Excerpt
Table of Contents
CHAPTER 1: INTRODUCTION AND BACKGROUND STUDY
1.0 Introduction
1.1 Background to the Study
1.2 Problem Statement
1.3 Research Objectives
1.4 Research Questions
1.5 Hypothesis
1.6 Justification of the Study
1.6 Definition of Terms
1.6.1Customs Modernisation
1.6.2 Trade Facilitation
1.6.3 Information and Communication Technology
1.6.4 World Customs Organisation
1.6.5 Clearing Agent
1.6.6 Revised Kyoto Convention
1.6.7 Safe Framework of Standards
1.7 Delimitation of study
1.8 Limitations
1.9 Organisation of the rest of the study
1.9 Chapter Summary
CHAPTER 2: LITERATURE REVIEW
2.0 Introduction
2.1 Customs Modernisation Overview
2.2 Customs Modernization: Drivers and Principles
2.3 Customs Role in Trade Facilitation
2.4 Trade Facilitation and Economic Development
2.5 Developing Country Concerns of Modernisation
2.6 Options to Move Forward on Trade Facilitation Modalities
2.7 Customs Modernisation Initiatives
2.8 Benefits from Modernisation Initiatives in Different Countries
2.9 Chapter Summary
CHAPTER 3: RESEARCH METHODOLOGY
3.0 Introduction
3.1 Research Design
3.2 Target Population
3.3 Sampling Techniques
3.3.1 Judgement Sampling
3.3.2 Simple Random Sampling
3.4 Sample Size
3.5 Data Collection
3.5.1 Data Collection Procedures
3.6 Research Instruments
3.6.1 Questionnaire
3.6.2 Observations
3.7 Sources of Data
3.7.1 Primary Sources
3.8 Secondary Sources
3.8.1 Textbooks
3.8.2 Newspapers and Journals
3.8.3 Magazines
3.8.4 Newsletters
3.8.5 Internet
3.8.6 Advantages of Secondary Data
3.8.7 Disadvantages of Secondary Data
3.9 Pilot Testing
3.10 Ethical Issues
3.11 Data Processing
3.12 Data Presentation and Analysis Procedures
3.13 Chapter Summary
CHAPTER 4: PRESENTATION AND ANALYSIS OF DATA
4.0 Introduction
4.1.0 Response Rate
4.1.1 Questionnaires
4.1.2 Interviews
4.2 Questionnaire Responses Analysis
4.2.1 ZIMRA clients Questionnaire
4.2.3 Analysis of waiting time before payment at ZIMRA
4.2.4 Effect of modernisation on business operations
4.2.5 Analysis of Modernisation on Trade Facilitation initiatives
4.2.6 Analysis of modernisation of trade facilitation initiatives on state revenue
4.2.7 Implication of modernisation on trade and travel
4.2.9 Hindrance to trade facilitation
4.2.11 Trade facilitation measures implemented by ZIMRA
4.2.12 ZIMRA Employees Questionnaire
4.3 Findings from observations and interviews
4.4 Hypothesis Testing
4.5 Chapter Summary
CHAPTER 5: SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
5.0. Introduction
5.1 Summary of findings
5.1.1 Information Computer Technology
5.1.2 The Role of Clearing Agents in Modernisation of Customs Procedures
5.1.3 Role of Customs and its impact on Trade
5.1.4 Extent of Implementation of modern customs initiatives by ZIMRA
5.1.5 Non-intrusive Equipment
5.1.6 Post clearance Audits
5.1.7 Preclearance System
5.1.8 Risk Management
5.1.9 Successfully installed modern customs procedures
5.2 Conclusions
5.2.0 Customs Relationship with the Business Community
5.2.1 The Role of Clearing Agents in Trade Facilitation
5.2.2 Extent of Implementation of modern customs initiatives by ZIMRA
5.2.3 Information Computer Technology
5.2.4 Modernisation of customs procedures and Economic Development
5.2.5. Customs Relationship with the Business Community
5.4 Recommendations
5.4.1 Risk Analysis and Management
5.4.2 Use of ICT
5.4.3 Simplification of Documentation
5.4.4 Modern Trade facilitation Initiatives
5.4.5 Timely Release of Information
5.4.6 Training of ZIMRA officials
5.4.7 Preclearance
5.4.8 ZIMRA Relationships with relevant agencies
5.4.9 Modernisation of Trade Office
5.5 Suggestions for further research
5.6 Chapter Summary
REFERENCES
APPENDIX 1: Questionnaire for ZIMRA clients
APPENDIX 2: Questionnaire for ZIMRA employees
DEDICATION
This Research Project is dedicated to my late parents, Mr and Mrs K.C Mhuru. I miss your lovely guidance mum and dad. May your souls rest in eternal peace. The sacrifice of my brother Archibald and his wife Irene, who stood by me during my study period have made this project a success. This is for you; with your support I have accomplished this research. May the Almighty remember you in all your endeavours in life.
ACKNOWLEDGEMENTS
If it wasn’t Jehovah Elshaddai-the sufficient God, who was going to provide for me?
My sincere gratitude and thanks goes to all the NUST Faculty of Commerce and Finance Department staff for their unwavering support on this journey. May they be partakers of love, mercy, blessings and above all wisdom from God. To my project supervisor, Mr G. Ndlovu, whose integrity, honesty, brilliance and eccentricities make me proud to have been his student. Thank you so much. Ms P. Pawandiwa aka Phillo in the Finance Department, you are not forgotten; your support was not in vain.
Justice would not have been served if I do not extend my gratitude to my Overseer, Reverend C. Mpakaidzwa, colleagues, college mates and all others who had a hand in making this project a reality. Be blessed indeed!!
“To the Mhuru family, especially my sister Tsitsi, thanks for making me who I am. Thank you for your support and encouragement throughout this degree program.”
ABSTRACT
The government of Zimbabwe through its customs administration Zimbabwe Revenue Authority (ZIMRA) has under gone an up-grade of its customs procedures (customs modernisation) in 2005. ZIMRA’s focal point has always been the provision of effective and efficient service to its clients; importers, exporters, clearing agents and its stakeholders. The research was aimed to establish the impact of customs modernisation on trade facilitation initiatives implemented by ZIMRA and the relationship between modernisation of customs procedures and economic growth as well as the challenges being faced by the Customs Administration in its objective. Scholarly work has been reviewed in assessing the impact of modernisation in customs operations based on empirical evidence from different countries by various scholars. The modern customs procedures under operation in most customs jurisdictions are one stop border post concept, DTI (Direct Trader Input, deferred payment concept, use of non-intrusive equipment, post clearance audits, risk management, red and green routes, yellow card system, automation, advance rulings, preclearance, single administrative document (SAD) and single window concept. Data analysis methods that were used were quantitative and qualitative. The target population were the ZIMRA employees and various participants such as agents, importers and exporters. The data was collected through questionnaires, interviews and observations. Despite failure by the government to fully implement the modern customs initiatives, and reap the benefits there from, it was discovered that indeed, modernisation of trade facilitation initiatives is of great value to the economy of Zimbabwe and the world at large. Based on the research, hypothesis holds that modernisation of customs procedures is of value to the economy of Zimbabwe. Therefore the government should continue investing in modern customs equipment for better delivery of services to its clients involved in international trade. However, further research ought to include effects of Authorised Economic Operators on modernisation of customs procedures.
ACRONYMS
Abbildung in dieser Leseprobe nicht enthalten
List of Figures
Figure 1: Period in queue at ZIMRA stations
Figure 2: Modernisation of Customs Operations
Figure 3: Modernisation of Trade Facilitation initiatives Concept
Figure 4: Increase in state revenue due to modernisation
Figure 5: Rate of Trade and Travel
Figure 6: Economic Development
Figure 7: Trade Facilitation Hindrance
Figure 8: Implementation of Modernization Initiatives in Customs Procedures
Figure 9: Trade Facilitation Due to Modernisation of Customs Operations
Figure 10: Modernisation of Trade Office
List of Tables
Table 1: Structure of Sample
Table 2: Questionnaire response rate analysis
CHAPTER 1: INTRODUCTION AND BACKGROUND STUDY
1.0 Introduction
It is generally accepted that trade is the engine of globalisation and that a larger component of trade facilitation is based on customs modernisation. It is in recognition of the central role that customs procedures play as part of a trade facilitation programme that the Government of Zimbabwe took a bold decision to embrace Customs in the overall national reform program. International trade increases economic development and welfare of a country. There is a strong relationship between trade and growth. Trade can be a powerful force for growth and poverty reduction. Research has shown that modernisation of trade facilitation initiatives leads to improvement in revenue collection, increase in trade, reduction in corruption at entry points and increase in economic development.
The World Trade Organisation website defines trade facilitation as, ‘the simplification and harmonisation of international trade procedures for collecting, presenting, communicating and processing data required for the movement of goods in international trade.’ The Doha declaration refers to trade facilitation as, ‘expediting the movement of, release and clearance of goods, including goods in – transit’ .Trade facilitation simplifies, increases security and lowers the cost of complying with rules and procedures both for government and business. Although research has shown that trade facilitation brings several benefits to countries, it has been noted that developing countries still remain with more cumbersome trade procedures. This study investigates impact of modernisation on trade facilitation initiatives with particular reference to Zimbabwe if it have implemented World customs organisation and World trade organisation trade facilitation initiatives. This study also investigated why there has been unending complaints from business regarding delays in the movement of goods across Zimbabwe’ major entry points.
1.1 Background to the Study
The realization that customs services could be improved has prompted many governments including Zimbabwe to devote substantial energy and resources to modernization of trade facilitation initiatives.The current situation in the country in the customs administration include physical verification of goods, physical control focus, one size fits all strategy, focus on non compliance, limited use of Information Technology and lack of cooperation at border posts and in trade.
Customs reform or modernization programs are critically important if countries are to reduce trade transaction costs and enhance international competitiveness. With total trade transaction costs estimated in the range of 10%-15% of the total value of world trade, and Customs compliance costs 5%-7% of that sum, programs that would reduce such costs by even 1%-2% can have a huge positive impact on world trade and economic growth. Trade facilitation is currently on the agenda of the WTO Doha Round negotiations, which signifies the economic importance of such initiatives. De Wulf, Luc (2004)
Faced with these forces for change, Customs is the pivotal agency through which such reforms must be focused . Customs remains the primary revenue collector in many developing countries, meaning that reform and modernization of this institution is critical to improving the fiscal situation. It is also the source of extremely important trade data upon which many economic policies are based. Customs must maintain a level playing field for all traders by ensuring openness and fairness. It has an extremely important role to play in protecting society from prohibited and unsafe goods, detecting the minority of unscrupulous traders and persons carrying drugs, weapons, and other contraband, while facilitating trade for the vast majority of compliant traders and travellers. Maintaining an appropriate balance between these two competing objectives of enforcement and facilitation is not an easy task for any Customs service. With good governance a cornerstone for economic development, redressing rampant fraud and corruption in Customs services has also become an essential aspect of such reforms. Dennis (2006)
In pursuance of modernisation, Zimbabwe chose to migrate from a system of coding goods known as the Customs Cooperation Council Nomenclature to the more specific Harmonised Description Commodity Coding System in the field of classifying goods that are traded in internationally. It also moved from a system of valuing goods Known as the Brussels Definition of Value (BDV) to the General Agreement on Tariffs and Trade (GATT) valuation code. The BDV had one method of valuation which posed problems because some situations under which goods moved from one country to another were not catered for by the agreement unlike the GATT valuation code which has one main method of valuation and five alternative methods which are used in the event that the main method fails to be of use in the determination of the customs value.
The country which is the object of this study also reduced the number and type of forms that were required to clear goods and combined them into one form known as the Single Administration Document (SAD) and moved from the manual to electronic processing of declarations using ASYCUDA system. It further introduced the concept of risk management which is used as a tool for selecting the highest risk goods, conveyances and or persons for examination or further examination thereby allowing unhindered flow of traffic perceived or identified as being of low risk. To cap all these reforms up, ZIMRA has a vibrant training Centre which trains all its technical staff in technical and non – technical compensatory areas of operation. By so doing, it is engaging in a reform process known as capacity building.
The implementation of these reforms is said to lead to higher revenue yields, improved traffic flows, reduced costs for complaints, higher investor confidence, and reduced level of corruption. The World Trade Organisation recommends customs administration that provides traders with transparent, predictable, and speedy clearance of goods. Indeed, a poorly functioning customs administration can effectively demerit the improvements that have been made in other trade related areas.
1.2 Problem Statement
The implementation of customs reforms is a topical issue in the customs modernisation field to the extent that the donor community has been funding the projects in many developing countries. However, the greatest challenge is on to the extent to which they affect trade facilitation initiatives. Modernisation of trade facilitation initiatives has been described as the key to sustainable economic development and thus a poverty reduction tool. Zimbabwe has not been seen to be much committed to trade facilitation, instead, it has been characterised by cumbersome and complicated trade procedures, which have worked against trade facilitation in most third world countries. Some of the modernisation initiatives proposed are not being fully utilised. Thus the researcher seeks to evaluate the consequences of those initiatives if implemented in the Customs Administration. Zimbabwe’s economy is backed up by trade with other countries and is also used as a transiting country which links trade between various other countries.
1.3 Research Objectives
To investigate the impact of modernisation on trade facilitation initiatives in Zimbabwe
Secondary objectives
- To identify the benefits and costs of trade facilitation.
- To assess challenges faced by the Customs administration on modernisation of trade facilitation initiatives.
- To evaluate the role of various participants in modernisation of trade facilitation initiatives.
- To provide recommendations on modernisation of trade facilitation initiatives.
1.4 Research Questions
The research seeks to answer the following questions:
- To what extent does the economic environment have any bearing on the modernisation procedures in Customs Administration?
- How relevant is the Customs legislation in support of modernisation of customs trade facilitation initiatives?
- Has ZIMRA achieve its intended goals towards embarking on modernizing its Customs operations?
- What is the impact on various stakeholders, for instance, importers, exporters and the Zimbabwean government?
- What are the benefits and costs of trade facilitation?
- What is the relationship between trade facilitation and economic development?
1.5 Hypothesis
- Null- Hypothesis (H0)
The modernisation of trade facilitation initiatives has an impact on the economy of Zimbabwe.
- Alternative Hypothesis (H1)
Modernisation of trade facilitation initiatives is of no value to the economy of Zimbabwe.
1.6 Justification of the Study
The findings of the research are meant to help the government of Zimbabwe particularly the policy enforcers Zimbabwe Revenue Authority drive out relevant strategies that would enhance revenue generation and management and service delivery through modern customs technology. The importance of trade facilitation has dramatically increased in the past few years. With the world turning into a global village the trade facilitation concept has become indispensable. From the countries whose Customs Administrations have been reformed it has been observed that their economic growth rates have increased.
Modernisation of trade facilitation initiatives have also been seen to be the pivot for regional economic integration. It goes without argument that in today’s world a country cannot go it alone in isolation. It is therefore desirable for every country to be integrated into the world’s global village. The economic benefits of this cannot be overemphasized. Trade facilitation should therefore be part of every nation’s trade policy. This study becomes critical in that when its recommendations are adopted, Zimbabwe will be able to attract foreign direct investment. This will obviously lead to sustainable economic development.
Empirical evidence has shown that investors will be attracted to those countries perceived to be committed to modernisation of trade. Multinational Corporations being most of the leading investors are sensitive to costs and will only invest in those countries where production costs and distribution expenses are minimal. Cumbersome and complicated trade procedures are the major drivers of delays at national borders. These delays significantly increase trade transaction costs. These additional costs render exports uncompetitive on the international market. This is the reason why investors would shy away from those countries which are not committed to trade facilitation programmes. The research is also a partial fulfilment of the Bachelor of Commerce (Honours) Degree in Fiscal Studies.
1.6 Definition of Terms
1.6.1 Customs Modernisation
It entails the comprehensive streamlining of processes, formalities; procedures and documents handled by Customs; improved legal and regulatory framework; optimal application of ICT solutions; and improved human resources management policies.(Chisembwere 2010)
1.6.2 Trade Facilitation
It is the simplification and harmonisation of international trade procedures and controls governing the movement of goods across national borders. (Grainger 2007)
In Hill (2005) trade facilitation is defined as, ‘that which focuses on improvements in the efficiency of the processes associated with trading in goods across national borders’. This definition broadens trade facilitation to include the controls implemented at national borders by other authorities.
1.6.3 Information and Communication Technology
It is an umbrella term that includes any communication device or application, encompassing, radio, television, cell-phones, computer and network hardware and software, satellite systems, as well as the various services and applications associated with them, such as videoconferencing and distance learning. ICTs are often spoken of in a particular context, such as ICTs in Revenue Management, education, health care, or libraries. (SAITIS 2000)
1.6.4 World Customs Organisation
This is an organisation of Customs Administrations which succeeded the Customs Cooperation Council in 1988. The WCO has been working in the area of trade facilitation since its inception. The WCO has been responsible for the simplification and standardization of Customs procedures and the development of conventions, recommendations and standards. (WCO 2005)
1.6.5 Clearing Agent
This is an independent, who acts on behalf of his principal, the trader/importer, on clearance of imported goods at the offices of the customs administration. An agent has to complete a bill of entry for the declaration of goods, to the extent of accuracy of details shown on the import documentation supplied to him by the trader/importer and attend to any queries raised by the Customs Administration and arrange for the payment of the import duty due.
1.6.6 Revised Kyoto Convention
It is the International Convention on the Simplification and Harmonisation of customs procedures. A revised version of the document was adopted in June 1999 and is now popularly known as the revised Kyoto Convention. It is one of the major international instruments developed by the World Customs Organisation (WCO). It is recognised as an international standard and used as a benchmark, for the global customs community. (Mikurio 2011)
1.6.7 Safe Framework of Standards
This is a WCO trade facilitation instrument which provides for relationships between Customs Administrations and between Customs Administrations and Business. These relationships are meant to enhance the secure movement of goods across international borders.
1.7 Delimitation of study
The study seeks to investigate the relationship between implementation of Customs reforms and customs revenue generation as well as to prove or disprove the assertion that Customs modernisation improves revenue collections. This study is focusing on inland ports in Bulawayo and designated border posts such as Beitbridge and Plumtree border posts. The study will involve importers, exporters, transporters, Customs administrators, Government agencies and Clearing Agents. The researcher will also interview clearing agents and importers at the above three stations. The scope will cover the years 2001 to 2011.
1.8 Limitations
- Time Factor
- It is really a challenge to carry out the research and complete it within the reasonable time due to work commitments.
- Financial Resources
Financial resources are a constraint to carryout research in the targeted areas as there is need to go to Beitbridge and Plumtree.
- Language Barriers
There are so many languages in Zimbabwe, but the researcher has chosen communication in English, Shona and Ndebele. People who cannot communicate in the stated languages might not respond accordingly or as desired, and this might also result in misrepresentation of information.
- Confidentiality
The researcher, being a former attachee of ZIMRA who did sign the Oath of Secrecy at the time of taking up employment, there is some information within the organisation which is not for public consumption. In such cases, the information obtained will therefore be generalised.
1.9 Organisation of the rest of the study
The study is organised into five chapters namely chapter one which largely presents the motivation for the study, research questions, problem statement and justification. Chapter two reviews the theoretical and empirical literature on the subject matter and situates the study within a conceptual framework within which chapter three is formulated. The method employed to address the study objectives is outlined in chapter three. Finally, chapter four and five presents the research findings and conclude the study with respective recommendations.
1.9 Chapter Summary
The research started with Chapter one which introduced and studied background to modernisation of customs operations. The statement of the problem highlights Zimbabwe’s prospects for economic development towards implementation of modern customs procedures. The primary objective of the research assessed the impact of modernisation on trade facilitation initiatives in Zimbabwe. Costs and benefits were also examined as well as effects of various participants in trade facilitation. The chapter also examines the purpose of the study. The hypothesis was hinged on the notion that the modernisation of trade facilitation has an impact on the economy (null hypothesis) and the alternative hypothesis stated that no value is brought to the economy by modernisation of customs procedures. The other areas that are looked at in this chapter are justification of the research, assumptions made during the research, research questions, and delimitation of the study and the limitations of the study that may cause this study to require more research.
The chapter is wrapped up by defining terms used in the chapter. The following chapter (Chapter 2) looked at literature review.
CHAPTER 2: LITERATURE REVIEW
2.0 Introduction
This chapter makes a critical analysis of the relevant theoretical and empirical studies on the impact of modernisation on trade facilitation initiatives. In this chapter the researcher is reviewing some literature from primary and secondary sources regarding impact of modernisation on trade facilitation initiatives.
2.1 Customs Modernisation Overview
Efficient custom administration is key driver to socio-economic development and requires adequate resources to modernize, both from government and donors. (Duc 2005). Customs modernization entails; the comprehensive streamlining of processes, formalities; procedures and documents handled by Customs; improved legal and regulatory framework; optimal application of ICT solutions; and improved human resources management policies. According to the Customs Modernization Handbook by Luc De Wulf and Jose B.Sokol (2005), the realization that customs services could be improved has prompted many governments to devote substantial energy and resources to modernization. They have also mobilized external assistance in this endeavour.
In response, bilateral and multilateral development agencies have supported many customs reform initiatives. International donors or financial institutions such as the European Union (EU), the International Monetary Fund (IMF), the Inter-American Development Bank (IDB), the African Development Bank (AfDB), the Asian Development Bank (AsDB), the United Nations Conference on Trade and Development (UNCTAD), and the World Bank (WB), have all been engaged in customs strengthening operations.
Customs modernisation objectives differ from country to country depending on national objectives. In Zimbabwe, the government relies on revenue collected by ZIMRA to fund its fiscal needs thus the success of customs modernisation is measured in terms of success in the generation of revenue.
The Handbook recognizes that conditions differ greatly across countries, so that each customs administration will need to tailor its modernization efforts to national objectives, implementation capacities, and resource availability. Nevertheless, it is possible to generalize that meeting the modernization objectives will most likely require the adoption of a few core principles discussed in this Handbook: adequate use of intelligence and reliance in risk management; optimal use of information and communications technology (ICT); effective partnership with the private sector including programs to improve compliance; increased cooperation with other border control agencies; and transparency through information on laws, regulations, and administrative guidelines.” ( Sokol 2005)
2.2 Customs Modernization: Drivers and Principles
Organizations must re-engineer themselves to accommodate an ever-changing environment if they are to fulfil their mandates. For customs administration, modernization is not just an option—it is a necessity. At the threshold of twenty-first century, the International Chamber of Commerce (1999) urged Governments to modernize customs administration; as such modernization was seen as an important catalyst to economic development. The Chamber indicated that countries that recognized the competitive advantage of customs modernization would reap the lion’s share of the rewards. The international customs community responded vigorously to this initiative, and two milestones demonstrated the concerted commitment to modernize customs administrations.
First, in 1999 WCO adopted the revised Kyoto Convention on the Simplification and Harmonization of Customs Procedures which is seen as the blueprint for modern and efficient Customs procedures in the twenty-first century. The second milestone was the adoption of the Framework of Standards to Secure and Facilitate Global Trade2 (SAFE Framework), which is aimed at achieving worldwide trade security and facilitation through customs-to-customs cooperation and customs-to-business partnership.
To establish an effective and efficient customs system, WCO has identified the key external drivers which characterize the global trade landscape and context for customs modernization, increased and more complex international multilateralism, increasing workload and complex trade requirements, such as rules of origin, new trade and logistics models, pressure on supply chains, higher demand such as just-in-time distribution for fair trade practices, increased security threats and organized vulnerable supply chain, balance between crime trade security and facilitation, higher expectations from both the public, increased effectiveness and efficiency to and private sectors meet the needs of the stakeholders ongoing trade facilitation negotiations that is, there is need to adjust their policies and method of working in advance and be prepared for the implementation of the outcomes of trade facilitation negotiation (WCO, 2008). It is obvious that modernization initiatives benefit customs administrations themselves as well as national development. De Wulf and Sokol (2004) as well as the International Chamber of Commerce (1997) have put forward insightful proposals on crosscutting issues of customs modernization.
2.3 Customs Role in Trade Facilitation
As postulated by Roy and Bagai (2004), ‘Trade Facilitation in the context of customs involves the avoidance of unnecessary trade restrictiveness while strengthening the quality of controls in an internationally harmonized manner’. Flanked by other government agencies at national borders, Customs administrations are the custodians of the countries’ entry points. Their position at the national borders is of high influence. In fact they play a pivotal role in as much as trade facilitation is concerned. The time taken for clearance of goods has an impact on the competitiveness of countries. The more time it takes for clearance of goods the less competitive a country becomes. Delays in the clearance of goods increase transaction costs. The international standard time for clearance of goods is less than 24 hours. (ibid )
General conclusions that can be drawn of the role of customs in trade facilitation include the following; close link between the role of customs and export competitiveness can be identified. The role of customs in enhancing export competitiveness is multifaceted; trade facilitation is a main component. In customs modernization initiatives, there are no distinct measures aimed specifically at promoting exports. Rather, improving overall effectiveness and efficiency requires comprehensive modernization initiatives. Governments have an important stake in the modernization of customs administrations, which constitutes a priority of trade facilitation. Appropriate investment is required for effective and efficient cross-border trade management. Customs should incorporate whole-government concepts into its operation by forging closer cooperation with other government agencies; balance between effective control and efficient operations in customs operations must be upheld.
The tension between trade facilitation and security must be properly handled.
Customs modernization must be well woven into the national development agenda, and responsive to the needs of stakeholders. Customs modernization should properly incorporate international standards and best practices, especially those developed by WCO, while adapting appropriately to each country’s unique setting. Customs-to-customs cooperation and customs-to-business partnerships should be taken as basic pillars to secure and facilitate global trade.
According to the WCO Safe Framework of Standards, June 2007, the framework provides a new and consolidated platform which will enhance world trade, ensure better security against terrorism, and increase the contribution of Customs and trade partners to the economic and social well-being of nations. It will improve the ability of Customs to detect and deal with high-risk consignments and increase efficiencies in the administration of goods, thereby expediting the clearance and release of goods. Adoption of the SAFE Framework brings benefits for nations or governments, Customs administrations and the business community.
One of the main thrusts of the SAFE Framework is to establish Customs-to-Customs network arrangements to promote the seamless movement of goods through secure international trade supply chains. These network arrangements will result, inter alia, in the exchange of timely and accurate information that will place Customs administrations in the position of managing risk on a more effective basis.
2.4 Trade Facilitation and Economic Development
Hellqvist (2003) in his report, ‘Trade Facilitation from a Developing Country Perspective,’ argues that developing countries tend to benefit more from modernisation of trade facilitation initiatives. His argument rests on the fact that SMEs make up the bulk of businesses and are the major source of employment for most of developing countries. He further argues that it is in developing countries where trade procedures are cumbersome and outdated. The complexity of trade procedures and unpredictable customs regulations will mean additional costs for business. SMEs will definitely find it burdensome to shoulder the costs that come with unpredictable regulations. Simplification of trade procedures may to a larger extent improve SMEs’ competitiveness in international markets.
Modernisation of trade facilitation initiatives and in particular Customs reform directly improves tax returns by enabling effective collection of import duties. High duties combined with unsimplified Customs procedures generate an untrustworthy environment of systematic tax evasion, fraud and under-collection. Reformed Customs procedures reduce levels of evasion, under-declaration, fraud and collusion with Customs officials and thus generate obvious profits for the public revenue. Grainger (2007(c)
Where a country implements trade facilitation initiatives there is bound to be an increase in revenue collection. Cumbersome Customs procedures are an incentive for customs duties evasion and bribery. Traders will find it easier to collude with Customs officials than follow complicated formalities.
Hill (2005) concludes that trade facilitation increases revenue collection efficiency in Customs Administrations. He is also right in saying that complex customs procedures increases tax evasion. Levels of voluntary compliance are bound to increase where importations and exportations for genuine travellers are allowed through without delays. With employment of Risk Management Techniques a Customs Administration will increase its efficiency as limited resources are devoted to high risk traffic. Travellers can resort to smuggling where they are forced to follow an endless queue to receive a service.
Roy and Bagai (2004) states that, ‘Empirical evidence indicates that trade is good for growth. Developing countries that are integrating faster with the world economy tend to have higher growth rates, and lower poverty levels’. Trade facilitation therefore leads to economic growth. Trade facilitation enhances efficiency and can lead to higher competitiveness for nations. This reinforces the position that trade facilitation leads to economic growth and development. (ibid)
2.5 Developing Country Concerns of Modernisation
Developing countries express several concerns that have to be addressed if the modernisation on trade facilitation initiatives is to move forward. Those concerns account at least partially for lack of implementation capacity of developing countries and for lack of their strong incentive concerning trade facilitation initiatives.
2.5.1 Negotiating dynamics
A first set of concerns centres on the difficulty in prioritizing modernisation on trade facilitation in the whole Doha Agenda. Many countries felt that, prior to adopting the new regulatory obligations inherent in the customs modernisation, an agreement on issues of importance to developing countries had to be reached. Many were reluctant to adopt an affirmative position on launching negotiations on the modernisation of customs issues as their regulatory burden was thought to possibly outweigh the benefit emerging from their commitment.
2.5.2 High cost of implementation
A second concern centers on the cost and administrative difficulty of implementing obligation arising out of negotiations. They might require investing in new technologies for customs managements or for managing ports. Finger and Schuler (2000), based on analysis of World Bank projects, estimated that the 16 areas of the customs valuations agreement would cost $2.5 million each to improve. They find that the costs of implementing the customs valuation agreement amounted to the millions of dollars in middle-income developing countries. Additional rules might involve institutional changes that would exceed implementation capacities, and as a result dispute settlement associated with violation of new WTO obligations might increase. Costa Rica, for example, indicated that it would be impossible to implement the customs valuation obligation without large investments in the modernization of customs administrations.
2.5.3 Enforcement of institutional improvement
A third concern centres around the appropriateness of attempting to enforce institutional improvements through rulemaking. In contrast to policies, which can be changed quickly, institutional improvements require sustained effort over a long period, and countries at different stages of development have different needs, priorities, and capacities to implement global rules. One conventional way to mitigate this constraint is to provide for long transition periods for at least the poorest countries through special and differential treatment (SDT). However, as Hoekman (2003), and Mattoo and Subramanian (2004) have argued in the context of broader modernisation or reforms of the WTO’s regimes, this has not been particularly effective in engaging countries in the reform process; nor will it in this case produce the sustained effort necessary for institutional reform.
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