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Illicit trade in consumer goods and normally licit products 17th October 2013 Karl Lallerstedt . Karl Lallerstedt co-founder Black Market Watch member OECD Task Force on Charting Illicit Trade Past Political and Economic Analyst - Department of State - The Economist Intelligence Unit - PowerPoint PPT Presentation
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Illicit trade in consumer goods and normally licit products
17th October 2013
Karl Lallerstedt
Karl Lallerstedt
co-founder Black Market Watch
member OECD Task Force on Charting Illicit Trade
Past
Political and Economic Analyst- Department of State- The Economist Intelligence Unit- Oxford Analytica
Illicit Trade Expertise- Anti-illicit trade director, Fortune 500 Company- Steering committee, International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy (BASCAP)
The global picture
Transnational organised crime
United Nations Office on Drugs and Crime (UNODC) meta study for 2009
1.5 percent of world GDP
6 times global development assistance budgets
870 billion USD
(2012 = over one billion USD)
Breakdown: Transnational organised crime
UNODC meta study:
Narcotics 320 bn
Counterfeiting 250 bn
Trafficking 32 bn
Excise goods - another significant category
International Chamber of Commerce 2011Counterfeiting a bigger problem?
Ill effects of illicit trade
All illicit trade
1) Revenues for organised crime groups, terrorists and insurgents
Economic power = “military” power and political influence
2) Corrupts Border guards, law enforcement, military, politicians, civil servants
3) Smuggling routes Once developed for one goods can be used for others
Normally licit products
1) Reduces government revenues (excise tax, import duty, VAT, income tax, corporate tax)
2) Undermines job creation and economic development
3) Consumer risk associated with ”normal products”
Deaths due to medication, foodstuffs, electrical components, etc
Africa: Illicit trade in normally licit goods
African terror attacks in the news
Kenya - September Westgate Mall attack61 civilians killed, including EU citizens
Al-Shabaab claimed responsibility
Algeria - January gas plant attack39 foreign hostages killed, including EU citizens
Al-Qaeda linked terrorists led by Moktar Belmoktar responsible
What did the two attacks have in common?
Perpetrators have profiteered on illicit trade in consumer goods
Al-Shabaab Charcoal smuggling --> GulfConsumer goods smuggling --> Kenya Poaching trade - ivory and rhino --> China
Moktar Belmoktar A.K.A. “Mr MARLBORO” smuggling across Sahel
Illicit trade: the economics
West Africa estimates, source: UNODC 2009
Nigeria: Oil Bunkering
“one of the greatest threats to the rule of law in West Africa is rooted in the smuggling of a licit commodity: oil” UNODC 2009
Oil bunkering impact
Estimated value of stolen Nigerian oil per year$3 billion - $8 billion
West Africa: Wholesale value of cocaine to Europe is $1.25 billion UNODC, World Drug Report 2013
Piracy, drug- and arms-trafficking in Niger DeltaNetworks sometimes overlap
Kidnapping linked to oil theft
Source: Chatam House September 2013
Cigarettes
“There is evidence to suggest that the worldwide retail value of the illicit trade in tobacco products may be comparable to the cocaine market”
- Transcrime (The Joint Research Centre on Organised Crime of the Università Cattolica del Sacro Cuore and the University of Trento, Italy), 2012
Cigarettes
Africans smoke 400 bn cigarettes a year
60 bn are bought on the black market
*Figures UNODC estimates from 2009
1 in 7Cigarettes smoked in Africa are illegal
South Africa
201230% consumption illegal8.5 billion cigarettestax losses 5bn Rand
Source: The Tobacco Institute of Southern Africa
“Information obtained suggests that a number of well-known organised crime figures have been moving away from investing in traditional illegal drug smuggling, and are now getting involved in the tobacco industry."South African Revenue Service spokesperson Adrian Lackay, 2012
Medication
In 21 surveys of drugs from six classes from 21 countries in sub-Saharan Africa:20% were classified as falsified35% failed chemical analysis Source: The Lancet, 2012
Charts;UNODC 2013, WHO data from 2011
Medication - WCO project in Africa1 week operation using new IPM tool, July 2012
Diagrams: WCO
Medication & tobacco: common factors
Medication
SourcesAsian imports: China & IndiaAfrican production
Routes from Asia:Often container via Free Trade Zones (UAE)
Containers:Often mis-declared for inland markets
Tobacco
SourcesAsian imports: China & UAEAfrican production
Routes from Asia:Often container via/from FTZ (UAE)
Containers:Often mis-declared for inland markets
Customs Unions: ECOWAS/EAC/SADC facilitate movement of goods
Sources: UNODC & industry
The future: Does illicit trade in normally legal goods risk becoming a bigger problem?
Oil
- Higher prices = stronger criminal incentive
- Gulf of Guinea growing in importance as global supplier of oil
Tobacco
- Higher taxation = higher profits
Counterfeits
- Projected growth rate
- Significant Chinese role
Source: Chatam House September 2013
Thank you!
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