THE re-opening of borders for international travel and trade on April 1 will likely trigger an uptick in illicit cigarette trade and trafficking where demand remains robust due to inflationary pressures and high smoking prevalence rate among the B40 or lower-income segment.
Malaysian-based think tank Datametrics Research and Information Sdn Bhd (DARE) observed that border closures and movement control orders (MCOs) implemented at the height of the COVID-19 outbreak had played a role in curtailing the ability of criminal syndicates to smuggle illicit goods like cigarettes and alcohol from other countries into Malaysia.
Distribution of such goods throughout the country was also hampered when inter-state travel was halted.
Additional, DARE also noted that the Government’s move to curb severe illegal cigarette problem through a series of initiatives in Budget 2021 – which included a ban of transhipment, making cigarettes and tobacco products taxable in all duty-free islands and free zones as well as reviewing and freezing import licenses – has seen encouraging results.
The latest Nielsen’s 2021 Illegal Cigarette Study (ICS) in Malaysia commissioned by the Confederation of Malaysian Tobacco Manufacturers (CMTM) showed that the incidence of illicit trade has declined by 6.5 percentage points to 57.3% from 63.8% a year ago.
“It was the coming together of a multitude of factors that have collectively lowered illegal cigarettes levels in the market for the first time in seven years,” DARE’s managing director Pankaj Kumar pointed out.
“Unfortunately, the tide is now against this progress as we foresee illegal cigarettes smugglers will have more avenues to take advantage of while our enforcement personnel will be more stretched as international travel resumes in full force.”
Be proactive
In this regard, he said the Malaysian Government must not relent to this headwind but should instead step up efforts to eradicate illegal cigarettes trade.
“To achieve this, more inter-ministry cooperation is required to expand enhancement efforts and look into policies that can dis-incentivise illicit trade,” he stressed.
The Health Ministry (MOH), for one, has the enforcement power to take action against those who sell cigarettes below the minimum price of RM12 per pack set by MOH itself.
“Instead of placing the responsibility solely on other enforcement agencies or blaming corruption, MOH can take the bull by the horns and lead the charge against this issue that undermines public health,” he added.
The penalty for selling cigarettes below RM12 is a fine of not exceeding RM10,000 or imprisonment for a term not exceeding two years or both.
Commenting on MOH’s plan to ban the sales of cigarettes to those born after 2005, he said that while this is an ideal concept, the noble idea will in the end be negated by easy access to illegal cigarettes.
“A generation ban on cigarettes and vape sales is also a slippery slope for the Malaysian economy,” he argued. “DARE envisions that it may not just stop at cigarettes and that there will be parties making moves to ban other sectors like alcohol and beer, gaming and even online streaming entertainment platforms.”
According to Pankaj, taking the route towards a nanny-state will have severe implications to Malaysia’s ability to attract investors and spur domestic spending.
“Before we get to that stage, the immediate clear and present danger to our national economy is the stubborn illegal cigarettes trade problem which MOH can play a more pro-active role from the enforcement perspective,” he insisted.
“We at DARE believe that eradicating illegal cigarettes trade permanently through better inter-ministry coordination, enhance enforcement inland and coastal areas and maintaining the counter-measures initiatives set in Budget 2021 as well as prolonging the excise moratorium, can counter the anticipated uptick in illicit trade and bring down illegal cigarettes market share even further.”
According to DARE’s Winning the War on Tobacco Black Market October 2021, criminal syndicates currently reap RM8 bil per annum in total sales revenue of illicit tobacco products in Malaysia while the Government losses around RM5 bil in uncollected tax revenue. – March 25, 2022
