96795 Knowledge Brief Health, Nutrition and Population Global Practice TOBACCO CONSUMPTION IN PAPUA NEW GUINEA May 2015 KEY MESSAGES:  Tobacco use is a major challenge to international development.  Despite being a signatory to the Framework Convention on Tobacco Control (FCTC) and a Tobacco Free Pacific, Papua New Guinea is one of the ten countries with the highest rates of tobacco use in the world.  Tobacco consumption in Papua New Guinea disproportionately harms poor households.  The Government of Papua New Guinea has announced in its 2015 National Budget a change to the indexation arrangements applying to tobacco excise, increasing it by 5 percent biannually (10 percent annually) for the next five years. This will help Papua New Guinea to achieve the target of raising the excise duty to 70 percent of the retail price.  However, this policy must be supported by other control measures including advertising bans, smoke free zones, public education, graphic messaging, and enforcement of rules against selling tobacco to minors. 2. Tobacco use raises direct costs for individuals and How Does Tobacco Use Undermine governments. Individuals who smoke will, on average, have Development? higher health costs than non-smokers. Women subject to second hand smoke are likely to have babies with a lower birth 3 Tobacco use undermines development in at least four ways. weight and higher medical costs. Tobacco use makes treating existing diseases like diabetes more complex and more 1. Tobacco use is the leading global cause of preventable expensive. It also raises the costs to the government health death. The World Health Organization states “the tobacco system. 4 epidemic is one of the biggest public health threats the world 1 3. Tobacco use imposes indirect costs on individuals, has ever faced, killing nearly six million people a year.� Tobacco use is the only risk factor common to all four of the industry, and government. The money that individuals spend main noncommunicable diseases (NCDs) – cancer, on tobacco could be spent on beneficial products and services, cardiovascular disease, diabetes and respiratory disease. While such as improved housing and education rather than this always 5 tobacco use accounts for an estimated one in six of all NCD potentially harmful product. Smokers impose costs on industry 2 through absenteeism. The extra money that governments spend deaths it is also the single greatest preventable cause of NCDs. There is no safe level of tobacco use. Page 1 HNPGP Knowledge Brief  to treat tobacco-related diseases could instead be spent on rural roads, electricity generation, or education. Figure 2. Smoking prevalence by education 4. Tobacco use increases social and financial inequity by 6 disproportionately harming the poor. The poor tend to have 60 a worse health status to begin with; have fewer financial 50 resources to spend on tobacco; and are less able to access Percentage health care if tobacco-related diseases occur. 40 Read without 30 difficulty The Situation in Papua New Guinea 20 Read with difficulty Papua New Guinea is among the top ten countries in the world 10 in terms of tobacco consumption — around 40 percent of the Can not read 0 population consumes tobacco. It is an important development Currently Ever challenge, imposing a significant burden to households, Smoking smoked particularly poor households. Smoking status Tobacco expenditure accounts for 3-7 percent of household total expenditure and 13-27 percent of food expenditure, depending on wealth status. Smokers from the poorest quartile are more likely to consume non-processed tobacco, while smokers from Figure 3. Expenditure on tobacco as % of household the richest quartile are more likely to consume cigarettes. food expenditure, by wealth quartile Equity and tobacco consumption: The World Bank recently 7 analyzed data from the 2009-2010 Papua New Guinea 6 Household Income and Expenditure Survey (2009-2010 Papua 5 Percentage New Guinea HIES) to identify trends in tobacco use and expenditure. That analysis is important because the 2009-2010 4 HIES is the first comprehensive and nationally representative 3 survey of the socioeconomic status of Papua New Guinea 2 households since the 1996 Household Survey of Papua New 1 Guinea. The key findings are displayed in Figures 1-4 below. In 0 essence, it is clear that: Poorest Q2 Q3 Richest  The poorest quintile has the highest rates of tobacco use Household expenditure level (Figure 1).  The least educated have the highest rates of tobacco use (Figure 2).  For the poorest segments of society, more than 6 percent of Figure 4. Choice of tobacco type by wealth quartile total household expenditure is spent on tobacco (Figure 3).  The poorest quartile smokes more non-processed tobacco (Figure 4). Poorest Q2 Q3 Richest 100.0 Figure 1. Smoking prevalence by wealth quartile 80.0 percentage 60.0 60 50 40.0 Percentage 40 20.0 30 Poorest 0.0 20 Q2 Manufactured Hand-rolled Tobacco non- 10 Cigarettes Cigarettes processed 0 Q3 Tobacco type Currently Ever smoked Richest Smoking Smoking status Page 2 HNPGP Knowledge Brief  not captured in the price. There are also classic ‘information Policy Discussion failures’ about the health risks of smoking and about the 1. The “do-nothing� option will impose increasing health, addictiveness of smoking: especially amongst the poor. social and economic costs on Papua New Guinea. Rising Governments need to counter the ‘market power’ of the incomes in Papua New Guinea, a growing population of younger powerful tobacco manufacturers to avoid socially undesirable people, and aggressive marketing by tobacco companies will outcomes such as advertising and selling to children. inevitably lead to a rise in the prevalence of tobacco use. This Reducing inequity and protecting the poor is another in- will, in turn: principle justification for government intervention.  Increase the incidence of otherwise preventable and costly  Action to reduce tobacco consumption generates early NCDs such as cancer; reductions in disease and health costs: often within just  Directly raise the health costs to individuals and governments; one year. In 2008, Turkey raised cigarette taxes to 81 percent  Indirectly reduce expenditure by individuals and governments and banned tobacco advertising and smoking in public places. on goods and services that increase wealth and productivity; The following year, hospital emergency room admissions in  Increase absenteeism and therefore raise costs in Papua New Turkey for smoking-related diseases declined by nearly a Guinea industry; and quarter and smoking rates dropped 16 percent over three  Reduce sales of other beneficial products produced in Papua years. 9 New Guinea.  There are practical challenges in applying an excise duty 2. A strategic option is for the PNG Government to actively on non-manufactured tobacco that will need to be and purposefully work to reduce tobacco consumption. considered, given the availability/ prevalence of growing There are several reasons why government intervention is tobacco in small local gardens — more than 70 percent of necessary and can be effective: non-processed tobacco is purchased from a local market  There are effective, feasible ways to reduce tobacco and/or street vendors in Papua New Guinea (HIES consumption. Raising the excise duty on tobacco is 2009/2010). This will create a practical challenge in terms of considered to be an essential and effective step to reducing implementing increased excise duties over the short to tobacco consumption globally. More specifically, WHO medium term. This however must be addressed as raising the recommends that raising excise duties to at least 70 percent excise duty on manufactured tobacco without commensurate of the retail price is “best practice�. The reasoning behind this increases in non-manufactured tobacco is likely to see a shift strong recommendation is that the subsequent price increase in consumption from the former to the latter. would induce many current users to quit; deter youth from 3. Excise duty needs to be supported by other non-price taking up the habit; and reduce adverse health outcomes and 7 measures. Other tobacco control measures include advertising costs to government and users. bans, smoke free zones, public education, warning pictures and Recognizing the high health risk and increasing treatment enforcing rules against sales of tobacco to minors. These and costs of tobacco-related diseases in Papua New Guinea, the similar measures are set out in the WHO Framework Convention Government of Papua New Guinea has made a strong on Tobacco Control (FCTC) which the Government of Papua commitment in the 2015 National Budget Document to change New Guinea ratified in 2006. They are particularly important the indexation arrangements to tobacco excise. It has now interventions given the practical challenges of imposing applied an increase of 5 percent biannually (10 percent increased excise duties on non-manufactured tobacco. annually) from 2.5 percent or CPI inflation, whichever is lower. Implementation of FCTC has been challenging in many low- This is a remarkable start. income and middle-income countries, and Papua New Guinea is  Raising the excise duty on tobacco generates additional no exception. The World Health Organization monitors tobacco revenue for government. The Government of the use and prevention policies; they report that graphic warnings, Philippines recently raised tobacco (and alcohol) taxation and which would help the population who have difficulty reading or used much of the additional revenue to fund the expansion of who cannot read to understand the dangers of smoking, have 10 Social Health Insurance for the poor. 8 not been implemented. In Papua New Guinea cigarettes are still sold on the street and promotion and sponsorship activities  There are “market failures� that justify government have not been banned. Stronger leadership, commitment and action. Virtually all economists agree that government capacity are required to legalize and implement these 1 intervention is justified when there are “market failures�. For provisions. example there are large ‘externalities’, that is, the direct and 4. There are opportunities and resources to reduce tobacco indirect health and economic costs of tobacco on society are consumption. Ministers of Finance and Ministers of Health from the Pacific Island Forum have jointly agreed to implement their 1 own country specific Roadmap for the control of Non- In essence, a market failure occurs when the social benefits normally generated through competitive market forces fail to materialise because of Communicable Diseases. This is the first and most substantive distortions and failures in the market. decision to reduce tobacco consumption. Strong action by Page 3 HNPGP Knowledge Brief  Papua New Guinea would therefore be part of a regional Pacific approach to reducing tobacco consumption. This HNP Knowledge Brief highlights the key findings from a study by the World Bank on the “Determinants of References Tobacco Consumption in Papua New Guinea: Challenges 1 in Changing Behaviors� by Xiaohui Hou, Xiaochen Xu and World Health Organization. 2014. Tobacco Fact Sheet: Number 330. Ian Anderson. Financial support for this work was http://www.who.int/mediacentre/factsheets/fs339/en received from the Australian Government. 2 Beaglehole, R., Bonita, R., Horton, R., Adams, C., Alleyne, G., Asaria, P., et al. 2011. “Priority Actions for the Non- Please contact Xiaohui Hou at xhou@worldbank.org for communicable Disease Crisis.� The Lancet, 377(9775), 1438- any inquiries on this work. 1447. 3 Been, J. V., Nurmatov, U. B., Cox, B., Nawrot, T. S., van Schayck, C. P., and Sheikh, A. 2014. “Effect of Smoke-free Legislation on Perinatal and Child Health: A Systematic Review and Meta-analysis.� The Lancet, 383(9928), 1549-1560. 4 Yang, L., Sung, H., Mao, Z., Hu, T., and Rao, K. 2011. Economic Costs Attributable to Smoking in China: Update and an 8-year Comparison, 2000–2008. Tobacco Control, 20(4), 266-272. 5 Rokx, C., Schieber, G., Tandon, A., Harimurti, P., and Somanathan, A. 2009. Health Financing in Indonesia : A Reform Road Map. World Bank. 6 Townsend, J. L. 1987. Cigarette Tax, Economic Welfare and Social Class Patterns of Smoking. Applied Econ, 19(2), 355-365. 7 World Health Organization (2014). Tobacco Fact Sheet: Number 330. 8 Jha, P., Joseph, R., Li, D., Gaurvreau, C., Anderson, I., & Moser, P. 2012. Tobacco Tax Administration: A Win-win Measure for Fiscal Space and Health. Asian Development Bank. 9 Angell, S., Levings, J., Neiman, A., Asma, S., and Merritt, R. 2014. “How Policymakers Can Advance Cardiovascular Health.� Sci Am, 24-29. 10 World Health Organization. 2013. World Health Organization Report on the Global Tobacco Epidemic, 2013. Accessed at http://www.who.int/tobacco/global_report/2013/en/ on April 14, 2015. The Health, Nutrition and Population Knowledge Briefs of the World Bank are a quick reference on the essentials of specific HNP- related topics summarizing new findings and information. These may highlight an issue and key interventions proven to be effective in improving health, or disseminate new findings and lessons learned from the regions. For more information on this topic and on Papua New Guinea go to: www.worldbank.org/health and http://www.worldbank.org/en/country/png Page 4