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Tob Control 2004 Alechnowicz Ii71 8

Tob Control 2004 Alechnowicz Ii71 8

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Published by TobaccoTaxReforms
In 2004, systematic keyword searches of tobacco industry internal docs show PHL tobacco industry to be Asia's strongest tobacco.
In 2004, systematic keyword searches of tobacco industry internal docs show PHL tobacco industry to be Asia's strongest tobacco.

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Published by: TobaccoTaxReforms on Oct 17, 2011
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RESEARCH PAPER
The Philippine tobacco industry: ‘‘the strongest tobaccolobby in Asia’’
K Alechnowicz, S Chapman
...............................................................................................................................
See end of article for authors’ affiliations.......................Correspondence to:ProfessorSimonChapman,School of Public Health,Room 320B Edward FordBuilding, A27, University of Sydney, Sydney, NSW 2006 Australia;simonchapman@health.usyd.edu.au.......................
Tobacco Control 
2004;
13
(Suppl II):ii71–ii78. doi: 10.1136/tc.2004.009324
Objective:
To highlight revelations from internal tobacco industry documents about the conduct of theindustry in the Philippines since the 1960s. Areas explored include political corruption, health,employment of consultants, resisting pack labelling, and marketing and advertising.
Methods:
Systematic keyword Minnesota depository website searches of tobacco industry internaldocuments made available through the Master Settlement Agreement.
Results:
The Philippines has long suffered a reputation for political corruption where collusion betweenstate and business was based on the exchange of political donations for favourable economic policies. Thetobacco industry was able to limit the effectiveness of proposed anti-tobacco legislation. A prominent scientist publicly repudiated links between active and passive smoking and disease. The placement of health warning labels was negotiated to benefit the industry, and the commercial environment allowed it tocapitalise on their marketing freedoms to the fullest potential. Women, children, youth, and the poor havebeen targeted.
Conclusion:
The politically laissez faire Philippines presented tobacco companies with an environment ripefor exploitation. The Philippines has seen some of the world’s most extreme and controversial forms of tobacco promotion flourish. Against international standards of progress, the Philippines is among the world’s slowest nations to take tobacco control seriously.
I
n 1995, Philip Morris International’s (PMI) advertisingagency, Leo Burnett, summarized the Philippine situation with the slogan ‘‘There can’t be a better time’’
1
for thetobacco industry. According to the agency, international anti-tobacco activists had nominated the Philippines as having thestrongest tobacco lobby in Asia.
2
By 1996, the Philippinesranked first in sales for PMI’s Asian region
3
and continuedgrowth led to the establishment of a US$300 millionmanufacturing facility in the country which commencedproduction in 2003.
4
The Philippines (population 80 million) is the 15th biggestconsumer of cigarettes in the world
5
and the largestconsumer among the Association of Southeast AsianNations (ASEAN).
6
Some 54% of adult men and 11% of adult women smoke
7
 with overall adult smoking prevalencebeing the fourth highest among ASEAN countries. Tobaccouse among Filipino youth (18 years or less) is high, withapproximately 37% of young men and 18% of young womensmoking on at least a monthly basis. There has been a 33%increase in the prevalence of having ever smoked since 1995.
8
 Alarmingly, almost one fifth of young Filipinos beginsmoking before age 10.
8
 A 1999 government white paper onsmoking calculated that two Filipinos die every hour fromtobacco use.
9
Cigarette prices in the Philippines are low, with the price of Marlboro being the second lowest for all ASEAN nations.
10
The cigarette market has been dominated by menthol brandsfor several decades,
11
although non-menthol volume has beensteadily improving in recent years.
12
La Suerte Cigar andCigarette Company and the Fortune Tobacco Company (FTC)have been the two leading producers, and have had licensingagreements with PMI and RJ Reynolds (RJR) respectively.FTC commands a 67% market share, while La Suerte holds a25% share.
13
Unlike other Asian nations, the Philippines is a highlyChristian country, with approximately 80% of the populationbeing Catholic. English is spoken widely, with a recognisably American accent. There has been a strong US presence in thePhilippines since the American colonial period from 1901until 1946.
14
This presents a rare cultural consistency betweenan Asian nation and the Anglophone tobacco transnationals.Poverty and unemployment remain the country’s gravesteconomic problems.
15
Gross national income is $1020 percapita, and approximately 28% of people live below thenational poverty line.
16
Economic problems are higher in ruralareas where some 55% live in poverty.
17
For many years, the Philippines was governed by anadministration with a global reputation for corruption,particularly during the presidency of Ferdinand Marcos(1972–1986). The commercial necessity of using contactmen to facilitate cronyism in conducting business wasacknowledged in an early Philip Morris document.
18
In thefirst paper to report on revelations from the tobaccoindustry’s internal documents, this paper examines theconduct of the tobacco industry in this political andcommercial environment, highlighting tactics and episodesillustrative of the companies’ conduct in thwarting tobaccocontrol.
METHODS
The evidence presented was located from internal tobaccoindustry documents located through searches conducted onthe Master Settlement Agreement websites betweenDecember 2003 and March 2004.
19
Search words includedPhilippine geographical terms as well as the names of localtobacco companies and organisations. To facilitate systematicanalysis, the 5958 documents and related metadata collected
 Abbreviations:
AFTA, ASEAN Free Trade Area; ASEAN, Associationof Southeast Asian Nations; BAT, British American Tobacco; B&W,Brown & Williamson; ETS, Environmental Tobacco Smoke; FTC, FortuneTobacco Company; PMI, Philip Morris International; RJR, RJ Reynoldsii71 www.tobaccocontrol.com
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from the searches were incorporated into a database. Theresults were sorted by date and evaluated according to theirdegree of relevance to a concern to examine industry conductin the Philippines relevant to tobacco control. The finalanalysis is based on 164 documents identified as havingmost relevance to this topic. A detailed search strategyexplanation including a list of search terms is availableat http://tobacco.health.usyd.edu.au/site/gateway/docs/pdf/ Philippines_Search_Strategy.pdf. Lack of access to British American Tobacco documents from the Guildford depositoryis a limitation.
20
 A further limitation is the lack of documentsfound from local tobacco companies such as FTC and LaSuerte, so the paper is best read as an overview or primer to adetailed history of tobacco industry conduct in the country.
RESULTS
Political corruption
The Philippines has long suffered a reputation for endemicpolitical corruption.
21
Evidence spanning 30 years (19621992) reveals that foreign tobacco companies sought to work within this operating environment. A 1962 PMI documentnoted that key political figures might be paid off in order torelease tobacco being withheld from sale: ‘‘Two partiesapproached me yesterday and informed me that for P6M orP1 per lb. they could induce Senators and perhaps thePresident to release the tobacco’’.
22
Internal PMI correspon-dence from 1963 noted that ‘‘[c]orruption, bribery, smug-gling and dirty politics are worse than anywhere else andcontinues for the benefit of officials who want to get richquick’’.
23
With the help of the USA, martial law was established in1972. Collusion between state and business routinelyfeatured the exchange of political donations for favourableeconomic policies.
21
Consequently, the state had troublecontrolling the erratic economic policies developed bycommercially sponsored politicians.The tobacco industry was well aware of the economicadvantages of cronyism. A Lorillard executive highlightedthis in 1973: ‘‘Again the government has postponed theannounced tax increase… It is entirely possible that there will be no increase as the implementation dates have nowtwice been delayed and according to reliable sources will beput off again for a price… the government has been boughtoff twice and it is possible for it to happen again as themanufacturers stand to lose considerable revenue if the bill isenacted’’.
24
The general manager of the FTC, business tycoon LucioTan, was able to evade and hinder tax changes through hislong established relationship with the Cabinet. Tan had closeties with the Marcos regime and beyond, where embeddedcronyism assisted him in instilling a protectionist policy forhis company. Tan was said to have ‘‘gotten his way’’
25
byconvincing Congress to stay with a two tiered ad valorem taxsystem
26
 which gave FTC a pricing advantage over itscompetitors.
27
In 1986, PMI secured a ‘‘leading role in the PhilippineChamber of Commerce’’ through the appointment of RichardSnyder, a PMI executive, as the Chamber’s chairman.PMI boasted that its staff held ‘‘key positions in a widearray of international organizations’’ that could be of futureassistance.
28
The Ramos administration was elected in1992 with only 32% of primary votes. It was ‘‘rocked byscandals, corruption and slow decision making’’
12
andcontinued the tradition of cronyism. Ramos, in an attemptto spark the national economy, developed a bill to breakdownlarge monopolies including the tobacco sector.
29
Publicly,tobacco corporations and other targets gave ‘‘wholeheartedlip service’’ but then surreptitiously called upon theirfavourite congressmen in an attempt to limit the bill’seffectiveness.
29
Licensing agreements
In 1955, PMI established a licensing agreement with localtobacco manufacturer La Suerte Cigar
&
Cigarette Company.Its flagship brands, Marlboro and Philip Morris, wereproduced at La Suerte’s manufacturing plant until PMI chosenot to renew its contract with La Suerte, which expired on31 December 2002. Production has now commenced at PMI’snew 25 hectare manufacturing plant, the company’s biggestinvestment in Asia to date. The plant will reap the benefits of the ASEAN Free Trade Area (AFTA). Established in January1992, the AFTA aims to eliminate tariff barriers for ASEANon a wide range of products traded within the region,including tobacco.
30
In 1974, RJ Reynolds signed a contract with localmanufacturer, Fortune Tobacco Company (FTC) ‘‘to manu-facture RJR name brand cigarettes in the Philippines’’.
31
 According to BAT, through ‘‘unfair and discriminating lawsto favor Fortune’’ Lucio Tan was able to command thehighest cigarette market share in the Philippines for many years.
12
FTC was able to maintain this share throughdiscriminatory pricing advantages that allowed its interna-tional brand names to be classified as local brands thusreducing tax duties. In contrast, PMI’s international brandnames manufactured by La Suerte were classified asimported brands and subject to higher taxes. Tax avoidanceby manufacturers extended to the establishment of ‘‘dummymarketing companies’’
12
in the 1990s as the computation of the excise tax levied was based on a percentage of the ex-factory price. These dummy companies were the first link inthe distribution chain and minimised price increases.
32
Obfuscating health problems
The Philippine tobacco industry worked in step with itsinternational counterparts to publicly repudiate the linksbetween smoking and disease. In 1983 the Minister forHealth, Jesus Azurin, stated that smoking was the ‘‘fifthcause of mortality in the Philippines’
33
and researchpublished in the
Philippine Journal of Oncology
in 1984concluded that smoking was the single most importantcontributory factor in more than 80% of all lung cancers.
34
Yet, as elsewhere in the world,
35–38
the tobacco industrysought to deny and obfuscate the health hazards associated with smoking. During the 1970s and 1980s, Domingo Aviado,a Filipino pharmacologist resident in the USA, spoke outagainst reports claiming associations between smoking anddeleterious health effects. During this period, cigaretteconsumption was steadily rising.
13
 A journalist from the
 Philippine Daily Express
stated that Aviado was ‘‘neck-deep inresearch, trying to disprove the claim of the U.S. surgeon-general’’ against smoking and that ‘‘Dr. Aviado may yet provethat cigarettes are not only safe but may actually be good forthe health’’.
39
 Aviado, whom Marcos had awarded his presidential ‘‘mostdistinguished Filipino abroad’’ award in 1975,
40
 was also amember of the American Heart Association. He argued thatFilipinos were less cancer prone than other communities,
41
and had a lower risk of developing coronary heart diseasethan US citizens.
42
His views were published in localnewspapers in 1975 with headlines such as ‘‘Doctor debunkslink of smoking to hypertension’’
43
and ‘‘New light shed onsmoking perils’’.
42
 Aviado was paid US$22 685.00 in consult-ing fees from the tobacco industry in 1975, the largestamount to any of eight consultants.
44
Through ‘‘courtesy of…Philip Morris International’’, Aviado spoke at a 1980 tobacco forum organised by thePhilippine Virginia Tobacco Administration, advising that ‘‘in
ii72 Alechnowicz, Chapman www.tobaccocontrol.com
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the event that I will testify before the committees in theBatasang Pambansa [National Assembly], I have prepared…key arguments against the Bill 605 which is relating tolabeling cigars and cigarette packages… The health problemsof Filipinos are different from the health problems of  Americans and Europeans…there is no scientific basis forlabeling tobacco products that smoking is dangerous to thehealth of Filipinos’’.
45
 As recently as 1994, PMI commissionedthe advertising agency, Leo Burnett, to propagate ‘‘studiesthat point to other possible causes of lung cancer’’.
1
Tar and nicotine
In the same year Aviado was publicly disputing any causallink between smoking and deleterious health effects, localcigarettes in the Philippines were found to contain 8% morenicotine and 76% more tar than imported brands.
46 47
Despitethis, advertisements from the Philippine Tobacco Board, inconjunction with the Department of Trade, stated theopposite in a public advertisement: ‘‘Internationally, thePhilippine grown tobacco…is possibly the only safe, non-cancer producing tobacco because of the very low tar andnicotine content and because Philippine grown tobaccoburns completely, avoiding the formation of hazardoushydrocarbons.’’
48
In 1981 Philip Morris noted it had been able to influencegovernment to keep tobacco yield information off packs:‘‘There is a Bill before the Philippine Government which callsfor cigarette manufacturers to publish tar and nicotinenumbers on cigarette packs. So far we have been able todelay the passing of this Bill.’’
49
Environmental tobacco smoke consultants
 As in other parts of Asia and the world,
50–53
the industryrecruited and briefed apparently credible scientists in thePhilippines who could then be available to testify on ETS inlegislative, regulatory, or litigation proceedings to defend theindustry’s position.
54
PMI’s environmental tobacco smoke(ETS) programme aimed ‘‘to put ETS in perspective andmaintain social acceptability of smoking by dispelling themisconceptions about ETS and promoting tolerance andcourtesy’’.
55
By October 1989, two initial consultants wererecruited for the Asian ETS Consultants Project.
54
Dr BenitoReverente was a member of the WHO Occupational HealthPanel and a Lecturer at the University of the Philippines, andhad excellent Asian connections. Professor Lina Somera,Head of Public Health in the University of the Philippines, was also recruited.
56
PMI agreed to pay Reverente andSomera $600 per day for their consultancy work. Doctors who the tobacco industry considered to be of lower stature were ‘‘politely discouraged’’ from becoming consultants, andinstead assisted with consultant recruitment through theircontacts.
57
 At the request of several supporting companies,
54
JohnRupp from PMI’s legal firm Covington and Burling recruitedtwo additional Philippine consultants. Dr Camilo Roa Jr, a well known pulmonary physician, was undertaking researchthat PMI believed could be used to promote the insignif-icance of ETS in the development of respiratory disease.
54
DrLuis Ferrer, a prominent architect, was also recruited to bringpractical knowledge to the project regarding building designand ventilation, and how these could effectively deal withindoor air pollutants such as ETS. Ferrer had extensive ties with the government due to his position as Director of HealthInfrastructure Services for the Ministry of Health.
54
In orderto increase the stature and credibility of the consultancygroup, it was suggested they accept and solicit researchassignments from a variety of sponsors, including govern-ment bodies.
58
Reverente claimed that ETS was rarely trapped indoors andthat outdoor air pollution in cities overwhelmed thecomparatively miniscule contribution to the indoor environ-ment made by ETS.
57
Research was also conducted to testindoor air, pointing to indoor air pollution sources unrelatedto ETS.
58
 A newspaper article asserted, ‘‘[i]f you areexperiencing indoor pollution and blame environmentaltobacco smoke (ETS) for your predicament, you are lookingat the wrong suspect. A number of scientific studies haveconcluded that inadequate ventilation is most often the realculprit, according to Asian Tobacco Council, an organizationof individuals and companies associated with the tobaccoindustry in the Asian region’’.
59
Packaging
The saga of delays in introducing pack warnings perhaps bestillustrates the power the Philippine tobacco industry had ininfluencing government policy. While pack health warningsfirst appeared on US packs in 1966, Philippine citizens had to wait nearly 30 years to read health warnings. During the1970s, the government developed a bill that would requirecigarette manufacturers and importers to print ‘‘Caution:Smoking tobacco may be hazardous to your health’’
60
onpacks. By 1981, the National Assembly had still not approvedhealth warning labels,
61
and industry documents from the1980s argue that warning labels on packs were notrequired.
62 63
In a public hearing addressing cigarette reg-ulatory legislation, fear was expressed by the head of theNational Tobacco Administration that a health warning labelcould adversely affect the tobacco industry. An FTC repre-sentative stated that if labels were to be required, the warning should be toned down to ‘‘smoke at your ownrisk’’.
64
In 1991, proposals for national legislation to introducehealth warnings resurfaced. PMI stated ‘‘we believe that inquiet discussion with government officials and L.S. [LaSuerte], we will be able to negotiate the placement of theproposed warning statements’’.
65
The effectiveness of Philippine tobacco industry lobbying against governmentproposals was seen as exemplary within the industry. In1993, a PMI USA executive requested PMI Asia to shareinformation on how the Philippine industry had influencedgovernment to push through a ‘‘reasonable warning labelregime’’.
65
The House of Representatives had passed TheConsumer Act which, as advocated by the industry,
66
requiredthat all packs carry a health warning on one side panel from1 July 1994.
67
The bland notice read ‘‘Warning: CigaretteSmoking is Dangerous to Your Health’’.
68
 An internal document from 1994 highlighted industryconcerns regarding front panel warnings: ‘‘Governmentrequired warnings placed on the largest packaging panel,often called the front and/or back, are the biggest marketingthreat to all of us in Asia …Our final communication vehicle with our smoker is the pack itself. In the absence of any othermarketing messages, our packaging…is the sole commu-nicator of our brand essence. Put another way—when youdon’t have anything else—our packaging is our marketing.’’
69
In 1994, the Philippines Industry Association commenced alawsuit against regulation requiring that the side panelhealth warning be replaced by back and front noticescovering 25% of both panels.
70 71
 A decade later, side panel warnings are still in place, and will continue to occupy notless than 50% of one side panel until 30 June 2006.Commencing 1 July 2006, health warnings will be locatedon the front panel of every tobacco product package andoccupy not less than 30% of these panels. Four rotatinghealth warnings were implemented on 1 January 2004 aspart of the Tobacco Regulation Act of 2003, and must eachequally appear within a 24 month time period.
72
The Philippine tobacco industry ii73 www.tobaccocontrol.com
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