An escalating trend in NCDs and tobacco consumption among the Vietnamese during the past decades raised growing concern. Although the harmful effects of smoking are well known and scientifically proven, the habit continues to spread, with a current adult smoking prevalence of 23.8% (15.3 million), with 47.4% among men and 1.4% among women, the overall prevalence being one of the highest in the world. This has resulted in substantial health, economic and social costs to the Government. The total direct and indirect health care cost for five diseases attributable to tobacco use (lung cancer, cancers of the upper respiratory tract, chronic obstructive pulmonary disease, ischaemic heart disease and stroke) among smokers was estimated to be VND23139.2billion (about USD1113.7million) in 2011. As the price of tobacco products is still low, they are relatively affordable.
The magnitude of the problem outweighs the health promotion and preventive measures taken by the Vietnam Government because of a limited national health budget. Tobacco use has always been perceived as of low priority on the health agenda, and only a fraction of funding is allocated for smoking prevention programs. Thus, 90% of the resources for the tobacco control movement initiatives have been from international donors since the early 1990s. However, the contributions from these international donors were not guaranteed or regular. The limited national budget for tobacco control and a diminishing flow of international funding make it difficult for Vietnam to effectively implement comprehensive tobacco control measures in accordance with the WHO FCTC, which it ratified in 2004. This realization triggered an urgent call to the Government to secure more regular, stable, sustainable funding to deliver comprehensive tobacco control programmes across the country.
Inspired by Australia (the Victorian Health Promotion Foundation) and Thailand, Vietnam obtained funding through a dedicated tax from 1987. This was, however, ruled by the High Court as unconstitutional in 1997, and tobacco control has received funds from the national budget ever since). A group of health professionals and tobacco control advocates was formed, which is spearheaded by the Vietnam Steering Committee on Smoking and Health (VINACOSH), the tobacco control unit in the Ministry of Health. The Steering Committee has been advocating for a tobacco control fund in Vietnam since 2008. An intensive movement to garner both political and public support for the establishment of a tobacco control fund began the following year, with the drafting of a tobacco control law. The importance of establishing a sustainable funding mechanism was recognized as essential for ensuring a primary and long-term stream of funding for advancing tobacco control policies in Vietnam.
Strategic partnerships and multi-sector collaboration between the Government and non-government agencies in the health and fiscal sectors led to establishment of the Vietnam Tobacco Control Fund (VNTCF) as a self-sustaining internal financial resource from taxes on tobacco products. This was achieved by enactment of the country’s first comprehensive tobacco control law with provision of a dedicated fund. The law was adopted by the National Assembly on 18 June 2012 and took effect on 1 May 2013.
- Process that led to adoption of the Vietnam Tobacco Control Fund
The Vietnam Government ratified the WHO FCTC in 2004. Three years later, the tobacco control law was proposed for inclusion on the National Assembly agenda; however, it was not considered a priority at that time. In 2010, it made its way onto the official agenda, paving the way for establishment of the VNTCF and a tobacco control law. After a series of consultations and revisions to the overall structure and wording of the draft law and incorporation of recommendations from various ministries in order to gain their support, it was submitted to the National Assembly for review in August 2011. After two rounds of hearings in November 2011 and May 2012, the tobacco control law was adopted on 18 June 2012 by the National Assembly.
The Ministry of Health, and particularly VINACOSH and the Department of Legislation, spear- headed the process of adoption of the law. The strategic partnership between the Ministry of Health and the Ministry of Finance was the determining factor in establishing a tobacco control fund based on an earmarked tax. VINACOSH contacted various ministries, such as of Justice, Finance, Education and Training, Public Security and Industry and Trade; National Assembly committees, such as for Social Affairs, Legislation and Budget and Finance); public organizations (Labour Union, Women and Youth Union, Fatherland Front); civil society (NGOs, HealthBridge Vietnam, Community Development Service Centre, the Hanoi School of Public Health and the Public Health Association); local leaders and National Assembly delegates in some localities; the Tobacco Control Working Group, WHO, international donors and the mass media. They received technical and financial support from regional and international partners, including Bloomberg Philanthropies, the International Union against Tuberculosis and Lung Disease (the Union) and the Campaign for Tobacco-free Kids, Atlantic Philanthropies, Vietnam–Sweden Health Cooperation, WHO and the Southeast Asia Tobacco Control Alliance.
VINACOSH was at the forefront of preparation of the tobacco control law and in advocating for its enactment. The Committee took various approaches and strategies, with partners including WHO, HealthBridge and local NGOs, to strengthen collaboration and gain support from key stakeholders for the tobacco control fund. They consulted with officials in relevant Government agencies to obtain their commitment, gain access to high-ranking officials and build contacts with Vietnamese agencies with similar funding mechanisms. Workshops, technical meetings, unofficial face-to-face discussions and follow-up phone calls were used. Bilateral study tours are another means for policy-makers to learn from countries and regions with experience in tobacco control measures, particularly Australia (Victorian Health Promotion Foundation), Hong Kong (China) (Council on Smoking and Health), Malaysia (Malaysia Health Promotion Board), Singapore (Health Promotion Board) and Thailand (ThaiHealth). High-ranking officials in the National Assembly and the ministries of Finance, Justice and Health participated in the study tours to gain better understanding of different tobacco tax systems, financing tobacco control through taxes and controls on cigarette smuggling and to gain support for strengthening Vietnam’s tobacco tax policy and ideas for sustainable funding that could be adapted for Vietnam. Regional and international experts served as resources for the workshops, technical meetings and briefings with high-ranking officials to inform them about tobacco control laws and a to- bacco control fund. The programmes received technical and financial support from WHO, the Southeast Asia Tobacco Control Alliance, the Union and the Campaign for Tobacco-free Kids. The use of evidence-based resource materials (PowerPoint presentations, leaflets, fact sheets, booklets) on tobacco taxation and health promotion facilitated effective discussions on issues, particularly among policy-makers, the public and the media. Local and international evidence- based materials were compiled and synthesized as a basis for messages to support passage of the tobacco control law, including the Global Youth Tobacco Surveys in 2003 and 2007, the Global Adult Tobacco Survey in 2010, studies on health care costs, tobacco affordability and the impact of a tobacco tax, tobacco prices, tobacco and poverty, tobacco and employment, desk reviews of health promotion models including lessons learnt from regional and international health promotion foundations, graphic health warnings and smoke-free best practices.
The original proposal was for a compulsory contribution of 2% of the taxable price per pack for all cigarette brands produced locally or imported for local consumption to be channelled into the VNTCF. The rate was based on the ThaiHealth model, in which a 2% surcharge tax on tobacco and alcohol is collected. A gradual increase in the percentage of the compulsory contribution from the tobacco industry for VNTCF was proposed, after consultation with the National Assembly (particularly the Committee of Budget and Finance, the Government Office and related ministries). The proposal was for a gradual increase 3 years after the tobacco control law came into force, including 1% from 1 May 2013 and thence an increase to 1.5% from 1 May 2016 and to 2% from 1 May 2019. The proposed gradual increase took into account experience from other health promotion funds, which indicated that the fund needs time to build and strengthen its capacity and should therefore start with a small amount and gradually increase it. The proposed rates were adopted by law.
Inevitably, some challenges were encountered during advocacy for the law and inclusion of a tobacco control fund. Initially, there was opposition and reservations about inclusion of a tobacco control fund in the law and also about other important features, such as graphic health warnings, smoke-free tobacco sponsorship and kiddie packs (packs of small size) that are attractive to children. It was clear that there was little awareness among policy-makers, who raised concern about effective use of the fund, corruption and the governance and structure of the VNTCF. Some ministers proposed that the VNTCF be placed under the Minister of Health in order to minimize administrative costs and avoid fund abuse and corruption. Compulsory contribution is a new tax mechanism for Vietnam, and it was challenged by some of the members of the National Assembly and ministries. The tobacco industry raised the argument that a tobacco control fund would affect their profit, as it would increase the price of cigarettes, which would reduce tobacco consumption.
VINACOSH, in collaboration with its partners, prepared a series of evidence-based advocacy materials containing arguments and messages to counter the opposition from the tobacco industry. It also attempted to gain support from the Ministry of Justice and related ministries. The key arguments included those listed below:
- A similar model with a surcharge tax has been used in various countries. Professor Dr Prakit Vathesatogkit summarized 16 health promotion and tobacco control funds around the globe.
- The health promotion fund is an effective way of generating sustainable revenue for long-term investment. A study in the United States showed that investment of USD 1 in tobacco control can generate a return of USD 5 by reducing hospitalizations for heart disease, stroke, respiratory disease and cancer due to tobacco use.
- The funds would be collected from users of these harmful products, instead of taking them from the pockets of the entire population through the State budget and taxes.
- The health promotion fund could be managed effectively, as seen in the health promotion models used by ThaiHealth, the Victorian Health Promotion Foundation, the Singapore Health Promotion Board and others.
- Some countries in the Association of Southeast Asian Nations have established or are establishing a tobacco control fund or a health promotion fund, including the Lao People’s Democratic Republic, Malaysia, Singapore and Thailand.
- The 2% tax for the tobacco control fund would have a minor impact on the price of tobacco products, as it will add only 1% to the factory price. Therefore, the actual cost to the tobacco industry and to individual consumers of the proposed surcharge tax would be negligible, whereas the revenue gain from the tax would be significant for tobacco control and health promotion.
Workshops, meetings with stakeholders and study tours to countries that have established health promotion foundations or similar funding mechanisms were used to raise awareness and for information. Consultations were also held with the Tobacco Control Working Group and international partners, including the Southeast Asia Tobacco Control Alliance, WHO, the Union and the Campaign for Tobacco-free Kids for advice on strategies for tobacco control, and their international experts were used as resources for the workshops. Other measures included mobilizing public support through an online public poll, a communications campaign, dissemination of materials on tobacco control issues and support for the law.
More than a decade of consolidated efforts by various partners resulted in enactment of the tobacco control law and establishment of the tobacco control fund in 2012. Strong support from the Tobacco Control Working Group, high-level political leadership and commitment by policy-makers, including the Minister of Health, the Minister of Finance and the Prime Minister
and also the leader of the Social Affair Committee and the Chairman of the National Assembly, resulted in establishment of the tobacco control fund.
VINACOSH and partners used comprehensive strategies for advocacy and drafting of the law and raised awareness among policy-makers and the public on the harmful effects of tobacco use and tobacco control. With technical and financial support from the donors and other partners listed above, a local evidence base was accumulated to formulate tobacco control policies and an effective communication campaign. Information, education, communication, lessons learnt, common challenges and best practices in health promotion fund initiatives and mechanisms were disseminated to target groups to garner support and coordinate all stakeholders working towards establishing the fund. A strong partnership was built on the basis of shared goals and trust for tobacco control policy reform.
- The Vietnam Tobacco Control Fund
The creation of the VNTCF under the Tobacco Control Law is a historic milestone in tobacco control in Vietnam, as it is a semi-autonomous body with regular, predictable funding from compulsory contributions from the tobacco industry for an earmarked tobacco tax. The funding mechanism was developed by the ministries of Finance and Health and enacted in the tobacco control law. The funding is a separate stream and does not offset any Government budget. The total budget of the VNTCF in the first 18 months (between May 2013 and December 2014) was estimated to be VND 299.17 billion (USD 13.91 million), equivalent to 0.5% of the national health budget in 2014. This complements the national health budget fund, which is used mainly for curative services. The VNTCF supports diverse tobacco control and intervention programmes on a national scale, which replace the pilot projects carried out in selected provincial cities before inception of the Fund.
The funding for the VNTCF is based on compulsory contributions calculated as a percentage of the excise tax. Thus, since 1 May 2013, tobacco manufacturers and importers have been required to contribute 1% of the factory prices of all cigarette packs. This tax will be increased to 1.5% from 1 May 2016 and to 2% from 1 May 2019. The fund is also open to voluntary contributions from national and international organizations and individuals, although other funds have not yet been received. The tobacco companies pay the excise tax to the Department of Taxation each month and an additional 1% is collected for the VNTCF account, with a monthly report to VNTCF. The planning and finance division of the Fund cross-checks with the bank and documents the financial statement with a data management software to document the process.
The organization and operation of the Fund are defined in the law, as decided by the Prime Minister. It is administered by an intersectoral management board, which comprises an advisory board, a comptroller board and the executive board. The management board is chaired by the Minister of Health, with a representative from the Ministry of Finance as the Vice-chair and representatives from the ministries of Industry and Trade, Education and Training and Information and Communication, the Labour Union and other relevant agencies.
VNTCF is under the Ministry of Health and is subject to State financial management by the Ministry of Finance. The Ministry of Health reports to the Government on the performance management and the use of funds annually and reports to the National Assembly on the results of operations and management of the fund biannually. The two main organizational structures, the Executive Board and the Board of Comptrollers, ensure the transparency and accountability of the funding flow and distribution, and the Fund is audited annually by an independent audit agency and a State audit agency. A report is submitted to the Management Board and the ministries of Health and Finance on all expenditure in each fiscal year. Independent bodies, such as academic institutions, conduct impact evaluations and cost-benefit analyses of the VNTCF plan and programmes as its activities continue to expand. A guideline for monitoring and internal evaluation of grants has been prepared in line with the monitoring and evaluation framework, to assess progress in achieving the Fund’s mandate and to identify areas for improvement and future directions.
3.2 Collection and distribution of the VNTCF
The earmarked revenue is used strictly to support tobacco control programmes and strengthen implementation of the tobacco control law. As the Fund functions as a semi-autonomous entity, it retains flexibility in disbursement, and grantees can request additional funding for unplanned activities by revising their original proposal and resubmitting it to the VNTCF for further review and consideration. The Management Board, which convenes only biannually, has the sole authority to grant final approval of any adjustment made to the original proposal.
- Tax implications
4.1 Programme priorities and granting mechanism
The VNTCF provides a long-term, recurrent budget to support short-, medium- and long-term strategies and other activities to prevent and control the harm of tobacco nationwide. The priorities are set in accordance with its mission, as stated in the law, emphasizing policy, capacity and research development and implementation of tobacco control programmes. These include:
- communication and community campaigns on the harmful effects of tobacco use and other prevention and control strategies for different target groups;
- pilot models of smoke-free communities, agencies and organizations;
- community-based smoking cessation services;
- evidence generation through research and capacity-building in a network of collaborators;
- educational materials on the harm of tobacco and on tobacco control programmes; and
- alternative occupations for tobacco growers and workers in raw material processing and manufacture.
As the VNTCF is still in the early stages of operation, only some priorities have been funded. An annual tobacco control plan will be prepared in line with the areas of interest submitted by partners at provincial and national levels. All plans are reviewed by both the Board of Comptrollers and the Advisory Board to ensure that the projects match the priorities stipulated in the law.
At present, funding is given only for proposals submitted by ministries, popular organizations (Labour Union, Women and Youth Union, Fatherland Front) and the people’s committees of provinces and cities. Open grant will be funded in the coming years.
An estimated VND 299.171 billion (USD 13.94 million) earmarked revenue had been generated for the Fund by the end of 2014, which was equally distributed among the different objectives. In 2015, 47% of the total budget was allocated for awareness-raising among policy-makers and the public about the harm of tobacco use and the tobacco control law. Another 36% was used to disseminate smoke-free models in State, provincial and municipal agencies; 6% was allocated to strengthen tobacco cessation services, the quit-line and consultancy services in all health settings; 2% was used for capacity-building in the network of collaborators and the VNTCF Executive Board, 2% to conduct research on intervention programmes and their socio- economic impact, 3% to build the capacity of inspectors to monitor and enforce the tobacco control law and 4% for the administration and management of the VNTCF.
In the first 6 months of operation (July–December 2014), the VNTCF funded proposals from 11 provinces or cities, six ministries and the Labour Union, with a total disbursement of VND 16.853 billion (USD 0.8 million). After 8 months of operation, in 2015, 92 grantees were funded, for a total of VND 200 billion distributed among 20 ministries, popular organizations, 63 provinces or cities and six hospitals. The projects were mainly communication campaigns on prevention and control of tobacco use, smoke-free areas, enforcement of the law and capacity-building programmes.
The funds received represent a huge increase over the USD 50,000 per year that was allocated from the Government budget for tobacco control to VINACOSH before inception of the VNTCF (apart from international grants). Once the Fund is fully operational, the relatively small amount allocated from the Ministry of Health budget for VINACOSH to conduct tobacco control activities will no longer be needed.
To ensure effective implementation of its programmes, the VNTCF and the Steering Committee have strategically fostered a multi-sector partnerships and collaboration with Government and NGOs, public and private interest organizations, communities and other agencies. They have established strong partnerships with 20 ministries and popular organizations and reached out to 63 provinces and cities.
4.2 Programme and project monitoring and reporting system
The VNTCF prepared both a strategic plan and a monitoring and evaluation framework to operationalize the objectives of the national policy on tobacco harm prevention and control. The monitoring component is built into project implementation, and grantees include this aspect from the start; if it is not mentioned in the proposal, the activity is not considered for funding, even if it is approved initially. Publications and any resource materials must be submitted to the VNTCF for review before they are finalized for printing and dissemination. Internal project monitoring is conducted by a focal point from the monitoring and evaluation unit of the VNTCF, involving a site visit or regular participation in the project. Grantees are required to submit a progress report to the monitoring and evaluation department not later than 20 days after the end of each quarter. Most reporting on activities is observational. The quarterly progress report is reviewed within 3 working days to provide feedback and seek clarification if needed. Subsequently, a proportion of the funding is released to the grantee to support project implementation in the following quarter. In addition, an independent agency evaluates the performance of the VNTCF and determines the effectiveness of each project or programme after 2 years (until the end of 2015). None of the grantees is allowed to receive sponsorship from the tobacco industry. All training courses and workshops must be conducted in a smoke-free setting.
Several problems were identified in the initial stages of operations of the Fund. One is the frequent change in leadership at ministerial level, which could affect the Fund, as most of the members of the three boards are from ministries. Furthermore, most board members contribute on a part-time basis. The absence of well-trained human resources at the VNTCF for operational and project management and inadequate capacity and experience in tobacco control issues also limit effective work. Grantees also lack skills in planning, proposing and managing projects, and most provincial officials lack experience and knowledge in tobacco control fund management. These are challenges to ensuring effective use of funds. There has also been interference from the tobacco industry, particularly the Vietnam Tobacco Association, which requested funding to control smuggling; their proposal was refused, as smuggling control is not one of the tasks or functions of the Fund.
As the VNTCF has been in operation for less than 2 years, it is premature to measure any impact of the projects that have been funded. The Fund is still learning to improve the effectiveness of its funded projects. Much work remains before the Fund can be fully used to meet its objectives, and concerted, multi-sectoral effort is required at central and provincial levels to ensure effective use of the Fund to improve people’s health and meet its public health objectives.
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