Swiss tobacco giant Philip Morris enters Egyptian market through doubtful tender

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Philip Morris International, Phillip Morris

Swiss tobacco giant Philip Morris International (PMI) has sparked controversy by penetrating Egypt’s lucrative tobacco market through a highly questionable and secretive tender process. This move, which has attracted widespread scrutiny and disapproval, underscores concerns about the transparency and fairness of PMI’s entry into one of the world’s most desirable tobacco markets. Allegations of impropriety have cast a shadow over PMI’s expansion efforts in Egypt, raising serious questions about the integrity of the process and the company’s business practices.

PMI’s journey into the Egyptian market traces back to the early 1980s, a fact illuminated by a WHO report from 2003, revealing the company’s enduring fascination with this North African nation. Despite PMI’s longstanding interest, Egypt’s tobacco sector remained firmly under the grip of the state-owned Eastern Company, impeding private enterprises’ aspirations to dominate the market. The landscape shifted when Egypt found itself under pressure from the International Monetary Fund to privatize state assets. This pivotal moment heralded a new era, allowing private investors such as PMI to seize opportunities previously out of reach, as doors swung open to private involvement in Egypt’s tobacco industry.

The pivotal moment came in 2021 when Egypt’s Industrial Development Authority invited private tobacco firms to bid for a license to manufacture cigarettes. Amidst protests from major international tobacco firms, the tender was awarded to United Tobacco Company in April 2022. Notably, PMI’s involvement in United Tobacco was not publicly disclosed until mid-2023, when it was revealed in a filing to the US Securities and Exchange Commission.

PMI’s stake in United Tobacco, alongside Emirati businessman Abdullah Al Hussaini and Eastern Company, raises questions about the transparency and fairness of the licensing process. The ownership structure of United Tobacco remains shrouded in mystery, with significant shares held by entities whose identities are undisclosed. Such opacity not only undermines transparency but also fuels speculation regarding potential involvement of politically connected entities, including Egypt’s military.

The lack of disclosure surrounding company ownership in Egypt is a cause for concern, hinting at possible entanglement with entities linked to the military, a sensitive issue in the country’s domestic landscape. While there is no concrete evidence linking United Tobacco to military interests, the broader context of military-owned enterprises in Egypt underscores the need for greater transparency in business dealings.

Moreover, PMI’s reputation has been tarnished by accusations of involvement in cigarette smuggling and various unethical behaviors. Alongside other prominent tobacco firms, PMI encountered legal challenges from the EU during the early 2000s, stemming from allegations of instructing distributors to participate in illicit activities, such as smuggling products into nations under embargo. These claims have created a cloud of suspicion around PMI’s activities and evoke apprehensions regarding its conduct in burgeoning markets like Egypt. Such controversies not only undermine PMI’s credibility but also raise significant ethical concerns, prompting closer scrutiny of its operations in various global markets.

The transfer of shares from Eastern Company to Global Investments Holding, an entity based in the UAE and associated with Al Hussaini, adds another layer of complexity to Egypt’s tobacco industry. Al Hussaini’s dual ownership in Eastern Company and United Tobacco intensifies worries about market monopolization and the erosion of competition. The consolidation of influence among a select few entities, combined with obscure ownership arrangements, poses a significant risk to market transparency and consumer interests. This concentration of power heightens concerns over the potential exploitation of market dynamics, potentially leading to detrimental effects on both market integrity and the welfare of consumers.

Egypt’s tobacco sector represents a lucrative opportunity for investors, given its rising demand and substantial contribution to government revenue. However, the lack of transparency and fair competition in licensing processes raises red flags and demands greater scrutiny from regulatory authorities. As Egypt continues its journey towards privatization, ensuring accountability and transparency in business dealings is paramount to fostering a competitive and sustainable marketplace.

PMI’s entry into the Egyptian tobacco market through a questionable tender process underscores the need for greater transparency and accountability in the country’s business environment. The opacity surrounding company ownership, coupled with allegations of unethical practices, raises concerns about the integrity of the market and the welfare of consumers. As Egypt navigates its privatization journey, it must prioritize transparency and fair competition to safeguard its economic interests and uphold ethical standards.

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