Tobacco gets duty-free boost, 9/09/10

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Photo by: Rick Valenzuela

A man displays hand-rolled cigarettes of homegrown tobacco in front of a packhouse not far from Kampong Cham town.

VIETNAM will allow duty-free imports of Cambodian tobacco later this month, as part of agreement set to revive the industry and save it US$2.4 million a year.

The move comes after a three-year deal – that enabled Cambodia to send 3,000 tonnes of tobacco leaf to Vietnam duty-free each year – expired at the end of 2009, a senior commerce official said yesterday.

When that deal ended, distributors hit by duties of around US$800 per tonne had less demand for domestic crops – cutting the price of tobacco by around 50 percent, affecting the Kingdom’s farmers.

The new deal will renew duty-free quotas for 2010 and 2011, a move farmers and tobacco buyers alike have welcomed.

“The agreement will be signed in mid-September,” Sok Sopheak, director general of the Ministry of Commerce said yesterday. The ministry had seen a sharp drop in exports since the quota was stopped, he said.

Kun Lim, head of corporate and regulatory affairs for British American Tobacco, which produces ARA, Liberation and National cigarettes, supported the agreement.

BAT will now be allowed to export 600 tonnes per year duty free. So far this year, it exported no tobacco to Vietnam.

He said: “[The quota] will benefit everyone relevant to this sector. Prices will bounce back.”

Kun Lim advised the government to announce the quota publically, to enable tobacco farmers to prepare themselves for demand. He estimated
that Cambodia yields 8,000 to 10,000 tonnes of dried tobacco a year.

Small-scale farmers have seen investments suffer in 2010.

Tobacco farmer Sdoeung Trap, 57, of Kampong Cham’s Koh Samrong commune, said yesterday: “Overall, I and other farmers lost about 20 percent of our investment in tobacco crops this year.”

He said the price of dried tobacco had dropped 50 percent this year, to $1.5 a kilogram from around $3 last year.

Tobacco is grown from November and yields in April. There are about seven exporters of the leaf in Cambodia.

Sok Sopheak said that Vietnam has also extended the quota for duty-free milled rice to 250,000 tonnes this year, up 50,000 tonnes on 2009. The quota would benefit Cambodia by around $2.5 million per year, as duty is around $10 a tonne.

Neither the spokesman for the Vietnamese Embassy, Trinh Ba Cam, nor Vietnam’s commercial counselor, Le Bien Cuong, could be reached for comment yesterday.

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