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Cigar maker pressurises govt for undue privilege

Published : 24 Feb 2021 09:54 PM | Updated : 25 Feb 2021 01:00 AM

A multinational tobacco company has allegedly been pressurising the government for giving it some undue privileges, which go against Bangladesh’s anti-tobacco commitments and efforts.

The Bangladesh concern of Japan Tobacco International (JTI), which acquired the tobacco businesses of Akij Group, has sought a cut in tax for lower-segment cigarette, and permission for import of finished tobacco products to Bangladesh, and introduction of flavored capsule-inserted cigarettes in the lower segment.

Sources said the company, Japan Tobacco International (Bangladesh) Limited, is using the Japan embassy in Dhaka to exert pressure on the government. 

In a recent letter to Finance Minister AHM Mustafa Kamal, the Japanese Ambassador requested the government to give JTI the facilities it has sought.

Terming JTI the largest single Japanese investment in Bangladesh, he said, “Success of JTI is a factor for decision making of potential investors of Japan.”

The letter claimed that JTI faced huge losses after enforcement of new tax structure in 2019, when tax was raised for lower-segment cigarettes, as the company heavily relies on lower-priced cigarette production. 

The Japanese mission wants the cancelation of the tax structure though such abrogation goes against the government’s efforts and commitment against tobacco.

Bangladesh has signed the global anti-tobacco statute -- WHO Framework Convention on Tobacco Control (FCTC) -- and enacted smoking and tobacco products control law, while Prime Minister Sheikh Hasina has pledged to build Bangladesh tobacco-free by 2040.

Sources said JTI (Bangladesh) Limited has already secured several privileges from the government, including approval for a rise in debt-equity ratio to 80:20 from usual 70:30, and 5 percent rate of interest for the loan it has taken from the parent company.

Sources at Ministry of Finance, National Board of Revenue (NBR), and Bangladesh Investment Development Authority (BIDA) said they have given all the benefits to JTI that it deserves as a foreign investor.

“But still the company is pressurising the government for undue privileges claiming they have made a major investment here. What the company demands will encourage people to smoke more. This clearly contradicts with the vision of government,” said an official requesting anonymity.

An official said if the government bows down to the pressure of JTI, low-priced cigarettes with flavoured capsule inserted will be more available in the market, attracting the young generation and low-income people.

“Japan is a nation, which prioritises healthy lifestyle. Japan is also a signatory to FCTC. Demanding any privilege that encourages smoking by any Japanese company goes against Japan’s anti-tobacco stand,” said the official.

He said the high rate of interest on loan from the parent company would facilitate flight of funds from Bangladesh.

JTI bought tobacco business of Akij Group in 2018 at 1.47 billion US dollars and started operation under the style Japan Tobacco Industry (Bangladesh) Limited. Of the investment, the country took 780 million dollars from the parent company as a loan with 5 percent interest rate. The loan is payable in 10 years from 2022. 

Asked about the seeking of undue privileges from the government, JTI (Bangladesh) Limited Corporate Affairs and Communications Director Zakir Ibne Hai sent a written reply to Bangladesh Post.

The reply, however, did not contain any direct answers to the queries. 

It said JTI is committed to the highest standards of compliance regarding local laws and regulations. “Bangladesh is no exception and as such JTI operates its business in accordance with all applicable national laws.”