british american tobacco p.l.c. sustainability report 2010 - Anti-illicit trade in Malaysia

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Sustainability Report 2010

The illicit cigarette trade in Malaysia is, according to the 2009 Global Tobacco Report by Goldman Sachs, the largest in the world by market share. In 2010, illegal cigarettes represented 36.7 per cent of the market based on the results from the Illicit Cigarettes Survey, commissioned by the Confederation of Malaysian Tobacco Manufacturers for the period March to May 2010. This significant increase has been primarily fuelled by high excise duties and the recession prompting consumers to choose cheaper illicit cigarettes.

This high level of illicit trade impacts not only the legitimate tobacco industry but also the Malaysian Government, which is estimated to lose up to MYR 2 billion (£402 million) in unpaid taxes in 2010. In addition, illegal cigarettes are more accessible to the underage and the illicit trade is known to have links with organised crime.

In 2010, British American Tobacco Malaysia’s anti-illicit trade strategy continued to tackle both the demand for, and the supply of, illicit cigarettes. The company raised awareness of illicit trade among consumers and retailers and worked with various Malaysian enforcement agencies.

Through its involvement with the Confederation of Malaysian Tobacco Manufacturers (CMTM), the company worked with the Royal Malaysian Customs, the Royal Malaysian Police, the Malaysian Maritime Enforcement Agency and the Marine Police. With these agencies, the CMTM raised awareness of the illicit cigarette trade and discussed enhanced enforcement efforts. This has helped lead to some notable enhancements to the enforcement activities of the Malaysian Maritime Enforcement Agency and Marine Police. This work was complemented by engagement with government ministries around the impact of excessive excise.

Impressive results were seen: raids by the Royal Malaysian Customs increased 100 per cent in 2010 and stiffer penalties were given to retailers caught handling illicit cigarettes. This included a number of retailers being issued with fines of up to 10 times the value of the illicit cigarettes they were caught with.

The Malaysian Maritime Enforcement Agency and Marine Police are carrying out more frequent raids which have, in turn, resulted in increased media coverage of seizures efforts, creating greater awareness among the public. Raids on retailers by the Ministry of Health have also increased, highlighting how retailers who trade in illegal cigarettes are undermining the Government’s health agenda.

During 2011, British American Tobacco Malaysia will continue to provide support to the Government and enforcement bodies to reduce the illicit trade in cigarettes.