IN many Muslim-majority countries such as Turkey, Morocco and the UAE, one will find numerous sheesha cafes buzzing with life where people gather together to enjoy their evenings after a long day. Not so in Pakistan, where sheesha smoking has been effectively banned since 2017, except for those with the patronage and connections to circumvent the ban.

To indulge in this activity in Karachi, one must have an ‘in’ at the establishment serving sheesha. A name is checked off the list following which a backdoor is opened, evoking memories of being in a speakeasy during the days of prohibition in the US. Much like that era, the establishments’ managers are tipped off about police raids and the servers hurriedly remove the sheeshas. Once the all clear is given, usually within the span of 10 minutes, it is back to business as usual.

This ban and its enforcement in Pakistan’s largest city — I experienced this on a recent trip to Karachi — is a case study in how ill-advised policies are executed across the country. The rationale for the ban is that sheesha smoking poses serious health risks. That sheesha smoking, much like cigarette smoking, has negative health consequences cannot be debated. But is a ban the right way to deal with this, especially in a country where cigarette smoking is far more prevalent? If the goal is to reduce tobacco consumption, then why is it that one can easily smoke cigarettes in most restaurants?

The reality is that like, many other policies, this ban has been put in place on a whim and without any research, thereby creating negative societal and financial externalities in the economy. The policy misdirects scarce policing resources away from more important activities and towards the enforcement of a ban. Furthermore, it creates a black market leading to perverse incentives that corrupt law-enforcement authorities, essentially directing potential tax revenue — a necessity for an economy struggling to mobilise fiscal resources — into the coffers of a corrupt political and law-enforcement apparatus.

The ban must be replaced by a common-sense policy.

The correct way to minimise negative health externalities while raising revenues through economic activities generated by sheesha smoking is to properly regulate the sector. One way to do this is to auction off a dozen or so sheesha licences in popular neighbourhoods in each major city. This would allow businesses to compete for a scarce resource — the licence to serve sheesha — in a transparent manner. Establishments who win the auctions would be required to follow certain regulations — such as not allowing indoor smoking, reporting their monthly sales to the tax authorities, and enforcing ID checks to ensure that underage individuals are not served — while failure to comply with these regulations would lead to the revocation of their licence, a steep financial penalty, and closure of the business establishment. Part of the revenues raised from these auctions could be invested in education and marketing campaigns to deter tobacco usage, particularly among younger members of society.

Such a policy environment would allow the government to have a better view into the demand for sheesha smoking, raise much needed tax revenues from the economic activity, and eliminate the perverse incentives that create a black market in the economy. The outcome would be a win-win for all: business owners can legally sell a product, sheesha lovers can enjoy their time out without indulging in illegal criminal activity, and the police can stop focusing on enforcing sheesha bans and instead focus on more important police work.

Such a policy framework is also important given that Pakistan is seeking to take advantage of an improved security environment to attract international tourists. Without a well-regulated market for activities such as sheesha smoking, a country like Pakistan will struggle to fully leverage its tourism potential; one only needs to go to Istanbul’s sheesha bars to know how popular these establishments are with both locals and tourists. Outright bans on these activities only create a black market, deterring law-abiding tourists who may want to spend the money but are fearful of the legal consequences. The outcome is increased corruption and diversion of scarce financial resources away from the state’s tax revenues.

Given the way in which policies are devised, debated and executed in Pakistan, it is highly unlikely that a common-sense regulatory framework for sheesha cafes will ever be executed. And this sector is a case study of a larger phenomenon, highlighting how poorly executed policies distort the market and have significant unintended social and financial consequences. Much like the rest of the economy, ill-advised and hare-brained policies that distort the market, create perverse incentives, and lead to the benefit of a law-breaking few at the expense of the law-abiding majority are the norm and not the exception in Pakistan.

The writer is a non-resident fellow at the Atlantic Council in Washington D.C.

Published in Dawn, January 17th, 2020