Illicit Cigarette Industry Addressing The Multi Billion Ringgit Dilemma In Malaysia

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THE illegal tobacco trade in Malaysia has evolved into a multi-billion-ringgit industry. Run by highly organised syndicates, they have raked an estimated RM5 bil in income from dealings in illegal cigarettes, resulting in the government losing RM2 bil annually in unpaid duties.

The May 2025 Nielsen survey confirmed that 55% or six out of every 10 packs of cigarettes sold in Malaysia is illegal.
These illegal cigarettes mainly come from countries such as Vietnam, China and Indonesia, smuggled in using 40-footer containers carrying 1,000 master cases (50 cartons x 10 packets x 20 sticks) or 10 million sticks.
The Malaysian Anti-Corruption Commission (MACC) has been working to cripple this syndicate and the companies believed to be involved in the smuggling of cigarettes and cigars.

The syndicates appear at times to be one step ahead of the enforcement agency’s efforts. It is suspected that military intelligence officers are colluding with the syndicates by leaking operational information to help them evade enforcement.
The think tank IDEAS produced a report on the illegal tobacco trade in Malaysia which stated that pervasive corruption and lack of transparency are contributing factors in our failure to successfully address this issue.
Lax enforcement coupled with weak penalties emboldens smuggling as it becomes more profitable to conduct illegal trade when the costs are small compared to the expected profits.

Customs Director General Datuk Anis Rizana Mohd Zainuddin has been a leading proponent in addressing this illicit trade. Under her leadership corrupt officials who not only tarnish the country’s image and reputation but also affect the majority of officers who are honest and dedicated have been removed from the system.
Results Thus Far
Body-worn cameras are now mandatory for Customs officers and personnel working in sensitive areas, while scanners with artificial intelligence (AI) are deployed to detect illicit cigarettes;Customs increased its revenue collection by 19% from RM55.17 bil in 2023 to RM65.57 bil in 2024;Malaysia’s illicit cigarette trade continues to drop from 55.6% in 2023 to 55.0% in 2024;Restricting transhipment to only a few ports in Port Klang, Johor and East Malaysia has seen the incidence of illicit cigarette smuggling drop; andIncreased operations conducted by Customs and Police has also resulted in more seizures.(Image: Nielsen Consumer LLC)Current situation
Currently 90% of illegal cigarettes smuggled into Malaysia arrive via coastal routes. Shipments are loaded onto private chartered vessels in Vietnam and Indonesia which then transfer their loads to smaller speed boats in international waters along Peninsular Malaysia’s east coast.

This modus operando is used as Malaysian law enforcement does not have jurisdiction in international waters.
These smaller boats will then traverse our long coastline between Terengganu and Johor to unload the illegal cigarettes at designated spots such as private jetties to avoid detection. Kuala Besut is a hot-spot for ship to ship (STS) transfer of illegal cigarettes.
What more can be done?

The government should stop issuing licences to import cigarettes. The majority of these importers are involved in the smuggling of illicit cigarettes and money laundering activities;Charge anyone in power or uniform found compromising our anti-smuggling efforts;Involve the Malaysian Navy in addressing illegal trans-shipping activities in international waters;Review existing regulations to remove loopholes which can be exploited by smugglers;Provide Customs and the Malaysian Border Control and Protection Agency (AKPS) with more resources and modern equipment. Law enforcement agencies must be adequately equipped to match the high-speed boats used to smuggle illicit cigarettes;andForm a public-private partnership between law enforcement agencies and the local tobacco industry. The Confederations of Manufacturers Tobacco Malaysia (CMTM) is well placed with the resources, tracking software, expertise and strong connections with international law enforcement agencies to provide an effective platform to share data and cooperate in investigations.Any failure to implement concrete measures to address the illicit cigarette smuggling trade and curtail the black economy will result in continued losses in government revenue.
At a time when funding for development programmes is stretched and with a challenging global economic outlook, these are losses which the rakyat cannot afford.
Datuk Seri Dr Akhbar Satar is the president of Malaysian Integrity and Governance Society.

The views expressed are solely of the author and do not necessarily reflect those of  MMKtT.
- Focus Malaysia.

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