Khalil from the Regie: More than 124 smuggling passages in Lebanon

18 June 2019
Khalil from the Regie: More than 124 smuggling passages in Lebanon
"The phenomenon threatens the country's economy" and it’s "one of the signs of its degradation"

Khalil from the Regie: More than 124 smuggling passages in Lebanon
Some are fostered and we cannot take real steps to control them

Seklaoui: Any raise in tobacco prices under the open smuggling passages would be a gift to smugglers

The current smuggling market in tobacco sector ranges between 30% and 35%, an estimated 250 thousand annual smuggled boxes
Tobacco industry losses from smuggling around $ 300 million
The Minister of Finance Ali Hassan Khalil said on Wednesday that there are "more than 124 smuggling passages in Lebanon," adding that the phenomenon of smuggling "threatens the country's economy and contributes to the deficit of public treasury and the decrease of imports," describing it as "one of the leading signs of the government’s degradation", complaining of the inability to take" real steps in seizing it". "We won’t be living in a real State while we tolerate and perhaps foster such violations," he said.
During the meeting that was held in the Regie’s Hadath Headquarter Khalil spoke about the illegal trade in the presence of Mr. Nassif Seklaoui, Director General of the Regie, and members of the Board of Directors; George Hobeika, Mazen Abboud, Dr. Essam Salman, and Financial Controller Carol Youssef, Director General of Customs Badri Daher, representatives of Army Chief General Joseph Aoun, Director General of General Security, Major General Abbas Ibrahim, Director General of Internal Security Forces Major General Imad Othman, and a number of officials at the Ministry of Finance.
In his speech, Khalil praised "the successful work of the Regie, its successful experiences, and its ability to pursue its responsibilities and proposals". "Today, we witness the Regie’s success in transforming the exceptional conference held around a year ago into an event generating serious decisions through follow-up and persistence."
Describing smuggling in general, Khalil said that "it is one of the major dilemmas that threaten the country’s economy”. "It is a real problem that has affected our economic, social, and financial life." He noted that "smuggling is one of the fundamental problems that contribute to the deficit of the treasury and the decrease of imports, which urges the government to review its budget for the current and upcoming years". He stressed that "customs and tax evasion are therefore one the factors that prevent the required balance".
He added: "according to official security services, there are more than 124 smuggling passages in Lebanon. Unfortunately, these are named after a certain product, a specific person, or a town". "We know that smuggling is not a national issue, rather a global one but the most dangerous type is that we witness; where it became clear still we cannot seize".
He said: "We do not deny our responsibility; it’s our duty to raise our voice in order to combat this ordeal." Some may take advantage of the situation, which will bring down the country. We have raised our voice and declared during the discussion of the public budget in the Cabinet, during the past days, and today in the Parliamentary Committee of Finance and Budget that this situation requires an integrated cooperation between relevant security and customs services". "We won’t be living in a real State while we tolerate and perhaps foster such violations," he said.
He pointed out that the issue of smuggling is "one of the issues that overshadows public debate about public budget" that shall be concluded "as soon as possible by the Committee on Finance and Budget before being adopted by the General Committee, which will enable the government to tackle budget related issues, such as the discussion of the economic plan that must be integrated with the budget to move on the economy, the investment, and to benefit from the Cedar Conference projects and other developmental projects financed by lenders or donors from friendly nations and organization dealing with Lebanon."
He noted that "the budget is being exploited on public level", emphasizing that "no one in the government nor at the level of political leaders intends to target any public sector”. He explained that "the debate today is around the ability of conducting public reforms at the financial, economic, and social levels related to the budget, which may require changing some situations that can damage public money, and the state’s and individuals’ interests”.
He added: "Much has been said about targeting military and security institutions but I ensure once more that we aim to preserve the rights of military, security, and administrative bodies. The important is to ensure the services that such institutions provide". However, we shall overcome the gaps in the system in order to upgrade the State while achieving serious and real reforms."
Noting that "some may refuse the course of the debate," he warned that "it is very dangerous to undermine what the budget can achieve, hence the need to create a supporting public opinion that encourage international organizations reporting on the situation of public reforms and budget because risks are able to harm our stability". "We are all on the same boat; whether public or private sector, employees or retirees. Therefore, all components of the country will have to face negative results of whatever negative evaluation from the media and public opinion".
Khalil reassured his trust “in the Regie and developmental projects that it carries”, reminding that "the true understanding of the Regie’s role should be based on the social, economic and national dimensions that encourage people to stay in their land without burdening public treasury through production and savings". "I am also determined to reduce negative effects of tobacco products through regional developmental projects and by supporting the concept of sustainable development that tackle people's lives”. He considered that there should be "a deep appreciation and understanding of a comprehensive approach toward these issues of economic and social dimensions by a governmental body". "This is a success for the Regie, encouraging us to focus more on results rather than on harming the picture on the sector," he said.
He praised "the mentality of partnership in dealing with this sector, including smuggling, among various official bodies in cooperation with private sector." "We believe that the country's ability to continue requires such close cooperation between public and private sectors in all economic and financial areas and in a way that protects the State and the stability provided by this sector on the level of employment, production, and public treasury." I hope that this course will be pursued at the level of combating smuggling, adopting the highest standards of governance, and following up the work of the public sector in order to build a state where citizens feel their citizenship on all levels. He concluded by saying: "Thus we can talk about the resurrection of a country, while staying isolated on sectarian and regional levels may take away our ability to survive with our great country Lebanon and its values."
Seklaoui welcomed Khalil, "who follows with attention the plans and projects of the Regie despite the pressing currents events." He said that the Regie would not have been able to achieve what it had achieved "without this support."
Seklaoui devoted the first part of his speech to "correct some of what was stated in the study of the American University and in the statements of some officials." As for the study of the American University, which suggests raising tobacco prices and thus raising revenues and reducing health bills, he said that "this equation is true, in one case, which is when citizens have no choice but legitimate goods. However, when all kinds of tobacco are being smuggled into the market, the study becomes surreal and far from reality. " He explained that "any tentative to raise prices in light of the current economic situation of open passages will lead the citizen toward cheaper alternatives, which will not drop the numbers of smokers and will not increase revenues, rather will offer a free gift to smugglers."
Seklaoui criticized the press conference that was held by one of the “respectful MPs” few days ago, in which he talked about “havens of corruption”, naming the Regie as one of them. "We are surprised at the false accusations against a sector that is productive on economic, social, and cultural levels, and at the exposure of a pioneer institution on the field of development", said Seklaoui. We are surprised by the targeting of an institution that adopts accountability, legal auditing, and preliminary then subsequent supervision by an external auditing firm nominated by the Ministry of Finance to which it sends its budget annually before the deadlines in September in order to be studied, then another budget in March, duly transferring the profits to the state treasury."
As for the MP's proposal to increase the price of tobacco by 1,000 L.L., Seklaoui asked: "Is the goal to collapse the Regie? as happened in 1999 following the increasing of customs duties, when we felt under a financial deficit for years as a result of this decision and the treasury’s profits reached two billion dollars? The MP is well aware of that. "
As for the Regie’s contributions to the municipalities, Seklaoui said in reply to the same MP that "the legislative and advisory body in the Ministry of Justice decided in 2015 the Regie’s eligibility in offering grants", noting that "the Regie may upon the approval of the Minister of Finance and the proposal of the Government Commissioner provide grants to public departments".
Seklaoui answered the MP's statement that the mission of the Regie is to sell tobacco and provide money to the state, saying: "the mission of this institution should not be delimited to this. The Regie goes beyond financial and economic support to ensure social stability of tobacco farmers in rural areas, by providing them stability in their land and improving working conditions. So it is the core of our duties to take the initiative through the municipalities to complete agricultural road or water collection ponds and to provide pesticide and other equipment to support farmers ... So far, the Regie’s projects covered more than 200 towns in the north, south and Bekaa, without exceeding the 6 per thousand of net Treasury revenues from tobacco sector."
"The concept of a modern management and corporate social responsibility is based on interaction with local communities, especially rural ones," he said. He added: "It is an asset to establish a sustainable development department within our structure because we consider these activities to be the core of our work."
Seklaoui spoke about smuggling and said that "today, the Regie that is the fifth source of support for the state treasury, is under a real threat of smuggling". "The numbers ... are a proof that the damage is serious." "The current smuggling market in the tobacco sector ranges between 30 % and 35 %, an estimated 250,000 smuggled boxes per year, and if prices are to be raised as suggests the study of the American University, smuggling rate could be doubled," he said.
"The direct loss is now estimated at 100 million dollars, while the actual loss is estimated at 300 million dollars because smuggling deprives the state of supposed profits when prices of tobacco products cannot be raised."
He added: "Last year, we sound the alarm at the first conference of combatting illegal trade under the auspices of Minister Khalil, which brought together more than 600 participants from more than 20 Arab and foreign countries. During the conference the Minister stressed that financial situation was critical, requiring controlling illegal trade and financial and administrative corruption, in order to rebalance the economy and public finances by reviewing the legislative and executive bodies and depicting necessary mechanisms to control this phenomenon, and one year after our conference, we ask the question again: who is responsible for protecting this sector and the resources of this country? Is it enough to meet and put recommendations without adopting any realistic operational procedures? "
"In fact, we are asking these questions today, because our efforts remain incomplete if they do not fall within the framework of a national vision," he said. "taking seriously the need to act in this regard, we have shared the results and recommendations of this conference with the three presidents last year."
He said that "the Regie adopted the method of commercial control as the basic solution of addressing the problem of illegal trade, laying in controlling land, sea, and air passages, is unfortunately not achieved yet."
He explained that one of the steps that fall within this approach is " launching a Regie national Cedars brand at a competitive price." He said: "Without this brand, smuggling today would have covered more than 50% of the Lebanese market."
The second step within the commercial control approach is "the Regie’s intent to produce within the next eight months a national mo’assal in its laboratories under a license to combat the smuggling of this product." He pointed out that "all mo’assal brands are imported and the smuggling rate is estimated at 30 % of the market, i.e. about 1,200 tons of smuggled mo’assal."
According to Seklaoui, "the Regie will start manufacturing SLIM Cedars cigarettes within months," adding that the ELEGANCE brand controls 70 percent of the smuggled SLIM market, expecting the decrease of smuggling activities.”
He expressed the Regie’s intention of introducing legal electronic cigarettes. He pointed out that "the rate of electronic cigarette smuggling is 100 percent. Today, all types of electronic cigarettes are still being smuggled." "We witness an invasion of smuggled electronic cigarettes. However, four years after the Minister of Finance signed the entry system, which was issued in the Official Gazette, we have not yet been able to introduce it," he said.
Seklaoui thanked the Public Finance Prosecution Judge Ali Ibrahim, "who took an unprecedented step in the history of justice by supporting the Regie, arresting smugglers without releasing them until after reconciliation and payment of the fines imposed on them."
"These facts are limited to tobacco sector exclusively, which is currently estimated at 300 million dollars in lost. So how much can be estimated the lost in other sectors?" He added: "Today we face a real challenge and serious damage to both the country and the economy. Each one must try according to its responsibilities to take the initiative. However, we cannot ignore the fact that the main solution to combat smuggling is to control illegal passages before increasing prices. Only then we can propose to raise prices".
He concluded by paying tribute to the Regie’s anti-smuggling team, pointing out that its members are "no more than twenty individuals executing important tasks while under threat. Yet, they were able to achieve a lot."
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