Market Structure and Market Failures in Sri Lankan Tobacco Industry
Table of Contents
1.0 INTRODUCTION TO TOBACCO CURRENT MARKET IN SRI LANKA 2
2.0 SRI LANKAN TOBACCO MARKET STRUCTURE ANALYSIS 3
2.1 THE PRIVATE AND SOCIAL COSTS OF SMOKING 5
2.1.1 Private Costs and Social Costs of Smoking 5
2.1.2 Explaining the Market Failure 5
3.0 TAXATION AND REGULATIONS 7
3.1 COMMAND AND CONTROL OF THE INDUSTRY 7
3.2 INDIRECT TAXES AND PRICE ELASTICITY OF DEMAND 9
4.0 PROBLEMS AND FUTURE FORECAST 10
4.1 PROBLEMS 10
4.2 FUTURE FORECAST 11
5.0 RECOMMENDATIONS 12
REFERENCES 14
1.0 Introduction to Tobacco Current Market in Sri Lanka
Farming: The number of registered tobacco growers rose during the 1980s and most of the 1990s, but fell sharply in 1998 and 1999. It is estimated that tobacco growing provides between 5,355 and 16,580 full-time equivalent jobs (the range depends on the labor requirements per hectare), which is just a fraction of one percent of the total labor force (0.08-0.25%).
Employment in tobacco manufacturing has fallen since 1990, from 6-7% of all manufacturing employment to 4-5% (the lower number refers to employment, the higher number also includes others engaged in the sector). Production volumes were fairly steady averaging around 5.2 billion sticks between 1995 and 1999, with a marked fall to 4.6 billion in 2000. An estimated approximately 3 billion bidis are produced annually as well. There is no information on illegal production of so-called "white cigarettes”. Average salaries and wages in the tobacco industry are about half the level for all manufacturing, and have fallen slightly in real terms during the 1990s. Manufacturing sector indirect tobacco employment is estimated to be small, of the order of 150 people. There are about 41,000 retailers that sell tobacco products, which typically account for only a small part of their total turnover. The Sri Lankan tobacco industry is dominated by the Ceylon Tobacco Company (CTC). The holding company of CTC is the British American Tobacco Company (BAT). BAT is the second
1.0 INTRODUCTION TO TOBACCO CURRENT MARKET IN SRI LANKA 2
2.0 SRI LANKAN TOBACCO MARKET STRUCTURE ANALYSIS 3
2.1 THE PRIVATE AND SOCIAL COSTS OF SMOKING 5
2.1.1 Private Costs and Social Costs of Smoking 5
2.1.2 Explaining the Market Failure 5
3.0 TAXATION AND REGULATIONS 7
3.1 COMMAND AND CONTROL OF THE INDUSTRY 7
3.2 INDIRECT TAXES AND PRICE ELASTICITY OF DEMAND 9
4.0 PROBLEMS AND FUTURE FORECAST 10
4.1 PROBLEMS 10
4.2 FUTURE FORECAST 11
5.0 RECOMMENDATIONS 12
REFERENCES 14
1.0 Introduction to Tobacco Current Market in Sri Lanka
Farming: The number of registered tobacco growers rose during the 1980s and most of the 1990s, but fell sharply in 1998 and 1999. It is estimated that tobacco growing provides between 5,355 and 16,580 full-time equivalent jobs (the range depends on the labor requirements per hectare), which is just a fraction of one percent of the total labor force (0.08-0.25%).
Employment in tobacco manufacturing has fallen since 1990, from 6-7% of all manufacturing employment to 4-5% (the lower number refers to employment, the higher number also includes others engaged in the sector). Production volumes were fairly steady averaging around 5.2 billion sticks between 1995 and 1999, with a marked fall to 4.6 billion in 2000. An estimated approximately 3 billion bidis are produced annually as well. There is no information on illegal production of so-called "white cigarettes”. Average salaries and wages in the tobacco industry are about half the level for all manufacturing, and have fallen slightly in real terms during the 1990s. Manufacturing sector indirect tobacco employment is estimated to be small, of the order of 150 people. There are about 41,000 retailers that sell tobacco products, which typically account for only a small part of their total turnover. The Sri Lankan tobacco industry is dominated by the Ceylon Tobacco Company (CTC). The holding company of CTC is the British American Tobacco Company (BAT). BAT is the second
References: 1. Nisha A. WHO Economics of Tobacco Control Paper No. 12, The Economics of Tobacco in Sri Lanka, 2007, 13-21. 2. Ceylon Tobacco Company. CTC Social Report. Social Profile, 2006. 3. Tobacco/Magazines. Marketing Strategies, 2007. Retrieved 12th August 2009 from . 4. Financial Times. CTC: Growing in a controversial market, 2008. Retrieved 15th August 2009 from < http://sundaytimes.lk/040718/ft/7.html>.