Tackling illicit trade in alcohol will put Asean on a growth trajectory 

IF YOU ever come across alcohol that smells bad or has hilarious spelling errors on its packaging, chances are, it is fake or illegally produced.

The global economy loses over US$2.2 trillion due to counterfeiting and other illicit goods such as food, pharmaceutical and toys. In South-east Asia, illicit alcohol – those not complying with regulations in the countries they are consumed – is a thorny issue that has grabbed the attention of policymakers, the media and public health agencies. The unrecorded alcohol market in Asia is significant, particularly in lower-income countries.

Based on World Health Organization (WHO) data available from the WHO Global Health Observatory, unrecorded alcohol accounts for roughly 26 per cent of total alcohol consumed in Asia, which is significantly higher than in other regions, for instance, Europe and the Americas. In some Asian countries, such as Myanmar, Vietnam and Indonesia, unrecorded alcohol accounts for more than 60 per cent of all alcohol consumed.

This illegitimacy casts a long shadow over the region, threatening its economy, public health and safety. Take Vietnam, for example – an estimated US$441 million was lost in 2019 due to untaxed illicit alcohol, a whopping blow to the country’s pursuit of progress. Human lives are also at stake, with bootleg alcohol seen to be causing severe poisoning and death in the last few years.

This issue’s severity and complexity would require a multi-stakeholder approach to bring illicit alcohol into the regulated sphere. While 2023 is shaping to be a challenging year defined by a state of “polycrisis”, governments and business leaders should not turn a blind eye to the rampant chaos caused by illicit alcohol. With eyes on Asean’s projected growth in 2023, especially with the revival of tourism and hospitality as the region rebounds from the Covid pandemic, putting an end to illicit alcohol should be high up on policymakers’ priorities this year.

Here’s an analysis of the impact of illicit alcohol and the recommendations to put Asean on a growth trajectory.

Develop taxation policies to cork the leakage in tax income and profits

For governments, illicit trade has a particularly debilitating effect on driving public investment, as they lose a significant potential tax income. Moreover, illicit alcohol erodes confidence in government standards, enforcement and the integrity of legitimate, regulated brands.

Taxation policies that disincentivise illicit trade will help to combat this – in partnership with the Central Institute for Economic Management (Ciem), the Asia Pacific International Spirits and Wine Alliance (Apiswa) and the British Embassy in Vietnam cooperated to undertake a comprehensive review of the country’s current policy approach towards alcohol taxation.

Protect the safety of consumers through legislation

Illicit alcohol can cost lives and often affects the poor and vulnerable the most, contributing to the vicious cycle of ill health and widening inequalities. In 2018, 150 people in Indonesia died from organ failure after consuming homemade alcohol containing toxic ingredients, such as mosquito repellent and cough medicine. In Cambodia, home-brewed rice wine containing highly toxic methanol claimed 11 lives at a village event in 2021.

As cases of methanol poisoning become increasingly apparent in the region, these incidents underscore the unintended but tragic consequences of illicit alcohol on human lives. More importantly, it sheds light on the gross abuse of regulatory guardrails that legitimate producers and governments have put in place to protect the health and safety of end consumers. For a start, enforcing regulations to make tampering with lot codes on alcohol products illegal can protect consumer safety.

Enhance enforcement cooperation to fight transnational crimes

Illicit trade extensively destabilises regional security due to its role in facilitating transnational organised crime. The financial flows that perpetrators gain from peddling unrecorded alcohol fuel other crimes such as money laundering, smuggling and human trafficking, all of which undermine the rule of law. The cross-border and multi-faceted nature of illicit trade could also lead to corruption in the public sector and stoke social unrest in local communities.

It is therefore critical to enhance cooperation at the enforcement level. Public-private partnerships are the most effective means of mobilising all other measures to tackle illicit trade. For example, a dedicated Asean Taskforce on Illicit Trade led by the Asean chairmanship could support coordinated actions across the region and be a platform for exchanging information and dialogue.

Putting a stop to the production, transport, and sale of illicit alcohol has wide-ranging benefits for public health, communities, and the economy. However, this requires key players in the alcohol industry to join forces to tackle the interconnected and deep-seated challenges and address them head-on.

It is in everyone’s interest and responsibility to stop such illegitimate production and trade, and producers, governments, communities and special interest groups must participate in a whole-of-society approach to rid this shadow economy. By promoting shared responsibility, prioritising policy response, and fostering the political will of governments, we can put Asean on a path of sustained growth that increases the liveability, prosperity, and socio-economic development of its people and communities.

The writer is chairman of the Asia Pacific International Spirits and Wines Alliance (Apiswa).