Tobacco false investments in post-Soviet countries

Konstantin Krasovsky

Alcohol and Drug Information Center, Kiev, Ukraine

11th World Conference on Tobacco or Health, Chicago, USA, 2000. Abstracts, page 730.

One of main arguments of tobacco industries in post-Soviet countries is that they are main foreign investors to the economy. Formally, the figures of their investments are rather considerable if compare with other investments. Real nature of these investments is seen when we consider how they are used. Main part of investments are used to buy "new" equipment. Actually it is second-hand machines which have been used in Western factories of the investors. To modernize equipment on Western factories tobacco companies need to find a way what to do with old one. Selling it to themselves (for the price they wish) and moving to other countries as investment is the best solution. Substantial part of investments is used to training abroad. Top managers of local tobacco factories are usually foreigners and their salaries are dozens times higher that salaries of local workers. Tobacco companies include even purchase of raw tobacco abroad as investment. As result of investments local economy has practically nothing. Raw tobacco and all materials (paper, filters, etc.) are imported. For example in 1999 foreign tobacco companies, which control 93% of tobacco market in Ukraine did not buy local raw tobacco at all. Actually real benefits from tobacco investments get economies of other countries: Greece, Spain (raw tobacco), Austria (cigarette paper) and others. Tobacco companies get tax benefits as investors but abuse them. For example RJ Reynolds had 5 year tax benefits for factory in Lviv (Ukraine) and closed it in 5 days when the benefit period was over. 680 workers were discharged.

Tobacco investments are not investment of Western money to Ukrainian economy. They are investment of Ukrainian smokers money to the Western economy. Ukraine gets only smoke, deaths and diseases.