Impact of smuggling on local industry

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Smuggling

The smuggling means importing or exporting secretly the prohibited goods by law, without paying custom duty to the government. Today Pakistan has so many problems related to industries. Smuggling is considering one of the big problem. Jamrud industrial Estate failure has so many reasons in which smuggling from Afghanistan Via different routes is one of the reason. Pakistan has big border with Afghanistan which is mostly uncovered. Because Pakistan Military and other civil forces is unable to cover the long belt. Which is porous and Smugglers are getting benefits from weak border control by government.

Total bilateral trade between Afghanistan and Pakistan was conservatively estimated at $2.5 billions in 1996/97, equivalent to approximately 48% of Afghanistan roughly estimated GDP and around 12-13% of Pakistan's total trade. This trade can be divided into four categories.

  1. Formal trade between the two countries in locally produced goods is 2% of the estimated bilateral trade.
  2. Informal trade in locally produced was worth $357 million, which comprises 14% of the estimated Afghanistan-Pakistan Trade.
  3. Trade under the 1965 afghan transit trade agreement (ATTA), which primarily comprises of imports bound for afghanistan. Scope of ATTA was expanded in 1997 and includes now trade inlets from Turkmenistan, Valadevostock and air routes from Dubai and India.
  4. Unofficial re-exports of goods from Afghanistan into Pakistan has been estimated at $1.96 billion (84% of the total trade) in 1997.

The Cross Border Informal Trade:

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The informal trade or smuggling across the Pak-Afghan border, which was estimated to be Rs102.583 billion as against Rs1.709 billion through the official channels, has two aspects;

  • Smuggling in locally produced goods, and
  • Re-exports (smuggling) of goods imported through transit facilities.

Smuggling in Locally produced Goods:

Smuggling takes place in locally produced goods from Afghanistan to Pakistan via Torkhum, Chaman/weish, Angor Ada, Miranshah and shahi-Saleem.

  • As may be observed in table 1, the major items of smuggling are fresh and dried fruits on all the routes, which accounts for 60% of the total Rs369 million worth of goods smuggled through torkhum. Animals skin and carpets, with 9.7 percent and 11.7 percent share in the total, are important items injected in the Pakistani markets through Torkhum.
  • Through Chaman/weish, the other items with major share in smuggling goods are carpets, animal skins, scrap metals and vegetables.
  • Via Angor Ada, after fresh and dried fruits, with 36.6% of the total Rs752.1 million estimated smuggling, animal skin (15%) , vegetables (12.3%) and spices (6.5%) are the major items which find their way to Pakistan through Angor Ada.
  • The passage of shahi-Saleem apperars to be a paradise for the smugglers of precious stones. Its share of Rs603.98 million accounts for 65% of the total value of Rs929.2 million that slipped, passing the sight of law enforcing agencies. Other items appear to be live animals (9.7%), animals skin (3.1%) and spices (1.9%) in order of their share in the total value smuggled.

Table 1

Unofficial imports (Smuggling) from Afghanistan

To Pakistan (1997)

Smuggling Routes/items

Torkhum

Chaman/Weish

Angor Ada

Miranshah

Shahi Saleem

Total

Fresh and dry foods

223.049

953.88

275.194

524.74

22.3

1999.163

Vegetables

-

64.452

92.50

109.77

-

266.722

Spices

2.959

45.116

48.552

33.88

17.657

148.164

Live animals

-

-

-

-

90.132

90.132

Animal skins

35.880

167.57

115.071

109.77

28.805

457.096

Wool

-

42.968

18.050

14.835

-

75.853

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Precious Stones

-

-

-

-

603.98

603.98

Timber/wood

-

-

11.281

66.333

-

77.614

Carpets

43.278

406.05

-

230.38

5.575

235.955

Scrap metal

-

90.233

23.315

16.192

2.787

132.527

Other

64.723

378.118

168.135

249.3

158

1018.276

Total

369.9

2148.4

752.1

1355.2

929.2

5554.9

Source: World Bank 1997

Re-Exports of the transit goods From Afghanistan to Pakistan:

The term re-exports means the goods imported by Afghanistan through the transit facilities provided by Pakistan , were never meant for consumption in Afghanistan, but intended to be re-exported to Pakistan. More than 80% of the estimated total trade (both official and smuggling) consists of re-exports of goods or smuggling.

  • Re-Export of Goods transited through Pakistan
  • Re-Export of Goods transited through other inlets

Re-Export of Goods transited through Pakistan:

This is not a new phenomena, but has existed for decades. Fry 1 estimated that items officially exported into Afghanistan for unofficial re-exports to Pakistan accounted for 20 percent of Afghanistan's total commercial trade in early 1970s.

Khan2 estimated that aside from large smuggling of locally produced goods, unrecorded re-exports from Afghanistan were also quite substantial. During the late 1960s, he calculated the amount to be in the range of Rs40-60 million annually, equivalent to around 2 percent of Pakistan's imports.

As may be observed in the table 2, Afghanistan Transit Trade imports have recorded an upward trend at an increasing rate. Taking the values in 1985-86 as a base, the percentage increase may be increase of 441.85 percent and 503.95 percent in 1995-96 and 1996-1997 respectively may be because of internal political situation in Afghanistan. The transit trade resumed its increasing rate in Taliban Ara (1998), valuing at Rs14.97 billion and its percentage increases of 1883.12 was the highest ever.

Table 2

Afghan Transit Trade Imports 1985/86 - 1997/98 through Pakistan

(Rs.Million)

Items

1985-86

1986-87

1987-88

1988-89

1989-90

1990-91

1991-92

1992-93

1993-94

1994-95

1995-96

1996-97

1997-98

Textiles

82.83

31.85

216.97

268.01

280.54

434.3

277.4

1127.5

2908.3

2018

0

0

0

Yarn

210.7

276.18

259.02

146.84

120.01

119.74

126.03

332.4

360.3

33.94

0

0

0

Tyres and Tubes

89.84

325.83

451.64

173.36

238.75

207.43

56.9

188.17

126.9

0.78

198.37

2.42

0

Electrical goods

19.89

14.57

14

23.74

31.31

69.27

113.43

259.5

357.8

395.57

664.9

789.71

642.85

Betal nuts

3.46

0.79

0.15

0

0

0

0

0

14.23

5.66

8.77

0

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Crockery

0

2.92

10.43

23.22

23.62

17.4

49.59

214.84

676.8

320.2

304.2

433.9

631.46

Air conditioners

0

0.98

7.07

6.67

1.19

14.65

36.79

63.51

327.68

528.9

4.6

0

0

Iron and steel

19.5

13.34

13.59

8.13

6.35

0

0

0

57.64

23.8

0

151.9

0

Washing machines

0

0.28

0.28

0

0

0

0

0

0.22

2.63

2.45

1.95

0

Tape recorders Audio/video

2.1

2.1

0

0

0

0

0

0

0.12

17.5

26.2

173.8

175.66

Cassettes

13.7

1.37

0

0

0

0

0

0

0

0

0

79.8

163.97

Television

0

0

0

0

0

1.9

40.23

171.67

954.7

1372

0

0

0

Auto parts

6.4

18.29

37.14

39.94

20.56

1035

23.61

149.15

737.81

536.63

6.58

0

27.15

Batteries

0.8

3.11

39.96

63.2

26.55

0

0

0

24.19

64.73

12.98

0

484.39

Tea

94.96

58.96

79.97

83.51

15.13

13.15

26.7

49.3

415

635.2

123.7

205.26

520.19

Toiletries

0.7

0

0

0

0

0

0

51.03

126.31

366.7

0

0

114.19

Machinery

11.45

23.31

50.99

41.41

2.48

0

0

0

19.89

43.25

67.81

109.78

41.36

Vehicles/cars

21.12

34.62

39.37

19.47

0.65

0

0

0

19.89

43.25

67.81

109.78

0

All others

196.91

124.25

125.81

213.81

215.83

168.4

263.6

582.7

887.42

1720.4

2646.14

2680.53

6153.17

Total

754.87

946.21

1345.95

1111.31

983.64

1050.3

1037.7

3329.23

8004.1

8139

4090.3

4559.09

8954.39

Source: Collectorate of customs, Karachi

The goods enter into Pakistan through various land routes along the porous Pakistan-Afghanistan border. The official routes under the ATT are through the port of Karachi to Chaman (Balochistan) and Peshawar (NWFP) in Pakistan for further transit into Afghanistan. A large share of goods under ATT are believed to end up in Pakistan, either by never crossing the border or after crossing the border, promptly re-entering Pakistan, via multiple smuggling routes. The world bank estimates for one year re-exports of goods transited through Pakistan to Afghanistan come to Rs4559 million. Detailed break down is given in table 3.

The comparison of the figures given in this table with table 2 shows that almost the entire volume of goods imported in the name of transit trade through Pakistan ended in the markets of Pakistan.

Table 3

Re-Exports of Goods Transited Through Pakistan (1997)

items

Value in Million of Rupees

Percentage Share

Glassware

508

11.2

Electrical goods

472

10.4

Consumer electronics

638

14.1

Bicycle

150

3.3

Textiles

148

3.3

Toiletries

204

4.5

Tea

205

4.5

Non-electrical machinery

293

6.5

Petroleum products

589

13

Others

1352

29.7

Total

4559

100

Re-Export of Goods through other inlets:

The government of Pakistan bans some items in order for controlling smuggling. Because local industries were affected by illegal trade through ATTA. Whereas the banned items started pouring into Pakistani Markets via the transit Vladevostock, through rail and land routes into Western Afghanistan or by air routes from Middle east and India into Eastern and Southern cities in Afghanistan for further transit into Pakistan.

The World Bank estimates of re-exports of such goods in 1997 are given in the table 4.

Table 4

Re-Export of Goods to Pakistan

Imported through Routes Other Than Pakistan (1997)

items

Value in Rs. Million

Percentage Share

Television sets

14846

17.7

Textiles

9168

10.9

Bicycles

4830

5.8

Tyres

4146

5

Air conditioners

3510

4.2

Vehicles

3312

4.0

Cigarettes

2970

3.5

Tea

1932

2.3

Electronics

4883

5.8

Toiletries

1937

2.3

Other

32247

38.5

Total

83760

100

Means of Transportation:

The modes, in which the cross-border transportation of unofficial trade is carried out, may be divided into:

  • Trucks
  • Animals
  • Human carriers

Trucks:

Trucking is the most dominant mode of cross border transportation between NWFP and Afghanistan. Most truckers are hired by wholesalers or clearing agent and shipping agents to carry goods from Afghanistan through the tribal area. And mostly the truckers are local people of Fata. The trucking transactions are done by mutual trust between the owners of the truck and the owner of the goods. The owner of goods have a firm belief that the truck owner and his employed agent or driver will look after the goods. Similarly the truck owner is confident that he will be paid his due within the specific time. The mutual trust is the core of this cross-border trade.

The smugglers goods come to Karachi, through trucks it reaches to Afghanistan via Torkhum border. The trucks are off-loaded in Afghanistan. And then again those goods reloaded on small trucks and pickups for NWFP. The key routes using by trucks mafia are;

  1. konar - narang - border - Peshawar
  2. jalalabad - torkhum - border - landi kotal - Peshawar
  3. kohistan (north of Kabul) - mahmood-e-raqi - sarobay - nesarak - border - parachinar - Peshawar
  4. Sad (south of Kabul) - baraki - khoshi - border - parachinar - Peshawar
  5. loghar province - kotgai - border with paktia - wana - Peshawar
  6. Baghlan - bamyan - maidan - wardak - ghazni - skaran - urgun - bamal - border with paktia - wanna - Peshawar

Animals:

On all unofficial routes, as mentioned above, smuggling is carried out by animals both at the crossing points of border and through the tribal area. Horses, camels, mules, and cattle used to cross the goods over to warehouses having a network throughout the belt. The shifting of those smuggled goods from warehouses to Karkhano Markets and from there to other shopping centers (Bara markets) is mostly done by vehicles. But occasionally when the circumstances are not favorable, animal is used to facilitate shifting of goods from warehouses to the final sale centers in Peshawar.

Smuggling of goods through animals is safe from the security point of view but transportation cost is high. The delivery of goods on time and damages are other risk attached to animal smuggling.

Human Carriers:

The human power is employed at particular cross-border points at Torkhum. The routes followed by human carriers are across the mountains. As locals, they move on both sides of the border quite freely without fulfilling any legal formality. The human carriers are either hired by individuals, who purchase single unit of electronics or electrical goods in normal circumstances, or by traders when it hard to follow the normal and routine routes.

As per tribal conventions, the law enforcing agencies have no authority in the tribal areas to check these carriers or intercept them on tracks across the mountains.