SMART customs control can raise trade and economic competitiveness

Md Tariq Hassan | Published: January 27, 2019 21:13:45 | Updated: February 01, 2019 21:20:03

International trade is a key driver for economic growth and development. Over the last decade, Bangladesh posted an average gross domestic product (GDP) growth of 6.5 per cent that has been largely driven by international trade. During this period, volume of trade in Bangladesh has more than quadrupled. However, the 21st century global trade landscape is becoming more and more complex and highly sensitive to external drivers such as innovative business models, new trading patterns, cross-border e-commerce, modern technologies, multi-modal transportation methods, increased security threats and organised financial crime. While governments do pursue economic and trade policies that are meant to benefit the country individually, such policies may not always bring competitive advantages over other countries.

It is very important to understand that international trade is no more a zero-sum game where there are only winners and losers. Rather it has become all about gaining competitiveness of one country over another. This is particularly relevant for a country like Bangladesh where the economy is at the take-off stage. The country is constantly looking to attract investments and new business opportunities. Hence, in order to gain trade and economic competiveness over other countries, the role of the customs administration as guardians of the international trading system is very vital. Apart from collecting import revenue, everywhere in the world, customs plays a central role in facilitating trade and travel while ensuring security and protecting citizens while working with other agencies at the border.

In the last fiscal year, Bangladesh Customs facilitated international travel and transit for more than 15 million people and collected Tk 611.18 billion as customs duties. This is 30 per cent of the total revenue earned by the National Board of Revenue (NBR). It is, therefore, essential for Bangladesh's customs administration to transform itself into a smart and service-oriented organisation by following the Secure, Measurable, Automated, Risk Management-based and Technology-driven (SMART) guiding principles.

The present nature of the market economy demands that the customs administration serve rather than control in its basic form and change the traditional management philosophy to the service concept. For this reason, this year, the World Customs Organisation (WCO) has adopted the slogan of implementing "SMART borders for seamless Trade, Travel and Transport" among its member countries. This can promote swift and smooth cross-border movement of goods, people and means of transport. SMART customs means that customs should ensure principles like Secure, Measurable, Automated, Risk Management-based and Technology-driven activities are at the centre of customs compliance, enforcement and facilitation efforts.

In order to comprehend the idea of 'SMART Customs', one needs to know the focus and purpose of setting the individual guiding principles mentioned above. The concept of providing security, which is one of the core functions of the state, has expanded from the traditional notion of military and political security to incorporate the idea of national economic security. Protecting citizens against threats such as contaminated food, unsafe toys and consumer products, fake medicines, counterfeit products and smuggled goods provide new imperatives for Customs. Customs, partner government agencies and economic operators need to continue pursuing the common objective of securing the complex global supply-chain system and increasing efficiency based on mutual trust and transparency to facilitate legitimate trade while safeguarding revenue collection.

Excessive control and inefficiencies in customs procedures are very common in many parts of the developing world including Bangladesh. For example, complexities and resultant disputes over classification, valuation and overall clearance procedures increase the time needed to release goods. This escalates the cost of doing business and reduces competitiveness. Hence, measuring the actual performance of customs in facilitating trade and controlling borders, as well as evaluating overall organisational performance, should be the two major pillars for sound decision-making processes for customs administrations. Tools like the WCO Time Release Study (TRS) should be regularly used to identify bottlenecks and measure performances so that appropriate steps can be taken to overcome various behind-the-border constraints.

Automation should be the fundamental aspect of a modern customs administration in this era of rapid digitalisation where delineation between physical, digital and biological components is fading, cross-border e-commerce is exponentially growing and the concept of geographical border is in continuous dilution. Unnecessary documentation, physical inspection, and, sometimes, multiple inspections in the presence of more than one agency often cause lengthy delays and cost escalation in customs clearance. Hence, customs should strengthen measures to improve its processes, services and overall performance by adopting technology-based solutions such as  automated customs clearance system, single-window concept, electronic exchange of information, and electronic delivery of services. Considering the risk of cyber security threats and the importance of data privacy and protection, there is also an urgent need for an integrated robust information security management system to be adopted by the customs administration. In addition, in the pursuit of an effective paper-free, hassle-free, fast and efficient border management, it is required to conduct further research and leverage the new wave of social, mobile, analytics and cloud (SMAC) solutions, as well as digital forensics and internet privacy.

Risk management is at the core of every customs procedure. An intelligence-driven and data-enabled risk management framework allows customs to be more effective at all levels, particularly in decision-making and targeted interventions. Risk-based approach such as Advance Electronic Information (AEI) programs, Advance Passenger Information (API) and Passenger Name Record (PNR) should be introduced to strengthen supply chain integrity and mitigate potential security threats so as to make trade, travel and transport seamless.

Lastly, technology-driven digital disruption has brought about new opportunities and challenges for customs and partner government agencies. The use of various technology-based solutions such as smart track and trace technologies for cargo, containers and conveyances; a worldwide standard for X-ray images supporting interoperability between different Non-Intrusive Inspection equipment; advanced technologies providing intelligence through chemical analysis; and the use of geo-spatial technologies and drones for monitoring, and tackling the global supply chain can significantly enhance the competitiveness of Bangladesh.

Because of increasing trade volume and limited resources, striking a balance between customs control and their highly efficient operation has become more and more important over the years. It is a widely accepted fact that, customs, through trade facilitation, can reduce transaction costs and thus contribute directly to enhance trade competitiveness. There is also growing evidence that the quality and reputation of a particular customs administration also contribute to the popularity of ports which in turn can improve the economic performance of a country by attracting more economic operators. The other factor, revenue collection, is also correlated to increasing economic competitiveness as it is necessary to have a steady stream of revenue to achieve productivity growth and rising living standards and hence improve economic competitiveness. As such, the SMART borders concept highlights the role of customs in achieving a number of Sustainable Development Goals  (SDGs) by ensuring timely delivery of raw materials to industry, reducing unfair competition in local communities, opening up opportunities for marginalised communities to access new markets, creating transparent and predictable conditions for trade and facilitating legitimate business. This will in turn contribute to economic growth and job opportunities. Therefore, the country's trade and economic competitiveness can be raised by adopting a government-wide approach towards "SMART" redesigning of the customs business processes while applying new technologies to facilitate trade and travel and mitigate threats inherent in the cross-border flows of goods.

Md Tariq Hassan is a Deputy Commissioner of Customs and Second Secretary of the National Board of Revenue.                             


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