Philip Morris and British American Tobacco in Serbia

The final signature on the purchase agreements by Philip Morris and the British American Tobacco for their respective purchases of Nis and Vranje Tobacco industries is expected for the end of the current month.

The privatization of the Nis Tobacco Industry for 518 million euros and the Vranje Tobacco Industry for 87 million Euros, will bring 340 million Euros into the Budget of the Republic of Serbia, which represents a remarkable result not only in the Balkans region, but much wider. The rest of the funds will be allocated for the local autonomy authority and social funds. The importance of this achievement is not only reflected by the positive reactions throughout the national media, but the privatization of domestic tobacco industry companies called the attention of the international media as well.

Minister Djelic, president of the Tender commission, did not hide his satisfaction with the realized achievement, and emphasized that this result wouldn’t have been attained without the coordinate action on stamping out the smuggling carried out by the Ministry of Finance and economy, the Ministry of Trade, tourism and services, and the Ministry of Interior in the last two and a half years.

During the period 2000-2002, the illegal trade of tobacco derived products was reduced from 50% to 20%, which represents an additional annual amount of 150 million euros for the Budget of the Republic of Serbia. This result should not be any surprise, knowing that 247 tons of seized cigarettes were destroyed in the same period. Also, during the first semester of 2003, the revenues from the excise tax collection were 48,2% superior compared to the same period last year.

The last piece in this puzzle was the adoption, on 18th July 2003, of the Amendments to the Excise Tax Law, providing for the regulation in the matters until 2010, assuring the mentioned companies long-term investment stability.

Minister Djelic repeated that the funds from these privatizations will not be spent on salaries and pensions raise. For the major part, it will be used for the covering of the budgetary deficit, and an other part will be used for the next year’s national treasury resources.

The proposed social program also speaks in favor of the attractiveness of the Philip Morris and BAT tendering offer, which represents approximately 80 Million Euros for the next two years period. The positive effects will primarily be reflected in the reduction of the foreign-trade deficit by 45 Million Euros annually. Also, the buying up of the whole domestic tobacco harvest is expected on the same occasion.

Since this is the first major investment by Philip Morris in this part of Europe, there could be reasons for immodesty in declaring that Serbia will become a tobacco pole of the South-Eastern Europe.

The benefit is more than multiple, and this time the producers, the State, and the end-users – given the opportunity to enjoy some of the most famous cigarettes brands, can altogether be satisfied with this operation.