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Strong Talk on Tobacco from the World Bank, but …
October 17, 2011
… where’s the action?
The World Bank has said all the right things about putting its substantial influence behind sensible programs that generate revenue, cut health costs and save lives. So far, however, it has done little on a simple measure that would cost-effectively achieve all three of these goals: raising tobacco taxes.
The World Bank spoke strongly about this issue in its report to the recent U.N. General Assembly conference on non-communicable disease, entitled “The Growing Danger of Non-Communicable Diseases: Acting Now to Reverse Course”. According to the press release accompanying this conference report:
“Particularly effective at very low costs are measures to curb tobacco, such as taxes, as indicated in the WHO Framework Convention on Tobacco Control, …”
Raising tobacco taxes is extremely cost-effective, actually raises funds for governments, and addresses a key risk factor for millions of deaths a year – more than deaths from HIV/AIDS, TB, and malaria combined.
The press release also proudly notes that the World Bank has a portfolio of $10.8 billion in programs aimed at improving health in developing countries. So how much of this money and effort goes toward reducing tobacco use? As far as I know, there are a few dedicated bank staff working on the topic but few if any policy loans or investment loans that address this problem.
So, reducing tobacco use is a top priority for promoting health but the World Bank is moving forward cautiously if at all. Why the hesitancy? The problem seems to be that tobacco control falls between the cracks. The people working to improve health have their hands full with all the logistical, managerial, and policy issues involved in getting a complex sector to perform well at delivering services. And the people working to improve fiscal and tax policies don’t have the tobacco-related disease burden very high on their agenda. This is as true within country governments as it is within the World Bank. Typically the task gets assigned to health staff who care about the issue but have little clout with finance ministries when, instead, the mandate should probably go to the fiscal experts, with instructions to rely on tobacco control experts for their experience and knowledge.
If there is some other obstacle, I have no idea what it would be. In fact, every single piece of the puzzle is on the table. All that is lacking is some leadership to put them together.
- 174 countries are parties to the WHO Framework Convention on Tobacco Control that includes provisions on raising taxes;
- The World Bank has policy loans that could easily incorporate provisions to support implementing and raising tobacco taxes (Amanda Glassman explains how in this blog);
- The IMF has indicated its willingness and ability to provide technical assistance to raise tobacco taxes;
- A number of organizations including the World Bank, have policy simulations, toolkits and programs that show how it can be done and with what effects;
- Models exist in countries in every region.
The only thing missing is leadership. Borrowing countries can request this support but their hands are pretty full. All it would take is a World Bank willing to act as energetically as it has spoken.
Thanks to Amanda Glassman and Lawrence MacDonald for their helpful comments and suggestions.
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7 Responses to “Strong Talk on Tobacco from the World Bank, but …”
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October 18th, 2011 at 2:47 pm
What about not wanting to draw money and attention away from the health-related MDGs?
October 19th, 2011 at 1:21 am
I am an ex-tobacco farmer, kicked off in 2002.
When Zimbabwe agriculture is rebuilt it would, in my opinion, be a mistake to rebuild the tobacco industry. A high value cash crop, grown on a field scale should be found to replace tobacco. I have been researching the feasibility of growing bamboo as an industrial crop for processing into laminated boarding and textiles. I would welcome comment from your organization.
October 19th, 2011 at 4:08 am
The World Bank’s ICSID (International Center for Settlement of Invested Disputes) has accepted a case brought by Philip Morris against Uruguay, based on Uruguay’s alleged “expropiation” of the tobacco’s company investment. What Uruguay did was to apply the anti-tobacco convention and expand the size of the warning messages on the cigarette boxes (to 80% of the surface) and to ban the misleading use of colors like light blue in the branding, as they are associated with the notions of “light” and therefore less dangerous.
The very fact that the case was accepted implies a sanction for a small country like Uruguay, forced to deviate million of dollars to pay for lawyers whose fees, even if the country wins the case, will be larger than any claim for “damages” to the tobacco firm, which has an insignificant market in the country. Courts can refuse to even consider weird cases and this should have been done, but “investors rights” have priority over health in the World Bank’s value scale.
October 19th, 2011 at 12:28 pm
Thanks for the feedback.
Health MDGS: I don’t see any reason that the tobacco control efforts would take attention and effort away from the Health MDGs. Raising tobacco taxes requires technical support and in-country staff who generally have little to do with health. If there is an opportunity cost, it would be the tax administration experts who would rather be doing other things (e.g. improving income or VAT taxes).
Future of farming: I agree with Bruce 100% that tobacco is not a good future for any farm, no matter how productive and profitable the crop is today. Putting the investment and effort into alternative crops and markets is going to be sustainable in a way that tobacco isn’t. The economics of this decision may be very tough in different circumstances, but ultimately it cannot be satisfying to produce a product that harms people’s health and leads to so many deaths.
World Bank dispute mechanism: When I first saw that the tobacco companies were using the WB ICSID to go after Uruguay, I planned to blog how this contradicted WB policies on health. However, after investigating further, I found out that the ICSID is more like a court (not a WB operational department), bound by procedures, for dealing with international disputes. I don’t think there is any way for the ISCIS to refuse to hear such a complaint unless tobacco were an illegal product. I may be wrong. I suppose they could judge it to be frivolous by rejecting the argument that advertising requirements in some way “expropriate” tobacco company assets. I’d be interested in hearing more if anyone can enlighten me on the legal standing of the ICSID to reject such suits.
October 19th, 2011 at 1:42 pm
The ICSID logo looks like he World Bank logo, the ICSID website is http://icsid.worldbank.org/ and it states that “The ICSID Convention is a multilateral treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development (the World Bank).”
Further, “the Administrative Council convenes annually in conjunction with the joint World Bank/International Monetary Fund annual meetings” and “the President of the World Bank is ex officio Chairman of the ICSID.”
It functions, yes, as an arbitration mechanism (NOT as a court, which would imply independence from other powers), but that does not make it autonomous in any way from the World Bank, which designed it, manages it, selects arbitrators and promotes countries to adhere to it as part of its loan conditionalities.
The referees may ultimately decide on their own, but the ICSID rules of the game are entirely biased against governments and their ability to comply with human rights requirements (health included) when those conflict with investors interests. Further, ICSID contradicts the principle of equality under the law, as Uruguayan tobaccco companies can only sue their government in local courts while foreign investors, like Philip Morris, can use an international mechanism.
October 19th, 2011 at 1:46 pm
Thanks to Bill for flagging this important issue. The Bank strongly agrees that tobacco control is a major public health issue, and that’s why we have take such a strong stance not only in our recent paper, quoted by Bill, but also at several events during the UN NCD Summit, and the Washington Post Live forum on NCDs. We fully agree that we all can and should do more to help countries accelerate the implementation of the FCTC articles and the EMPOWER measures. But how to go about it?
The question about Bank lending for tobacco control is fair, but it may not be the most relevant one. Given the proven potential for tobacco taxes not only as a public health intervention but also to increase the government’s revenue, most middle-income countries — where tobacco use is highest — do not require Bank financing to engage in tobacco control. In these cases, the most value-added the Bank can bring to the table is not our money, but our knowledge and technical support to help countries take sensible development decisions – like adopting tobacco control programs – and put them into practice.
And we are doing this. For example, in Russia, the Bank-financed report Dying Young zeroed in on the impacts of tobacco use on increased male mortality, and in turn provoked a policy dialogue that led to the passage of the recent tax increase in alcohol and tobacco. As Bill suggests, we are in the process of uniting our health and fiscal specialists to work together on this issue. We will be starting work soon in Latin America and the Caribbean to analyze tobacco taxes as part of a broader regional study on national taxation systems. In addition, we have joined forces with key voices in tobacco (notably WHO, CDC, and the Bloomberg Philanthropies) to strengthen our collective capacity.
That said, as we move forward the Bank also stands ready to provide financial support to countries if they seek our help – consistent with our country demand-driven financing model. We welcome your continued strong advocacy to keep this issue front and center.
November 3rd, 2011 at 10:18 am
Thanks, Montse, for sharing how this issue is seen within the World Bank. I appreciate your engagement and efforts and the points you make sound good. Nevertheless, the comment reinforces my main concern: tobacco control is falling between the cracks in the World Bank bureaucracy and is not receiving the attention it requires from higher management levels.
You’ve listed a number of ways that the World Bank is talking about tobacco at meetings, issuing a report in Russia and being available to help if countries seek your help. From inside the World Bank, this may look like progress but from outside it looks like the institution is failing to mobilize its real power as a vocal spokesperson for good public policies. The World Bank has never been shy when it comes to promoting particular approaches to fiscal and trade policies, to health systems work, or rural development. Why wouldn’t it mobilize a strong, all-Bank strategy, on a cross-sectoral and obvious policy like tobacco control? An article I read recently about tobacco control in Vietnam (http://bit.ly/soDAuw) describes how the Health Ministry’s pioneering efforts to control tobacco may be reversed by opposition from the Finance and Trade Ministries. It is precisely because the World Bank (and IMF) regularly meet with and engage these finance and trade ministries in low- and middle-income countries that a strong statement from Zoellick and a strong directive to put tobacco control on the table of every fiscal policy and health system discussion is so important. The World Bank plays a unique role in this way that no other institution can play (with perhaps the exception of the regional development banks? It would be great to see them step up to the plate).
Roberto Bissio’s comments are quite troubling and deserve some response from the World Bank, too. Now that I understand how much responsibility the World Bank has for the ICSID’s decision to hear cases, it is clear that the World Bank’s management is advising the Board to combat tobacco in one arena (policies on NCDs and health systems) and to undermine tobacco controls in another arena (i.e. the ICSID). That action, more than anything else, speaks louder than words.