Tobacco track and trace: mission impossible for Pakistan?s FBR?

For nearly a decade, Pakistan’s Federal Board of Revenue (FBR) has been struggling to award a contract for a track and trace system to crack down on illicit tobacco products in the country. After legal challenges forced the cancellation of a decision made under suspicious circumstances last year, new complaints surrounding the FBR’s latest attempt to award a contract this month make clear the structural issues which plagued past tenders remain unresolved.

As the FBR struggles to address these fundamental problems, prime minister Imran Khan’s congratulatory statement about the most recent tender clashes with the reality of Islamabad’s lacklustre efforts to implement a tobacco control programme that meets global standards. This issue remains a thorn in the side of both Pakistan’s national public health efforts and its relations with international partners like the IMF.

Backing the wrong horse

Fresh indications of the FBR’s failure to carry out a transparent track and trace tender emerged during January’s bidding process, which saw the FBR evaluate the bids of eight companies deemed “technically compliant”. The scoring was cumulative, combining the firms’ technical scores with their financial scores (the quoted cost of the contract).

This stage of the process was meant to be transparent, with each bidder’s technical score made public before bidding began. Instead, both the competing bidders and Pakistani civil society groups grew suspicious after the AJCL/Authentix consortium was declared the “most advantageous bid on the basis of the combined highest score,” despite a quoted cost that was 52% more expensive than the cheapest bid. Nor was that the only anomaly; Steuermarken Solutions, which received the second highest technical score during the FBR’s last attempt to award the contract in 2019, obtained the worst technical score this time around.

The contract, reportedly worth between 25 and 39 billion Pakistani rupees, is intended to curb rampant tax evasion and counterfeiting which costs the government Rs20 billion per year in the tobacco sector alone, in addition to undermining the Pakistani government’s tobacco control efforts. Despite the substantial benefits promised by such a contract for the exchequer and for Pakistan’s public health policies, the rollout has been repeatedly waylaid by the FBR’s missteps in conducting tenders.

No smoke without fire

Previous contract awards have ended in litigation, including the FBR’s attempt to issue the contract to a National Radio & Telecommunication Corporation (NRTC) joint bid with Swiss firm Inexto – known for its ties to the tobacco industry – in 2019. A scandal over the NRTC’s mislabelling of its bid price snowballed, sending the FBR back to the drawing board.

This latest attempt looks set to end in similar fashion, after the Pakistani branch of anti-corruption organisation Transparency International raised concerns the FBR has cost the exchequer some Rs13.5 billion through violations of procurement rules. One of the competing bidders, Reliance Solutions, has also challenged the FBR’s decision, seeking a detailed breakdown of the evaluation scoring. In a statement, Reliance argued the “transparency of the entire process being conducted by the licensing committee is severely compromised” by the failure to disclose the precise evaluation criteria, and flagged the fact the licensing committee has refused to return sealed copies of the unsuccessful bidders’ financial proposals.

The FBR’s struggle to conduct a transparent process is all the more surprising given the international pressure on Pakistan to get a tobacco traceability system up and running. Per the terms of the country’s $6 billion IMF bailout in 2019 (of which a fresh $500 million tranche is expected to be paid out shortly), Islamabad was supposed to have track and trace in place by March of last year.

Big Tobacco’s suspected involvement

Why has the FBR shown such a disappointing lack of resolve with so much on the line? The root cause of the FBR’s difficulties, as outlined in a comprehensive OCCRP investigation last year, appears to be Big Tobacco’s extensive influence in Pakistan, a country with an estimated 24 million smokers. The OCCRP confirmed some of the world’s largest tobacco companies have been complicit—and even actively involved—in the black-market production and trade of their own products in Pakistan. In 2017, tax officials seized nearly 60 million illegal cigarettes from a factory in Mandra which had been manufactured using machinery owned by tobacco major Philip Morris International (PMI).

PMI is also accused of manipulating the FBR by proxy. The disputed winner of the 2019 bidding process, NRTC, lacked practical experience in the industry but secured the tender by partnering up with software firm Inexto. The tracking system proposed by Inexto is based on Codentify, a track and trace system designed by PMI itself and licensed for free to the other international tobacco majors. Unsurprisingly, this system has been deemed unfit for purpose, given tobacco companies have a vested interest in controlling track and trace systems and a history of complicity in the illicit tobacco trade.

Life or death situation

The IMF bailout conditions are not the only reason for urgency in sorting out the FBR’s track and trace tender issues. Tobacco traceability is not only important for the exchequer, but also for the health of millions of Pakistanis. As the World Health Organisation and its Framework Convention on Tobacco Control (FCTC) have repeatedly underlined, an independent and robust track and trace system helps curb the illicit tobacco trade, which undermines public health measures taken to reduce smoking rates. Pakistan is a party to the FCTC, as well as to the additional Protocol to Eliminate Illicit Trade in Tobacco Products.

Smoking rates remain especially high in Pakistan—women are taking up smoking at unprecedented rates, while cigarette smoking reportedly claims 125,000 lives every year in the country. Despite the patent urgency of this healthcare crisis, and ongoing pressure from the IMF, the FBR again appears to have once again awarded this important contract on suspicious grounds, throwing the country’s ability to carry out a key public health measure further into doubt.

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