Tobacco and tobacco products are in Thailand's free trade Inclusion List, and thus will be allowed import duty-free status per the ASEAN Free Trade Area (AFTA) agreement, effective January 1, 2010. Thailand has already cancelled import tariffs levied on unmanufactured processed tobacco and scrap tobacco. However, the Kingdom will be required to reduce import tariffs to duty-free status in 2010 on tobacco products and manufactured tobacco substitutes that are currently subject to a 5 percent duty.
Schedules to reduce import tariffs on tobacco and tobacco products within ASEAN vary from one country to another, wherein Thailand, Indonesia and Malaysia have already agreed to reduce them to duty-free status next year, while the Philippines will continue to impose import tariffs on untrimmed tobacco leaves and scrap tobacco at 3 percent, plus 5 percent on partially trimmed or trimmed tobacco leaves and tobacco products. However, the Philippines has already scrapped import tariffs levied on processed tobacco substitutes.
Brunei, likewise, has cancelled import tariffs imposed on manufactured tobacco substitutes, but kept tobacco and tobacco-based products on their General Exceptions List, because they consider these products as being detrimental to society. Vietnam has also put tobacco and tobacco products on their General Exclusions List. Malaysia is the only ASEAN member nation that assesses duties on tobacco and tobacco products in value and volume. Malaysia has put these products on their Sensitive List, but will be required to reduce import tariffs on them to 5 percent in 2010. Meanwhile, Cambodia, Laos and Myanmar will be allowed to keep import tariffs levied on tobacco and tobacco products at 5 percent, but will be obliged to reduce them to scheduled rates by 2015.
AFTA trade liberalization will have positive and negative impacts on the Thai tobacco industry. Regarding the positive impacts of import duty cancellations on unmanufactured tobacco and scrap tobacco, the Thai tobacco industry will benefit from lower production costs with the arrival of cheaper imports from within ASEAN. However, because Thailand largely imports those raw materials from non-ASEAN member nations, such as the US, Brazil, China, India and Tanzania, Thailand should benefit more from the Thailand-India FTA (duty-free status took effect in 2006) and the ASEAN-China FTA (duty-free status will take effect in 2010). For tobacco products and manufactured tobacco substitutes, it is expected that Thailand will be able to export more tobacco products to ASEAN, both to those nations that still have import tariffs, i.e., Malaysia, Cambodia, Laos and Myanmar, as well as those that must cancel import tariffs, i.e., Indonesia and Singapore.
Inevitably, Thailand will be adversely affected by the AFTA because the agreement will allow non-ASEAN tobacco companies to set up production bases within ASEAN, thus offering them the opportunity to cash in on lower import costs for the production of their own products that would be less expensive than those of ASEAN firms. As a result, ASEAN (including Thai) tobacco industries should expect heightened competition from locally-produced foreign brands.
The Thai tobacco industry will likely be affected by expected increases in the imports of ASEAN and non-ASEAN brand tobacco products, as well. To address this problem, the government may consider tariff measures to curb imports of tobacco products, while other non-tariff measures may be necessary to restrict the sales and marketing of foreign brand cigarettes to safeguard the public health from their harmful effects, including erecting taxes on tobacco products citing the state of the economy, or the imposition of a ban on tobacco or cigarette advertising via all media, prohibiting smoking in public areas and placing health warnings on cigarette packaging.
Meanwhile, a survey conducted in October 2009 on the government's anti-smoking campaign shows that most respondents cited health, family and social concerns as major reasons for giving up smoking. If this campaign continues, it is expected that more consumers will realize that smoking is harmful to their health and family, thus reducing the number of smokers.
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