Pakistan is awash with black cash. And a large part of it being used to fund a highly lucrative smuggling sector expanding exponentially on the back of country's consummate consumerism. But what we want to do is, plugging a new sieve that has appeared recently following a tame attempt at compressing the official import bill.
So, with effect from September 1, special joint teams of the FBR would be visiting major shopping areas, especially large retailers, in major cities to check import documents for imported goods available for sale to consumers, according to instructions issued by the FBR.
On the face of, it is a welcome move as up to 600% increase is said to have taken place in smuggling of certain goods in the past one year, which were subject to regulatory duties. Before the imposition of duties, these goods were imported through official channels but after the levy of duties, their import shifted to the ATT regime.
Also a large number of machinery and other items from India come via Dubai. Since nothing is made in Dubai, the customs should issue regulations to prove that the country of origin is not India. Any import documents from Dubai should be subject to counter check.
However, the real problem is said to be unchecked smuggling at the borders and it is widely believed that law enforcement agencies and Customs officials are involved in it. A 2015 confidential report of the FBR revealed that Pakistan was losing a staggering $2.63 billion worth of revenue a year due to just ATT related smuggling of just 11 goods (high-speed diesel, vehicles, tires, tea, auto parts, mobile phones, garments, cigarettes, plastics, television sets and steel sheets), which were making their way through the porous borders and, more alarmingly, through high seas and containerized cargo with full support of the state machinery.
More likely, this exercise could end up in a law and order situation as the shopkeepers would aggressively resent the inspection. It would also open up one more opportunity for the side income of corrupt FBR personnel.
Smuggling has been one of the major reasons for the expanding informal economy in the country. Since we, as a nation, are generally averse to documentation, it is not possible to know exactly how much black cash is currently in circulation. But if one went by the astonishing rush in our shopping centres and eating places in both urban and rural Pakistan, it becomes too difficult to not question the socio-economic profile of the country put out periodically by the official statisticians.
Since the rich and the not-so-rich agriculturists do not pay any income tax, and get all their inputs including water at highly concessional rates, official statisticians simply have no way of knowing what happens to the cash in the hands of these agriculturists belonging to a sector which makes up 20 to 22 per cent of the economy. Even most of those belonging to the manufacturing sector, which makes up 25 per cent of the economy, are known to have been adjusting their incomes against barren lands they have purchased for just this purpose.
And, of course, most of the professionals, like doctors, lawyers, engineers, most self-employed persons, private hospitals and private educational institutions - which have mushroomed by the hundreds over the years, surpassing now by thousands the number of hospitals and educational institutions in the public sector - either do not pay any tax on their incomes or pay only a paltry sum.
And since the ruling elite, in collusion with the big business, has consistently nipped in the bud attempts to document the economy by opposing with religious zeal all attempts to introduce measures like the General Sales Tax (GST), the government is being deprived of billions in taxes annually from those operating in the legal economy as well.
Add to this the money made in bribes, smuggling and by over-and under-invoicing foreign trade. Power, water and gas are also pilfered by the big business and feudal aristocracy, which if monetized would also amount to billions of rupees lost to the formal economy. Obviously, the official figures of GDP growth of three to four, or even eight per cent, would not reflect this massive amount of black cash in circulation and the growth in the size of the black economy it finances.
An official report has noted that the resilience of the informal sector appears to be pushing the formal economy forward. Everything from auto parts to sports goods, knitwear, clinics and beauty salons fall into the informal economy. All these make a significant contribution to employment and income, and that's one reason why the economy is still growing.
The undocumented demand from Pakistan's 200 million people means the nation's purchasing power is more than estimated. Rising crop prices have pumped an extra more than one trillion rupees into the rural economy in the past years, most of it undocumented.
Evidence of consumer demand is everywhere as new shopping malls and restaurants in Karachi, Lahore, Islamabad, Rawalpindi and Faisalabad are filled to capacity. Car sales have been rising without any abetment except in the current year, as more people could afford a Toyota Corolla or Suzuki Mehran.
That is perhaps is the reason why the masses have not taken to the streets protesting all-round price hikes going through the ceilings. Indeed, there is no tradition in Pakistan of taking to the streets against price hikes, no matter how high the hike. Pakistan has suffered inflation rates as high as 25-30% during the period between the second half of the 1980s and the entire decade of the 1990s with no street protests. The only time the people of Pakistan went out protesting against price increase of a paltry 25 paisa (of sugar) was in 1968-69 leading to the ouster of President Ayub Khan. This had paved the way for General Yahya Khan's Martial Law.
And as well, the combined opposition would be too wary to bring the masses on streets on any pretext, genuine or non-genuine because they know, that would lead to the wrapping up of the system itself as the establishment would not like to hold an election so soon fearing that despite manipulation it would still fail to keep the combined opposition winning the elections. Therefore, the opposition, knowing very well that such an agitation would either end in the fourth military take-over or a 'legally' sanctioned postponement of an election for at least three-years to begin with and the induction of an interim government of technocrats, is more likely to underplay its hand rather than go for the final kill using price increases.
Meanwhile, big business seems to have taken over the PTI-led coalition government. All those powerful lobbies representing various vested interests like the automobile industry, the sugar 'mafia', the real estate racket, the engineering bonanza etc., led from behind the scene by the even more powerful Overseas Investors Chambers of Commerce and Industry have over the last one year chewed away the entire socio-economic road-map of 'Naya Pakistan' to implement which the ruling Party had entered the government in August, last year.
These big business representatives in order to get the government's attention diverted from their profiteering sprees are said to have set the government on a wild goose chase by having it constitute a commission to find out 'where the billions borrowed between 2008 and 2013 have gone?'
The fact of the matter is, a part of these billions has certainly gone into servicing and amortizing the past debts. This has been happening since the last days of General Zia. Remember when he died in an air-crash our kitty was totally empty? We had to pledge one of our cash crops in a foreign bank as collateral for an emergency loan and the then interim finance minister Dr Mehbubul Haq had to rush to the IMF for an emergency bailout.
Next, according to Stockholm International Peace Research Institute (SIPRI), Pakistan ranks 10th in the global list of arms purchasers. And unfortunately since long we are also in a kind of arms race with India which tops the global ranking of weapon purchasers. A recent AFP report quoting SIPRI had also said that all nuclear weapon-possessing countries are modernizing these arms, and China, India and Pakistan are also increasing the size of their arsenals.
Borrowed dollars were also spent indiscriminately in the last ten years to keep the exchange rate plugged to an artificially high value.
Part of these borrowed funds were also used in the wars that we fought over the last 10 years - the wars (Rah-i-Raast, Zarb-e-Azb and Raddul Fasaad) that we fought against the TTP.
And by the way, in the last ten years, Pakistan's GDP has expanded to $300 billion from $171 billion in 2008 reflecting an extraordinary spell of investments during this period, obviously explaining where part of the borrowed billions has gone.
And there is no way one can get the right figures for the amount that was spent out of the borrowed dollars during the last five years to expand the power generating capacity in the country which is said to have added 11,000 MW of electricity to the national grid. Indeed, today we have more generating capacity than the actual demand. But because borrowed dollars were used to add to the generating capacity, the output is decidedly too expensive.
This is a rough list of the items on which the borrowed dollars were perhaps spent. It is not a complete list. But this is not to say no corruption took place in the last ten years or for that matter part of the borrowed dollars did not slip through the fingers into the private coffers of the handlers and implementers.