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The African Development Bank (AfDB) and the World Customs Organization (WCO) have recently signed a memorandum of understanding aimed at strengthening the efforts of both institutions towards enhancing capacity building and customs modernization in Africa. While acknowledging that “many African Customs administrations are lagging behind others”, the World Customs Organization’s Secretary General, Kunio Mikuriya, is optimistic about Africa’s ability to strengthen its customs system. “Many African customs administrations have obtained political support for customs modernization initiatives,” he said in an interview.
Question: How would you assess the current situation of African Customs administrations?
Answer: Many African Customs administrations have made substantial progress in recent years in becoming more effective and efficient in achieving their goals. There is much to do, but most are on the right path.
Revenue collection remains the primary focus for many African customs administrations, and this is appropriate because customs thus supports a large part of the national budget that contributes to vital government services, such as education, health care, and law enforcement. Customs administrations are, however, diversifying by devoting more attention to key objectives such as trade facilitation and societal protection. In particular, trade facilitation is important in Africa, because trade is an engine of national and regional economic growth, and thus contributes effectively to poverty reduction in Africa.
Political leaders, donors and the business community have increasingly recognized customs’ role in trade facilitation, and consequently supported the modernization and reform initiatives of African customs administrations, together with other policy and regulatory reforms.
A modern, efficient and well-functioning customs administration should base its procedures on global standards, outlined in the Revised Kyoto Convention (RKC) on the simplification and harmonization of customs procedures. The RKC is the WCO’s “trade facilitation convention”. Harmonizing customs rules and procedures based on global standards is also a catalyst in the framework of regional economic communities in Africa. Thanks to the awareness raised among stakeholders, many WCO members in Africa have recently acceded to the Revised Kyoto Convention.
Question: Is it comparable to that of other developing regions (Latin America for example)?
Answer: While African customs administrations continue to face challenges, my many visits to the continent make it clear that there is strong commitment to customs modernization. Working together, the WCO and African customs administrations are slowly but surely making progress. Challenges that need to be overcome include factors resulting from being a land-locked country; remote location from major world markets; lack of Customs infrastructure including IT system; and weak trade-oriented policies.
Consequently, businesses consider that many African customs administrations are lagging behind others. The “Doing Business” report recently revealed that the average number of documents required for export and import for sub-Saharan Africa as well as the clearance time for imports and exports are higher than global averages, and regional average for the Latin America and Caribbean region.
However, the situation has changed significantly. With awareness raised, many African customs administrations have obtained political support for customs modernization initiatives. In addition, latecomers may have certain advantages by being able to adopt the latest technology and customs techniques and take account of others’ experiences and success stories.
Question: To which extent does this situation hamper intra-African trade?
Answer: Non-tariff barriers, including costly and time-consuming border procedures, are considered to hamper intra-African trade, along with other factors such as high tariff rates, poor infrastructure and lack of production capacity as discussed at the last African Union Summit. Excessive regulatory requirements and physical and documentary controls at time of importation/transit/exportation cause delays at the border and increase transport costs, thus hampering trade. In particular, efficient and effective Customs and other border procedures are crucial when developing the regional trade supply chain, which significantly contributes to boosting intra-African trade.
Customs procedures are especially relevant for land-locked countries. They suffer from higher transaction costs and longer travel time to get inputs from outside or to reach foreign markets. It is important to further facilitate trade in transit or along corridors. In this regard, special cooperation and coordination are needed with customs administrations in neighbouring countries. Regional harmonization and simplification of customs procedures are needed to facilitate regional trade in such a way as to comply with global standards outlined in the Revised Kyoto Convention and other instruments and tools.
Question: What are the estimated losses (fiscal, financial...) for Africa as a whole and for African countries in particular?
Answer: Customs administrations that have not reached their potential can be a hindrance to successfully collecting revenue and facilitating trade. As a result, substantial revenue loss is often observed. For businesses, costs incurred by delays at the border have to be considered in addition to direct transaction costs. Furthermore, they can discourage businesses to invest in a country, and thus undermine national competitiveness.
The WCO is not in a position to estimate fiscal or financial losses for Africa as a whole or for individual countries. What we do know is that, on average, African economic growth is increasing, revenue collection is increasing, and trade facilitation is improving.
Experiences not only in Africa but in all regions have proved that customs modernization can bring substantial benefits to a country. Potential benefits through customs modernization may provide an insight when estimating losses incurred by the current capacity of customs administrations.
For example, a World Bank study estimated that reducing exporting costs by 10 % in sub-Saharan Africa through improvements in the efficiency of the trade process could increase exports by 4.7 %. Another study indicated that a 1-day reduction in travel time could bring a 7 % increase in exports for land-locked African countries.
By way of example, the Ethiopia Revenue and Customs Authority (ERCA) has made significant progress in introducing modern customs techniques, and has upgraded its human resource management with new organizational arrangements and training. Through those efforts, the time required for transit at the border was reduced from 3.5 hours to 14 minutes from 2006 to 2010, 7 days to 8 hours for Customs clearance at importation, and 8 hours to 15 minutes for clearance at exportation. Revenue grew by over 50 % during that period.
In Ghana, customs revenue increased by 49 % in the first 18 months after the new customs IT system became operational.
The “Performance Contract” reform in Cameroon has led to 93 % of declarations being cleared within a day, and revenue collection has increased by 12 %.
Question: How to improve the situation? What are WCO's plans in that regard?
Answer: First of all, it is essential for African customs administrations to individually and collectively comply with global customs standards to integrate into the global and regional trading system. The WCO has developed and maintained a variety of global standards – the Revised Kyoto Convention on harmonized and simplified procedures, the HS Convention on goods classification, the Data Model on data harmonization under IT systems, etc. – and continues to assist with providing technical assistance and training.
Furthermore, the “3Ps” – Political Will, People and Partnerships – are identified as the key driving elements for successful sustainable capacity building. Strong political will, together with administrative will, ownership and leadership for any customs modernization programme, is essential in building robust customs administrations. It is important to improve skills of people in strategic planning, upgrade the management structure, and ensure adequate human and financial resources. Customs officers should be trained to ensure professional knowledge and integrity. Partnerships with foreign customs administrations, other border agencies, donors and business are another key factor. Good partnerships with stakeholders are essential for modern customs administration.
To this end, the WCO continues to support the African customs administrations in building institutional capacity through the “3Ps” approach. I believe that the WCO’s efforts will be enhanced by the memorandum of understanding with AfDB.
Question: To which extent will the just concluded partnership between WCO and AfDB help improve African customs administrations' efficiency?
Answer: The memorandum of understanding between the WCO and AfDB will have a substantial impact on future programmes aimed at improving the effectiveness and efficiency of African customs administrations and enhancing regional integration. Indeed, it provides a concrete basis for the two institutions to further cooperate and coordinate on customs issues in Africa. The two institutions will work together on more customs modernization and reform projects and programmes. This partnership will enable the WCO to provide its technical expertise for the AfDB’s customs-related programmes, and the AfDB to provide financial support for the WCO’s capacity building activities.
Furthermore, the memorandum of understanding will facilitate a knowledge partnership including research in areas of common interest, and enhance close institutional dialogue to ensure a coherent approach. Exchange of information and increased and better cooperation and coordination between the two institutions will help ensure that the relevant resources of each institution can be used in an appropriate way.
Both institutions are also committed to collaboration in identifying, developing and implementing customs capacity building projects. This may take the form of joint workshops/seminars related to customs capacity building for customs modernization and reform. The memorandum of understanding also opens the way for a supplementary agreement for joint funding for joint technical assistance activities. In this regard, it is a first step towards further partnerships between the two institutions.
Last but not least, the MOU gives a clear message to stakeholders such as political and business leaders, as well as other international and regional partners, that the two institutions will strengthen the partnerships in enhancing the capacity of African customs administrations. I hope that more partners will work together in the near future. The memorandum of understanding also helps to raise the profile of customs among stakeholders by indicating how important customs is in facilitating legitimate trade, protecting society, fighting transnational crime, and thus contributing to sustainable economic development.