Daily Times

Looking at the economic landscape of Pakistan, one cannot help but be dismal. A developing country, a growing economy, challenges of natural disasters, third-world geopolitics, and now combine with it illicit trade in the region, Pakistan constantly remains riddled with potent challenges.

The nation’s plate is full of concerns and now smuggling of goods at the cost of the economy, health, and fair competition is not going to help the situation. Trade and development go together. But illicit trade is a cartel that damages the growing potential of the economy. It may provide the short-term ease of relatively lower-cost products but its long-term and broader impact eat into the well-being of the very people that it is supposedly helping.

Trade is the soul of the economic engine. Export needs to exceed import. More importantly, local manufacturing industries need support and cooperation as their sales and growth have to be prioritized for all areas of economic development. Since the inception of the World Trade Organization (WTO) in 1995, cross-border trade has more than trebled, lifting more people out of poverty than at any other time in history. Yet, there is a dark underside to the recent expansion in international trade, namely an explosion in illicit trade. At trillions of dollars in earnings, the smuggling or fraudulent trade of other legitimate goods is expanding its networks. This problem is especially prevalent in less developed countries, stifling development potential.

Illicit trade is a cartel that damages the growing potential of the economy.

Pakistan is the fifth largest milk-producing country in the world. The quality of milk and its by-products are superior to many. Pakistan’s dairy products have established themselves for standard and nutrition and can be well on their way to exports and international acclaim. Healthy competition is a critical element for unlocking a nation’s full innovative capacity and associated economic growth and employment potential.

Conversely, illicit products rob the industry and economy of their right to grow constructively, and this creates significant harm, not only to the domestic producers but to consumers’ health and the economy in general. These costs are real and huge if quantified. The recent presence of unknown brands on the stores’ shelves, claiming to be cheaper and better in quality has created a similarly harmful situation. Since illicit trade operates outside the law, assessing the exact level of this activity and evaluating its harmful consequences is substantially challenging.

With no guarantee for manufacturing and expiry dates, supply chain standards, and the quality of ingredients and hygiene processes, everything in and between the process is questionable, yet the only charm remains the lower cost – which comes at the price of the economy at large, as a result of widespread counterfeiting and smuggling. Pakistan has inadvertently experienced a loss of sales and tax revenue. The loss of revenue to the government has a direct impact on welfare spendings such as health care, education, and public transport. Police and other enforcement infrastructure are also hit by this crunch, which worsens the problem of insufficient enforcement in relation to smuggling operations.

This will also downplay any potential for foreign trade as foreign investors will be reluctant to invest when the return on investment is made more uncertain due to the disproportionate domestic situation. According to the latest report, Pakistan’s Foreign Portfolio Investment fell by 240 million USD in June 2022. According to a Pakistan Dairy Association estimate, with support from the government, Pakistan can earn up to 30 billion dollars from exports of only dairy products and milk.

Of even greater concern, is the consumers’ risk of health and safety as they are duped into buying unhealthy, harmful, and unsafe products. Can Pakistan afford this?

There are two major actions that need to be taken immediately, quickly, and collectively. First, the government needs to build a strong legal framework in Pakistan to counter this problem. All segments of the industry must call out for greater and stronger enforcement of existing laws and regulations around counterfeiting, and smuggling. It is important to recognize the significance of the underlying economic damages and ensure strict implementation of the Consumer Protection Act for the protection and promotion of the rights and interests of the consumers.

Secondly, the government must take necessary action to protect consumers’ health and safety from dangerous counterfeits through significant education efforts. It needs to raise awareness of the serious consequences of consuming low-cost but unsafe products.

The corporate giants and industry leaders must come forward and initiate the critical discussions needed to address the concerns highlighted. Lastly and most importantly, the consumers need to develop a sense amongst themselves that counterfeit products and smuggling activity are victimless crimes. What the victims, however, CAN do is avoid buying counterfeits and harmful products. Pakistan is one of the most vital economies in the region and with slowing growth rates, we can little afford to ignore the growth opportunity that the dairy industry offers for the large economic impact it could provide.

The writer is a journalist based in Karachi and can be reached at sara.amj@hotmail.co.uk.