RTBA Malaysia: Illicit tobacco trade in Malaysia poised to escalate

THE illicit tobacco trade in Malaysia is expected to expand further due to financial constraints and clever criminal tactics, thus negating any positive strides achieved by anti-smuggling measures introduced in Budget 2021.

A recent report by the Retail and Trade Brand Advocacy Malaysia Chapter (RTBA Malaysia) has highlighted a high level of dexterity and ingenuity shown by criminal syndicates to circumvent anti-smuggling initiatives under Budget 2021 which came to effect Jan 1 this year.

“In view of the limitation of transhipment activities, criminal syndicates quickly moved from smuggling illicit cigarettes via container ships and docks at big ports to unloading these products from large cargo vessels from source countries onto small speed boats or fishing vessels before dropping them off at private at private jetties and landing spots throughout the country’s vast coast,” revealed RTBA Malaysia’s managing director Datuk Fazli Nordin.

Fazli’s exposure came following the launch of RTBA Malaysia’s Country Report: Illegal Tobacco Trade 2021 Malaysia which was produced based on public information analysis and discussions with sources close to the issue.

According to the report, Malaysian authorities seized a total of 40 million sticks of illegal cigarettes in 2020, whereas a total of 84 million sticks were seized from anti-smuggling operations in coastal areas in 1Q 2021 alone.

Interestingly, the report found that these criminal syndicates are now forced to adjust price and cost to mitigate the loss of volume from smuggling in large quantities through transhipment abuses at big ports to smaller but more frequent batches of contraband via coastal smuggling routes.

Due to this switch in supply chain strategy, they are also incurring higher costs by turning swiftlets houses, commercial shop lots, and private homes into warehouses to store products.

“The increased costs have been passed on to consumers who now have to pay RM9/pack of illegal cigarettes from RM6/pack prior to the introduction of Budget 2021 measures,” Fazli pointed out.

Although higher cost of illegal cigarettes may seem like good news for the war against this illicit trade, Fazli said the cost of legal cigarettes is still significantly more.

“More and more consumers are expected to turn to illegal cigarettes that are still cheaper compared to legal products due to financial constraints caused by the COVID-19 pandemic,” he opined.

“Moving forward, it would be counter-productive to increase the excise tax further as it would certainly benefit the criminal syndicates and reverse the positive impacts brought by the Budget 2021 measures.”

In this regard, Fazli proposed that the existing excise moratorium is maintained in Budget 2022 while more funding is channelled to ramp up enforcement initiatives in coastal areas.

“The use of privately owned assets – from warehouses to rented homes – to store illegal cigarettes must also be curtailed,” stressed Fazli.

“This can be achieved by holding landlords and premise owners accountable for renting out their premises for criminal activities while increasing the number of raids on suspected premises.”

Following the release of its report, RTBA Malaysia will be spearheading a series of initiatives to educate Malaysians on the impact of the illicit tobacco trade on the country’s socio-economic fabric.

These initiatives include educative article series in newspapers, public service announcements on radio as well as informative materials and its country report that is made available on its Facebook page https://www.facebook.com/rtbamalaysia/. – Sept 18, 2021

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