Acknowledgement

We are thankful to our honorable teacher Professor Ikram-Ullah-Toor Sb. that he has given us a wide topic BARA MARKETS and its impacts on our economy. Due to his guidance we have been able to work and to insert our inputs towards the completion of these project successfully .The efforts we made in the preparation of this project will be helpful in our student life and also in our future professional career. In order to learn more and more; we had put a lot of our efforts towards the completion of this project.

BARA-MARKET An Introduction:
Bara-Market is market where goods or products are purchased and sold for lesser price levels as compared to other local and general markets. The reason for this less price is that most portions of Bara market products consist of smuggled items, which come from other countries through illegal ways and means, thats why we can say that the Bara market is the other name of smuggled good markets. These markets start as small markets in streets and then convert as established and big markets in the city, Raja bazaar and Liaqat road Bara markets are the examples of it.

How bara markets flourished:

Smuggled goods were confined to Landi Kotal, Quetta and 'bara' markets up to the late 1960's. Later, these goods began to be sold in main shopping centres of Islamabad, Rawalpindi, Lahore, Karachi and other cities with the result that smuggled cloth and electronics goods are now abundantly available. In addition, with the construction of Karakoram highway towards the late 1970's the market with China has been opened and smuggled goods mainly fabrics, crockery and thermos began appearing at Gilgit and brought to Rawalpindi for onward sale in other cities. Smuggling is not limited to fabrics, electronics or crockery; it encompasses almost all items such as tyres, tubes, automobile spare parts cosmetics, cheese, blanket, ready-made garments, tea, colour film, paper and allied materials and even cattle. Smuggled goods are now readily available on the streets. One can see imported goods now being sold from the trunks of cars stationed all over Karachi. Such large scale smuggling has had a very negative impact on local industries. It is quite common that local industrialists raise hue and cry against

smuggled goods. The local industries are asking for tax concessions to compete with smuggled goods. The bara market products (smuggled goods) are not included in the National Income and GDP of a country. They are not tax paid goods also. So a country suffers a lot from such practices of bara market. If we look economy of Pakistan, we will come to know that the concept of bara markets have been practiced in many big cities of country. Some important and big cities of Pakistan where bara markets exist are as follows:

Etc On the other side Bara markets have some advantages also, especially in a country like Pakistan, where the per capita income of people is low. So they (people) of low and middle income some times prefer to go to bara markets for purchasing different goods. The main and major products which may be found in these bara markets consist of:

 Rawalpindi (Raja bazaar, Pir-Wadhi)  Islamabad  Lahore  Peshawar  Quetta  Mardan

 Food items i.e.

Tea Juices Biscuits Cold Drinks Cigarettes Sweets

 Textile products  Crockery items  Cosmetics i.e.

Perfumes Lipsticks Other hair and facial beauty products

 Medicines  Drugs  Explosive material  Alcohol  Shoes  Mobiles  Explosive bombs  Vehicles i.e.
Their parts Tyres  Smoking items i.e. Cigarettes Heroine Injections etc

Effects of Bara-Markets on Economy

Bara-Market severely harms the economy of a country in multidimensional ways. It undermines the local industry, discourages legal imports and reduces the volume of revenues collected from duties and levies by the state. Unfortunately a parallel underground economy has taken roots in Pakistan. A major proportion of the revenue to be collected by the Government is being lost, over and above the adverse impact that the smuggled items cause to our industry. Obviously this can not be done without connivance of the corrupt officials including those in the law enforcement agencies and every one is aware of it but no action is being taken. Markets and Shops across the country are flooded with smuggled goods of any and all descriptions. Smuggled items through the borders of Iran, Afghanistan, China, and the Afghan Transit Trade form a major part of the informal economy volume of which ranges between 50 to 60 per cent of the formal economy. In Bara-Market, smuggling has assumed an alarming proportion and turned out to be a parallel economy, which is depriving the country of its rightful levies including excise and customs duty worth hundreds of billions of Rupees.

(Graph shows that how Bara-Markets and smuggled products affect GDP growth of an economyPakistan has the lowest GDP growth rate as compared to other countries shown in the graph) It has been said that: Smuggling has become a routine part of all economic activities in Pakistan

Chinese products replaced Bara Markets:

Now a days Chinese products are replacing the Bara markets of our economy. Many Chinese products have been introduced and are available for sale with Bara markets. The quality of these China made products is better as compared to Bara Markets products. So the introduction of Chinese products is a positive indicator for the growth and development of our economy. This will also discourage the persons who bring the smuggled products in Bara markets. The reason of flourishing China products and markets is that cost of production, labor and other costs are quite LOW in China as compared to Pakistan. Thats why the prices of China made goods are low as compared to Pakistan. And this is also

the reason why Chinese products are replacing Bara markets of our economy continuously.

Loss to Industries:
Due to above mentioned facts, thousands of industrial units have been rendered sick, due to the availability of smuggled goods in open markets. Afghan Transit Trade is the main source of such illegal products into Pakistan and its annual volume has been estimated about five to six billion dollars, about 70% of the total smuggling causing a revenue loss of about 2.5 to 3 billion dollars annually (which has been almost tripled during 2008-2010) to the national exchequer. Afghan imports under Afghan Transit Trade are actually arranged for back smuggling into Pakistan with the help of Afghan traders.

(News of Daily Jang to stop smuggling between Pakistan & India)

It is not possible to determine the precise amount of revenue loss and size of black money or shifting of money abroad. Revenue loss on account of smuggling of Afghan transit trade alone, as estimated by the World Bank, amounted to US$ 35 billion during nine years from 2001 to 2009. Bara-Market has now become the place of a routine part of all economic activities places in Pakistan which hardly raises any eye brows nor stirs the slightest fear of the law. Pakistan is facing the challenge of measuring and countering enormous revenue leakages and black money its size estimated to be three time the regular economy. People are bringing in Pakistan petroleum products from Iran which is cheaper than in Pakistan. The volume of this trade is estimated to about rupees two billions. Even improvised explosive devices are being smuggled via Afghanistan are contributing to a climate of fear. Smuggled materials help militants prepare suicide jackets, explosive-laden vehicles and other sorts of explosive bombs. Involvement of Pakistan customs officials in this unethical process cannot be ruled out. With their connivance the containers registered in the name of NATO containing alcohol, expensive spices and other contraband items are also offloaded in Pakistan. Another gateway for Bara-Market i.e. Afghan Transit Trade through Wahga Border has been opened by the present regime which would result in a big chunk of Indian goods destined for Afghanistan would ultimately land in our domestic market, which would damage the national economy of Pakistan which is already dwindling because of the impact of the war on terror and Afghan transit trade.

To curtail the existing high volume of Bara-Market through Afghan Transit Trade Pakistan needs to revise the transit agreement. Both the countries should also reach on a uniform taxation mechanism on imports. Anti-Bara-Market and anticorruption laws need to be strengthened and their implementation in letter and spirit through a dedicated staff should be ensured. Pakistani policy-makers must realize that a sound development strategy seeks to reduce the size of the informal economy and bring into the open resources that lie in the form of black money. FBR should remove distortions from the economy, bring all the sectors and taxpayers in the tax net, curtail Bara-Market, curb parallel economy, and take all the stakeholders into confidence and make it business friendly.

(Smuggled perfumes, used to sale in Bara-Markets) At the same time, it should rationalize the taxation system to attract the influential industrialists to pay taxes. Measures should also be taken to discourage underinvoicing and proper documentation of economy should take place to bring the informal economy under the tax net. According to an estimate, presently tax evaders in Pakistan annually deprive the country of revenue of over US $20 billion in aggregate but the government, instead of putting them behind bars, encourages their unlawful activities. A good thing in fresh legislation of Switzerland is that now burden of proving that

the money came from legal sources would lie with the allegedly corrupt official, rather than the Swiss state. If the official could not prove a legitimate origin of his or her Swiss assets, they would be confiscated by the Swiss state. The Government should take immediate steps to retrieve this black money which will surely discourage the smuggling and Bara-Market tendency also.

Afghan transit tradeits implications on Bara Markets

Afghanistan is a landlocked country with a lot of mountains and it produces little food or other goods for domestic use. The post-Soviet military operation period has been characterized by civil war shattering the economy further. Karachi is the nearest port which has been used as transit facility for goods imported or exported from Afghanistan. As a result, Afghanistan has been dependent upon Pakistan for the transshipment of goods since long. Prior to the demise of USSR, to the north of Afghanistan lay the Soviet Union whose goods were brought to Afghanistan for smuggling to Pakistan which shares around 1000 miles of porous border.

(Adopting measures to curb smuggling under Pak-Afghan trade pact)

Since Afghanistan had little industrial activities, the pursuit of its people mostly has been smuggling and sale of smuggled goods across the border. As a result, 'bara' markets were established in adjoining areas of Pakistan such as Landi Kotal and Chaman as far back as 1960s or even 1950s, The 'bara' markets later sprang in Peshawar, Karachi, Quetta, Rawalpindi and other cities which has been a source of anxiety for the government because of loss of customs revenues and for industrialists on account of keen competition from smuggled goods. According to Dr. Mahbubul Haq, a former. Finance Minister, the size of black economy including smuggling, drug trafficking, tax evasion and corruption is as high as Rs. 700 billion, or about half of the official GNP (A National Agenda, Critical Choices for Pakistan's Future, p.5). The Finance Minister in his current year's budget

speech pointed out that since the beginning of 1980s, smuggling grew "not only in size and proportion but also in terms of number of items and their scale. It is now one of the most organized features of illiciat trade backed by financiers operating from all parts of the country. Some careful calculations estimate the quantum of such smuggling and leakages at not less than Rs.50 billion. The effect of this phenomenon has been disastrous.......... Accordingly, the import duties on different goods were slashed.

Problems with transit trade:

The problem with transit trade is that goods imported by Afghanistan find the outlet to Pakistan causing incalculable damage to government revenues and local industries. The current Afghan Transit Trade Agreement (ATTA) initiated in 1965 expires in September next. The present budget envisaged total revenue Collection of Rs. 259 billion which consisted of Rs. 60.8 billion of direct taxes, Rs. 91.0 billion of customs, Rs. 58.4 billion of sales tax and Rs. 48.8 billion of central excise. Collection of total taxes over the first six months (July-December 1994) amounted to Rs. 95 billion (or 36.9 per cent) with direct taxes at Rs. 24 billion (or 39.4 per cent), customs at Rs 33 billion (or 37.3 percent), sales tax at Rs. 19 billion (or 31.9 percent) and central excise at Rs. 19 billion (or 39 percent). Alarmed by huge shortfall, the government undertook measures which inter alia included reshuffling of Central Board of Revenue and review of ATTA. In the first week of February in a major crackdown, the government suspended clearance of all goods imported under ATTA. The action, resulting in huge piling of goods in KPT sheds, has been taken following reports by Customs Intelligence that fake letters of credit are being used as instruments for imports. The government has also directed to seize all goods loaded onto railway wagons and trucks en route to Peshawar along the National Highway. The goods seized included, among other things, about 25,000 TV sets and 19,000 air conditioners beside millions of metres of cloth and a large number of electronics. The axe fell on ATTA following reports that some of the importers using Afghan Transit Trade facility are Pakistani nationals living in the tribal areas that transfer money out of the country through non-banking channels and import goods duty free under the garb of Afghan Transit Trade.

(Wrist Watches in Bara-Markets) The crackdown most severe since the transit trade began to be closely monitored to plug the loophole reflected the CBR's concern over the fact that the value of such trade has quadrupled to about Rs. 11 billion last year as compared to about Rs. 3 billion in the previous year. The government has advised all importers of Afghan transit goods to produce certificates from foreign beneficiary banks confirming the letters of credit opened for imports. From February 8, no goods were to be cleared under the Afghan Transit Trade unless the importers produce letters of credit confirmation certificates from foreign beneficiary banks. By mid-February, Advisor to Prime Minister on Finance and Economic Affairs, Mr. V.A. Jafarey pointed out that there will not be total ban on transit trade but fifteen terms were prohibited which constituted about 80 percent of imports under Afghan transit trade. The banned items are air conditioners, art silk fabrics, auto parts (all sorts), ball bearings, refrigerators, soap and shampoo, television sets and parts thereof, timers and capacitors, black tea, cigarettes, metalised films, poly vinyl chloride, plastic moulding compound, tyres and tubes and yarn (all sorts). The import of cigarette, tyre and tube was banned as far back as June 1992 following complaint of rampant smuggling of these items into Pakistan.

After Pakistan's ban on tea trade through Afghan Transit Trade, the smugglers have now shifted their operation to the Iran border and according to one estimate around 1,000 tonnes of Kenya black tea has been shipped to Afghanistan through Bander Abbas (Iran) under Iran - Afghanistan Transit Facility. It is feared that the tea stock will eventually be smuggled into Pakistani markets as black tea has no demand in Afghanistan. According to Pakistan Tea Association, the national exchequer suffered a loss of Rs. 1 billion in 1994 when about 30,000 tonnes of tea valued at $60 million was clandestinely imported into Pakistan. Legal import of tea has been declining because of smuggling. In 1993, it was around 121 million kgs compared to 100 million kgs. In 1994 while according to annual consumption, it should have been 130 million kgs. With the block of Afghan Transit Trade through NWFP areas, smugglers have found a new route using Pak-Iran-Afghan borders for smuggling of tea via Mombasa - Dubai - Islamqila. It may be mentioned here that smuggled tea through various channels has nearly eaten up 60 per cent market of local importers. According to a local importer, unless prompt remedial action was taken by the government in this regard, the decision to ban black tea imports would be negated and become irrelevant.

The menace of smuggling:

Smuggling harms a national economy, any national economy, in many ways. It undermines the local industry, discourages legal imports and reduces the volume of revenues collected from duties and levies at the import stage and taxes collected at the retail stage. Smuggled goods are not only easily available but are also appreciated by the bulk of buyers who prefer anything which is foreign. The situation has become so bad that smuggled products such as many premium varieties of cigarettes which are either locally produced or being legally imported have to face a stiff competition from their smuggled counterparts. While the menace of smuggling has left hardly any sector untouched in Pakistan there are certain items which are more smuggling-prone than the others. Electronics items such as television, VCR, VCP, hi-fis; household items such as blenders, mixers, juicers, radio cassette players, air conditioners, refrigerators, irons; garments, cloth and a wide range of toileteries, perfumes, and cosmetics are some of the high smuggling-prone items. One can easily buy a range of known smuggled cigarettes, perfumes, electrical and electronic items, and even shoe polish.

In short, smuggling has become a routine part of all economic activities in Pakistan which hardly raises any eye brows nor stirs the slightest fear of the law. Instead, a smuggled good is proudly flaunted. The immediate-past chairman of SITE, the biggest industrial area of Pakistan, has lamented to PAGE that "Our markets have become the warehouses of foreign goods as our national psyche prefers all goods of foreign." Following is the detail of some products which are being sold in bara markets after smuggling:

Tea:
According to Hanif Janoo, the chairman of Pakistan Tea Association, about 20 per cent or 25 million kilogram of the total annual tea demand of 135 million kilogram is met by the smuggled tea. Importers blame the high duty 25 per cent which along with sales and other taxes adds up to 58 per cent, as the primary cause of huge tea smuggling. While the import duty on tea has been gradually reduced during last few years many feel it is still on the high side to provide smugglers with the required incentive to keep pushing tea into the country.

Automobiles:
Even the automobiles are not left untouched by the smuggling regime in Pakistan. According to an official estimate over 25,000 smuggled vehicles, a majority of them high-priced station wagons and four-wheel drives are present in the country most of which are not registered. Last week the Central Board of Revenue, the apex tax collecting agency, extended the deadline for the legalisation of non-duty paid smuggled vehicles by January 31 next year. The owners are asked to legalise such vehicles by paying the assessed duty and taxes without imposition of any fine. According to CBR some 3,500 smuggled cars/jeeps were legalised in May/June last year while another 4,000 heavy transport vehicles were legalised during the amnesty campaign till a few months ago.

(A view of smuggled automobile)

Tyres:
Tyres, particularly the truck and bus variety, have also being smuggled into our country. According to Muhammad Aslam, a Karachi based tyre importer, some 770,000 truck and bus tyres are being smuggled into Pakistan annually which cause a revenue loss to the government of a huge Rs 2.1 billion. To highlight how badly the menace of smuggling is underminging the national economy, PAGE talked to Muhammad Aslam on the impact of huge revenue loss

of Rs 2.1 billion from the smuggling of truck and bus tyres into the country. Putting the truck and bus population in Pakistan at 161,000, Aslam said that it comprises 97,500 trucks, 58,500 buses and 5,100 oil trucks.

Tyre Smuggling, Chaman, Pak-Afghan border, Pakistan

Smuggling of tires from Afghanistan into Pakistan via Friendship gate at Chaman is one of the most lucrative businesses in that region, apart from smuggling of narcotics and weapons. In fact, tire smuggling has lately into an art form, where over-loading is the order of the day and a lump sum amount allows driver to take as many as he can. This driver is a good example of that.

(Tyre smuggling, at Chaman, Pak-Afghan border) Buses are fitted with seven tyres, trucks with 7,10 and 22 tyres depending upon the make and model. As the estimated life of the tyre of these commercial vehicles is between six to nine months under normal operating conditions and based on the usage ratio of seven tyre per vehicle, the annual demand of truck and bus tyres in Pakistan comes to around 1,058,000 annually. Local production and imports are only able to meet 19 per cent or 200,000 units and 8.2 per cent or 88,000 units respectively of the total annual demand of 1,058,000 truck and bus tyres. On the other hand, over 72 per cent of the local annual demand for 770,000 tyres are met by the smuggled tyres.

Of these 770,000 bus and truck tyres 39 per cent or 300,000 are of Indian and Japanese origin each while the rest of the 22 per cent or 170,000 tyres are from the other origins. Aslam said that massive smuggling of truck and bus tyre, an obviously big item, is not possible without the connivance of various government agencies which have a cut of the illegal but profitable trade. Putting the expenses at Rs 750 per tyre Rs 250 from border to the Quetta city in the Balochistan province or to Peshawar or Miran Shah in the North West Frontier province, the two major routes, and Rs 500 from wholesale to the retail markets in various cities, he said that each retail shop pays anywhere from Rs 3,000 to Rs 6,000 per month to various agencies as protection money. The unholy alliance between hundreds of truck and bus tyre retail outlets and the various agencies adds up to a huge Rs 600 million at the expense of the exchequers. Aslam put the net annual revenue loss at Rs 2.1 billion from this singular smuggling activity per year.

Suggestions/ Recommendations Bara-Markets:

The bad impact of Bara-Markets and smuggling can bi stopped by devising and adopting strong and economic beneficial policies and laws so that the illegal trade of tobacco, cosmetics, crockery, textile products, vehicles and other electronics and food items can be avoided: Here are some of the important steps and recommendations, which if taken wisely at right time, can stop the hazards of smuggling and BARA MARKETS from the economy:

 Raise public awareness of the negative aspects of smuggling  Increasing penalties: cigarette smugglers continue because

the benefits

outweigh the risks.  There should be strict check and balance of Bara Markets from time to time to ensure that no illegal and unlawful means of trade or import from other countries is in progress.  Place tax-paid markings on tobacco products: these clearly distinguish between legal and illegal goods, making contraband products easier to detect and trace, and the law easier to enforce.  Eliminate duty-free sales, which often serve as a major source of smuggled cigarettes.

Special steps for Tobacco:

 Each delivery of goods from out side the country would be regulated and all

wholesalers would have to obtain country import permits.  All tobacco products would be accounted for prior to delivery from the wholesaler and all trucks carrying such product had to report to a central control facility prior to delivery.  A Nation surcharge would be levied on the tobacco product with the resulting funds used for communal projects.  All retailers would be licensed by the government of Pakistan and subject to periodic inspection. No tobacco product could be sold without government stamp.  Cigarette smuggling can be reduced, but action is needed at the national, regional and global level. Effective international action should be facilitated by the inclusion of a specific protocol on smuggling in the proposed WHO Framework Convention on Tobacco Control.

Conclusion:
The concept of Bara Markets has been flourishing and expanding in Pakistan day by day. There are different cities where such markets exist like Rawalpindi, Lahore, Karachi, Peshawar, Quetta, Mardan and many more. The advantage of Bara-Markets is that low income people can do shopping from these markets at cheaper rates as compared to other markets; BUT its hazards are greater and more dangerous for the economy. Most portion of Bara market products include of smuggled goods. Income from such illegal means is NOT included in the GDP of country also. It also puts bad effects and signals on other manufacturers and producers of country. These hazards can be avoided and stopped by having check and balance on all imports, spreading awareness campaigns and devising economic friendly policies which are in the best interest in the progress and development of our economy and country.

References:
We have consulted various journals and websites to collect data for the completion of our project. Some important ones are as follows:

 http://indiancountrynews.net/index.php?option=com_content&task=view&i
d=2193&Itemid=56

 http://findarticles.com/p/articles/mi_hb092/is_n8_v29/ai_n28711477/  http://www.pakistaneconomist.com/issue1999/issue51/cover.htm  http://findarticles.com/p/articles/mi_hb092/is_4_31/ai_n28820246/  http://www.globalink.org/en/smuggling.shtml  http://www.dailytimes.com.pk/default.asp?page=2007\09\20\story_20-92007_pg11_11  http://criticalppp.com/archives/28602

International Islamic University, Islamabad