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September 21, 2019

Smuggling satiates half of key products demand: OICCI


September 21, 2019

KARACHI: Smuggled goods happen to meet more than half of the consumer demand for petroleum, tea, mobile phones, auto parts, and other major products in Pakistan, upending government’s revenue collection efforts and keeping industrial investments at bay, a body representing foreign investors said on Friday.

Overseas Investors Chamber of Commerce and Industry (OICCI) said there is not a single study to identify the complete magnitude of illegal trade in the country. “But, it is estimated that approximately 60 percent of the total demand for products of over half a dozen sectors of the formal economy, including petroleum, tea, mobile phones and auto parts, is met only through smuggling,” Shazia Syed, president of OICCI said in a letter to the chairman of the Federal Board of Revenue (FBR).

OICCI currently has 189 members, representing 35 various countries and 14 different sectors of trade and industry. The chamber said the country is plagued by illegal trade across all the major sectors, which is negatively affecting tax revenues, causing difficulties in growth and dissuading investment opportunities.

“Bulk quantity of illegal/smuggled goods is available and these goods are mainly affecting sectors including petroleum, tea, mobile phones and auto parts industry,” it said. “Virtually all major organised crime groups are involved in the trade, resulting from huge profits but little risk, and whilst utilising the services of children and slave labour.” OICCI said illegal traders do not pay taxes and fair wages. “There is a zero traceability of funds generated from the trade and their eventual disposition,” it added. “More often than not, these funds may be redirected to terrorism, and money laundering.”

Foreign investors called for measures to plug loopholes to stop illegal trade in the sectors, including tobacco, consumer goods, oil, fabrication, publishing and tyres.

“There is need of urgent improvement of customs checking and control at the western borders together with visible vigilance and action in urban markets selling smuggled products,” OICCI said. “FBR should also arrange frequent raids at such warehouses where illicit items are stored along with inclusion of dealer’s shops in raid list, currently not practiced.”

The chamber further laid emphasis on ‘strict’ and ‘independent’ check and monitoring of under-invoicing at the import stage. Strict check on imported items would provide level-playing field to local producers who will be able to enhance local production, saving employment and foreign exchange.

OICCI Secretary General Abdul Aleem said illegal trade continues to be the biggest and fastest growing obstacle for multinational companies and foreign investors in Pakistan.

“Illegal traders are becoming larger, more innovative, and faster in their efforts day by day,” Aleem said. “This is one of the reasons as to why Pakistan continues to suffer from low tax revenue, a difficult growth path, and failure to attract investment across various formal sectors.”

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