Covid-19, e-commerce fuel illicit trade in Asean: EU-Asean Business Council

SMUGGLED wildlife, cigarettes, counterfeit medicines, substandard personal protective equipment (PPE), and even children's toys that bypass safety checks are among the worrisome goods traded in South-east Asia's illicit markets.

The region's counterfeit goods market, excluding fraudulent medicines, is worth around US$35.9 billion annually, according to a 2019 report by the United Nations Office on Drugs and Crime (UNODC). It also costs governments further billions in tax revenues, and is linked to organised crime activities.

Now, the pandemic and the rise of e-commerce could coincide in a perfect storm, fuelling the region's already-bustling trade.

On Tuesday, the EU-Asean Business Council (EU-ABC) convened a roundtable discussion on the dual impact of digital economies and the pandemic on Asean's illicit trade. Participating in the discussion were representatives from the pharmaceutical, automotive, alcohol and tobacco industries.

"It's a fact that illicit trade has never been more pronounced than during this pandemic," said roundtable participant Arnold Perez, PMI's senior counsel of illicit trade prevention in Asia. "Legitimate businesses have had to deal with various protocols for Covid-19 imposed by governments to continue (their operations).

"These were never a hindrance for illicit operators, since they are beyond the purview of the government. So these illicit trade operators fulfilled the market needs for - in our case - cigarettes, vis-à-vis the legitimate manufacturers struggling to comply with government restrictions," Mr Perez added.

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On the consumers' end, noted Olivia Widen, associate director for corporate affairs at Pernod Ricard Asia, some governments' curbs on alcohol - such as in Thailand, last year - could have driven drinkers underground, incentivising illicit markets and criminal activity.

"Between 2018 and 2019, over 100 drinkers were hospitalised from methanol poisoning produced by drinking illegally produced and counterfeit alcohol in Malaysia," said Ms Widen, who called for measures to improve labelling requirements to support consumer safety.

Lately, exacerbating such concerns is the rise of e-commerce. The proliferation of online sales has made it more difficult for consumers to identify counterfeit goods, and easier for them to fall victims to scams. Sometimes, this has deadly consequences.

"About one million people die every year due to counterfeit drugs," said Patrick Kos, head of legal and compliance at Roche Pharmaceuticals. "Ninety per cent of drugs purchased online are illicit. There are about 50,000 online pharmacies, and almost 100 per cent of them are non-compliant with industry standards."

He added: "The key risk is patient safety, and we can't highlight this enough. Ten years ago, people were producing illicit products using sugar water for medicines. Now, they use all kinds of stuff - cement, sewage water, things you really don't want in your body."

Mr Kos also noted recent incidents of counterfeit vaccines being manufactured and sold in China. "People who are working from home, and can't really leave their homes - they try to find access to medicines. Now, clearly, other parties are taking advantage of the situation," he said.

Counterfeiters are also getting more sophisticated and aggressive.

"I personally participated in a raid of a counterfeit factory," said Fernando Ferrer, BMW Group Asia's customer support director, at Tuesday's roundtable. "The packaging, the labels, the parts looked just the same - but the glue they used to connect the metal parts and brake pads was common household glue. I certainly wouldn't put my family (in a car made of those parts)."

Mr Ferrer added: "What we are seeing is an increase in such illicit parts, and with online platforms and the rise of e-commerce, it's getting harder for us to police."

Last November, the EU-ABC issued an advocacy paper on Asean's illicit trade. The paper noted the presence of players such as Bukalapak, Carousell, Shopee and Tokopedia on the United States Trade Representative's (USTR) Notorious Markets List - a list of online and physical markets that reportedly engage in counterfeiting and piracy.

Such e-commerce channels can be prone to unauthorised sellers, counterfeit goods, rogue domain name registrars and false advertising. Third-party vendors often fall outside the jurisdiction of law enforcement agencies, eluding regulators and law enforcement.

To tackle the concerns, participants of Tuesday's roundtable called for stronger public-private partnerships, tougher enforcement action, and the cooperation of e-commerce firms.

A spokesperson from Bukalapak told The Business Times that the company works closely with various regulators in Indonesia – like the police, the central bank, the drug and food control authorities, and the ministries of trade, health, and communication and information technology, among others – to take down illegal items from its platform.

"So far, we manage to fulfill what has been required of us by these regulators," said the spokesperson. "We are open ourselves and willing to cooperate with all our stakeholders in tackling these issues."

Said Pernod Ricard Asia's Ms Widen, at the roundtable: "We really need to put the consumer at the forefront. At the end of the day, I think the biggest risk is to individuals who are buying our products."