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 T O B A C C O

IN THE DEVELOPING WORLD


The antismokers who recently convened in Beijing are trying to spread their corrupted science and falsified statistics to other countries for the purpose of launching a world-scale attack against smoking. Among the tactics used is the belittling of tobacco as a valuable crop, and "plans" to "compensate" the growers of the tobacco-producing countries. Of course, their media accomplices cheer the proposal, and withhold information from the public on the devastating damage that this approach would create. The truth is that tobacco is THE most valuable non-food cash crop in the world, and a major contributor to global economy.

We are pleased to link with the International Tobacco Growers' Association Website, to give voice to a side of this issue that has been repressed by the media. We also reproduce excerpts from the "Tobacco in the Developing World - Second Edition" published by the International Tobacco Growers' Association.
Both the brochure and the website explain not just the tremendous importance of tobacco as a pivotal revenue for families and countries, but also the absurdity of even conceiving the elimination of this crop. We recommend reading what reported in order to better understand the magnitude of the damage the antismoking cartel intends to inflict to the world economy to satisfy its predatory agenda.


Much more updates and information are available from the Association's Website:

http://www.tobaccoleaf.org


THE SOCIAL AND ECONOMIC IMPACT OF TOBACCO
EMPLOYMENT: AN INDISPENSABLE BENEFIT OF TOBACCO PRODUCTION
TOBACCO'S CONTRIBUTION TO FOREIGN EXCHANGE
GOVERNMENT REVENUE FROM TOBACCO
THE STRONG, STABLE MARKET || TOBACCO AND FOOD SUPPLY
CONCLUSION || FACTS & FIGURES


THE SOCIAL AND ECONOMIC IMPACT OF TOBACCO

Introduction

Tobacco's influence on social and economic issues dates back several centuries. Decade-to-decade growth in tobacco consumption is virtually uninterrupted -- since 1556 when explorer Andre` Thevert brought tobacco from Brazil to his native France (among tobacco's earliest points of entry into Europe).

Ongoing trade activities between France and various South American settlers were soon established -- making tobacco one of Brazil's most profitable export crops of that time.

Today in the developing nations, farmers find numerous incentives for growing tobacco.

Among them: stability of the world-wide demand for the crop; relative ease in transporting tobacco; and tobacco's profitability when compared with other crops.

These factors, and others, make tobacco one of the most appealing cash crops in nations where immediate return on investment is essential for the farmers' survival. (In a later section, we will examine replacing tobacco with other crops.)

The socio-economic influence of tobacco farming extends beyond the immediate interest of the farmer, reaching out to the farming communities and beyond -- affecting the economies of entire nations.

While data regarding tobacco's expansive global appeal as a valuable farm commodity is impressive and worthy of discussion here, it is equally important to focus on tobacco's socio-economic impact within individual nations, as well as within the farm communities of those nations.

Profitability for growers

World consumption of tobacco increased by seven per cent from 1992 to 1995, and is projected to increase by an additional five to seven percent by the turn of the century.

This steady demand for the crop and relative stability of the world tobacco market prices make tobacco one of the most appealing cash crops for farmers in developing regions. In these areas, farmers cannot afford to invest in crops that bring unsteady prices or unpredictable demand. By producing tobacco, farmers can effectively increase the level of cash income necessary for acquiring inputs for production of food crops.

The profitability of tobacco reaches well beyond the farm, as economic activity does not occur in isolation. Farmers who reap a profit from their tobacco crop will, in turn, sped a portion of the money on various goods and services for themselves and their families, as well as for their farm.

In Zimbabwe, which exports 98 percent of its tobacco, the crop has a 'multiplier effect' on the local economy estimated to be 4.3 times the cost of production. For example, a kilogram of tobacco which cost Z$7.88 to produce was found to generate Z$33.84 within the local economy. [6]

EMPLOYMENT: AN INDISPENSABLE BENEFIT OF TOBACCO PRODUCTION

No other crop creates as much employment per hectare of cultivated land as tobacco [7]. This fact, alone, paints a clear picture of tobacco's socio-economic impact in developing nations. Estimates suggest that is workers' families, seasonal workers and landless labourers are included, some 33 million people are currently employed through tobacco growing and early stages of processing. If all tobacco-related industries and processes are included, the figure is at least 100 million - nearly 90 percent of whom are in developing nations. [9]

By comparison, only about 1.6 million people are involved in the cultivation of maize or sugar cane.

Despite technological progress, tobacco cultivation (for large and small farms, alike) has remained one of the most labour-intensive operations in all of agriculture. (For example, the production of flue-cured tobacco in Tanzania requires 533 man days per hectare, compared with 217 man days per hectare for rice, the next most labour- intensive crop.) Generally, tobacco is a crop not readily mechanised except in richer countries and on larger farms. Women, in particular, and unskilled labourers who would otherwise have a little chance of employment are therefore able to earn a living. This is especially important in developing nations, where rural employment can be scarce.

The employment created by tobacco growing extends beyond the farm fields. The tobacco must be sorted, stored, auctioned, processed, packaged for dispatch, transported to the ports and loaded on ships. In nations where tobacco growing is prevalent, an extensive industry of processing establishments, auction houses, warehousing firms, carriers, packers, transhipment companies and insurers -- right down to local production and distribution centres -- has sprouted up around the growing process.

Jobs created from these industries are especially important in nations where the agricultural sector is already depressed. The World Health Organization (WHO) even acknowledges that in such nations it may be difficult to find alternative employment for those previously employed in the agricultural sector. [9]

In numerous developing nations, such as Tanzania and Malawi in south central Africa, the vast employment created on tobacco farms has curbed migration from rural areas to the over-populated cities -- a problem common in developing nations. In Malawi, it was estimated in 1987 by the Ministry of Labour that nearly one third of total paid employment in that nation was derived from the tobacco industry. The economic impact of tobacco in nations such as Malawi cannot be disputed -- even by the WHO, which has reported that tobacco is the 'backbone' of that nation's economy, noting that tobacco exports in 1990 accounted for almost 70 per cent of total income from exports. [10] In such nations, it can be safely assumed that any reduction in tobacco farming (even if it were replaced by other less labour-intensive crops) would harm the nations' economies and probably lead to increased poverty.

In Thailand, where a predominantly agricultural based society is transforming into an industrial base, farming still accounts for about two thirds of the nation's employment. And it is estimated that in the tobacco growing sectors of Thailand, more than one million people are employed full or part-time by way of this industry.

As an agricultural commodity that helps employ at least 33 million people in the production process, tobacco's positive socio-economic contributions are indisputable.

TOBACCO'S CONTRIBUTION TO FOREIGN EXCHANGE

Developing nations have always relied heavily on the export of agricultural products as one of their few viable sources of foreign exchange earnings. And indeed, tobacco makes significant contributions to the economy of many of these developing nations through foreign exchange receipt and sales on the international market. In 1987, the world's developing countries received more than US$1.7 billion in foreign exchange receipts from tobacco sales on the international market. [11] In the absence of any comparable alternatives, government continue to regards tobacco exports as a lucrative and reliable source of funding for their economic ad social development plans.

For example, in Brazil, the Dominican Republic, India and Tanzania, tobacco contributes to about five percent of total agricultural exports. For the Republic of Korea and Turkey, it rises to about 12 percent, and in Malawi and Zimbabwe, tobacco export earnings provide some 56 percent and 47 percent, respectively. [12] Indeed for the latter two countries, tobacco provides 74 percent of foreign exchange earnings in Malawi and over 30 percent in Zimbabwe.

Tobacco's high degree of price stability also enhances its foreign exchange capacity. Widely fluctuating world prices for other farm products present problems for many developing nations. Over the years, the stability of tobacco exports earnings consistently out-performs that for a host of other export commodities -- including sugar, coffee, tea and rice.

GOVERNMENT REVENUE FROM TOBACCO

Historically, tobacco has been one of the most heavily taxed consumer products in the world, consequently creating much-needed government revenue. In nations of all sizes and socio-economic standing, tobacco is often taxed at the local and national level. While specific tax policies vary from country to country, taxes on tobacco are often levied throughout the various stages of its production, distribution and sales -- i.e. levied on farmers based on the amount of tobacco grown; on the importers and exporters; on the manufacturers that purchase the leaf; and on the consumer of tobacco products at the time of purchase. It is likely that many of those who are employed by the various sectors of tobacco production have concerns about whether their product may be overtaxed.

In an era when some tobacco opponents propose additional taxes on tobacco products merely to curtail the consumer demand (i.e. 'taxing tobacco out of existence'), tobacco growers are understandably wary discussing the benefits of taxation. But numerous governments of rich and poor nations alike rely on tobacco taxes as a significant source of revenue. And while tobacco farmers, manufacturers, importers/exporters and consumers may want explicit limitations on taxation, the fact remains that these taxes greatly enhance tobacco's socio-economic importance to many nations.

"NOT ONLY IS TOBACCO AN IMPORTANT ECONOMIC COMMODITY, BUT FOR A NUMBER OF COUNTRIES IT IS AN IMPORTANT SOURCE OF INCOME AND FOREIGN CURRENCY."

The remarkable internal revenue produced by tobacco taxes enables governments to better serve their citizens through various services -- such as enhanced education and health care. Education is an important catalyst to the socio-economic development of any nation. And in tobacco-producing regions of a number of countries, revenue from tobacco production and consumption contribute to the educational need of rural communities through construction of facilities and employment of teachers. Similarly, in developing areas, governments often struggle to provide adequate health care for their citizens. Tobacco produced taxes often make the difference in providing medical facilities, staff and medication accessible to all the population.

Conclusion Tobacco's revenue-producing attributes cannot be denied. Expenditures undertaken by tobacco growers, their families and seasonal workers have favourable economic effects in the individual farming communities, as well as positive impact throughout the various nations.

Profitable tobacco farmers play a role in enhancing the agricultural infrastructure necessary for the growth of other traditional food crops. Tobacco profits lead to the financing of schools, health services, roads, water supplies and environmental improvement initiatives.

In many nations, tobacco facilitates capital formation for other industries, including transportation, finance, construction, retail and wholesale trading and manufacturing. Shops, markets and small businesses that cater to the needs of farm workers and their families benefit from tobacco production. All these enterprises would be adversely affected by the tobacco farmers' loss of income.
 

THE STRONG, STABLE MARKET

Demand for tobacco continues to steadily increase. To meet the increases in tobacco consumption, world production of tobacco increased by seven percent from 1992 to 1995 -- with the largest increase seen in developing nations such as Indonesia, China and Zimbabwe. In developed nations, growth during this period was about one percent.

Simply, with the increases in tobacco consumption and production, it is difficult for tobacco growers to consider making substantial changes in their crop selection -- for as long as the demand for the product exists, production will continue. Given the continued stability in the tobacco market, reduction of the resources devoted to the production of tobacco in one country would only result in an increase of production in other countries.

Tobacco farmers throughout the world find comfort in the relative stability of the world tobacco market prices. Virtually all studies of tobacco price stability, when compared with price stability of other crops, show that farmers' confidence in tobacco is justified. The World Health Organization has acknowledged i its writing that other crops than can potentially give high returns (such as fruits and vegetables) "have limited potential because of market constraints and unstable prices." [15] And according to the United Nations Conference on Trade and Development (UNCTAD), between 1984 and 1993 tobacco prices were two, three, and four time more stable than those of wheat, tea and sugar, respectively. In fact, with the exception of beef, tobacco was the most stable of over 30 commodities. [16] This factor, when linked to continuing market outlets, give farmers far greater security than most other crops.

The stability of price levels is of great importance, especially in the case of producers in developing areas who cannot afford the financial risk of investing in crops that provide unsteady prices from year to year. While fluctuating commodity prices may be nothing more than an occasional distraction for many farmers in developed regions, a sudden drop in prices could easily lead to dreadful economic hardship -- even starvation -- in the least developed regions.

Also, in developing nations some crops are well-known for their insufficient marketing and support infrastructure -- often leading to long delays between sale of the crop and payment. This is an important drawback for farmers, especially when high interest rates are considered. And tobacco farmers are accustomed to trading practices which ensure rapid payment for their crops.

As discussed previously, no other crop creates as much employment per hectare of cultivated land as tobacco. The nature of tobacco crops requires meticulous "hands-on" labour. Millions of unskilled labourers, who otherwise would be most likely unemployed, earn a living in tobacco cultivation. Tobacco's high labour requirements have been instrumental in stemming the flow of under-employed and unemployed people from rural to urban areas. Therefore, tobacco in developing nations is often seen as a means to partially alleviate the socio-economic and political problems associated with surplus labour.

In the debate regarding alternative crops, only tobacco can boast such a tremendous influence on employment.

Tobacco's ability to grow well in climates and soils unsuitable for other crops gives it an immediate edge over many alternatives. In many developing nations, the soil is too poor and offers too few nutrients for most other food crops. As a hardy and sun-loving plant, tobacco can tolerate a wide variation in rainfall patterns while still yielding a commercial crop -- unlike cereals or soybeans which cannot be grown in such extreme conditions.

In regions where fragmented farmland and widely dispersed field are prevalent -- regardless of those nations' socio- economic levels -- tobacco growing is a sensible choice, as adequate mechanisation for alternatives may bi impractical or impossible to introduce. This is true in the tobacco hotbeds of the south-east United States, as well as in Greece, Italy and numerous smaller, developing nations. [17] Also, most of the farms that grow tobacco, especially in the Far East consist of relatively small plots of land, as few crops can match tobacco's per hectare profitability, and this provides for a family substinence.

About 25 percent of tobacco produced world-wide is internationally traded. Although the US is still a leading exporter (especially of high-quality flue-cured tobacco), the developing countries have caught up considerably. These nations regard tobacco as an indispensable source of foreign exchange, bringing in more exports of other commodities. For example, in Zimbabwe -- the major tobacco producer in south central Africa -- nearly all of its tobacco is exported. In fact, tobacco shipments amount to up to 60 percent of the nation's total agricultural exports. About half of Thailand's tobacco crop is exported.

The steady world-wide demand on tobacco is not the only reason for its role as an important source of foreign exchange. In developing countries, the cost of transporting tobacco for export is considerably less compared to other agricultural products. Tobacco's high value/weigh ratio allows it to absorb costs of long journeys. It weighs relatively little, requires comparatively less transportation space than other exports such as most vegetables, fruits and flower. It is also considerably less perishable.

In many tobacco producing countries, national growers associations actively advise members on the growing and marketing of other crops. This helps growers to maximize their income from rotational farming. For example, AFUBRA in Brazil has demonstration farms which show how best to produce maize and black beans as well as tobacco.

Indeed, one of the most important obstacles to extensive growth in alternative crop production is the difficulty in transporting the highly perishable goods to market. Many developing countries do not have adequate infrastructure for rapid movement of such goods to seaports or airports. High rates for air freight and low capacity, along with meagre selection of export destinations, make air transportation difficult.

Where complementary crops are grown, the lack of custom-built transport for carrying highly perishable produce, plus the high cost of air freight, tends to force exporters to concentrate on premium products such as strawberries, asparagus and cut flowers. Some of these premium commodities offer potential financial returns in excess of those generated by tobacco. But they also require an enormous (and often prohibitive) initial capital investment, and pose higher risks. They are expensive to grow, transport and market.

Sometimes, deciduous tree fruit and citrus are mentioned as possible alternatives for the tobacco crop. But growers would realize no income for several years after the initial investment, until the trees have reached the bearing stage. In most developing nations, farmers simply cannot afford such a wait.

In many nations, crops like tea, coffee and sugar are inhibited by internal quotas, which largely determine how much a country can produce. In any case, these products are already grown extensively and, should additional production ever be required, it would almost certainly be on existing estates and plantations -- where the land, equipment, labour and skills are already available.

TOBACCO AND FOOD SUPPLY

In view of the need for increased food supply within many developing nations, some final comments should be made regarding the claim that excessive production of tobacco is interfering with production of much-needed food crops.

First, supported by the information presented in this document, the suggestion top replace tobacco with food crops simply cannot be supported. Certainly, the need for increased food supplies in particular areas may, at times, be substantial. But factors other than tobacco farming must be considered when analyzing the causes.

In many developing nations (India and Malawi, for example) problems regarding food supply are most markedly related to political inequities and inadequate infrastructure. Generally, crop losses due to inadequate or insufficient storage and transport can reach 40 percent of the quantity harvested.

A study of nearly 1,000 farms in 1996 by AFUBRA, the Brazilian tobacco growers' association, found that tobacco provides an average annual income of US$8,000 for every family that grow the crop. Parallel crops (grow in rotation with tobacco) bring an extra US$2,000, The survey also revealed that a farmer has to grow 9 hectares of corn to equal the income from 1 hectare of tobacco. [19]

More importantly, tobacco's far-reaching socio-economic impact in developing nations simply cannot be overlooked. Tobacco, compared with other cash crops, offers a high degree of security of income. Earnings are paid out immediately after sale. This provides farmers with the necessary cash for investment in other areas of agriculture as well. Often, a substantial portion of a nation's staple foods -- maize, beef, wheat, soybean, etc. -- are produced by tobacco farms. And, as discussed previously, most of the world's tobacco farms are on relatively small areas of land -- where high profitability per hectare is essential.

A study in the Migori District of Kenya examining the economic influence of tobacco cultivation on the production of food supported two conclusions: First, tobacco had no significant negative effect on production of food crops; second, tobacco was the most profitable per unit of land of the four enterprises examined -- tobacco, beans, maize, diary. [20] By producing tobacco,, farmers would most effectively increase the level of cash income vital for acquiring inputs for food crop production. In Zimbabwe, over 80 percent of diversification has been undertaken by tobacco farmers who have the capital resources necessary.

CONCLUSION

Without question, tobacco is an important export commodity and a substantial source of foreign exchange for many developing nations. It is also a major generator of rural employment and provides the means for peasant farmers to break away from mere substinence agriculture. Tobacco cultivation utilises more labour than most other crops. Its labour-intensity is instrumental in stemming the flow of under-employed and unemployed people from rural to urban areas.

It has also been noted that cultivation of tobacco represents only a modest use of agricultural land. Therefore, the argument that tobacco should be replaced by food crops is irrelevant. In fact, most data indicates that tobacco production assists in facilitating the spread of improved crop husbandry techniques for the production of other crops. Tobacco's ability to grow in soils and climates that are not conductive to other food products also negates the argument for replacing tobacco with food staples.

In the foreseeable future, tobacco farmers are not likely to responds to calls to cease production of such sustainable crop. Farmers will continue to invest in tobacco production as long as consumer demand for tobacco products exists at current of higher levels, and as long as they can be assured that their crops will sell quickly and profitably. Equally as important, as prudent agricultural businessmen, they will invest in new opportunities as they arise.

FACTS & FIGURES

COUNTRY Agricoltural
Employment
Manufacturing
employment
Retail &
Distribution
Employment
Total number
of people
employed
Estimated number
of dependent
people
Unmanufactured
tobacco in
tonnes 1996
Algeria11,240 6,1509,940 27,33027,330 5,300
Argentina105,000 9,7277,700 122,4271,000,000 79,010
Bangladesh700,000 102,80334,100 836,9035,000,000 60,000
Brazil600,000 43,870120,200 764,0708,000,000 398,000
Chile3,760 1,9452,550 8,2558,255 12,356
China16,000,000 500,0001,070,000 17,570,00050,000,000 2,314,000
Columbia302,000 9,35030,000 341,650341,650 28,178
Cuba20,000 40,10013,400 73,50073,500 28,000
Egypt--- 16,70038,630 55,33055,330 ---
Ethiopia22,360 858 1,870 25,08825,088 3,500
Guatemala24,200 1,480 930 26,61026,610 10,720
Haiti1,226 4361,520 3,1823,182 730
India6,000,000 500,000 900,000 7,400,000 25,000,000 524,500
Indonesia 1,500,000 259,0301,055,000 2,814,030 20,000,000 171,400
Iraq 28,600 1,99010,190 40,78040,780 2,180
Kenya35,500 1,216854 100,000100,000 9,910
Malawi662,121 20,25130,400 712,7724,250,000 130,686
Malaysia37,678 2,84120,162 60,681188,390 10,867
Mexico350,000 4,81325,900 380,7131,000,000 45,427
Morocco14,680 3,5366,250 24,46624,466 3,962
Myanmar350,000 19,320106,500 475,820475,820 44,000
Nigeria93,948 1,6981,810,610 1,906,2561,906,256 9,223
Pakistan200,000 39,2701,025,500 1,264,770 2,000,000 80,917
Peru10,000 1,440 1,900 13,34013,340 3,100
Philippines565,000 55,030272,200 892,2308,000,000 63,651
Romania60,900 23,9009,870 94,67094,670 13,300
South Africa66,000 8,55028,600 103,150103,150 23,006
South Korea281,900 16,700 65,000 363,6001,000,000 83,861
Sri Lanka 150,000 1,83044,680 196,510750,000 9,000
Syria9,610 4,8107,010 21,43021,430 17,208
Tanzania66,000 2,0002,081 70,081333,000 25,080
Thailand1,360,000 11,464159,000 1,530,4647,000,000 58,500
Tunisia15,310 2,8843,105 21,29921,299 6,500
Turkey500,000 25,10366,700 591,8033,000,000 206,580
Venezuela95,000 3,5706,700 105,270105,270 18,857
Zaire21,000 2,4404,700 28,14028,140 4,110
Zimbabwe110,500 8,4958,120 763,000763,000 209,042

REFERENCES

1 - Chollat-Tracquet, C. (1996) Evaluating Tobacco Control Activities, World Health Organization, Geneva, p. 32
2 - ITGA (1996) Tobacco -- a major world crop, ITGA Issues Paper No. 2, East Grinstead, England
3 - US Department of Agriculture (1994) World Tobacco Situation Report, Foreign Agriculture Service
4 - Reuters, April 18, 1996
5 - UN ECOSOC (1994) Annex II - Position Paper of the Food and Agriculture Organization of the United Nations on Tobacco Cultivation, Multisectoral Collaboration on Tobacco or Health UN Economic and Social Council, 21 June 1994, p. 23
6 - Rooney, M & Ellis, M. (1994) Zimbabwe Tobacco -An Important Economic Impact Study, unpublished paper, Harare, p. 2
7 - Reemstma (1995) Tobacco -- Driving Forces for Economic Development
8 - Chollat-Traquet, C. (1996) Evaluating Tobacco Control Activities, World Health Organization, Geneva, p. 32-36 10 - ibid, p. 33
11 - FAO (1989 The Economic Significance of Tobacco, FAO Economic and Social Development Paper 85, Rome
12 - ibid
13 - Chollat-Traquet, C. op. cit., p. 38
14 - Agro-Economic Services Ltd and Tabacosmos Ltd, The employment, tax revenue and wealth that the tobacco industry creates. London, 1987, Table A 3.6
15 - Chollat-Tracquet, C. op. cit., p. 33
16 - World Bank (1994) Commodity Markets and the Developing Countries, Washington
17 - Patchett, D. Alternatives to Tobacco Tobacco Forum, ITGA, Col 2, No. 2
18 - AFUBRA (1996) Brazilian Tobacco Grower Profile, Santa Cruz do Sul
20 - Oyugi, L.A., Mukhebi, A.W. and Mwangi, W.M. (1987) The Impact of Cash Cropping on Food Production: A Case Study of Tobacco and Maize in Migari Division, South Nyanza District of Kenya. East African Economic Review, Volume 3, No. 1

BIBLIOGRAPHY

International Tobacco Growers' Association, East Grinstead, England:

(1990) Tobacco in the Developing World
(1992 and 1993) Tobacco farming: Sustainable alternatives, vol. !, 1992 and vol. 2, 1993
(1992) The economic significance of tobacco growing in Central and Southern Africa
(1994) Tobacco Trade or Aid?
(1996) Tobacco Growers -- Issues Papers
Campbell, J.S. (1994) Tobacco and the Environment, CORESTA Congress Paper, Harare
Chilowa, W. (1993) The significance of tobacco in the economy of Malawi, University of Malawi, Centre for Social Research, Blantyre
FAO (1990) Tobacco: supply, demand and trade projections 1995 and 2000, FAO Economic and Social Development Paper 86, Rome


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