Issue 4, 2018. August-September

   

GEORGIA'S TOBACCO GAMBIT: NEW REGULATIONS IMPOSE STRICT CONTROL ON TOBACCO USE

A series of new regulations has strictly curtailed where cigarettes can be smoked and how tobacco products can be advertised. This follows significant increases in taxes on cigarettes in recent years and proposed further increases in the future. Anti-tobacco advocates say the changes push Georgia to the forefront of international efforts to control tobacco use and are necessary to combat Georgia's high levels of smoking. Questions remain, however, about how the amendments will be implemented and the impact they will have on health, public finances and the economy.

Georgia has shot forward in its efforts to control tobacco use. In recent years it has steeply increased taxes on tobacco sales, and earlier this summer, introduced a series of amendments that restrict where cigarettes can be smoked and how tobacco products can be advertised. More changes are expected, which will further increase taxes and restrict packaging.

The changes have garnered international praise from health organizations. Smoking levels in Georgia are extremely high. An estimated 58 percent of men - and six percent of women - smoke. As a result, the health improvements could be dramatic. However, such a high incidence also means that the unintended consequences of a poorly implemented policy could also be severe for public finance and the economy.

From 'Laggard' to International Standards

The new regulations, which went into effect on May 1, put Georgia at the forefront of international efforts to reduce tobacco consumption, according to Alex Liber at the American Cancer Society.

From May 1, enclosed public and workplaces are smoke free in Georgia, and the advertisement, promotion, and sponsorship of tobacco is prohibited. Other regulations are also set to be implemented over the next few years which will dramatically increase taxes, as well as placing more severe restrictions on point of sale advertising and cigarette packaging.

Health specialists, including the UN country team in Georgia, have argued that the changes are necessary to save lives.

"In Georgia, the prevalence of smoking among men is among the highest in the world at approximately 57 percent; the prevalence of smoking among women, despite still being relatively low, has almost doubled in the recent years," the team said in a press statement.

"Half of all long-term smokers will be killed early by a smoking-related disease. Approximately 11,000 citizens of Georgia die prematurely every year from diseases caused by tobacco, and among those are approximately 3,000 non-smokers. The alarming figures clearly indicate a need for strong and imminent action in tobacco control."

The new regulations represent a "quantum leap" for Georgia in terms of its tobacco control policy, according to Liber.

"Prior to this, Georgia was very much a laggard in tobacco control policy," Liber said.

"Over half the world's population is covered by some kind of smoking ban. Georgia was one of about 60 countries that only had a text warning on cigarette packaging. It has made a quantum leap forward."

Liber noted that it is "hard to name" another country that went from so little to such high standards in tobacco control legislation.

Censorship and Economic Concerns

It is precisely the speed with which the change is coming about that is a source of concern for some. The tobacco industry has been generally accepting of the need for new regulations.

"In general, we are for regulations, because tobacco is a controversial product. It is harmful and we think that there should be regulations," Nona Mamulashvili, from Phillip Morris International, pointed out.

However, along with others in the industry, she says that laws have been brought in quickly and with little consultation. "The regulations should be implemented gradually so that businesses have time to adapt, and there should be discussions with all the sides. For this set of regulations [that came into effect in May] we were excluded from any discussions," she says.

As a result of the failure to include all stakeholders in discussions, she says, problems have arisen so "the same people who were pushing forward to pass the law very fast ... now have to recall the law and regulate the technical details."

For example, she says that they now realize, "there are some people in a hospital and in institutions who need to have a separate area where they will be able to smoke because, as of today, there is no smoking place on the territory of institution....so that a sick person has to go a few hundred meters away to smoke."

Ovidiu Cernei from Japanase Tobacco International, makes a similar claim. "If we had been consulted previously when the law was drafted, maybe we would have been able to recommend some practices from other markets where similar laws have been implemented, but it was not the case because the law was passed in a hurry and we barely had the chance to comment and there was not too much consideration for our comments."

Pub and restaurant owners interviewed by Rustavi-2 TV channel also voiced concern that they would lose business.

"It ends up you can smoke all you want at home, in your car, or at the casino but not in cafes and bars," noted Chai Khana cafe owner Levan Jibghashvili. "In the end, this will affect all of us."

Pub owner Levan Grigolia argued that the law is too strict for a developing economy like Georgia.

"This law should be more liberal. It shouldn't be so strict especially since we are not in Germany or Austria or Greece," he was shown saying. "First should come economic [growth] and then strict laws."

In response to these concerns, the UN country team in Georgia noted that the impact of similar bans in other countries has been positive for the economy.

"Case studies from other countries in the region indicate that a total ban on smoking in restaurants and bars is likely to have a neutral to positive impact on revenue for the hospitality sector in the short- to medium-term. Employment gains are more likely for this sector than job losses," it said in a press statement.

The other main concern is that increases in taxes and changes in packaging may lead to increases in smuggling and this will mean a loss of revenue for the government and increased criminality generally.

The government plans to increase duty on cigarettes to reach European levels over the next five years. This would amount to increasing the current duty from 1.7 GEL per pack to 5.2 GEL per pack, an increase of the current duty of 200 percent, which, according to the tobacco companies, will double the cost of a pack of cigarettes. There is also a plan to bring 'plain-packaging' into Georgia, so that cigarettes will simply be sold in white boxes with no logos.

Felizio Feraz, General Manager of British American Tobacco notes that "if not managed properly, that can make illicit trade grow significantly."

"I worked in South America and I saw in Panama that [when they brought in these laws] while legal sales reduced by half, consumption did not reduce by half. Because, consumers, they find a way to get their product," he adds.

This, he argues, will have an impact on government revenues. Which could be significant, as they say that tobacco is responsible for as much as 10 percent of government revenue. He also argues that plain-packaging makes this worse, by making it easier to counterfeit cigarettes.

"We have seen plain packaging...Australia was the first market and...illegal black-market increased, and they don't respect any regulations. So, they will not comply with packaging regulations, they will not pay any excise," Feraz says.

The answer, they argue, is that changes in the law need to be brought in more gradually, as Mamulashvili from Philip Morris International points out, "the EU is telling the country that you need to have the regulations in place, but... You are not obliged to do it in six months or even a year. Romania has taken 15 years to come to the EU requirements. Georgia is trying to do it much faster..."

All sides seem to agree on one thing. The new laws are an incredibly significant change in a country with extremely high levels of smoking.

What impact that will have on the incidence of smoking, connected businesses, smuggling and government revenues, only time will tell.