Will Pakistan’s tobacco traceability odyssey finally come to an end?

October 23, 2020


In the light of extensive links between Big Tobacco and legislative processes, there’s little reason to wonder why the government’s previous attempts to install a tracking system have been so notoriously opaque and dysfunctional

Pakistan is bracing for the second wave of the coronavirus as the number of active cases rapidly increases. October 19th saw an increase of 567 infections, bringing the country’s total to more than 323,000. A week earlier, the percentage of positive infections reportedly surpassed two percent for the first time in six weeks, in the wake of the Pakistan Medical Association’s warning that the second Covid-19 wave is likely to begin in schools before spreading to other areas.

This is undoubtedly bad news, made worse by the fact the country’s healthcare system has been placed under immense strain by burgeoning population growth and perpetual health infrastructure crisis. But Pakistan’s healthcare woes are exacerbated by another factor: smoking. With over 19% of Pakistan’s population and nearly 32% of men using tobacco, the news that tobacco use is a dominant risk factor for severe COVID-19 effects is anything but encouraging. Recent research shows that smokers may even constitute close to one-fifth of adults hospitalised for the respiratory disease.

Pakistan has long been recognised by the World Health Organization as carrying a “heavy burden” as a consequence of heavy tobacco use, no less because of the ready availability of illicitly traded cigarettes. Given the numerous unregistered cigarette manufactures in the country, it’s hardly a surprise that illegal cigarettes account for roughly 38 percent of total consumption in Pakistan (March 2020), a rise of 6 percent compared to last year. In turn, the staggeringly high number of smokers –10 percent of Pakistan’s adult population, on top of the estimated 20 million underage smokers aged 6 to 15 – is easily explained.

Big Tobacco’s tentacles

As such, the pandemic is hitting a particularly vulnerable population, with efforts at instituting badly needed tobacco control measures caught in a protracted struggle with Big Tobacco and its relentless, prolonged lobbying campaigns. Besides illegal manufacturers, the domestic market is made up of dozens of local players, and two multinational firms: Pakistan Tobacco Company (PTC), the Pakistani subsidiary of British American Tobacco, and Philip Morris Pakistan Ltd (PMPKL). Combined, these firms sell up to 85 billion cigarettes in Pakistan every year – and the industry is determined to maintain the market in spite of public health priorities.

The focal point of industry efforts has been to hijack the creation of a reliable cigarette track and trace system in Pakistan, one that would regulate the supply chain of tobacco products in its entirety and work to eliminate the illicit tobacco trade. Such traceability systems have already been implemented across the world and have proven successful in undercutting the sale of illicit tobacco products, along with boosting public revenues.

But therein lies the rub: it’s no secret that Big Tobacco has a substantial stake in the illegal cigarette trade. Not only does the sale of untaxed cigarettes help maintain domestic demand in the face of government health initiatives, but also protects the all-important bottom line. PTC and PMPKL, for example, have been under-declaring production quantities for years and thereby robbing Islamabad off close to US$500 million in lost taxes each year, according to estimates from Oxford Economics.

Controlling the system

In the light of extensive links between Big Tobacco and legislative processes, there’s little reason to wonder why the government’s previous attempts to install a tracking system have been so notoriously opaque and dysfunctional. Case in point was the May ruling of the Islamabad High Court, which invalidated the previous government tender for a cigarette tracking system and ordered the Federal Board of Revenue (FBR) to initiate a new bid.

The ruling cut short a fraudulent tender process that saw the FBR award the track and trace contract to the National Radio & Telecommunication Corporation (NRTC) last October – despite the fact that the bid relied on a blatant pricing mistake, offering 0,731 instead of 731 PKR ($4.49 USD) per 1,000 tax stamps. Under normal circumstances, this should’ve disqualified NRTC from the tender. Instead, the firm was able to negotiate with the authorities and rebid with an altered price that finally clinched the contract.

Yet perhaps the most disturbing detail is that NRTC was offering to implement a track and trace system developed by Swiss software company Inexto, a product suite known as Codentify. This system has been shown to have been developed entirely by tobacco giant Philip Morris and promoted jointly by the tobacco companies as a way to ensure track and trace regimes remain ineffective.

Pricing issues aside, an industry-designed tracing system is a blatant violation of the WHO Framework Convention on Tobacco Control (FCTC), notably the FCTC Protocol to eliminate illicit trade in tobacco products. That agreement expressly forbids such collusion between system suppliers and the industry; among its other provisions, Article 13 of the Protocol goes as far as to prohibit any relations between public officials, the tobacco industry, and those representing the industry’s interests for track and trace beyond the strictly necessary.

A new hope?

Still, the unravelling of the tender debacle shows clearly that not all is lost. After all, the court’s decision not only is a chance to reset the process and make sure the tender procedures are transparent and fair. Perhaps more importantly, it’s a chance to leverage international scrutiny of the bidders and eliminate those who are corrupting the system, especially as Pakistan engages with multilateral lenders such as the IMF and the World Bank and finds itself compelled to demonstrate its commitment to reforms in the face of doubts over the government’s ability to collect revenue – most recently voiced by Moody’s.

There’s little doubt the bar is now set significantly higher than before. If Pakistan were to successfully implement a robust track and trace system against the illicit trade of tobacco products, billions of rupees in tax revenue could go towards shoring up the healthcare system at time of unprecedented crisis – and equipping it to deal with future ones.