China's State Tobacco Monopoly Administration to be Merged into Super Ministry

Source from:  Special Report by TobaccoChina Online 03/17/2008

The State Tobacco Monopoly Administration (STMA) - the regulator of China's tobacco industry - will be merged into the Ministry of Industry and Information, one of the five "super ministries" China is establishing under the government plan for institutional restructuring expected to be adopted at the two-week First Session of the 11th National People's Congress (NPC) that will end in Beijing on March 18. Deputies attending the NPC session began to deliberate on March 11 the plan for institutional restructuring of the government formulated by the State Council, or cabinet, which involves the installation of "super ministries" on energy, transportation, industries and environment protection. State Councilor Hua Jianmin, also secretary-general of the State Council, made an explanation of the plan at the session. Over recent years, there were always speculations about structural reform of China's State tobacco monopoly system. Some radical opinions proposed annulment of the State tobacco monopoly system while mild opinions suggested continued separation of governmental functions from enterprise management in the tobacco industry, which has been under State monopoly for decades. For the fate of the STMA in the institutional restructuring leading to the establishment of "super ministries", there were basically the following two versions of speculations: Firstly, the State Administration for Industry and Commerce, the STMA and the General Administration of Quality Supervision, Inspection and Quarantine would merge to form a "super ministry" to strengthen government regulation of markets. Secondly, the Ministry of Commerce, in the capacity of a "super ministry", would take over the functions of standardization and quality control regulation from the State Administration for Industry and Commerce, the General Administration of Quality Supervision, Inspection and Quarantine, the State Administration of Work Safety, the State Food and Drug Administration, the STMA and the State Administration of Traditional Chinese Medicine; the functions of construction work quality supervision and control from the Ministry of Construction; and the functions of control over economic operation and pricing from the National Development and Reform Commission. The release of the State Council's plan for institutional restructuring put an end to all such speculations by specifying that will be merged into the Ministry of Industry and Information. According to the plan for institutional restructuring, "Steps will be taken to promote systematic reform of public institutions in a timely manner. In accordance with the principle of separation of public institutions from government agencies, separation of enterprises from public institutions and separation of the functions of government administration from the processing of management affairs, public institutions that mainly perform administrative functions shall be gradually converted into administrative organs or placed under the control of administrative organs. Those that mainly operate businesses of production or marking shall be gradually converted into enterprises. For those that are mainly designed to provide public services, they shall have their resources reformed to strengthen their nature as public institutions while government supervision and control over them shall be strengthened." The aforesaid statements of the plan for institution restructuring clearly indicate that the STMA will be converted into an administrative organ while China National Tobacco Corporation will be converted into an enterprise and operate in accordance the principle of the market. The plan for institutional restructuring suggests that the STMA will be dedicated to performing the function of administrative control over planning, policymaking and standards formulation of the tobacco industry and lead the development of the tobacco industry, like what it was previously doing in exercising supervision and control over State tobacco monopoly within the tobacco industry. After the separation of China National Tobacco Corporation from the STMA, such supervision and control will become government supervision and control. Converted into an enterprise, China National Tobacco Corporation will take further steps to strengthen inter-provincial joint venture development and continue enlarging its scope of operation and strengthen its capacity. In explaining the plan for institutional restructuring, Hua Jianmin said that while steps are taken to conduct institutional restructuring in a timely manner, any reform in this regard must be based on the realities and there should be no imposition of uniformity on all institutions, which suggests that the reform of the tobacco industry will proceed in a steady way. Following reform, tobacco manufacturing enterprises in China are expected to each have a smaller workforce and will see their costs decline. For tobacco monopoly administrative authorities across China, they will be able to make more powerful administrative regulation over the tobacco industry because of the severance of their relations of interests with the latter. Therefore, such a change can mean a win-win situation, which, more significantly, will be a great advantage to the sound and sustainable development of the tobacco industry and increases in financial revenues for the State. Enditem