Illicit Trade Still Rampant Despite MCO

KUALA LUMPUR, 08 April 2020 – Retail and Trade Brand Advocacy (RTBA), a non-governmental organisation that safeguards businesses from criminal conduct, says the travel restrictions, movement control order (MCO) and tighter scrutiny by enforcement agencies at border checkpoints and expressways have done nothing to disrupt the illicit trade supply chain in Malaysia.

Heath Michael, Managing Director of RTBA, said: “Recent feedback from industries and enforcement agencies indicated that instances of illicit trade in Malaysia remain high as syndicates and perpetrators utilise innovative ways to circumvent the more intense spotlight cast by the authorities due to the Covid19 pandemic.”

“In the case of illicit tobacco trade in Malaysia, our research has found that demand for illicit cigarettes has increased during the MCO period as legitimate manufacturers are not allowed to distribute cigarettes, which are not considered as essential items.”

“The syndicates have intensified their use of eCommerce and social media platforms along with eHailing and courier services to meet the heightened demand. “This trend is worrying as it defeats the national health agenda to encourage Malaysians to quit smoking during MCO while extending the Government’s loss of revenue,” Michael added.

Michael’s comments came in conjunction with the launch of the RTBA’s Illicit Tobacco in the Asia-Pacific Region: Causes and Solutions report today.

According to Michael, “RTBA’s research shows that Malaysia is not only losing more than RM5 billion annually in revenue to illicit tobacco trade. Malaysia, along with China, Vietnam, Indonesia, Singapore, has also been identified as a lead vector in the spread of illegal tobacco throughout the region.”

“We found that illicit tobacco, primarily manufactured in China, are shipped into Malaysia before being distributed across the rest of Asia, and further destinations, including Australia. We expect this trans-national supply chain to remain intact as multinational organised crime find clever ways to export and import illicit cigarettes during the Covid19 pandemic,” Michael explained.

Underscoring this point, Michael said that recently, the Bureau of Internal Revenue Philippines 1 had seized over a million packs of illicit cigarettes in the Pampanga province of Central Luzon. “These contraband products were supposed to be shipped to Malaysia for local consumption as well as to be exported elsewhere,” he continued.

Illicit trade of tobacco continues to cause substantial revenue loss for governments and legitimate businesses in the Asia-Pacific region. “In terms of revenue alone, total tax loss estimated across 19 monitored markets in the region was over USD5.8 billion (RM25.3 billion) in 2017, with nearly 50% of this occurring in just two markets; Australia and Malaysia,” Michael added, quoting from the report.

Malaysian Government Must Step Up “Latest news reports have indicated that both the Ministry of Health Malaysia and the Royal Malaysian Police have acknowledged the current situation and have vowed to crack down hard on the online sale of illicit tobacco MCO. This is clearly a move in the right direction, though its effectiveness remains to be seen.”

“The Malaysian Government can do more to cripple illicit tobacco trade permanently by further strengthening vulnerable border points; increasing international cooperation and cross border intelligence sharing; and implementing demand-driven solutions that address the price gap between
legal and illicit tobacco.”

“Taking out this illicit trade segment once and for all will immediately put RM5 billion per year back into the Malaysian Government’s coffers. This amount can already fund 50% of the RM10 billion stimulus package for small-medium-enterprises (PRIHATIN Tambahan) recently announced by the Prime Minister of Malaysia,” Michael concluded.

The RTBA’s Illicit Tobacco in the Asia-Pacific Region: Causes and Solutions can be found on RTBA’s website at www.rtbacommerce.com.

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