by countries of the Far East picked back up in 2005 and 2006, mostly because of rising imports into Japan. Lower prices caused the average for cigarette imports reported by countries in the region decline to an average of about $4.3 bn annually during 2002–04, before rising to about $5.5 bn in 2006. Greater imports by Japan have helped to offset smaller imports by Singapore. Cigarette exports reported by Far East countries showed an upward trend from an annually average of about $2 bn during 2001–03 to an average of about $2.17 bn annually during 2005–07. The quantity of cigarettes imported rose from 150 bn pieces in 2002 to about 187 bn by 2004, and remained near that level in the two following years. Japan accounts for about half of the region’s cigarette imports, but only about a tenth of the exports.
Cigarette manufacturers in countries of the Far East have produced higher quality products in recent years. Through various arrangements, more blended American type brands were produced in East and Southeast Asia. This tended to create a more competitive situation. The competition can be evaluated by the way the average export price for US cigarettes to Japan trended downward during 2004–07. By 2006 they were slightly less than half the 2002 price of 50 cents per pack of 20. However, a reduction for the price of US cigarette exports to Asia declined by half in five years to a range of 21 to 23 cents per pack. Yet, that did not cause a rise in exports to most markets in the Far East. Competition from other exporters with attractive prices hampered US export efforts to engineer a rebound. The problem was that more multinationals and manufacturers in East Asia had quality brands for sale at even lower prices. South Korea had a boom in cigarette exports during 2002–05 with an average price in the range of 10 to 13 cents per pack. Before barriers for imports were erected, South Korea had been a large importer of US cigarettes five years ago.
Some of the trade flows for cigarettes reported in East Asia have been modified moderately in the last three years. Japan remains by far the leading destination for US cigarette exports, although lower prices trimmed the value for this trade by half from the peak of $1.936 bn recorded in 2000 to $921 mn by 2005. Hong Kong’s smokers have preferred quality imported cigarettes for a decade, while most of the output from their factory was exported to customers in Southeast Asia. Taiwan’s cigarette imports showed an upward trend in the recent decade. Taiwan’s cigarette imports increased to a peak of $601 mn in 2005. Japan has supplied over 60% of Taiwan’s cigarette imports. The US, Germany, and the UK provide most of the remainder.
Singapore’s Cigarette Trade Declined Sharply In Recent Years:
The most conspicuous tumble for cigarette trade in Asia has been the way imports into Singapore declined from 24.5 bn pieces in 2001 to a low of 12.7 bn in 2004, before rebounding by about a fourth in 2005. Before other countries in Southeast Asia had investments and manufacturing arrangements with multinationals to manufacture quality brands, Singapore was an important distribution point for premium brands from the UK, Hong Kong, and US to neighboring countries. The greatest decline for Singapore’s cigarette imports stemmed from the deep reduction for imports from UK suppliers. Malaysia also had a decline for imports at the same time that new facilities provided blended brands for export.
Some Countries Strive To Boost Cigarette Exports From A Comparatively Small Beginning:
The trade pattern for some smaller cigarette importers showed fluctuations in the recent decade. Vietnam became a larger importer of cigarettes from Hong Kong and China before arrangements were made to produce quality brands under license in domestic facilities. Then, Vietnam began to expand exports of inexpensive brands at the same time that imports from Hong Kong were important. Indonesia had a boom for cigarette exports to some other members of ASEAN (Asian Association of Southeast Nations) during 2002–05, but by 2006 some of those countries had developed greater output of quality brands domestically. That tended to slow down the pace of growth for Indonesia’s cigarette exports after they reached a peak of 28 bn pieces in 2005—nearly double the 2000–02 average. Cambodia was one of the most spectacular markets for Indonesia’s cigarette exports. Nearly a half of the 21.7 bn cigarettes imported into Cambodia in 2005 came from Indonesia. Malaysia also had a decline in cigarette exports as neighboring countries expanded output in new factories.
Foreign investors helped cigarette manufacturers in some countries of Southeast Asia to compete effectively with imports and also enhance their exports. Cigarette trade in the Far East in 2007 will be only about half the level it was a decade ago because imports have been replaced by local output in some countries, especially South Korea, Singapore, and Myanmar. Most of the decline for imports into Singapore has come for sales of cigarettes by UK exporters. Cigarette exports from Germany to the Far East actually showed strong gains during 2004–06, compared with 2000–03. US cigarette exports to Japan moved higher in 2006 to a record 84 bn pieces, but then ebbed downward by a seventh in early 2007. Exports of cigarette manufactured in the region have fared better with significant gains between 1999 and 2005, followed by a certain flatness in 2006. In addition to greater Far East intra-regional cigarette trade, some Far East exporters (especially those in South Korea, China, and Hong Kong) found sales to new customers in the Middle East and Central Asia in the recent decade.
South Korea Was The Leading Far East Cigarette Exporter During 2002–05:
South Korea’s cigarette exports rose from 16.4 bn pieces in 2001 to a peak of nearly 44 bn pieces in 2004, before flattening out during in 2005 when shipments were valued at $235 mn. Competition from Switzerland, and some EU countries for sales to Iran and UAE tended to slow down the booming exports of South Korea. Yet, South Korea remains a larger cigarette exporter than other countries of East Asia. Their exports are well above the level of cigarette exports out of Hong Kong, Singapore, China, or Japan.
South Korea’s cigarette exports increased dramatically from $76.4 mn in 2001 to a peak of $228.7 mn in 2003, and then flattened out at $225 mn in 2004. Loss of the once leading customers in Afghanistan caused South Korean cigarette exports to drop to a lower pace in 2005—about a tenth below the 2004 level. Strong gains for shipments to Iran and Russia helped to offset the loss of Afghanistan. South Korea’s cigarette exports to Afghanistan zoomed from 15,718 t valued at $3.9 mn in 2001 to a peak of 9.6 mn pieces in 2003, valued at $44.7 m., but fell sharply in 2004. Gains in exports to Iran, UAE, and the United States helped push South Korea’s cigarette exports to $235 mn in 2005.
Direct exports of cigarettes from South Korea to Iran reached $44.7 mn in 2004, and remained at a high level in the two following years, compared with and $1.3 mn in 2003. South Korean deliveries to Iran filled some of the gap left by reduced UK shipments through transit trade centers in the Arabian Peninsula following the GCC import duty hike to 150% ad valorem.
The duty-free port of Dubai in United Arab Emirates has been a more reliable customer for South Korea’s cigarette exports. Shipments to UAE rose from $25.3 mn in 2001 to a peak of $99.7 mn in 2003 and then declined about a fourth in 2004.
South Korea’s cigarette exports to Former Soviet Union republics fluctuated widely in recent years. Exports to Russia during 2005 surpassed $13 mn, which was nearly double the value for calendar 2004, and six times the 2003 level. Shipments to Turkmenistan increased from $10 mn in 2001 to $32.6 mn in 2003, and fell to $10 mn in 2004, but tumbled to about a tenth that level in 2005. South Korea’s cigarette exports to Kazakhstan surpassed 2 mn pieces in 2005, compared with $1.4 mn in 2004. Shipments to Kyrgyzstan were about 8 mn pieces in 2004 and were at a higher level in 2005. Exports to Uzbekistan fell from $6.7 mn in 2001 to nearly $3 mn in 2004, and were at a slightly slower pace in 2005.
Japan’s Cigarette Imports Rising:
The recent arrangement with Japan Tobacco ended the manufacturing of Philip Morris brands at their factories in Japan. This tended to cause an upward movement for cigarette imports into Japan, as arrivals reached a peak of 95.7 bn pieces in 2006. The lack of an import duty tends to keep Japan in first place among the world’s cigarette importers. Japan still has about 100,000 street vending machines for cigarette sales. Concern that buyers under 20 years of age could use the machines caused laws to enforce use of identity cards and taking photographs of buyers. US shipments of cigarettes to Japan rose from 71 bn pieces in 2004 to a peak of 83.8 bn pieces in 2006. US cigarette exports to Japan declined 13.8% to 42.8 bn pieces in January–July 2007.
Japan has been the leading Far East importer of cigarettes in the recent decade. During 2000–03, Japan’s cigarette imports averaged about 83 bn pieces for an average value of about $2.1 bn annually. During 2005, the value for Japan’s cigarette imports reached about $3.1 bn. Greater deliveries by the US, Germany, and Switzerland pushed Japan’s cigarette imports to a peak of about 95 bn pieces in 2006. It appears that the total arrival of imported cigarettes into Japan in 2007 may slip slightly, and that the US share may drop to less than 88%.
Taiwan Importing More Cigarettes:
The second major Far East cigarette importer during 2003–06 was Taiwan, with average annual imports of about 25.3 bn pieces. Imports increased 6.3% to 26.1 bn pieces valued at $601 mn in 2005. JTI has a busy office in Taiwan and this has contributed to exports of over 12 bn cigarettes annually from Japan to Taiwan. Most shipments were various versions of the Mild Seven brand. Tobacco production in Taiwan has shown a downward trend. This means that imports of leaf tobacco for Taiwan cigarette factories have been rising. It may have accounted for greater cigarette imports recently. Arrangements to import cigarettes from Germany, US and UK have contributed to significant imports from those suppliers in the recent decade. US cigarettes to Taiwan declined from 2.15 bn in 2002 and 1.5 bn in 2005 to 945 mn in 2006. This was followed by a steep reduction for deliveries in early 2007. Competition from Germany and Switzerland contributed to the decline.
Hong Kong Reduces Cigarette Imports:
Hong Kong’s cigarette imports fell from $1.319 bn 1996 to $423 mn in 2002, and then imports flattened out during 2003–06. Lower prices for US cigarettes contributed to some stability for Hong Kong’s cigarettes during 2002–06, when they averaged about 18 bn pieces, including about two-thirds for re-export to other Asian markets. US cigarette exports to Hong Kong drifted downward from 2.8 bn pieces in 2002 to an average of 2.1 bn annually during 2003–05, before falling to 1.7 bn in 2006. Then came a rebound of 25.8% to 1 bn pieces during January-July 2007. Demand for premium brands tend to keep import levels up, and lower prices provided by exporters have contributed to the recent stability for imports.
North Korea Imports Cigarettes From Other Asian Countries:
Imports of cigarettes into North Korea averaged nearly 1 bn pieces annually during 2002–06. China, Hong Kong, and Japan were suppliers. Back during 1970-90, North Korea had fluctuating exports of both leaf tobacco and cigarettes to Russia and Ukraine.
Singapore Accounted For Most Of The Far East Decline In Cigarette Exports In Recent Decade:
Singapore accounted for a large share of the decline in Far East cigarette trade between 1994 and 2004. By 2005, most of the steep decline for exports of cigarettes from Singapore had already happened. Most of the distribution through Singapore involved of re-exports of cigarettes provided by European and US exporters. Relatively expensive premium brands from the UK have been an important segment of the re-export trade. Smokers in Southeast Asia have shifted to less costly brands provided by either domestic manufacturers or less expensive cigarettes provided by other Asian suppliers. As the quality of cigarettes produced in Southeast Asian countries improved, transit traders in Singapore found it difficult to maintain the level of business they enjoyed in the mid 1990s. The value for Singapore’s cigarette imports fell from $1.08 bn in 1997 to $353 mn by 2005, and edged lower afterwards.
After the steep slide for Singapore’s trade had run its course by 2002, total cigarette trade for the region tended to adjust to a new setting, but Southeast Asia’s cigarette imports during 2002–04 were less than half what they had been during 1995–97. Most of the decline was a result of a steep reduction for UK cigarette exports to Singapore.
Indonesia’s Cigarette Exports Increased Recently:
Indonesia sharply expanded exports of cigarettes to markets in Southeast Asia between 1999 and 2003. Then exports declined in 2004, but rebounded in 2005 to $186 mn by 2005. Gains for exports to Cambodia were astonishing at times during the last five years, with peak shipments in 2005. Cambodia accounted for about a third of Indonesia’s cigarette exports during 2001–05. Lower prices for cigarettes from Indonesia tended to hamper prospects for some other countries seeking to advance exports of their brands in the area, particularly China.
Trade opportunities provided by free trade among countries of the Association of Southeast Asian Nations (ASEAN) have provided substantial benefit for Indonesian cigarette exports. However, gains were greater before some other countries in the area began to copy the Indonesian thrust. Indonesia’s cigarette exports to Cambodia rose to 9.9 bn pieces in 2002, and were about a third higher during 2004–06.
China’s Cigarette Exports Become More Diversified:
China made larger cigarette exports to Iran, UAE, and Saudi Arabia in the last three years, as intense competition made it difficult to expand sales to countries in Southeast Asia. At one time it appeared that China’s cigarette exports would rise to $1 bn, when the value reached $832.7 mn in 1996. Then the value dropped to $436.4 mn in 1997, when shipments through Hong Kong transit traders tumbled. A lack of business in Hong Kong and smaller sales to Burma caused the value for China’s cigarette exports to drop to a low of $113 mn in 1999. However a rebound to 16 bn pieces occurred in 2005. The value for China’s cigarette exports averaged $220 mn during 2004–06. The rebound was enhanced by greater shipments to Philippines and some Middle East markets. China faces strong competition from Hong Kong traders in Philippines and Vietnam, and from Indonesia in Cambodia, Thailand, and Laos.
China’s reported cigarette imports averaged about 2.6 bn pieces annually during 2004–06, with most of the deliveries coming from Hong Kong. Arrangements between CNTC and Philip Morris to manufacture Marlboro in China are likely to limit prospects for increasing cigarette imports, despite lower duties.
Hong Kong Remains An Important Cigarette Trade Center:
Hong Kong’s remaining cigarette exports have focused on sales of quality blended brands to Philippines, China, and Vietnam. Those three markets account for about three fourths of Hong Kong’s total cigarette exports (including domestic output and re-exports). During 2000–03, each of those markets accounted for about a fourth of the total.
Total exports of cigarettes from Hong Kong declined to 16 bn pieces by 2005—a third below the 2001–04 average. Exports portrayed the popularity of brands made by Nanyang Brothers Cigarette factory in Hong Kong. Nearly all of the output of Nanyang Brothers factory is exported. Exports of cigarettes made in Hong Kong rose from 9.5 bn pieces in 2000 to 18 bn pieces in 2004.
Hong Kong’s cigarette exports to Vietnam reached a peak of 5.7 bn pieces in 2000.
Exports of cigarettes from Hong Kong to Turkey averaged about 2.6 bn pieces during 2001–04, but declined as competition from European exporters intensified during 2003–06. Hong Kong found new customers for cigarettes in Iran and countries of the Arabian Peninsula.
Exports of cigarettes made in Hong Kong to China doubled between 2000 and 2002, when the quantity reached 1.04 bn pieces. Most of the recorded shipments of cigarettes from Hong Kong to China involve re-exports, or supplies obtained from foreign suppliers. Total shipments of cigarettes from Hong Kong to China fell from 6.5 bn pieces in 2000 to 5.4 bn pieces in 2002, and remained in that range during 2003.
Transit Trade Business From Hong Kong Flattens Out:
The leading destination for Hong Kong’s re-exports of cigarettes is Philippines, and shipments to that market rose from 4.2 bn pieces in 2001 to 5.1 bn in 2002 and remained at a high level in 2003. After, China the third major customer for Hong Kong’s transit trade in cigarettes is Vietnam, which was a market for 1.3 bn pieces in 2002.
Hong Kong’s cigarette imports have held up better than those of Singapore, because of the busy transit trade business. Imports of cigarettes into Hong Kong fell gradually from 22.3 bn pieces in 2000 to 16 bn in 2005. Hong Kong’s imports of cigarettes from the UK fell from 6.6 bn pieces in 2002 to 5.5 bn in 2001, and edged down to 5.3 bn by 2002.
China’s deliveries of cigarettes to Hong Kong rose a sixth to 3.78 bn pieces in 2005 to 4.65 bn in 2006. German shipments of cigarettes to Hong Kong in 2002–04 averaged about a third below the 2000 level of 1.6 bn pieces. In contrast to the relatively strong showing for UK cigarettes and gains for deliveries from China, Hong Kong’s imports of US cigarettes have shown a more downward movement in recent years.
Taiwan Remains Large Importer Of Cigarettes From Japan, But Reduces Purchases From Others:
Japan remained the leading supplier of Taiwan’s cigarette imports in 2002–06. Output of cigarettes in Taiwan averaged about 20.5 bn pieces during 2003–05. Over half of the cigarettes sold are imported. Japan provided about half of the 26.1 bn cigarettes imported in 2005. US cigarette exports to Taiwan averaged about 5 bn pieces annually during 2002–06. German deliveries of cigarettes to Taiwan in 2002–04 averaged about 2 bn pieces, and rose to 4.8 bn pieces in 2006. UK cigarette shipments to Taiwan during 2002–04 were about half the 2.6 bn provided in 2001. Swiss shipments of cigarettes to Taiwan rebounded to about 685 mn pieces in 2006. Slovenia provided Taiwan significant cigarette deliveries during 2001–06.
Philippine Cigarette Trade Expanding:
The transit traders in Hong Kong have continued to find a good market in the Philippines. Most of the Philippine cigarette imports consist of supplies from EU and US manufacturers which are provided by traders in Hong Kong, and to a lesser extent Singapore. The duty-free setting for Hong Kong contributes to this setting, since direct US shipments to Philippine importers are small. Passengers entering Manila airport from Hong Kong often have suitcases filled with cartons of cigarettes, meaning that the distribution of premium brands of foreign cigarettes in the Philippines is apparently greater than what the trade matrix numbers show. Philippine cigarette exports to the Middle East increased sharply in 2004, pushing the total to about 17 bn pieces, followed by strong sales in 2005 and 2006.
Vietnam’s Imports Drift Lower As Domestic Output Rises:
The value for Vietnam’s imports of cigarettes averaged 10.3 bn pieces during 2002–04, and increased to 11.1 bn pieces in 2005. Hong Kong and Indonesia were the leading suppliers of Vietnam’s cigarette imports. China, Philippines, and Singapore were also suppliers. Vietnam’s cigarette output expanded sharply during 2000–06, partly with increased arrivals of leaf tobacco from China, plus small supplies of US tobacco for blending. Vietnam’s cigarette exports rose from a low level in the 1990s to an average of 520 mn annually
during 2004–06. Cambodia and Laos are significant markets for Vietnam’s emerging cigarette exports.
Cambodia Shifts To ASEAN Suppliers For Cigarette Imports:
Cambodia had been an important cigarette customer for the transit traders of Hong Kong and Singapore in the 1990s. Then came the free trade arrangement ASEAN. This contributed to a shift to Indonesia, Philippines, Malaysia, and Vietnam. Cambodia’s cigarette imports averaged about $222 mn annually during 2004–06, compared with a low of $136 mn in 1999. Cambodia’s cigarette imports reached 21.7 bn pieces in 2005, compared with 17.8 bn during 2004. Increased revenue from agricultural exports contributed to a rebound in per capita purchasing power in Cambodia.
Laos Finds ASEAN Cigarette Deliveries Attractive:
The duty-free trade through ASEAN appears to have contributed to a stronger market for imported cigarettes in Laos. This has apparently enhanced deliveries of cigarettes to Laos from Thailand, Vietnam, and Indonesia. These suppliers appear to have caused China’s share of the market for imported cigarettes in Laos to drop far below the level reported for some years in the 1990s. Imports of cigarettes into Laos rose to a peak of 770 mn pieces in 2005, compared with an average of 489 mn pieces during 2002–04.
Burma Shifts From Relatively Large Cigarette Imports To An Expanding Exporter:
Burma was an important market for cigarette exports from China and Singapore during some years of the 1990s. Burma’s cigarette imports fell from $138 mn in 1996 to $76 mn in 1997, and averaged about $20 mn annually during 2002–04. Investments by foreign manufacturers in cigarette factories in Burma contributed to greater output of quality brands, which reduced demand for imports. Increased sales in nearby countries, contributed to a rise for Burma’s cigarette exports to 611 mn pieces by 2005.
Thailand Importing More Cigarettes:
Modern cigarette factories in Thailand use quality imported tobacco to blend with the relatively mild domestic tobacco. Despite efforts to provide excellent quality cigarettes, imports from ASEAN suppliers recently showed an upward trend. Thailand’s cigarette imports showed an upward trend in recent years, rising from $25 mn in 1998 to an average of about $67 mn during 2000–04. Exports of cigarettes from Thailand fluctuated in the recent decade, ranging from a peak of $12 mn in 2000 to an average about half that during 2003–06.
Malaysia’s Cigarette Exports Fluctuate:
The competitive situation for cigarette trade in Southeast Asia caused a decline for exports from Malaysia from a peak of 13.7 mn pieces in 1999 to a low of 7.9 bn pieces in 2002. Then the quantity of cigarettes exported rose to a peak of 14.6 bn pieces in 2004 and remained strong at 11.4 bn pieces in 2005. Imports of cigarettes into Malaysia rose to a peak of $115 mn in 2005, compared with $93 mn in 2004. Malaysian factories use expensive imported US tobacco for a high proportion of some premium brands, which helps to lessen the amount of imports.
Mongolia’s Imports Show Upward Trend:
Cigarette imports into Mongolia averaged about 618 mn pieces annually during 2003–06. China gained market share as arrivals from South Korea fell. Russia increased deliveries with some of the popular brands from multinationals.