PHILIP MORRIS INTERNATIONAL TO BUILD CIGARETTE PLANT IN

UNCLAS DAKAR 002887

SIPDIS

SIPDIS

STATE FOR EB/TPP/ABT, OES/IHA, AF/W AND AF/EPS
STATE PASS USTR/ENV
USDOC FOR 4510/OA/PMICHELINI, AROBINSON-MORGAN/KBOYD
USDOC FOR 3131/CS/ANESA/OIO/GLOOSE/GLITMAN/MSTAUNTON
USDOC PASS DHYLTON/OCC

E.O. 12958: N/A
TAGS: EAGR BEXP ETRD EINV AMGT SG
SUBJECT: PHILIP MORRIS INTERNATIONAL TO BUILD CIGARETTE PLANT IN
SENEGAL

REF: 05 STATE 50339


1. This is an action request for State Economic Bureau, Office of
Trade Policy and Commerce, Office of Chief Counsel for International
Commerce. See paragraph 6.

Summary
--------------

2. Per Reftel, Post seeks guidance on Tobacco company Philip Morris
International's (PMI) request for a letter of support as they
proceed with construction of a new USD 30 million cigarette
manufacturing and distribution center in Senegal. Once completed,
PMI would be the second largest U.S. investor in Senegal. PMI is
concerned about the imposition of an increased import tax and may
request additional USG assistance if they conclude this is an
illegal, protectionist effort that only applies to PMI imports. End
Summary.


3. Tobacco company Philip Morris International (PMI) has announced
plans to build a USD 30 million cigarette manufacturing and
distribution plant in Senegal. The plant, PMI's first manufacturing
facility in Africa, would employ 400 workers. PMI would export
cigarettes produced in Senegal throughout the eight-country West
Africa Economic Monetary Union (WAEMU) region. To ensure that the
construction of the plant proceeds as planned, PMI representatives
have requested a letter of support from Ambassador Jacobs to express
the U.S. Government's expectation that PMI will receive the GOS's
full and unbiased cooperation as they proceed with construction.
Until the completion of the plant, PMI will import its Marlboro
brand of cigarettes from the U.S., which until September 2006,
were imported into Senegal by PMI's former Senegalese partner Mtoa
Imperial.


4. PMI expects to begin production of its Marlboro brand of
cigarettes in September 2007 at which time it will halt the
importation of this brand. According to PMI, Senegal's Investment
Promotion Agency (APIX) has been instrumental in helping PMI
identify a site and secure a construction permit in six months. In
Senegal's challenging investment climate, PMI considers this a
record feat. However, Senegal's Directorate of Customs suddenly
imposed a 30 percent tax (officially called a "minimum import
price") on the first container of cigarettes PMI imported into
Senegal.


5. PMI believes that the 30 percent tax has been instigated by its
former partner--now competitor, Mtoa Imperial Tobacco. Mtoa is a
Senegalese company and is the only local cigarette manufacturer.
PMI is now the largest importer of tobacco products in Senegal with
minor competition from local importers and, upon completion of the
plant, will be Mtoa's biggest competitor. PMI has agreed to pay the
tax, with the caveat that that each of its competitors pay the same
"minimum import price".


6. PMI also questions whether WTO procedures were properly observed
since, according to PMI, the tax went into effect overnight. PMI
estimates that the additional tax will cost over USD 3 million
through September 2007.

Action Request
--------------

7. Post requests guidance on whether to send a letter from the
Ambassador to appropriate GOS officials expressing U.S. Government
support of PMI's investment in Senegal. Post also requests guidance
on whether to advocate on behalf of PMI regarding tax and other
alleged unfair treatment, if requested.

Jacobs