Imperial Tobacco has been accused of allowing a trade in cheap cigarettes in Laos through a special deal with the country’s government.
A tax agreement between Imperial and state-owned Laos Tobacco means cigarettes can cost as little as 25 pence per packet, researchers said.
The University of Bath’s Tobacco Control Research Group claimed it is encouraging children to start smoking.
Imperial said it abides by all international tax obligations.
The firm is based in Bristol.
A similar packet of cigarettes can cost around £12.50 in the UK, and there are strict laws which prevent them being promoted to children.
Dr Maniphanh Vongphosy of the Asian Tobacco Control Alliance said: “Young people do smoke here – 13 to 15% of young people are smoking.
“It’s not only the low price and the high affordability.
“Tobacco companies put their products in colourful boxes next to sugar or something the children can access.”
Smoking rates are high in Laos, and it is not unusual to see children with cigarettes.
Around 5,000 people die each year in Laos from tobacco-related illnesses.
Tobacco campaigner Phil Chamberlain claimed the deal means that Laos has lost more than £140m in tax revenue from the deal it struck with Imperial.
In a statement, Imperial said it did not endorse the placing of its products next to confectionary.
It also added the tax deal was one of many economic aspects of the agreement, and their investment saved Laos Tobacco from bankruptcy.
Imperial said they paid the Laos government a regular dividend income, and the low price of their cigarettes there needs to be seen in a context where many live on the equivalent of £1 a day.