The World Bank (WB) is preparing a project that aims to support the Philippine Bureau of Customs (BOC) in enhancing its efficiency, effectiveness and transparency, and revenue collection.
In its Project Information Document/Integrated Safeguards Data Sheet available on its website, the Washington-based lender said the Philippines Customs and Trade Facilitation Project (PCTFP) aims to support export-led economic growth by assisting BOC in reducing trade costs, improving transparency, and increasing revenue collection.
“The project will support the modernization of systems, procedures and operational activities in line with accepted international standards for the processing and clearance of imported and exported goods. This will be especially beneficial for traders from outside Manila (i.e. Visayas and Mindanao), which will be able to deal with Customs without having to complete their processes at the capital,” the concept paper stated.
It added that this, in turn, will increase the Philippines’ trade competitiveness, facilitating the growth and diversification of exports.
WB said that under a more competitive international environment, adopting trade reforms is key to achieving rapid, inclusive, and sustained economic growth.
Moreover, modernizing the BOC will lead to a more transparent and accountable governance.
According to WB, “the poor performance of the Bureau of Customs (BoC) hampers the Philippines’ capacity to use trade as a vehicle for inclusive economic growth, job creation and poverty reduction.”
It noted that the country is currently ranked 95th under the Doing Business (Trading Across Borders) indicator and is ranked 78th under the Customs and Border Management component of WB’s 2016 Logistics Performance Index, having fallen 31 places since 2014, “reflecting not only its poor performance but the efficiency and effectiveness gains made by competitors.”
Various customs challenges
WB listed the customs bureau’s challenges, which include an old and outdated customs ICT system unable to accommodate modern paperless trade practices in line with regional and international standards; a lack of key capabilities needed for effective customs administration, such as risk management, intelligence, valuation, and post-clearance audit, all of which are absent or underdeveloped; poor office accommodation; and inadequate access to physical resources and infrastructure such as x-ray scanners and CCTV capabilities.
The bureau is also wrestling with issues such as inadequate management information systems needed to drive effective management decisions; a lack of performance monitoring and evaluation capabilities and inadequate operational statistics; a lack of pro-active dialogue and effective coordination with key stakeholders including port operators, other border management agencies, and the private sector; and an operational environment in which almost all key customs activities are vulnerable to corruption.
The project, with an estimated total cost of US$200 million, will be financed via investment project financing that provides International Bank for Reconstruction and Development loan and International Development Association credit/grant. Project appraisal will likely take place on November 27, while board review date is set for July 12, 2018.
The project will consist of three operational support components, namely, institutional development, trade facilitation, and ICT modernization, as well as one project management component.
The regional coverage of the project will include Manila and Mindanao. The estimated financing amount will range between $120 million and $150 million, depending on the agreed scope of work prior to project appraisal.
Institutional development, which will cost from $25.5 million to $50 million, will support the development of BOC as a professional organization that is transparent, accountable, and more responsive to the needs of public and private stakeholders.
This will be achieved by undertaking an organization and structure review, supporting strategic and operational planning, developing client service standards, preparing integrity assessments and mitigation strategies, and supporting human resource management and development reforms.
The trade facilitation component, which will cost $2.75 million, will support the implementation of internationally agreed standards for the processing of imported and exported cargo, consistent with World Trade Organization (WTO), World Customs Organization (WCO), and Association of Southeast Asian Nations commitments.
This will be done by reviewing and redesigning business processes, implementing the provisions of the WTO’s Trade Facilitation Agreement related to customs, improving voluntary compliance, and developing or strengthening a range of critically important value-added functions including intelligence, post-clearance audit, enforcement and anti-smuggling and compliance-based risk management. This also includes the effective implementation of the Customs Modernization and Tariff Act.
The third component, which costs the most at $95 million, will support the modernization of BOC’s core ICT systems, related technical infrastructure and internal capacity to manage and operate a sophisticated ICT operation to ensure it contributes to improving operational effectiveness, integrity, accountability, and organizational performance. It will also see the development of a long-term ICT strategy, connection and interoperability of government agencies to the National Single Window (NSW) system and port community systems.
Since most advanced functions, such as post-clearance audit and Authorized Economic Operator (AEO) would need efficient ICT, WB said its project will devote significant attention to fast-tracking the design and implementation of the core ICT system and related infrastructure.
The last component, project management, will support project implementation and establish a project implementing unit within BOC to provide fiduciary support for quality assurance, together with monitoring and evaluation functions to assess progress in meeting the project’s development objective. The IT infrastructure will cost $3 million.
The proposed project will include establishing a Customs Academy in either Subic Bay Metropolitan Authority or Clark Freeport, both of which are owned by the national government. However, the final location is yet to be determined.
WB said the overall project design has been guided by a recent comprehensive diagnostic study based on the internationally accepted Customs Capacity Building Diagnostic Framework developed by the WCO. The WCO framework involves assessments of the key components of modern customs administration and is consistent with accepted international standards and best practice approaches. – Roumina Pablo
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