Asean urged to snuff out hot tobacco trade
Middle East disruptions. Energy security jitters. The worsening conflict in Myanmar.
These are among the issues that have come to define the Philippines’ chairship of the Association of Southeast Asian Nations (Asean) this year.
But amid these more immediate crises stands another problem that has continued to spread across Southeast Asia’s borders: pesky illicit tobacco trade.
At this year’s European Union-Asean Sustainability Summit in Cebu, executives from Philip Morris International (PMI) have warned that renewed supply chain disruptions linked to the Middle East crisis could create fresh openings for cigarette smuggling syndicates across the region.
PMI regional director for illicit trade prevention Rodney Van Dooren says periods of economic disruption tend to weaken legal supply chains.
“These are usually the times [when] illicit traders thrive,” Van Dooren says in an interview. “The minute you start to strangle a supply chain and make it difficult to get access to the products you need, these illicit guys jump all over it.”
During the COVID-19 pandemic, illicit cigarette trade in the Philippines climbed from about 6 percent of the market to 17 percent, PMI estimates. Lockdowns and shipping bottlenecks disrupted legal distribution channels then.
Van Dooren says the same risks are reemerging as higher fuel prices and logistical uncertainties pressure regional trade flows.
PMI estimates that governments in Southeast Asia lost around $4 billion in excise taxes from illicit cigarettes in 2024 alone. Including illegal vape products, losses rise to roughly $6 billion.
According to Van Dooren, the losses go beyond excise collections.
Governments also lose customs duties, value-added taxes and corporate taxes when illicit products enter the market. In many countries like the Philippines, tobacco excise taxes help finance health-care systems, hospitals and infrastructure.
“It’s not just business that’s being hurt,” he says. “It’s society that’s being hurt.”
Most trafficked in Asean
Van Dooren describes illicit tobacco as “probably the most trafficked product in Asean,” pointing to weak cross-border coordination within the region and the ability of smugglers to exploit gaps in customs enforcement.
“This is an Asean problem, and it needs an Asean solution,” he says.
As such, Van Dooren urged governments to strengthen customs coordination through the Asean Single Window system, which allows member-states to electronically exchange shipment data in real time.
Under such a setup, customs agencies could immediately identify when tobacco shipments from another Asean country are entering their market.
He also urges the Philippines to use its Asean chairship to push for tighter regional coordination on illicit trade enforcement.
“What’s happening is tactical, but the issue is structural,” he says.
While cigarette smuggling remains a concern, Asean has also become one of PMI’s fastest-growing markets for smoke-free products.
PMI chief sustainability officer Jennifer Motles says the young population, rapid adoption of technology and openness to innovation have accelerated the PMI’s transition from traditional cigarettes.
“Asean is flourishing very quickly,” Motles says.
Globally, PMI says smoke-free products already accounted for 43 percent of net revenues during the first quarter. In the Philippines, PMI has invested more than $2 billion in manufacturing expansion, smoke-free product development and digital capabilities. It operates two factories and employs more than 5,000 workers here.
But Motles says illicit trade threatens efforts to improve transparency and traceability across supply chains.
“You cannot transform what you cannot track and you cannot create value when there’s no governance,” she says.
With the 48th Asean Summit now wrapped up, the bloc shifts its focus to the more anticipated leaders’ meetings in November.
But whether illicit tobacco trade will finally stop slipping through Southeast Asia’s borders remains, for now, up in the air.
