THE PRIME MINISTER OF GOVERNMENT
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SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
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No.88/2007/QD-TTg

Hanoi, June 13, 2007

 

APPROVING THE OVERALL STRATEGY OF VIETNAM’S TOBACCO INDUSTRY UP TO 2010 AND A VISION TOWARDS 2020

THE PRIME MINISTER

Pursuant to the Law on Organization of the Government dated December 25, 2001;

At the proposal of the Ministry of Industry in Document No. 1902/TTr-BCN dated May 3, 2007, submitting to the Prime Minister for approval the overall strategy of Vietnam’s tobacco industry up to 2010 and a vision towards 2020; and comments of relevant ministries and branches,

DECIDES:

Article 1. To approve the overall strategy of Vietnam's tobacco industry up to 2010 and a vision towards 2020 with the following principal contents:

I. VIEWPOINTS

1. The State does not encourage tobacco product consumption, carries out measures to closely monitor, and impose quotas of, the tobacco output and import, adopts tax policies to limit tobacco consumption, and conducts propaganda to reduce tobacco use demand;

2. To reform the tobacco industry's management mechanism in accordance with WTO commitments, and step by step implement the Framework Convention on Tobacco Control (FCTC)

3. The State holds monopoly in tobacco product supply, including production and import. Only licensed state enterprises, and joint ventures between licensed enterprises and foreign partners in which the State holds a majority share, may produce tobacco products. To perform state management of tobacco product import;

4. Tobacco products are commodities subject to restricted trading. The State control tobacco circulation and consumption on the market and strictly manages the wholesale and retail of tobacco products;

5. The tobacco product production capacity of each enterprise and the whole tobacco industry determined as three shifts per day, is the capacity of machinery and equipment existing at the time of promulgation of the Government's Resolution No. 12/2000/NQ-CP dated August 14, 2000, and announced by the Ministry of Industry;

6. The annual output of tobacco products supplied to the domestic market (including production and import) by enterprises must not exceed the capacity specified in their tobacco product production permits. The Ministry of Industry shall specify enterprises' output of domestic-and foreign-branded tobacco products in each period;

7. Tobacco product production is a conditional investment domain. Not to invest in building a new and expanding establishments producing tobacco products for domestic consumption in excess of the aggregate tobacco product production capacity determined by competent authorities. To allow only intensive investment and renewal of tobacco production technologies and equipment for the purpose of product restructuring with a view to raising product value and quality, reducing harmful effects, and protecting the environment;

8. To carry out international cooperation with a view to conforming with common principles of international economic integration and Vietnam's international commitments, refrain from increasing the capacity of tobacco production for domestic consumption, improving product quality, and fighting fake and smuggled cigarettes;

9. The production of new foreign-branded tobacco products for sale in Vietnam must be within the licensed production capacity and approved by the Prime Minister;

10. Foreign investment in tobacco product production must be in the form of joint venture or cooperation with licensed tobacco production enterprises; fully satisfy the conditions for obtaining a production permit; conform with the tobacco industry’s overall strategy; have the State held a majority share; and be approved by the Prime Minister;

11. Machinery, equipment, materials and paper for making cigarettes are commodities subject to line management and tight control of production, import and use;

12. Investment in tobacco growing areas aims to tap land and labor potentials and satisfy the market demand. To pay special attention to developing tobacco growing in mountainous, deep-lying and remote areas, making contribution to hunger eradication and poverty alleviation;

13. To boost scientific and technological research and application in the tobacco industry and raise its scientific and technological level to the regional one;

14. To continue reorganizing and rearranging tobacco production enterprises into big ones and to form the Vietnam Tobacco Group with multiple ownership and multiple business lines; to modernize equipment and technology to improve product quality, reduce harmful effects and protect the environment; to be highly profitable and competitive; the Vietnam National Tobacco Corporation plays a key role in this work.

II. OBJECTIVES

1. Organization of the tobacco industry's production up to 2020

a) The Vietnam National Tobacco Corporation plays a key role in reorganizing inefficient small tobacco production enterprises into strong ones which are nationally and internationally competitive.

b) To form the Vietnam Tobacco Group doing multiple business lines on the basis of further rearranging and restructuring key enterprises controlling tobacco production and trading, which are the Vietnam National Tobacco Corporation, Saigon Industry Corporation (Ben Thanh Tobacco Company), Khanh Viet Corporation, and Dong Nai Food Industry Corporation (Dong Nai Tobacco Company).

2. Tobacco product production

a) Total capacity of tobacco product production for domestic consumption

The tobacco product production capacity of each enterprise and the whole tobacco industry, determined as three shifts per day, is the capacity of machinery and equipment existing at the time of promulgation of the Government's Decree No. 12/2000/ND-CP dated August 14, 2000, and determined and announced by the Ministry of Industry.

The tobacco production capacity of each enterprise and the whole tobacco industry is the basis for managing special-use equipment investment as well as enterprises' tobacco product output.

b) Annual tobacco product output

Tobacco is a commodity whose consumption is not encouraged, but whose domestic production must be maintained to satisfy the market demand and at the same time limit the smuggling of tobacco products.

The tobacco industry's aggregate annual output of tobacco products for supply to the domestic market (including production and import) must not exceed the actual production capacity determined and announced by the Ministry of Industry on August 14, 2000. Each enterprise's output may not exceed the production capacity specified in its tobacco production permit.

The Ministry of Industry shall specify enterprises’ output of domestic- and foreign-branded tobacco products in each period to meet the domestic market demand with a view to gradually reducing the demand for tobacco product use.

c) Product structure

To restructure products with a view to raising the ratio of medium- and high-grade cigarettes and gradually reducing low-grade ones.

Product structure

Ratio (%)

2010

2015

2020

High-grade cigarettes

27.0

32.0

35.0

Medium-grade cigarettes

10.5

23.0

30.0

Low-grade cigarettes

62.5

45.0

35.0

Total

100.0

100.0

100.0

 

By 2010:

100% of the tobacco output will be filter cigarettes. The output of medium- and high-grade cigarettes will increase gradually and account for 37.5% of the total output for domestic consumption. The material localization rate will reach 64%.

By 2020:

Medium- and high-grade filter cigarettes will be the majority, accounting for 65% of the total output.

The material localization rate will reach 70%.

d) Roadmap for tar and nicotine reduction

In implementation of the Government’s Resolution No. 12/2000/NQ-CP dated August 14, 2000, on the national policy on tobacco harm prevention and control in the 2000-2010 period, Vietnam has acceded to the Framework Convention on Tobacco Control and ratified the roadmap for reduction of tar and nicotine amounts in cigarettes up to 2010 and visions towards 2020, prescribed as follows:

Particulars

2005-2010

2010-2015

2015-2020

Tar (mg/cigarette)

≤ 16

≤12

≤10

Nicotine (mg/cigarette)

≤ 1.4

≤ 1.0

≤ 1.0

 

e) Material production

- Agricultural production:

By 2010:

The tobacco growing area will reach around 39,200 hectares, the average yield will reach 2tons/hectare, the annual output will reach 78,400 tons.

By 2020:

The tobacco growing area will stay at 40,300 hectares, the average yield will reach 2.2 tons/hectare, the annual output will reach 88,660 tons.

The level of fanning techniques will be raised to world standards to produce a majority of materials for medium- and high-grade cigarettes.

- Material processing:

By 2010, 80% of processed materials will be used and over 30% of domestic materials will replace imported materials for the production of high-grade cigarettes. From 2015 onward, all tobacco production units will use 100% of processed tobacco materials.

e) Supplementary material production

The production of tobacco supplementary materials such as filter tips, wax paper of all kinds, cigarette paper, aluminum paper, packages of all kind (label, carton) fully meets the domestic and export production demand.

f) International cooperation

To continue cooperation with major international tobacco groups as strategic partners in producing cigarettes of international brands in the forms of joint venture, export processing and licensing, to raise the tobacco industry's competitiveness and reduce smuggled cigarettes without increasing the output for domestic consumption; to step by step boost the export of branded cigarettes of high value.

Investment cooperation and joint ventures with foreign partners in tobacco product production and trading must comply with common principles of international economic integration as well as Vietnam’s international commitments and must satisfy the following conditions:

- Intensive investment, and technology and equipment renewal aim to raise product quality and value without increasing the tobacco production capacity for domestic consumption.

- Foreign investment in tobacco product production must be in the form of joint venture or cooperation with licensed tobacco product producers, conform with the tobacco industry's overall strategy; have the State held a majority share; be approved by the Prime Minister; and fully satisfy the conditions for obtaining a production permit.

- To reduce harmful effects, protect the environment and community health, and observe the Framework Convention on Tobacco Control and regulations on management of tobacco product production.

- To encourage investment in tobacco product production associated with investment in raw material zones and use of domestic supplementary materials.

g) Investment

- Intensive investment

To renovate and upgrade existing cigarette plants with a view to modernizing production chains and technologies and supplementing automated high-capacity machinery and equipment without raising the production capacity. To liquidate and destroy obsolete, outdated and polluting equipment. By 2015, modern equipment will account for 40% of

the tobacco industry's production capacity and for 55% by 2020.

- Relocation of several plants under planning

To relocate a number of plants out of city centers under planning, including the Saigon Tobacco Company, Thang Long Tobacco Company and Ben Thanh Tobacco Company.

-Other domains

To invest in raising the capacity of scientific and technological research to increase product quality and value and reduce harmful and polluting substances.

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DECISION