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8.3 ECONOMIC ASSESSMENT OF THE IMPACT OF THE MALAYSIAN TOBACCO INDUSTRY Conducted for the COUNCIL OF MALAYSIAN TOBACCO MANUFACTURERS A Report on Methodology employed as well as utilization of the study By Mohd Arif Bador Executive Director INFOTAB NMA WORKSHOP WASHINGTON SEPTEMBER 19 - 22, 1983 Presented by T.J. Picton, INFOTAB

ECONOMIC ASSESSMENT OF THE IMPACT OF THE MALAYSIAN TOBACCO INDUSTRY. ( A Research Project undertaken by Frank Small and Associates, Malaysia, on behalf of INFOTAB and the Council of Malaysian Tobacco Manufacturers. ) OBJECTIVE OF STUDY AND METHODOLOGY Objective of Study The basic objective of this study was to analyse the economic impact of the tobacco industry on the Malaysian economy. In line with this objective, a tobacco sector statistical base was developed for the Malaysian Tobacco industry. Among the items included in this statistical base were : number of people employed directly and indirectly. - total wages or income of people working. - fixed and current assets. annual savings and investments of individuals and companies involved. - government revenue and expenditure. - import and export of tobacco products. - training and skill-upgrading provided for workers. changes in labour and capital productivity brought about by the introduction of new technology.

2 major items of expenditure. - total annual sales of tobacco products. This statistical base provided the foundation for evaluating the regional, sectoral and national importance of the tobacco industry in Malaysia. It also showed the impact on the various sectors of the industry of; a. future growth or fall in demand for tobacco products and b. changes in government policies relating to tobacco production, import and consumption. In addition, the study also made a qualitative assessment of the social impact of the industry, including quality of life improvements, cultural effects and other non quantifiable results that could be attributed to the industry. Methodology Data for this study were drawn from three main sources - questionnaire survey, key personnel interviews and official documents and statistics. A questionnaire survey was conducted for a sample of farmers, curers and manufacturers. The survey was carried out in March / April 1983 but virtually ..3/-

3 all the quantitative data relate to the period from January to December 1982. This was to ensure that a statistical data base for the industry relating to the year 1982 could be constructed. Fieldwork Survey - Farm Level A sample of 300 farmers in the main tobacco growing state - Kelantan and Trengganu were interviewed with the aid of a questionnaire. This sample size of 300 farmers was selected since it gave a+ 5 percent level of accuracy for responses based on an estimated total population of 44,000 farmers. Information was collected on the following main areas ; - farm size and cropping pattern. - employment of members in the household. - income and expenditure from tobacco cultivation. - time devoted to tobacco cultivation. - family income and expenditure. - farm savings and investments. - land prices and rental. - social and cultural changes associated with tobacco cultivation. ..4/-

4 Three criteria were used in selecting the farmers to be interviewed. Firstly,half of them were those planting less than 2,500 plants - small farmers, and half of them were those planting more than 3,500 plants - large farmers. Secondly, they must be scattered throughout Kelantan and Trengganu and thirdly, they must be representative of the farmers associated with the 50 curing station for the in-depth study i.e. six farmers per curing station. Interviewing in this place had to be handled by skilled people as well as people with high acceptability and credibility at a regional and on a vernacular level. The reason for this was that interviewing needed to extend beyond not only difficult basic data collection on factors such as incomes, but it also had to provide some insight into the cultural and social impact of the tobacco industry at the individual farming family level. This required good rapport between interviewer and respondents. The team for this study were drawn from the Frank Small and Associates, Kelantan/Trengganu field research team under the supervision of its national field supervisor, a Kelantanese with strong local ties to the tobacco industry. This team had a thorough experience with interviewing in this area and carried out 6 to 7 major field work studies each year in Kelantan and Trengganu.

5 Curers Survey Fifty curers from Kelantan and Trengganu were selected for this study. From the record of the National Tobacco Board, it was observed that the average number of barns operated by these curers is 15 and the average number of farmers served per barn is 134. In view of this, the curers were classified into 3 groups, small with less than 11 barns, medium with 11 - 19 barns, and large with greater than 19 barns. The number of curers selected in these 3 groups were 12, 18 and 19 respectively. The main areas of investigation on curers were : - labour utilization and wage structure. - income and expenditure for 1982. - savings and investments. - capital requirements and sources of loan. - social and cultural changes. Each curing station is owned by a number of individuals or company. In the case of share ownership, the range in the number of owners is from 2 to 17 with a median number of 5 owners. ..6/-

6 In the survey, where possible the interview was held with one of the owners of the curing station. In a few cases where none of the owner's were available, the interview was conducted with the manager of the curing station. Manufacturers Survey Senior representatives from the 3 manufacturers having 98 percent of the market share were interviewed with the aid of a questionnaire. The questions asked related to the following areas employment and total wage bill. - purchase and use of tobacco in 1982. - taxes on leaf and cigarette. - equity structure. - promotional activities. - income and expenditure for 1982. - savings and investments. - major technology introduced. - research and development activities. Questions relating to distributor's and retailer's estimated employment and income were also directed at the representative of the manufacturers. In view of their close relationship with the distributors and retailers, it was felt that these estimates would be highly reliable. .7/-

SCHEDULE f r t I t I I I I r I r I Feb Feb Feb Feb =':ar Mar s Ma.<: Aor yor A-yr A-)r Mf,~iy 7th 14th 21st 23th 7th 1tith 21st 2Eth ut : lith 1~S-t;ti 2:5-ch 2n,; Pre liT.; i-~ary Data Search Qvestionnaire L'esio Cu~ er Interviews Farrer lP. -,erv?.ews <ey Personnel i Piwnui acturers r- 1 DaTa Analysis Topli.ne F'i_-idi,-igs Discussion ujith4 c'l ient rep:^esen- tc3 t ivc~'_ Fi nal Feport preparation Questio^.naire r.....~.. 1C0~- Ci1TY.i^3 P.epoT'T. :I- ~ ~ V- t:~n::f. MlzQlosz

8 CMTM's Utilization of the Frank Small Study A more comprehensive utilization of the study is tied in with the appointment of Burson Marsteller to undertake CMTM's Long term Communications Programme. Burson Marsteller's appointment was formalised at the September 8, 1983 Meeting of the CMTM EXCO. An immediate assignment given to Burson Marsteller is to develop 3 Information Packages covering the following areas of priority concerns : 1. Economic Importance of the Malaysian Tobacco Industry. 2. Smoking and Advertising. 3. Smoking and Taxation. All these packages, in particular Package I would make an extensive use of the Frank Small Study, extracting relevant excerpts for particular target audiences. Packages 2 and 3 would also be prepared for distribution to target individuals or groups for scheduled completion by Mid December 1983. Ln O © a NJ M Ln so

9 The timing for all 3 packages takes due consideration of the fact that the 1984 Budget would be tabled in Parliament on October 21, 1983 by the Finance Minister for debate by Members during the period October 24 - December 1983. The Information Packages as per proposed by Burson Marsteller will consist of the following : 1. A One Colour fact booklet. 2. 5 - 10 minute slide presentation with script. 3. 10 minute speech. 4. A press release / feature story on the subject. Common information and key points will be highlighted in each media. The format of each information package will be similar to provide a " family appearance ". Distribution by target audience strate y In keeping with CMTM's measured profile strategy, distribution of information will be selective and targeted rather than " wholesale " general mailings or solicitation. The following is a distribution strategy by target audience group. 0 d NJ r cr" ..10/- CrS

i TARGET AUDIENCE DISTRIBUTION STRATEGY 1. Key government * Hi h level influences - booklet disseminated - influences irector - in personal t rough executive meetings (preferable) or through personal "for your information" letters. * Medium level influences - booklet disseminated to working level contacts through Burson- Marsteller in personal meetings or through personal letters. * Additional copies of booklets will be given to government contacts for supplemental distribu- tion to other government influences (if appropriate) 2. General public * Booklets will be mailed to individuals as a response piece to inquiries with standard "benefit-oriented" cover letter (based on press articles; from other forums) * Presentation materials/booklets will be used with audiences at each speaking forum 3. The press * Press kits and booklets will be distributed in private meetings with key journalists in story/article development or * Distribution in private relationship - building luncheons between executive director and key journalists 4. Consumer activist * Booklets will be distributed by Burson- groups Marsteller in person during climate-setting meetings or in response to adverse charges (if appropriate)

TARGET AUDIENCE DISTRIBUTION STRATEGY 5. Tobacco growers * Booklets will be distributed through a and curers "partnership-building" direct mail series under cover letter from executive director Objectives: - Enhance their role in industry - Help ensure their support of CMTM efforts I - Educate on their role/contributions - Develop a unified industry position on key issues * Presentation materials/booklets also used at industry forums 6. Tobacco distri- * Quantities of booklets given to member companies bution network for appropriate dissemination to distributors and key retailers Objective: - Develop unified industry stand on key issues 7. Member companies/ * Booklets distributed to member company employees management, executive team under cover letter from CMTM executive director and company C.E.O. * Presentation materials/booklets to be used at appropriate employee meetings * Press materials used in in-house publications * Quantities of booklets supplied to personnel office for opportunistic use and distribution 8. International * Information packages distributed to INFOTAB affiliate and select organisations under cover letter organisation from executive director

In the meanwhile, and in recognition of the urgency to impress upon particular policy, makers of the significance of the tobacco industry to the national economy - especially ahead of the October 21 Budget date, the EXCO decided that the full Frank Small Study be handed over personnally by the CMTM Executive Director to the following : ( These have since been handed over ) (i) The Minister for Primary Industries - in charge of the National Tobacco Board. (ii) The Minister of Agriculture. (iii) The Secretary General Ministry of Home Affairs ( Chairman of the One Stop Agency ) (iv) The Under Secretary, Taxation Division of the Treasury. (v) The Under Secretary Economic Planning Division of the Treasury. (vi) The Deputy Secretary General Ministry of Trade and Industry. (vii) The Director General of Health. (viii) The Director General of the National Tobacco Board. ..11/-

Generally, reactions to the Study have been constructive, positive and appreciative. Relevant information extracted from the Frank Small Study were also used by the Executive Director of CMTM during his discussions with relevant Senior Government Officials ahead of the September 9, 1983 meeting between Industry representatives and the Under Secretary,'Ministry of Home Affairs and Secretary to the Board of Film Censors Malaysia. The Meeting of September 9, 1983 resulted in the government's decision to suspend the implementation ( meant for September 1, 1983 ) of the latest Guidelines on Cigarette Advertising issued by the Board of Film Censors - which would have left debilitating effects upon the Malaysian Tobacco Manufacturing Industry.