Cigarette industry remains strong despite taxes

MANILA, Philippines - Despite the imposition of higher taxes on tobacco manufactures, the cigarette manufacturing industry in the country remains strong, said the National Tobacco Authority (NTA).

NTA administrator Edgardo Zaragoza said yesterday that during consultations with stakeholders in the tobacco industry, it was resolved that there is no significant change in consumer demand  tobacco products.

“There were concerns that a slight rise in taxes will be detrimental to the industry because of lower demand,” said Zaragoza. “But the industry continues to be stronger than it is.

Stakeholders in the tobacco industry believe demand would remain high if higher taxes on tobacco products is countered by increased export and substitution of imported tobacco.

To do this, the quality standards of local tobacco production should be raised.   

The NTA concluded yesterday its biennial Tobacco Tripartite Consultative Conference during which minimum buying prices for tobacco were set for the next two trading years.

During the consultation meeting, tobacco manufacturers stressed the need for farmers to produce high quality leaf to be used by local cigarette manufacturers so that importation would be lessened.

“Tobacco is still a crop to believe in and will be around for a long time.

As quality is improved, we are trying to keep more Philippines tobacco,” said Jorge Struecker, leaf buying manager of Philip Morris Fortune Tobacco Corp..

“To sustain production, we need to increase production efficiency,” he added.

Tobacco growing and trading firms also said Philippine tobacco needs to be competitive in the export market.

“We need to be competitive because we are not the only producer selling to cigarette manufacturers,” said Erwin Ang of Universal Leaf Philippines Inc.

Tobacco production this year is expected to reach more than 70 million kilograms, a recovery from the production level of 65 million kilograms in 2012 after unfavorable weather that prevailed for most of the year.

In 2011, tobacco production reached 79 million kilograms, higher than the 2010 production level of 73 million kilograms.

Zaragoza said that of the 70 million production expectation this year, 40 million kilos are expected to be exported, while 30 million would be retained for domestic production.

During the consultation, Zaragoza noted that the local manufacturing industry actually needs 150 million kilos of leaf for its blending requirements. The balance of the demand is imported from other tobacco-producing regions.

“So we are asking the mayors to come up with areas for expansion of tobacco crop, said Zaragoza, noting that this would be initiated by the private sector.

He noted that high quality Burley leaf is not being grown in Isabela. In Claveria, Quezon, production areas are being expanded and the quality of tobacco produce has been improved.

Zaragoza said tobacco exports, both manufactured and unmanufactured, is expected to be more or less the same as in 2012 which was placed at 73 million kilos valued at $188.85 million, up from the 2011 production of 71 million kilos valued at $339.20 million.