Bleeding us dry

Corruption, unlike bribery, has more serious and far-reaching consequences for the national economy.

The Pakistani people are suffering from ‘corruption fatigue’. Just as charities face donor fatigue — when frequent natural disasters inure the public to images of death and devastation, reducing empathy for the victims — the Pakistani people, faced with a plethora of corruption cases, a surfeit of financial scams and scandals involving those in high office, have lost their ability to be outraged at yet another case of colossal corruption.

News that the Afghan Transit Trade Agreement (ATTA) scam is bleeding our beleaguered economy dry to the tune of up to Rs37 billion per year has been met with a sigh of resignation. The ATTA allows goods destined for Afghanistan to transit through Pakistan duty free but ATTA goods, amounting to an estimated $2 billion, either stay in Pakistan or are smuggled back in. Described as the “main source of smuggling” in Pakistan, the ATTA scam is haemorrhaging our economy on several fronts.

The ATTA has become an unmitigated source of customs duty evasion. When the Federal Board of Revenue (FBR) enhances duties on any product, official imports to Pakistan decline as people shift to import the same product, fraudulently, under the ATTA. Such was the case with stainless steel imports, which doubled under ATTA within six months, immediately after duties were increased on it. So the ATTA has dented the FBR authorities’ ability to accrue revenue via customs duties which, when combined with the stranglehold of the feudal and political classes on preventing income tax collection, has stymied Pakistan’s tax-to-GDP ratio to an eye-watering nine per cent. This is a critical issue for the nation’s economic future.

The extent of the problem with ATTA is borne out by the fact that Afghanistan’s per capita imports are 72 per cent higher than Pakistan, even though its GDP per capita is almost 300 per cent lower. The statistics reveal the extent of smuggling into Pakistan. The Afghan economy cannot sustain such high imports. In fact, 80 per cent of these goods are smuggled into Pakistan, damaging local industry and destroying legal businesses here. Worse still, Pakistan’s high-value edibles are smuggled into Afghanistan, bleeding our exchequer further, as both fertilisers and flour are heavily subsidised by the government. The resultant shortage in Pakistan drives up prices — another body blow for the Pakistani people, already bludgeoned by food inflation.

In a comprehensive report by the Federal Tax Ombudsman (FTO), the ATTA corruption apparatus has been exposed, pursuant to the Supreme Court’s suo motu notice of the ‘ISAF container scam’. The report found that, over four years, not a single container out of 300,000 was officially recorded as having crossed over into Afghanistan. It estimates that almost 8,000 transit containers were pilfered, their goods put on the Pakistani market. The estimated loss to the national exchequer in the past three years alone is at least Rs19 billion. This is largely due to the massive holes in the customs procedural framework, especially the manual clearance system which lacks transparency and is open to collusion between tax payer and collector. An automated system is desperately needed, as well as the right to inspect and examine Isaf transit containers.

The report concludes that over the past five years, there have been a series of sophisticated scams involving senior officers of the Customs services, Afghan nationals, businessmen and clearing agents. Half-hearted investigations by the FBR have consisted of lame ‘fact-finding committees’. In one case the collector, who allowed the clearing of 52 liquor-laden containers imported fraudulently under the name of Isaf, was made part of the fact-finding committee itself, contaminating the investigation which ended without criminal charges being brought.

Corruption under ATTA, unlike bribery or other cases of corruption, has more serious and far-reaching consequences for the national economy and for every Pakistani. Smuggling and pilfering under the ATTA umbrella is bleeding our coffers dry, killing local business and raising food prices. No matter how tired we are of hearing the word ‘corruption’, this scandal deserves the full force of media and public opinion to ensure that the FTO report serves as an indictment of guilty officials. The Supreme Court must ensure the prosecution and dismissal of corrupt Customs management and stem this haemorrhage.

Published in The Express Tribune, January 22^nd,  2011.