It is now confirmed. Backpeddling is the name of the game in Malaysia.
We should request our country to be named in the Guinness book of Records, not so much for making u-turns but more so for the string of them done in succession in such a short duration.
The latest is the U-turn to ban the sale of 14-stick cigarette packs.
Let us read on.
"This policy indecisiveness on the Government’s part may well spell the risk of dampening foreign investor sentiment towards the country.
The last-minute policy U-turn, confirmed last week by the Government, was totally unexpected and did not reflect well on the country as an ideal investment destination, especially among multinational companies, an industry observer said.
He said tobacco companies in Malaysia had actually started making adjustments for the ban on 14s pack since late last year.
“The sudden change in policy stance can be damaging to some companies in terms of competitiveness and lost business opportunities,” the industry observer explained.
“This is particularly so for those that have entirely phased out their production machinery for the smaller packs and exhausted their inventory of the products.”
Already, Philip Morris Sdn Bhd had made noise last week, threatening to take legal action over possible losses that it had to suffer due to the sudden policy deferment.
In Malaysia, tobacco is an oligopolistic industry dominated by three companies – British American Tobacco (M) Bhd (BAT), JT International Bhd (JTI) and Philip Morris.
Besides stiff competition amid a declining industry volume, tobacco companies also have to deal with illicit cigarettes, which, according to the Customs Department, is now at an all-time high of 38% of the total industry in the country.
“Definitely, there are going to be losers and gainers,” A TA Research analyst said.“And depending on which perspective one is coming from, the policy deferment could actually be helping some companies to adapt, as the longer grace period could give them more room to manoeuvre.”
The rationale given by the Government was that it was not “withdrawing” the ban, but merely postponing it to January next year. This is to allow tobacco manufacturers more time to make the necessary changes and migrate their consumers over to the 20s pack.
The Government’s latest move to “extend the life for legal 14s pack” was also seen by some as a measure to curb the growth of illegal cigarettes. Already faced with the pressure of higher cost of living, more consumers, are going for the lower-priced contraband cigarettes.
The Government earlier noted that the exemption for regulations 9 and 16 of the Control of Tobacco Product Regulations 2004, which banned the manufacturing and sale of cigarette packs with less than 20 sticks, actually extended to the end of this year.
Most analysts saw BAT as the major benefactor of the policy deferment, as the company had the highest exposure to the 14s pack, which accounted for almost 50% of its sales.
The extension of the shelf life of the 14s packs means BAT could still derive revenue from this segment, which generally have higher profit margin compared with the 20s pack, for another six months.
On the other hand, there seemed to a consensus view that the effect on JTI was rather neutral, as the company had never been that dependent on its smaller-pack version in the first place.
The 14s-pack segment accounted for only around 30% of its sales. JTI’s forte had been on its value-for-money 20s pack segment."
Well, let us wait for the next U-turn or backpedal.
Postscript:
Hey, no need to wait. The Cabinet made another U-turn on their earlier U-turn and enforced the ban beginning this month. Walla!
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