Abstract:
The study analyzes the major problems and policies confronting Thailand with respect to the present-day tobacco issues and highlights the importance of understanding the role of political and economic factors which affect both the demand for and the supply of tobacco products. This study explores the political economy of the US policy on exports of cigarettes that led to trade sanctions and the opening of markets in many Asian countries including Thailand in the late 1980s. Although the US Trade Representative failed to pressure Thailand to open its market to the same degree as it did in other countries, it has had much influence on an increase in tobacco consumption in Thailand. The smoking prevalence rate which gradually declined in all surveys from 1976 to 1988 increased in a 1991 survey. Although the survey in 1993 reported a declining number of smokers and smoking prevalence rate for the whole country, total consumption and per capita consumption were on the rise in 1993 and 1994 while imports of foreign cigarettes also increased. The majority of Thai smokers still use traditional hand-rolled cigarettes. For manufactured cigarettes, the study found a substantial increase in per capita consumption over the past three decades. The prevalence of foreign cigarettes in the market is apt to induce people to take up the habit as a result of their perceptions of status associated with smoking foreign cigarettes. Those who cannot afford the high prices of legally imported products may turn to contraband or smoke more of the local products instead. The tobacco industry made up approximately 10 percent of government revenue in the early 1960s. It declined to 3.5 percent in 1995, still constituting a significant contribution to government coffers. At the same time, smoking is costly to society and is too great a problem to be left to the health sector alone. Statistics of smoking-related illnesses in Thailand have been on the rise and that will result in an increase in costs of smoking in the near future. The costs of smoking can be reduced by strict control of the tobacco industry, antismoking legislation, health education, and pricing policy. Some of these measures have been better implemented in Thailand compared to many developed countries. The production and sale of tobacco products are under the control of the Tobacco Act of 1966. The two major tobacco control laws have also been in effect since 1992. It is necessary that the government pay more attention to pricing policy. Since price is a significant determinant of sales and the study found a decrease in the real value over a period of time, it is suggested that the price of cigarettes be adjusted to keep pace with an increase in inflation so that the real value of the retail price does not fall. Theoretically, a monopoly is considered to cause welfare loss to society. In the case of tobacco products, a deadweight loss could turn out to be a social gain. Although, in truth, production and sales of these products are irresponsible in health terms, as long as multinational tobacco companies have made aggressive attempts to expand their markets worldwide, a more rational view towards this industry should be that a certain portion of the domestic industry be allowed to remain. It would be much easier to control tobacco consumption if the industry is under the control of the government. However, it should be made clear that the main point in having a state tobacco monopoly is not to generate revenue but to allow the government to have total control over the products that are known to do more harm than good to society. Cigarette excise tax is considered one of the most effective tools to reduce consumption. As for fairness, the regressive feature of tobacco tax could be balanced by increasing other benefits for smokers. A substantial portion of cigarette tax revenues should be used to finance health education and anti-tobacco activities. Tobacco tax should also be used to help some farmers get out of the tobacco growing business. Cigarette smuggling and illegal consumption can be mitigated by changing the attitudes of smokers, better law enforcement and higher penalties. Without law enforcement improvement, a high cigarette tax is likely to induce more smuggling and too high a tax could induce substantial loss in potential government revenue. Increasing penalties helps discourage illegal activities. Since increasing enforcement requires a substantial resource cost, a large portion of the tobacco tax should also be allocated for such activities. In the past, Thailand used to have a dedicated excise tax on cigarettes called 'contributions to education and public health'. It would be useful to bring back such a tax again. A policy like ear-marking funds in this way could help simplify the implementation of public programs on tobacco consumption control by encouraging government spending on activities that would directly reduce both tobacco consumption and smuggling. The empirical results indicate that a decrease in real prices of cigarettes has a significant effect on an increase in tobacco consumption. An increase in real income also has an effect but less significant. While an opening of the market to foreign products has no direct effect, an increase in the number of smokers of foreign cigarettes is positively correlated with an increase in consumption of domestic products. The study found the price elasticity of demand for cigarettes -0.65 for the model of myopic addiction and -0.73 for the model of rational addiction. Policies of revenue generating and health promotion might, at least, be able to go together in some harmony if the government were not addicted to revenues from this industry. One important task for the government among all public policies on smoking control at present is to determine the 'right prices' for these products. In this study, several optimal tax models are developed under varying assumptions of market structure. The simulation results suggest that there is still an opportunity for the government to yield both health benefits and favorable increases in tax revenue at the same time. Although there can be no definitive answer for the optimal tax level at this time due to lack of data, it is, however, suggested that an optimal tax could be higher than the present level. Thailand is at the crossroads with respect to the direction and development of its tobacco industry. Tobacco is not simply an economic issue. It is a dangerous substance that requires regulation. The contradictory policy of having the tobacco monopoly as an important source of government revenue as well as a policy to discourage smoking at the same time has put the government in a difficult position. Thailand already has a vital weapon against tobacco use, i.e., the two major tobacco control laws. Only if the government seriously implements a firm policy to reduce smoking, and only if the Thailand Tobacco Monopoly follows the Cabinet instruction on March 6, 1990, as well as its own policy to support the Ministry of Public Health on antismoking campaigns, can it be expected that smoking in Thailand will decrease in the near future.
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