KUALA LUMPUR: Malaysia has once again made global headlines for the wrong reasons when Euromonitor International, the leading independent provider of strategic market research, placed the country as the world's largest in terms of prevalence of the tobacco black market.
During a panel discussion hosted by New Straits Times yesterday, Shane MacGuill, Senior Head of Tobacco Research at Euromonitor International, said illegal cigarettes in Malaysia are close to 65 per cent or almost two-thirds of the entire market in 2019.
"There are no other markets that are effectively even close, as the next largest tobacco black market is Brazil, where we estimate the prevalence at about 50 per cent of the market," MacGuill added.
He also said out of the hundred markets that Euromonitor International looks at globally, only 10 markets have an illegal cigarette trade prevalence of over 30 per cent.
Out of these 10 markets, Malaysia has the highest illicit trade prevalence and is the 8th biggest market in volume terms for illegal cigarettes.
"Whichever way we want to slice and dice this pie, there is obviously a very significant issue in the Malaysian tobacco market," MacGuill said.
MacGuill was part of a three-member multinational panel on the NST175 Insight Forum themed, Tobacco Black Market: A Multinational Perspective. The panel discussion was moderated by NST senior news editor Faridul Anwar.
The other two panel members were David Luna, a former U.S. Diplomat and former Chair of OECD (Organisation for Economic Co-operation and Development) Task Force on Countering Illicit Trade, an expert on transnational organised crime, corruption, money laundering and trafficking crimes; and Pankaj Kumar, a well-followed newspaper columnist as well as a corporate and economic analyst.
In commenting on Malaysia's acute tobacco black market problem, Luna said, "This issue causes greater harm when it begins to merge with other crimes, whether it be human trafficking, narcotics or wild life trafficking, which are also perpetrated by organised crime.
"The tobacco black market is not only causing the government to lose precious revenue, it also creates a destabilising effect on the market (economy) and on government institutions.
It truly is disconcerting to see such a level of criminal penetration in Malaysia!" Luna said.
Luna said that Malaysia's tobacco black market is also harming other neighbouring nations as well as APEC economies. "Reports are indicating that the Malaysian criminal syndicates are now penetrating into the Australian and New Zealand markets because of the price of differential (of cigarettes)," Luna highlighted.
"Given that Malaysia has the presidency and is the host of APEC this year, the Malaysian government should take a leadership role to start cross border cooperation to tackle this multinational problem," Luna said.In terms of solutions, all the panel members agree that enforcement alone is not the solution.Pankaj said, "Our enforcement officers have proven that they are capable of catching these smugglers and bringing them to justice.
But why are we still seeing the flow of illegal cigarettes coming through our borders? It is not only just about the smugglers, it is the whole value chain.
"Affordability is an issue. After the government raised excise duties steeply in 2015, legal cigarette prices increased by 40 to 42 per cent.
"Today, the smoking population is concentrated on the lower income segment of society, including minimum wage earners. So if they were to smoke legitimate cigarettes at an average of 20 packs a month, we are talking about between 15 and 16 per cent and of their total income.
The cost is just too high and cheaper alternatives are available," Pankaj explained.
MacQuill agreed by saying that lower income segments are disproportionately likely to be smokers and disproportionately likely to be consumers of black market products.
"We are standing on the precipice of a very big increase in illegal cigarettes trade over the coming years because of the economic impact of Covid19.
"Different kinds of solutions need to be taken at one time rather than just looking at the issue of taxation or enforcement in isolation," MacGuill said.
The NST175 Insight Forum on the Tobacco Black Market – A Multinational Perspective is available on the NST Online at www.nst.com.my or Facebook www.facebook.com/nstonline