Bangladesh is one of the largest cigarette markets in the world, ranking eighth in terms of consumption and manufacturing of tobacco related products. Being such a large market, a number of laws have been put in place by the government to govern the sector.
Mostly, these laws and taxes have been instituted as an attempt to control and reduce the consumption of tobacco in the country. In August 2018, however, Japan Tobacco Inc purchased Akij’s tobacco company for approximately $1.5 billion.
At the time, Akij was the country’s second largest tobacco company with a 20% market share. The entry of the company has raised some serious concerns as regards to the effects that the company might have on existing laws, the government, and the social well-being of citizens.
The procurement signifies an aggressive push by the company into new markets, as sales of its products within the Japanese market are shrinking. Furthermore, the investment contradicts Bangladesh’s intent to making the country tobacco-free by 2040.
JTI’s traditional markets are shrinking in part due to new regulations that are quite unfavourable to tobacco companies. The growing pressure, especially from health workers, is also another major cause for concern. For that reason, JTI is clearly attempting to gain footholds in newer markets, especially where regulations are more likely less restrictive. In that respect, Bangladesh’s large market perfectly suits their intentions.
Under the Foreign Private Investment (Promotion and Protection) Act 1980, the government may, in the view of promoting foreign private investments, authorize such establishments with foreign capital for any given industrial undertakings, and which does not exist within the country and that the establishments prove desirable.
In addition, the establishments may not be available in the country at a scale adequate to accommodate for the economic and social needs of the country. To a larger extent, the establishment may prove more likely to positively contribute to the development of capital, technical, and managerial resources in the country, and in this case, for overall welfare of Bangladesh citizens.
In this regard, the investment may offer increasing employment opportunities for the citizens or to the overall economic development of the country as a whole. It is, however, debatable as to whether JTI’s investment fulfills the criterion as mentioned under the act, and even if it does so, whether the approval from the government is the best decision, considering the adverse effects of such an investment
It has been considered that JTI will introduce new cigarette brands, and their products will suit a wider range of markets. It is estimated that there will be a consistent 2% rise in tobacco consumption yearly. This will be reflected in illnesses such as lung cancer, strokes, and other cardiovascular diseases. In Bangladesh, many young children still in school are smokers, and they may have poor performance in their studies, since cigarette smoking has been linked to the reduction of activity in the nervous system.
Cigarette smoking has also been perceived as a gateway to the use of other drugs, linked to increased nefarious activities and leading the youth to be derailed.
JTI has a very high demand for tobacco to satisfy its market. The entry will most certainly give rise to farming activities to satisfy the need for raw materials. There will be an increase in deforestation to plant tobacco. Clearing the land for tobacco is mostly done by burning, which generates huge air, water, and land pollutants. Tobacco is also considered as one of the most chemically intensive crops, and farmers use inorganic fertilizers to promote growth in conjunction with herbicides to control weeds.
Most herbicides and pesticides used are banned or restricted, but are still being used. The venture of JTI has also had negative effects on the local firms. The profits of the existing cigarette firms have been dwindling, and it is feared that some companies may be completely knocked out of business, as JTI will continue to establish its dominance. With companies being at the brink of closure, there is fear that there might be widespread unemployment, as a significant number of citizens depend on these firms for employment.
In conclusion, the entry of JTI into Bangladesh could be disadvantageous to the citizens and the country. This perception is met with criticism, since the entry has been very advantageous to some people. Farmers are getting more income, due to the rise in demand for raw materials. There has also been a rise in initial employment, as people are needed for their services in farming activities, manufacturing, and transportation. The government is also making a lot of revenue from taxes from tobacco-related products.
Although some people are facing the negative effects and others positive, this is subject to change over time as the company gradually integrates itself within the country, and the overall picture becomes clearer.
Sayed-Ul-Haque Dinar is an Advocate at the Supreme Court of Bangladesh.
