PRA Releases the White Paper: “International Best Practices for Tobacco and Nicotine Public Policy”
by Property Rights Alliance Sep 14, 2021

PRA congratulates Prof. Adam Hoffer, Director of the Menard Family Initiative and Professor of the University of Wisconsin (USA); Abel Benjamin Lim, Economist at Bait Al-Amanah (Malaysia); Fariq Sazuki, Economist at Bait Al-Amanah and Fellow at the Center for Market Education (Malaysia); Benedict Weeresena, Economist at Bait Al-Amanah and Fellow at the Center for Market Education (Malaysia); and Carmelo Ferlito, CEO of the Center for Market Education (Malaysia) on the white paper “International Best Practices for Tobacco and Nicotine Public Policy.” This work examines the tobacco and nicotine policy in Asia with a focus on Indonesia, Malaysia, the Philippines, South Korea, and Japan to illustrate that adhering to international best practices will achieve harm reduction and smoking cessation.

Please click here to view the white paper.

Please watch the official presentation of the white paper on PRA’s YouTube page as well:

The New Wave of Innovation Policies in Asia
Official Presentation of the white paper: “International Best Practices for Tobacco and Nicotine Public Policy”

Featuring: Dato’ Sri Idris Jala, Dr. Ong Kian Ming, Former MP Mineyuki Fukuda, Prof. Adam Hoffer, Dr. Carmelo Ferlito, Prof. Illoong Kwon, Yuya Watase, and Dr. Artidiatun Adji.

Watch here: https://www.youtube.com/watch?v=HHiO8jtmqZ0

Key Findings:

  • Failure to adopt harm-reduction policies negatively affects public health and disproportionately targets those in low- to middle-income countries. 8 million people die from tobacco-related usage each year. 80% of the current 1.8 billion tobacco smokers are from developing countries.
  • International best practices (IBP) for tobacco policy have three principles: 1) change should be incentivized through rewards, not restrictions like tariffs and taxes 2) policy should focus on decreasing usage of harmful, combustible products like cigars and cigarettes rather than less harmful products like heated tobacco and electronic cigarettes 3) efforts to decrease tobacco usage should nurture innovation to develop safer, better products than before and propel consumer choice.
  • Restrictive policies have disastrous consequences as seen in Indonesia, the second-largest global cigarette market. The Ministry of Finance imposed a maximum excise tax rate of 57% on e-cigarettes which instead of decreasing cigarette consumption among youth, increased usage.
  • Slight price increases on combustible tobacco products can have a positive effect. Academic literature estimates that the price elasticity of cigarettes is between -.03 to -.05 Meaning, that a ten percent increase in prices results in a three to five percent decrease in consumption. However, complete smoking cessation is not achievable with price increases.
  • Tobacco-induced taxes disproportionally affect those of lower socioeconomic status. Data from the United States’ Bureau of Labor Statistics Consumer Expenditure Survey shows tobacco usage decreasing as income increases.
  • Taxes increase activity in the black market. In Malaysia, black market sales of tobacco products increased from 24% in 2008 to 65% in 2019. This country is currently the world’s largest black market for tobacco in terms of prevalence.
  • The illicit trade of cigarettes is dangerous given these products are likely to be of bad quality and can hurt or even kill consumers. Likewise, sales of illicit and counterfeit products benefit criminal syndicate groups.
  • Literature on advertising restrictions is mixed. Some studies indicate no significant effect on cigarette consumption. A tobacco control campaign for Uruguay in 2005 led to a decrease in smoking for pregnant women and an average increase in the birth weight of former smokers’ children by 163 grams.
  • Smoking bans at bars and restaurants have few short-term effects compared to bans at the workplace. Bans at work reduced smoking prevalence by five percentage points and daily consumption by 10 percent.
  • A smoking prohibition for public places does have the benefit of eliminating exposure to secondhand smoke for pregnant women. Smoking bans to bars and restaurants decreased cases of low child weight birth in Norway.
  • Tobacco usage has been declining in Malaysia since 2000 with 88% of former smokers quitting their addiction by vaping. Consumer demand for vaping grew to 44% between 2018 and 2019. In this country, there are prohibitions on public smoking and advertising for tobacco products, differential excise taxes, as well as little to no regulations on quit aids.
  • Indonesia has implemented a tiered tax system for tobacco products paired with a 10% VAT and import tariffs to derail cigarette consumption. Despite these efforts, demand was expected to grow by 3% in 2020. Likewise, the 57% ad valorem tax on the retail price of quit aids and other nicotine alternatives did not help this effort.
  • The Philippines has implemented differential excise taxes between tobacco products and e-cigarettes. Taxes on 20-pack cigarettes will increase by 5 pesos each year until 2023, while the tax levy on heated tobacco will only increase by 2.50 pesos per year. This policy is in line with the harm-reduction framework.
  • Japan is the fifth-largest market for cigarettes and leads the world for former smokers switching to tobacco alternatives with 25% of the nation’s market doing so. This rate is attributed to differential excise taxes between cigarettes and heated tobacco products. Cigarette brands are sold to 63% of the retail price, while heated tobacco products are sold to 52% of the retail price. Japan can expand on this effort by further reducing these high tax levies on alternative products.
  • In South Korea, e-cigarettes usage is declining due to the government treating electronic cigarettes like conventional cigarettes. In 2011, e-cigarette usage was 4.7 percent. Usage decreased to 4 percent in 2015. This rate is a result of the heavy taxation policies on quit aids.
  • Other countries in East Asia and ASEAN have not adhered to the international best practices approach. E-cigarettes and heated tobacco products are either banned or not regulated.
Please click here to view the white paper.