Article Text

Download PDFPDF

The economic costs of tobacco consumption in the Kingdom of Saudi Arabia
  1. Abdullah M N AlBedah1,
  2. Mohamed K M Khalil2
  1. 1Family & Community Medicine, Arabian Center for Tobacco Control, Riyadh, Saudi Arabia
  2. 2Public Health & Research Development, Arabian Center for Tobacco Control, Riyadh, Saudi Arabia
  1. Correspondence to Dr Mohamed K M Khalil, Public Health & Research Development, Arabian Center for Tobacco Control, PO Box 88300, Riyadh 11662, Saudi Arabia; statkhl{at}hotmail.com

Abstract

Objective Pending a comprehensive study of tobacco economics in Saudi Arabia, our aim was to estimate the economic costs of tobacco consumption in Saudi Arabia over a period of 10 years (2001–2010).

Methods Pertinent data on imported tobacco were obtained from the Saudi Customs Authority through the Central Department of Statistics and Information. Mortality was calculated using the following parameters: 1 ton of tobacco consumed causes an average of 0.65 premature deaths, and the net loss was calculated as US$47.6 million (2011 US$ prices) for every 1000 tons of tobacco consumed. This represented the net cost of premature deaths and the direct and indirect costs of morbidity.

Results Using 2011 prices, the economic loss due to tobacco was US$20.5 billion over the last 10 years, without accounting for smuggled (illegally imported) tobacco. If the smuggling rate was 10% or 25%, the economic loss would be 22.6 or 25.6 billion US$, respectively. There were 280 000 premature deaths during the same period without accounting for smuggled tobacco.

Conclusions In Saudi Arabia, short-term and long-term economic gains will result from reductions in tobacco use.

  • Economics
  • Global health
  • Prevention

Statistics from Altmetric.com

Request Permissions

If you wish to reuse any or all of this article please use the link below which will take you to the Copyright Clearance Center’s RightsLink service. You will be able to get a quick price and instant permission to reuse the content in many different ways.

Introduction

Tobacco imposes enormous economic costs on every country. Tobacco's economic costs extend beyond the direct costs of tobacco-related deaths and their related productivity losses. Other costs include healthcare expenditures for active and passive smokers, employee absenteeism and reduced labour productivity, fire damage due to careless smokers, discarded litter and increased cleaning costs. The cultivation of tobacco can result in widespread environmental harm, including large-scale deforestation and pesticide and fertilizer contamination.1 Smoking cessation can save years of life at a very low cost compared with other lifesaving interventions that reduce the probability of premature death.2 The most obvious benefits of smoking cessation are improvements in life expectancy, quality of life and the prevention of disease.

The costs of smoking have been estimated in a number of developed countries.3 ,4 In developing countries, few studies of smoking-related costs have been conducted.5 These studies are limited by the availability of data and resources to conduct such analyses. As they have in the developed world, it is likely that estimates of the cost of smoking will prove equally useful in helping to motivate and guide efforts to reduce the harmful effects of tobacco in developing countries.5

Saudi Arabia has recently seen a rise in health awareness attributed to the rapidly growing healthcare system, health promotion campaigns and increased government measures and expenditures. Saudi Arabia ratified the WHO Framework Convention on Tobacco Control in May 2005.6

Despite these advances, tobacco continues to experience promising growth across all categories. According to marketing surveys, the outlook for tobacco in Saudi Arabia remains optimistic.7 Growth will be largely driven by rising disposable incomes and the growing population of young people. In Saudi Arabia, the market for tobacco increased at a compound annual growth rate of 4.1% between 2004 and 2009. The cigarette category has led the tobacco market in Saudi Arabia, cigarettes accounting for 98.6% of the market in 2008 and 99.3% of the market in 2009.8 The latest Target Group Index survey in 2010 showed that the percentage of the Saudi Arabian population age 15 years or more who smoke cigarettes (not including shisha or other tobacco products) increased to 22.4%, compared with 21% in 2008 and 20.5% in 2006.9 ,10 Smoking among males is more popular than it is among females, with 35.9% of males smoking cigarettes compared to 2.9% of females.9 The Global Youth Tobacco Survey in Saudi Arabia showed that the prevalence of ever and current smoking, the use of other tobacco products and the initiation of smoking by never smokers over a 1-year period increased among males.11

Many survey have been conducted to determine the prevalence of tobacco use in Saudi Arabia. However, they were either local and had a small sample size, or they targeted special groups such as students or youth. More importantly, they did not follow a standard protocol or use standard definitions.12 ,13

Given restrictions that effectively ban the production of any tobacco products within the country,7 Saudi Arabia is a net importer of tobacco. A net importer country easily allows the direct calculation of the economic consequence of tobacco consumption. Also, there are no concerns regarding permanent job losses if tobacco cessation increased.14

Pending comprehensive studies using sophisticated methods5 to estimate the economic cost of tobacco use in Saudi Arabia, simple indicators can be used for this estimation. The aim of this study was to estimate the economic cost of tobacco consumption using the parameters developed by the World Bank.15

Methods

The study was conducted in January 2012 by the Arabian Center for Tobacco Control to calculate the economic cost of tobacco consumption in Saudi Arabia over the last 10 years (2001–2010). The study method was based on the published method by Barnum,15 where mortality was calculated on the assumption that each ton of tobacco consumed causes an average of 0.65 deaths and the net loss for every 1000 tons of tobacco consumed is US$47.6 million (2011 US$ prices). The original net loss in the Barnum study15 was multiplied by 1.75 (using an inflation calculator)16 to compensate for the inflation rate from 1990 (date of the original study) to 2011 (date of report preparation). The net loss represented the net cost of premature deaths and the direct and indirect costs of morbidity. All tobacco consumed in Saudi Arabia is imported. Therefore, the amount of tobacco consumed over the last 10 years was obtained from the Saudi Customs Authority through the Central Department of Statistics and Information (CDSI, http://www.cdsi.gov.sa).17

Results

Aside from the year 2007, the trend of tobacco consumption increased from 2001. The economic burden of tobacco consumption over the last 10 years (2001–2010) in Saudi Arabia was 20.5 billion US$ (2011 US$ prices) without accounting for smuggled tobacco (table 1).

Table 1

Costs of tobacco consumption in Saudi Arabia (2011 US$ prices)

If the smuggling rate was 10% or 25%, the economic loss would be 22.5 or 25.6 billion US$, respectively. There were 280 000 premature deaths over the same period without accounting for smuggled tobacco.

Discussion

The trend of tobacco consumption increased in Saudi Arabia from 2001 to 2010, except from 2007 to 2008. This trend, which is supported by other published data,7 ,18 reflects the need for more political commitments and additional measures to decrease tobacco consumption. The decrease in imported tobacco from 2007 to 2008 might be due to variation in the stock volume caused by agents or by the economic recession and subsequent economic revival.

The economic burden generated in our study would be even larger if we used a rate of 1.3 (instead of 0.65) premature deaths per ton of tobacco consumed, which has been suggested by other studies.19 More importantly, the economic loss for one premature death and the direct and indirect costs of morbidity were calculated for the whole world, while Saudi Arabia is a high-income and rapidly developing country.20 This means that the net loss of 47.6 million US dollars for every thousand tons of tobacco consumed that was calculated in the Barnum study is an under estimation for Saudi Arabia. Also, according to the Barnum study,15 the benefits, (in terms of added value for consumers and producers) were subtracted from the total loss for each thousand tons consumed. Knowing that there is no tobacco agriculture or industry, this means that the benefit is much smaller.

Knowing that Saudi Arabia is a net importer of tobacco,7 the potential exists that modest short-term economic gains will accompany the transition of the Saudi society to one with decreased tobacco consumption. Reduced spending on tobacco imports will permit more domestic spending, and therefore more employment may be generated within the country.

However, measures to decrease importation and consumption cannot be successful without combating tobacco smuggling.21 It is estimated that 11.6% of all internationally traded cigarettes are smuggled,22 causing losses to government revenue worldwide. Smuggling reduces the overall price, increases demand and undermines national tobacco tax policies and, as a result, harms health by increasing tobacco use.

Governments have the potential to use tobacco taxes to manage consumption, raise revenues and promote public health. Raising tobacco taxes so that they account for at least 70% of retail prices would lead to significant price increases, induce many current users to quit and deter numerous youths from smoking.23

As a country without no cigarette production or excise tax, Saudi Arabia levies higher import duties on cigarettes for revenue purposes. As it does not manufacture cigarettes, there is no real effect on the economy. The Gulf Council Countries, including Saudi Arabia, impose a 100% duty based on importers’ declared cost, insurance and freight value, though the average price per pack of cigarettes in US$ is lower than the average global price.24

We acknowledge the methodological limitations of our study in using the Barnum concept and in using global parameters in a high-income country such as Saudi Arabia, where the economic costs of consumption are higher. In addition, applying global parameters does not take into consideration the time lag between the consumption and the effect of tobacco in different countries. The recent increase in tobacco consumption in developing countries will cause an increase in future illnesses.15 Regardless, our estimation of the economic loss is valuable in the absence of any economic study in Saudi Arabia to evaluate the burden of tobacco use. It motivates decision makers to implement effective policies to offset the harmful effects of future tobacco use.

In conclusion, tobacco consumption in Saudi Arabia results in a high economic loss. A more comprehensive study on the economic costs of tobacco consumption in Saudi Arabia is needed. Anti-tobacco policies, including anti-smoking campaigns and excise taxes, are recommended in Saudi Arabia.

What this paper adds

  • In the absence of a comprehensive economic tobacco study, simple economic indicators can highlight the problem of tobacco consumption.

  • Tobacco consumption is increasing in Saudi Arabia. To avoid the high cost of tobacco consumption, governments in Saudi Arabia and other developing countries need to act now to offset the harmful effects of tobacco use.

  • There is a need to develop an updated global atlas for the tobacco economy of each country.

Acknowledgments

The authors acknowledge with thanks Dr Kenneth Warner for reviewing the manuscript.

References

Footnotes

  • Contributors All authors included on this paper have fulfilled the criteria of authorship, that is, they have contributed to the conception and design, acquisition of data, analysis or interpretation of data and drafting or revising this article. Moreover, there is no one else who fulfils these criteria who has not been included as an author.

  • Competing interests None.

  • Provenance and peer review Not commissioned; externally peer reviewed.