Contraband depriving Lebanon of badly needed revenues

Large quantities of gasoline are smuggled through Baalbek-Hermel, a border area that is largely controlled by Hezbollah.
Sunday 16/09/2018
A farmer holds tobacco leaves in Aitaroun in southern Lebanon. (Reuters)
Fragile balance. A farmer holds tobacco leaves in Aitaroun in southern Lebanon. (Reuters)

BEIRUT - Illicit trade through porous borders with Syria costs the Lebanese treasury tens of millions of dollars in lost tax and tariff revenues every year while Lebanon’s public and foreign debt keep accumulating.

The effect of contraband is felt in many sectors, from the tobacco industry to agriculture and pharmaceuticals.

Tobacco and cigarettes are smuggled into Lebanon by air, sea and land through the border with Syria, said Mohammed Daher, anti-smuggling chief at the Regie Libanaise des Tabacs et Tombacs.

“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,” Daher said.

“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).”

Proceeds from the Regie, the state-owned tobacco monopoly, total up to 12% of the state revenues, Daher said. “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.

Last year, the Regie adopted procedures to combat smuggling. The measures mainly involved improving local industry and producing cigarettes that compete in quality with international offerings and signing agreements to produce international brands locally.

Tobacco is the fifth most important source of state revenues estimated at more than $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,” Naouss said.

Tobacco planting in Lebanon is a vital part of the agricultural economy and creates jobs in farming, fabrication and trading. The industry employs tens of thousands of people and has traditionally suffered from underinvestment and support. The jobs are also often in poorer areas of Lebanon.

“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,” Naouss said.

He maintained that Lebanon’s porous borders and the deteriorating economic conditions in the country caused an unprecedented increase in smuggling tobacco and other goods.

“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,” Naouss said.

While tobacco contraband has been increasing, smuggling of pharmaceuticals has been largely contained after several medicines and their generics were reduced by up to 70% three years ago, pharmacist Samar Baltagi said.

“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,” Baltagi said.

“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),” she said.

Medicines from Syria are rarely smuggled because they are of poor quality even though much cheaper. “The Ministry of Health is very strict in that regard. They have shut down pharmacies and retrieved the licences of wrongdoers,” Baltagi added.

Smuggling agricultural products and low-quality gasoline from Syria is also hitting state revenues. Large quantities of gasoline are smuggled through Baalbek-Hermel, a border area that is largely controlled by Hezbollah.

“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,” Tohme said.

He complained about the increasing smuggling of agricultural commodities from Syria that are flooding the market and bringing down prices. “Lebanese farmers are losing money. They cannot compete with Syrian produce because production cost in Lebanon is much higher than in Syria,” Tohme said.

“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,” Tohme added.