World Bank OKs $88-M loan for Philippine Customs modernization

Washington-based multilateral lender World Bank has approved a multi-million dollar loan for the modernization of the Philippine Bureau of Customs (BOC).

It said its Board of Executive Directors has given the green light for the $88.28-million loan for the Philippine Customs Modernization project.

According to the lender, the project is aimed at improving the country’s customs administration, reducing transaction costs and enhancing predictability and transparency of clearance process at the nation's borders.

Traders, exporters, importers, port operators, shipping companies, and transport providers – many of which are small and medium enterprises employing many workers – are expected to directly benefit from the project.

Customs administration is expected to improve by enhancing the streamlining and automation of BOC’s procedures, as well as supporting the development of a world-class customs processing system (CPS), World Bank said.

“Improved efficiency at the Bureau of Customs will reduce trade costs and support Philippines’ competitiveness,” said Ndiamé Diop, World Bank country director for Brunei, Malaysia, Thailand, and the Philippines.

“Automation will reduce face-to-face interactions and delays, and increase accountability, all of which strengthens efficiency and improves the business environment,” Diop added.

Likewise, it said that with the new CPS, important processes such as trade management and registration, cargo inspection, duty payment, and clearance and release, among others, will be integrated in a seamless online system.

Moreover, the project is also expected to improve adherence to international standards and conventions for customs processing, including an audit trail for transactions, allowing for greater transparency and less opportunity for corruption, according to the lender.

Further, the World Bank said the Philippines’ growth potential was constrained by inefficiencies in trade facilitation and customs administration.

For example, it said, a container in the Philippines takes 120 hours to clear customs and associated inspection procedures, much higher than in neighboring Vietnam (56 hours), Thailand (50 hours) or Malaysia (36 hours).

This provides a competitive advantage to firms in these countries vis-à-vis their Filipino counterparts, the World Bank noted.

The unfavorable business environment for firms in the Philippines reduces the incentive to engage in export, thereby foregoing the opportunity to expand markets and create more jobs in the Philippines.

Based on enterprise survey data, domestic firms in the Philippines export only 3.5% of their output, compared to 26% in Malaysia and Thailand.

“As for foreign firms, 78.7% of them in Vietnam, 84% in Malaysia and 93% in Thailand, directly or indirectly export, compared to 25.5% in the Philippines,” the World Bank said.

According to the bank, the “relatively poor” trade facilitation performance at the country’s borders can partly be attributed to outdated infrastructure and business practices.

On the other hand, the BOC has recently embarked on a reform process to improve its trade procedures  including the digitalization of its paper-based systems that are not in line with regional and international standards, and the improvement of its critical capabilities such as risk management, intelligence, and post clearance audit, and other transaction processes that were vulnerable to corruption.

The Customs Modernization project supported by the World Bank aims to accelerate these reforms, the lender said. —LBG, GMA News