Many Southeast Asian countries are ill-equipped to combat illicit trade, and as a result rank at the bottom of the Illicit Trade Environment Index released by The Economist Intelligence Unit.
The Index, sponsored by the European Chamber of Commerce, Singapore, looks at 17 Asian economies.
The countries included in the Index are (in order of rank): Australia, New Zealand, Hong Kong, Japan, South Korea, Malaysia, Taiwan, Singapore, China, India, Thailand, Philippines, Vietnam, Indonesia, Cambodia, Laos, and Myanmar.
Australia has the best environment for preventing illicit trade. The country down under scores in the top five in each of the index’s four categories: intellectual property, transparency and trade, customs environment and supply and demand.
Hong Kong, once a hub for trade in counterfeit goods, ranks third in the index, with experts in illicit trade and intellectual property pointing to great improvements in policies and institutions designed to combat illicit trade.
Hong Kong scores highest in the supply and demand category, which measures the degree to which governments have used policy levers such as taxation levels to curb demand, and hence supply, of illicit goods.
The report notes that the flow of illicit trade tends to follow that of licit trade and in this regard Southeast Asia could see an increase in the former as rising labor and other costs in China encourage manufacturers to seek investment sites elsewhere.
China, where companies are notorious for producing huge volumes of counterfeit goods, finishes ninth in the index based on improvements in IP protection and transparency.
While it has the strongest customs environment, a failure to monitor its busy free trade zones dragged Singapore’s score down to 7th, where it is tied with Taiwan.
Chris Clague, the author of the report, said: “Illicit trade poses a threat to public health, the environment and innovation, and provides funds for transnational crime networks and terrorist organizations.
"History has shown that illicit trade tends to follow its licit counterpart, so as the region continues to integrate, the threat will only grow unless governments make greater efforts to combat it. The Illicit Trade Environment Index and accompanying report are intended to stimulate and improve discussion of the issue.”