In the years since the end of the war, Vietnam had fought a seemingly losing battle against smugglers. Until 1990, the "transit" or smuggled market into Vietnam was estimated by BAT to be 12-18 billion cigarettes a year. Then, after a clampdown that September, "smuggling was virtually eliminated for 18 months", according to a report to Paul Adams, Asia-Pacific regional director.
The hiatus did not last long. As border conditions relaxed, contraband routes again appeared, particularly through Cambodia. In 1992, the company’s Cambodia business plan referred to this situation as, apparently, a temporary contingency: "Cambodia will continue to service the Vietnamese market until the [Vietnamese cigarette import] ban is lifted".
Soon, contraband into Vietnam was climbing to pre-1990 levels. In 1992, Mr Adams was told that BAT’s State Express 555 brand cigarettes was the "major smuggled brand in the area … there is no doubt it has a tremendous image and sales potential". Sales of smuggled SE555 were then estimated to be about one billion cigarettes, worth roughly £10m a year.
A series of company papers showed that from 1991, BAT pursued a twin-track strategy to maximise earnings from Vietnam. One track was to negotiate with the Vietnamese government and its tobacco monopoly, Vintaba, to produce international brand cigarettes locally. The other track was monitored from BAT’s Asia-Pacific Regional Business Unit, where one executive made notes on "the high margins on illegal product [being] justified on grounds of risk. The amount of handling associated with imported distribution [is] coupled with the requirement of frequent concealment".
Both projects went ahead. By mid-1993, BAT State Express 555 brand cigarettes were being sold as "Made in Vietnam".
Meanwhile, back in Britain, executives in BAT’s Far East Support Unit (FESU) juggled complex calculations to assess what balance of trade channels would deliver maximum profit.
In a document suggesting the clarity and precision of BAT’s understanding of pricing in the GT trade, Brookes was told that: "Ex-factory price should be such that retail price falls at parity with GT (not fully controllable). GT price structure is: BATUKE to SUTL, $245, SUTL to importer, $290, Importer to Wholesaler, $348, Wholesaler to Trader (Cambodian border) $350". In other words – and in recognition of the independence of smugglers – BAT staff in Britain seemed to wish to adjust the sale price of their cigarettes to their agent to set the final end-market price in Vietnam.
BAT’s records suggest that Vietnamese officials treated the company’s conduct with suspicion – and told them so. Company executives had a series of meetings with Le Dinh Thuy, director general of the Vietnamese Vintaba tobacco company. A letter from Singapore to BAT’s headquarters, then in Staines, Middlesex, reported that at a June 1991 meeting "Mr Thuy was obviously fully aware of both BATUKE’s and SUTL’s activities in Vietnam, stating ‘what are these people doing visiting Vietnam when the import of cigarettes is banned?’ It is a point I think should be taken very seriously".
Similar enterprises took place across Asia. In Taiwan, BAT reckoned in the early 1990s that it had about a one billion share of the four billion a year "transit" market. In Thailand, the market was more than 555 million a year. In Vietnam, it was one billion.
In 1993, BAT employed a single senior executive to take charge of GT sales around the world. The post of "senior regional export manager" was based at BATCo’s HQ in Staines. Although the job was to co-ordinate sales in Asia and the Pacific, the executive’s second task was "co-ordinator of GT worldwide".
In this capacity, the manager was made "responsible to all five regional directors for the co-ordination of all BATCo general trade sales worldwide". This person was charged with the "maintenance of profiles of all main dealers, and monitoring of supply routes; negotiation of trans-regional accounts, [for example] SUTL".
But there was a special warning "due to the nature of export general trade business, the distributors handling this are not easy to manage and difficult to motivate. Their loyalty is sometimes questionable. Due to the type of business and the sums involved, bribery attempts are frequent … [The person appointed] must be permanently alert to the confidentiality needed in some areas of the business".
The executive had to be on continual alert for new trade by conducting a "proactive search for new GT business".
The report concluded, without any apparent irony, that "integrity is an absolute must".
The disclosed BAT documents indicate that "GT", "transit" or, more plainly, smuggling, seemed to be seen by BAT Industries in the early 1990s as a necessary and substantial part of being competitive and successful in the international tobacco business. Its directors were told in a 1993 paper that "a significant proportion of the world export trade is transit. It exists wherever there are widely different excise rates and trade restrictions, and is expected to continue.