The re-opening of borders for international travel and trade on April 1 will likely cause an uptick in illicit trade and trafficking, especially illegal cigarettes, where demand remains robust due to inflationary pressures and high smoking prevalence rate amongst the B40 or lower-income segment, warns a Malaysian-based think tank today.
Datametrics Research and Information Sdn Bhd (DARE) indicated that border closures and the Movement Control Orders implemented during the COVID19 pandemic 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 these goods throughout the country was also hampered when inter-state travel was halted.
Additional, DARE also said that the Government’s move to curb the 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 Ilegal 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.
Pankaj Kumar, Managing Director of DARE, said, “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.
“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.
“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 corporation is required to expand enhancement efforts and look into policies that can dis-incentivise illicit trade.”
Pankaj explained that the Ministry of Health, 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 ten thousand ringgit or imprisonment for a term not exceeding two years or both.
Pankaj also said that MOH’s plans to ban the sales of cigarettes to those born after 2005 is an ideal concept, but in the end, the noble idea will actually 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.
“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.
“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.
“We at DARE believe that eradicating illegal cigarettes trade permanently, through better inter-ministry coordination, enhance enforcement inland and coastal areas and maintaining the countermeasures initiatives set in Budget 2021, and prolonging the excise moratorium, can counter the anticipated uptick in illicit trade and bring down illegal cigarettes market share even further,” he concluded.
According to DARE’s Winning The War On Tobacco Black Market October 2021, criminal syndicates currently reap RM8 billion per annum in total sales revenue of illicit tobacco products in Malaysia, while the Government losses around RM5 billion in uncollected tax revenue. – BACALAHMALAYSIA.MY