Tobacco firm fumes as Liow confirms policy U-turn, 27/05/10

KUALA LUMPUR, May 27 — Health Minister Datuk Seri Liow Tiong Lai has confirmed a delay in banning small cigarette packets over concerns of rising illicit trade despite a tobacco company mulling a legal suit over the policy flip-flop.

The government had earlier banned small pack cigarettes effective this June 1 but that deadline has been reportedly pushed to Jan 1, 2011.

“You stop the small pack then it will go to illicit cigarettes,” he told The Malaysian Insider.

The Customs Department estimates that more than 38 per cent of cigarettes sold in Malaysia are illegal.

Liow said the government will only arrive at a decision on whether or not to go ahead ahead with the original Cabinet directive to stop the sale of 14-stick packs in “a few months”.

The minister noted that the exemption for regulations 9 and 16 of the Control of Tobacco Product Regulations 2004, which ban the manufacture and sale of cigarette packs with less than 20 sticks, only extends to the end of 2010.

He declined to comment on possible legal action by Philip Morris (Malaysia) Sdn Bhd (PMM) over possible damage to business arising from this U-turn.

PMM had earlier released a statement threatening legal action over the government’s flip-flopping over the small pack ban.

“In the absence of clarity surrounding this decision, PMM will have no choice but to evaluate all possible avenues, including legal recourse, to recover any losses the company may suffer,” the statement said.

PMM managing director Richard Morgan said that this sudden reversal of a previously-approved Cabinet directive was not only a “devastating blow” for business but foreign investor confidence as well.

“How can any corporation plan for its future and maintain its viability in an environment of such legal uncertainty, where decisions that are supposedly set in concrete can be overturned so rapidly and without any consultation?” he asked.

“This precipitous decision, coming less than one week before the previously-announced deadline, will cause damage to PMM’s business and competitive position, and it conflicts with the Ministry of Health’s stated public health objectives.”

Morgan appealed to the prime minister and his Cabinet to reinstate the June 1 deadline for the ban on cigarette packs of less than 20 sticks.

“We believe this is essential to ensure foreign investor confidence that Malaysia is indeed a fair and transparent nation in which to do business,” he said.

PMM said it had relied on “numerous statements… [and] official letters” by the ministry confirming the decision to ban small packs and depleted inventory accordingly, citing the last correspondence it received from the Ministry of Health on May 12, 2010 confirming the end of delays to enforcement of regulations 9 and 16.

British American Tobacco (Malaysia) Bhd (BAT) said it will await official confirmation from the government before commenting further.

“BAT Malaysia is aware of a claim made in The Edge Financial Daily that the government has decided to defer the ban on 14-stick cigarette packs which is suppose to take effect on 1st June 2010,” BAT said in a statement.

“We have not received formal notification from the government and are seeking clarification on this matter. As such, we are unable to provide further comments until we receive further clarification,” it added.

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