The Magnitude of Illicit Cigarette Trade in Malaysia: Empirical Evidence Compared to Industry Studies

Abstract

In Malaysia, the illicit cigarette trade issue has been a priority for the government. The Malaysian government has enacted the necessary laws and regulations to combat the trade in illicit cigarettes. In order to discourage the expansion of these illegal activities, the government increased penalties in January 2014 by imposing fines of up to RM 10,0001 and jail terms of up to two years for those involved in the purchase or sale of illicit cigarettes. Later, former Customs director-general Datuk T. Subromaniam proposed to parliament in July 2017, a minimum fine of RM 100,0002 for selling illicit cigarettes and approved amendments to the Customs Act 1967 and Excise Act 1967 in January 2019. With the higher penalty in place, only 466.16 million sticks of illicit cigarettes were seized by the Royal Malaysia Customs Department (RMCD) in the year 2019 compared to 1,266.2 million sticks of illicit cigarettes seized in the year 2018. The stark difference in the numbers demonstrates the effectiveness of imposing higher penalties in reducing illicit trade activities. According to International Tobacco Control (ITC) Project’s Southeast Asia surveys, the average price of illicit cigarettes was about RM 1.62 per pack in 2004 and increased to only RM 4.23 between 2011 and 2012 (Liber et al., 2015). In May 2017, former Customs director-general Datuk T. Subromaniam told the New Straits Times that illicit cigarettes were sold between the price of RM 3.50 to RM 8.00 for a twenty-sticks cigarette pack. In contrast, the retail price of the most popular brand of legal cigarette is sold at RM 17, which is much higher than those illicit cigarettes. According to the ITC project (2012)’s survey-based study, by collecting used cigarette packs from self-reporting smokers in Malaysia, illicit packs of cigarettes often do not include pictorial health warnings. From the used cigarette packs, the market share of illicit cigarettes in Malaysia was estimated to be 19% in 2009 (ITC Project, 2012). However, this study was only published for the year 2009; therefore, the latest information and magnitude of illicit cigarette trade remains inadequate in Malaysia.