Structural issues and governance problems in trade: One step forward, two steps back

Tobacco is a highly lethal and addictive substance endangering millions of lives every year. Consumed in any form, excessive use of tobacco results in substantial economic and social losses across the globe.

World Health Organization (WHO) asserts that smoking alone causes around 8 million casualities annually which includes 1.2 million non-smokers as well. Although the situation of excessive tobacco consumption is not promising for all Asian countries, yet, Pakistan presents unique challenges in terms of its curtailment. As per the World Bank report of 2019, Pakistan is included amongst the countries with highest prevalence of tobacco consumption.

Owing to numerous structural issue and governance problems, Pakistan is included among the worst victims of tobacco trade by industrial sources, thereby exacerbating the social and economic implications of tobacco epidemic.

Despite of numerous efforts by the local and international institutes, the harrowing effects of increased tobacco consumption could not be curtailed as anticipated. In this context, the alleged influence of tobacco companies is one of the prime factors which undermines the effectiveness of any tobacco control campaign planned for the benefit of masses.

The tobacco companies are often found involved in various schemes intended to demand tax relaxations from governments. Apparently, the tobacco lobby uses its connections to bend the public policies in its favor through statistical exaggerations and false case studies. 

A classic example of this influence is over emphasis on the illicit trade as one of the factors exacerbating the health and economic implications for the state. Oxford Economics and some other institutes of international exposure claimed in their reports that the percentage of illicit tobacco trade as high as 41.9% in Pakistan. Upon close inspection, these reports often funded or inspired by tobacco companies were full of contradictory facts and questionable methodologies.

According to the official survey conducted by the Pakistan National Heart Association, the volume of illicit trade is not more than 9% which suggests that the official production figures quoted by the tobacco industry are highly inflated. The World Bank Group has also reported in 2019 that the tobacco proponents have created a false impression of massive illegal trade in Pakistan for demanding tax evasions from the government.

Through their coordinated ploy, not only that they succeed in acquiring tax relaxations but also manage to evade taxes through illegitimate means. More often than not, the major tobacco firms are found involved in smuggling tobacco products due to the local weak legislative structure.

The growing evidence suggests that companies like Phillip Morris facilitate the black market, causing a revenue loss of around Rs. 70 billion to state exchequer. Therefore, in order to put an end to this conniving tactics employed by tobacco companies, Government of Pakistan decided to introduce the tracking and tracing system.

The tracking and tracing of tobacco products, as proposed by WHO, is an effective technique which aims to tackle the illegal tobacco markets. The Illicit Trade Protocols suggest that each product could be identified through its unique ID, thereby aiding the governance institutions in reaching the source of this menace and nib the evil in bud.

The Federal Board of Revenue (FBR) would be getting all the details relevant to manufacturing and taxation of each cigarette packet, thereby abetting in an end to illegal trade and tax evasions once and for all.

While the initiative was thought of as a major step to keep the tobacco industry in check, the evidence suggests that the tobacco lobby has been successful in defying the local authorities. While the goal of dominating the accountability system for vested interests remains the same, the mechanism also shows a similar trend as to that implemented for statistical exaggeration of illicit trade.

After carrying out the usual procedure, a company by the name of National Radio and Telecommunication Corporations (NRTC) was awarded the tender by FBR. However, close inspection suggests that the company is working in coalition with Inexto which comprises of the former Phillip Morris employees.

Inexto works with the Codentify tracking and tracing system which is basically developed through funding of tobacco industry. Despite of tall claims, the leaked documents available online suggest that Inexto may not be financially independent as often portrayed by its officials.

Startling revelations have come to surface, suggesting alleged involvement of top tobacco players in initiating the whole mechanism with ill intents. Thus, it seems that in another attempt to sabotage the protocols initiated for controlling local and international smuggling, the tobacco companies have decided to control the tracking and tracing system through their front men and companies.

Such huge revelations have not only exposed the real face of tobacco lobby, it has also put the entire bidding process in jeopardy. Due to the links established between NRTC and Inexto, major anti-tobacco activists have come forward to demand fresh bidding whilst ensuring the transparency of the firms involved.

The Islamabad High Court has also cancelled the multi-million dollar contract after finding irregularities in the bidding process. Thus, the whole mechanism reeks of criminal negligence in selecting a company for carrying out tracking and tracing of tobacco products.

The current situation suggests that the story of tobacco track and trace system implemented in European Union is being replicated by local actors. In EU as well, Inexto tried to influence the bidding process before its involvement with the tobacco industry was found.

Thus, these instances suggest that the Illicit Trade Protocol needs to take into account the efforts of tobacco companies to overpower the accountability process. All the stakeholders must come together to ensure that the devious attempts by the said lobby are always countered with strict compliance of rules and regulations.

The whole mechanism must be implemented with complete transparency while carrying out the bidding process so that no company with links to Inexto or Codentify are allowed to contest for the bid.

Additionally, companies like Inexto must be fined heavily for their links with tobacco industry. All the parties involved must stay vigilant so that the tobacco industry cannot find its way to the system commenced for its liability.

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