In a country where the consumption of illicit cigarettes runs rampant and corruption is part and parcel of daily life, Pakistan’s Federal Board of Revenue’s (FBR) move to get serious about implementing the long overdue track and trace (T&T) system for tobacco products should be good news. However, a closer look reveals that the current tender for technical T&T solutions is poised to be a dud, rather than a new hope – as the tobacco industry’s reach into the government is risking undermining the effectiveness of the proposed T&T system.
As a signatory of the WHO’s Framework Convention on Tobacco Control (FCTC), Pakistan’s implementation of T&T should not only curb illegal cigarette sales, but also fill the state’s chronically empty coffers. Currently, billions of Rupees are lost to tax evasion each year. Even so, the tender and implementation have been delayed for an astonishing nine years already, and the FBR most recently missed an International Monetary Fund (IMF) mandated deadline to issue tobacco track and trace licenses by the end of September 2019, a directive tied to the release of a six billion dollar loan.
The FBR first issued the Invitation for License (IFL) in August this year – before making abrupt changes in the technical and financial score criteria, so that now the price of the system is the most important factor, rather than its proven effectiveness or compatibility with FCTC regulations. For a country facing accusations that the tobacco industry is deeply intertwined with the political-decision making process, these sudden alterations seem more than just a little suspicious.
As it happened, the new emphasis on pricing effectively knocked established competitors in the field out of the competition. Instead, the main company in the running is now hitherto unknown NRTC, which has no track record in the sector. According to sources close to the dossier, NRTC procures its T&T technology from a subcontractor called Inexto – which has been promoting a tracking solution known as “Codentify” and which has proven links to Big Tobacco, particularly industry giant Philip Morris International (PMI).
It was PMI that in the mid-2000s created Codentify to promote it to governments all over the globe as a solution to the illicit cigarette problem. But since an industry devised and controlled T&T system is not allowed under the FCTC, Codentify was sold to a newly created company in 2016– Inexto – to give Codentify the at least a semblance of independence. Inexto has been offering the technology ever since, despite the fact that it is staffed with former PMI officials.
From this it becomes abundantly clear why Pakistan would be well-advised not to award the contract to NRTC: doing so would allow an industry Trojan Horse into the system, opening all doors to Big Tobacco, its lobbying and PR. Apart from rendering moot all hopes that Pakistan’s finances could profit from reduced tax evasion by tobacco producers, it would also be an international embarrassment to Islamabad. After all, Inexto is incompatible with Pakistan’s FCTC commitments and the Convention is ultimately only as strong as its weakest members.
Even if these developments are shocking, they are hardly surprising. PM Imran Khan’s flamboyant rhetoric and recent order of a “crackdown” on illegal cigarettes notwithstanding, Big Tobacco has managed to keep a firm hold on Pakistan’s tax structure for years. The Pakistani industry is dominated by two multinational companies and 25 local manufacturers that have succeeded in skewing policy in their advantage for years.
One of Pakistan’s big players, British American Tobacco (BAT), has garnered a global reputation for curbing government oversight and adequate tax structures through intense lobbying activities. The firm has already been placed under investigated by the British Serious Fraud Office for allegations tied to its activities in East Africa, where efforts to implement an adequate track and trace system face similar challenges as in Pakistan. Moreover, as the parent company of Pakistan Tobacco Company (PTC), BAT’s reach in the country is unavoidably broad.
In February 2015, Pakistan’s health ministry embarked on a campaign to put the country near the top of global rankings for tobacco deterrent efforts. Big Tobacco was quick to fight back, and BAT and PTC were soon accused of lobbying then-Finance Minister Ishaq Dar and Minister of State for National Health Services Saira Afzal Tarar to drop a plan to enlarge health warnings on packaging.
Then, in March, a delegation from Pakistan Tobacco Company was dispatched by BAT to meet with Dar, and “express its reservations about the notification issued” by the upstart health ministry. A senior PMI executive, Jon Huenemann, was simultaneously lobbying then-PM Shahid Khaqan Abbasi to reduce the size of warning labels. His request was reiterated by Pakistan Tobacco Company a fortnight later. Within two short months, the ministry had issued a notification for smaller warnings.
Years later, Pakistan’s regulatory capacity doesn’t look any more promising. With many local politicians or their relatives sitting on the boards of tobacco companies, there is next to no incentive to change the way things currently are. According to Transparency International, Pakistan’s battle against corruption is failing.
Despite Prime Minister Imran Khan’s ambitions of a nationwide crackdown on the illicit tobacco trade, the future looks bleak in the absence of a sufficient track and trace system.
If the current trend of infiltrating national policy-making processes and leveraging local politicians by the tobacco industry for its end continues – and there is no reason to believe that it won’t – Pakistan is looking at tough times ahead. In a country where up to 1,200 children take up smoking every day, Big Tobacco’s fight against smoking deterrents is nothing short of fatal.
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