Helping The Tobacco Industry Survive Beyond 2010

Source from:  Bernama.com  12/25/2006

BACHOK, Dec 22 (Bernama) -- Though tobacco is not one of Malaysia's export commodities, it is the lifeline for 3,530 families in the Bachok district of Kelantan since 1978. The annual domestic demand for tobacco leaves, estimated at 15 million kilogrammes, has helped transform the landscape along the 25km route from Bachok to Tok Bali in Pasir Puteh from a poor fishing settlement into an affluent neighbourhood. A total of 2,742 hectares of land along the coast is cultivated with tobacco with the farmers reaping up to RM25,000 from per hectare. They are in fact fulfilling 70 percent of the local demand for tobacco leaves worth RM200 million annually. But there is a downside. Tobacco production here is not cost-effective and considered among the costliest in the world. According to British American Tobacco's (BAT) head of Leaf Ramli Hashim during a press conference here recently, a kilogramme of tobacco leaves fetched RM14 last year, the highest in the region and among the most expensive in the world. In Thailand it was only around RM6 a kilogramme, and in Vietnam and the Philippines it is about RM5 a kilogramme. UNCOMPETITIVE PRODUCERS But the high price is expected to come down drastically by 2008 in line with the Asean Free Trade Area (AFTA) coming into force, and some tobacco growers and curers fear it will no longer be feasible to grow tobacco. The price of tobacco leaves at RM13 per kilogramme now is expected to drop by RM9 and if this is the case it will no longer be feasible to grow tobacco. Ramli said: "The local price must come down if we want to be competitive in the region but it cannot go below RM6 per kg." This is important to sustain the local tobacco industry and protect the livelihood of 14,000 people involved in cultivating the commodity and the 302 tobacco curers all over the country. "If steps are not taken in that direction, the Malaysian tobacco leaves will no longer be competitive by 2008," Ramli said. But in the final analysis, he said, it would be cheaper to import tobacco leaves from Asean member nations by 2008. SHIFTING TO OTHER COMMODITIES Looking at the situation, the government through the National Tobacco Board (LTN), has allocated RM86.6 million to enable tobacco growers and curers to face the AFTA onslaught. According to LTN chairman Mohd Zain Ismail, tobacco cultivation would be restructured to provide a competitive edge through higher productivity and lower production cost. At the same time, growers and curers who do not have the economies of scale will be encouraged to make a transition to other commodities. Mohd Zain said the tobacco curers who were once the lynchpin of the industry would be given a helping hand in restructuring their activities, including encouraging them to grow tobacco as well. At the same time, growers too will be encouraged to cure the leaves themselves. This in turn will create 3,000 to 4,000 individual grower-curers who will be the leading players in tobacco cultivation. "Those seen viable will be given priority in efforts to boost efficiency and productivity, while those who lag behind will make a transition to other integrated crop cultivation," Mohd Zain said. JOINT CULTIVATION Other than this, an alternative system known as the Joint Production System (SPU) has been adopted by LTN. The SPU was introduced by JT International Tobacco early this year to prevent the growers from being left out and at the same time increase their productivity and reduce overheads through proper agricultural practices. In his message in the SPU guidebook, the company's Leaf director Gary Tullidge describes the SPU as an option for the farmers to play the dual role of growers and curers that indirectly enhances the efficiency and competitiveness of the industry. He says through the system, the tobacco grower-curers form a smart-partnership with the tobacco companies where both parties will invest, face risks and share the profits that are to be deposited directly into their accounts after deducting the money advanced and the curing cost. RESTRUCTURING MUST TAKE INTO ACCOUNT FARMERS' WELL-BEING A tobacco grower for more than 20 years, Ismail Awang, 60, said the short-term tobacco venture had been the mainstay for fishermen in the coastal areas and several clay soil areas in the state. Ismail who earns about RM70,000 per season said tobacco helped to change the socio-economic status of many in the state and any restructuring exercise must take into consideration the well-being of the tobacco farmers.