Straight talk with Shehzad Munim
Recent times, NBR has faced challenges in collecting targeted revenue. Under this budget deficit scenario, the top three sectors (tobacco, telecom and construction) will play a critical role to ensure the revenue target for the government. The tobacco sector is by far the highest revenue generating sector. However, revenue potential from this sector is still untapped and correct measures can bring in additional Taka 4,500 crore revenue this fiscal year. Today we will talk to Shehzad Munim, the first Bangladeshi Managing Director of BAT, about the potential of the tobacco industry. BAT is one of the key players and the current market leader in the tobacco industry.
What are the obligations to the society that you feel as a Managing Director of such a big company?
In recent times, Bangladesh has promised a lot in many ways – our economy is moving towards a positive shift; we are showing positive outcomes in child education, health and sanitation, digital revolution, etc. We are self-sufficient in many aspects like growing our own crops and food security. We are even minimising our dependency on foreign aid. Per capita income and GDP are growing constantly. And we are taking bigger steps than ever before in developing the nation, i.e. Padma bridge.
BATB's various community development projects play a significant role in the communities where we operate. For over 50 years, we have worked with our farming communities and shared the global best practices with the Ministry of Agriculture. We have worked with various government institutions to ensure workplace safety, and to protect the environment from industrial hazards.
Our esteemed Board of Directors navigate this business so as to protect our shareholders and stakeholders. We bring out the best talents of the country and create dynamic professionals to take up leadership positions inside and outside the country.
Do you think Bangladesh has the right environment for the foreign investors to invest?
This has been one of the top agendas of the government this year. In recent times, the government has been adopting various interventions on policy levels to help businesses grow and support the national economy. However, level playing field is an important area where it still needs to intervene so that foreign investors get the right environment to invest. Neighbouring country, Myanmar has brought massive changes in their policies to attract foreign investors. As a result, various international companies are now investing and setting up big operations there.
What are the prospects of the tobacco industry to contribute more to the national exchequer?
In the last fiscal year, we could not achieve the desired revenue target from the tobacco industry. This year, we are again on the verge of losing the untapped potential this sector possesses. If we can bring some changes in the policy level and adopt the correct measures, then we as an industry can additionally achieve Taka 4,500 crore.
The measures that need to be taken are: a) increase the cigarette floor price; b) stop down-trading from higher priced cigarette to cheap cigarettes; c) provide appropriate pricing for top segments to curb smuggling; and d) reduce the complexity of our current price and tax model.
So I believe we need proper policy evaluation and interventions to address the concerns to make this industry a sustainable one, and to contribute to our government's long-term revenue and health agendas.
We have seen that the percentage of smokers is decreasing globally, whereas in our country it's increasing. In fact, the lower end cigarette market is almost 65 percent of the total cigarette market, but our tobacco price is still lower than any other neighbouring country. How do you think the government can address this issue?
The government needs to seriously consider moving away from fixing the price of cigarettes. Bangladesh is the only country where the government dictates the price of cigarettes.
Percentage-based slab price increase has widened the absolute price difference between upper and lower segment. Due to this price pressure, the top three segments suffered a lot of down-trading, and over the years the lower segment volume has increased. The government should increase the price of all brands by Taka 10 per pack – this will bring in additional revenue as mentioned earlier.
In the last three to four years, we have seen that smuggled cigarettes are being sold in the market and local premium cigarettes are declining. How can the government solve this issue?
The government needs to maintain the price gap between premium and high segments. Local operators must be allowed to offer more competitive priced products in this zone to combat smuggling. And there is always the matter of enforcement. We have seen a lot of success stories where authorities have seized smuggle cigarettes on different occasions.
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