A review of the impacts of tobacco industry privatisation: Implications for policy

Abstract

State-owned tobacco companies, which still account for 40% of global cigarette production, face continued pressure from, among others, the International Monetary Fund (IMF), to be privatised. This review of available literature on tobacco industry privatisation suggests that any economic benefits of privatisation may be lower than supposed, because private owners avoid competitive tenders (thus underpaying for assets), negotiate lengthy tax holidays and are complicit in the smuggling of cigarettes to avoid import and excise duties. It outlines how privatisation leads to increased marketing, more effective distribution and lower prices, creating additional demand for cigarettes among new and existing smokers, leading to increased cigarette consumption, higher smoking prevalence and lower age of smoking initiation. Privatisation also weakens tobacco control because private owners, in their drive for profits, lobby aggressively against effective policies and ignore or overturn existing policies.

This evidence suggests that further tobacco industry privatisation is likely to increase smoking and that instead of transferring assets from state to private ownership, alternative models of supply should be explored.

Keywords:

• privatisation
• tobacco industry
• public policy
• tobacco control
• IMF

Acknowledgements

We would like to thank Cathy Flower for administrative support in preparing the manuscript, and all those who provided us with unpublished reports and responded to requests for information on privatisation.

A.G. is supported by a Health Foundation Clinician Scientist Fellowship. Further support was provided by the National Cancer Institute of the United States National Institutes of Health (Grant No. R01 CA91021-09) and the Wellcome Trust. The funders played no role in study design; collection, analysis and interpretation of data; writing of the paper or decision to submit it for publication.

Anna Gilmore conceived the idea for the paper, undertook the literature review and wrote the first draft. Gary Fooks undertook the review of tobacco industry privatisations, contributed to the literature review, drafting and editing. Martin McKee contributed to the drafting and revision of the paper and updated the literature review. All approved the final version submitted for publication.

Notes

1. In reality this led only to the exclusion of a few smaller privatisations such as those of leaf processing units.

2. Thus, excluding three countries where investment occurred after 1997 – considered too soon to have had an observable impact.