KUALA LUMPUR – The government’s proposal to limit exposure to cigarettes as a way to reduce smoking, via the implementation of plain packaging as well as a product display ban, may not achieve the desired results based on findings in countries that have done so.
Instead, it is likely to encourage more illicit cigarettes that are resulting in billions of ringgit in revenue losses for the country. Smuggled and counterfeit cigarettes account for about half of cigarettes sold in the country, industry sources say.
They also suggested that efforts should be directed at the less-regulated vape industry, which sells products most popular among the young compared to cigarettes, as well as the relatively small contribution it offers in the form of duties and taxes.
In 2022, then-health minister Khairy Jamaluddin said in line with the amendment to the tobacco and smoking control bill, the ministry was studying a proposal for the retail display of cigarettes. He had also said the proposal was for tobacco product packaging not to display the brands and to have plain packaging instead.
Plain packaging laws standardise the appearance of cigarette packs by prohibiting all design features (including colours, shapes, images, logos, textures/finishes, scents and promotional text) other than those explicitly permitted.
A brand and variant name in a plain font may appear on the pack, and the packs are also required to carry health warning labels plus other required consumer information. Packs must appear in standard colours, with Pantone 448C, a drab green/brown colour, as the main background colour of the pack.
While the proposal brought about various reactions from various quarters, plain packaging was nothing new for the industry. Australia was the first country in the world to implement plain and standardised packaging for tobacco products, with plain packs appearing on retailer shelves as early as December 2012.
The Europe Economics August 2017 report stated that it found no evidence in the countries where it carried out the study – Australia, Canada and several European countries – where the introduction of display bans had reduced smoking prevalence or smoking consumption, either among the general population or those aged 15 to 19 (in the case of Canada).
“In Australia we find that display bans have been statistically significantly correlated with an increase (not decrease) in smoking prevalence for the general population aged 14 years and above,” the report said.
Similarly, the report also found that in Canada, the display bans have been statistically significantly correlated with an increase in smoking prevalence for the 15 to 19 age group.
Tobacco companies have always argued that plain packaging is a violation of trademark and intellectual property rights.
However, the World Trade Organisation found in favour of plain packaging in June 2018 and the following year, Thailand became the first low-to-middle income country to introduce plain packaging.
An editorial by the Tobacco Induced Diseases journal in 2020 highlighted that as of October that year, a total of 17 countries had adopted plain packaging. They are Australia, Canada, France, Ireland, Israel, New Zealand, Norway, Saudi Arabia, Singapore, Slovenia, Thailand, Turkey, the United Kingdom, Uruguay, Belgium, Hungary and the Netherlands.
However, industry sources questioned if this would work in Malaysia. A big concern is that plain packaging could encourage counterfeit and smuggled cigarettes, and Malaysia is one of the largest illicit-cigarette markets in the world.
Plain packaging would encourage counterfeit cigarettes as consumers may not be able to identify their brands which would have distinctive features on their packaging. Also, smuggled cigarettes could easily be sold legally since they would be almost indistinguishable from legal cigarettes.
According to the Illicit Cigarettes Study in Malaysia report in January 2024, illegal cigarette incidences in Peninsular Malaysia stood at 52.4% as of January 2024 as compared to 51.4% in November 2023. The figures were notably higher in Sabah and Sarawak, where in January 2024, illegal cigarette incidences were 79.6% as compared to 78.8% in November 2023.
It was reported that six out of 10 packs of cigarettes sold in Malaysia are illegal, or about 12 billion sticks of cigarettes sold in the country each year are illegal.
What drives consumers to these illicit cigarettes?
The price, of course, as they are sold between RM4 and RM8 per packet, compared to the lowest category of legal cigarettes fixed at RM12.
An industry player said Malaysia loses about RM3 billion in excise duties for illicit cigarettes every year, an amount that can go a long way towards funding other expenses.
A study also found that the sales of illegal cigarettes had soared when the government imposed a 40% excise tax increase on tobacco in late 2015. It is expected that plain packaging and a retail display ban would likely have a significant impact on the illicit cigarette trade.
Thailand was the first Asian country to implement a complete ban on the retail displays of cigarettes and a study found that while it reduced the display, the move had not completely eliminated exposure to tobacco marketing at the point of sale.
Locals can still easily purchase cigarettes at convenience stores and smoke outside the outlets, further raising the question of the effectiveness of the ban to reduce smoking.
Closer to home, retailers have shared their concerns too. The Malaysia Singapore Coffee Shop Proprietors’ General Association, which represents over 20,000 coffee shop operators in the country, is worried how the proposal for a retail display ban will affect their livelihoods.
With the sales of tobacco in retail shops making up to 30% of total revenue, they are really concerned.
It is estimated that RM620 million could be incurred as the cost to comply with the display ban, while annually it is estimated that RM277 million would be needed to ensure continued compliance to the display ban.
Industry sources said making it difficult to buy cigarettes in stores is not going to help address the main issue that the government wants to tackle. Instead, it may lead to increased illicit cigarette business that would handsomely profit the criminals behind the trade, besides incurring additional costs for retailers.
The government would also be better off by flexing its muscles through enforcement to address the issue of illicit cigarettes. Lack of enforcement has been a real dampener in the effort to reduce tobacco consumption among Malaysians.
The source added that the government should also look at the sharply growing vape industry as a new and significant revenue source. It should also be looked at since vaping is especially more popular than cigarettes with young people.
Vapes are openly sold and easily available, with attractive options and offers, and are less regulated. It is most popular among young people while their consumption of cigarettes has gone down.
The Malaysian Vape Chamber of Commerce estimated the retail value of the vaping market surged 53%, from RM2.27 billion in 2019 to RM3.48 billion last year. Vapes are also subjected to less duty when compared to tobacco products. – July 18, 2024