Tobacco Asia

Tobacco Asia 25 Malaysia: Transitioning toward a fully illicit market Malaysia represents one of the most dynamic and closely-watched markets in the ASEAN region, as it moves toward the full implementation of a vaping ban by 2027. Euromonitor's Venugopalan reported that the illicit e-vapor incidence reached 66.2% in 2024 and is projected to climb to 100% once the ban is fully enforced. This anticipated development reflects a broader pattern observed in markets where prohibition leads to a contraction of the legal sector while simultaneously sustaining or even expanding illicit supply. As the ban takes hold, a portion of consumers is expected to exit the market altogether, while others—driven by nico- tine dependence—are likely to transition to illicit products. Venugopalan noted that this dynamic will result in a significant expansion of the illicit market, which is expected to stabilize at high levels in the absence of additional mitigating factors. The Malaysian experience is particularly notable given the country's historical challenges with conventional illicit tobacco products, particularly cigarettes, raising questions about whether similar enforcement strategies will be sufficient to contain the growth of illicit vaping. The presence of local e-liquid production further complicates the picture, as it provides a potential domestic source for both legal and non-compliant products, blurring the lines between regulated and unregulated supply chains. Philippines: Tax complexity and systemic evasion The Philippines stands out as one of the most thoroughly examined illicit vaping markets in the region, of- fering valuable insights into the interplay between taxation policy and illicit trade. Varshini Venugopalan estimated that the illicit vape incidence reached 84.5% in 2024, again a remarkably high figure driven largely by affordability pressures and structural features of the country's tax system. The Philippines employs a two- tier tax regime, with lower rates applied to freebase nicotine products and higher rates imposed on nicotine salt formulations. This differential creates incentives for misclassification, with products often declared under the lower-tax category to reduce fiscal obligations. Venugopalan observed that such practices contribute to the growth of illicit imports, as well as distortions within the domestic market. Compounding this issue is the policy of annual tax increases of 5%, which further widens the gap between legal and illicit pricing over time. Meanwhile Barnaby Page, editorial director at Barcelona-based Tamarind Intelligence, reinforced these findings through a detailed audit of disposable vaping products in the Philippines. He noted that Tamarind's analysis reveals that the average price per milliliter of these products is approximately half of the legal floor price, strongly suggesting widespread tax evasion. This evidence points to a systemic challenge in enforcing tax compliance, with illicit products undercutting legal offerings on price. While the government is consider- ing moving toward a unified tax system, which could reduce opportunities for misclassification, the current framework continues to incentivize illicit activity and complicate enforcement efforts. Singapore: Enforcement, deterrence, and emerging risks Singapore presents a markedly different scenario within ASEAN, characterized by stringent enforcement and a proactive approach to curbing illicit vaping. Varshini Venugopalan told Tobacco Asia that the illicit e-vapor market in Singapore has been contracting, reflecting the effectiveness of targeted crackdowns and Draconian penalties. Authorities have focused particularly on online platforms, which serve as key distribution channels for illicit products, implementing measures designed to disrupt supply and deter participation in the black market. The imposition of stiff penalties, including fines and imprisonment, reinforces this deterrent effect, contributing to a decline in illicit activity. However, as Tamarind's Barnaby Page pointed out, Singapore has, relatively recently, faced a unique and concerning development: the emergence of vaping products laced with other illicit substances. This phenomenon carries significant implications, as it effectively merges the regula- tory challenges of nicotine control with those associated with drug enforcement. Page suggested that this con- vergence not only complicates policy responses but also alters public perceptions of vaping, framing it within the broader context of illicit drug use. Furthermore, the presence of such products highlights a potential unintended consequence of strict prohibition, wherein the absence of a legal market may create opportunities for more dangerous forms of illicit activity to take hold. Thailand: Total illegality and the impact of enforcement Thailand's vaping market is defined by a comprehensive ban that has been in place since 2014, resulting in a situation where all vape products are, by definition, strictly illegal. Despite this, Euromonitor's Varshini Venugoplana indicated that the country is expected to experience a decline in illicit vaping activity, a trend that sets it apart from many other markets in the region. This reduction is attributed to a combination of harsh penalties, including imprisonment and very high fines, and intensified enforcement efforts. Notably, the Thai government has introduced initiatives aimed at encouraging public participation in enforcement, such as rewarding citizens for reporting vaping activity. These measures reflect a broader strategy of deterrence and community engagement, which appears to be yielding measurable results. However, the Thai case also under- scores the complexity of interpreting illicit market dynamics in environments where legal alternatives are en- tirely absent, raising questions about the sustainability of enforcement-driven approaches over the long term.

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