The joint venture will see the establishment of British American Tobacco Myanmar Ltd, in which BAT will have the majority share, which will enable it to manufacture, distribute and market its brands in Myanmar, according to BAT.
Under the terms of the agreement approved by the Myanmar Investment Commission in January, the company will invest about US$50 million over five years to establish a world-class manufacturing facility.
IMU is part of local conglomerate Sein Wut Hmon Group, which has an extensive FMCG distribution network throughout the country.
According to the Asean Tobacco Control Report published in June 2012 by Southeast Asia Tobacco Control Alliance (SEATCA), Myanmar adults make up 6.97 per cent of ASEAN smokers. The number of adult smokers aged 15 and above in ASEAN countries was 127 million––29.5 per cent of adults in the region.
Myanmar has a population of 59.13 million, of which 22 per cent are adults (aged 15 and above). The smoking population is made up of 44.8 per cent of male adults; 7.8 per cent of female adults; 13 per cent of boys aged 13 to 15; and 0.5 per cent of girls aged 13 to 15.
Myanmar technically bans all forms of direct and indirect tobacco advertising, promotion and sponsorship, including free giveaways, and requires that packaging carries health warnings.
However, Daw Nang Naing Naing Shein, a director of the Ministry of Health’s Tobacco-free Initiative, was quoted as saying last month that the law has not come into force and the rules have not been finalised.
Rehan Baig, managing director of British American Tobacco Myanmar, noted that BAT in Myanmar historically had a market-leading position, which it aims to rebuild with its partner. It plans to offer consumers its products and brands through “responsible marketing”, he said.
“The joint venture gives us a very sustainable and long-term position in this growing economy,” he added. “This signifies much more than a shared responsibility for the production of our international brands. It is a long-term commitment to developing local talent in technical know-how and management capabilities.”
He added that the company will employ around 400 people to begin with and intends to collaborate with local farmers to improve the yield and quality of local tobacco.
The tax on domestic cigarettes is 50 per cent, while imports have a tax of 100 per cent. The most popular foreign cigarette brand sold for US$3.08 in 2011––the fourth highest in the region after Singapore ($8.3), Brunei ($5.9) and Malaysia ($3.32)—according to SEATCA.
The venture marks the return of the tobacco brand after it left the country in 2003 following an international campaign against it over its links with the military through the 60 per cent stake it owned in Rothmans of Pall Mall Myanmar, which was 40 percent owned by the military-backed Union of Myanmar Economic Holdings.
BAT reportedly sold its share in Rothmans of Pall Mall Myanmar to Singapore’s Distinction Investment Holdings, after receiving what was described as an “exceptional request” from the British government to leave Myanmar.