Rise in smuggling

A report prepared by officials of the commerce ministry and Harvard economists reveals that a significant part of the demand for goods in the Pakistani market is met by smuggled goods. The commodities much in demand and illegally entering the country generate a huge amount of 3.3 billion US dollars a year, and law enforcers and regulatory bodies are able to seize a mere 5% of the smuggled goods.

Together with consumer goods, medicines valued at Rs44 billion have also been smuggled into the country in the recent past. This is an alarming situation as it remains unconfirmed whether these medicines are real, harmless spurious or toxic. From 2014 to 2018, the value of foreign goods entering the country clandestinely increased three-fold. In this period in terms of value as a share of the country’s GDP, smuggling jumped from 3.88% to 11.88%. Cellphones, tyres, tea, fuel, toiletries, medicines and cigarettes top the list of goods smuggled into Pakistan. Surprisingly, a large quantity of textiles is also smuggled into the country to fill the gap between demand and supply. Nearly three-fourths of the cellphones sold in Pakistan are brought in illegally.

Measures taken by the present government have brought about a slight decline in smuggling. Officials say efforts to curb smuggling are hampered by lack of resources, manpower and capability in the federal customs department and other relevant organisations. They also claim that some smugglers are politically influential and this makes action against them difficult. This shows that smugglers and corrupt elements walk hand in hand inflicting grave harm on the economy.

The multiplier effect keeps the economy going: increased demand creates increased production. This leads to increased employment, and also brings in more revenue for the government that it can spend on public welfare and development activities. In smuggling, the multiplier effect works in the reverse order causing job losses and making a severe dent into state coffers. Smuggling also increases if tariff is increased too much. Appropriate remedial measures are needed to combat the menace of smuggling.

Published in The Express Tribune, November 26^th, 2020.

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