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  • Writer's pictureBait Al-Amanah

High-Income Aspirations: Combating Illicit Trade, Cultivating a Holistic Ecosystem

Malaysia is on track to achieve a remarkable milestone in the coming years as it progresses from being an upper-middle-income nation to attaining the long-awaited status of a high-income nation. To drive the nation forward towards this crucial milestone, high-value investments serve as a powerful catalyst, propelling sustainable growth and elevating income levels. This aligns with the Madani Government’s New Investment Policy which seeks to ensure key changes are implemented to strengthen Malaysia’s foundations for nurturing both emerging and established high-value growth ecosystems. One key change of utmost importance is intensifying efforts to address the critical issue of illicit trade, which is essential for maintaining a market-friendly business ecosystem that is fair and transparent.

The evidence on illicit trade underscores a dire situation, posing a formidable obstacle to Malaysia's quest for high-income nation status. For instance, Malaysia was ranked the world no. 1 in terms of tobacco black market prevalence by Euromonitor International in the year 2020. Moreover, Malaysia remains in the top 10 list of countries responsible for the global illicit wildlife trade. Furthermore, the black market which includes counterfeit goods trade amounts to an estimated RM300 billion or 21% of gross domestic product (GDP) annually. All these point to the crucial need to re-examine current regulations, enforcement efforts, technology utilisation, public awareness, and international cooperation, in addition to identifying areas for improvement, as detailed in the Policies and Practices on Illicit Trade in Malaysia Case Study.

Enhanced Enforcement Efforts

Primarily, stricter enforcement of existing laws by government agencies is imperative. Take, for instance, the Ministry of Health's pivotal role in overseeing tobacco packaging laws, which include enforcing health warnings and establishing a minimum price per package. However, instances of inconsistent compliance with these regulations suggest a gap in enforcement rather than a flaw in the laws themselves. Thus, ensuring effective and holistic enforcement requires a multifaceted approach, focusing on bolstering the resources and capabilities of agencies, increased training opportunities, supporting the participation of rights holders in enforcement activities and enabling more effective raids and seizures to disrupt illicit supply chains.

In addition to manpower reforms, the issue of underpayment within the civil service, especially among enforcement agencies, must be addressed. Emphasis should be placed on enhancing remuneration to mitigate corruption risks, coupled with the implementation of stronger sanctions for identified wrongdoing. Robust border enforcement measures, including enhanced data sharing, technological solutions, and coordinated efforts between customs and the navy, are vital to prevent the exportation and importation of counterfeit goods. Implementing sophisticated tracking systems throughout the supply chain enhances the ability to trace and intercept illicit goods. Moreover, improving prosecution and conviction rates, possibly through legislative acts like the Anti-Money Laundering and Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLAFTA), and establishing a standardized tracking system, akin to LEMIS in the USA or EU-TWIX in Europe, can contribute to more effective law enforcement efforts in the long term. Besides that, capacity-building and training initiatives are essential, particularly through joint training sessions that unite prosecutors and judges, enhancing their collaboration and understanding to facilitate more effective legal actions against those engaged in illicit trade.

Education & Behavioural Change

Next, a comprehensive understanding of consumer motivations is crucial, encompassing financial, cultural, emotional, medicinal, recreational, social, entertainment, and reputational factors. Targeted behavioural change interventions should be informed by evidence-based implementation plans that consider attitudes and values. A key strategy involves initiating impactful communication campaigns, starting with educational efforts in schools to raise awareness among children. These campaigns aim to equip students with knowledge about illicit products and trade, encouraging them to transfer this information to their families. Incorporating hands-on exercises, such as surveys on counterfeit goods at home, creates a bridge between classroom learning and real-world experiences, fostering a global citizenship mindset.

Invest in Securing Habitats on the Ground

Investing in securing habitats on the ground is crucial to combat wildlife trafficking, as recommended by the TRAFFIC report. The focus should include a comprehensive re-evaluation of laws, particularly in Sabah and Sarawak, with updates to provide legislative protection for both native and non-native species. The need for standardised penalties nationwide and the integration of a robust monitoring and evaluation system are emphasised. Continuous support for successful initiatives like Operasi Bersepadu Khazanah is recommended, acknowledging its progress and advocating for its further development. A transparent monitoring and reporting system, spanning physical and online markets, is highlighted as essential for evidence-based policymaking and the formulation of effective implementation plans, emphasising the importance of publicly accessible information on captive breeding operations.

A Holistic Ecosystem

Beyond the need to address illicit trade, Malaysia's journey towards a high-income future demands a robust, interconnected ecosystem. Strong property rights foster an environment for the seeds of innovation to thrive. When creators and inventors know their ideas are protected, they are empowered to take risks, invest in research and development, and bring ground-breaking technologies to life. A secure legal framework that upholds property rights not only attracts local and foreign investors but also catalyses the development of intellectual property and technology-driven industries.

Additionally, a comprehensive analysis of the trade barriers index becomes crucial, as it directly impacts the flow of foreign research and development investments. A high score on the trade barriers index acts as a barbed-wire fence, discouraging foreign R&D investment and stifling the cross-pollination of ideas needed for true economic vibrancy. By identifying and dismantling unnecessary trade barriers, Malaysia can attract more foreign capital, fostering a collaborative environment that accelerates economic growth and technological advancement, propelling us towards a high-income future.

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