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Critical that an independent trade facilitation unit be set up by government
Quote from OECD report

“Steady increases in trade volumes and complexity in recent years have significantly changed the operating environment for the international trading community. They have also highlighted the negative impact of inefficient border procedures on governments, businesses and ultimately on the customer and the economy as a whole. Governments may face smuggling, fraud and national security problems, which drain the public coffers, while businesses pay the price of slow and unpredictable goods delivery, costly customs procedures, and even lost business opportunities. And all these costs ultimately make goods more expensive for the consumer. These ‘hidden’ costs of trade are so high – as much as 15% of the value of the goods traded in some cases – that studies show that for many countries, the welfare benefits from more efficient customs procedures could be as high as those from reducing tariffs.”

Trade facilitation
67Since early the 1990s, the Sri Lankan export, import and shipping trade has been pushing for trade facilitation with automation and simplification of outdated processes and procedures at the Customs Department as a starting point for trade facilitation. Trade facilitation covers all the steps that can be taken to smoothen and facilitate the flow of trade. The term has been used widely; the World Trade Organisation (WTO) defined it as “the simplification and harmonisation of international trade procedures” covering the “activities, practices and formalities involved in collecting, presenting, communicating and processing data required for the movement of goods in international trade.”

Changing global trade demands
International trade has grown rapidly in recent years, thanks to the progressive reduction of tariffs and quotas through multilateral trade liberalisation. More trade means more goods crossing borders and having to comply with Customs formalities. As a mega transhipment port and an emerging maritime nation in Asia, Sri Lanka will have to take giant steps towards trade facilitation to be a competitive destination to cope with the increased traffic and demand.

Changing business practices have also put the spotlight on speed of delivery in an environment of “just-in-time” production. Today global businesses have become more aware of the costs involved in taking goods across borders, such as waiting time etc. and will look at the most efficient logistics to reach markets. Businesses cannot afford to have imported or exported goods tied up for long periods at the border because of unnecessary or over-complicated trade procedures and requirements.

There is also the question of costs inherent in the increased complexity of trade. Globalisation and international competition has created hub locations for the manufacture, storage, shipping and sourcing of components and final products for consumer markets. It’s not a secret that Sri Lanka is eying this position, but the Government needs to be mindful that we have do a lot more to achieve such quality and standards.

Inefficiency in border procedures is costly both for governments and businesses – costs which ultimately are passed on to the taxpayer or the customer. For governments in terms of lost revenue, smuggling and difficulties in implementing trade policy, for instance because of failure in determining the origin of products or in collecting accurate statistics. Inefficient border procedures are also likely to lead to poor export competitiveness and make the country involved less attractive to investment. Taking action to improve the efficiency of border procedures has been shown to produce results. Countries that have carried out reforms in this area have achieved a substantial increase in Customs revenue, despite the reduction in duties brought by trade liberalisation.

New chapter at Sri Lanka Customs-Export Facilitation Centre (EFC) with e-documents
Since the end of the conflict in 2009, the trade has seen a very positive attitude at Sri Lanka Customs which took a lead role to introduce electronic documentation through the customs operating system known as ASYCUDA which had been dragging and lagging behind for nearly two decades without much progress.

We have observed that the system was given new life and priority since 2011 to develop new payment gateways, e-documentation and connectivity system where the users of customs could wildly use online platforms to use the Direct Trade Input (DTI) facility.

Since the beginning of 2013 the simplification process and the automation process have taken an accelerated path and today the Customs Department is fully geared to service the export trade by providing 100% online facilities for export shipments and the import procedure too is finalised for online facilitation.

In parallel to this development of automation the Customs Department has also set up a one=stop export cargo facilitation centre (EFC), which will also streamline the operational aspects of physical cargo movements. Both automation and the EFC will and should help the export trade to increase speed and reduce unseen hidden costs in processing and clearing export cargo in the near future.

The trade is confident that the team, led by the pro-reform Director General of Customs (DGC) and the senior management and the ICT division will deliver the needed service from the department and will extend the same facilities to imports and other related services provided by the department. Whilst change will be challenging to both the Customs and the trade at some point, in the short to medium term Sri Lanka will start to reap the benefits.

The next step
The giant step taken by Sri Lanka Customs to set the EFC with automation is a huge example for rest of the government institutions as most people believe that the difficult place for reform is the Customs. Whilst the Government and the Ministry of Finance must be appreciated for the work done along with Customs and the support given to achieve the current status of automation etc., it must be noted and cautioned that this is only the beginning of overall trade facilitation process.

Therefore, it is critical that the Government brings in legal reforms/policy through Parliament to ensure continuity and set up an independent national trade facilitation unit with private sector participation with the necessary regulatory powers. Such an institution would ensure proper coordination and establish integrated systems and procedures across all cross functional departments and bodies that would facilitate trade and make Sri Lanka an attractive destination for cargo storage, movement as a logistics and shipping hub.

(The writer is the CEO of Shippers’ Academy Colombo, an economics graduate from the Connecticut State University USA, past Chairman Sri Lanka Shippers’ Council and immediate past Secretary General of the Asian Shippers’ Council.)

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