The government has rejected a proposed joint venture with a British cigarette company on the grounds that it contradicts existing tobacco industry regulations.
The Dong Nai Foodstuff Industry Corporation had applied to form a joint venture with the UK-based Imperial Tobacco Overseas Holdings.
At a meeting in August, Deputy Prime Minister Nguyen Sinh Hung said the establishment of a tobacco joint venture would contradict Decree 76, dated October 22, 2001.
“Therefore, the joint venture is not permitted to be established,” he said. However, he said that the two companies could maintain their existing partnership.
The Dong Nai tobacco company currently holds a franchise from Imperial Tobacco that allows the former to receive material, processing formulas and technical assistance from the latter.
Company officials said the joint venture would help both sides to increase their production capacity and allow Imperial to gain a foothold in the Vietnamese market.
Dong Nai currently sells about 300 million packets of cigarettes each year, from VND3,000 ($0.18) to VND4,500 ($0.28) depending on the variety of cigarette.
It contributes about VND300 billion ($18 million) to the provincial budget each year and currently employs about 650 workers.
Pham Kien Nghiep, general secretary of the Vietnam Tobacco Association (VTA) said that the government had made the right decision, in line with regulations banning the establishment of new tobacco enterprises.
Vietnam currently has 17 domestic tobacco companies and three foreign investors, namely British American Tobacco, Phillip Morris and Japan Tobacco International.
The Danang and Vinasa Can Tho tobacco joint ventures were also established in the early 1990s.
Nghiep said the industry produces about four billion packets of cigarettes each year and will contribute about VND6,500bn ($400m) to the state budget this year.
No. 777/September 4-10, 2006