While Singapore is ranked above most South-east Asian counterparts in a new index on preventing illicit trade, it is still behind economies such as Malaysia and Hong Kong.

Despite having the strongest Customs environment, "failure to monitor its busy free trade zones" lowered Singapore's score on the Illicit Trade Environment Index, which was released yesterday.

Australia and New Zealand topped the list by the Economist Intelligence Unit (EIU), an arm of The Economist Group.

It measured 17 economies in the Asia-Pacific by ranking the extent to which they enable illegal trade. This was based on the categories of intellectual property, transparency and trade, Customs environment, and supply and demand. Singapore tied with Taiwan for seventh place.

"Illicit trade poses a threat... and provides funds for transnational crime networks and terrorist organisations," said Mr Christopher Clague, senior editor at the EIU. Such trade could range from contraband cigarettes and counterfeits to endangered species. "As the region continues to integrate, the threat will only grow unless governments make greater efforts to combat it."

Although Singapore topped the Customs environment category - its clearance and inspection times are among the best in the region - it was fourth from the bottom for transparency and trade.

Calling Singapore "the world's largest transshipment port", Mr Edward Chatterton, partner at law firm DLA Piper, said a recent report identified that around 2 per cent of the world's fake goods are believed to be transshipped through Singapore. The country also has a strong interest not to discourage transshipments, which bring income, he added, and "the cost of seizing illegal goods would be high".

A Customs spokesman said that given the large volume of transshipment trade and tight turnaround time here, "it would be more effective to adopt an intelligence-led approach" to run enforcement against suspected shipments.