Ban Dong Yang. Thailand - Boonchuey Sisenpila isn't a heavy smoker, but he's real big on tobacco.
At this time of year, tens of thousands of strung tobacco leaves
are drying in his yard. More leaves hang underneath his house built on
stilts. And sometimes, piles of leaves are inside his simple home in
this village 450 kilometers northeast of Bangkok.
Ten years ago, Mr.
Boonchuey worked only half a year growing rice on his infertile land.
And for Mr. Boonchuey, like thousands of other farmers in northeast
Thailand, the rice crop barely was enough to survive on.
Today,
however, he plants a type of oriental, or Turkish, tobacco after the
rice harvest. The income from the tobacco, recently brought to the
region on a large scale, provides for a better life.
"Without
tobacco, my life would be pretty miserable," says the 38-year old
Mr. Boonchuey. With tobacco, Mr. Boonchuey has a better house, a
motorcycle and a television. He pays school fees for his four children
and can afford medical care.
Oriental tobacco is a success story in
this arid region. The credit for this success goes partly to the state
tobacco monopoly, which first grew it in the area, but mainly to a
small Thai-American private venture that created an export market for
the product.
The development of oriental tobacco has improved the
lives of about 40,000 families. Nevertheless there still are many poor
farmers in the northeast, where one-third of the country's 49 million
people live. The per-capita income in the region is less than $304 a
year, about one-sixth that in Bangkok.
For some poor farmers, Adams
International Ltd, the U.S.-Thai joint venture, has given them what's
probably needed most: a market and assistance to produce the quality
tobacco that the market requires.
Adams's experience in northeast
Thailand is a good case study of rural development working because
supply and demand are properly aligned. It's also working because
government agencies and private concerns are cooperating to everyone's
benefit. And because farmers, who must meet rigorous requirements, get
what they are promised.
"This isn't any kind of charity," an Adams executive says. "We have to make a profit."
The company has won high marks from farmers and Thai officials.
"I've been looking for skeletons in their closet." a foreign
agricultural specialist says, "but I can't find any."
But
despite its success, Adams is concerned about the future. The company
is keenly aware that the future of tobacco isn't secure. Changes in
the world market already are affecting farmers, and Adams has scaled
back the number who grow it.
Adams is experimenting with other
crops. It may take years to develop them, but the company's
78-year-old chairman. Canton-born Kosol Chongsuknirandr, is patient.
Mr. Kosol, a naturalized Thai citizen also known as K.S. Chung, worked
10 years to get the export of Thai oriental tobacco going.
But
contrary to the acronym it uses - AIL - Adams is healthy financially.
The company reported a profit for 1983 of $900,000 on sales of $16
million.
Adams has had many setbacks though. In 1978, the company
destroyed nearly 10% of the tobacco grown for it. The company paid
farmers as promised, then burned the low-quality leaves in front of
them because they weren't salable.
"We had to dramatize that
the product wasn't useful," says Peter LaRamee, a former Peace
Corps volunteer in the northeast who's an Adams executive. "We
want farmers to do it right."
Until the late 1950s, Thai
farmers didn't grow oriental tobacco, though many grew two other types
of tobacco - flue-cured (Virginia) and Burley - in the far north
around Chiang Mai. Oriental tobacco, grown primarily in Greece and
Turkey, is mixed with the other two types to make cigarettes.
In a
bid to cut down import, the state-owned Thailand Tobacco Monopoly
began planting oriental tobacco in the northeast. The monopoly
perceived that the region's dry sandy soil and lack or rain from
November to April offered potential.
Starting with 200 families, the
monopoly established that the tobacco could grow. But it lacked
resources - or incentives - to boost production substantially. By the
late 1960s, the crop still was small, totaling less than 100 metric
tons.
The monopoly's work was noticed by Mr. Kosol, who had moved to
Thailand from Hong Kong after World War II to sell American tobacco.
With encouragement from the government, he looked into exporting
oriental tobacco.
"Farmers were eager to grow more," Mr.
Kosol says. The market, however, wasn't so good; several foreign
buyers looked at Thai oriental tobacco and turned it down because of
low quality.
Mr. Kosol wasn't discouraged. He arranged some small
sales to buyers in Taiwan "who weren't so critical of
quality." He also tried to improve the leaves and arranged some
export of flue-cured and burley tobacco.
In 1969, W. A. Adams Inc.
of Oxford, North Carolina, a tobacco processor, decided to enter a
joint venture with Mr. Kosol to export Thai tobacco of various
types. The U.S. company took 49% in Adams International, while Mr.
Kosol's family held 51%.
The venture's big break with oriental
tobacco came in 1974, when Philip Morris Inc. of the U.S. took a
50-ton sample. The U.S. cigarette-maker said it could take larger
quantities to blend with other tobaccos, assuming the quality of the
Thai product improved.
Mr. Kosol says the U.S. interest "was
exactly what we needed to put Thailand on the map of oriental tobacco
producers." Adams's exports of Thai oriental tobacco surged to
580 tons in 1975 from 70 tons in 1974.
There were quantum jumps in other years, with exports peaking at nearly 5,800 tons and $13.5 million in 1982.
Adams currently sells to seven or eight countries, but Philip
Morris remains the major customer. The U.S. company accounts for about
60% of Adams's oriental tobacco exports.
The large demand from
Philip Morris fueled a big expansion in tobacco cultivation in the
northeast. In the beginning, Adams's needs were so small that it
simply paid farmers already growing for the tobacco monopoly to
cultivate more for Adams. In 1974 when Philip Morris took the trial
order, 982 farmers were growing specifically for Adams. By 1982, the
number reached 40,450.
Philip Morris worked closely with Adams to
improve the quality of the Thai oriental tobacco. In expanding. Adams
carefully chose farmers and land. While the northeast and oriental
tobacco generally make what the company calls a "perfect
fit," many areas aren't suitable for cultivation.
Oriental
tobacco, which takes about four months from seeding to curing, is
labor-intensive. Many tedious hours are required for stringing the
leaves to dry and for sorting and baling.
The families growing
tobacco distribute the tasks. Sai Nawat, a farmer in Ban Song village
in Roi Et province, says his wife and four children, aged nine to 17,
help. "Everyone is needed." he says. "Tobacco is a lot
of work."
But he welcomes the chance to work at home. Like many
northeast men, Mr. Sai used to move around the country looking for
dry-season work.
The governor of Roi Et province, Preecha
Kachapalayook, says it's good that tobacco is so labor-intensive.
"Tobacco gives the men something to do after the rice harvest
rather than drinking and gambling." he says.
Since tobacco is
so much work, each family can properly cultivate only a small area.
Adams assigns the families quotas based partly on the amount of land,
partly on the number of people who can work it and partly on the
company's needs.
Many families cultivate only one rai, or 1,600
square meters. Farmers working for Adams say hard work on a small area
gives a good return.
Some farmer growing for the tobacco monopoly
plant five or six rai, but Adams won't permit that. "If you do
too much, you won't do it well." Mr. La Ramee says.
Mr. Boonchuey plants 1 1/2 rai. He says he and his family "can't handle any more."
He's happy with his return. In a good year, he gets a profit of
about $320 after paying back about $26 for all the Adams-supplied
materials. The price of the tobacco is fixed by the governments'
Excise Department. The department sets the price to ensure a
reasonable return for the farmers growing for the tobacco monopoly or
for Adams.
To get higher quality, Adams has a large extension
program that includes 400 "village inspectors" who assist
farmers.
Adams recruited its first 60 inspectors from Thai
agricultural colleges. This failed dismally. Within a year, half the
inspectors quit and the other half was fired. Adams says many of them
wanted desk jobs and others were too young to earn farmers' respect.
Also as one manager puts it, "They wanted to flirt with the
prettiest girl in the village rather than work with the best
farmers."
Adams then appointed many of its good farmers as
inspectors. It taught them about tobacco and gave them tools for
teaching others.
Each seed packet an inspector gives a farmer has
pictures showing how to make a seedbed. Adams also provides farmers
with a wall calendar, each page has pictures illustrating what should
be done each month, plus the right and wrong way of doing it.
In
addition to advice, Adams supplies farmers everything they need from
fertilizer and insecticide to twine and burlap for baling leaves. The
company insists these materials be used as directed.
There's no
ifs, ands or buts about this." Mr. LaRamee says. "We're out
there to get quality, and we know that in the long run, if farmers do
as we say, they'll get quality and a better price." (Tobacco is
bought by grade. with higher grades getting better prices.)
Unfortunately for Adams and the farmers, prospects for expanding
exports of Thai oriental tobacco aren't good. Mr. Kosol says the trade
will, at best, remain the same and we'll be satisfied to maintain
present production."
Current production is well below peak
levels: Adams expects to export slightly under 4,000 tons this year a
45% drop from the 1982 record.
Philip Morris has maintained its
purchases, but some other buyers haven't. For a long time, Thai
oriental tobacco was cheaper than similar leaves from Greece. But
Greek tobacco currently is cheaper because of subsidies the country
gets from the European Community.
The number of farmers growing for
Adams also has dropped to fewer than 27,000. Adams reieased some
because their soil and production weren't good enough.
Many of the
farmers that Adams can't keep have been transferred to the tobacco
monoly. The state company, benefiting from its cooperation with Adams.
is getting better oriental tobacco for its own use. Consequently. it
has increased demand repaidly. This year. it expects to buy about
3,000 tons from farmers. 50% more than last year.
Diversification
from tobacco would benefit Adams and its farmers. "We need to
produce something more essential than tobacco. "Mr. Kosol says.
"and that's food."
The poor soil in the region has
discouraged many from trying new crops. But Adams appears to be making
headway on an experirmental farm growing vegetables and fruit.
Promoting New Crops
Adams says it won't get farmers to grow anything
until the crop is proved viable. Mr. La Ramee says. "We have to
make sure the farmer won't lose any money doing it."
In
promoting new crops. Adams has the advantage of already having the
farmers' trust. But it has one potential disadvantage in that all its
experumentation work could be wasted if farmers sell to middleman
offering a higher price. This isn't a risk with tobacco. which
requires substantial processing. (An Adams factory employs 1,000 women
part of the year.) But it could be a danger with a crop like tomatos.
Even with diversification. Adams expects to sell a lot of tobacco.
meaning that ists future may hinge on retaining a strong link with
Philip Morris. which appears to have an attachment to the Thai program.
A promotional film shown at the 1983 meeting of Philip Morris's
shareholders notes that the market for Thai oriental tobacco "did
not exist until Philip Morris created it."
The film includes a
segment with Aran Thammanon. director-general of Thailand's Excise
Department. He comments that Adams and Philip Morris "have done a
great job for the people of this country" and adds that Thailand
wants more cooperation with the company.
Philip Morris hasn't
received all the cooperation in Thailand it would like. The company
has been labbying unsuccessfully for years for permission to make and
sell cigarettes in Thailand. The tobacco monopoly, which comes under
the Finance Ministry has resisted efforts by several foreign companies
to break its lock on the lucrative domestic market.
