INTERVIEW: Secret deal means Laos has some of the world's cheapest cigarettes

American Military News

a day ago

This article was originally published by Radio Free Asia and is reprinted with permission.
A pack of cigarettes in Laos costs as little as 32 U.S. cents, thanks to a secret deal between the Lao government and British tobacco giant, Imperial Brands.
In a new report, The Examination, a news site that focuses on global health threats, looks into who benefited from the 2001 deal and how an agreement capping excise taxes has hit government revenues in the Southeast Asian nation and kept the price of cigarettes among the lowest in the world. That's had serious public health consequences for Laos, which has very high rates of smoking.
Radio Free Asia's Mat Pennington spoke with Jason McLure, an investigative journalist with The Examination who reported the story. The interview has been edited for length and clarity.
RFA: Can you tell us about the deal?
Jason McLure: This story is about a deal that dates to 2001 when the communist government of Laos was privatizing the country's state tobacco monopoly. Now, what they did instead of having an open tender … they basically invited Imperial Brands and a local company called ST Group, run by a local businessman named Sithat Xaysoulivong, to bid on this. And ultimately what the Lao government decided to do was to form a joint venture with Imperial Brands and Mr. Sithat Xaysoulivong and his ST Group.
Now, the way this was done was very unusual and it also highlighted some very close political connections between Mr. Xaysoulivong and the Lao government at the time.
RFA: So who really benefited from this? And what was the fiscal impact for the Lao government? Did they lose revenue?
McLure: The way the deal was structured was the Lao government retained 47% of the tobacco monopoly and Imperial Brands, this British tobacco giant, got 34%. The remaining 19% of the company was owned by this offshore company called S3T which, we know and learned was owned partly by Imperial Brands and partly by Mr. Sithat Xaysoulivong who, as it happened, was an in-law of the Lao prime minister at the time, Bounnhang Vorachit. So there was clearly some familial relationship involved. And ultimately this deal paid $28 million over basically two decades to the former prime minister's in-law. And this had big consequences for the Lao government. One tobacco control group did a study of the consequences of this deal on public health, and what they found was that the Lao government missed out on $143 million in tobacco tax revenue and that is because one provision of this tobacco contract capped cigarette excise taxes and essentially left Laos with some of the cheapest cigarettes in the world.
RFA: How much is a packet of cigarettes in Laos?
McLure: The cheapest brands of cigarettes in Laos cost about 7,000 kip. That's about 32 U.S. cents. So, we were able to look at WHO (World Health Organization) data from all around the world and find that basically these are some of the very cheapest cigarettes in the world.
RFA: So what have been the health impacts of this?
McLure: So the health impacts, they really have been significant in Laos. As in many other Asian countries, relatively few women smoke, but somewhere around 37 to 40% of men smoke. So there's a very high smoking rate there. It's one of the highest in the world, at least among men. And this is in part a direct consequence of these very cheap cigarettes that are a consequence of this 25-year contract that was signed back in 2001.
Now, there's a lot of data, a lot of research from tobacco control researchers and public health researchers that show the best way to cut smoking rates to get people to quit smoking, or especially to prevent them from starting to smoke, is to increase the price of cigarettes. And the way that governments can do this is by increasing tobacco excise taxes. Now, this 25-year contract in Laos absolutely prevented the Lao government from doing that.
RFA: And as we know, Laos is one of the poorest countries in Asia, and it doesn't have a very well-developed health system. So you can see what the sort of impacts would be.
McLure: That's right. One of my colleagues visited one of the government hospitals in Laos, and she interviewed people who were there with smoking-related diseases. And the treatment was extremely expensive. And even for many people who have common smoking-related diseases like emphysema or lung cancer … particularly people in the countryside, people in villages, any form of radiation or chemotherapy or treatments like that are going to be out of reach.
RFA: So what does Imperial Brands say about this?
McLure: During our reporting, we reached out to Imperial Brands to ask them about this contract and specifically to ask why they decided to include an in-law of the prime minister at the time as part of this contract. And what they told us was that, for one thing, they said they comply with all regulations and generally behave in an ethical manner. But they didn't respond to the substance of our questions. We asked them as well about why this contract was kept secret for so long. The contract, in fact, itself, contained a secrecy provision. They told us that this type of confidentiality is normal in such commercial arrangements.
RFA: And did the Lao government respond at all to any of your inquiries or Mr. Sithat Xaysoulivong or Mr. Bounnhang Vorachit?
McLure: Unfortunately, the Lao government, Mr. Vorachit, Mr. Sithat, even the current Lao Prime Minister Sonexay Siphandone, they did not respond to our inquiries for this story.
RFA: I understand that this isn't a problem that's totally isolated to Laos, that major tobacco companies have reached deals with authoritarian countries and other nations.
McLure: That's right. You know, what's really a little bit unusual about this deal is that we were able to get the documents that showed exactly how the payments flowed from the Lao tobacco company and Imperial to the in-law of Laos' then prime minister. But we've seen that British American Tobacco, another one of the tobacco giants, has been involved in dealings with the North Korean regime in violation of U.S. sanctions. In fact, they agreed to pay more than $620 million as part of a deferred prosecution agreement with the U.S. Justice Department as a result of that.
RFA: So what's the future of this agreement in Laos? I understand that it's coming up to its term now.
McLure: Well, that is an interesting question because this is a 25-year agreement that was signed in 2001. It will expire next year. Now, the government of Prime Minister Sonexay Siphandone has already informed Imperial that they won't be renewing this agreement again. However, they did leave the door open to negotiating a new agreement with the same tobacco company. We'll see if that comes to pass and whether or not any insiders like Mr. Sithat, the in-law of former Prime Minister Vorachit, are involved. One thing that we do know is that Mr. Sithat is also close to the family of the current Prime Minister Sonexay. So it remains to be seen. Ultimately, what we've been told is that the current prime minister will be the one making the decision. And as we've seen, this could have huge impacts on the future of smoking in Laos and on Laos' public health.
The Examination is a nonprofit newsroom that investigates global health threats. Their investigative report was supported in part by a grant from the Pulitzer Center.