Thailand Tobacco Monoploly - union concerned about privatization..

August 20, 2009 - Thailand Tobacco Monopoly (TTM) faces tough situation due to internal and external factors. Foreign producers, continue to make inroads in the market, with foreign cigarette sales totaling 418.86 million packs in 2007, compared with just 12 million in 1991. The TTM saw its own sales drop to 1.59 billion packs in 2007 compared with 2.31 billion 10 years earlier.

Internally a tax hike combined with an aggressive anti-smoking campaign resulted in continuing decline in the smoking population in Thailand.

TTM needs to make its operation more efficient in order to reduce production cost. The Union resist change and and indicate TTM must reconsider its organizational restructuring, said chairwoman Jantima Sirisaengtaksin. Mrs Jantima said it was incumbent on management of the state enterprise (TTM) to reopen talks with the TTM's 3,000- strong union and that restructuring did not imply a privatization.

"The policy to change the TTM into a juristic (legal) person is not a privatization, but a restructuring of the organization aimed at improving flexibility and reducing obstacles to operations," she said.

Currently, the TTM must essentially seek Finance Ministry approval for nearly any strategic decision, significantly hindering the agency's ability to respond to changes in the market.

Mrs Jantima warned that without change, the TTM may very well face collapse, similar to cigarette producers in other countries.

The TTM produces the market-leading brand Krong Thip, but has seen its revenues fall sharply in recent years due to stiffer anti-smoking regulations as well as competition from foreign producers such as Philip Morris, Japan Tobacco and British American Tobacco.

Mrs Jantima said trade liberalization had caused the TTM's market share to fall to 77%. While still dominant in the market, the TTM's market share had never fallen below 80% until recently. The TTM hopes to boost its market share to 85% by 2010-11 through better cost controls, more efficient production processes and product innovations.

TTM sales for fiscal 2009 ending next month are projected at 28.8 billion cigarettes, or 5% below targets. Revenues, however, are expected to exceed targets slightly at a projected 44 billion baht this year.

Thailand is a member of Southeast Asia Tobacco Control Alliance (Seatca).

References: Union holds up tobacco restructuring by WICHIT CHANTANUSORNSIRI, Bangkok Post, 8/19/2009; Tobacco in Thailand, EuroMonitor International, published November 2008.

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