Cambodia Investment Review
Japan Tobacco International (JTI) underscored the significant economic and social challenges posed by the illicit tobacco trade during a presentation at the EuroCham Fast-Moving Consumer Goods (FMCG) Forum. The session, led by Ms. Julian Cheung, Anti-Illicit Trade Operations Director at JTI, detailed the scale of the issue in Cambodia, where the government loses an estimated $10 million annually in tax revenue due to illicit tobacco products. The presentation also highlighted the broader implications for the Asia-Pacific region and called for strengthened collaborative efforts to combat this persistent issue.
As part of the Japan Tobacco Group, JTI operates globally with over 53,000 employees and has positioned itself as a key advocate against the illegal trade of tobacco. Globally, the World Health Organization (WHO) estimates that one in ten cigarettes sold is illicit, translating to 500 billion illegal cigarettes annually, or 11.6% of the total tobacco market, as noted by the British Medical Journal. Governments worldwide lose between $40.5 billion and $47.4 billion annually to this issue, with significant portions deemed irrecoverable.
Read More: JTI Cambodia Advocates For Fair Tobacco Regulations
Illicit Tobacco in Cambodia and Its Impact
In Cambodia, 18.5% of the tobacco market is classified as illicit, amounting to substantial revenue losses for the government. Between 2020 and 2024, this loss is projected to reach $50 million. Illicit products, including contraband, counterfeit goods, and “illicit whites,” predominantly enter Cambodia through Vietnam and Thailand. These products bypass taxation and regulatory controls, depriving the government of funds necessary for essential infrastructure, education, and healthcare.
The presentation noted that the Ministry of Finance and Ministry of Health face mounting challenges in addressing this issue. The illegal trade undermines public health initiatives aimed at reducing smoking rates while creating significant hurdles for legitimate businesses competing with unregulated, untaxed products.
Regional and Structural Drivers of Illicit Trade
Cambodia’s challenges are part of a broader regional trend. In the Asia-Pacific, countries such as Pakistan and Malaysia experience even higher levels of illicit trade, with Pakistan reporting 63.5% of its market impacted, amounting to 51 billion illegal cigarettes annually. Malaysia follows with a 54.4% rate, equating to 9 billion illicit cigarettes. Cambodia’s geographic location and porous borders further complicate efforts to combat the inflow of illegal tobacco products.
Low penalties and weak enforcement were identified as key drivers of the trade. Current penalties under the Tobacco Control Law and Taxation Law range from $1,000 to $5,000, with imprisonment terms of up to five years for tax evasion. Such measures are insufficient to deter large-scale criminal networks exploiting the lucrative trade. Limited enforcement capacity further exacerbates the situation, making it easier for illegal products to reach consumers.
Strengthening the Fight Against Illicit Trade
The presentation called for a coordinated response to address these issues, emphasizing the need for stricter penalties, enhanced enforcement, and improved cross-border collaboration. Efforts to disrupt smuggling routes and improve regulatory frameworks were highlighted as critical components of a long-term solution.
The EuroCham FMCG Forum served as an important platform for stakeholders to engage in meaningful discussions on tackling this pressing issue. JTI reaffirmed its commitment to supporting government initiatives aimed at reducing the prevalence of illicit trade. By raising awareness and fostering action, the company aims to create a more equitable and sustainable market environment, protecting both consumers and legitimate businesses.
The illicit tobacco trade remains a significant concern for Cambodia, as the economic, social, and health-related costs continue to grow. Stakeholders agree that collective action and increased vigilance are vital to mitigating its impact and safeguarding future growth and development.
