Conduits of smuggling – is CPEC next?

Afghanistan Transit Trade has become to a large extent associated with, if not actually synonymous to, smuggling. Other than smuggling, the extent of mis-invoicing and mis-reporting under APTTA is staggering (read “APTTA: walking in the dark” published on July 13, 2017). APTTA involves a handful of countries that export to Afghanistan. CPEC, as part of OBOR, involves nearly 70 countries and envisions trade many times that of Afghanistan. How much bigger is the scope of smuggling under CPEC?

One figure estimates that APTTA accounts for 75 per cent of an estimated $5 billion worth of smuggled goods entering Pakistan. Some other figures estimate that around 40 percent of transit goods do not cross Pak-Afghan border or re-enter into Pakistan. China envisions its trade to increase by more $1 trillion over a decade. Even a small percentage of that volume of trade smuggling into Pakistan would be crippling to its economy.

CPEC covers over 3000 km within Pakistan over some of the more turbulent areas. APTTA routes are smaller by comparison. Though troops will be policing CPEC routes, they will provide protection from physical threats, whereas APTTA has given evidence time and time again of corruption within Pakistan Customs.

Other than the damage to the local economy as smuggled goods flood in are the potential losses to the exchequer. An estimate placed losses to be about $35 billion from 2001-2009 due to smuggled goods since GST, import duties, withholding tax and custom clearance charges were not paid.

Furthermore, CPEC envisages establishment of export processing zones, special economic zones and free zones. This requires door-step customs facilitation to ensure swift clearances of goods without any pilferages. In the short to medium term, there will be a whole division of army providing security to the cargo so hopefully stories of missing CPEC cargo appearing in godowns will not pop up in newspapers. However, it is not the army’s task to physically check the cargo and match it to the data provided.

Smuggling in general is a concern for Pakistan that does not find much space in mainstream media. The fact is that regardless of all the blinding bling of CPEC, currently Pakistan Customs is facing challenges curtailing smuggling from APTTA alone. Massive enhancements of administrative, technical, and operational capacity are required though little seems to be in the pipeline to achieve that. Given APTTA’s experience, it begs the question whether Pakistan Customs can handle future challenges.