Malaysia is now losing huge revenues to cheap imported beer, much of it being smuggled in without taxes being paid. Due to high import duties on beer, many smugglers have been smuggling beer in illegally. Current estimates conclude that Malaysia may be losing as much as RM 250 million to beer smuggling.
Malaysia is the 10th highest beer consuming country
While Malaysia is a Muslim country, it is also a big drinking country. In fact, the World Health Organisation reports that Malaysia is the 10th highest beer consuming country in the world. Malaysia officially spent over 1.5 billion ringgit on beer in 2010, with about 11 liters of beer consumed per person. It should come as no surprise then that the government may be losing hundreds of millions of dollars in revenue to smugglers.
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As Malaysia is a moderate Muslim country and home to millions of non-Muslim people, the government has generally taken a lax stance towards alcohol consumption. It does, however, charge high import duties on any alcohol imported into the country. Indeed, the mark up of beer and alcohol can be has high as 300% or more when compared to neighboring countries such as Thailand and Cambodia.
Given the high import duties, smugglers have plenty of incentives to smuggle in beer. It is believed that most of the alcohol is brought in and customs officers are then bribed to look the other way. Indeed, just about every can of smuggled beer carries the import tag to prove that duties were paid. Of course, in many cases duties are not being paid at all.
A cheap beer can now be bought at a store for as little as 5 ringgit (about $1.50), whereas local peers usually cost 7 ringgit or more. Pubs and clubs mark up their beer even more, with a pint of local beer costing 25 Ringgit or more. With such a huge price difference, Malaysians and expats alike have been buying cheap beer. Indeed, it’s common for people to leave clubs to drink cheap beer at local stores before returning.
The cheap beer is especially favored by migrant workers
Many of the smuggled beers are higher in alcohol content. While a local beer might contain 5% alcohol, smuggled beer often carries an alcohol content of 12% or more. While most of the imported beers are not renowned for their taste, they still get the job done. The cheap beer is especially favored by migrant workers and lower income individuals who drink it to get a cheap buzz.
Besides beer, cheap whiskeys and spirits from India and elsewhere are also flooding into the market. Indeed, in many stores it’s possible to buy a bottle of American spirits for 70 ringgit or less, while legitimate stores might charge 120 ringgit for the same bottle. Spirits companies claim, however, that this liquor is actually a bootleg knock off.
Beyond duty revenues, local beer breweries, stores, and pubs are losing massive amounts of sales. While estimates are not available, it is likely that this lost revenue amounts to tens of millions of dollars in lost revenue, if not more.
Malaysia is rich in natural resources
The government is looking to crack down on the illegal import of beer. While Malaysia is rich in natural resources, such as oil and natural gas, the government still needs the revenue. Malaysia’s debt-to-GDP ratio is one of the highest in Asia at 56%. The hundreds of millions of dollars in lost revenue is money that the government desperately wants to get its hands on.
The combination of corruption and high taxes, however, is making it difficult for the government to crack down on the illegal imports. Cops and customs officials are poorly paid, so the kickbacks for turning a blind eye can quickly add up and supply extra income. Many high ranking government officials are also believed to be receiving kickbacks, and are suspected of providing cover and support for smugglers.