Pakistan’s Hopes for Transparent Tobacco Tracing Go Up in Smoke

In late February, Pakistan’s Public Procurement Regulatory Authority (PPRA) gave the Federal Board of Revenue (FBR) the green light to go ahead with procurement proceedings for a technological solution to track and trace certain goods, including tobacco products. This should be encouraging news for both Pakistan’s exchequer and its public health authorities, given that the World Health Organisation has repeatedly underlined how, if efficiently implemented, this form of monitoring can go a long way towards eliminating the illicit tobacco trade. Indeed, the system is considered so beneficial that the International Monetary Fund (IMF) made its swift implementation a condition of the $6 billion bailout it granted Islamabad in 2019.

In this case, however, allowing the procurement to move ahead is likely to add more fuel to the fire of controversy surrounding the FBR’s tender. Indeed, the tender has been plagued with a laundry list of problems which have sapped confidence in the scheme Pakistan is planning to implement. Four out of eight companies which participated in the bidding process have filed complaints after widespread irregularities came to light, including the fact that the FBR’s technical committee failed to counter-check potential conflicts of interest or company history, ignoring even publicly available information.

Tender riddled with flaws

Last month, the solution proposed by the AJCL/Authentix consortium was deemed the “most advantageous bid” by the FBR due to its highest combined score, apparently in accordance with the Licensing Rules 2019 and PPRA Rules 2004. Soon thereafter, Prime Minister Imran Khan praised the FBR for procuring a “cutting-edge track and trace system.” Despite the fanfare, the reality could not be further from the truth.

For one thing, the AJCL/Authentix consortium received a bizarrely high technical score despite failing to meet a number of essential criteria. For one thing, the FBR tender expressly invited applicants with a yearly turnover above $50 million; the annual revenue of Authentix has yet to exceed $20 million. At the same time, the tender specified that applicants should have a history of steering clear of any activities such as fiscal fraud or corruption—yet AJCL director Abdul Kader Jaffer was implicated in the Panama Papers. What’s more, there are conflict of interest concerns over AJCL’s involvement in the import and export of goods covered by the planned track and trace initiative, including ethanol and sugar.

Long-standing issues

To make matters worse, the current issues with the tender are only the latest in a long run of problems which have exposed just how deep Big Tobacco’s influence runs in Pakistan. In fact, the FBR has been scrambling to award a track and trace contract for the better part of a decade, and the organisation’s very public fumbling of the issue faces increasing scrutiny at home and abroad.

In 2019, the FBR announced the bids for an initiative which would stamp cigarette packs so as to allow regulators to ascertain whether sales tax had, or had not, been paid. The National Radio & Telecommunication Corporation (NRTC) submitted the winning bid, despite a mislabelling of its bid price and the proposed use of track and trace technology grounded in a system developed by tobacco giant Philip Morris and promoted by the tobacco industry. In response to the scandalous trojan horse attempt, the Islamabad High Court ordered the FBR to initiate fresh bidding for the system.

Less than a year later, the FBR is once again in hot water over its mishandling of the tender process. This time, the Pakistani mouthpiece of global anti-corruption organisation Transparency International has warned that the FBR has already cost the exchequer as much as Rs13.5 billion in tax funds thanks to procurement rule violations. Moreover, rival bidder Reliance Solutions alleges deliberate wrongdoing on the part of the FBR, and has now requested a detailed breakdown of scoring decisions. “The transparency of the entire process being conducted [by the FBR] is severely compromised”, Reliance Solutions argued, highlighting a general opacity on the FBR’s part, including its refusal to return sealed copies of bidders’ financial proposals and a reluctance to disclose the tender’s exact evaluation criteria.

Urgent need for a better system

The FBR’s continued failure to hold a fair and transparent tender is particularly tragic given the scale of the tobacco problem in Pakistan. Indeed, thousands of Pakistanis are dying each year from tobacco-related illnesses, at an annual cost of more than $1.3 billion to the healthcare system. If Pakistan were to successfully implement an effective track and trace system, as many as 44% of all cigarettes sold in the country could be brought under the umbrella of excise taxes—to the tune of billions of rupees each year and thousands of lives saved. That the FBR would continue to drag its feet, then, would seem a laughable paradox if not for the gargantuan stake—and influence—of the tobacco industry.

Pakistan is in dire need of adequate frameworks to track down and eliminate the illicit tobacco contributing to an escalating public health crisis. Rather than demonstrating a commitment to the cause, however, attempts to push forward with the current flawed tender will only deepen the perversion of genuine efforts to tackle the issue. Implementing a weak and easily circumvented tender which would solely benefit the tobacco majors will come across as mere window dressing, pandering to the international financial institutions determined to see Pakistan implement a comprehensive track and trace system without actually addressing the practice of illicit trade. It is only by rooting out the structural weaknesses that have beset previous tenders that Pakistan has any chance of a healthy future.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes