Pakistan Loses $20M Cigarettes Export Order

Staff Report:

Pakistan has lost a $20.5 million export contract to Bangladesh due to bureaucratic obstacles, according to a senior executive from Pakistan Tobacco Company (PTC).

Qasim Tariq, PTC’s Senior Regulatory Affairs Manager, provided details about a significant export setback for Pakistan. Earlier this year, PTC had secured an agreement to export cigarettes worth USD 20.5 million to Sudan—an opportunity that would have provided Pakistan with much-needed foreign exchange. However, despite support from the Special Investment Facilitation Council (SIFC) and approval from the Prime Minister, the deal fell through due to delays in decision-making by officials at the Ministry of Health and opposition from certain anti-tobacco organizations.Philip Morris Pakistan Exports $48 Million

As a result, the order was awarded to a neighboring country, causing Pakistan not only to lose a key economic opportunity but also to miss out on vital foreign reserves that are essential to the country’s financial stability during challenging economic conditions.

“Certain provisions of the World Health Organization’s Framework Convention on Tobacco Control (FCTC) were misinterpreted and used as a basis to block this export deal,” explained Tariq. “Ironically, the neighboring country that ultimately secured the contract is also a signatory to the FCTC, just like Pakistan and Sudan. This incident highlights the damaging effects of misinformation and the economic harm that can arise from the unchecked influence of specific advocacy groups on public policy.”

PTC also acknowledged the Federal Board of Revenue’s (FBR) recent actions against the illicit tobacco trade, praising their efforts. However, Tariq stressed that isolated enforcement actions alone will not resolve the issue. The demand for illicit products remains high due to limited resources available to the FBR and inconsistent enforcement at the retail level, where smuggled cigarettes are readily available.

PTC has strongly advocated for the full and consistent implementation of a Track & Trace system across all regions, including Azad Jammu & Kashmir (AJK), to enable authorities to track and monitor products, reduce tax evasion, and ensure that only legitimate products are available to consumers. The continued absence of an effective Track & Trace system remains a significant obstacle in Pakistan’s battle against illegal trade.

Tariq also criticized certain non-governmental organizations (NGOs) for not raising concerns about the smuggled and illegal cigarettes flooding the markets. According to media reports, illicit cigarette sales have now reached almost 50% of the total market.

“The sales of legitimate products are clearly declining in favor of smuggled packs, which lack health warnings and manufacturer information,” he said.

PTC has called on the FBR to delegate enforcement powers to the provinces, so local law enforcement can actively monitor the retail sale of illicit and smuggled cigarettes.

The legitimate tobacco industry in Pakistan is facing significant challenges, as illicit cigarette sales continue to rise, according to representatives from Pakistan Tobacco Company. In the first quarter of the current fiscal year, PTC reported a staggering decline of nearly 0.8 billion cigarette sticks compared to the same period last year. This shortfall reflects the severe impact of the illicit trade on legitimate businesses and government revenue, which are crucial for financing development projects that support Pakistan’s growth.

The economic impact of the rise in illicit cigarette sales is multifaceted. A recent statement by the FBR to the Senate Standing Committee revealed that 50% of cigarettes sold in Pakistan are now illegal, highlighting the deepening problems in the sector. Additionally, the unprecedented Federal Excise Duty increase of over 150% in February 2023 has further hurt the legal industry, as higher prices have led many consumers to switch from legal brands to cheaper, illegal alternatives.