Smuggling As the ''Key to a Combined Market'': British American Tobacco in Lebanon

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Smuggling As the ''Key to a Combined Market'': British American Tobacco in Lebanon Research paper Tob Control: first published as 10.1136/tc.2008.025254 on 25 September 2008. Downloaded from Smuggling as the ‘‘key to a combined market’’: British American Tobacco in Lebanon R Nakkash,1 K Lee2 1 Department of Health ABSTRACT young female smokers in Lebanon is also notable.7 Management and Policy, Center Objectives: To understand the strategy of British Tobacco, in turn, poses a significant health burden for Research on Population and 8 Health, American University of American Tobacco (BAT) and other transnational tobacco in Lebanon, accounting for 3500 deaths annually. Beirut, Beirut, Lebanon; 2 Centre companies (TTCs) to gain access to the Lebanese market, TTCs sought a major presence in the Lebanese on Global Change and Health, which has remained relatively closed under monopoly market as early as the 1930s when a French London School of Hygiene and ownership and political instability. company purchased assets of the Ottoman Regie Tropical Medicine, London, UK Methods: Analysis of internal industry documents, local to form the Compagnie Libano-Syrienne des Tabacs.9 Correspondence to: language secondary sources and industry publications. Following the end of French rule in 1935, control Dr Rima Nakkash, Department of Results: TTCs have relied on legal and illegal channels to was assigned to the French company with Health Management and Policy, supply the Lebanese market since at least the 1970s. Lebanese shareholders.10 11 This arrangement con- Center for Research on Population and Health, American Available documents suggest smuggling has been an tinued until the 1950s when the government University of Beirut, Beirut, important component of BAT’s market entry strategy, returned the Regie Libanaise de Tabacs et Tombacs Lebanon; rima.nakkash@aub. transported in substantial quantities via middlemen for (hereafter the Regie) to state ownership, placing it edu.lb sale in Lebanon and neighbouring countries. TTCs took under the tutelage of the Ministry of Finance in advantage of weak and unstable governance, resulting in 1959, which exerted strict control of imports, Received 26 February 2008 12 Accepted 17 July 2008 uncertainty over the Regie’s legal status, and continued to exports and production. This was not intended supply the contraband trade despite appeals by the as a permanent arrangement, with discussion of a government to cease undermining its revenues. Since the planned tender in 1961.13 Periodic reviews of the end of the civil war in the early 1990s, continued Regie’s monopoly status have followed, with uncertainty about the tobacco monopoly amid political resolution hindered by the country’s political instability has encouraged TTCs to seek a legal presence instability and sectarian fragmentation. in the country, while continuing to achieve substantial The Regie’s legal status has remained uncertain sales through contraband. until the present day.14–16 A key hurdle has been the Conclusion: Evidence of the complicity of TTCs in entanglement of the tobacco industry with key cigarette smuggling extends to Lebanon and the Middle factions who historically grant favours to farmers http://tobaccocontrol.bmj.com/ East where this trade has especially benefited from weak and Regie employees in exchange for their political governance and chronic political instability. The regional support. Equally important has been government nature of TTC strategy supports strong international support for tobacco farmers in southern Lebanon cooperation under the Framework Convention on Tobacco to keep them on land threatened by Israeli Control to tackle the problem. incursion. The government has also been keen to protect revenues earned from the tobacco industry. The goal of the Regie, which employs around 3800 The Middle East has been targeted by transna- individuals and affects the livelihoods of 40 000– tional tobacco companies (TTCs) since the 1970s 50 000 people in the agriculture, industrial and as a key emerging market because of its young and commercial sectors,17 has been a profitable com- growing population. Arab countries have grown, pany that supplies the domestic market and on September 24, 2021 by guest. Protected copyright. from 127 million in 1970 to 335 million people in competes internationally. This complex mix of 2007. Around 20% of the population is aged 15–24 competing interests has been complicated by the years,1 a proportion predicted to increase as the civil war (1975–90) and ongoing political instabil- population increases to 600 million by 2050.2 ity. Between 1990 and 1997, tobacco consumption in Within this context, TTCs have sought access to the region grew by 24.3%,3 making it ‘‘one of the this substantial and growing market. Local cigar- few growing markets in the world for tobacco’’.4 ette brands dominated the market until the 1970s However, scholarly analysis of the tobacco indus- (two-thirds of supply in 1970), after which imports try in the Middle East remains limited, including by Philip Morris, British American Tobacco (BAT) study of industry efforts to expand sales. and Japan Tobacco grew to 85% of the market by Based on industry documents, this paper exam- 2000.18 Imports have since grown from 5554 ines how TTCs have sought to gain market access million sticks in 2000 to 9574 million sticks in to Lebanon. Lebanon’s relatively liberal attitudes 2006.19 This analysis shows that smuggling has and geographical location (bordered by Syria and played an important part in ensuring the supply of Israel, and close to Cyprus) have made it a foreign brands to Lebanon. TTCs have long denied strategically important market. Smoking preva- involvement in the contraband trade,20 which This paper is freely available lence in 2002 was 46% for adult males and 35% for globally accounted for around 10.7% of sales in online under the BMJ Journals 5 21 unlocked scheme, see http:// females, relatively high compared with 38% and 2005. However, previous analysis of industry tobaccocontrol.bmj.com/info/ 7%, respectively, in the Middle East and North documents suggests TTC complicity in unlocked.dtl Africa (MENA) region in 1995.6 The rising rate of Europe,22 23 Asia,24–26 North America27 and Latin 324 Tobacco Control 2008;17:324–331. doi:10.1136/tc.2008.025254 Tob Control: first published as 10.1136/tc.2008.025254 on 25 September 2008. Downloaded from Research paper America.28 In 2003–4, the Eastern Mediterranean Regional It was from the early 1970s that smuggling grew to Office (EMRO) of the World Health Organization published significant levels.46 47 In large part, this was due to weakened two reports of cigarette smuggling in the region, focused on Iran government control over customs and excise during the civil and Iraq, based on industry documents accessible at that war, coinciding with the plummeting of domestic production time.29 30 Enabled by improved public access, this paper under- and legal imports by the Regie. As described by Philip Morris, takes a detailed analysis of TTC activity in Lebanon. ‘‘[r]ecent difficulties with the Lebanese Monopoly have lowered Documents suggest that contraband was used by TTCs to orders and resulted in quantity shortages in the normal build market share, as well as being a means of furthering imported market’’.48 As legal supplies declined, ‘‘the transit regional expansion. A fuller understanding of this strategy [contraband] markets have filled the gap’’.48 BAT reported that supports the need to implement the WHO Framework ‘‘[c]igarette production during the years of the civil war (which Convention on Tobacco Control (FCTC) ratified by Lebanon lasted 15–16 years) has come down to practically zero and [legal in 2005, and negotiation of an FCTC protocol on cigarette and illegal] imports into Lebanon rose to 13–15 billion smuggling. cigarettes’’.49 As cheap contraband flooded the market, it created fierce competition for dwindling supplies of local brands. Threatening METHODS strike action, Regie staff proved unsuccessful at securing This paper is based on industry documents obtained online government support for stronger regulation of import prices, from the British American Tobacco (BAT) Document Archive as well as upgrading of manufacturing equipment.50 51 While the (BATDA) and Legacy Tobacco Documents Library (LTDL), and media reported poor financial management by the Regie,52 on-site from the BAT Guildford Depository. The obstacles to former director-general Walid Salam saw the failure of the accessing, and limitations of working with, BAT documents government to control smuggling as the real problem (interview have been described elsewhere.31–34 Based on an iterative search with Walid Salam, former Regie director-general, Beirut, 22 May strategy, an on-site search at file level was undertaken in 2004 of 2006). This is supported by documents that describe direct the depository’s crude index using keywords of place and appeals by the Lebanese government to TTCs. In 1973, Phillipe organisational names related to the Middle East. A total of 65 Serhal (director-general Regie) asked Lorillard to ‘‘conform to files were reviewed. 53 the rules of business ethics’’ and cease supplying smugglers. He Online searches at document level were undertaken between warned that the Regie would ‘‘reconsider our entire policy of 2004 and 2007 of LTDL and BATDA using keywords generated the legal importation of your products for sale in our internal from initial searches and secondary sources. These included market’’.53 In 1977 the Regie met with Lorillard again with the names of industry
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