The report found that 86 percent of e-vapes sold in the Philippines are illicit — the highest rate among ASEAN countries where e-vapes are legal, surpassing both Indonesia and Malaysia.
From 2024 to 2025 alone, illicit e-vape sales in the Philippines resulted in an estimated P23 billion ($400 million) in lost government revenue.
Across the ASEAN-6, illicit tobacco trade caused a combined $13.1 billion in lost government revenue over the same period.
Rising market
The study highlighted rapid growth in the region’s illicit tobacco market, with illicit tobacco incidence projected to rise from 24 percent in 2025 to 28 percent by 2028 across the ASEAN-6.
Illicit operators were also found to be recording increasing profits year after year, depriving governments of critical tax revenues.
Indonesia posted the largest revenue losses in the region at $5.6 billion, followed by Malaysia and the Philippines at $2.5 billion each.
The report estimated that illicit tobacco generated around $12.6 billion in revenue across the ASEAN-6 from 2024 to 2025.
Illicit cigarette sales increased by 14 percent, while illicit e-vape sales grew 24 percent during the past year.
Malaysia recorded the region’s highest illicit cigarette market share at 57 percent in 2025, making it the only ASEAN market where illegal cigarette sales exceeded legal sales.
“The scale of illicit trade across ASEAN is often sorely underestimated — and, more worryingly, growing at an alarming pace,” said EU-ABC executive director Chris Humphrey.
“Its impacts are wide-ranging, spanning economic, public health and security challenges,” he added.
Smuggling hotspots
According to the report, illicit cigarettes are largely produced within Southeast Asia, particularly in Indonesia and Cambodia, with additional supply coming from China.
Illicit e-vapes, meanwhile, are mostly imported from China and disguised as retail e-commerce goods due to their compact size and packaging.
The report said illicit trade networks exploit ASEAN’s interconnected trade routes and Free-Trade Zones (FTZs) to avoid customs duties and regulatory scrutiny.
Among the identified smuggling hotspots were Port Klang in Malaysia, Subic Bay Freeport Zone in the Philippines, Laem Chabang Port in Thailand, and Sabang and Batam in Indonesia.
Online platforms were also identified as major enablers of illicit tobacco trade.
Sales are often conducted through encrypted messaging applications and social media marketplaces, while payments are commonly completed offline using cash transactions.
“The decentralised nature of online sales makes it hard to crack down on illicit tobacco operations,” said Firdaus Muhamad, head of Consulting for APAC at Euromonitor International.
“Sellers can quickly shift between platforms, communication channels and delivery networks to evade detection,” he added.
The report also cited weak and uneven supply chain controls across ASEAN, including fragmented track-and-trace systems that complicate customs enforcement.
Economic risks
The EU-ABC warned that illicit trade poses broader risks to ASEAN’s economic resilience, especially as Southeast Asia faces economic and supply chain pressures linked to the Middle East crisis.
According to the report, revenue losses from illicit trade reduce governments’ ability to fund infrastructure, healthcare, education, green investments, and economic relief measures.
“Revenue lost to illicit trade reduces the fiscal space available for relief and mitigation measures, while illicit networks continue to exploit weaknesses in regional supply chains,” Humphrey said.
Beyond lost tax revenue, the report said illicit tobacco weakens the formal economy by diverting income away from legitimate businesses that contribute through employment, taxation, and investment.
The study also warned of health and security risks linked to illicit tobacco products, including higher exposure to toxic chemicals and the financing of organized crime networks.
Regional response
In a separate paper published earlier this year, the EU-ABC proposed a regional strategy for combating illicit trade under the Philippines’ 2026 ASEAN chairmanship.
Recommendations included stronger intelligence sharing, coordinated customs enforcement, enhanced use of digital and AI tools, and closer collaboration between governments and the private sector.
“Illicit trade is a regional problem that demands a regional solution,” Humphrey said.
“ASEAN’s economic future hangs in the balance,” he added. —Ed: Corrie S. Narisma
