The tobacco industry has contributed to the growth of Malaysian economy where the industry ranked 5th out of 92 sectors with the total economic output being RM11.7 billion or 3% of GDP . Moreover, tobacco plantation in Malaysia grew from a mere of 8 hectares in 1959 to 12,148 hectares in 2004; whereby East Malaysia has approximately 1,200 hectares. Therefore, the industry indirectly contributes significantly to the country’s economy where more than 190,000 employment in 2003; as per study conducted by Ernst and Young in 2005.
Despite the economic growth and upward tobacco cultivation, the industry has its challenges covering issues such as illicit cigarettes; rising taxes and government urge on restrain smoking. According to the Confederation of Malaysian Tobacco Manufacturers (CMTM), the occurrence of illegal cigarettes increased from 11.5% in 2004 to 36.3% in 2010. As a result, Malaysia is projected to be among the top three nations in Asia with a high level of illegal cigarettes with an estimated projection of 40.4% in 2014. Price range of there illegal cigarettes is from RM1.80 to RM3.20 per packet, depending on the brand.
In Malaysia, the tobacco industry has three main players – British American Tobacco (BAT), JT International and Philip Morris. The mentioned companies have a range of of brands to supply individual preferences. As at October 2012, the cigarette price ranges from RM7.00 per pack of 20 sticks to RM10. Thus, the local players have a high potential in breaking through the tobacco demand and supply as it is less competitively priced.
Please join StudyMode to read the full document