KUALA LUMPUR: The local vape retailers are facing an uncertain future as the government continues to delay in regulating the industry, with a growing concern that these businesses could shutter by year-end.
The delay threatens 31,500 jobs, while the government may face a significant dip in tax revenues.
Industry insiders and experts challenge the merits of the Generational Endgame (GEG) policy and urge the government to re-evaluate its stance, highlighting the adverse impact of the policy on national tax revenue and its potential economic ramifications.
Malaysian Vape Chamber of Commerce (MVCC) secretary general Ridhwan Rosli said apart from the possible closure of vape businesses and loss of tax revenues to the government, the GEG implementation will also deter foreign and domestic investments throughout the manufacturing, logistics, distribution and retail sectors related to the industry.
"Based on our study, retail businesses have grown significantly over the past few years. Our first report on the vape industry was in 2019, and since then, we have seen the industry continue to grow exponentially.
"Apart from contributing significantly to the country's economy and helping smokers to quit cigarette smoking, it has also facilitated the growth of local entrepreneurs and created multiple job opportunities throughout the entire supply chain, directly and indirectly," he told Business Times.
According to MVCC's latest data, the number of vape manufacturers remained at 250 but there was a steady increase in importers to 100 in 2022 (2019: 30).
Furthermore, the industry has expanded its sales channels, with vape products now available in general stores.
In addition, the industry has also created many business and job opportunities for the Bumiputera community.
"It is estimated that all Bumiputera vape retailers will be forced to close their businesses eventually, as their potential customers will no longer be allowed to purchase or consume any vape products.
"It may not be immediately, but eventually, it will happen," Ridhwan said.
He believes the current ban on vape products will be ineffective.
"Historical trends in Malaysia have shown that before the recent policy amendments this year, which banned the sale of vape liquids containing nicotine, there was a consistent consumer demand for these products. This demand led to the establishment of the Malaysian vape industry.
"Therefore, a ban on vape products will drive consumers to seek out unregulated products.
"This, in turn, will create a market with unregulated products where the quality and safety of products are not guaranteed. And it will also undermine the efforts of responsible and compliant businesses within the vaping industry," he said.
On September 5, the Ministry of Health (MoH) said that it will engage with the Health Parliamentary Special Select Committee (PSSC) to discuss necessary adaptations to the Control of Smoking Products for Public Health Bill 2023 prior to the bill's planned tabling in the upcoming Dewan Rakyat meeting scheduled this month.
Health minister Dr Zaliha Mustafa's special advisor Dr Kelvin Yii said the bill is expected to be tabled in the Dewan Rakyat during the third meeting beginning on October 9.
Malaysia Retail Electronic Cigarette Association president Datuk Adzwan Ab Manas said the domestic vape industry is valued at RM3.48 billion based on the latest data from 2023.
The number of retailers has also increased exponentially, with about 7,500 general retail shops and 2,500 speciality stores selling vape products. Consequently, the workforce has increased from 15,000 in 2019 to 31,500 in 2022.
"The concerns about tax revenue losses are valid due to the proposed ban on vape products. It isn't just about tax revenue losses but also the industry where jobs and businesses could be impacted if the government decides to ban vape products as part of the GEG policy.
"The government needs to take a balanced approach. The introduction of a vape tax is a move in the right direction, which should be coupled with a regulatory framework," he said.
Adzwan said the history is clear that prohibition does not work because it will force industry players and consumers into the illegal market.
"Our recommendations to the government have always been for the introduction of a sensible regulatory framework that meets the needs of adult consumers, protects them with safety standards in place and prevents underage from accessing the products."
Adzwan added that the future of the vape industry in Malaysia will be shaped by a new regulatory framework that will be introduced by the government.
Therefore, the industry players urge the government to develop a sensible approach to developing the regulatory framework for the vape industry and see the industry playing a role in providing less harmful alternatives to traditional cigarette smoking while supporting job creation and the Bumiputera community.
Datametrics Research and Information Sdn Bhd managing director Pankaj Kumar said a prohibitive stance at the crux of the Control of Smoking Products for Public Health Bill 2023 will have more negative implications than positive ones for the country and economy.
GEG could lead not just to potential business shutdowns and a significant drop in tax earnings but also to the unemployment of vape business owners, predominantly Bumiputera entrepreneurs throughout the vape industry's supply chain, he added.
"A ban rarely works, as consumers move from legal to illegal products. This not only puts consumers at higher risk of tainted products but also results in losses for the government in the form of tax revenue.
"The country is already losing about RM5 billion annually to illegal cigarettes. A ban on vape and tobacco products will fuel the illegal market and cause more losses to the government," Pankaj said.
Regulations are necessary to enforce and reinforce these educational efforts, ensuring that the entire vape ecosystem, from manufacturers to retailers, adheres to guidelines that unequivocally position vaping as a tool to help smokers quit while safeguarding the health and well-being of minors.
"By integrating education and robust regulations, we can strike a balance that promotes harm reduction and prevents use by minors, ultimately harnessing the true potential of vaping in the fight against smoking-related diseases," Pankaj said.