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Scoping the Illegal Economy in Pakistan

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Scoping the Illegal Economy in Pakistan DISCLAIMER The contents of this publication do not necessarily reflect the views or policies of UNODC, SDPI or contributory organizations and neither do they imply any endorsement. The designations employed and the presentation of material in this publication do not imply the expression of nay opinion whatsoever on the part of UNODC concerning the legal status of any country, territory or city or its authorities of concerning the delimitation of its frontiers or boundaries. ii iii TABLE OF CONTENTS PREFACE ............................................................................................................................................. i ACKNOWLEDMENTS ......................................................................................................................... iii EXPLANATORY NOTES ....................................................................................................................... v ACRONYMS ..................................................................................................................................... vii EXECUTIVE SUMMARY ...................................................................................................................... ix 1 INTRODUCTION .................................................................................................................... 1 1.1. Scope of the research ........................................................................................................... 2 1.2. Methodology ........................................................................................................................ 4 2 CONTEXT .............................................................................................................................. 7 2.1. Institutional apparatus .......................................................................................................... 7 2.2. Legislative framework ........................................................................................................... 9 2.3. Legal economy and development........................................................................................ 12 2.4. Political and security situation............................................................................................. 18 3. DRUGS AND PRECURSORS .................................................................................................. 21 3.1. Production trends ............................................................................................................... 22 3.2. Trafficking trends ................................................................................................................ 39 3.3 Modus operandi ................................................................................................................. 46 3.4. Proceeds of drugs and precursors trafficking....................................................................... 48 4. HUMAN TRAFFICKING AND MIGRATION ............................................................................ 51 4.1. Trends in migrant smuggling ............................................................................................... 51 4.2. Trends in human trafficking ................................................................................................ 63 4.3. Modus operandi of migrant smuggling and human trafficking ............................................. 65 4.4. Proceeds of migrant smuggling and human trafficking ........................................................ 67 5. ARMS TRAFFICKING............................................................................................................ 69 5.1. Trends ................................................................................................................................ 70 5.2. Proceeds from the illegal arms trade ................................................................................... 71 6. ILLEGAL TIMBER TRADE ...................................................................................................... 73 6.1. Trends ................................................................................................................................ 73 6.2. Timber markets in Afghanistan and links with Pakistan ....................................................... 76 6.3. Illicit re-exports ................................................................................................................... 77 6.4. Proceeds of the illegal timber trade .................................................................................... 77 7. KIDNAPPING FOR RANSOM ................................................................................................ 79 7.1. Trends ................................................................................................................................ 79 7.2. Proceeds of kidnapping ....................................................................................................... 83 iv 8. THE MONEY TRAIL .............................................................................................................. 85 8.1. Informal value transfer system............................................................................................ 85 8.2. Money laundering............................................................................................................... 88 9. IMPACT OF THE ILLEGAL TRADE ......................................................................................... 91 9.1. Impact on the economy ...................................................................................................... 91 9.2. Impact on the government.................................................................................................. 93 9.3. Impact on the society.......................................................................................................... 94 10. CONCLUSION AND RECOMMENDATIONS ........................................................................... 97 Annex I ........................................................................................................................................... 99 Annex II ......................................................................................................................................... 101 Annex III ........................................................................................................................................ 102 v PREFACE Pakistan is uniquely placed in the crime and illegal economy nexus due to its geographic location. This study - the first of its kind in Pakistan - has been commissioned by the United Nations Office on Drugs and Crime (UNODC) to assess the size, nature and dynamics of the illegal economy in Pakistan and inter-linkages with the region and beyond. The focus is on the dominant forms of transnational organized crime present within the region, specifically, drugs and precursors trafficking, migrant smuggling and human trafficking, arms trafficking, illegal timber trade and kidnapping for ransom. These forms of crime have become a threat to governments, civil societies and economies, undercutting the rule of law and hampering the achievement of Millennium Development Goals. Traditionally, these issues have been left at the edge of development discourse but there is now an acknowledgement at the highest levels in the United Nations and by leading institutions like the World Bank and the World Economic Forum that security issues need to be mainstreamed into traditional development paradigms. The United Nations has recently established a Task Force to focus the United Nations Development Group (UNDG) regional teams, United Nations country teams and peacekeeping and political field missions to effectively address these issues. The key finding of this study is that in an inter-connected world, countering the illegal economy is a shared responsibility. It is striking that most illicit flows go to major economic powers. In other words, the world’s biggest trading partners are also the world’s biggest markets for illicit goods and services. This reflects the extent to which organized crime has become linked to the global economy, and vice versa, through the illicit trade of legal products (like natural resources), or the use of established banking, trade and communications networks (financial centres, shipping containers and the internet). The response requires increased international cooperation within the context of an integrated, comprehensive and cost-effective strategy with a balanced approach between development and security, and respect for national sovereignty and human rights. It is important that awareness is increased and collective action is taken against the threat of organized crime and its resultant illegal economy. Studies like this make an important contribution to understanding the nature and dynamics of the illegal economy and identifying where interventions are most likely to be successful. UNODC will continue to contribute to the research effort by collecting and analyzing data, and helping to build the research capacity of national institutions and agencies. In closing, we would like to underline that despite the constraints which hinder research on organized crime and illicit trade, and the preliminary nature of the findings and recommendations, it is quite possible to start an effort to understand the dynamics and nature of the illegal economy in a country and its wider impact
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