Innovation Banned. The Case Of Hong Kong And Other Asian Countries

The ban of e-cigarettes is back in the news in Asia, this time partnered with its disastrous partner, “plain packaging.” As these violations of intellectual property (IP) rights are being proposed once more, it is important to review where they have been implemented and what effects they have had.

In 1992, Singapore banned the import, manufacture, and sale of chewing gum, reportedly because vandals were sticking it over door sensors on new Mass Rapid Transit (MRT) trains, preventing them from functioning properly and causing disruption to services. Fast-forward 26 years – to when Singapore introduced its ban on e-cigarettes last year – and critics, including Bloomberg, asked, is this the new chewing gum?

Hong Kong once had a common sense approach to vaping – waiting for evidence, one way or the other, on efficacy and potential negative side effects. But, even now that we know that vaping is at least 95% safer than cigarette smoking and much better than nicotine replacement gum (which is legal in Hong Kong), Hong Kong has decided to join Singapore in banning vaping.

Hong Kong skyline before sunset seen from Kowloon, Hong Kong, China.

To make matters worse Singapore has now intensified its war on smokers, not just by banning the one credible alternative to smoking, but now also passing “plain packaging” for cigarette containers. This tears away unique brand identifiers and logos, and can lead to a dangerous slope of taking away IP rights from other products deemed “unhealthy.”

As well as the removal of branding and trademarks from tobacco products, Singapore has also conducted a public consultation regarding sugary soft drinks. The proposal goes so far as to ask the public to consider a complete ban on such beverages and their trademarks.

When the World Health Organization (WHO) began promoting plain packaging, it attempted to play down concerns that it was not, in fact, creating a precedent for trademark seizures on other consumer goods by calling tobacco “uniquely harmful.” However, as it is rapidly becoming the go-to measure for curbing consumption of supposedly “unhealthy” products, this policy is undermining the trademarks system and inviting other countries and activists to question the importance of brand protection and intellectual property rights overall.

Singapore, boosted by its strong trading and the tech economy, has historically been a strong IP supporter according to various international indices. In less than 200 years, the state has gone from a little known cricket pitch and colonial trading post to a global financial center and hub of trade for the entire region. It’s an incredible achievement and a feat of towering vision and human endeavor. That is why it may come as a shock to many to see them joining the growing trend of Asian countries racing toward throwing away IP rights.

In Thailand, a bill was passed in December 2018 mandating plain packaging for tobacco products by this September. Malaysia is also considering the measures. The timing of these announcements, and the apparent rush to pass legislation, makes little sense: Australia, the first country to remove branding from cigarettes in 2012, and the only example of long term policy effectiveness, is in the process of reviewing its tobacco control approach, which health experts and politicians have admitted is not working.

Brand valuation experts Brand Finance estimate the implied loss to businesses at close to HK$2.35 trillion (US$300 billion) if plain packaging is extended to the beverage industry alone. Such an expropriation would certainly lead to job losses. Consultancy firm Frontier Economics performed a survey of trademark-intensive industries in ASEAN, of which food & beverage is a large part, concluding that these are responsible for up to 29% of employment, and 60% of exports.

Perhaps worse is the effect these bans will have on the already potent black market in Asia. After Australia implemented plain packaging, illegal tobacco sales went up by 30%. The illegal market there is now at 15% – the country’s highest level on record. Seizures of smuggled cigarettes in Hong Kong last year were up more than 50% in 2017. Last month, Singapore customs reported a record seizure of illegal tobacco, and with more than 60% market share, Malaysia is the number one country for illegal tobacco worldwide. This is a region that already has issues with illegal tobacco, and these policies would exacerbate the issue.

Rather than copy Australia’s failed experiment, policy-makers in Asia should develop their own approaches to tobacco control, based on evaluating all available data in the context of the local environment. Public health is rightly a priority, but prohibition and brand censorship will not achieve desired outcomes.