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Illegal Economy of Pakistan

Partner/Donor: UNODC

Time: 2012

Locale: Sustainable Development Policy Institute

Team: Dr Abid Suleri, Syed Qasim Ali Shah


Although there have been various studies conducted about the size of the informal economy in Pakistan, the size of the ‘illegal economy’ remained an untouched subject so far. Through the pioneer research on this topic carried out in collaboration with the UNODC, SDPI research team tried to highlight the magnitude and impact of illegal economy in Pakistan.  In this study, expenditure approach has been used to calculate the size of the illegal economy stemming from the chosen sub-sectors.  This involved estimating the expenditure made by purchasers of drugs, illegal migrants and families of kidnapped victims.  To the extent possible, payments made to non-registered suppliers of arms and ammunition and smuggled timber were also estimated.  The expenditure approach was preferred to the income approach in this case, because the latter approach would really require data collection on income earned from the criminal elements themselves, which was not possible.

SDPI and UNODC have carried out a report titled ‘Examining the dimensions, scale and dynamics of the illegal economy: A study of Pakistan in the region’.


This study – the first of its kind in Pakistan – assesses 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 which include 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 development. 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 key finding of this report 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).


There is a need of 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 to increase awareness and a collective action should be taken against the organized crime and its resultant illegal economy.

For More Information, Contact the Following Person:

Syed Qasim Ali Shah