Myth defeats market

First, the ‘good news!’: Pakistan’s recent loss of a $20 million export contract to Sudan is not just a financial setback but a significant blow to its economy.

This lucrative contract for 10-stick cigarette packs, won by one of the highest tax-paying business organisations in Pakistan through a competitive process, was hijacked by the concerted efforts of local NGOs backed by illegally operating INGOs in Pakistan.

Their fallacious narrative branding the 10-stick pack as a ‘kiddie pack’ directly disregarded the legality of this export, resulting in an unjustified cancellation and the subsequent loss of a substantial amount of foreign exchange earnings for Pakistan.

The irony?

Sudan, the importing country and a Framework Convention on Tobacco Control (FCTC) signatory, legally permits 10-stick packs, as do several other FCTC nations. While, the country that snatched this export order is also a signatory to the FCTC protocol and has sales of 10-stick packs in the country as well.

This targeted opposition did not consider that the government of Pakistan’s had ensured that 10-stick packs for export adhered strictly to the importing country’s laws. Sudan’s tobacco market consists overwhelmingly of 10-stick packs, with 90 per cent of its legally manufactured cigarettes in this format.

These packs, responsibly and ethically produced by a multinational in Pakistan, would have generated foreign revenue while being fully compliant with Sudanese health regulations, including graphic health warnings. Yet, a campaign falsely claimed that these exports violated FCTC guidelines, misleading the government to abandon a legally sound export order. Meanwhile, Pakistan’s FCTC commitments and sovereignty provide ample room for such exports, given that Article 6(2) of the FCTC explicitly upholds a nation’s right to tailor its tax and regulatory policies to local conditions.

It is disturbing to note that anti-tobacco NGOs in Pakistan remain silent on the real issue affecting Pakistan’s economy: tax evasion in the tobacco sector.

In Pakistan, illicit cigarette manufacturers dominate the market with over 50 per cent share, recently acknowledged by both the FBR and the Ministry of Finance. Yet, they contribute a mere Rs5 billion in taxes, compared to the Rs291 billion paid by legitimate businesses. Furthermore, over 30 per cent of cigarette sales come from single-stick sales, in direct contravention of Pakistan’s Ministry of Health’s ban. Despite this glaring issue, what are targeted are the two multinationals that have consistently adhered to Pakistan’s regulatory frameworks. At the same time, illicit trade and duty-free sales continue to bleed the economy to Rs300 billion annually.

The loss of this $20 million export contract is emblematic of a rather dangerous problem.

While the prime minister and the Special Investment Facilitation Council (SIFC) strive to make Pakistan a business-friendly environment, an entrenched network lobbies to obstruct legitimate trade. This is not just a lost contract; it is a warning. If Pakistan fails to support its tax-paying businesses, it risks alienating legitimate investors, reducing economic growth, and allowing the illicit sector to flourish unchecked.

In articles written by critics of the contract, attempts were made to undermine an entirely lawful $20.5 million export contract to Sudan, whose market demands 90 per cent of its cigarette consumption in a 10-pack format. This contract would have brought foreign revenue to Pakistan’s struggling economy while helping Sudan fulfill a legitimate consumer need. Instead, misleading narratives led to its cancellation, and the order was diverted to another South Asian country, also an FCTC signatory. That South Asian country will fulfill the order because its government does not cave in to the fallacious propaganda.

The references used in critical articles referred to the World Health Organization’s Framework Convention on Tobacco Control (FCTC) and were flawed and misinterpreted. The FCTC’s Article 6.2 explicitly allows countries to determine their regulatory policies to meet national and international market requirements, which Pakistan adhered to with clear labeling and bonded cargo handling for export-only products.

This and many other facts were sidelined to support a one-sided narrative against a major revenue-generating industry. Consider a fact: the same organisation has been exporting cigarettes since 2019 – yet no product leakage inside Pakistan has ever been reported. Moreover, any tax-paid 10s pack produced by the same organisation will be more expensive than most non-tax-paid packs available in the market, including the illegally manufactured and openly sold 30-stick packs.

Further concerning is the silence on Pakistan’s pervasive illicit cigarette trade, dominated by non-taxpaying local manufacturers. While the government loses over 50 per cent of cigarette tax revenue to this illicit trade, these groups maintain a strategic silence, downplaying the impact of smuggling and tax evasion. There is a severe need for a reality check on whether this agenda serves to protect public health or merely secures funded agendas at the cost of Pakistan’s economy and lawful enterprises.

In the face of such disappointing realities, one cannot help but question the government’s priorities. Are we indeed so easily swayed by misleading propaganda? One has to wonder: is this the future we envision? Why do laws and regulations bend this easily rather than standing firm on principles that would ensure our economic growth and global competitiveness?

It is deeply unsettling that, while efforts from the highest offices, including the prime minister and the SIFC, aim to build a pro-business environment, they are thwarted by entrenched lobbies. This isn’t merely a loss of $20 million; it is also a signal for Pakistan that if it continues to ignore its lawful revenue-generating sectors, it will push away legitimate tax-paying investors and undermine business confidence for further investment.

The writer, a freelance contributor, is interested in political, economic, and social issues.