Price hikes won't impact smoking rates, says trade body

Booming trade: Some of the contraband cigarettes being sold in Chow Kit.

KUALA LUMPUR: Worried about a possible hike in prices of cigarettes, the Confederation of Malaysian Tobacco Manufacturers (CMTM), warned the increase could provide more fuel to the booming illegal market.
 
It said on Thursday any further price increases would not impact smoking rates as smokers would turn to the very cheap and readily available illegal cigarette segment which is already spiraling out of control. 

“The impression that smokers will quit when cigarettes are too expensive ignores the fact that there are cheaper alternatives in the market,” it said. 

CMTM pointed out the cigarette black market was a new record high of 57.1% - based on the latest Illicit Cigarette Study (ICS) conducted by Nielsen Malaysia in December 2016 – and is one of the highest rates in the world. 

“This demonstrates that the illegal market is a crisis that cannot be ignored. So what benefit will be derived from increasing the price of cigarettes to RM21.50 when the hundreds of unregulated illegal cigarette brands are sold mostly between RM3 and RM5 and which has already overtaken the regulated segment?” it said. 

Citing the Health Ministry reports, between 2011 and 2015, it said the number of smokers had increased. 

CMTM said the ministry’s Global Adult Tobacco Survey (GATS) 2011 revealed the number of smokers in Malaysia was reported to be at 4.75 million.

However, the Ministry’s National Health and Morbidity Survey (NHMS) 2015 – Reports on Smoking Status among Malaysian Adults reported the number of smokers increased to five million. During the same period, cigarette prices on average rose by more than 30%. 

CMTM argued that if the hike in cigarette prices did correlate with smokers kicking the habit, then the percentage of smokers would have dropped. 

“In the current economic environment where consumer sentiment remains low, another round of cigarette price increases will only produce a detrimental situation for both the dovernment and the legitimate industry as consumers will switch to cheap illegal alternatives selling as low as RM3 per pack. 

“When more than one in two packs is illegal and sold that cheaply, increasing legal cigarette prices to RM21.50 will not reduce anything except government revenue collection,” it added.

The illegal cigarette activity has caused the government to lose RM4bil in revenue collection as reported by the Customs Department in 2016. 

CMTM also cited the Tobacco and E-Cigarette Survey among the Malaysian Adolescent (TECMA) 2016, which released by the Health Ministry recently which showed 71.6% of adolescent smokers in Malaysia spent less than RM9 on per pack of cigarettes which is below the minimum cigarette price threshold at RM10. 

“This makes illegal cigarettes the key contributor for adolescents in Malaysia to start smoking given the easy accessibility and cheap price factor,” it said.