EIZ wins PMI IMPACT research grant to assess illegal trade of tobacco products

The Institute of Economics, Zagreb started the implementation of the research project “Illegal Trade of Tobacco Products: Smuggling as Experienced along the Balkan Route – BalkanSmugg”, funded by PMI IMPACT, a global grant award initiative of Philip Morris International, aiming to support public, private, and non-governmental organizations to develop and implement projects with a lasting impact against illegal trade and related crimes.  

BalkanSmugg was one of the 32 projects selected by the Expert Council in the first funding round of this grant award initiative from more than 200 proposals received from various organizations from all around the world.   

The project will assess illegal trade of cigarettes and other tobacco products and smuggling as experienced by citizens in countries along the Balkan route, namely Slovenia, Croatia, Bosnia and Herzegovina, Serbia, Montenegro, Macedonia and Kosovo.   

The research will estimate economic costs of illegal trade of tobacco products by determining the possible range of unofficial economy for the observed Balkan countries. It will analyze differences among excises and duties on tobacco products in order to understand their impact on Balkan tobacco smuggling routes. To forecast a gradual and predictable increase of the excises in all countries in the region in the long term, the project will model scenarios of equalization of excises on tobacco products that would alleviate smuggling due to smaller price differentiation. One of the objectives of the project is to analyze structural changes in the production and value added of the tobacco industry, including the tobacco green leaf production in the observed countries. 

The specific objective of the project is to produce a strong evidence base on the tobacco illegal trade attitudes and practices of smokers buying cigarettes on the black market. Therefore, in the core of this research is a survey assessment of attitudes and experiences of citizens in the region regarding illegal trade of cigarettes and other tobacco products.  

Moreover, since survey data also enable us to arrive at the estimated amount of lost revenues for all companies in the supply chain of tobacco and other products subject to smuggling, we can also estimate the impact of these lost revenues on the GDP and employment in individual countries using the input-output model. This assessment is necessary to put the illegal trade with cigarettes and other tobacco products in a wider context and measurable economic framework.   

An important goal of the project is to raise awareness about the harmfulness of illegal trade of cigarettes and OTP in the Balkan region and to produce policy recommendations to the stakeholders who will be involved from the very beginning of the project.   

The project is expected to have a long-lasting impact in the Balkan region and beyond. The project will last for two years, until July 14, 2019. The project team, which consists of seven researchers, will be led by Jelena Budak, deputy director of the Institute of Economics, Zagreb.