Saturday, April 12, 2014

Georgia: Georgia Feeds Turkey’s Jones for Tobacco

Originally published by
Georgia Feeds Turkey’s Jones for Tobacco
By Nicholas Alan Clayton

Taking the bus from Tbilisi to Istanbul is a 24-hour-plus ordeal that generally involves cattle-dodging, seaside views, stops for local food and the pungent odors of fellow travelers. But there is another rite of passage that helps differentiates the trip from most other long bus rides -- the loading and transit of hundreds of cartons of cigarettes.

“Everyone either has three cartons of cigarettes with them or buys three cartons at the border,” said one Georgian woman who has made the trip several times. Each person crossing into Turkey is allowed to bring a maximum of three 10-pack cartons of cigarettes. “Even if you don’t smoke or say you don’t want any, someone will give you three cartons just to carry across the border and you give them back to them once you’re in Turkey,” said the woman, who gave her name as Nana.

Since 2008, Turkey has been pushing hard to get its citizens to kick smoking by restricting advertising, increasing cigarette taxes and banning smoking in workplaces and public buildings. But by jacking up prices, it appears Turkish officials are doing as much to encourage the development of black-market trade in cigarettes, as they are to discourage Turks from lighting up.

Currently, at an average price of 3.40 euros ($4.72), a pack of cigarettes in Turkey ranks as the most expensive in the Black-Sea region, according to the Turkish Ministry of Customs and Trade. The tax on each pack ranges from 80 percent to 83 percent. By comparison, the average price per pack in Georgia, Turkey’s eastern neighbor, is 1.30 euros ($1.81), the ministry states. That price disparity has created a strong incentive for black-market dealing. Turkey’s Tobacco and Alcohol Market Regulatory Authority claims that about 20 percent of the packs of cigarettes in the country today are either smuggled or counterfeit, The Hürriyet Daily News reported.

The Turkish Confederation of Craftsmen and Tradesmen now estimates that the country annually loses between 4 billion to 5 billion Turkish lira ($1.9 billion-$2.4 billion) in lost revenue to illicit cigarette sales, according to Today’s Zaman. That’s more than the government’s estimates for total profits from the illicit drug trade inside the country.

Most of these black-market cigarettes are believed to come from Iraq and Syria, but Georgia ranks as a significant source as well. In Istanbul, packs with warning labels in the distinctive Georgian script are openly displayed in small shops and bazaars, or sold on the sidewalk alongside other bootlegged packs. Istanbul cigarette sellers approached by declined to say how they obtained their Georgian-language wares.

Some tobacco-company representatives have their own ideas. A regional official with the London-based tobacco multinational British-American Tobacco (BAT) told that, overall, about 1.5 million more cigarettes are sold in Georgia than are consumed locally. The company believes that most of the extras end up in Turkey, according to the executive, who spoke on condition of anonymity because he is not authorized to speak with the press.

Major tobacco companies operating in Georgia have taken steps to monitor the distribution and consumption of cigarettes, and many have gone as far as “cutting off” Georgian wholesalers that are seen to be selling far more cigarettes than people in their distribution areas could smoke, the BAT executive continued. The companies have shared their findings with the Georgian government, he said, but officials in Tbilisi, he claimed, have yet to make serious moves to stop the shady practicies, a source of tax revenue from additional cigarette sales.

The Georgian Ministry of Finance did not respond to a request for comment. Information about the amount of cigarette-tax revenue generated in 2013 was not immediately available. A 25-percent to 33-percent tax hike last September was expected to increase the government’s take by 25-billion to 26-billion lari (roughly $14.3 million-$14.8 million).

Illicit cigarette shuttle-trading doesn’t just potentially boost the flow of revenue into Georgian government coffers, it provides a chance for the many Georgians to make ends meet. Women, many from the impoverished western Georgian region of Samegrelo, appear to make up most of the cigarette-conveyors. “They all come from places where, compared to Turkey, it’s hard to imagine people can live that way,” commented Nana, a 57-year-old Tbilisi native who works as a caregiver in Istanbul.

Based on average prices, these traders can make a potential profit of 63 euros ($87.54) on the three 10-pack cartons they sell in Turkey. With the cash earned, they often scoop up heaps of cheap clothing and footwear – prices rank as Europe’s lowest, according to the European Commission -- to sell in bazaars back home.

The current visa regime between Turkey and Georgia encourages this type of commerce. Georgians can enter Turkey with just their national identity cards and make an unlimited number of entries and exits so long as they spend no more than 90 days inside Turkey in any 180-day period.

Turkish officials did not respond to requests for comment in time for publication about what measures are being taken to crack down specifically on cigarette shuttling-trading from Georgia. In the past, they have urged countries to meet Turkey’s own cigarette-tax rates, but, apparently, without success.

Georgians “are probably hoping this anti-tobacco crackdown [in Turkey] never ends,” the BAT official commented.

Editor's note: Nicholas Alan Clayton is a reporter based in Istanbul.