Khalil during the inauguration of the national conference of combating illicit trade: Cedar without reforms to increase the debt burden

27 March 2018
Seklaoui: tobacco smuggling rates increased in Lebanon from 6.1% to 30.1% during 2017

Khalil during the inauguration of the national conference of combating illicit trade: Cedar without reforms to increase the debt burden

Khalil: Troubled financial situation to require control over smuggling and corruption so that the economy and public finances can stand

Khalil: The 2018 budget is balanced and its reform measures are necessary but not sufficient

Khalil: Budget adoption to restore the regularity of public finances; a positive message for home and abroad

Seklaoui: The Regie’s sales fell from $ 1 billion in 2012 to $ 564 million in 2017

Seklaoui: 300 billion LBP in loss annually due to smuggling and illicit trade 
On Wednesday, during the opening ceremony of the first national conference of combating illicit trade, which was organized by the Regie at the Seaside Front Complex in Beirut, the Minister of Finance, Ali Hassan Khalil stressed that “the critical financial situation requires the control of illicit trade, smuggling, and administrative and financial corruption in order to correct the economy and public finance”. “The adoption of 2018 annual budget will restore public finances; a positive message to all people at home and abroad that the government is financially stable”. Describing it as a “balanced budget”, he considered that its reform is “necessary but not sufficient”. Still, he hoped that “in the coming years it will become an action plan of the coming governments.” He expressed his hope that the Cedar conference in Paris would be a transition station “towards a better reality”, warning that failure to cope with reforms would increase “the burdens of public debt.”
The first national conference to combating illicit trade, entitled “Your economy you protect it”, brought together about 600 participants, including international experts and Arab delegations, as well as general managers and ministerial and security officials, and representatives of legislative and judicial bureaus, unions, and private sector.

In his speech, Khalil praised tobacco plant that generously and unconditionally gives not only farmers but also managing administration, the government, and then the citizens; a cycle of loyalty availed by tobacco. “We came from the land of tobacco whose smell was kneaded with the soil, thanks to the worker's hand and blood scattered among the seedlings in defense of his land and family”, he said.
He praised “the generosity of the Regie’s Chairman and employees that extend parallel to the generosity of the land and people toward the State.” He noted that the Regie “maintain the farmers' relationship with their State by supporting local production and thus providing them with a decent income”.
He described the question of illicit trade as “extremely important and influential to producer as well as consumer, worker and employer, and the entire State.” He stressed the need to “clean the Lebanese economy of this harmful activity so that we protect it ourselves.”
He added: “Illicit trade has inflicted huge losses on the world economies and has left serious social, health, psychological, and environmental impacts. Over time, it affects sectors that have not been yet, which increases merchants’ access to illegal markets.” Unfortunately, counterfeit attacks healthcare sector and thus, instead of curing, medicine become a murderer that kills hopes and people as well. What end humanity would reach if this trade prevails without the ability to control it?”
Khalil stressed that: “the canals of illicit trade had increasingly attracted organized drug dealers and human organ traffickers and affected human cultural heritage that includes the identity and the origins of communities”. “These activities are not limited to this extend since it affects weapon trafficking; imposing a catastrophic result in case mass destruction weapons were smuggled. As well, illicit trade affects not only animals, some of whose species are endangered, but also money laundry, funding terrorism, and prostitution networks. In fact, illegal migration led to some shameful activities of human trafficking that had been active back in the time.
He pointed out that “the threat posed by illicit trade has recently expanded to hundreds of millions of people; a deadly activity that affects healthcare, weapons, and the quality of food products”. “The danger of this trade to people's lives is greater than most of the wars if the criterion of risk is adopted,” he said.
He said that illicit trade “also affects people’s chances to work, increases the level of unemployment, and limits access to social security for workers who do not have the right to claim their rights from the employer in case of illegal jobs. It raises criminal activities and implicates all parties.”
He noted that “illicit trade is a real sabotaging activity that leads to a decline in the tax revenues and finances, which negatively affects social security benefits. Profit made through this trade is a reflection of personal greed”. He stressed that “the legitimate economy is the only to protect all parties; from employer to worker and from producer to distributor and end consumer.”
He highlighted the importance of “keeping abreast of fighting illicit trade by developing efforts at all levels. At the electronic level we should adopt electronic data, in order to fully integrate the customs information to which the Ministry of Finance allocates utmost importance through a series of measures to control smuggling. Of a great account are international cooperation agreements that may strengthen control measures and enhance customs, as well as the involvement of citizens in supporting these efforts. Their duty is not to purchase smuggled products and to report such activity.
Khalil considered that “the impact of smuggling, illegal trade, tax evasion, and corruption is one of the biggest challenges facing the Lebanese economy in order to restore public finances. The objective is to fill the gap of tax revenues, which is achieved through responsible and advance control of smuggling and tax evasion.”
He said: “We face a critical financial situation that requires the government to reconsider legislative and executive authorities and to set mechanisms of controlling illicit trade, smuggling, and administrative and financial corruption.”
He added: "In this context, we witness a reaffirmation of public finances through the adoption of the 2018 budget; a positive message to all people at home and abroad that financial situation is already regulated. We tried hardly to come up with a balanced budget that resets the deficit by reducing expenses, increasing imports and adopting a number of necessary though insufficient reforms that may evolve in the coming years into an action plan of the government".
He added: "in few days we head to Paris to attend the Cedar conference to support investments in Lebanon. We positively and responsibly consider this move toward a better reality, keeping in mind necessary reforms that limit the burdens of public debt". He continued: "This debt becomes a major onus that should be restructured and managed in a way that put public finances back on the right track."
He added: "the objective of this conference is an essential part of the reconstruction process that control smuggling and illicit trade. Thus would certainly provide the treasury with additional resources to relieve the deficit and increase the size of economic pie so that our public debt regains balance in proportion to gross domestic product."
Concluding, Khalil assured the: "Commitment as a ministry and a government, to concreting the recommendations in the forthcoming stage."

The Regie’s President and Director General Mr. Nassif Seklaoui said that the meeting of various administrations and sectors in this conference shows that "all national economic entities are threatened." He noted that “smuggling poses today a real threat to the stability of security and economy of different nations under the open borders, especially within our region". He considered smuggling as a “threat to Lebanese economy that needs protection more than any time”. "It is us that must protect our economy, and the onus is on us to eliminate all threats, notably illicit trade, to preserve the treasury’s resources and revenues, and to combine our efforts because the government has entitlement to its resources, and the country to its income and the Lebanese to every penny that smugglers, pirates, and counterfeiters take away".
He noted that "the scourge of smuggling is plaguing all sectors, not only tobacco sector. The private sector suffers, as does the public sector, while the industrial sector struggles the most". He stressed that the effort of any party "remains deficient unless it falls within a national and comprehensive vision, especially as the fight against tobacco smuggling is not unilateral. It intersects with the problem of smuggling in general, and therefore everyone is concerned and demanded to combat from his position and responsibility.”
"The smuggling of tobacco products is highly profitable and relatively safe for smugglers", he said. "Sanctions do not have real deterrent effect". "Studies have evidenced the relationship between tobacco smuggling and other crimes, such as the involvement of tobacco smugglers in illegal activities; e.g. product fraud, transport of goods, drug trafficking, acts of terrorism, money laundry, and human trafficking. It showed that they play an important role in facilitating the exchange and transfer of funds on behalf of organized crime groups".
"The rate of tobacco smuggling in Lebanon increased from 6.1% to 30.1% in 2017, and the Arab world is at the top of the list of victims of illicit trade and its repercussions. According to latest study, loses reached between 2003 and 2012 about $739 billion or about $ 75 billion annually". Seklaoui pointed that the Regie’s sales had fallen since 2012 "from $ 1 billion in 2012 to $ 564 million in 2017".
He reminded that "the Regie provides the fifth source of support for the national treasury", warning that "the damage caused to the tobacco sector by smuggling will inevitably be reflected in the government’s revenues." He pointed out that "what the national economy loses annually because of the smuggling and illicit trade in tobacco sector only, currently stands at 300 billion LBP and the actual loss is much higher than what figures show. Thus applies of course to all sectors, while losses are on the rise. In addition, smuggling deprives the treasury of presumed revenues because of the inability to raise prices in line with global tobacco prices. Any increase in prices will be a motive to increase smuggling".
He pointed out that the Regie was able in 2016, with the support of the Minister of Finance Ali Hassan Khalil and the available resources, to achieve some success in combating this dangerous phenomenon. He valued as well, the minister’s adoption of the Regie’s proposals in this regard, among which “the brave decision to compel importing companies to pay the price of smuggled goods, customs duties, and profits lost by the treasury", " to strengthen the status of national industry "through" implementing a comprehensive plan for the development of national industry and producing brands that compete with smuggled products”, and “to sign agreements that allow the production of international brands at the Regie’s plants”. He also pointed to "prices stabilization at the marketplace, especially when raising the tax."
"In line with these efforts, in 2016, the Regie developed a sustainable development plan with the participation of all its stakeholders. Hence the need to combat illicit trade was at the top of its priorities," he said, hoping that the conference would contribute to "finding logical and practical solutions for all parties."
He pointed out that "the smuggling scourge is dangerous and its revenues are almost equivalent to that of the promised oil wealth and can be seized." Surprised by the "inability to control open crossings", he stressed that "the networks of forfeit are mostly known" and called to benefit from international experiences and come up with "an integrated approach to combat illicit trade and relieve all sectors."
Seklaoui continued: “it’s our responsibility to protect our economy… however one hand can’t clap, so let us put together recommendations that would set a clear and common plan to combat illicit trade and let our conference result in practical measures that protect our sectors and our State, treasury, and citizens."
Seklaoui proposed a number of recommendations, to be a five-year plan, among which "supporting the execution” of the conference’s “national strategies aiming to control illicit trade, strengthening the cooperation and coordination between security and judicial authorities, and establishing a joint committee with various agencies to enhance investigation and intelligence". As well, to cooperate with judiciary and legislative bodies in order to update the laws and legislations needed to combat smuggling. He also proposed "raising awareness of consumer through awareness campaigns and the dissemination of information about health, social, and economic risks associated with illicit tobacco trade", "establishing a common national database for the exchange of information through the adoption of modern technologies and the implementation of an advanced tracking and tracing system", and "seeking with neighboring countries to harmonize prices and taxation policies in order to control imbalances between the prices of tobacco products across borders, especially in light of the low prices of tobacco products in some neighboring countries compared to prices in Lebanon."
He hoped that the conference would be a "cornerstone for the launching of a comprehensive initiative by all concerned parties in the fight against smuggling" and that recommendations would be "a serious step towards setting a road map allowing all parties to tackle smuggling problems in Lebanon, each according to his position”.  He called to adopt the 28th of March of each year as a "National Day to Combat Illicit Trade".
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