The unabated rise of the illicit tobacco trade in the country is not only depriving the government of billions in revenues but also undermining legitimate tobacco farmers whose livelihoods depend on the legal market, according to the European Union-Association of Southeast Asian Nations Business Council (EU-ABC) and Euromonitor International.
Based on recent studied, it was learned that the Philippines has lost an estimated US$2.5 billion (approximately ₱141 billion) in government revenues over the past two years even as illegal tobacco operators gained massively from the underground market.
But beyond the economic losses, industry leaders are warning the Marcos administration that the growing illegal trade is also hurting local tobacco farmers by weakening the legitimate supply chain that traditionally supports farming communities.
“Legitimate producers maintain good relationships with tobacco farmers—looking after farmers and their communities and investing in them. However, illicit traders have no interest in maintaining those relationships the way legitimate producers do,” EU-ABC executive director Chris Humphrey pointed out.
Humphrey noted the expansion of illicit tobacco products that have been creating unfair competition and diverting revenues away from legal businesses while reducing the capacity of legitimate companies to invest in farming communities, employment and local development programs.
In agreement, Euromonitor International’s head of consulting for Asia-Pacific Firdaus Muhammad enthused that observations in several markets indicated that illicit operations at times exploit tobacco farmers by forcing them to sell products at lower prices.
“In some cases, tobacco farmers are being used in illicit operations. Illicit operators force tobacco farmers to sell their products at a lower price,” Muhammad asserted.
While there is still no specific Philippine study quantifying the direct impact of the illicit tobacco trade on Filipino tobacco farmers, Euromonitor claimed that experiences from other countries show how legal tobacco supplies are often diverted into illicit channels, contributing to the rapid growth of the illegal market.
A recent study identified the Philippines as one of the most exposed markets in Southeast Asia, particularly in the illicit e-vapor sector. More than four out of five e-vape products sold in the country are reportedly illicit, the highest among ASEAN countries where vaping products are legal.
On the other hand, for cigarettes, about one in four products sold in the Philippines are estimated to be illicit, significantly above the ASEAN average.