Contraband is increasingly depriving Syria of much needed revenues. The illicit trade of contraband, which includes tobacco, cigarettes and pharmaceuticals, through Syria’s porous borders with Lebanon, is set to costs the Lebanese treasury tens of millions of dollars in lost taxes every year. It comes at a time when the country’s public and foreign debt keeps growing at an alarming rate. But everyone know it: contraband is nothing but new in the region.
According to Mohammed Daher, who heads Lebanon’s Regie Libanaise des Tabacs et Tombacs, an anti-smuggling unit, cigarettes and tobacco are smuggled into Lebanon by land, air and sea. “More than 30% of the tobacco products in the Lebanese market are contraband. Smuggling of tobacco and imported cigarettes increased from 15% only two years ago to more than 30% today,” said Daher.
He went on to add, “They are being smuggled in containers, cars or trucks, concealed under clothes and other goods. This is mainly due to the security situation and the porous border with Syria, the difficult economic conditions in the country and the big number of Syrian refugees (who earn money from smuggling).”
Revenues from the state-owned Regie, which has a monopoly on tobacco, contributes nearly 12% to the state’s revenues, said Daher. “The state’s loss from the illicit trade of cigarettes is around $200 million-$250 million annually. Iraq is a main source of cigarettes contraband via Syria” he said as a pointer to the potential loss of revenues from contraband.
As a measure to combat and control the rising tide of smuggling of cigarettes, in 2017, the Regie adopted procedures which include improving the qulity of the locally produced cigarettes to match international standards. It also signed agreements to produce international brands locally.
The smuggling of contraband cigarettes is vital given that the tobacco industry is the fifth biggest source of revenues for the states and contributed as much as $450 million last year, said Robert Naouss of Philip Morris.
“It is a very important sector not only in terms of public revenues but also in terms of economic activity. You have 25,000 families that make a living from planting tobacco in the south, Bekaa and north Lebanon,” said Naouss.
Boosting tobacco plantations in Lebanon could create more jobs in agriculture, fabrication and trade. It is crucial to support this industry since it employs tens of thousands of people. In Lebanon, the industry has typically suffered from lack of support and lack of financing. These are only more reasons to combat the threat of contraband which threatens the tobacco industry.
“Lebanon produces very good quality tobacco that is sought by big international companies like Philip Morris and others. The larger part of the crop is exported and the rest is used for local production,” said Naouss. “It is the easiest product to smuggle. It is light, small in size and can be carried in many different ways. Also, there are still no strict international penalties or sanctions on tobacco smuggling as it is the case with the smuggling of pharmaceutical products”.
Smuggling of pharmaceuticals
According to Samar Baltagi, a pharmacist, while tobacco contraband has seen a rise in recent years, the smuggling of pharmaceuticals and their generics have largely been contained and reduced by up to 70% from levels seen 3 years ago.
“Today, the problem is what we call the ‘suitcase traders.’ These people buy the medicines in Turkey and transport them in their personal luggage to sell to their neighbours, friends and relatives,” explained Baltagi. “Turkish-made pharmaceuticals are of good quality and much cheaper than in Lebanon. People are so impoverished that they would go for smuggled medicines even if that means saving a mere 2 pounds ($1.30)”.
Contraband pharmaceuticals are rarely sourced from Syria given that they are of inferior quality though they are much cheaper.
“The Ministry of Health is very strict in that regard. They have shut down pharmacies and retrieved the licences of wrongdoers,” said Baltagi.
Another contraband item which is hitting state revenues is low-quality gasoline from Syria. Large quantities of gasoline are routinely smuggled through the border area of Baalbek-Hermel.
“There are an estimated 1,500 illegal crossings between Lebanon and Syria that are used by smugglers,” said Tony Tohme, of the Chamber of Commerce, Industry and Agriculture in the Bekaa. “In one instance, some 30 gasoline tanks crossed into upper Hermel while customs could intercept only one tank.”
“Beirut port’s activity has also dropped by 30% in the last year because of smuggling. Goods are being shipped to the port of Tartus (in Syria) and smuggled directly to Lebanon through the northern border,” he added. Contraband low-quality gasoline hit the Lebanese economy in multiple ways. “Lebanese farmers are losing money. They cannot compete with Syrian produce because production cost in Lebanon is much higher than in Syria”.
“We need to close down illegal crossings, our economy is suffering, the state is being deprived of customs revenues and local farmers are getting poorer,” said Tohme. If things go on as they did in the Wadi Khaled region, the Lebanese state will get poorer for sure…