Dhaka, Bangladesh
Japan's entry into smoke area draws flak

Japan's entry into smoke area draws flak

Business Desk Japan Tobacco's entry to Bangladesh market with the biggest-ever single foreign direct investment (FDI) in the country has drawn sharp criticism from anti-tobacco activists and created mixed reaction among experts. The $1.48 billion deal (about Tk 12,430 crore) irked anti-tobacco activists while entrepreneurs see it as a good example of foreign direct investment (FDI) in the country. Japan Tobacco Inc., one of the five largest tobacco companies in the world, last week acquired Akij Group's tobacco business in a $1.47 billion deal (about Tk 12,430 crore). United Dhaka Tobacco Company Limited, the Akij concern, holds about 20 percent share of Bangladesh's cigarette market, making it the second biggest player after British American Tobacco. The news of Japan Tobacco's steps to buy the tobacco business of Akij Group, Bangladesh's second-biggest tobacco company has irked the anti-tobacco activists, who came out with harsh criticism fearing sharp rise in tobacco addiction in the country. PROGGA, a leading anti-tobacco group in Bangladesh, said Japan Tobacco's presence will "increase the risk of public health since the company will invest a huge amount of money to market their lethal products". "This is also contradictory to the prime Minister's call to free Bangladesh from tobacco menace by 2040," Executive Director of PROGGA, ABM Zubair, said. Japan Tobacco is expanding in Bangladesh "because its cigarette sales in Japan has decreased. It happened in all developed countries. So they are taking the chances of developing market which is less regulated," he said. Core revenue for the domestic tobacco business in Japan fell by 5.1 percent last year. "Note that Japan Tobacco is duplicitous. It talks about a 'safer alternative', in reality, it is aggressively increasing its cigarette markets in developing countries like Bangladesh," Zubair said. United Dhaka Tobacco Company Limited, the Akij concern, holds about 20 percent share of Bangladesh's cigarette market, making it the second biggest player after British American Tobacco. Japan Tobacco would buy shares of Dhaka Tobacco at $1.09 billion and pay $386 million for trademarks and design rights. For the last three years, Dhaka Tobacco has been acting as a contract manufacturer and distributor of Japan Tobacco's Winston brand and Philip Morris's Marlboro brand. "This is the biggest FDI in the private sector," Executive Chairman of Bangladesh Investment Development Authority, Kazi M Aminul Islam, said. He went on to term Japan Tobacco's investment plan as a good example of FDI. If the Tokyo-based company's investment is successful, it would add at least $100 million to export receipts, he added. The purchase is straight out of central casting for Japan Tobacco as it looks to offset shrinking sales in its traditional markets, brought about by tighter smoking regulations and growing awareness of the hazards of tobacco consumption. In the past 12 months, the company snapped up companies in Russia, Indonesia and the Philippines, all three amongst the top ten tobacco markets in the world. Bangladesh is the eighth largest cigarette market in the world, with volumes exceeding 86 billion units and growing by about 2 percent year-on year. "With this investment, we continue to accelerate our expansion in emerging markets that matter," said Executive Vice-President and President of the Tobacco Business, Mutsuo Iwai,. The transaction, which is expected to be complete in the third quarter of 2018 following regulatory clearance, will also support the company's sustainable profit growth objectives in the mid- to long-term, he added. "Bangladesh is one of the fastest growing economies in the world with a pro-business mindset, which is why we are keen to expand our presence in the country," said President and Chief Executive of Japan Tobacco International, Eddy Pirard. The tobacco business of Akij is profitable, has state-of-the-art manufacturing facilities and a strong distribution network and workforce, according to Pirard. "With our strong track record of integration, we can accelerate operational efficiencies and introduce some of our global flagship brands alongside Akij's well-established portfolio," he added. (Inputs taken from agencies)

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