Malaysia’s Illicit Cigarette Woes Nearing “Critical Stage”

In simple terms, buying illegal cigarettes is like paying for ice-coffee at a roadside warung, while legal cigarettes are priced more than a cup from a popular coffee chain.

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Malaysia continues to grapple with a persistently high level of illicit cigarette consumption, with industry players warning that the problem has reached critical levels.

Philip Morris International head of regulatory, fiscal and ITP strategy Mohd Zahail Mohd Zuslaini said illicit cigarettes currently account for roughly half of the total market in Malaysia, a figure significantly higher than many neighbouring countries.

“At this point, Malaysia is still dealing with illicit cigarettes at around half of the market,” he said, adding that the country lags behind regional peers in curbing the issue.

He pointed out that Singapore maintains an illicit cigarette rate of below 10%, while Thailand records around 25%.

“Malaysia is among the highest in the region. Countries like Panama remain among the highest globally, but within this region, our numbers are still very concerning,” he said.

Mohd Zahail stressed that one of the most pressing concerns is the normalisation of illicit cigarette consumption among smokers, noting that accessibility is no longer an issue.

“People who smoke know where to buy illegal cigarettes. They know which shop to go to. That makes it difficult.”

Echoing similar concerns, Head of External Affairs at Japan Tobacco International, Muhamad Selamat Tan said the sharp rise in illicit cigarette consumption can be traced back to a major policy shift in 2015.

He explained that a steep excise duty increase of between 40% and 47% that year led to a significant jump in cigarette prices, from approximately RM13.80 to around RM17 per pack.

“The milestone was in 2015. Before that, increases were minimal, around 10 sen. But suddenly, prices went up drastically,” he said.

According to Muhamad Selamat, the immediate impact of the price hike was a surge in illicit cigarette consumption, which peaked at about 63% of the market.

“That was where we saw illicit cigarette incidence rising to its highest level,” he said.

Muhamad Selamat said the widening price gap between legal and illegal cigarettes has since become the main driver of the illicit market.

“In the past, the price difference was maybe RM1 or RM2. People were not really driven by that. But today, the gap is much wider,” he explained.

He warned that the growing illicit market carries serious implications beyond the consumer.

Both Mohd Zahail and Muhamad Selamat were among the panellists during the Illicit Cigarettes in Malaysia: Policy, Enforcement and Multi-Agency Solutions forum at the fifth PDRM Special Dialogue 2026, held at the Kuala Lumpur Golf and Country Club (KLGCC) Convention Centre, today.

Meanwhile, when met outside the forum, Deputy Director of Customs Import, Export and Border Control Branch Division, Muhammad Nazim Dzul Fakar stressed that public cooperation is equally critical in addressing smuggling activities.

“Apart from enforcement, the role of the community and the public is also crucial in helping to combat smuggling, in line with the community-based reporting approach practiced internationally,” he said.

Nazim said that enforcement agencies alone cannot fully contain smuggling syndicates, as they continuously adapt and exploit new loopholes.

“If the community does not play a role, anything can slip through, including illegal cigarettes or even more dangerous items,” he added.

Muhammad Nazim said that the fight against illicit cigarettes ultimately requires a multi-pronged approach, combining enforcement, policy calibration, and behavioural change among consumers.

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