Illicit trade in focus

business strategy 5Data from The World Economic Forum has found up to 15 per cent of global Gross Domestic Product (GDP) is lost each year to illicit trade.

To combat the issue, the Australian Retailers Association (ARA), various government organisations and associations have formed the Australians to Stop Counterfeiting and Piracy (AUSCAP) industry group to stop illegal trading of consumer goods.

The group recently commissioned Chris Clague from The Economist Intelligence Unit to develop The Global Illicit Trade Environment Index to evaluate 84 nations around the world and their efforts in combating the issue.

The Index is a measure of the extent to which economies enable, or inhibit, illicit trade through their policies and initiatives, concentrating on four main categories government policy, supply and demand, transparency and trade, and the customs environment. The index evaluates 84 economies on their structural capability to protect against illicit trade.

According to the report, given Asia’s geographic, economic and political diversity, it should come as no surprise that its economies have had varying degrees of success in and varying attitudes towards combating illicit trade.

As the region continues to grow, and as it moves towards deeper economic and trade integration via various trade agreements and related initiatives, there will be a need for stricter policies on illicit trade. The report said the region’s record “so far is not encouraging”.

New Zealand leads the pack

New Zealand, with a score of 82.3 (out of 100), is the overall top-ranked economy in Asia Pacific, in terms of creating a comprehensive environment for preventing illicit trade.

Globally, New Zealand follows closely on the heels of top ranked Finland (85.6), the UK (85.1) and the US (82.5) a clear indication, according to the report, that it has been very successful in creating the right policy settings to prevent illicit trade, even compared with its global peers.

In Asia, New Zealand is followed by Australia (81.0), Hong Kong (78.4) and Japan (78.2).

The second tier, in rank order, consists of South Korea, Singapore, Taiwan, China and Malaysia, with scores of between 60.0 and 76.0. They are followed in order by Thailand, India, Kazakhstan, Armenia, the Philippines, Vietnam, Indonesia and Pakistan (scores between 40.0 and 60.0).

Rounding off the list are four economies with scores below 40.0: Kyrgyzstan, Cambodia, Laos and Myanmar.

New Zealand is the top-ranked economy in the world (with a score of 90.3) in the category ”supply and demand”, which measures the domestic environment that discourages or encourages supply and demand for illicit goods largely due to its strong scores on the strength and effectiveness of its state institutions.

The two most populous Asian economies land in the middle of the rankings, with China doing marginally better than India. China is ranked 8th in Asia and 44th globally—although the country remains a source of many illicit goods given the scale of its economy, its efforts to combat illicit trade ‘are not usually appreciated’.

India, on the other hand, punches well above its weight it is ranked 11th in Asia and 49th globally, despite having among the lowest per-head incomes of all 84 economies in the index.

At the bottom of the list are the Southeast Asian economies of Myanmar, Laos and Cambodia, with their rankings suffering from low scores relating to the capacity, skill, institutional and resource constraints these economies face in addressing illicit trade.

“Australia’s approach to tackling illicit trade were highlighted in this latest Index, due to the success of the government’s policy to tackle the $2 trillion global black market,” said Russell Zimmerman, executive director of the ARA.

“Our recent initiative to combat the illicit tobacco trade, whose global value is some $35 billion annually, means Australia is well placed to support the Asia Pacific region’s otherwise, frankly, weak performance in areas relating to government policy.”

Although Australia received the highest score in government policy in the Asia Pacific region, Clague believes there is much to be done to build a better environment and prevent illicit trade.

“Illicit trade affects businesses, people, nations, and in the present transnational environment, and what the Index shows is that while some nations are striding forward, others are falling behind,” Clague said.

 

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