Banks.am, Armenia
Feb 21 2020
21.02.2020
Banks.am has contacted several tobacco importers for comments on passage of the “anti-tobacco” bill, which took place last week, and its possible ramifications.
Below you can read the responses we have received from JTI Armenia (Winston, Camel, Sobranie, LD, Monte Carlo trademarks) Director Ivan Bakharev, Imperial Tobacco (Davidoff, P&S, West trademarks) Market Manager Tigran Khachatryan, and British American Tobacco (Dunhill, Kent, Pall Mall, Rothmans, Lucky Strike trademarks) Director of Legal and External Affairs Caucasus & Moldova Zviad Skhvitaridze.
Tigran Khachatryan, Imperial Tobacco
In Armenia and other countries, tobacco industry wants to operate in a predictable and stable environment, but the recent changes in legislation will limit competitive capacities of tobacco companies. In particular, they will be no longer able to make any investment aimed at supporting small and medium-size points of sale.
We believe that the Government of Armenia has to assess the social and economic impact of the bill. Without a hint of a doubt, this bill will lead to decrease of tax revenue from tobacco industry, create obstacles and cause losses for retail sellers.
Global experience proves that ban on display consistently causes increase of illegal trade, which leads to drop in legal production in Armenia.
We urge the government to engage in a constructive, open dialogue with tobacco companies in order to have a transparent and regulated market. We expect a constructive solution which would comply with the EAEU treaty.
Ivan Bakharev, JTI Armenia
Unfortunately draft TCL voted by parliament of Armenia contradicts the EAEU treaty, bill itself is not clearly written and provides room for wide misinterpretation. We are afraid that the application of the law will lead to a sharp increase in the volume of illicit trade and will have serious negative economic impact on retail outlets in Armenia and will be damaging for the economy. And this is when tobacco companies are amongst top largest taxpayers in the country (two major domestic producers and two major importers are in top ten).
Another unfortunate development is lack of predictability and consistency of the process, for us as an international company operating in Armenia this is of utmost importance and when we see that very often decisions, statements and actions made by public officials are contradictory. This sends very negative message to the business society and investors.
One of the most controversial issues is the provision of uniform/plain packaging. The example of Australia, which was the first country to apply uniform packaging, shows that this measure is ineffective and harmful to all stakeholders except criminal groups. Uniform packaging will not reduce the volumes of smoking, but will cause great harm to the economy.
Uniform packaging puts pressure on prices and limits consumers’ ability to make informed decisions and make choices. In addition, the requirement for uniform packaging is contrary to the basic principles of paragraphs 51, 52 and 53 of the Eurasian Economic Union Treaty which are binding on the member states of the Union. We firmly believe that this is unnecessary measure that will significantly damage sector in Armenia and will have severe negative effects for the economy.
At the same time, the ban on the display of tobacco products will have a serious impact for retail universe in Armenia. According to the most modest estimates, the stores receive from the tobacco companies an average of 8-10 billion drams annually. With the new regulation retail will be deprived from this resource. Representatives of more than 3,500 shops have written to the National Assembly about this issue, but their opinion was not taken into account.
We call on the Government to engage in an open dialogue with the business operators and to regulate the market in light of the principles of better regulation by the OECD. In our opinion, the regulations should be proportionate rather than one-sided and should be managed based on inclusivity and transparency. We still do hope that decision will be revisited, and sound judgment will prevail, eventually leading to the situation were both state and business are benefiting from mutual cooperation.
Zviad Skhvitaridze, British American Tobacco
We are deeply concerned with the decision of the Parliament, all not weighted and ungrounded regulations were adopted without having Regulatory Impact Assessment on board. This was instigated by so called health care NGOs which will cause considerable problems for countries economy.
Georgia is a vivid example where due to unfeasible regulations state budget lost more than 200m USD only in one year. We do hope room for negotiations still exists to manage smooth implementation with proper transition periods.