Global tobacco company Japan Tobacco International (JTI) vowed to continue investing in the Philippines, including a substantial capital expenditure for next year, hiring of additional workers for its Global Business Service (GBS) center, and potential production of its heated e-cigarettes at its manufacturing hub in Batangas.
JTI Philippines General Manager John Freda told Manila Bulletin Business they have been investing in the country amid a declining tobacco market and worrying illicit tobacco trade.
“We are constantly investing in the Philippines in our factory and employment,” said Freda. Although, JTI has no major investment in factory at the moment, Freda mentioned of a substantial capital expenditure for next year.
Following its successful GBC center, which was established in the country at the height of the pandemic in 2020, Freda said they will be hiring additional 150 people this year, bringing its overall shared service facility manpower to 600 to further service the requirement of its affiliates in Asia Pacific and the Americas.
Although there is no immediate plans, Freda did not discount the possibility of JTI producing its heated tobacco sticks Ploom in the country considering that the Philippines is its manufacturing hub for the Asia Pacific region. Ploom is currently produced in Japan and in EU.
“Am sure that in time we have production in the Philippines, too, on the basis that it is our manufacturing hub for Asia, but at this point we have no immediate plans to do so,” he said adding they also “intend to launch” the heated cigarette here but cannot say when.
Its cigarette plant in Malvar, Batangas also exports more than 50 percent of its production mainly to 16 countries in the Asia Pacific region. The factory employs 800 people with a marketing team support of over 4,000 personnel across the country.
In the meantime, Freda emphasized their focus is on the worrying rate of increases in illicit cigarette in the country, which now reached 16-18 percent of market according to data. In some areas in Mindanao, smuggled cigarettes could reach a high of 60 percent of the market.
Thus, he urged for a strict enforcement of measures to counter cigarette smuggling.
He emphasized that while they understand the extent of taxation to address the health and fiscal agenda of governments around the world, he also said that spikes in pricing would just “exacerbate” illicit tobacco trading.
He cited the case of Malaysia where illicit tobacco went over 60 percent share of the local market following the imposition of high cigarette taxes.
“We are paying P55 per pack in taxes and clearly the illicit operator is not paying like that and as prices increase due to taxation it becomes even more profitable for smugglers and therefore need strong enforcement measures,” he said.
JTI, which accounts for 37.5 percent of the local cigarette market, is very supportive of the recent bill classifying illicit tobacco smuggling as economic sabotage saying it is a step forward because the “size of the prize of smugglers is huge.”
On the preparation for the Implementing Rules and Regulations (IRR) of the VAPE Law under Republic Act No. 11900, or the Vaporized Nicotine and Non-Nicotine Products Regulation Act, Freda said their position is for the regulation of the new cigarette category.
“As always it is important that it is fair and open to all competitors within that category and make sure that the policy allows fair competition in the market. We are in favor of regulation, we do believe it is appropriate,” he said. “We just want to ensure that as a category we are able to compete and there are no barriers to anyone competing in that category,” he said.
The industry, however, has been declining over the years and Freda said the decrease is seen to accelerate this year resulting from the impact of high inflation on consumers and rapid expansion of illicit cigarette trade.