The political economy of narcoterrorism: Pakistan’s rising share

In September 2021, then Prime Minister Imran Khan tasked all federal and provincial agencies to present a comprehensive drug awareness and treatment policy by the end of 2021.

However, this remained unfinished at the end of Khan’s tenure in April 2022 and no subsequent action has been taken.

The Ministry of Narcotics Control is currently pursuing the creation of a National Coordination Center to improve drug enforcement operational coordination among law enforcement agencies as well as a unified approach to substance use disorder treatment among provincial and federal stakeholders.

The Government of Pakistan does not, as a matter of government policy, encourage or facilitate illicit drug production or distribution, nor is there evidence of its involvement in laundering the proceeds of the sale of illicit drugs, but corruption remains a key concern.

The National Accountability Bureau (NAB) is Pakistan’s main agency responsible for eliminating corruption. The NAB claims to have recovered more than $4.8 billion since it was established in 1999, but the consequences for convicted perpetrators are rarely severe.

Corruption undermines the government’s ability to address illicit drugs, as bribed public servants may facilitate the movement of contraband or otherwise interfere with arrests and prosecutions.

Media sources regularly report that police officers are involved in drug trafficking or the selling of seized drugs“—International Narcotics Control Strategy Report (INCSR, Vol. I, March 2023) Terrorism, drugs-for-arms and money laundering, intrinsically linked, pose considerable threats to global peace and security besides destabilizing political and financial stability of nation States.

These menaces increased manifold since 9/11’s ghastly incident in New York. The terrorism unleashed by militancy and fundamentalism has an undeniable nexus with criminal networks involved in drug-arms and other organised crimes.

The critics of American foreign policy allege that in the aftermath of 9/11, United States and its allies’ military actions against innocent civilians were more than concentrated attacks on the terrorists. Al-Qaeda, the Taliban, Daesh [its other names are ISIL, ISIS, IS etc] and many other terrorist and militant groups. The agenda was much larger, related to political economy of narco-terrorism aimed at controlling world resources, including oil and gas reserves.

It is strange, but understandable, that all these groups, despite tall claims of eliminating the by US and its allies, enjoy free flow of legal and illegal funds and no serious effort has been made till today by international intelligence community to attack and destroy their financial lifelines.

We all know that all such militant groups enjoy networking with many criminal groups having hubs in many countries of the world, not confined to Afghanistan or Pakistan in particular.

It is by now well-established that the successive governments in Pakistan have been providing tax amnesty and assets-whitening schemes to facilitate money launderers, drug barons, terrorists, tax evaders, the corrupt and plunderers of national wealth in the name of “good economic measures” (sic) and/or mobilizing tax revenues —unfortunately these were tacitly approved or not interfered with even by the country’s highest court observing “we cannot intervene in policy matters” and “we will not intervene in the tax amnesty scheme and if the scheme fails, the government will be responsible for it”.

The above observations were highlighted by one of the biggest online realtors in the country. There is even official admission that immovable property in Pakistan is an established sanctuary for shady money. Resultantly, tax evaders, drug barons and persons engaged in other organised crimes, availed “legal means” to whiten assets worth billions under the State patronage.

June 26, 2024 marked the International Day against drug abuse and illicit trafficking. The worldwide observance was decided by the United Nations General Assembly in 1987 to raise the level of awareness in the international community about the dangers of drug abuse, to prevent its spread and to encourage all efforts to combat the menace at international level.

Each year the United Nation Office on Drugs and Crime (UNODC) selects theme for the day and this year the theme is ‘The evidence is clear: invest in prevention’.

Till recently, anybody could bring money in Pakistan or remit outside through normal banking channels without being probed by officers of Federal Board of Revenue (FBR) and Federal Investigation Agency (FIA) about its ‘source’ — courtesy the Protection of Economic Reforms Act, 1992 [“PERA 1992”] augmented by the late General Pervez Musharraf through Foreign Currency Accounts (Protection) Ordinance, 2001. These laws were later amended by Finance Act, 2018 to withdraw blanket immunity from probe.

In other parts of the world through asset-seizure legislation, governments confiscate unlawful assets/dirty money and punish offenders—Pakistan has yet to pass any such law.

Law of once complete and blanket immunity, PERA 1992, was the brainchild of Muhammad Ishaq Dar. He is presently the 4th Deputy Prime Minister and 39th foreign minister, was four times federal federal finance minister. He is considered as economic wizard of Pakistan Muslim League (Nawaz). He is an in-law of three-times elected Premier Nawaz Sharif, whose disqualification for life time and ouster from politics by the Supreme Court of Pakistan in now overturned in a case, considered highly controversial. He was punished in an Iqama matter whereas the case recommended by the Joint Investigation Team (JIT) was for non-furnishing of money trail by the accused for buying the expensive Avenfield apartments (Mayfair properties) in London through offshore companies.

In the Income Tax Ordinance 2001, promulgated on September 13, 2001, a special provision [section 111(4)] was inserted, facilitating tax evaders and criminals for laundering their ill-gotten money through banking channels, surrendering the foreign currency to the State Bank and getting Pakistani rupees as encashment.

This was done by the military dictator, late General Pervez Musharraf, through a Presidential Ordinance. Thus, both civilian and military regimes have extended immunities from probe into sources of shady funds.

The Finance Act, 2018 placed a limit of Rs10 million for exemption from probe, which was later reduced to Rs5 million through the Finance Act, 2021 with effect from July 1, 2021. The Finance Bill 2023 prepared under the dictates of Muhammad Ishaq Dar proposed to enhance it to an amount equal to US$ 100,000 with effect from July 1, 2023 but was withdrawn in the Finance Act 2023 on the instance of International Monetary Fund (IMF).

During the first government of Mian Muhammad Nawaz Sharif, many schemes like Bearer National Fund Bonds, Foreign Exchange Bearer Bonds, Special Bearer Bonds, US Dollar Bonds and Certificates were introduced to decriminalize dirty money [Economic Disaster under PML (N), address by Leader of Opposition, Benazir Bhutto, to Peshawar High Court Bar Association on December 3, 1998—Benazir Bhutto: Selected Speeches from 1989 to 2007].

Since the era of General Muhammad Zia-ul-Haq [1977-1988], black economy has been flourishing at an amazing rate. According to various studies, the parallel economy is growing at an alarming rate of 20% per annum since 1980.

A 2010 study by State Bank of Pakistan (SBP), ‘The Size of Informal Economy in Pakistan’, estimates the size of informal economy at around 30% of GDP.

It means that since 2010 annually some Rs1,500-2,000 billion are generated by parallel economy (informal, though not illegal).

Black money, generated through organised criminal activities e.g. bribery, kidnapping for ransom, rent-seeking, smuggling in goods and narcotic trade etc. is about Rs3,000 billion per annum that does not appear in the study of SBP but documented in Pakistan: Enigma of Taxation. Another study—Pakistan: Drug-trap to Debt-trap—estimated the total figure of informal economy at US$ 200 billion in 2003.

Pakistan is among those countries that are worst hit by tax evasion, corruption, terrorism and money laundering. There is sufficient evidence that militant groups working against the security and stability of the State generate huge funds through criminal activities and also get huge “donations” from “sympathizers” in and outside Pakistan.

Yet, hardly any prosecution is reported under the provisions of Anti-Money Laundering Act of 2010. The banks do not diligently report suspicious transactions required under section 7 of Anti-Money Laundering Act, 2010 or section 67 of Control of Narcotics Substance Act of 1997. This shows the slackness of institutions and regulators/agencies responsible for implementing these laws.

The illicit trafficking in drugs is not possible without the connivance of police, having political connections and backing of mafias. The case of Lyari in Karachi is a classic study. It is sad to note that nobody has exposed the scandal of ephedrine in proper context — its international business connections and local political nexus.

The so-called experts writing on ephedrine in media do not even know how it is abused (many erroneously call it ‘poor man’s cocaine’ whereas it is a main ingredient of ‘ecstasy’ and is consumed by the rich who can spend thousands just for a single shot).

Accumulation of vast assets by drug barons in Pakistan has enabled them to continue large-scale operations even after crackdown and arrest of some of their leaders (although they have also managed to defy proper investigation getting them released). On a serious note, over the past four decades, drug barons in Pakistan have established themselves as patrons of politicians and government functionaries.

The ‘Norwegian Connection’ saga exemplifies as to how narcopower flourished in the country and how drug barons managed to influence the highest authority in the State—read details in Pakistan: From Hash to Heroin. The “financial assistance” provided to some politicians by drug barons in the 1995, 1988, 1990 and all subsequent general elections are nothing but a continuation of the ‘drug legacy’ of the mid 1970s.

The drug scene at its roots in Pakistan, like other countries, is nothing more than a business story. This is a stark reality of the emergence of ‘dirty money power’ in the country. A 2018 study reveals that the share of Pakistani drug cartels in the total world drug trade was not less than US$2 billion a year.

It has now reached the level of US$ 5 billion, if not more. A trade that started in the late 1970s has achieved this unbelievable proportion in five decades and so its political connections are understandable—those in power in Pakistan want to make quick bucks, irrespective of legality or illegality of their source.

The politics of drug trade has rendered millions of people, as a most helpless lot. This is a war against the people and humanity. Our present day civilization faces a great threat of annihilation if the rising tide of drug culture is not stemmed. Awareness alone can bring light to overcome the darkness caused by drug traders, merchants of death and destruction.

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