Efforts to stamp out southeast Asia’s growing illicit markets must be accelerated

Over two years since Myanmar’s military coup that ousted Aung San Suu Kyi, democratic hopes remain painfully out of reach. On 1 August, the ruling junta announced the indefinite postponement of August elections and the fourth extension of its democracy-crushing state of emergency amid growing civil unrest and armed clashes with rebel groups.

Having already killed over 3,800, arrested 24,000 and displaced 1.6 million of its citizens, the military regime’s latest powerplay threatens to thrust the southeast Asian country “deeper into violence and instability” as the US State Department has decried, with catastrophic humanitarian and economic consequences.

Indeed, in late June, the World Bank published a new report concluding that the military coup had “permanently scarred” Myanmar’s economy. Moreover, The Irrawaddy, a Burmese pro-democracy news outlet, has highlighted the widespread poverty and misery fueled by this economic crisis, while cautioning that the post-coup growth in illicit markets and organised crime “is in danger of contaminating the whole region.”

In this context, southeast Asia must double down on emerging efforts to prevent the further expansion of its illicit trade, particularly considering its devastating effects on socioeconomic development, public health and government services.

Illicit trade undermining ASEAN ascent

While southeast Asia has become one of the world’s fastest-growing economic regions in recent years, the Transnational Alliance to Combat Illicit Trade (TRACIT) has raised the alarm over the “increasingly serious threat” of its illicit trade. Released in June, TRACIT’s in-depth analysis of the illicit trade within the Association of Southeast Asian Nations (ASEAN) – a ten-strong intergovernmental organisation – emphasises its pernicious socioeconomic, political and environmental impacts.

From slashing government tax revenue, legitimate business profits and job creation to compromising consumer safety and biodiversity and funding international terrorist groups, the illicit trade in commodities including pharmaceuticals, petroleum and tobacco is a scourge impeding the sustainable development of a region still recovering from the Covid-19 downturn – which incidentally fueled illicit markets as consumers sought its cheaper products.

According to TRACIT, ASEAN’s counterfeits market has hit a whopping $35 billion, with Myanmar’s illicit trade alone representing $4.6 billion and over half of Vietnam’s alcohol market off the books, to the great detriment of public coffers. And as the Economist Intelligence Unit (EIU) has noted, the region is undergoing a troubling transformation from a major source of illicit supply into one of demand, severely exacerbating the situation.

Moreover, in its TRACIT-commissioned Global Illicit Trade Environment Index for Asia, the EIU rightly observes that the deepening economic and trade integration in the ASEAN region has made the fight against its cross-border illicit markets increasingly vital.

Region waking up to the problem

Encouragingly, leaders in southeast Asia have recognised the gravity of the problem and its implications in realising the ASEAN Community Vision 2025 for political, economic and cultural development.

As Jeremy Douglas of the UN Office on Drugs and Crime (UNODC) has highlighted, southeast Asian countries have sprung to action in recent years to bolster border management and illicit flows monitoring. For example, Vietnam and China have led Operation Mekong Dragon III with UNODC support, bringing together regional countries to launch joint investigations into the illicit trade of wildlife, timber and drugs, with the first half of 2021 seeing more seizures then in all of 2020. Similarly, Thailand and Laos are ramping up collaborative efforts via UNODC’s regional intelligence sharing programme to push back against the Golden Triangle’s massive flows of synthetic drugs.

Furthermore, multistakeholder regional forums such as the ASIAS Security Group (ASG)-hosted Asia Security Conference & Exhibition – most recently held in Singapore at the end of July –

are providing a collaborative space for key private, public and civil society players to share the latest innovations in tackling the illicit trade.

SICPA and Reyal showing the way

Among the participants that shared their expertise were industry leaders in high-security printing, brand protection and anti-counterfeiting solutions such as Singapore-based Reyal, Swiss firm SICPA and the German SCRIBOS, Filipino and Malaysian customs officials, and the EU-ASEAN Business Council (EU-ABC).

ASG’s conference notably highlighted the importance of a cross-sector, holistic approach to combating the plague of illicit markets. While public authorities and lobbying associations like the EU-ABC work together to implement the right regulatory and enforcement environment, private companies like SICPA and Reyal provide the cutting-edge digital technologies that the region needs to protect legitimate products and identify illicit supply chains.

Indeed, SICPA’s “Unlimitrust Campus” – unveiled in June as the world’s first centre dedicated to the ‘Economy of Trust’ – is set to become a leading hub for these innovative solutions. Bringing together leading start-ups, research institutions and corporations, the Campus’s collaborative model will facilitate the development of high-tech security and authentication solutions to help southeast Asia keep pace with its accelerating illicit trade, complementing the efforts of Reyal and other anti-counterfeiting innovators in the ASEAN region.

Long road ahead

Yet given the scale of its illicit trade problem, the region will need to rapidly build on this emerging foundation over the coming years.

According to TRACIT, the top priority for southeast Asian countries should be boosting cross-border cooperation and harmonising tax policies to improve detection and enforcement capacities while reducing financial incentives for smuggling. In this endeavor, fully implementing the ASEAN Economic Community (AEC) will be key, as deepening economic integration breeds the necessary trust for robust information sharing in addition to providing a common regulatory environment. ASEAN should also consider establishing a dedicated illicit trade taskforce, as well as localised public-private partnerships to bolster anti-counterfeiting capacities, as TRACIT has recommended.

On the political and security front, ASEAN members should unite against Myanmar’s junta, as Cambodia, Laos and Thailand are worryingly vying for ASEAN to recognise a military regime whose reign of terror continues to undermine anti-illicit trade efforts. As The Irrawaddy has rightly argued, Western governments should double down on sanctions against the junta and its crony businesses, amplifying the efforts of ASEAN politicians and civil society groups fighting for the restoration of democracy and stability in Myanmar.

Beyond political support, the US and EU should equally boost foreign direct investment as well as funding and technical support for multilateral cooperation and skills-building programmes to help ensure that the illicit trade does not derail the region’s sustainable development ambitions.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes