The Detrimental Impacts of Smuggling [Archives:1999/29/Business & Economy]

July 19 1999

It is self-evident that smuggling is one of the destructive and dangerous phenomena in our society. It has a negative impact on the economy of the country, and on development in particular. This phenomenon is really a haunting nightmare that has become part of our lives. What we find is that there are many smugglers who smuggle enormous numbers of goods that are against the regulations and laws of the country. What aggravates the situation is that there is no observation and accountability from the people in charge. This very much damages the economic situation of the country and affects the Yemeni consumer as well. On the other hand, it makes fortunes for those people who smuggle, and, induced by the great amount of money they get from it, they will do anything: bribing, killing, threatening, etc., to maintain and secure their self-interests. As a result of smuggling goods, we find that our products suffer much, and that is mainly because of the low prices of the equivalent smuggled goods and the heavy taxes imposed on our local ones.
Smuggling has lots of negative consequences in the economic and social areas. It can lay low the economy of the country. The effect of smuggling on the country at the economic level is estimated at around 60-75 billion Yemeni riyals in comparison with what would be gained from equivalent local goods. Moreover, the country loses around 5-6 billion Yemeni riyal in taxes that are not paid on the smuggled goods every year.
Smuggling takes different forms, such as smuggling cars, electrical devices, textiles, alcohol, drugs, various foodstuffs, etc. According to many studies we reached the conclusion that the ratios of smuggling goods may come to the following:
1- Cigarettes. The amount of smuggled cigarettes that exist in the Yemeni market is around 15-25%. This happens at a time when the local producer pays 42 riyals for each packet as taxation while the smuggled packet is sold for 30 or 40 riyals. Therefore the taxation income from cigarettes has halved from more than on billion riyals during the first half of the year 1998.
2- Various foodstuffs
The amount of smuggled goods existing in the Yemeni market is around 20-35%
3- Biscuits and chocolate.
The amounts of smuggled goods existing in the Yemeni market is around 30-45%.
Moreover, around 21 types out of 30 types of medicine are categorized among smuggled medicine. The amount of smuggled medicine over sea and land is around 75% of the total amount of the medicine coming to Yemen every year, indicated by some studies. This constitutes three times what Yemeni official organizations’ import and equals one billion riyal. Smuggling has also resulted in the closing of around 27 companies and is mainly due to their products inability to compete with the smuggled ones. This is harmful in view of the growing taxation imposed upon them. As figures also show, we find that there is a reduction in the oil production in Yemen from 8700 ton in 1996 to half that in 1997 for the same reason. One of the Yemeni businessmen indicates the harmful effects of the smuggling on the economy of the country by saying that he used to pay 32 million riyal per month as taxation, but what he pays now is not more than 2 million riyals. The problem is that no one has ever asked why and how this reduction happened.
We used to have hopes that the private sector would help to enhance the economic situation of the country, as its interest in 1996 reached 350.8 billion riyals. However, smuggling and chaos became dominant, and the situation has really become hazardous. This is best seen in a report introduced by the manufacturing committee in the Parliament that indicates that this phenomenon is wide-spread, and the indifference of the people in charge constitutes a major obstacle in the prosperity of investment. What has been dealt with so far is the economic effects of smuggling, the social effects of this phenomenon can be pointed out in the following:
1- Reports indicate that 50-70% of sick people receiving treatment in Jordan are ill due to those smuggled drugs. Other reports show that 70-80% of common diseases in the country are caused by those smuggled diseases.
2- The closure of 27 factories and the horrible conditions of other ones that are in their way to be closed, will increase the burden of unemployment on our society and worsen the conditions of the sacked employees.
3- Seeing such conditions, so many investors tend to ignore and shun Yemen and look for other countries where they can safely invest their money. This makes the social problem more difficult and complicated.
In my point of view, if we want to put an end to smuggling, there should be sincere efforts to eradicate this phenomenon. In case the government is not able to do so, there is no need to put such high taxation on local products. This will be very beneficial in protecting our businessmen, our products, and the economic situation of the country as a whole.
Dr. Mohammed Abdu Al-Rasheed Ali
Aden University