Interoperability

We have not been optimizing whatever advantages we have sitting as chair of the Association of Southeast Asian Nations (ASEAN) this year. This should be an opportunity for us to rally the regional community for joint action on shared concerns.

Several times in the past, the member-countries of the ASEAN succeeded in reducing problems through joint action. By undertaking joint naval patrols, for instance, we greatly reduced incidence of piracy in the seas we share.

The same joint patrols enabled our countries to interdict smuggling of dangerous drugs across our porous borders. There are no official numbers for the reduction in drug flows across borders, but anecdotal evidence suggests the gains are significant.

Today, cigarette smuggling remains a problem in the region. The proliferation of illicit tobacco products in Mindanao suggests that smuggling across our southern border plays a major role.

A recent report by Euromonitor International gives us an idea of the scale of the challenge posed by the illicit tobacco trade. Over the past two years alone, it is estimated that global illicit cigarette sales generated about $12.6 billion in revenue.

Furthermore, illicit cigarette sales rose 14 percent over the same period. More dramatically, illicit e-vape sales surged by 24 percent over the past year alone.

In the Philippines, government lost about $2.5 billion (about P141 billion) in revenues. The tobacco industry estimates that one in every four cigarette sticks and more than four in five e-vapes sold here are illegal, contraband, counterfeit or unbranded.

All the ASEAN countries impose heavy taxes and duties on tobacco products. In the Philippines, a large portion of what we call “sin taxes” goes to funding public health programs – including our chronically underfunded PhilHealth. The high tax rate makes smuggling lucrative.

The full implementation of our Universal Health Care Law is estimated to require funding of about P450 billion. The funding gap widened when government took away about P60 billion of what it described as “excess funds” from PhilHealth two years ago. To compound that, the notorious 2025 national budget denied PhilHealth any subsidy.

The P141 billion in potential revenues would go a long way in helping rebuild our feeble public health system. But those revenues will come only if government deals more effectively with the illicit tobacco trade. It can deal with this illicit trade only with the support of our regional partners in the ASEAN.

Apart from depriving government of much-needed revenues, rampant smuggling of tobacco products undermines the livelihood of 2.2 million Filipino tobacco farmers. Persistent smuggling is a disincentive for legitimate, tax-paying businesses planning to invest in our economy, further constraining our growth potential. Above all, rampant smuggling exposes our consumers to unregulated cigarettes and vape products.

The report cited above found that illicit cigarettes and e-vapes are largely manufactured within the Southeast Asian region. They come particularly from Indonesia and Cambodia, with additional supply from China.

Meanwhile, Malaysia, Singapore and Vietnam have emerged as key distribution hubs. The illicit tobacco trade has evolved into a sophisticated cross-border supply chain that thrives on uneven regulation, porous borders and weak coordination.

During the Third International Tobacco Summit held in Manila last May, government officials, lawmakers and industry experts agreed that no country can effectively combat illicit trade on its own. As long as neighboring states maintain different regulatory standards and enforcement regimes, criminal syndicates will continue to exploit the weakest link.

Filipino enforcers have not been totally idle. Last June 22 alone, BIR and NBI operatives seized 22 containers of illicit cigarettes at the Manila North Harbor. But despite occasional busts of this magnitude, illicit tobacco products continue to find their way to market across the country.

NTA administrator Belinda Sanchez underscores the fact that the country is now “uniquely positioned to elevate illicit trade as a regional priority and drive more coordinated action.”

The Philippines assumed the ASEAN chair with a stronger enforcement record in this regard than in previous years. In the first half of 2026 alone, the Philippine National Police conducted nearly 9,000 anti-smuggling operations. In these operations, about P8.6 billion worth of illicit products were seized. Interior Secretary Jonvic Remulla described this campaign as a “bloodless war against crime,” highlighting the fact that enforcers are targeting the syndicates rather than relying on isolated arrests.

But even relentless local enforcement operations can only achieve so much for as long as illicit products can still move seamlessly across borders. Most of the ASEAN countries lag behind adopting global anti-smuggling protocols. Some sense of urgency is required here.

The Philippines and Vietnam are leading the region by piloting independent national track-and-trace systems. Several other countries are now developing digital systems to monitor the movement of tobacco products from manufacture to retail.

One practicable goal that may be achieved during the Philippines’ chairmanship of the ASEAN, according to ECCP director for advocacy Kathyrin Pioquinto, is to encourage member-countries to move towards common technical standards. This will provide a shared “language” for track-and-trace systems moving out of fragmented paper-based monitoring with real time digital oversight. We are in the age of artificial intelligence, after all.

JTI’s Anti-illicit Trade director Valentin Dinca sees the Philippines as well-positioned to advocate stronger export controls across the region. Under Philippine law, tobacco exports must comply with the labelling and tax requirements of their destination countries.

Regional interoperability will make smuggling unsustainable.