The Economist Intelligence Unit (EIU) published a study on the state of illicit trade in 17 countries across Asia and the Pacific. While there is no surprise in seeing Australia and New Zealand scoring highly in this “ Illicit Trade Environment Index”, and developing countries such as Lao or Myanmar scoring poorly, an intriguing finding is the relatively poor performance by the city-state of Singapore which shares 7th place with Taiwan.

Rather than conducting a quantitative comparison inherently complicated due to the nature of illicit trade, the EIU focus on four qualitative indexes. Intellectual property enforcement was the first pillar of the index. Secondly, transparency in trade was defined as the effects of government’s regulations, and cooperation with stakeholders. The third category was the customs environment, its ability to facilitate trade while conducting inspections, and low corruption. Finally, the EIU studied governmental efforts to suppress the supply and demand for illicit trade.

The IP laws and enforcement efforts in Singapore are strong and it has the highest scoring customs environment of all the countries included in the study, with high efficiency and low corruption. The government actions were deemed one of the most conductive to curtailing illicit trade, only behind Hong Kong and New Zealand. So why did Singapore only come 7th out of 17 on the illicit trade index, below Malaysia and Hong-Kong?

The explanation lies in its particularly poor rating regarding transparency, on which only Cambodia, Myanmar and Laos did worse. As one of the world’s busiest ports, Singapore hosts major Free Trade Zones (FTZs) over which the authorities exercise very little oversight, and in which they are likely to intervene only when dangerous materials such as guns are transiting. The study also found that authorities considered by experts as generally uncooperative with international stakeholders such as intellectual property rights owners wishing to seize infringing goods while they are transiting through Singapore.

The report claims that the economic benefits which the city-state gains from the FTZs encourage this lax approach which enables illicit trade through the port of Singapore. The Singapore Customs denied what has been described as “an abdication of responsibility” by a member of the panel, claiming that it actively cooperates with interested parties. However, what is widely seen to be a significant disadvantage is a system of a border IPR enforcement which is based on specific notification on the infringing shipment, instead of structural recordal system with the Customs. In a time of further economic integration and economic development of the whole ASEAN region, one can hope that a developed economy such as Singapore will show the way to its rising neighbors on matters of illicit trade and intellectual property protection.