Thursday 27th of February 2020 |
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Pundits weigh in on repercussions of smuggling


The Jordan Times


AMMAN — Several experts on Monday weighed in on the issue of smuggling, its causes, impact and measures to combat the phenomenon in light of recent incidents. 
Many countries worldwide suffer from smuggling, as in 2015 alone the global financial damage from smuggling stood at around $45 billion, which could have served as revenues, economist Husam Ayesh told The Jordan Times over the phone on Monday.
"The local estimated loss incurred from smuggling is JD300 million in general, excluding cigarette smuggling, but, as Jordan's foreign trade of imports and exports is between JD20 billion and JD21 billion, and if 5 per cent of this trade involves smuggling, then we are talking about around JD1 billion worth of smuggled goods every year," he said.
The economist estimated the damage based on the percentage of smuggling; if smuggling is at 10 per cent then the loss amounts to JD2 billion, 5 per cent would make it JD1 billion and 2.5 per cent would incur a JD500 million damage.
Smuggling is one of the main factors that affect the economic process, also allowing entry of products to the market without inspection and set standards, according to Ayesh.
"Speaking about cigarette smuggling in particular, it is clear how good it is for smugglers when the taxes on cigarettes in Jordan reach 80 per cent while in other countries it can be 40 per cent or so, like in Lebanon," Ayesh said.
On borders there is usually cooperation between residents on either side, and that is tied to their livelihoods, he said.
He urged the government to consider projects that could help employ people who are engaged in smuggling and provide a livelihood for them, in addition to raising awareness about the ill effects of smuggling on society.
"A lot of the smuggled material violates safety standards.  Smuggling pushes investments away due to the unjust competition between legal products and contraband," he said.
Parallel markets comprise 20-25 per cent of the total gross domestic product (GDP), Ayesh said, adding that the market brings in JD7 to JD8 billion, thus clearly requiring the legal parts of it to be integrated into the official and legal economy, while combating the illegal types.
For his part, economist Mazen Marji said that the cause of smuggling usually lies in the fact that there is a big difference between costs of products that enter the Kingdom legally and those of contraband.
Economic reasons are the main factors behind smuggling, as people find smuggled products cheaper, especially when they are in demand, regardless of whether they are smuggled from nearby or faraway countries, Marji said.
Putting the factors together: A difference in price, demand and the intent to avoid legal commitments create a conducive environment for smuggling. 
Economist Wajdi Makhamreh said that smuggling costs $1 billion a year, according to various estimations, "and it is well known that there are well-connected people, commonly known as ‘whales of the market’, who must be dealt with and held accountable for the damage they cause to the economy".
Their actions cause a drop in revenues, increasing the deficit and thus its ability to stand on its feet, which requires an effective solution to curb the phenomenon, he noted.

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