Anti-Illicit Trade Forum 2019 Illict Trade In Myanmar ...€¦ · Anti-Illicit Trade Forum 2019 Illict Trade In Myanmar: assessing impacts and discussing perspectives The European

Anti-Illicit Trade Forum 2019

Illict Trade In Myanmar: assessing impacts and discussing

perspectives

The European Chamber of Commerce in Myanmar (EuroCham) serves as the voice of European

business in Myanmar. Its main mission is to significantly increase the presence of European

companies in the country and to facilitate market access particularly for European SMEs – by

advocating for member interests with the government and organisations in Myanmar, the ASEAN

region and the EU.

Given the lack of data and information on Myanmar’s illicit trade activities, EuroCham missioned a

report on Anti-illicit Trade activities in Myanmar and hosted the Anti-Illicit Trade Forum 2019, as it

recognises how valuable information can be as a tool to raise awareness and mobilise action. This

second edition of Anti-illicit Trade Forum organised with the support of MoC, and MoPF and

MFIU (Myanmar Financial Intelligence Unit) took place in Nay Pyi Taw on Thursday 19th of

September 2019.

This event, on a highly topical issue, is the only one in Myanmar, and is meant to assess the

Anti-Illicit Trade societal and environmental impacts and its perspectives; The in-depth

discussions will strive to improve the knowledge and understanding of the regulatory environment

and economic circumstances that enable illicit trade and provide recommendations on priority areas.

Foreword from TRACIT (Transnational Alliance to Combat Illicit Trade)

Illicit trade is a scar of the face of the global trading system

Despite the importance of international trade as an engine for economic growth, development and

poverty reduction, very little attention has been given to the substantial negative impacts of illicit

trade. From smuggling, counterfeiting and tax evasion, to the illegal sale or possession of goods,

services, humans and wildlife, illicit trade is compromising the attainment of economic and social

development goals in significant ways, crowding out legitimate economic activity, depriving

governments of revenues for investment in vital public services, dislocating millions of legitimate jobs

and causing irreversible damage to ecosystems and human lives.

In Myanmar, illicit trade is a major and multifaceted problem. From illegal logging and mining of

gemstones like Jade, to alcohol smuggling, wildlife trafficking and counterfeiting of all types of

consumer goods, the country faces numerous challenges with combatting illicit trade. In fact, our 2018

Global Illicit Trade Environment Index ranked Myanmar 82nd of 84 countries evaluated on the extent

they enable or prevent illicit trade.

Given the scale of the problem, I was pleased to learn that EuroCham Myanmar had established an

Anti-Illicit Trade Advisory Group to fight illicit trade and intensify partnership with the Government of

Myanmar. Naturally, I readily accepted their invitation to participate in the Anti-Illicit Trade Forum

they hosted in Nay Pyi Taw last September. I considered these to be fundamentally important

commitments in the fight against illicit trade, signaling the readiness of business to partner with

government in the process.

One year later, I have the impression that progress is underway in Myanmar. I think the government

is listening to our calls for an effective policy response to illicit trade, and I think they are responding

to the recommendations we put forward in Nay Pyi Taw to increase collaboration with the private

sector, raise awareness and establish an interagency task force with high-level authority within the

Union Government Office.

Consequently, the recent formation of the Illegal Trade Eradication Steering Committee, led by

Myanmar Vice President U Myint Swe shows that a President to ensure that the 13 tasks delineated

by the Steering Committee in June become priorities tomorrow.

In the balance lies the future of sustainable development in Myanmar. Illicit trade has far reaching

consequences, with negative impacts on all aspects of society. Our recent TRACIT report, Mapping the

Impact of Illicit Trade on the Sustainable Development Goals, shows how illicit trade in all its forms

present significant deterrence to all 17 of the UN Sustainable Development Goals (SDGs) – holding

back progress, increasing costs and pushing achievement of the goals further away.

So, the time to act is now. The sweeping, negative impacts of illicit trade on Myanmar’s economic

development will require sustained efforts from all stakeholders to achieve an effective response to

this varied illegal activity.

This year’s 2019 EuroCham Anti-Illicit Trade Forum is a critical opportunity to keep the momentum

going. In particular, I hope that EuroCham Myanmar’s Anti-Illicit Trade Advisory Group and the Illegal

Trade Eradication Steering Committee can agree on priorities, establish methods of collaboration and

work together to implement measures to stop illicit trade in Myanmar.

Jeffrey Hardy

Director General

Transnational Alliance to Combat Illicit Trade (TRACIT)

Guest speakers of Anti-Illicit trade Forum 2019

Illicit Trade exhibition tour for VIPs and media.

This year, EuroCham worked with its Anti-Illicit trade members to set up an exhibition showcasing the

extent of illicit trade in Myanmar.

European compagnies working in the beer, spirits, cigarettes, cosmetics, bread improvers and flower

bulbs industries presented to the media and high government representatives H.E. U Soe Win, Union

Minister of Planning and Finance, U Maw Than, Auditor General of the Union, Daw Myat Myat Soe,

Commissioner of Anti-Corruption Commission, and U Aung Naing Oo, Permanent Secretary, Ministry

of Investment and Foreign Economic Relations, some smuggled and counterfeit goods available for

purchase in many shops in Myanmar. Explanatory images of seized smuggled and counterfeit

products were also displayed in order to assess the extent of illicit trade in Myanmar.

Opening remarks from Marc de la Fouchardiere, EuroCham Myanmar Executive Director

“We’re happy to learn that the Government of Myanmar has been strengthening its efforts to combat

illicit trade in Myanmar and we welcome the formation of Illicit Trade Eradication Steering Committee

in June 2019, chaired by the Vice President H.E. U Myint Swe. “

“We have started to witness a lot of positive changes in terms of illicit trade control. The most recent

example is the agreement in this month between Myanmar and China to resume joint inspections of

their common border for the first time in 24 years.”

Keynote address from H.E. U Soe Win, Union Minister of Planning and Finance

H.E. U Soe Win started by thanking EuroCham for organising this event and reminded that the

outcomes of the 2018 edition in collaboration with TRACIT were “very fruitful” with discussions

revolving around illicit trade, organised crime and money laundering.

He informed the public regarding the short and long-term strategic plans of the newly established

Anti-Illicit trade Steering Committee to effectively face illicit Trade. In particular, he insisted on

reinforcing border and checkpoints controls together with surprise checks in the short time, while, on

the long term, coordination, E-lock, single-stop inspections and bonded warehouse systems will be

introduced.

His excellency mentioned also rearrangements of the Internal Revenue department regarding the

Special Good tax Label in particular on “Alcohol, Cigarettes, Vine and Spirits”.

In addition, he praised the exchange of ideas, opinions and experiences between the Government,

the Public and International Organizations and told to be amazed by the Illicit trade exhibition

showed him right before starting the forum. Nevertheless, he confessed the fear that what showed

was only “a tip of an iceberg” of illicit trade in Myanmar.

“I promise that this forum will be attended with a serious concentration”

“(The second edition of the forum) is useful giving a better opportunity and effective opinions for

reducing illicit trade and its consequential issues”.

UNODC presentation on Illicit Trade and Transnational Organised Crime

Mr Troels Vester, Myanmar Country Manager of the United Nation Office on Drugs and Crime

(UNODC) shared insights on organised crime and experiences in other countries such as Panama and

Vietnam where he previously worked.

First, he admitted that when people think about UNODC they usually refer only to drugs and crimes,

ignoring the trade of counterfeit product, since

considered a “soft crime”. Therefore, it occurs

that not enough attention, during the training of

officers, is given to this issue.

He spoke about the UNODC report that will be

provided to the Myanmar government in the coming weeks. Because of the nature of UNODC, they

rely exclusively on “conservative and careful data” coming from governments, in practice, only on the

reported case but “for sure there are more”. For the same reason, a genuine collaboration with the

government, a long process of elaboration and consultation are behind every UNODC report.

Then he went to the crux of the matter, saying that it is common misperception to consider the

production and transport of counterfeit products and the production of drugs as separated, in fact,

they are very interconnected as he explained in detail. Transnational organised crime uses the same

people, the same routes and measures for the transport of counterfeit products, drugs and even

human trafficking. In addition, these organisations have the resources and capacities to promptly

adapt to new situations, something that is not always true for who needs to stop transnational

organised crime.

In particular, Southeast Asia is considered as a hub in the production and distribution of counterfeit

goods. The GPD of some countries from the area compared to the revenues deriving from counterfeit

goods (without even considering other forms of transnational organized crime) provides a worrisome

picture of the scale of the problem.

In the Myanmar context, he highlighted the proximity with China, several borders, conflict zones and

low consumers awareness, not only about the loss of tax, but also the costs for the government, for

example, the cost related to damaging products and the public healthcare system. In addition, the

country has several so-called “free trade zone” where law enforcement is extremely difficult since the

goods are supposed to come and go really fast. In these cases, you cannot control every shipment or

container. Profiling and intelligence work must

be done even before the container arrives.

Among the many, Mr. Troels Vester focuses

frequently on the illicit trade of medicines, since

it has “a major impact on health”. Recently, there

have been cases of counterfeit Malaria

medicines which worse the problem since the

mosquito where able to build resistance to the

weaker and not effective counterfeit medicine.

While concluding, since there seems to be “changes around corner”, he confessed that only a

comprehensive strategy, bringing together all the actors from the regions, including staff of the

different custom departments, but also following the money deriving from illicit trade and sharing

“Illicit trade is a health issue, is a tax issue, is a crime issue, an agricultural issue, is a custom’s issue, therefore a Governmental approach is necessary.”

“Everything is counterfeit: we are no longer talking of high-end products, but everything.”

best practises could lead to a change of direction. As best practises, he suggested an application for

telephones used by the police force to recognise counterfeit products or the institution of a hotline

connecting them directly to the producers. These and other best practises will hopefully soon be

followed at the port of Yangon.

Report presentation on Tax losses on selected consumer goods

Myanmar Market Research & Development Research Director, U Aung Min, delivered a presentation

on the key findings of the report commissioned by EuroCham as a follow up to the 2018 report from

TRACIT and its Global Illicit Trade Index. MMRD has a strong experience in conducting extensive

studies for public and private institutions, in 2016 UMFCCI commissioned a study detailing trade

deficit caused by illicit trade.

Myanmar being one of the lowest-scoring countries (82/84) in the Global Illicit Trade Index, the

research’s purpose was to point out the root causes of the phenomenon. The study focused on 6

categories of consumer goods (beer, whisky, tobacco, pharma, mobile handset and dairy products)

on the period of 2017 to 2018 by conducting a survey to each sector’s relevant departments,

associations and private companies.

One of the first key findings lies in the comparison of the local custom data to the neighbouring

countries’ (Thailand, India, China). The figure for a minimum amount of USD 6.4 Billion between

foreign data and national data became apparent. U Aung Min outlined the fact that only 15 official

trade points were considered thus not including all of the illegal/undeclared checkpoints along

Myanmar long border. “The figure of known illicit trade of USD 6.4 Billion is only the tip of the iceberg”

emphasised the research director.

The presentation also showcased brief case studies of selected consumer goods. The common point

being the lack of traceability of the product, the weak penalties resulting in greater incentives for the

smugglers and general weak awareness from the consumer. The conducted study found out that

consumers usually choose products based on their price regardless of its origin, ignoring the eventual

health hazard. To illustrate the extent of illicit trade, the study displayed numerous pictures of seized

products as well as illicit products being openly sold in shops or online.

In the spirit of the study, it became clear that the lack of enforcement was an important part of the

problem. According to the customs department’s data the total amount of seized products

represented a shockingly low 0.4% of the estimated USD 6.4 billion USD of the known illicit trade

amount. This results in massive loss in tax revenue for the government as well as creating an unfair

business environment for legitimate companies complying to the laws. It is apparent that legitimate

businesses could produce the same amount of goods and contributing to additional revenue for the

government, but illicit products are often preferred due to the price differential mentioned before.

To conclude the presentation, research director U Aung Min detailed actions taken by all the

concerned players while highlighting that stronger enforcement from the local authorities and greater

awareness from Myanmar population was key to combat illicit trade in the long term.

Panel 1: Combating Illicit Trade: Regulatory Framework

For the first panel of the day, moderator Eaimt Phoo Phoo Aung (Economic and Commercial Attachée

for the Flemish Region, Embassy of Belgium) invited speakers U Myint Thura (Director General,

Department of Trade, MoC), U Zayar Kyi Nyunt (Deputy Director General, Internal Revenue

Department, MoPF), Daw Myat Myat Soe (Commissioner of the of Anti-corruption Committee), Ms.

Khine Wai Thwe (Co-Chair of Anti-illicit Trade Advocacy Group), Mr. Khin Maung Nyo (Economist) to

the stage to assess impact and discuss perspectives in detail relating to illicit trade in Myanmar.

The discussion mainly gravitated towards the root cause of illicit trade in Myanmar. Ms Khine cited

the MMRD report on Revenue Loss to put emphasis on the supply and monetary side to the problem.

“Myanmar’s geographical position and the lack of awareness from the general public” was pointed out

multiple times by the representative from the MoC. Mr Khin Maung Nyo, the economic expert,

jokingly told that “[he] was surprised by the number of everyday goods that are fake without [us] realizing

it”

DDG Zayar Kyi Nyu from the Internal Revenue Department deplored the lack of hard data and

statistics to pinpoint the critical trading zones. The ACC representative gave some insights and its

mandate by widening the scope of defining corruption and including loss and damages to the state-

owned property. There was a strong call from all of the government representatives to incite locate

population to share information when witnessing illicit trades. Daw Myat Myat Soe encouraged every

organisation involved in the efforts to look beyond the borders and to considerate the global aspect

of transnational crime.

The economist Mr Khin Maung Nyo pointed out that “we shouldn’t solely focus on the negative aspects

often portrayed in the media, as recent efforts send encouraging signs”. He also observed that Myanmar

had one of the lowest average income in the Asian region. He was confident that “raising the standard

of living and awareness is the most efficient way to curb illicit trade in the long run.” But he insisted on the

important role media plays here, as they should not only be more aware of the illicit trade issue but

also play their part in educating consumers.

Recent actions taken by the governmental body were also discussed. The representative from the IRD

affirmed the willingness to have a level playing field for legitimate producers. Foreign companies

following the rules stressed out how impacted they were by the lack of enforcement. Ma Khine

stressed out that disproportionately high taxes for compliant companies would be

counterproductive, “European companies are eager to invest sustainably, but there needs to be a level

playing field and guaranteed transparency in trade for all the businesses operating in Myanmar.”

Following the recent development of Vice President U Min Swe’s initiative to create the Illicit Trade

Eradication Steering Committee, DDG U Myint Thura shared the current state of the affairs. The

committee being launched last June, the priority is to strengthen inter-ministerial efforts and

therefore creating sub-committees to focus on one precise aspect of illicit trade.

MoC Representative called any person witnessing acts of illicit trade to “share information, file

complaints and help to arrest criminals, as a reward is also granted for any useful insights”.

Ms Eiamt Phoo Phoo Aung concluded by sharing her “optimism to change the Myanmar culture and

raise awareness for current and future generations in Myanmar.”

Panel 2: Anti-illicit Trade Forum Panel: Effective Enforcement

The panel was moderated by Ms. Nandar Thaung, Legal Director of EAC Euro Asia Group of

Companies and the panelists include U Kyaw Htin, Director General of Customs Department from

the Ministry of planning and Finance, Police Brigadier General Kyaw Win Thein, member of

Financial Intelligence Unit from Myanmar Police Force, and Mr. Troels Vester, Myanmar Country

Manager of the United Nation Office on Drugs and Crime and Mr. Matthieu Glorieux, Managing

Director Seagram Myanmar.

U Kyaw Htin reminded the recent reforms and new procedures in line with International and

European procedures that should increase the strictness of the control and speed up the procedures.

The improvement of technologies such as X-Ray machines and software for data analysis and money

tracing are also part of strategy of the Financial

Intelligence Unit as told by Police Brigadier General

Kyaw Win Thein. But what needs to be done first, is the

creation of a solid legal framework, only then

implementation and capacity building will be truly

effective.

The panelist agreed that a single approach is not

enough, the issue needs to be tackled for different angles said Mr. Troels Vester. Commenting on

the formation of the Anti-Corruption Unit, he said that “one unit cannot stop corruption, they will have

too much work”. This and other recommendations will be in the UNODC country visit document, that

will be finalised shortly and provided to the government. “I know that the government takes it (the

issue) seriously” concluded the UNODC country

manager.

Another factor that will help to remove the

smuggling business, according to Mr. Matthieu

Glorieux, is the market mechanism: the high

price differential caused by the Special Good Tax

and the Ban of foreign Spirits, disadvantage the

local producers. “As a local producer, we are very concerned, not only for us, but also for health, the

rule of law, and taxations” he said, adding that the solution is a dialogue between the public and the

private to establish the level of “right taxation”.

“No single ministry can solve this issue.”

Police Brigadier General Kyaw Win Thein

“Response [to organised crime] needs to be regional, because if not, the problem will move from one place to another.” Troels Vester, UNODC Myanmar Country manager

Key findings from Health roundtable:

The round table, hold with the help of Dr. Saw Nay Nwe, Domestic Relation Committee Chair of

MPMEEA (Myanmar Pharmaceuticals & Medical Equipment Entrepreneurs Association) saw the

participation of both private and public sector, with the presence of representatives of the Ministry

of Health and Sport and the Myanmar Consumers Union.

The illicit trade of medicines and supplies appears to be related to the demand for fake or smuggled

alternatives. The consumers, erroneously, tend to believe that “something is better than nothing” said

Prof. Dr. Aung Myint.

One topic that was immediately mentioned is misfunctioning of the procurement and supply chain

management and too long registration procedures, due to the lack of budgetary and human

resources of the Food and Drugs Administration (FDA). The registration for new medicines, but also

the renew of previous registrations, requires months and the application process is uncertain.

Stronger collaboration between the FDA and the private sector, and, in general, a better public-private

partnership (PPP) is essential. Likewise, real-time information sharing between the stakeholders

would improve the healthcare system.

Better traceability of medicines, the monitoring of retailers and the strengthening of accreditation

bodies would also limit the illicit trade of medicines and be beneficial for public health. Nevertheless,

the measures require strong monitoring and law enforcement.

Key findings from Agrobusiness roundtable

The Agrobusiness roundtable gathered both private sector (Fresh Studio, METRO, Agrim, DPULSACE,

Lesaffre), MoHali representatives from the seeds division and representatives from the Netherlands

and French embassies.

3 recommendations were outlined from the discussions, the 1st being to clarify grey areas. Some

substances are not mentioned either on the authorised ingredients list nor the banned either.

Lesaffre, a French company producing bread improvers and yeast and importing their products to

Myanmar detailed their current combat on potassium bromate as a grey ingredient damaging

manufacturers health.

As a much cheaper ingredient, potassium bromate is widely used in Thailand. 60 to 70% of the yeast

and bread improvers in Myanmar come Illegally smuggled from Thailand.

The group strongly advise for intergovernmental coordination improvement: as a flower

manufacturer, Agrim is suffering from this lack of communication between implementation and

enforcement entities. According to MOALI (Ministry of Agriculture, Livestock and Irrigation) flower

manufacturers shouldn’t be taxed at customs, still, customs is requesting a 15% tax when importing

its flower bulbs.

According to the discussion, a better alignment on a regional level should provide a better playing

field: with harmonised standards and regulation, especially with Thailand, illicit trade would be

undercut dramatically. This would also make the boarder controls more efficient.

Additionally, to move from manual administrative processes for all dematerialised solutions would

reduce the chance for smugglers and counterfeits products to reach the market.

All the aforementioned solutions require resources from the government it doesn’t currently has.

Throughout Public-Private Partnerships, the government could get the financial support they need to

tackle the anti-illicit trade issue.

Key findings from Beverages & Consumer goods roundtable

Participants from the private sector starts with discussion on Consumer Protection Law, focusing on

the importance of public-private cooperation in legislative processes. Once a law is enacted, it would

be hard to amend it in case of necessity as well as it might be challenging for stakeholders to comply

with it. That is why the participants encourage the government and policy making bodies to

strengthen public-private engagement in terms of law making and to consult private sector

representatives and organisations before tabling a draft law at the parliament since the formulation

of a law requires diverse insights of different stakeholders and careful calculation of possible

problems that may arise after the enactment of the law. More time should also be given to the private

sector to review draft laws and prepare their suggestions as most of the consultation meetings are

being done in short notice.

The effective enforcement of the regulation and tax regimes should not be a burden to clean

businesses which should be much more rewarding to the responsible investors. Participants from

private sector also points out that tax burden on certain goods could lead to reverse effects

sometimes, so the policy makers should take great care in formulating and implementing tax regimes.

The majority of consumers in Myanmar have been very used to smuggled products as they only pay

attention to cheaper goods and they do not care about the country of origin. That is why the

government should start working together with the private sector to education the citizens to raise

their awareness on negative impacts of illicit goods. People also need to be educated regarding quality

awareness and counterfeiting too. The online marketing to consumers through social medias such as

Facebook is popular but consumers should be aware of illegitimate businessmen using this for cutting

corners and avoiding tax providing the substandard, disqualified or untrustworthy source of supply.

Key findings from Intellectual property roundtable

Nearly 20 participants from various sectors like the Myanmar Intellectual Property Practitioners Association (MIPPA), Police force representatives, law firms and private sector. (Luther Law firm, Metro Wholesales) actively engaged dialogue to better understand challenges related to Intellectual Property issues in Myanmar. 4 key outcomes were underlined:

1. To raise more awareness and educate people on companies' right and how to protect their intellectual property. In Japan, students are educated about how to differentiate counterfeit products. MIPPA already proposes 2 weeks training.

2. The new IP law and regulation will be implemented in 2020 but there is no guaranteed

enforcement. Police don't have the expertise nor the training to prosecute offenders. There is a need to trace back the origin of counterfeit products to eradicate the illegal trade.

3. Recommendation for creation of a separate unit in the police dedicated to the Intellectual Property cases. An anonymous hotline with legal experts to file complaint when witnessing IP violation case should be created.

4. The Police invited foreign companies to collaborate in order to identify fake products.

The roundtable discussion was followed by a short presentation from Ms. Yuwadee Thean-ngarm from the Southeast Asia Intellectual Property Right helpdesk, which highlighted the current protection of IP rights in Myanmar and new developments with the new law coming next year. A specific focus on trademark rights protection under the new trademark Law and on Patent, Industrial Design and copyright was highlighted.

For Additional Information:

In English:

Laurenne Sautier

Head of Marketing & Communications

[email protected]

+95 9 45951 8085

In Burmese:

Ngu Whar Thin Thin (Hazel)

Communication Officer

[email protected]

+95 9 45927 8793