Could a nationwide alcohol ban really work?

SHAH ALAM - The idea of a nationwide alcohol ban in Malaysia has resurfaced, sparking a debate as strong as the drink itself.

Calls for stricter measures against impaired driving have prompted questions about whether prohibition could be the answer, but economists caution against hasty action.

While a ban may appear to improve road safety, experts warn it could strain the economy, fuel black-market activity and deliver only modest gains in public safety.

Economist Professor Emeritus Dr Barjoyai Bardai said Malaysia’s alcohol industry, though modest in size, is a meaningful contributor to the economy.

“From a macroeconomic perspective, Malaysia’s formal brewing and alcoholic beverage industry contributes around RM7.1 billion annually, equivalent to about 0.4 per cent of national GDP,” he said, citing input–output modelling by the Southeast Asia Public Policy Institute and the University of Nottingham Malaysia, commissioned by the Confederation of Malaysian Brewers Berhad (CMBB).

This figure includes activity across manufacturing, logistics, retail, hospitality and services, while wider spillovers from tourism, nightlife and the informal sector suggest total alcohol-linked economic activity could range from 0.5 per cent to 0.7 per cent of GDP.

The industry supports roughly 52,000 jobs, concentrated in urban hubs such as the Klang Valley, Penang, Johor Bahru and tourist destinations like Langkawi and Sabah.

Revenue from alcohol-related activities is also notable. Excise duties on beer and spirits generate about RM3.3 billion annually, while Sales and Service Tax (SST) contributions range between RM0.4 and RM0.6 billion. Licensing fees at state and local levels total RM50 to RM100 million and corporate and income taxes from alcohol-related businesses contribute an estimated RM0.5 to RM0.8 billion.

“Total annual fiscal contribution from alcohol-related sources is roughly RM4.3 to RM4.8 billion, about 1.5 per cent of federal tax revenue. Malaysia already imposes some of the highest alcohol excise taxes globally, yet around 25 per cent of beer consumption occurs through illicit channels, resulting in about RM1.2 billion in lost tax revenue annually. Full prohibition would likely expand illicit trade without eliminating consumption,” Barjoyai added.

He said a nationwide ban could affect Malaysia’s appeal as a tourism destination. In 2024, the country welcomed 17 million international tourists, many from non-Muslim-majority markets where alcohol availability is expected. Tourist arrivals are projected to exceed 40 million in 2026.

“A ban could reduce Malaysia’s competitiveness compared to regional peers like Thailand, Vietnam and Bali. Hospitality and nightlife sectors rely on alcohol sales to sustain operations. Price shocks from excise increases have historically led to 10 to 15 per cent revenue contractions, especially for smaller urban establishments. Under prohibition, small and medium enterprises could close, youth employment could decline and alcohol consumption could shift to unregulated channels,” he said.

Economist Dr Geoffrey Williams highlighted the growth potential of Malaysia’s alcohol market, projecting it to reach US$11.21 billion (RM45.3 billion) by 2025 and US$15.68 billion (RM63.3 billion) by 2030, with a compound annual growth rate of 6.94 per cent. This expansion is expected to be driven by rising demand for premium products and tourism growth.

“Excise duties of around 10 per cent would generate roughly RM4.5 billion in direct tax revenue, contributing about 2.5 per cent to GDP. A nationwide ban could lead to an estimated RM45 billion in lost business revenue, reduced corporate tax contributions and ripple effects across hotels, restaurants, tourism operator and logistics providers,” he told Sinar Daily.

Associate Professor Dr Ahmed Razman Abdul Latiff from Putra Business School suggested that strengthening existing regulations is more practical than a blanket ban, given Malaysia’s diverse demographics, economic structure and regulatory capacity. Stricter enforcement, higher penalties and driving bans for offenders could achieve public safety goals without extreme measures.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid agreed, emphasising a balanced approach.

“A total ban would be extreme, particularly for non-Muslims. Focus should be on strict enforcement of driving under the influence laws, combined with education and public health campaigns to raise awareness about excessive alcohol consumption risks,” he said.