British American Tobacco's erosion of health legislation in Uzbekistan

Short abstract

Uzbekistan shows how countries that privatise state owned tobacco industry can be manipulated by global companies

In 1994 Uzbekistan's tobacco industry was privatised in a closed deal enabling British American Tobacco (BAT) to establish a production monopoly.¹ While completing this deal, BAT learnt that Uzbekistan's chief sanitary doctor, Mr Iskandarov, had issued Health Decree 30, a potentially highly effective piece of tobacco control legislation that would have banned tobacco advertising and smoking in public places and introduced health warnings. BAT responded aggressively, delaying completion of its investment until the decree was replaced with a voluntary advertising code.

Until now BAT has implied that it developed the code without prompting and presented it as an example of “the company's responsible attitude to its advertising practices.”² We have obtained evidence from BAT corporate documents released after litigation in the United States³ that shows how BAT in fact developed this code when overturning health legislation that would have served to protect the health of the Uzbek population. Its behaviour highlights broader concerns about the influence of transnational tobacco companies over health policy when they invest in low income countries. A description of our methodology is available on bmj.com.

Marketing environment

The regime of Uzbek President Islam Karimov has held power since independence in 1991, gaining notoriety for serious human rights abuses.⁴,⁵ Despite largely rejecting international advice to pursue rapid and extensive privatisation,⁶,⁷ President Karimov aligned himself closely with the BAT deal, then Central Asia's largest foreign investment.^8-10 He hoped to use it to project Uzbekistan as a safe investment environment.¹¹

BAT, in turn, considered Uzbekistan a remarkable opportunity. After a company visit in July 1993 identified only one electronic billboard in the country,¹² a marketing report described Uzbekistan as, “unique in the world in terms of its singularly unexploited advertising and promotional environment,” arguing that trade and consumer loyalty could be established rapidly as advertising costs were “cheap enough to allow multinationals almost unrestricted market spend.”¹³

BAT's plans projected a 45% increase in annual cigarette consumption between 1993 and 1999.¹⁴,¹⁵ The increased supply of cigarettes, assisted by an exclusive arrangement with the state distributor, would be a key driver of market expansion alongside population and economic growth.^13-18 BAT expected a “growth in incidence among women as cultural stigma on smoking recedes,”¹⁹ claiming that “females can be drawn into the market via menthol offers or lighter brands.”¹³

Figure 1.

Helping BAT achieve its targets

Credit: CORENTIN FLEURY/DEADLINE/NETWORK

But marketing activities were also key to efforts to “stimulate” consumption¹⁴,¹⁸ with objectives predicated on an unrestricted advertising environment.¹⁵,^19-21 As William Wells of Schroders, BAT's financial advisers in Uzbekistan, noted: “BAT would require an undertaking from the government not to impose restrictions on the advertising of tobacco products for a period of (seven) years from the agreement to invest”¹⁹

Health decree 30

As negotiations progressed swiftly, BAT was shocked to discover, in August 1994, that the Ministry of Health had recently issued a tobacco control decree.^22-24 Although BAT had seemingly already overturned²² a decree banning street advertising in the capital Tashkent,²⁵ Mr Wells warned that the ministry would prove “an altogether more difficult animal with which to deal.”^w1 The decree, unprecedented in the region, banned filterless cigarettes and those high in tar and nicotine, banned tobacco advertising and smoking in public places, required outlets to be licensed, and introduced health warnings.²³ It also noted, in contrast to BAT's reports just one year earlier, that “large scale” tobacco advertising was undermining health promotion efforts.²³

BAT described the decree as a “deal stopper”^w2 that infringed its agreement with the Uzbekistan government^{22 w1} and immediately pursued its reversal or deferral.^{22 w3-w5} Within 24 hours BAT had coordinated counter arguments from its corporate affairs and smoking issues teams^{22 w6 w7} and met with Mr Mahsudov^w3 from the Cabinet of Ministers. It then met Mr Iskandarov and other health officials a few days later.^w4

BAT sought to counter each section of the decree (see table A on bmj.com), repeatedly claiming to be a responsible manufacturer of a legal product^w4 and making three key assertions. Firstly, BAT depicted the decree as jeopardising foreign investment in Uzbekistan,^{11 w3 w4} while warning the health ministry that it would lead to “the immediate demise of the domestic cigarette industry” and threaten an investment supported by Karimov.^w4 Secondly, BAT refuted the health effects of smoking as accurately described in the decree,^{24 w4 w6 w8} suggesting an ongoing controversy in which “smoking has not been proven to actually cause” diseases.^w6 Thirdly, the company portrayed Mr Iskandarov's intended restrictions as “seriously interfering with...commercial freedom”^w4 and denied that advertising affected consumption: “World wide experience consistently shows that advertising bans do not reduce consumption. Advertising a mature product like cigarettes is not intended to increase the overall market but to expand company market share.”^w4

Additionally, BAT portrayed Russia's recent voluntary code as epitomising the industry's responsible approach in working with governments to agree adverting standards.^w4 This code was actually developed collaboratively by tobacco companies and entailed only modest and ineffective restrictions.^w9

BAT's amended decree

Since Mr Iskandarov refused to withdraw the decree, BAT sought extensive amendments.^w4 An amended decree was rapidly circulated (table B on bmj.com) alongside highly confidential briefing notes.^{26 w8}

BAT's version downplayed claims about the health impacts of smoking, repudiated proposed interventions, and nullified its regulatory impact (table).²⁶ Thus the intended total advertising ban was replaced with a voluntary code. The ban on smoking in public places was replaced with a ban confined to institutions dealing with health and children, specifying that elsewhere smoking areas would be provided.²⁶ Despite BAT's claims not to encourage young people to smoke,^w4 the original ban on smoking in colleges and universities was removed, consistent with BAT's marketing plans.¹³,¹⁴

Table 1.

Examples of BAT amendments to Health Decree 30 (changes highlighted in bold)

Original decree21*	Amended decree24
Smoking can essentially worsen the clinic [sic] course of such diseases as stomach and duodenum [sic] ulcer, chronic gastritis, etc, and strongly influence the development of the heart-crowning artery [sic] sclerosis...	Smoking has been claimed to worsen the clinic [sic] course of such diseases as stomach and duodenum [sic] ulcer, chronic gastritis, etc, and to influence the development of the...
In Uzbekistan the number of people suffering from the diseases of breathing systemt, including those related to smoking, increased from....	In Uzbekistan the number of people suffering from the diseases of breathing system, including those associated with smoking, increased from....
There is data that tobacco smoke is more harmful to non-smokers than to smokers	Sentence removed
Advertisement of the local and foreign brand tobacco products, including the advertisement through the mass media (television, radio, cinema, newspapers, magazines, etc) [shall be permanently prohibited]	Advertising of local and foreign brand tobacco products, including advertising through the mass media (television, radio, cinema, newspapers, magazines, etc); will be restricted according to the attached code
Smoking [will be banned in] public places, on the transport, at the health care institutions, kindergartens, schools and other institutions for children, colleges and universities. At other institutions and enterprises smoking should be permitted only in specially arranged places	Smoking at health care institutions, kindergartens, schools and other institutions for children, will be prohibited. At other institutions and enterprises, and on public transport, both smoking and non-smoking areas will be provided

^*The unusual English is explained by the fact that this was translated from the original Russian

In September, when Mr Iskandarov still refused to concede,¹¹ BAT abandoned negotiations with the Ministry of Health^w10 and shifted focus to the first deputy prime minister, Mr Djurabekov, whom President Karimov had charged with implementing the proposed joint venture.^w11 BAT seemingly enjoyed a good relationship with Mr Djurabekov and seemed confident of presidential support, expecting a satisfactorily amended decree despite the health ministry's intransigence.^{11 w12}

An order to be issued by Mr Djurabekov on the Cabinet of Minister's behalf, requiring the Ministry of Health to amend decree 30 was faxed from BAT's Tashkent office.^w13 Documents suggest it may have been drafted by BAT.^w10 It incorporated BAT's main concerns, with the tar and nicotine limits and the bans on smoking in public places, filterless cigarettes, and advertising all cancelled.^{w10 w13} The advertising ban was replaced with a new code,^w13 which seems to be an even less restrictive version of the Russian voluntary code.^w9

The Cabinet of Ministers approved BAT's proposal,^w14 agreeing that “Djurabekov will write to the Minister of Health formally requesting amendment, hopefully on the terms discussed with BAT”, with the expectation that “the political situation will lead to a satisfactory amendment to the decree.”^w14

In response, the health ministry reportedly offered BAT a two year exemption,^w15 a compromise BAT dismissed as insufficient. This rejection triggered the direct involvement of President Karimov: “Djurabekov/Chzehen are writing to Karimov to inform him of this response and make him aware that unless the decree is suitably amended it is unlikely that BAT will invest, the Uzbek cigarette industry will collapse with the domestic market being flooded by imports, there will be a leaf farmer crisis and Uzbekistan will have its reputation as a place in which to invest very materially damaged. This letter is to be delivered to Karimov's home and it is likely that it will received [sic] prompt attention.”^w15

Although there were concerns about the president's formal authority to amend the decree,¹¹ once the dispute reached presidential level resolution seemed inevitable. BAT cited 31 October as a date when the decree would be “amended and in force,” noting that this was a condition for further progress.^w16 Within a month the deal had been completed,^w17 with BAT transferring its first payment in November 1994.^w18

After the deal

From the mid-1990s, tobacco advertising in Uzbekistan became ubiquitous.^{1 w19} Tobacco consumption has reportedly increased by 7% to 8% annually, primarily among young people,^w20 and cigarette sales rose by 50.5% between 1990 and 1996.^w21 By 1999, BAT had achieved a market share of over 70%,^{w22 w23} not far short of its 80% target.¹⁴ In the 10 years since BAT's investment, further legislation has been confined to a partial ban on direct advertising, introduced in 1998 and amended in 2002,^w24 which can serve only to maintain BAT's dominant market position.

Discussion and international implications

By successfully overturning bans on tobacco advertising and smoking in public places as well as significantly reducing cigarette excise rates (as detailed elsewhere^w25), BAT removed the three most effective means of controlling tobacco consumption.

Documents suggest that such policy influence has not been confined to Uzbekistan. When BAT was considering manufacturing in Kyrgyzstan, proposed conditions for the deal included a voluntary code and agreement that no advertising restrictions would be introduced^w26 alongside extensive excise reforms.^w27 Documents also suggest that reversal of a Soviet decree banning tobacco advertising was a precondition for the deal by R J Reynolds and Philip Morris to import 34 billion cigarettes to the Soviet Union in the early 1990s.^w27

Our findings highlight the difficulties in developing tobacco control measures in the context of industry privatisation and investment by transnational tobacco companies. They support our previous contention that former Soviet countries with major tobacco company investments and highly centralised one party systems of government faced the greatest challenges in implementing effective tobacco control policies.¹ Between 1992 and 2000 BAT's investment accounted for over a third of total foreign direct investment into Uzbekistan.¹ The chief sanitary doctor was powerless next to BAT, particularly given its close alliance with President Karimov.

Effective control policies are much needed during privatisation because growing evidence, supported by our findings, suggests that liberalisation of investment fuels consumption.^w28-w30 International financial organisations should therefore reconsider their support for privatisation of the tobacco industry.^{w28 w31} If privatisation does proceed, it should be conducted openly and preceded by implementation of effective tobacco control legislation. In countries where privatisation has already occurred, every effort should be made to implement comprehensive, enforceable tobacco control policies.

The ability of tobacco companies to shape public policy assumes particular importance in the context of the World Health Organization's first public health treaty, the Framework Convention on Tobacco Control. Now ratified by 119 countries, though not by Uzbekistan,^w32 the convention has already accelerated policies on tobacco control in participating countries. Although this move is extremely promising, it may also, perversely, heighten opportunities for tobacco companies to shape legislation or to encourage the pre-emptive adoption of ineffective measures. If the potential of the convention is to be realised, participating states must develop binding protocols rapidly and provide adequate funding to low income countries to facilitate development of effective tobacco control policies. This requires development agencies to recognise the contribution that cost effective tobacco control measures can make to the millennium development goals.^w33

Summary points

In 1994 the Uzbekistan tobacco industry was privatised and British American Tobacco (BAT) established a production monopoly

BAT's investment plans predicted a 45% increase in cigarette consumption

As part of its investment conditions, BAT overturned tobacco control legislation that banned advertising and smoking in public places

Safeguards are needed to prevent transnational tobacco companies influencing health policy when investing in low income countries

The Framework Convention on Tobacco Control could help but needs to be enhanced with binding protocols