Creating a Tobacco-Free Future for Laos

These are lives needlessly lost. 

Beyond the tragic human cost, tobacco use harms economies. In 2017, tobacco use cost the Lao economy 3.6 trillion kip, equivalent to 2.3 percent of its gross domestic product, due to high healthcare costs and productivity losses from smoking-related illness and premature death. The negative consequences of tobacco use on socioeconomic development are huge, but there are effective solutions to the scourge that tobacco poses to society. 

In recognition of World No Tobacco Day, the UN Resident Coordinator and country representatives of the World Health Organisation, United Nations Development Programme and World Bank wish to highlight some of the notable progress made by Laos PDR thus far - and the work that remains on introducing these solutions. 

WHO estimates that in 2022 in Laos PDR, tobacco use among people over the age of 15 was 27 percent– almost one in three people – and alarmingly, nearly half of all men use tobacco. 

Laos has made significant progress in many areas of tobacco control such as restricting tobacco advertising, the upcoming introduction of plain cigarette packaging, and becoming one of only 34 countries in the world to ban e-cigarettes. These all represent commendable steps to protect health. 

But, while these efforts play a part in reducing tobacco use, one of the most effective solutions remains increasing taxes and the price of tobacco products. 

Unfortunately, Laos PDR has the lowest tobacco tax Creating a tobacco-free future for Laos rate (and the second lowest tobacco prices) among ASEAN countries. In 2022, the tax on cigarettes was about 15 percent of the retail price, while WHO recommends a tax rate of at least 75 percent. 

One reason Laos’s tobacco tax rates remain low is because of benefits and tax exemptions granted to the tobacco industry through the Investment License Agreement, which is approaching renewal for another 25 years. We want to be clear: no tobacco company should be granted any tax exemptions, incentives, privileges, or benefits. 

This agreement not only harms health it also causes direct tax revenue losses. Because of the excise tax exemption, Laos PDR has lost an estimated US$140 million from 2002 to 2019. Our estimates show that these funds could have helped build 30 hospitals or funded urgently needed essential healthcare services. 

In short, there is significant room for the country to increase the tax rate for tobacco, thereby protecting health, and generating much-needed revenue for development priorities like health, education and social protection. Across the region, taxing tobacco products has proven to be the most effective tool for mitigating their lethal impacts and unlocking substantial revenue. 

The Philippines implemented significant tobacco tax reforms between 2012 and 2020, increasing the tax on cheaper cigarettes ten-fold. As a result, domestic tobacco tax revenue jumped from US$ 0.99 billion in 2012 to 6.6 billion by 2020, reaching about 11 percent of total government revenue in 2020. 

These additional funds were strategically reinvested in the national health insurance programme, which led to a remarkable three-fold expansion in coverage for low-income and near-lowincome households within just three years. Importantly, the Philippines also witnessed a decline of more than 34.4 percent in smoking due to higher tobacco prices. 

Thailand adopted a similar approach, implementing a 2 percent surcharge tax on tobacco and alcohol. This revenue is directed towards health prevention initiatives managed by an autonomous government agency, the Thai Health Promotion Foundation (ThaiHealth). ThaiHealth received US$ 136.5 million from this dedicated surcharge in 2021 alone. If we want to protect health, the economy, and the future of the country, there is an effective way to do it – by increasing tax on tobacco products. 

On this World No Tobacco Day, we encourage Laos to consider taking additional steps to ensure a healthy future for the next generation. As we move towards the Global Summit of the Future in September, with its clear emphasis on taking urgent steps to mobilize critical resources for sustainable development, increasing tobacco tax rates is a concrete decision the country can take with enormous potential benefits. 

At a time when health budgets globally are under pressure, reducing tobacco related health impacts and generating much-needed revenue offer a win-win for all, and can contribute to safeguarding lives for generations to come.

Read more:

https://www.undp.org/laopdr/publications/investment-case-tobacco-control-lao-pdr-case-scaling-who-fctc-implementation

https://documents1.worldbank.org/curated/en/099022624111038295/pdf/P17590614928f70a51bf291fa92d7044f12.pdf

Authors: 

Bakhodir Burkhanov, United Nations Resident Coordinator to Laos PDR, 

Mariam Sherman, World Bank Country Director for Viet Nam, Cambodia and the Lao PDR, 

Martine Thérer, UNDP Lao PDR Resident Representative, 

and Dr Yu Lee Park, Acting WHO Lao PDR Representative.