A new treaty promotes international efforts to address the economic and public health effects of the tobacco black market.
By Menekse Tokyay for Southeast European Times in Istanbul -- 23/11/2012
A man sells tobacco products on the streets of Istanbul. [AFP]
Industry analysts are hopeful that a new compact signed by 176 countries will strengthen regional co-operation against the illegal trade of tobacco.
The treaty, titled The Protocol to Eliminate Illicit Trade in Tobacco Products, was adopted by consensus at a meeting of the World Health Organisation (WHO) in South Korea on November 12th. It calls on participating countries to standardise efforts against the trade by controlling the supply chain and developing cross-border law enforcement initiatives.
Illicit trade in tobacco products is a global problem, affecting every part of the world from the Balkans to the Middle East and Asia. While 11.6 percent of the global cigarette market is illicit, at least 32 billion euros worth of tax revenues are lost annually because of the underground trade, according to the International Union Against Tuberculosis and Lung Disease.
Noyan Gurel, CEO of Turkey's Sunel Tobacco Company, told SETimes the new treaty represents a victory for public health and economic fairness.
"The elimination of all forms of illicit trade in tobacco products and the creation of a global tracking system constitute an essential component for the fight against illegal and counterfeit trade of such products," Gurel said. "It will serve both the public health requirements as well as the protection of the rights of registered tobacco companies."
Gurel added that increasing cross-border law enforcement efforts could have the added benefit of disrupting cash flows to illegal organisations.
"The illegal and fake trade has become day by day a 'monster sector' free of any control and supervision. In addition to this, nobody knows where such huge money flow is going," she said.
According to recent data, Turkey has the world's tenth largest illicit market in tobacco, covering 10.5 percent of the underground trade globally. Cigarettes are often smuggled into the country from northern Iraq and the Russian Federation.
Ankara has stepped up enforcement measures since 2011, capturing 1.6 million packages of illicit tobacco in the first eight months of 2012, according to the ministry of customs and trade. Turkish police are using a new generation of high-tech digital tax stamps with invisible ink and a covert code with data for each pack to verify whether products are authentic.
Balkan countries are not immune from the problem, as their geographical location makes them ideal transit countries to Western Europe and beyond.
Macedonia, which signed on to the new convention, has undertaken major efforts to curb the trade in recent years. While six years ago a quarter of cigarettes sold in the country came through illegal channels, today the rate is less than 6 percent. In comparison, about 20 percent of cigarettes sold in the Balkans come from the illegal market.
Skopje continues law enforcement operations to stem smuggling, especially from Bulgaria and Greece, and its successes have meant 80 percent higher budget revenues from taxes on cigarette sales.
Like their Turkish counterparts, Macedonian tobacco producers support stricter controls on the illicit trade.
"We do nothing illegal. If they impose stricter control over the smuggling, it will only mean that we will finally have a chance to fight the black market, which is damaging us as well," Arben Ismaili, a Macedonian tobacco grower, told SETimes.
Romania's black market in cigarettes swelled to more than 14 percent of the national total trade in tobacco in September, according to the latest study by the Bucharest-based Novel Research firm.
While this represents an increase from the 12.9 percent registered in summertime, it's significantly below the January 2010 peak of 36 percent, which was brought down through more aggressive anti-smuggling measures.
According to experts, a 1 percent increase in the cigarette black market results in 30 million euros lost in taxes from the state budget, meaning Bucharest's beefed up enforcement has led to significant economic benefits.
The main source of illegal cigarettes in Romania is duty-free shops, while about 26.7 percent of smuggled products originate from Moldova.
According to the WHO, 35 percent of cigarettes consumed in Bosnia and Herzegovina (BiH) come from illegal markets. Police say most are smuggled into the country from Montenegro and Kosovo before being sent on toward neighboring countries and Western Europe.
BiH's 1,500 kilometers of borders, much of it in mountainous terrain that is difficult to police, houses more than 400 illegal crossings, according to law enforcement reports.
As efforts to stem the illegal trade in tobacco have continued, many countries have also increased taxes on cigarettes to encourage people to quit. Few would dispute the benefits for public health, but some industry analysts warn that increasing the price of legal cigarettes with higher taxes pushes consumers to buy cheaper products on the black market.
Under BiH's national anti-tobacco policy, for example, taxes on the sale and production of cigarettes will increase annually until 2014. A public relations officer from the country's last fully functioning tobacco factory, located in Sarajevo, told SETimes the resulting price hike could push him out of business.
"Our biggest problem is black market and imported cigarettes, and we are looking forward to a wider international co-operation against the illegal market," said the officer, who didn't provide his name because of company policy. "But, the truth is that with new and higher taxes, the prices of domestic and imported cigarettes will be equalised and the survival of the factory will be called into question."
Hilal Ozcebe, a professor of medicine at Ankara's Hacettepe University, disagrees, telling SETimes that a lack of regulation is what allows the black market to flourish.
"However efforts [to curb the illicit trade] will bear fruit only if the international community supports [efforts] to change mindsets, considering porous borders are what make this problem global in the first place," she said.
SETimes correspondents Ana Lovakovic from Sarajevo, Paul Ciocoiu from Bucharest and Biljana Lajmanovska from Skopje contributed to this report.