Hong Kong comes in the third in Asia after Australia and New Zealand and twelfth globally for its efforts to stop illicit trade, according to a new survey.


The Transnational Alliance to Combat Illicit Trade (TRACIT), a non-profit business-led initiative to mitigate the economic and social damages of illicit trade, worked with the Economist Intelligence Unit (EIU) to produce The Global Illicit Trade Environment Index, which evaluates national and sub-jurisdictional efforts to prevent illicit trade across 84 countries.

Free trade good, but zones poor at stopping illicit goods in Asia

In the times of globalisation and free trade, free trade zones (FTZ) often become black boxes for illicit trade, says Chris Clague, the managing editor for the EIU’s thought leadership division in Asia.

“Products can be labeled as one thing or from a country then sent into the FTZs where things can be switched around. They are sent back out under a different name or country of origin,” he says.

A busy trade and financial hub in the Asia Pacific region, Hong Kong sees a great volume of goods coming in and out across its border, especially via shipment. Often on the headlines are animal parts, cigarettes or drugs being smuggled in and out of Hong Kong.

But according to Jeffrey Hardy, Director General of TRACIT, the city is actually doing a fine job in fighting illicit trade.

“Ranking third in the index means Hong Kong has more tools and policies than other places,” Hardy tells Harbour Times.

“There’s a new ordinance the government is passing on wildlife trade. It shows the government is taking these issues seriously,” he says.

Taking effect on May 1, the Protection of Endangered Species of Animals and Plants (Amendment) Ordinance 2018 aims to regulate import and re-export of ivory and elephant hunting trophies and phase out the local ivory trade. Penalties on smuggling and illegal trade in endangered species include fines of up to $10 million fine and 10 years’ imprisonment to provide a strong deterrent against would-be smugglers.

Advanced technology is another contributor to Hong Kong’s high ranking in the index, says Hardy.

“[C]ustoms are deploying modern technologies and solutions to inspect containers, such as X-ray, to examine the containers, risk profiling, mechanisms to see what a high risk container is. They have the resources to inspect less than 1 percent of all the containers,” he added. “These are steps in the right direction.”

Areas to improve

However, having the tools is one thing. Using them effectively is another, says, Hardy. There are still grey areas that Hong Kong needs to watch out for. One example is human trafficking, a crime that is not widely addressed in the city.

“Hong Kong can be more responsible for stopping human trafficking by sharing information with other governments,” says Hardy. Hong Kong is tied with 66 other countries on reporting human trafficking.

Another challenge for Hong Kong is its close ties to China, an enormous source of counterfeit products..

“The government needs to do a better job on the land border with China, as there are a lot of physical movements of counterfeits and people. Don’t just look at the ports and ocean going [vessels],” says Hardy.

One thing Hong Kong can do, according to Hardy, is to enhance interagency cooperation within its government.

“A government like Hong Kong can appoint an “anti-illicit trade coordinator” with high-level authority to guide the law enforcement, customs and tax department to cooperate,” says Hardy. “The coordinator can also go into China and talk to his Chinese counterpart. He can have the power to act.”

Lead the region

As Hong Kong outperforms other regional peers in the index, it has the responsibility to lead the region, says Clague.

“Hong Kong has done good things and has policies which can be used to teach other countries in the region how they can put together effective programs to combat illicit trade,” says Clague. “It can export its advanced techniques and technology to the neighbouring countries.”

He also suggests that if Hong Kong indicts shipments that pass through its borders, it will have an impact on illicit trade in the region.

Meanwhile, Hardy points to the role of international organisations such as ASEAN.

“ASEAN exists to identify the best practices of the countries that make up the organisation, then promotes those to countries that might not have legislation and regulations in place. In this case, ASEAN can look at Hong Kong for best practice,” he says.

TRACIT and EIU have come up with a set of policy recommendations to combat illicit trade. They include protecting free trade zones from illicit traders, rationalising tax policies and subsidies and establishing an intelligence sharing system, among other measures.

“Illicit trade is the ugly scar on the face of trade. It’s 2018. It’s time to put a stop to it. It is no longer acceptable for the government to look the other way,” says Hardy.

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