MALAYSIA: Malaysian brewers fear smuggling as Guinness and Carlsberg increase prices

Malaysian brewers are preparing a report to be submitted to the country's Finance Ministry detailing the effect of recent tax increases on beer, and in particular their concerns on the impact on smuggling.Under 2001 budget proposals, the increase in sales tax from 15%-20% is much higher than neighbouring countries putting local Malaysian brewers at a major disadvantage, according to Malaysian reports.The industry fears the price hikes that will follow the tax increase will create a greater disparity between duty free beer and that sold in the local market, encouraging an increase in black market sales.The prices at retail stores will be at least 20% more when compared with beer sold in duty free, Malaysian statistics reveal. One industry source told the Malaysian press: "As the price difference increases, it will be more attractive for smugglers to bring the contraband across country."According to analysts, the sales of smuggled beer could contribute up to 10%-15% of all beer sold in certain areas, particularly in remote areas where law enforcement is weaker.Carlsberg and Guinness Anchor have already announced their price increases to cover the tax jump. Although Guinness has said the new prices reflect the full impact of the taxes, there are thoughts in Malaysia that brewers, afraid to pass on the full price hike, will subsidise consumers.Beer sales in the country have dropped by at least 12% since the last time beer prices were raised in 1998, further increases it is feared may increase this negative trend.