Resolving smuggling in a systematic way

Before the Aquino administration ends, smuggling must be controlled. With political will, this can be done.

A recent victory against livestock smuggling was achieved with the support of Agriculture Secretary Proceso Alcala and Undersecretary Jose Reano—124 containers of smuggled pork were apprehended in the last few months. Credit should also be given to Bureau of Customs (BOC) Commissioner Alberto Lina and Deputy Commissioner Jessie Dellosa.

Nevertheless, these antismuggling victories were sporadically, not systematically, achieved. To do this systematic approach, we must use a public private mechanism established in 2005. The creation of the Cabinet Oversight Committee Against Smuggling (Cocas) resulted in a 25 percent decrease in smuggling.

Unfortunately, Cocas was abolished in 2006 after it achieved a big purpose. From a 6 percent smuggling rate in 2005, this steadily increased to 36 percent in 2014.

Here is how smuggling estimates are calculated: From the United Nations Trade Statistics, a report is given to the Philippines based on information provided by exporters. This is then compared vis-à-vis the report of the Bureau of Customs (BOC) on the actual volume received.

The difference is underreporting. Many believe this is the smuggling rate. While some imports are exported later on, we should note that the numbers above constitute only 80 percent of total trade. This is from the top 20 countries exporting to the Philippines.

Using these numbers, we calculated the smuggling losses and compared them to independent estimates. Using tariff and VAT assumptions and a P45 to the dollar exchange rate, our estimate of a P204 billion smuggling loss for 2012 is 2 percent higher than the P200 billion estimate given by President Aquino in his 2013 State of the Nation Address.

The P169 billion loss, which we estimated for 2011, is 4 percent lower than the P176 billion loss calculated by Global Financial Integrity, a Washington, DC-based think tank.

What is clear is that the rate of underreporting is still increasing. Consequently, so is the damage to our jobs and government revenues.

In 2014, the National Competitiveness Council (NCC) created a low-level version of the 2005 Cocas. This NCC Anti-smuggling Committee worked with Commissioner John Philip Sevilla with good results.

Though the lower version of the Cocas partly worked in fighting smuggling, it was a far cry from the 25 percent reduction in smuggling that the high-level Cocas achieved in 2005. This is understandable.

Unlike the 2005 version wherein a Cabinet Secretary chaired bi-weekly meetings with undersecretaries from the departments of Finance, Agriculture, Trade and Industry, and Justice in attendance, the newer version is co-chaired by a DOF consultant and a private sector representative. Low-level representatives from the other four departments participate, with DA only sending an official representative two years after the committee’s creation.

Most recently, despite Commissioner Lina stating he would attend the monthly committee meetings himself, he has only attended two in the last five months. We are certain that with a high-level Cocas, Lina will not only participate in every meeting, he will also give concrete commitments.

It is now election season. Our current government should show its political will by creating the soonest a high-level Cocas. The BOC can also systematically determine the amount of underreporting for each product from specific countries.

Despite this recommendation given much earlier by the current antismuggling committee, BOC has not done its part of the job. BOC should now do this in a systematic manner and place these products on a pro-active anti-smuggling watchlist. In addition, the Senate and House committees should include this public private mechanism in the currently being deliberated Customs and Tariff Modernization Act.

It is only by creating this high-level Cocas that we can stop smuggling systematically.

(The author is Chair of Agriwatch, former Secretary for Presidential Flagship Programs and Projects, and former Undersecretary for Agriculture, Trade and Industry. For inquiries and suggestions, e-mail [email protected] or telefax (02) 852-2112)