Smuggling in Pakistan is creating trouble in generating revenue as a huge chunk of goods is being smuggled into the country, the Customs department reveals in a report.
According to the report, 59% of the demand of mobile phones in the country is met by smuggling, not only alarming for the consumers as they have no warranty and after sale claims, but also giving no fortune to the government.
The report suggests an explanation for why Pakistan continues to suffer from low tax revenue, a difficult growth path, and failure to attract investment across various formal sectors.
The Model Customs Collectorate (MCC) Preventive, Karachi investigated 13 items prone to smuggling in Pakistan, for the financial year 2014 and concluded that 11 of them were severely impacted due to illegal trade.
The report stated, “The share of smuggled televisions stood at 57%, while the rest of the demand was met through domestic production (37%) and imports (6%).”
In May of this year, they have arrested suspects, involved in affixing logos of famous brands (on smuggled items) and selling them in various markets of Lahore, in Sindh and other areas.
The share of smuggled auto parts in the total demand stood at 57%, while the rest was met through domestic production (18%), imports (16%) and counterfeit (9%). Around 10% demand for steel sheets is met through smuggling, 87% through formal imports, while it meets rest through domestic production.
According to the report, Cigarettes meet 3% demand and plastic granules meet 11% through smuggling, similarly, the 12% demand for vehicles is met through smuggling, 67% through domestic production and remaining 21% through formal imports. The prevailing demand for fabrics was met through 17% smuggling, 58% domestic production and the rest 25% through imports, while the smuggling of diesel carries a share of 33%.
Transit trade to the neighboring landlocked state Afghanistan has played a key role in promoting illegal trade with Pakistan, the report added.
Afghan Transit Trade (ATT) Agreement, which was signed between Afghanistan and Pakistan in 1965 to provide Afghanistan with port access.
This facility provided to Afghanistan is being misused as goods destined for Afghanistan are either pilfered inside Pakistan or are smuggled back into the country after reaching Torkham or Spin Boldak in Afghanistan.
Pakistan’s economy, which is worth over $313 billion now with GDP growth rate of 5.7% in FY18, has an equivalent undocumented economy over the years. Smuggling has played a key role in fueling the informal economy and restricting growth.
The MCC Preventive Karachi suggested in the study to rationalize import tariffs, control smuggling through only one law enforcement agency, rather than many at present, renegotiate bilateral trade agreement to discourage smuggling and invite new investment.