"Smuggling" in Yemen

There’s an article in the latest Yemen Observer (

) entitled “Smuggling threatens Yemen’s economic health.” It’s silly on a lot of different levels… The biggest one being that somehow people buying things without the government’s cut is going to do something bad to the economy. Actually, the article makes it quite clear that the smuggled items are less expensive and have more profit in them, how is that going to mess up the economy? If the government had it’s way, things would cost more and people would make less money selling them. In other words, they would be poorer… It’s unclear what exact goods the article is discussing. The text talks about some expired food, weapons, and maybe some medicines, but the picture in the article shows radios and other consumer electronics. I can imagine that there could be a safety issue with the first three, but radios? What really gets me is the implication that there are import duties placed on medicines. This is a common practice in many poor countries as it is a good source of revenue. A better name for an import duty is an import tax. People pay more money on things that they buy without any benefit coming to them for the extra cost. It always bothers me when a government acts in a profit maximizing way…

I got a laugh out of one official’s statement that the import duties had been reduced by 5% therefore there is no reason to smuggle items into the country. I was happy to see that the article does mention that Yemen is trying to be more trade friendly. It pointed out that local manufacturers used to be more protected from outside competition and that it resulted in low quality products at high prices. Ironically, by protecting local producers, the government aided the now widespread distrust of things made in Yemen. I have never heard of a country with such a low opinion of its own products. The article doesn’t say what the current tax is, but I’m assuming that it’s still high enough to make smuggling profitable since it is still going on. Another possibility is that the import tax is really low, but the bribes you have to pay customs officials may still be really high. Bribes are expected in just about every government transaction here and the customs officials are notorious in this regard.

The solution? Get rid of import taxes! Not only will this free up customs people to look for things that are actually dangerous (like weapons to supply an ongoing insurrection in the north), but most importantly, people will pay less and there will be more competition for those consumers.

Isaac

yemen middle east economics