Illicit tobacco trade hurts Filipino farmers, drains billions from economy

By Andrea B. Ramos

The booming illicit tobacco trade is not only depriving the Philippine government of billions in revenues — it is also undermining legitimate tobacco farmers whose livelihoods depend on the legal market, according to the EU-ASEAN Business Council (EU-ABC) and Euromonitor International.

A recent EU-ABC and Euromonitor International study revealed that the Philippines lost an estimated PHP141 billion (US$2.5 billion) in government revenues over the past two years due to illicit tobacco trade, while illegal operators gained massively from the underground market.

But beyond the economic losses, industry leaders warned that the growing illegal trade is also hurting local tobacco farmers by weakening the legitimate supply chain that traditionally supports farming communities.

“Legitimate producers maintain good relationships with tobacco farmers — looking after farmers and their communities, and investing in them,” said Chris Humphrey, Executive Director of the EU-ABC. “Illicit traders have no interest in maintaining those relationships the way legitimate producers do.”

Humphrey said the expansion of illicit tobacco products creates unfair competition, diverts revenues away from legal businesses, and reduces the capacity of legitimate companies to invest in farming communities, employment, and local development programs.

Euromonitor International’s Head of Consulting for Asia-Pacific, Firdaus Muhamad, said observations in several markets showed that illicit operations sometimes exploit tobacco farmers by forcing them to sell products at lower prices.

“In some cases, tobacco farmers are being used in illicit operations,” Muhamad said. “Illicit operators force tobacco farmers to sell their products at a lower price.”

While there is still no specific Philippine study quantifying the direct impact on Filipino tobacco farmers, Euromonitor noted that experiences from other countries show how legal tobacco supplies are often diverted into illicit channels, contributing to the rapid growth of the illegal market.

The study identified the Philippines as one of the most exposed markets in Southeast Asia, particularly in the illicit e-vapor segment. More than four out of five e-vape products sold in the country are reportedly illicit, the highest among ASEAN countries where vaping products are legal.

For cigarettes, about one in four products sold in the Philippines are estimated to be illicit — significantly above the ASEAN average.

The report also warned that illicit tobacco products are increasingly penetrating neighborhood stores, informal retail channels, and online platforms, making enforcement more difficult.

According to the study, the illicit tobacco market across ASEAN-6 countries is expected to continue expanding, fueled by price gaps between legal and illegal products, weak enforcement, and the growing use of digital platforms for distribution.

EU-ABC emphasized that illicit trade is no longer just a tobacco issue but a broader economic and public security concern affecting government revenues, legitimate businesses, workers, and farming communities.

The group urged stronger regional cooperation among ASEAN governments, tighter customs enforcement, improved digital tracking systems, and closer coordination with the private sector to curb illicit trade across the region.