Cigarette prices to skyrocket

From next year, the monopoly system on cigarettes will be abolished and any qualifying company, domestic or foreign, will be able to produce and sell cigarettes. Consequently, the price limit on cigarettes and the support funds provided to tobacco producers will also come to an end, driving up cigarette prices. The Ministry of Finance and Economy revealed Friday that it will submit a proposal to amend the tobacco business law containing these details to the upcoming convention of the regular National Assembly. The ministry plans to have the amended law take effect from the middle of January next year.

The current monopoly on tobacco production will change to a permit system. The government will stipulate a law specifying permit qualifications, including the size of capital and the production facility.

The price of cigarettes will also change from the current permit system to a declaration system. The government explained that this change aims to level the current standard with the standard applied to foreign cigarettes. This change will allow tobacco producers to raise the price of cigarettes significantly.

With the abolishment of the monopoly on tobacco production, Korea Tobacco Corporation¡¯s mandatory purchase of tobacco and payment for bounties, as well as accident compensation and other support funds for tobacco producing farmers, will also be banned. Chung Gap-Young of the Ministry of Finance and Economy`s treasury division asserted that in order to make up for the support funds being abolished, the ministry will encourage the Korean Ginseng and Tobacco Corporation to form a long-term purchase agreement with farmers maintaining the current level of support.

Choi Young-Hae moneychoi@donga.com