WASHINGTON, October 27, 2020—Traders, exporters, importers, port operators, shipping companies, and transport providers – many of them small and medium enterprises employing many workers – are expected to directly benefit from a new project that will modernize operations of the Bureau of Customs (BOC).
The World Bank’s Board of Executive Directors has approved today the US$88.28 million loan for the Philippines Customs Modernization Project to improve the country’s customs administration, reduce transaction costs and enhance predictability and transparency of the clearance process at the country’s borders.
The project will improve customs administration by enhancing the streamlining and automation of BOC’s procedures, as well as supporting the development of a world-class customs processing system (CPS).
“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 improve the business environment.”
With the new CPS, important processes like trade management and registration, cargo inspection, duty payment, and clearance and release, among others, will be integrated in a seamless online system. It will also 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.
Prior to the COVID-19 pandemic, the Philippines was one of the most dynamic economies in East Asia and the Pacific Region. Nevertheless, its growth potential was constrained by inefficiencies in trade facilitation and customs administration. For example, 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 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 percent of their output, compared to 26 percent in Malaysia and Thailand. As for foreign firms, 78.7 percent of them in Vietnam, 84 percent in Malaysia and 93 percent in Thailand, directly or indirectly export, compared to 25.5 percent in the Philippines.
Relatively poor trade facilitation performance at the country’s borders can partly be attributed to outdated infrastructure and business practices. 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.