1999; 'RM150m worth of tobacco produced despite bad weather', Business Times (Malaysia), February 2nd 1999, pg 2; Economic Report 1998/99, Ministry of Finance, pg 84. Government support for tobacco production: The National Tobacco Board in the Ministry of Primary Industries provides assistance to tobacco farmers and promotes domestic growth. The Board promotes tobacco growing by giving subsidies to farmers, including credit for fertilizers and pesticides to tobacco farmers. There have been some halfhearted attempts to replace tobacco with other cash crops such as roselle and groundnuts but the commercial gain is not as lucrative as tobacco and this has not proved successful.21 The Malaysia Tobacco Board was established in 1973. Primary Industries Secretary General Datuk Haron Siraj said that the Board was instrumental in developing the tobacco industry in Malaysia.22

In 1998, the Primary Industries Ministry set up a steering committee to restructure the local tobacco industry, making it more competitive. The move was made in light of tariff reductions expected to come in as a result of the ASEAN Free Trade Area (AFTA).23 Whilst the tobacco industry is constantly reminding Malaysians of how many "families"24 work for the tobacco industry, restructuring in preparation for the AFTA tariff reduction scheme will see thousands of curers, tobacco farmers and station workers out of work.25

Regional Differences in Tobacco Farming: Kelantan is the main tobacco growing state in Malaysia with 18,126 registered tobacco farmers in 1994.26 Kelantan produced 9 million kgs of tobacco in 1998.27 Terengganu is also a major tobacco farming state with 6487 registered tobacco farmers in 1994.28 It produced 3.2 million kgs of tobacco in 1998.29 Perlis and Kedah have seen an increase in the number of farmers through the 1980s and

21 Zulkifli Ahmad, Rogayah Jaafar, Razlan Musa, 'Cigarette smoking among Malaysian youth: problems and prospects', Proceedings of the Malaysian Society of Health 21st Scientific Symposium, Kuala Lumpur 6-7th December, 1997. 22 th Leong, N., 'Panel to restructure local tobacco industry', The Star (Malaysia), November 4 1998, pg5.

23 th 'Tobacco sector to be revamped', Business Day (Malaysia), November 4 1998, pg 14.

24 rd 'RM3.7m worth of fertilisers for flood-hit tobacco farmers', Business Times (Malaysia), April 3 1999, pg 2.

25 Leong, N., '20,000 farmers to gain from delay in liberalising tobacco industry', The Star (Malaysia), August 19th 1999, pg 6. 26 'Statistics on Commodities', Ministry of Primary Industries, Malaysia, July 1995

27 th 'Rmzoom in revenue from tobacco this year', The Star (Malaysia), February, 4 , 1999 28 'Statistics on Commodities', op. cit. 29 'Rmzoom in revenue from tobacco this year', op cit.

9 1990s. In 1994, Perlis had 3,326 and Kedah had 3,211 registered tobacco farmers.30 In 1998 Kedah produced 1.1 million kgs of tobacco compared to Perlis's 1 million kgs.31

Table 2.14: Tobacco Production Quota by State (million kg) State 1980 1991 1992 1993 1994 Total % Total % Total % Total % Total % Kelantan 6.42 67.0 6.47 61.8 6.84 60.3 6.49 56.9 5.48 56.2 Terengganu 2.10 21.9 2.53 24.2 2.64 23.3 2.63 23.0 2.32 23.7 Perlis 0.36 3.7 0.46 4.4 0.70 6.2 0.89 7.8 0.73 7.5 Kedah 0.20 2.1 0.57 5.4 0.73 6.4 0.84 7.4 0.74 7.6 Source: 'Statistics on Commodities', Ministry of Primary Industries Malaysia, July 1995.

In 1990, 14,000 hectares were harvested for tobacco, down from 16,456 in 1985. In 1992, 10,550 tonnes of un-manufactured tobacco was produced (0.2% of the world total).32 In 1997, tobacco production reached 11,965 metric tonnes, down from 12,485 metric tonnes the previous year due to adverse weather conditions. The production of raw tobacco nevertheless remained significantly higher than in 1994 and 1995.

A rise in the demand for tobacco from cigarette manufacturers and the completion of a new leaf processing plant run by Philip Morris boosted output levels. In 1997, Malaysia produced 11.241 million kilograms of tobacco, giving a revenue of RM 146 million. In 1997, 95% of the tobacco grown in Malaysia was flue-cured. In 1999, 14.5 million kgs of dry tobacco leaf was produced in Malaysia which was an increase from the year before when farmers were only able to produce 11.3 million kg.33 1.3% of arable land is used for growing tobacco.

30 'Statistics on Commodities', op cit. 31 'Rmzoom in revenue from tobacco this year', op cit. 32 Country Profiles on Tobacco or Health 2000, Malaysia, World Health Organisation, 2000, pg 41

33 th 'RM200m in revenue from tobacco this year', The Star, Feb 4 1999; 'RM150m worth of tobacco produced despite bad weather', Business Times (Malaysia), February 2nd 1999, pg 2; Economic Report 1998/99, Ministry of Finance, pg 84.

10 Box 1: US Tobacco Trade with Malaysia Despite facing weaker demand from the Malaysian cigarette manufacturers, tobacco was again America's second largest agricultural export item to Malaysia in 1998, behind soybeans. The decline in imports of flue-cured and burley tobacco was partly due to a drop in local cigarette demand and partly due to a bigger carry-in stock level. The outlook for cigarette exports in 1999 is promising with the relocation of British American Tobacco's Singapore manufacturing operations to Malaysia and Philip Morris' commencement of cigarette manufacturing since the beginning of 1999. Anticipated shortfall in local tobacco output and increase in demand from cigarette companies augur well for leaf imports. Total imports (flue-cured and burley) from the U.S. are estimated to approach 10,840 tons - about half of the Malaysian tobacco import market. However, domestic demand for cigarettes is expected to remain weak in 1999. Malaysia's total flue-cured tobacco production dropped to 11,361 tons in 1998, 20 percent short of the set target. Adverse weather conditions affected yield per hectare but leaf quality improved slightly. The total value of the 1998 crop was estimated at RM148 million. The domestic target for 1999 has been set at 14,400 tons but with the recent abnormally heavy downpours, the industry expects output to reach 10,000 tons. Domestic burley production dropped to 444 tons in 1998 due to prolonged dry weather conditions in the state of Sabah. For 1999, farmers are increasing area devoted to burley cultivation and expect domestic burley output to increase to 540 MT. Since RJ Reynold has been sold to the Japanese, Philip Morris is the only American tobacco company operating in Malaysia. Domestic cigarette output dropped two percent to 26.2 billion sticks in 1998. The decrease reflects a drop in domestic demand. The decline would have been steeper had it not been for the increase in leaf usage for manufacturing cigarette for the export market. The 1999 outlook for cigarette manufacturing is promising with the anticipation of a further increase in cigarette exports. However, the industry expects a further 10 percent drop in domestic consumption in 1999. Effective September 7, 1998, local manufacturers increased the cigarette price by RM0.20 per packet of 20.” Source: US Dept of Agriculture Foreign Agriculture Service

2.2 Tobacco Manufacturing Malaysia is a major cigarette-manufacturing hub for multinational tobacco companies working in the region. Recent changes have left the newly created British American Tobacco (Malaysia) dominating 70% of the domestic cigarette market.

Production: Between 1990 and 1995 the market gained 11.7% in value terms despite a 7.9% contraction in sales. Cigarette production reached an all time high of 27.4 billion sticks in 1997, an increase of 19.1% from 1996.

Table 2.15 - Cigarette Production (million pieces) 1992 1993 1994 1995 1996 1997 Production 18,040 19,244 19,468 21,827 23,000 27,400 Source: USDA / World Tobacco file [web page](2000) http://www.marketfile.co.uk/Tobacco/htmlcigs/Asia

Table 2.16 - Cigarette Sales Year Current Value % growth Volume % growth (RM million) year on year (million pieces) year on year 1990 1,317.8 -4.3 18,688 -1.4 1991 1,355.7 2.9 18,405 -1.5 1992 1,381.3 1.9 18,210 -1.1 1993 1,319.9 -4.4 16,792 -7.8 1994 1,426.0 8.0 17,284 2.9 1995 1,472.5 3.3 17,211 -0.4 1996 - - 17,595 2.2 Source: Statistics on Commodities, Ministry of Primary Industries Malaysia, July 1995 / World Tobacco File [web page](2000) http://www.marketfile.co

Table 2.17 - Production, Imports & Exports Revised 1998 Preliminary 1999 Old New Old New

11 Market Year Begin 01/1998 01/1999 Filter Production 24090 24090 28980 28110 Non-Filter Production 2100 2100 2520 2457 TOTAL Production 26190 26190 31500 30567 Imports 978 978 1000 903 TOTAL SUPPLY 27168 27168 32500 31470 Exports 7868 7868 14000 12467 Domestic Consumption 19300 19300 18500 19003 TOTAL DISTRIBUTION 27168 27168 32500 31470 Source: FAS Attache Report 2000

Table 2.18 - Production and Sale of Cigarettes Year Production (billion sticks) Sales (Billion Sticks) Sales Value Ex-factory (RM '000) 1970 9.22 8.99 248,894 1975 13.25 12.83 442,387 1980 16.52 15.95 578,021 1988 17.47 17.41 1,251,653 1989 18.06 18.22 1,315,574 1990 18.43 19.53 1,270,133 1991 18.16 18.84 1,310,831 1992 18.04 18.43 1,355,603 1993 17.34 17.58 1,396,307 1994 17.46 16.89 1,645,631 Source: 'Statistics on Commodities', Ministry of Primary Industries Malaysia, July 1995.

Table 2.19 - Annual Sale of Local and Imported Cigarettes (Billions Sticks) Year Cigarette Sales Local Imported Total 1981 14.40 1.55 15.95 1989 17.84 0.39 18.23 1990 18.63 0.90 19.53 1991 17.98 0.86 18.84 1992 18.01 0.42 18.43 1993 17.17 0.41 17.58 1994 16.89 n/a 16.89 Source: 'Statistics on Commodities', Ministry of Primary Industries Malaysia, July 1995.

Production Facilities: Most manufacturing occurs in the poorer eastern coast of Peninsula Malaysia. Rothmans has a production facility in Petaling Jaya (Selangor); the Malaysian Tobacco Co has a cigarette factory in Kuala Lumpur; RJ Reynolds manufactures cigarettes in Shah Alam (Selangor); Sampoera JI produces cigarettes in Petaling Jaya (Selangor); and Tai Chong Tobacco Manufacturers and Co. has a cigarette plant in Chemor (Perak).

Companies: Up until 1999, the Malaysian Tobacco manufacturing industry was dominated by the subsidiaries and affiliates of 3 tobacco multinationals: Rothmans International,

12 British American Tobacco (through the Malaysian Tobacco Company) and RJ Reynolds International. However the global merger of BAT with Rothmans triggered a local merger between MTC and Rothmans to form British American Tobacco (Malaysia), which now controls 70% of the Malaysian market. In addition, Philip Morris has been gaining ground with the growing popularity of Marlboro. Philip Morris controlled just over 10% of the market in 1998. RJ Reynolds (Malaysia), which is now owned by Japan Tobacco International, stated that Malaysia was one of JTI's most profitable markets in 1999. JTI (Malaysia) posted an operating profit of MYR134 million, up from MYR101.6 million in 1998.34

Table 2.20 - Leading Companies' Percentage Market Share, by Company Company / Year 1994 1995 1996 1997 1998 Rothmans* 51.0 48.7 48.5 56.0 56.9 RJ Reynolds 17.9 18.0 18.2 17.2 17.4 Malaysian Tobacco Company* 25.0 24.1 22.5 15.1 13.9 Philip Morris - - - 10.5 10.4 Japan Tobacco - - - 1.1 1.4 Others 6.1 9.2 10.8 0.1 - Source: MarketFile and Tobacco Reporter, September 1999, pg 28. * Rothmans of Pall Mall (Malaysia) Bhd and Malaysian Tobacco Company Bhd (a subsidiary of British American Tobacco) merged in 1999 to form British American Tobacco (Malaysia)

BAT (Malaysia) The global merger between British American Tobacco and Rothmans International in June 1999 created a global tobacco giant, which controls about 16% of the world cigarette market. The merger immediately triggered discussion regarding a local merger between the local subsidiaries of the parent companies.

In November 1999, Rothmans of Pall Mall paid RM769.5 million for Malaysian Tobacco Company Bhd (MTC)’s operating businesses, creating an enlarged company that was renamed British American Tobacco (Malaysia), in December. BAT (Malaysia) controls 70% of the domestic Malaysian market with leading brand Dunhill accounting for 40% of the market.35

BAT (Malaysia) made an after-tax profit of RM226.6 million in 1999 and earned RM689.2 million in the first quarter of 2000 ending March 31; Pre-tax profit grew 16% to RM177.6million. 36

34 Turner,C.,"Milk and honey - Following some tough years, the Malaysian tobacco industries prospects are looking up", Tobacco Reporter, Bonus Issue, Summer 2000, pg 25 35 th Eu Jin, Foo ‘British American Tobacco to focus on Dunhill brand’, Business Times (Malaysia), April 19 2000, pg6. 36 'BAT Malaysia first quarter Y2000 financial result', New Straits Times, April 21, 2000, pg 26.

13 Box 2: Malaysian Tobacco Company Bhd (MTC) British American Tobacco has been operating in Malaysia since the mid-1920s. The Malaysian Tobacco Company Bhd (MTC) has been operating since 1956 but its origins date back to 1911.37 Parent company BAT has a 54.70% interest in MTC via Chelwood Trading and Investment. It was reported in 1998 that MTC exported about half of its production and was increasingly looking to export more in the Asian region.38 In late 1994, MTC signed a three-year contract with the Kunming Tobacco Company of China to manufacture and export cigarettes to China. Exports were around 100 to 120 million sticks per month. MTC also exported for Singaporean and Hong Kong companies.39 MTC focuses on brands Benson & Hedges and Kent and has paid less attention to its other brands John Player Special, Lucky Strike, Kingsway, Gold Flake and Players Gold Leaf and 555. BAT was listed first in a list of the top KLSE-listed companies in terms of net return on equity (%) for 1998 (M) 200.964.40 In 1998 MTC produced 2.8 billion sticks for the domestic market and 3 billion for the export market, the relocation of BAT’s Hong Kong operations would see this export figure rise to 6 billion per year for export.41 In April 1998, BAT announced that it would relocate its Hong Kong manufacturing facility to Malaysia. In 1999, British American Tobacco moved its Hong Kong operations to Malaysia, with most of its production to fall to BAT’s Malaysian Tobacco Company. Manufacturing for export already made up half of MTCs total volume and it was set to increase by 50%. The move was part of BAT’s plans to consolidate its manufacturing base in Malaysia. BAT is the largest international tobacco company in Asia.42 Two new high capacity pieces of machinery were brought from Hong Kong to Malaysia and are situated in the MTC manufacturing plant in Sungai Besi.43

Table 2.21 - Malaysian Tobacco Company Bhd Profits 1992 1993 1994 1995 1996 1997 Turnover 540.4 493.4 503.6 537.3 537.72 525.8 (RM million) Pre-Tax 59.4 65.4 53.0 62.7 37.4 16.1 profit(RM million) Source: MTC aims to strengthen key brands’, Business Times (Malaysia), November 14th 1997, pg6., ‘Malaysian Tobacco group pre-tax slips 56.9pc’, Business Times (Malaysia), February 25th 1998, p5., ‘MTC’s core brands do well’, Business Times (Malaysia), March 26th 1998, pg6.

37 *MTC was originally established in 1911 as Straits Tobacco Company, it then became known as Malayan Tobacco Company Bhd which changed its name to the Malaysian Tobacco Company in March 1977. 38 st Sidhu, B., ‘MTC aims to export more to Asia’, The Star, January 31 1998.

39 th ‘MTC aims to strengthen key brands’, Business Times (Malaysia), November 14 1997, pg6. 40 'Top 5 KLSE-listed companies in terms of net return on equity (%) for 1998', The Sun (SunBiz), February 14, 2000, p.2

41 th Adnan H., ‘Decision to relocate BAT operations to Malaysia shows confidence in country: MTC’, The Star, April 28 1998. 42 th ‘British American Tobacco to Relocate HK ops moves to M’sia’, The Sun (Malaysia), April 24 1998, pg5.

43 th ‘MTC expects to increase after relocation’, New Straits Times, April 28 1998.

14 Box 3: Rothmans of Pall Mall (M) BHD Rothmans of Pall Mall began operations in 1962 in Singapore where it set up a pilot plant. For background see ‘Operations began at pilot plant in 1962’, Business Times (Malaysia), 12th June 1998.

From 1992 to 1997 Rothmans’ sales grew at an average rate of 2% per annum. In 1997 it used approximately 70% local tobacco.44 In 1996 Rothmans was the market leader accounting for 48.5% of sales. Dunhill, the country’s leading brand accounted for 35.8% of volume sales that year. Rothmans of Pall Mall has embarked on an expansion programme which will increase its production capacity to 16 billion cigarettes per year from 12 billion cigarettes per year by investing RM34.5 million.45 "In 1997, the company sold a total of 12 billion cigarettes. In terms of market size, it had dropped four per cent to about 1.7 billion sticks per month. Rothmans continued to command the market with a 55 per cent share. The company's brandnames include Dunhill, Perilly's, Peter Stuyvesant and Rothmans of Pall Mall. The company has spent RM34.5 million [USD1=RM3.8] during the last financial year on the latest technology for its plant and equipment as well as state-of-the-art warehousing facility. Its warehousing facility would be able to store between 15 billion and 16 billion sticks of cigarettes per year compared to about 13 billion previously."46 In 1997, Rothmans spent RM31 million on new technology to increase productivity of plant.47 In 1998, Rothmans undertook a factory reconstruction programme at a cost of RM60 million to increase the factory’s output to 1 billion cigarettes per month. 48

Table 2.22 - Rothmans of Pall Mall Annual Profits 1993 1994 1995 1996 1997 1998 Turnover 1,123.71 1,329.25 1,444.45 1,596.65 1,763.71 1,960 (RM million) Pre-Tax 347.70 402.23 433.23 509.76 559.64 653.53 profit(RM million) Source: ‘Rothmans to reap benefits of modernisation measures’, Business Times (Malaysia), July 7th 1997, Pg6., Johari,S., ‘Rothmans ready to take on challenges’, Business Times (Malaysia), June 12th 1998.

RJ Reynolds Bhd March 9th 1999, Japan Tobacco International (JTI) entered into an agreement with RJR Nabisco and RJ Reynolds Tobacco Co to acquire all the International tobacco business belonging to the RJ Reynolds group of companies. This major sale by the RJR group meant that it was withdrawing entirely from the International tobacco business.49

RJ Reynolds completed a RM150 million manufacturing expansion programme in 1998 which increased the production capacity of its factory in Shah Alam from 5 billion cigarettes per year to 12 billion cigarettes. RJR plans to export approx 40% of production to the regional market. The company began exporting in 1997 and has been designated the Asia-Pacific sourcing centre, exporting to Thailand, Hong Kong and Japan.

44 ‘Rothmans sales growth at 2pc’, Business Times (Malaysia), Jul9 1997, pg5.

45 th Daud, D., ‘Rothmans to increase production’, The Star, July 8 1998. 46 Kasmiah Mustapha, 'Rothmans revises growth projection downwards', New Straits Times, July 8, 1998

47 th ‘Rothmans to reap benefits of modernisation measures’, Business Times (Malaysia), July 7 1997, pg6. 48 ‘Looking ahead: Rothmans installs state-of-the-art facilities in anticipation of a ‘better year’’, Corporate World, February 1998, pg12 49 th How, H,B.,"Japan Tobacco to pay US$162.8 mil for 60% stake in RJ Reynolds", The Star (Malaysia), May 13 1999, pg1.

15 The closure of the Hong Kong sourcing centre in late 1997 makes the Malaysian centre the regional manufacturing hub for parent company RJ Reynolds Tobacco International Holdings affiliates in the Asia-Pacific Region.50

It will be supplying cigarettes to countries throughout this region. Cigarettes produced for the local market contain 70% local tobacco leaf51 RJ Reynolds’ company chairman Datuk Mohamad Nadzmi Mohamad Salleh said that, “… the new plant will provide RJR with longterm capability to develop its export business, especially when the South-East Asian economies recover.”52

Table 2.23 - RJ Reynolds Bhd 1993 1994 1995 1996 1997 1998 Turnover 406.5 494.9 569.9 604.2 649.2 641.5 (RM million) Pre-Tax Profit 76.3 90.3 133.7 141.8 133.9 101.6 (RM million) Source: Foo Eu Jin, ‘RJR expects 1998 to be satisfactory year’, Business Times, June 26th 1998, pg 6., ‘RJR chairman: Sales to depend on recovery’, The Star (Malaysia), May 22nd 1999, pg9.

Philip Morris In November 1998, Philip Morris signed a six-year contract with Malaysian Westport Distripark to provide 170,000sq ft of storage space in Malaysia’s free commercial zone. The new facility will be used to distribute tobacco products in the region.53 Philip Morris representative, Ricardo Cergneux states “We have decided to establish our South-East Asian operations in Malaysia…”54

2.3 Imports and Exports Imports: Import costs of tobacco and cigarettes in 1990 amounted to US$47.2 million (0.1% of all import costs). The United States is the main source of tobacco and cigarettes imported into Malaysia, accounting for 73% of raw tobacco imports and 40% of cigarette imports in 1994. The number of cigarettes imported from the US has declined during the 1990s as compared to the 1980s however the import of raw tobacco has remained consistent at approximately 3 million kgs.

Imports of cigarettes from Hong Kong and Singapore had been strong but saw sudden drops in 1994, a consequence of industry restructuring which saw closures of plants in those countries. Imports of cigarettes from Japan have been steadily growing. In 1997, according to the United States Department of Agriculture (USDA), cigarette imports amounted to RM97.5million, a 113% increase from 1996. Imports almost doubled during 1997, with around 1,252 million pieces, compared with just 640 million pieces in 1996.

50 rd 'RJ Reynolds to export 40pc of output to region', Business Times (Malaysia), May 23 1998, pg5, and Menon, N., ‘RJR to push exports, increase local market share’, The Sun, May 23rd 1998, pg18. 51 rd RJ Reynolds to export 40pc of output to region’, Business Times (Malaysia), May 23 1998, pg5, and Menon, N., ‘RJR to push exports, increase local market share’, The Sun May 23rd 1998, pg18. 52 rd ‘RJR developing export business in big way’, The Star, May 23 1998.

53 th ‘KPB unit and Philip Morris sign warehousing pact’, The Star (Malaysia), November 27 1998 54 ibid.

16 The US, Hong Kong, the UK, the Philippines and Indonesia remain the five largest suppliers to Malaysia. In general, high tarifs tend to restrict the quantity of cigarettes imported. Imports from the US and UK are usually destined for sale in duty-free shops.

In 1997, 20,475 tonnes of raw tobacco was imported into Malaysia, most came from the US but tobacco was also imported from China, Brazil, Turkey and Argentina. Imports of raw tobacco from Thailand have increased significantly during the 1990s from zero in 1988 to 4.6 million kg in 1994. It is becoming a major supplier of tobacco to Malaysia. In 1994, over 4% of raw tobacco imported into Malaysia came from Thailand.55 In June 1998, it was reported that tobacco companies could only import a maximum of 30% of their required raw tobacco leaves.56

Table 2.24 - Imports of Cigarettes (Volume in Kg/Value in RM CIF) Year Import of Cigarettes Volume Value 1980 2,890,942 46,909,309 1989 904,382 46,486494 1990 990,323 48,586,553 1991 2,215,301 93,654,517 1992 2,867,311 104,547,001 1993 1,962,617 81,019,637 1994 1,095,350 51,480,487 Source:"Statistics on Commodities", Ministry of Primary Industries, Malaysia. July 1995, p 139

Exports: Malaysia earned about US$651,000 in 1990, from cigarette and tobacco exports. In 1998, MTC exported 40% of its total production of some 5 billion sticks, mostly to Asian countries. A large part of MTC’s export business is represented by contract manufacturing for British American Tobacco which has a 54.7% stake in MTC.57

Cigarette exports surged from 3,707 in 1996 to 7,731 million pieces in 1997, with many of the exports going to Thailand, Hong Kong, and Singapore. Malaysia has also been targeting the Chinese, Korean and Vietnamese markets. In 1995, MTC signed an agreement with the Kunming Tobacco Company to supply between 100 million and 200 million sticks a month to the Chinese company.58

Export of tobacco products increased by 70% to RM379 million during the first seven months of 1998 (January to July 1997: 17.9%) due to increased demand for tobacco products from East Asia, particularly Hong Kong and Singapore.59

The manufacturers are allowed to import duty free tobacco for manufacturing cigarettes meant for export. This is aimed to boost manufacturing of finished product. In 1998, 8 billion sticks of cigarettes were exported. The volume might inflate in the near future as manufacturers are keen to make Malaysia a hub of cigarette manufacturing for export to

55 'Statistics on Commodities', Ministry of Primary Industries Malaysia, July 1995.

56 th ‘Rothmans ready to take on challenges’, Business Times (Malaysia), June 12 1998

57 th Parameswaran, P. ‘MTC: Cigarette sales still robust’, Business Times (Malaysia), March 27 1998, p6. 58 'MTC aims to strengthen key brands', Business Times (Malaysia), Friday, 14 November, 1997, pg 6. 59 Economic Report 1998/99, Ministry of Finance, pg 84

17 ASEAN countries and Asia.60

Table 2.25 - Malaysia: Imports/Exports of Cigarettes (million sticks) 1992 1993 1994 1995 1996 1997 1998 Imports 2,867 1,962 1095 2033 640 700 n/a Imports as a % of 16.0% 10.2% 5.9% 9.9% 3.2% 6.0% ___ consumption Exports 2,965 1,904 2008 3297 3707 5915 6035 Exports as a % of 16.4% 9.9% 10.3% 15.1% 16.1% 28.2% ___ production Source: USDA / World Tobacco, Tobacco Journal International and Confederation of Malaysian Tobacco Manufacturers

2.4 Smuggling Tobacco smuggling is estimated to cost US$200 million in tax losses each year. It is estimated to account for 10% to 18% of the total domestic market, mainly involving kretek cigarettes from Indonesia which sell at half the price of ‘white’ cigarettes.61

Tobacco Market File reported that, “In 1993, illegal sales of kreteks accounted for 17% of the tobacco market volume” and that, “In 1994 the level of smuggling declined slightly, although it rose to an estimated 18% in 1995”. 62 Many of these smuggled cigarettes are ‘kretek’ or ‘clove’ cigarettes coming from Indonesia.

Rothmans Chairman Tan Sri Abu Talib Othman said that smuggled cigarettes accounted for 15 to 20% of the market. He also disclosed that ‘kretek’ or clove cigarettes were the main cigarettes smuggled into Malaysia.63

In an interview in August 1999, MTC’s Managing Director Russell Cameron was quoted as saying, “In excess of 20% of all products smoked in Malaysia are duty not paid – smuggling – largely ‘kretek’ (clove cigaretes from Indonesia).” He went on to say that the Malaysian government lost around RM800 million to RM1.2billion in tax revenue each year, due to smuggling.64

3. Marketing strategies

“We spend a lot of money in advertising” - Nigel Buck, Managing Director of Rothmans (1998)65

Spending on tobacco advertising in Malaysia is extremely high. In 1997, the tobacco industry spent US$89 million (over RM400 million) on advertising in Malaysia alone.66

60 Ministry of Primary Industries Malaysia [web page](2000) http://www.kpu.gov.my/english/icis/tobaco/tcigar.htm 61 "World Tobacco File"[web page](2000) http://www.marketfile.com 62 ibid.

63 th ‘Rothmans plans to achieve 5pc sales growth’, Business Times (Malaysia), July 8 1998, pg66.

64 th ‘Rothmans, MTC to grow merged business’, The Star, August 10 1999. 65 ‘Looking ahead: Rothmans installs state-of-the-art facilities in anticipation of a ‘better year’’, Corporate World, February 1998, pg12

18 Rothmans is the largest spender; it is estimated that Rothmans spent RM127 million on advertising in Malaysia alone, in 1996.67 Malaysian Tobacco Companies are number one advertisers on electronic media and are the largest advertising and sponsorship spenders occupying about 25% of total advertising expenditure for 1995.68 Financial analysts say that advertising remains a major cost component for tobacco companies in Malaysia. Professor Dzul at Poisons Centre Malaysia, estimates that 43% of the revenue of television stations comes from tobacco advertising.

Table 2.26 - Top Advertisers in Malaysia (US$ thousands) 1991 1992 Rothmans Int 23,368 31,003 BAT Industries 13,440 12,975 RJR Nabisco 9,891 9,172 Source: Asia-Pacific Tobacco Control News, Bulletin No 18, March 1995 MTC Chairman Datuk Mohd Ghaus Badioze Zaman said that the company had installed 1000 merchandising units for Benson and Hedges in 1997.69

MTC spent RM9million on advertising between July 1997 and June 1998, said MTC's Consumer and Regulatory Affairs Director, Sharifah Rozita Sulaiman. The advertising budget of cigarette importers and distributors amounted to RM53.4 million while rival RJ Reynold spent RM14.5 million between July 1997 and June 1998.70

Mary Assunta, Consumer Association of Penang, believes that Malaysia is the testing ground for new advertising strategies for cigarettes. Tobacco industries contend that they need to advertise to stay competitive.

Table 2.27 - Top Marketers in Selected Countries Country Company Rank* Ad Spending ** Hong Kong Philip Morris 9 $12.9 Million Indonesia Philip Morris 10 $6.3 Million Malaysia Rothmans 1 $36.2 Million Malaysia BAT 2 $19.7 Million Malaysia RJR 4 $9.5 Million Pakistan BAT 2 $1.6 Million Philippines Fortune Tobacco 8 $17.9 Million (RJR Licensee) Bulgaria Philip Morris 3 $1.2 Million Bulgaria Rothmans 5 $1 Million Bulgaria BAT 7 $941,000 Czech Republic Philip Morris 9 $3.3 Million Romania Philip Morris 4 $2.1 Million Romania RJR 9 $1.2 Million

66 Assunta, M., 'Malaysia" A case Study in Brand Stretching', Global Aggression: The Case for World Standards and Bold US action Challenging Philip Morris and RJR Reynolds, INFACT 1998 Peoples Annual Report. 67 Govind S., ‘Where there’s smoke…’, Corporate World, February 1998, p9. 68 Tobacco Companies' Ads to Remain, Business Times, Aug 27, 1996.

69 th ‘MTC’s core brands do well’, Business Times (Malaysia), March 26 1998, pg6. 70 Lim, W., 'Deal set to give MTC a bigger mart share', Business Times, February 2, 1999

19 Slovak Republic Philip Morris 3 $1.8 Million Mexico Cigarrera La Moderna 8 $29.9 Million (BAT Subsidary Bahrain Philip Morris 4 $310,000 Kuwait Philip Morris 1 $4 Million Kuwait Rothmans 6 $1.2 Million Lebanon BAT 3 $4.5 Million Lebanon Philip Morris 10 $2.3 Million Oman Philip Morris 6 $513,000 Qatar Philip Morris 3 $417,000 Saudi Arabia Philip Morris 3 $3.5 Million UAE Philip Morris 4 $1.7 Million ** Spending amounts are for Asian, European and Latin American countries are from 1996, and for Middle Eastern Countries, from 1995. *Companies are ranked by advertising expenditure in each country Sources: Advertising Age; 10 November, 1997 and 11 November, 1996.

3.1 Electronic Media In 1996, the Ministry of Information announced that the government-owned Radio Television Malaysia (RTM) earned RM150.7 million (US$33 million) from tobacco advertisements, amounting to 43% of the total revenue collected from advertisements.71 Mary Assunta, stated that tobacco companies sponsor movies on television as well as live telecasts of sporting competitions, music shows and other broadcasts.

3.2 Newspapers and Magazines A survey of tobacco advertising in Malaysian daily newspapers found that Benson and Hedges was the most commonly advertised brand, followed by Peter Stuyvesant and Salem. Advertisements appeared in the English language press more often than the Malay language press.72

3.3 Brand Stretching Malaysia banned direct tobacco advertising in 1993 with the promulgation of the 'Control of Tobacco Products Regulations'. The regulations prohibit direct advertising of tobacco products in the local media, however it does not prohibit tobacco companies from using cigarette brand names to advertise other products and services. This gaping loophole has made Malaysia's advertising ban completely ineffective.

Tobacco companies have set up many 100% owned subsidiaries that use the same brand names and images as the cigarettes they produce. Examples of these types of ventures include the Benson and Hedges Bistro, Salem Holidays, Salem Power Station music stores, Salem Attitude clothing, Winfield Casuals clothing, Camel Adventure Gear, Rothman's International Executive Travel.

71 George, J., Conference Report for the 'Malaysian Conference on Tobacco-Related Issues' 1996, p.12. 72 United for Tobacco Free Malaysia [web page](2000) http://prn.usm.my/tobacco/adfebruary.html

20 The tobacco companies' profits from these subsidiaries are negligible but the companies spend millions promoting them.

This type of advertising is called 'brand-stretching' and the tobacco industry insists that it is legitimate. They refer to it as 'trademark diversification advertising'. In 1992, RJ Reynolds was exposed for advertising a non-existent travel business called 'Salem High Country'. The 'travel business' was advertised on television daily but did not in fact exist at all.73

3.4 Other promotional tactics Music and Movies: Despite numerous statements from the tobacco industry claiming that they do not target young people, campaigns in Malaysia are highly youth-focused. RJ Reynold's 'Salem' brand is promoted by sponsoring live pop concerts under the banner 'Salem Cool Planet' with international artists such as Alanis Morissette, Hootie and the Blowfish and Paula Abdul, as well as Chinese entertainers like Daniel Chan and Fay Wong. They also sponsor televised music concerts, sponsor a music show on television called 'Cool Planet Chart', run end-of-year disco parties and run the 'Salem Power Station' music store. For New Year 2000, RJR held the 'Salem Cool Millenium Party'. RJR also runs various contests for free tickets to concerts that they are not involved in, and give out free movie tickets under the 'Salem Cool Planet' banner.74 Sport: In 1996, Peter Stuyvescent Travel was the official sponsor of the Olympic Games in Atlanta. Tobacco companies sponsor many sporting events in Malaysia including soccer, Formula One Racing and golf. Soccer in Malaysia is dominated by Rothmans’ Dunhill brand, which is used to sponsor games and telecasts, including a live telecast of the World Cup in 1998 and telecasts of English League soccer matches. Rothmans also sponsors the Malaysian Professional Football League. Philip Morris has a long history of sponsoring motor racing in Malaysia. Malaysia's King, Prime Minister and Deputy Prime Minister, have all endorsed Marlboro's sponsorship of motor racing in the country. The sponsorship includes hosting racing events, telecasting races, and sponsoring the Marlboro Total Malaysian Club Prix. When the Formula One came to Malaysia, the Prime Minister of the country waved the flag to start the event.75

In the year 2000, BAT spent RM3.14 million (US$825,500) sponsoring the Benson & Hedges Malaysian Open, which was telecast live and via delayed telecasts throughout the four-day event. The Malaysian Open, which is co-sanctioned by the Asian PGA and European Tours, was also beamed live across Asia via cable TV. British American Tobacco (BAT) marketing director, Datuk Phan Boon Siong said, "The Benson & Hedges Malaysian Open will be put on the world stage via our live broadcasts."76

Public Relations and Corporate Philanthropy: The tobacco industry also spends money trying to "patch-up" their reputation, small donations are advertised extensively in the media. A recent example in Malaysia was Rothmans' provision of one-year scholarships to 5 children of Rothmans employees. This small donation gained considerable attention

73 Assunta, M., 'Malaysia" A case Study in Brand Stretching', Global Aggression: The Case for World Standards and Bold US action Challenging Philip Morris and RJR Reynolds, INFACT 1998 Peoples Annual Report. 74 ibid 75 Assunta, M., 'Malaysia" A case Study in Brand Stretching', Global Aggression: The Case for World Standards and Bold US action Challenging Philip Morris and RJR Reynolds, INFACT 1998 Peoples Annual Report. 76 'Golf: Live coverage for Malaysian Open', New Straits Times, Feb. 3, 2000

21 despite the fact that the students would be subsequently bonded for between two and three years with the company.77

In Malaysia, the industry is particularly interested in keeping tobacco farmers on side. In 1998, Rothmans, RJ Reynolds and the National Tobacco Board donated six water pumps to tobacco farmers at Kampung Gaung in Hulu Terengganu.78 They have also provided assistance to farmers during droughts. These small donations are carefully selected and widely publicised.

The Tobacco Industry (particularly Philip Morris) has been involved in trying to run so- called 'anti-smoking' campaigns for young people. The Ministries of Education in Thailand (See Thailand:Box 4) and in Malaysia have both been approached by the tobacco industry to jointly run anti-smoking programmes. In Malaysia, the campaign was called 'Right Decisions Right Now' and it was run in around 1,500 secondary schools in May and August of 1997. These types of programmes claim to 'empower' young people to make their own decisions, but they omit comprehensive health information with which to make an informed decision.

The tobacco industry in many countries such as Malaysia, routinely issue press releases restating how much money they have 'earned' for the country, how many people work in the industry and how much the industry pays the government in taxes. Malaysian business papers as well as standard papers regularly report the information from these press releases.

4. Tobacco Control Policies

Malaysia enacted the 'Control of Tobacco Products' Regulations in 1993, under the Food Act of 1983. The regulations were officially implemented on 15th May 1994. Although they have been amended a number of times, these regulations remain the primary legislative mechanism used to control tobacco in Malaysia.

Moreover, industry interference has meant that only the least effective tobacco control measures are in place in Malaysia. In 1997, MTC Chairman Datuk Mohamad Ghaus Badioze Zaman said, “as a member of the Confederation of Malaysian Tobacco Manufacturers, the company saw a need to explore opportunities to work with the authorities to ensure balance in designing new regulations that govern the industry and its ability to maintain smokers’ rights.”79

Smokefree Settings: Regulation 10 of the 'Control of Tobacco Products' Regulations prohibits smoking in amusement centers or theatres when such places are open to the public, as well as in hospitals, clinics, public lifts and public vehicles. The regulation also made mandatory the provision that at least 50% of seating in air-conditioned restaurants must be smokefree.

77 'Local students get Rothmans scholarships totaling RM30,000', New Straits Times, Saturday, November 14, 1998 78 Azura Abas, 'Mardi making efforts to increase tobacco output', March 23, 1998

79 th ‘MTC aims to strengthen key brands’, Business Times (Malaysia), November 14 1997, pg6.

22 In October 1996, the Cabinet endorsed the extension of this regulation to include banks and financial institutions; sporting complexes, including stadiums; shopping complexes, air- conditioned shops, including restaurants or any eating places; government offices; transport terminals for bus, taxi, ferry and train; schools, including kindergartens, nurseries, institutions of higher learning (excluding hostels and open spaces); petrol stations; public halls while in use by the public; airports excluding some designated areas); and service counters of Tenaga Nasional Berhad, Telekom and Pos Malaysia. There are now 18 public places where smoking is banned or controlled.

Malaysian Airlines banned smoking on all flights except those going to and coming from Japan, in January 1996 and in 2000 banned all flights.

Advertising: The ‘Control of Tobacco Product Regulation’ Act was passed in May 1994. The main provision of the act was the prohibition of all direct cigarette advertising, but indirect advertising using brand names was still permitted.80 This means that cigarette brand names and logos can be used for the promotion of non-cigarette items. The Minister for Information has argued that this type of advertising does not contravene the law. Subsequently, indirect advertising became extremely widespread in Malaysia.

Since 1996, the government has been looking into widening the ban however the government was attempting to do this through discussions with the Confederation of Tobacco Manufacturers. World Tobacco Marketfile stated, “The Malaysian Government is unlikely to extend the country’s ban to include indirect advertising due to economic considerations”. 81

Malaysia's incomplete advertising ban illustrates the need for a comprehensive ban on advertising, if it is to be effective at all. Business analysts believe that the short-term monetary importance of the Tobacco Industry's sponsorship of major sporting events in Malaysia, make it unlikely that a comprehensive advertising ban will be brought about in the near future.82

Warnings: Cigarette packs bear a single fixed health warning on the side of the pack which reads 'Warning by the Government of Malaysia: Smoking is dangerous to your health'.83 The warnings must be printed in capital letters, be at least 3mm in height and appear in the same colour and background as the packet. Cigarette packs must also have tar and nicotine levels printed on the pack. The Malaysian health warning is extremely small and does not reduce the ‘attractiveness’ of the pack.

Harm reduction: Malaysia has controls on the tar and nicotine content of cigarettes sold in Malaysia, which must be less than 20mgs of tar and 1.5mgs of nicotine.

80 Roemer R. Legislative action to combat the a World Tobacco Epidemic 2nd edn Geneva: World Health Organisation, 1993. 81 "World Tobacco File"[web page](2000) http://www.marketfile.com 82 Govind S., ‘Where there’s smoke…’, Corporate World, February 1998, p9. 83 Zulkifli Ahmad, Rogayah Jaafar, Razlan Musa, 'Smoking among Secondary Students in Kelantan', Proceedings of the Kelantan Health Conference, 1998.

23 Youth Access: The buying and selling of cigarettes to persons under 18 years of age is prohibited and cigarette vending machines are banned. However, studies have shown that the ban is not an effective mechanism for reducing youth access to cigarettes. A study in Kota Bharu, in the Malaysian state of Kelantan, found that 97.4% of youth attempts to purchase cigarettes, were successful.84

Taxation In June 1998, it was reported that the import duty on tobacco leaves was RM50 per kg. Sales tax on cigarettes in 1998 was quoted at being 15%.85

In 1992, the taxation on cigarettes was increased by 100% and import and excise duty was doubled in 1993 to US$11.44 per kg.86 In 1998 the import duties on cigarettes, cheroots, cigars and cigarillos was increased to RM180 per kg, from RM162 per kg for cigarettes and RM138 for cheroots, cigars and cigarillos. The excise duty on cigarettes was simultaneously increased from RM28.6 per kg to RM40 per kg.87

Cigarette prices were increased by RM0.20 per pack in August 1997. Prior to this change, cigarette prices had last been increased in May 1995 by RM0.10 per pack. The average price of a pack of cigarettes ranges from RM2.40 to RM4.00. On October 30th 2000, cigarette prices were raised by 30 sen partially due to a recent sales tax increase of 67%. Cigarette companies pay 25% tax currently.88

Table 2.28 - Rate of Duty on Tobacco and Tobacco Products 1996 Import Export Sales Tax Raw Tobacco; tobacco refuse. Tobacco not stemmed/stripped Flue cured, kg 5% and RM50 Nil Nil Other, kg 5% and RM50 Nil Nil Raw tobacco; tobacco refuse. Tobacco partly or wholly stemmed/stripped Flue cured, kg 5% and RM50 Nil Nil Other, kg 5% and RM50 Nil Nil Tobacco refuse 5% and RM50 Nil Nil Cigars, cheroots, cigarillos and cigarettes containing tobacco Cigars, cheroots, cigarillos, kg RM138 Nil 15% Bidis, kg 5% and Nil 15% RM19.50 Other RM162 Nil 15% Cigars, cheroots, cigarillos and cigarettes containing tobacco substitutes Cigars, cheroots, cigarillos, kg RM138 Nil 10%

84 Zulkifli A, Rogayah J. 'Cigarette sales to minors in Kelantan'. Med J Mal 1998;53(2):1-3.

85 th ‘Rothmans ready to take on challenges’, Business Times (Malaysia), June 12 1998 86 Tobacco Marketfile [web page](2000) http://www.co.uk/Tobacco/htmlcigs/Asia%2…/malaoe.htm & Zulkifli Ahmad, Rogayah Jaafar, Razlan Musa, "Smoking among Secondary Students in Kelantan", Proceedings of the Kelantan Health Conference, 1998. 87 Rosemawathi, Dr, (2000) Pers Comm. Disease Control Division of the Ministry of Health & [web page] (2000)http://prn.usm.my/tobacco.html 88 Raj,Adelaine Paul. "BAT expects initial drop in cigarette demand" Business Times, Malaysia, November 28,2000, pg.13.

24 Cigarettes, kg RM162 Nil 10% Other manufactured tobacco and manufactured tobacco substitutes Homogenised, reconstructed tobacco, tobacco extracts and essences Smoking tobacco packed for retail sale, airtight 5% and RM60 Nil 10% container, kg Smoking tobacco packed for retail sale, other, kg 5% and RM60 Nil 10% Snuff, kg 5% and RM60 Nil 10% Source: National Tobacco Board, Malaysia, 1996

Effectiveness of Tax: Taxes on cigarettes have been one of the more effective measures to control tobacco use. According to a statement by the Malaysian Tobacco Company Bhd (MTC), the Malaysian cigarette market declined by 7.4% for the first six months in 1999, following price increases in the last quarter of 1998.89 A similar story was found after the tax was increased by 100% in 1993, when the value of the market contracted by 4.4% and even sharper falls were felt in volume sales.90

In 1998 a Rothmans executive was quoted as saying, “Any increase in the cost for consumers will make it more difficult for them to buy cigarettes.”91

Government Revenue from Tobacco: The Malaysian Government earns a large amount of money from Malaysia’s involvement with the tobacco industry. World Tobacco Marketfile states that the Malaysian government collects in excess of RM810 million from import and excise duties, corporate sales tax and surtax from cigarette manufacturers annually. The Ministry of Health estimates that the government received approximately RM1.28 billion in taxes from tobacco in 1997.

Table 2.29 - Revenue from Tobacco the Industry (RM Million) 1981 1990 1991 1992 1993 1994 Import Duties (Tobacco, Cheroots and Cigarettes) 238.6 213.6 206.9 235.9 181.3 211.7 Excise Duties (Local cigarettes) 67.0 158.6 221.7 257.2 464.1 455.2 Total 305.6 372.2 428.6 493.1 645.4 666.9 Source: MTC, RJR, Rothmans, LTN referred to in 'Statistics on Commodities', Ministry of Primary Industries Malaysia, July 1995.

Islam: As done previously in many Muslim countries throughout the world, Malaysia National Fatwa Committee for Islamic Affairs ruled that smoking was 'Haram' (strictly forbidden) on March 23 1995,92 . The Fatwa had not, however, been given strong attention in the past, and Mary Assunta of the Consumers Association of Penang said that the Fatwa has been “unofficially set aside”.93 Activists in Malaysia are now seeking to re-invigorate the Fatwa and garner support from Imams in the country.

89 'Malaysia cigarette market down ', The New Straits Times Aug. 3, 1999, p.20 90 "World Tobacco File"[web page](2000) http://www.marketfile.com 91 ‘Looking ahead: Rothmans installs state-of-the-art facilities in anticipation of a ‘better year’’, Corporate World, February 1998, pg12 92 'Poison Control: Fatwa on smoking should be followed for the good of all', The New Sunday Times Press (Malaysia) Berhad, March 26th 2000.

25 Box 4: Why has smoking been declared Haram? There are many reasons why smoking was judged to be 'Haram'; amongst them that smoking harms your body. Islam prohibits any action that causes harm to oneself or to other people. Allah said, "Do not cast yourselves, with your own hands, into destruction." Islam requires its adherents to control their desires. Smoking also harms your mind and weakens your will power (Allah wants the believer to be strong and capable of controlling the reigns of his desires) ... it Harms The Environment (Regarding passive smoking, "Anyone who believes in Allah and the Last Day should not hurt his neighbor") ... it is wasteful ("A smoker wastes his wealth on that which harms and has no benefit; he will be asked about his wealth and how he spent it, as has been cited in the hadith earlier. His wealth belongs to Allah, so how would he dare to waste it in disobedience to Him?") Source: Assanta, M, CAP, (2000) Pers Comm.

Summary of Action and Events Year Event 1971 Prevalence study on public health doctors 1972 Prevalence study on medical students. 1972 Formation of Joint Committee of MOH and MMA on Smoking and Health - Action on Smoking or Health Committee (ASH). 1972 Sheikh Abdullah Pay Revision Report abolished free cigarettes to military personnel on operations. 1973 Smoking banned in cinemas (Banning of Smoking Rules 1972) 1975 MOH and MOD ban smoking in all their hospitals, clinics and health centres. 1977 Amendment to the Trades Description Act 1972. Government health warning: 'Smoking is dangerous to health' on cigarette packets and advertisements mandatory. Exemptions are international magazines not printed locally. 1979 Tobacco ads not allowed to feature humans, then restricted in number, and then not allowed before 9 pm. Health warning originally silent, but then voiced-over. 1980 World Health Theme 'Smoking or Health' celebrated. 1981 MOH prepares code of practice for cigarette advertising and sales promotion. 1981 Smoking banned in air-conditioned train coaches and in buses. 1981 Reversal of MAS converting horizontal to vertical ban. Non-smoking seats increased to 55-70% 1982 Directive by Chief Secretary of Cabinet prohibiting government servants smoking at work in government offices and vehicles except in toilets and canteen. 1982 Standard methods formulated by MOH and tobacco companies to monitor and introduce progressive reduction of tar levels. 1982 Budget: 30% tobacco tax increase. 1982 March Cigarette advertisements banned on radio and television, and in government publications. Other restrictions were placed on advertising in the press, cinemas and outdoor posters. 1983 First National Workshop on Tobacco or Health organised by ASH Committee of MMA, September National Cancer Society, Heart Association and Consumer Association (FOMCA) attended by >100 participants. 1984 Circumvention of television ban by brand names on non-tobacco products such as clothes, travel and gold items. Protests unsuccessful. 1984 MMA launch Superman campaign with budget of US$5,000. October 1985 March Code of Advertisement enforced. Further Guidelines for all types of cigarette advertisement issued by Censor Board of Ministry of Home Affairs. 1985 Conference on Smoking and Health, Kuala Lumpur UICC, ASH-MMA, FOMCA, Cancer October Society and MOH. * First criticism by tobacco industry. 1985 International Union Against Cancer/International Organization of Consumers Unions

93 Assunta, M., CAP, (2000), Pers Comm.

26 October Workshop 'Smoking Control Strategies', Penang 1985 Ministry of Home Affairs issued 'Guidelines for all types of cigarette advertisements,' which included restriction on content, restriction on certain promotions such as contests, and a compulsory health warning. 1986 Inaugural Malaysian No-Smoking Day Campaign. November 1987 5-Day Plan to Quit Smoking Classes. February By 1987 Annual national non-smoking day/week. 5-day quit plan 1987 US$25 million spent on tobacco advertising. 1987 Malaysian No-Smoking Week Campaign. November 1988 July Memorandum and campaign to ban smoking on aircraft. 1988 Malaysian No-Smoking Week Campaign. November 1988 Ipoh Municipality extended smoking bans to any public hall where performances are shown, & fine doubled to $400 1988 Budget: 5% increase in tobacco tax. 1988 US$32 million spent on tobacco advertising. 1991 Tax increases 1992 100% increase in tobacco tax (prices up 10-30%) November 1994 May Control of Tobacco Products Regulation 1993 (Implemented 15 May 1994) 3. Advertising: Prohibition of direct advertising of cigarettes. (previously just electronic media) Brand names still allowed. Direct tobacco advertising in imported print media allowed. 4. Ban on free samples of cigarettes 5. Ban on sponsorship 6. Labelling Single, fixed health warning Levels of tar and nicotine to be labelled. Tar and nicotine must not exceed 20 mgs and 1.5 mgs respectively. 8. Minors Ban on sales to <18 years. 9. Vending machines Vending machines for tobacco products banned. 10. No-smoking areas. Smoking prohibited in: * amusement centres * theatres * hospitals and clinics * public lifts * air conditioned restaurants^ * public transport * any specified building as the Minister thinks fit ^Flexibility is given to air-con restaurants, where these places are allowed to provide smoking areas not exceeding 50% of the floor space, provided they have adequate air ventilation and extraction systems. Penalty An offender is liable to a compound not exceeding Malaysian ringgit RM 1,000 or a fine not exceeding RM 5,000 or to imprisonment for a term not exceeding 2 years.

1994 May The Malaysian government will give cigarette manufacturers up till the end of 1994 to comply with the new Control of Tobacco Product Regulations 1993, which come into force on 15 May. 1994 May Malaysian Government banned rock concerts sponsored by RJ Reynolds, based on police information that the concerts promoted smoking, consumption of alcohol and free mixing.

27 1994 May World No Tobacco Day celebrated. 1995 March The Cabinet directed the Health Ministry to act on small restaurants which fail to provide a proper system of ventilation for their smoking section. Owners who fail to do so will have to declare their premises no-smoking restaurants. 1995 Smuggling of tobacco and cigarettes into Malaysia amounted to a loss in revenue to the industry of about RM170 million annually. 1996 Jan Smoking ban on Malaysian Airlines except for Japan. 1996 National Fatwa Council ruled smoking was 'forbidden' A total of 1124 summons was registered on smokers in the state of Negeri Sembilan under the Control of Tobacco Product Regulation, 1993. The offenders were caught smoking in 1997 public places designated as no smoking areas under the regulation. The total compound collected from the offenders was RM 94,635 1997 A total of 9348 students were caught smoking in schools which is a designated smoking area as specified under the Control of Tobacco Product Regulation, 1993. 1997 April Cabinet extended smoking prohibited areas to include 11 more places - Banks and financial institutions; sport complexes including stadiums (whether closed or open); shopping complexes; air-conditioned shops(including restaurants or any eating places); government offices; transport terminals, Airports (except some designated areas), schools (including kindergartens, nursery, etc), Institutions of higher learning (excluding hostels and open spaces); service counters of Telekom & Pos Malaysia; public halls (while in use by the public) 1997 April Ban on possession, chewing and smoking tobacco - under 18 1997 Top Advertisers Dunhill accessories US$m = 3.8 Ringgit m = 16.6 B&H Bistro US$m = 3.5 Ringgit m = 15.1 Kent Horizon tour S/B US$m = 1.9 Ringgit m = 8.1 1998 The import of dried tobacco leaves has increased from 5 million kg in 1997 to 7 million kg in 1998 due to the effect of El Nino 1999 701 smokers were penalized under the Control of Tobacco Product Regulations, 1993 in the state of Sarawak. Out of the 701 offenders, 48 were under 18 years old. 2000 67% increase in sales tax on cigarettes, from 15% to 25% now. Raising cigarette prices by 30 Sen.

Source: Judith Mackay "Summary of Action and Events, UICC Visit; National Health and Morbidity Survey, (1986), (1996); National Poisons Centre[web page](2000) http://www.prn.usm.my