VINA-BAT tobacco sparks off benefits

The VINA-BAT plant will transform the local economy in Kien Giang’s Chau Thanh district

The Vietnamese tobacco industry is one of the country’s biggest tax contributors, paying VND19-20 trillion (nearly $1 billion) to the state budget per year. It has created jobs for six million people, including factory workers, tobacco farmers, and workers in related commercial and service sectors. The industry has also donated billions of dong (hundreds of thousands of dollars) to social activities, including poverty reduction. However, aside from its significant contributions to the national economy, the tobacco industry has been facing many difficulties and challenges, including rapidly increasing tobacco trade fraud.

The illicit tobacco trade

Trading in smuggled tobacco is on the rise. Previously, illicit tobacco appeared mainly in the Mekong Delta. However, recently it has also been found in the central and northern regions. This is now a national problem. The government and other authorities have actively applied many measures to prevent illicit tobacco from entering Vietnam. In order to take more effective action and reduce the consumption of illicit tobacco, a key solution is to promote legal products with better quality among consumers that comply with regulations on health warnings and packaging. The government and relevant agencies continue to give their support to locally-built tobacco plants to boost the supply of high-quality products on the local market, which will in turn help lower incidences of tobacco smuggling.

In mid-March, VINA-BAT, a joint venture between Vinataba and the British American Tobacco Group (BAT), one of the four largest tobacco companies in the world, started construction on a VND160-billion ($7.3 million) tobacco production plant in the southern province of Kien Giang’s Thanh Loc Industrial Park.

Peter Henriques, general manager of BAT East Asia Area, said that products from the new plant would be both distributed in the domestic market and exported when production begins in 2017, which would help to implement the programme to keep out low-quality smuggled tobacco.

Each year, the plant would consume about 175 tonnes of raw materials, thus paving the way for expanding tobacco cultivation as well as improving the quality of domestic tobacco supplies.

Benefits for local socio-economic development

The joint venture commits to helping Kien Giang province - particularly Chau Thanh district, where the plant is located - restructure its economy and contribute to local revenues. In addition, apart from providing jobs to local workers, VINA-BAT will carry out training programmes to help employees acquire the professional skills and knowledge required to run the plant efficiently and make products according to an international standard. The plant will also create a well-trained local workforce, benefitting from BAT Group’s world-class business management.

Vu Van Cuong, chairman of Vinataba, stressed that when the factory was put into operation it would provide jobs for 100 workers and contribute to the local budget. “The joint venture will likely pay more than VND2.6 trillion ($119.2 million) in taxes in the first 10 years of operation,” Cuong said. “In addition, we aim to make quality products for export, with the driving ambition of exporting 50 per cent of the tobacco volume, or 750 million cigarettes, produced in its first five years.”

In a wider context, this event marks an important milestone for VINA-BAT. “At BAT, we believe that the successful co-operation between BAT and Vinataba over the past two decades is an outstanding example of a sustainable relationship between foreign-backed enterprises and Vietnamese companies, since Vietnam has opened her door to attract foreign investment,” said Henriques.