Illicit trade still rampant in Malaysia despite MCO - advocacy group

CORONAVIRUS | Illicit trade is still rampant in Malaysia despite the travel restrictions and scrutiny of enforcement agencies during the movement control order (MCO) period, said the Retail and Trade Brand Advocacy (RTBA).

The non-government organisation (NGO), which seeks to safeguard businesses from criminal conduct, said today that the tighter scrutiny by enforcement agencies at border checkpoints and expressways have done nothing to disrupt the illicit trade supply chain in the country.

The group’s managing director Heath Michael pointed out that recent feedback from industries and enforcement agencies indicated illicit trade remains high in Malaysia as syndicates and perpetrators utilise "innovative ways to circumvent the more intense spotlight cast by the authorities due to the Covid-19 pandemic”.

“In the case of the 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 e-commerce and social media platforms along with e-hailing 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 said in a media statement today.

The press statement came in conjunction with the launch of RTBA’s “Illicit Tobacco in the Asia-Pacific Region: Causes and Solutions” report today.

He said that the group’s research revealed that Malaysia not only loses more than RM5 billion a year in revenue to illicit tobacco trade but that the country, alongside China, Vietnam, Indonesia and Singapore, has been identified as a lead vector in the spread of illegal tobacco throughout the region.

“We found that illicit tobacco, primarily manufactured in China, is 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 Covid-19 pandemic,” Michael said.

He pointed out that the Philippines’ Bureau of Internal Revenue had seized over a million packs of illicit cigarettes in the Pampanga province of Central Luzon, where it was found that the contraband products were intended to be shipped to Malaysia for local consumption as well as to be exported elsewhere.

Michael said that illicit trade of tobacco continues to cause substantial revenue loss for governments and legitimate businesses in the Asia-Pacific region, where in terms of revenue alone, total tax loss estimated across 19 monitored markets in the region was over US$5.8 billion (RM25.3 billion) in 2017, with nearly 50 percent of this occurring in just two markets, namely Australia and Malaysia.

Michael urged the Malaysian government to step up efforts to stamp out the illicit trade supply chain, as despite the country’s Health Ministry and police having acknowledged and vowed recently to crack down hard on illegal tobacco online sale, 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 percent of the RM10 billion stimulus package for small-medium-enterprises (Prihatin Tambahan) recently announced by the prime minister of Malaysia,” he said.

On April 6, Muhyiddin announced a RM10 billion stimulus package for small and medium enterprises (SME) that may be hard-hit by heavily-reduced economic activities during the MCO, which was implemented since March 18 to combat the Covid-19 pandemic in Malaysia. - Mkini