KUALA LUMPUR: Illicit cigarettes continue to be a growing pressure on Malaysia’s micro-business ecosystem, as the continued dominance shifts transactions away from legitimate small enterprises operating within local communities, the Malaysian Micro Businesses Association (Mamba) said in the latest Illicit Cigarettes Study (ICS) 2025 by NielsenIQ.
According to ICS 2025 findings, illicit cigarettes account for approximately 54.4% of total cigarette consumption nationwide.
Mamba secretary-general Alvin Low Wei Yan said the findings illustrate how a large illicit tobacco market can distort competition and pose challenges for micro-entrepreneurs operating within a regulated business environment.
“Micro businesses rely on steady daily transactions to sustain their operations. When a large share of purchases moves outside the legal retail system, legitimate micro enterprises inevitably lose part of that market,” he said.
Micro businesses, especially small retailers, sundry shops, coffee shops and neighbourhood kiosks, form the heartbeat of Malaysia’s community-based economy, providing everyday goods across towns and neighbourhoods.
He said the wide price gap between legal (max RM18.40) and illicit cigarettes (min RM3.00) continues to influence consumer behaviour.
“When illegal cigarettes are sold at a fraction of the price of legal products, many consumers will gravitate towards cheaper options. Some micro businesses also encounter individuals peddling illicit cigarettes for sale because of the higher margins involved.
“The majority of our members turn them away, but the presence of illegal tobacco supply networks creates pressure on businesses trying to follow the rules,” he said.
Low noted that this situation creates an uneven playing field for entrepreneurs who operate within the regulated market.
“Our members comply with licensing, taxation, health and pricing laws. When illegal sellers operate outside that system, it creates unfair competition for entrepreneurs who follow the rules,” he said.
Low said the issue also highlights the importance of strengthening Malaysia’s micro-enterprise ecosystem.
“Malaysia has made significant progress in getting small businesses to adopt digital payment through initiatives by financial institutions like SME Corporation Malaysia and Bank Negara Malaysia.
“But when illicit trade siphons transactions away from legitimate enterprises, the entire ecosystem pays the price,” said Low.
According to the Department of Statistics Malaysia, 3.45 million Malaysians worked in the informal sector in 2023, accounting for 21.8% of total employment — a stark reminder of how many livelihoods remain vulnerable outside regulated markets.
Recent enforcement statistics further highlight the scale of the issue.
Media reports noted that illicit cigarettes were the second largest category of contraband seized in January, amounting to about RM38.68 million.
What is at stake is the backbone of Malaysia’s economy. SME Corporation Malaysia reports that MSMEs account for about 97.4% of all business establishments in the country, underscoring the urgent need to protect those operating within the law.
“This is clearly a complex issue that requires a balanced and comprehensive response. Enforcement remains important, but addressing the broader market conditions that allow illicit trade to persist is equally critical.
“Micro entrepreneurs across the country are working hard to operate within the legal system. Ensuring a fair marketplace is essential for sustaining Malaysia’s micro-business ecosystem and supporting the growth of local entrepreneurs,” Low said.
