TEXT: Illicit trade is a serious and a growing threat to a country’s economy and society. Through smuggling of counterfeits, contrabands and high value items, not only are governments losing billions in tax revenues but also legitimate businesses are being undermined, and consumers are being exposed to poorly made products which have health and safety hazards. Owing to the significant cross-cutting effects of illicit trade, governments have to be single-minded to take up the challenge of combating illicit trade through harnessing a much-needed political will (essentially required to offset the influence of powerful vested interests supporting and benefitting from proceeds of illicit trade), effective policy making and strengthening the institutions responsible for enforcement. Pakistan over the years, due to various reasons, ranging from weak democratic institutions succumbing to pressure from pressure groups aided by vested interests, weak policy making, partially effective enforcement agencies has become a big market for illicit trade which leads to lack of stability in the society. This results in sub-optimal industrial growth and exports, mushrooming of mafias and smugglers, and abysmal social indicators. Pakistan’s smuggling of goods landscape (informal cross border trade ICBT) is significantly higher than other countries at this same stage of development and in the region as well; similarly, Pakistan is one of the highest illicit drug-afflicted countries in the world being adjacent to Afghanistan and exposed to one of the highest trafficking and consumption of opioid drugs in the world.
It is estimated that 59% of the total demand for products of over half a dozen sectors of the formal economy is met through illicit trade causing losses to the national exchequer in shape of duty &taxes evasion to the tune of $3.47 bn per annum. Pakistan Customs, despite being the premier counter-smuggling agency, is incapacitated by lack of needed resources to curb smuggling. Despite that, for each rupee spent on Customs, Rs. 216 worth of smuggled goods were seized last year. The number of officers and staff mainly responsible for counter-smuggling coperations throughout the country including the long and porous western land borders with Afghanistan (2430 Km) and Iran (909 Km) besides a coastline of 1045 KM is around 3000. In addition, Custom Service’s marine force is practically nonexistent; there are only seven barely functional check posts along the more than 1,000 kilometers of coastline.
The Hon’ble Prime Minister of Pakistan has assigned Pakistan Customs the role of lead agency against smuggling and has approved the Border Management Initiative (BMI) while other law enforcement agencies have been mandated to support Customs in these activities. Being mindful of its role in interdiction of illicit trade, Pakistan Customs has devised a comprehensive counter smuggling strategy for optimum deployment of available resources and conducting information-based interception. Electronic tracking of all Afghan Transit containers is effected. Moreover, on the directives of Ministry of Interior, Border Task Forces have been established under the chair of Chief Collectors / Collectors to curb the menace of smuggling. National Targeting Centre has been introduced launching the Currency Declaration System (CDS) at 24 national entry / exit points which is also integrated with FIA’s Integrated Border Management System (IBMS) software. Besides, Customs Act, 1969 has been amended through Finance Act, 2020 to expand the scope of definition of smuggling to include “carrying, transporting, removing, depositing, harboring, keeping, concealing smuggled goods” and to increase the statutory punishment for smugglers to forfeiture of property which will greatly deter the criminals. The enforcement measures taken by Customs against smuggling have resulted in 44% increase in the revenue generated through seizures from PKR 25,391 Million in FY 2018-19 to PKR 36,570 Million in FY 2019-20.
Another success story of curbing the smuggling of high value items can be found in devising effective mechanisms for bringing a major chunk of mobile phones that used to enter the country by way of smuggling, into the ambit of legitimate commercial and personal (baggage) import. Device Identification Registration Blocking System (DIRBS) was launched by Pakistan Customs and PTA in January 2019. Since its launch till 30th November, 2020 as many as 1,935,378 devices have been registered in individual category against a revenue of PKR 8.9 Billion. Revenue figures of commercially imported mobile phones in Pakistan since after the launch of DIRBS rose to PKR 73.2 Billion. Quantity wise analysis of commercially imported mobiles also indicate an increase from 17.2 Million sets in 2018 to 32.83 Million sets in 2020 till 30th November, 2020.
Another highly dangerous tangent in the spectrum of illicit trade in Pakistan is narcotics. The so-called “Southern route” continues to be used for the trafficking of 70% opiates originating from Afghanistan to Europe by means of shipments from Iran and Pakistan by air or sea. These drugs, other than reaching international markets, also feed the domestic demand thus physiologically and economically damaging the country and its people. There has been a rise in the volume of drug trafficking and consumption in Pakistan despite the assignment of the task of counter narcotics to various agencies. Inter-agency task force was created under Anti-Narcotics Force (ANF) but it failed to effectively coordinate or improve the performance that it was tasked with as the number of cases and arrests declined from53685 to 22488 and from 57377 to 24768respectively over the past five years. This can be attributed to the phenomenon of digressing from assigned mandates by various agencies leading to duplication of effort in some functional areas and ignoring other equally critical areas. The function of interdicting narcotics at entry and exit points of the country lies with Customs given their already established footprint on the borders. Pakistan and Afghanistan should be enabled to make border check posts on all legal and recognized entry and exit points which are estimated to be around 700. Being responsible for the Counter Narcotics maritime jurisdiction and being a co-agency with Anti-Narcotics Force (ANF) for countering drug trafficking, Pakistan Customs has been striving to fight the menace of drug trafficking with limited available resources. A ‘Marine Section’ has also been established by MCC Gwadar to gather information and check attempts of drug trafficking through sea routes. An unprecedented improvement of 1577% was made in the past year when revenue collected from counter narcotics seizures by Pakistan Customs went from PKR 571 Million in FY 2018-19 to PKR 9581 Million in FY 2019-20.
Another phenomenon that plagues the genuine products of a country is the illicit trade of counterfeit products. According to a 2017 study commissioned by the International Chamber of Commerce, the global trade in counterfeit goods is estimated to generate between $923 Billion to $1.13 Trillion annually. All this profit is earned at the cost of legitimate businesses. Pakistan ranks at as low as 120 out of 129 countries on the global ranking in IPR. Although there has been an improvement in the status from being on ‘priority watch list’ in 2016 to ‘watch list’ which the country has been able to maintain for third year in a row due to efforts of Pakistan Customs, there is still a long way to go if we want our market to be a safe place for genuine products.
What can play a vital role in decreasing the volume of illicit trade is by minimizing the incentive in it. Pakistan has a misplaced burden of tax revenue on international trade instead of creating a genuine base for direct taxation which has incentivized smuggling and illicit trade, stymieing indigenous growth and industrialization, in addition to opening ways for IPR infringement and flight of foreign direct investment. In a nutshell, the country needs a comprehensive approach (to effectively fight illicit trade) comprising rationalizing import tariffs, controlling smuggling of counterfeits, contrabands and narcotics through only one law enforcement agency so that our market and industry could flourish giving rise to growing economy and prosperous and safe society.
Azka Zafar Rana, Assistant Director Pakistan Customs
Copyright Business Recorder, 2021
Comments
Comments are closed.