An opaque partnership reveals the influence of the tobacco industry in Laos

An investigation conducted by the media The Examination[1] reveals that a confidential agreement between cigarette manufacturer Imperial Brands and the Lao government helped maintain extremely low cigarette prices in the country for more than two decades. This partnership, kept secret for twenty-five years, is said to have quietly enriched a government insider while circumventing tobacco control efforts.

This situation raises many questions about the influence of the tobacco industry in countries with weak governance and the health and economic consequences of such an agreement.

An opaque contract artificially maintaining very low prices

In 2001, Imperial Brands, one of the world's largest cigarette manufacturers, entered into a joint venture agreement with the Lao government, formalized under the name Lao Tobacco Ltd. This business partnership granted the multinational particularly favorable tax conditions, including a cap on taxes on tobacco products for an initial period of 25 years.

The effects of this agreement on retail prices were immediate and lasting. By keeping taxes very low, the price of a pack of cigarettes was set at around 25 euro cents, one of the lowest in the world. This fixed tax policy resulted in increased accessibility to cigarettes for the entire population, including young people and low-income populations. As in many Asian countries, few Laotian women smoke. However, according to WHO estimates, the country's male smoking rate, at 37,%, is one of the highest in the world.

According to data collected by the Southeast Asia Tobacco Control Alliance (SEATCA), this mechanism deprived the Lao government of more than $143 million in tax revenue between 2002 and 2019. In the absence of annual adjustments or public renegotiation clauses, the government was unable to adapt its tax policy to economic developments or implement the levers recommended by the WHO Framework Convention on Tobacco Control, which Laos has nevertheless ratified.

The contract remained confidential for more than two decades. No documents were published by national authorities regarding the tax clauses or mutual commitments. This complete lack of transparency made any independent assessment impossible, both of the company's profits and the consequences for the country's public health policy.

A privileged beneficiary and a total lack of transparency

The investigation also revealed that a private individual with close ties to the Lao authorities personally benefited from the deal. This individual was Sithat Xaysoulivong, brother-in-law of former President and Prime Minister Bounnhang Vorachit. Through a Singapore-registered company, S3T Pte. Ltd., Sithat Xaysoulivong allegedly acquired a stake of between 20 and 34 billion CFA francs in Lao Tobacco Ltd.

This stake, purchased for approximately $990,000, has reportedly yielded over $28 million in dividends to date. This exceptional return was achieved without any disclosure requirements, public valuation, or known consideration. There is no indication whether the income received was subject to tax or reinvested for the benefit of the Lao people.

The names of the beneficiaries of the agreement were not included in public documents relating to the joint venture. The role of S3T and its owner was only recently discovered through the analysis of internal documents and financial records. The lack of transparency requirements regarding minority shareholders and dividends paid reflects a structural weakness in the governance of major economic partnerships.

Business ethics experts interviewed by The Examination point out that the profile of this transaction, combined with the nature of the sector concerned – in this case, the tobacco industry, historically exposed to high risks of illicit practices – would have justified, in other countries, the opening of formal investigations under anti-corruption legislation, such as the UK Bribery Act or the US Foreign Corrupt Practices Act (FCPA). To date, there is no evidence to suggest the existence of an illegal act, but all the conditions met – including the opacity of the contract, the beneficiary's position of influence and the disproportionate financial benefits – correspond to what the regulatory authorities commonly refer to as "red flags" or indicators of high risk of corruption.

A necessary response at the international level

This case highlights the risks that economic agreements concluded outside of any rigorous public framework can pose. It underscores the need for both states and international institutions to ensure complete transparency in contracts involving products with a high health impact, such as tobacco.

Article 5.3 of the WHO FCTC explicitly provides that public health policies must be protected from the commercial interests of the tobacco industry, and its implementing guidelines recommend excluding any voluntary agreements with the tobacco industry. The agreement signed in Laos appears to have resulted in the opposite situation, in which commercial conditions have compromised public health objectives while favoring private interests close to power.

The international community and regional governance bodies are called upon to strengthen transparency requirements for foreign investment, particularly in sensitive sectors. Finally, this case illustrates the importance of strengthened cooperation between public health institutions, tax authorities, anti-corruption organizations, and civil society to ensure that national policies are not exploited to the detriment of the public interest.

[1] Jason McLure, María Pérezand, Mailee Osten-Tan, How Imperial Brands' confidential contract kept cigarette prices low in Laos — while secretly enriching a political insider, The Examination, published June 17, 2025, accessed June 18, 2025