Kuala Lumpur, 18 January 2018 – Illicit trade in Malaysia is a problem that needs to be addressed. It has impacts on Malaysian economy such as losing government earnings through losses of tax revenue as well as criminalization through illicit trading and suppressing the potential that formal enterprises offer through innovation.

IDEAS has published a policy paper “Illicit Trade in Malaysia: Causes & Consequences” (that can be found here) and conducted a round-table discussion today in Kuala Lumpur. Different stakeholders joined today discussion ranging from the private sector, government, regulators, lawyers, and civil society.

Commenting on the round-table discussion, IDEAS Director of Research Ali Salman, also the co-author of the policy paper said, “We estimate that the government is losing RM8 billion last year due to illicit trade alone, based on the relative distribution of products prone to illicit trade including tobacco, food & beverages, machinery and cars.”

The participants of the round-table discussion were of the view that improving the level of education to encourage consumers to use legal brands and discourage counterfeit is essential. Besides, the formation of an international business committee that pools resources and commit to urging governments to place pressure on illicit trade also is needed. The participants also pointed out that there is a need to close the gap between law and enforcement if we want to prevent illicit trade in Malaysia from increasing.

IDEAS Research Coordinator Adli Amirullah, the lead author, also expressed his opinion: “High domestic taxes, lax border enforcement, and supply constraints can lead to an increase in illicit trade flows thus, reducing benefits of trade openness.” He also pointed to the social costs of illicit trade such as increasing the crime rate and unemployment rate.

The round-table recommended there should be a multi-stakeholders working group that consists of various ministries and private sector to tackle illicit trade problem in Malaysia. The round-table discussion also highlighted potential areas in illicit trade in Malaysia that we can look more in-depth such as digital piracy, drugs trafficking, and illegal logging.