Stopping illicit trade is an urgent priority for the Association of Southeast Asian Nations (ASEAN) as the region loses billions of dollars annually due to massive tobacco smuggling, according to an international report.
The Transnational Alliance to Combat Illicit Trade (TRACIT) and the EU-ASEAN Business Council said in a joint report that illicit trade could hinder ASEAN’s goal of regional integration by 2025.
To tackle the problem, about 100 delegates, including customs leaders from all 10 ASEAN member states (AMS), along with representatives from ASEAN partners China, Japan, Korea, and Australia, met from June 4 to 6, 2024, for the 33rd Meeting of ASEAN Directors-General of Customs in Phu Quoc, Vietnam.
ASEAN governments lost close to $3 billion in tax revenue from illicit tobacco products in 2017 alone. In the Philippines, around P100 billion ($1.9 billion) was lost annually due to cigarette tax evasion.
Thailand also reported tax losses of THB7 billion ($202 million) in 2021, with an illicit cigarette market share of about 10 percent.
“The concentration of illicit cigarette consumption is most prominent in Indonesia, Malaysia, the Philippines and Vietnam, which collectively accounted for about 95 percent of the region’s total illicit consumption in 2017,” the TRACIT report said.
“Cigarettes are exported from Indonesia to several countries in the region, predominantly the Philippines, through ports such as Nunukan and Tarakan. Further, the Philippines also receives large volumes of imports from Vietnam, Cambodia, and India that transit through Singapore,” it said.
Multiple news reports confirmed that areas in the Philippines such as Palawan, Zamboanga, Sulu, and Tawi-Tawi have been identified by local authorities as critical entry points for cigarette smuggling, with illicit products entering from Indonesia, Malaysia, Cambodia and Vietnam.
The TRACIT report added that other tobacco products like smokeless tobacco are also vulnerable to illicit trade. Bans on e-cigarettes in Singapore and Thailand have contributed to an increase in the smuggling of vaping products from neighboring Malaysia, a major producer of e-cigarettes.
It said that in Thailand, “brands that are exported from Vietnam and Indonesia and that appear to have consignees based in Singapore, Hong Kong, Malaysia and the United Arab Emirates are likely considered goods in transit which receive less scrutiny by Customs. These same brands are seized during law enforcement efforts in the Thai market; whereas Cambodia has exported brands destined for Thailand that are not sold legally in the market.”
The Customs meeting highlighted recent progress in ASEAN customs integration, including the signing of the ASEAN Authorized Economic Operator Mutual Recognition Agreement (AAMRA) which streamlines customs procedures for trusted businesses across ASEAN.
Six countries—the Philippines, Brunei, Indonesia, Malaysia, Singapore and Thailand—have implemented the AAMRA pilot program.
