KUALA LUMPUR (Jan 18): Institute for Democracy and Economic Affairs (IDEAS) estimates that the government lost RM8 billion last year due to illicit trade.

IDEAS Director of Research Ali Salman attributed the loss to the distribution of products prone to illicit trade, notably tobacco, food & beverages, machinery and cars.

In a statement, Ali also highlighted other sectors such as digital piracy, drug trafficking and illegal logging, as potential areas where illicit trade could occur.

“Illicit trade in Malaysia is a problem that needs to be addressed. It has impact on the Malaysian economy, such as the government losing earnings through losses of tax revenue as well as criminalization through illicit trading and suppressing the potential that formal enterprises offer through innovation,” Ali said in a statement issued based on a roundtable discussion today with stakeholders from the private sector, government, lawyers and civil society.

IDEAS Research Coordinator Adli Amirullah weighed in, “High domestic taxes, lax border enforcement, and supply constraints can lead to an increase in illicit trade flows, thus reducing benefits of trade openness.”

Adli pointed out the social costs of illicit trade such as increasing the crime and unemployment rates.

The participants in the discussion agreed that improving the level of education to encourage consumers to use legal brands and discourage counterfeit is essential.

“Besides (that), the formation of an international business committee that pools resources and commits to urging governments to place pressure on illicit trade is also needed. There is a need to close the gap between law and enforcement if we want to prevent illicit trade in Malaysia from increasing,” the statement added.

Back in October 2017, IDEAS had published a policy paper entitled “Illicit Trade in Malaysia: Causes & Consequences”.

First published in The Edge Markets, on January 18, 2018.