Background

SOTCs were historically widespread throughout Europe, Asia and the Americas, usually being established as ‘fiscal monopolies’ that controlled the supply of tobacco to generate reliable revenue for governments.8 From the 1980s, many tobacco monopolies were privatised,9 reflecting a wider global shift towards privatisation driven by the perceived economic inefficiency of state-owned enterprises.10 It is on this basis that international financial institutions have promoted privatisation.11 A second significant wave of privatisation occurred in the 1990s following the collapse of the Soviet Union.12

Within tobacco control, there are contesting opinions on the implications of privatisation. On one hand, its proponents argue that removing the responsibility of tobacco supply from government creates a policy environment more conducive to effective tobacco control.13 This view that privatisation is positive for tobacco control is challenged by evidence that privatised tobacco companies become more aggressive in their marketing and opposition to tobacco control policy.9

SOTCs are currently the principal cigarette manufacturer in 16 countries (see table 1).4 In most of these countries, the SOTC remains in the form of a traditional tobacco monopoly that is wholly owned and operated by the government (eg, China, Thailand, Vietnam). This model of SOTC will be the focus of this paper. Beyond countries that retain traditional tobacco monopolies, many governments have maintained or acquired interests in the tobacco industry. While Japan Tobacco (JT) operates as a private corporation, more than 30% of its shares remain held by the Japanese government.14 Elsewhere, governments or state enterprises have made substantial investments in tobacco companies; the Kenyan government has held a major stake in BAT Kenya via its social security fund,15 while 6 of the 10 top shareholders in the Indian Tobacco Company (ITC) are government-owned insurance companies.16

Alongside evidence, particularly historical, that perceived reliance on taxation revenues has impeded the development of tobacco control,17 a discussion of conflicts of interest and mechanisms to promote coherence across economic interests and health goals in tobacco control18 can be expected to have relevance far beyond countries with SOTCs.

Conflict of interest, state ownership of tobacco and public health: three perspectives

The relationship between government's interests in SOTCs and effective tobacco control has been conceptualised in three broad ways. Two of these centre on a recognition of conflicting interests between SOTCs and public health, whether seen as fixed and fundamental (termed here intrinsic conflict) or as capable of being either exacerbated or ameliorated by varying organisational mechanisms (institutionally mediated). Finally, and prospectively in the context of endgame thinking, a third understanding suggests that the objectives of SOTCs may be altered to advance public health goals (interest alignment).

The cases of China and Thailand

The starkly varying experiences of China and Thailand illustrate how conflicting interests can organisationally either be embedded by combining competing responsibilities or else mediated by their separation. In China, FCTC implementation is the responsibility of the Implementation Coordination Mechanism (ICM), an inter-agency organisation led by the Ministry of Industry and Information Technology (MIIT).5 As illustrated in figure 1, the MIIT also has responsibility for the State Tobacco Monopoly Administration (STMA), which manages the China National Tobacco Corporation (CNTC), and has the remit to promote the growth of the tobacco economy.24

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Figure 1

Institutional structures of tobacco control and SOTC management. (Developed from Vathesatogkit and Charoenca32 and Hu et al, 2013.23 SOTC, state-owned tobacco companies.

This institutional arrangement provides that one ministerial team is responsible for both promoting the economic performance of the tobacco industry and ensuring the effective implementation of policies to reduce tobacco consumption.24 While the Chinese Ministry of Health (MOH) is also a member of the ICM, it has been described as a “bureaucratically weak” organisation that struggles to compete with the “economic clout” of the MIIT in negotiations.31 China's limited progress in implementing key tobacco control policies (including effective taxation measures, smoke-free legislation and warnings on cigarette packaging) has been attributed to such institutionally mediated conflict of interest.5 ,24–25

In contrast to China, Thailand's government has separate arrangements for governing its SOTC and tobacco control. The state-owned Thai Tobacco Monopoly (TTM) is managed by the Ministry of Finance, while responsibility for tobacco control lies with the National Committee for the Control of Tobacco Use (NCCTU)—a committee chaired by the MOH, and legally required to include “no committee member from any ministry or other agency with a potential conflict of interest.” 32 The Thai government's decision to establish a firewall between the TTM and policymakers demonstrates that, even where the government has an economic interest in tobacco sales, it is possible to institutionally isolate this role from the implementation of tobacco control policy (see figure 1). The creation of this firewall has been commended by the WHO and identified as contributing to Thailand's world-leading status in tobacco control and FCTC implementation.33 ,34

While the case of Thailand demonstrates that it is possible to manage conflict of interest by appropriate institutional mechanisms, it does not demonstrate any level of ‘interest alignment’. Health policy in Thailand has been protected from the interests of the SOTC, rather than the SOTC adapted to advance health or other social policy goals.

SOTCS and FCTC article 5.3

Article 5.3 has been described as the backbone of the FCTC, seeking to establish a distinctive model of health governance that excludes the tobacco industry from health policy on the basis of conflicting interests.18 The complexity inherent in requiring those FCTC parties with SOTCs to protect the making of tobacco control policy from within the apparatus of the state is inevitably problematic, posing challenges for consistency at both national and international levels. The text of the FCTC makes no specific reference to SOTCs, referring generically to the tobacco industry without any differentiation by ownership.3 The guidelines for implementation of Article 5.3 published in 2008 do explicitly acknowledge SOTCs and provide specific guidance for managing their potential influence in the policy process.19 The guidelines state that “tobacco interference, including that from State-owned tobacco industry, cuts across a number of tobacco control policy areas” and make the broad recommendation that parties “[t]reat State-owned tobacco industry in the same way as any other tobacco industry.”19

This general exhortation of identical treatment is somewhat qualified in subsequent recommendations. For example, one recommendation notes that “government bodies should not have any financial interest in the tobacco industry.”, yet states that this does not apply if “they are responsible for managing a party's ownership interest in a state-owned tobacco industry”19 Similarly, another recommendation asserts that parties “should not invest in the tobacco industry and related ventures”—except for parties with SOTCs, which must only ensure that any investment “does not prevent them from fully implementing the WHO FCTC.”19 Countries with SOTCs are also asked to “ensure that the setting and implementing of tobacco control policy are separated from overseeing or managing tobacco industry” and to ensure that representatives of SOTCs are excluded from delegations to the Conference of the Parties.19

The WHO's “Technical resource for country implementation of the WHO FCTC Article 5.3”35 has recently elaborated substantially on the guidance provided to countries with SOTCs. A table of eight recommendations, specifically for countries with SOTCs (see table 2), illustrates significant strategic ambiguity by reflecting elements of each of the three perspectives outlined above.35 The core perspective can be seen as one of intrinsic conflict (as in the broad concluding recommendation 8) and thereby consistent with that of the FCTC text. This is, however, significantly qualified by the identification of mechanisms or procedures by which conflict can be institutionally mediated in the majority of recommendations (see, eg, 1 and 6).

Recommendation 2 is particularly interesting, encouraging introduction of legislation requiring SOTCs to “consider social and environmental consequences and to take certain steps to address those consequences.” 35 This suggests recognition of some scope for aligning SOTC goals with broader social policy objectives, seeming to acknowledge a potential strategic advantage in the ability of SOTCs to be ‘programmed’ to serve diverse policy purposes.28

Implications for the future of tobacco control

The three contrasting perspectives outlined here suggest varying directions for the development of tobacco control policy and practice in countries with SOTCs. If conflict of interest is considered ‘intrinsic’ to state-ownership of the tobacco industry, advocating privatisation of SOTCs may be perceived as the most appropriate policy response in countries with SOTCs.23–24 The substantial evidence that past SOTC privatisations have resulted in increased tobacco marketing, lower cigarette prices, and increased tobacco consumption9 argues compellingly against such a response.

Legislative separation of functions and responsibilities to institutionally manage conflicting interests within the state may, therefore, appear the most feasible and pragmatic alternative to privatisation. The experience of Thailand can be instructive in providing a simple potential model via which other countries with SOTCs can seek to isolate tobacco control from industry interference. Ensuring that such institutional measures do actually work to effectively protect tobacco control from industry interference by SOTCs constitutes an on-going challenge for parties to the FCTC. While there is a broad requirement for further research on the implementation of article 5.3, there is a particular need to examine strategies by which the principles and recommendations of Article 5.3 can be most effectively implemented in countries with SOTCs. As conflicts are not restricted to countries with traditional tobacco monopolies, future research should also consider how governments with other forms of economic interest in tobacco (eg, as a recipient of tobacco tax revenue or as a shareholder in a private tobacco company) may manage these in a way that minimises any conflict of interest with health.

Beyond mechanisms to institutionally manage conflicting interests, there would appear to be merit in exploring the scope to better align the interests of SOTCs with those of health and social policy. Rather than merely viewing SOTCs as less effective vectors of the tobacco epidemic and therefore, as marginally preferable to transnational corporations, state ownership may provide distinct opportunities to move towards context-specific tobacco control endgames. Learning lessons from the experience of alcohol retail monopolies may prove instructive in developing proposals for such reprogramming of SOTCs. Nordic alcohol monopolies, for example, have been described as having a “common and overriding objective … to reduce individual and social harm as a result of alcohol consumption”,36 and notwithstanding major recent changes to their structure and function, Finland, Iceland, Norway and Sweden still have the strongest alcohol policy regimes in Europe.37

While it is understandable that international tobacco control has focused primarily on seeking to regulate the conduct and impact of transnational tobacco corporations, the comparative dearth of academic literature focused on SOTCs is indicative of a broader neglect of their strategic significance and potential. TTCs are a significant obstacle to any strategy of interest alignment and complicated regulatory mechanisms have been proposed as a means to incentivise private tobacco industry to reduce, rather than increase, tobacco use.29 ,38 ,39 In comparison, SOTCs are adaptable entities that can act in whatever way political will dictates. There is a clear need for investigation of specific mechanisms by which it may be possible to reprogramme SOTCs to act in the interests of health. This may include exploring scope for ‘sun-setting’ policies whereby governments instruct SOTCs to actively work towards their obsolescence, informing endgame discussions of mechanisms by which tobacco products may be gradually withdrawn.40 ,41

If governments and civil society in countries with SOTCs could generate sufficient political commitment to radically refocus priorities and incentive structures, innovative reprogramming could make an important contribution to country-specific endgame strategies. Though the idea of remaking a significant component of the industrial vector of the global tobacco epidemic is both uncomfortable and intimidating, the rewards for successfully doing so could be enormous. The Bill and Melinda Gates Foundation has long supported the ‘Grand Challenges in Global Health Initiative’ with the aim to “overcome persistent bottlenecks in creating new tools that can radically improve health in the developing world.”42 There is no more persistent bottleneck to such progress than the tobacco industry, and there is arguably no opportunity in any sphere of global health that could compare with that of aligning the interests of the China National Tobacco Corporation to advance those of tobacco control.