World Bank to aid Philippines Custom’s Procedures Improvement

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 modernise 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. This project is to improve the country’s customs administration. It will do so by reducing transaction costs. It will also enhance the predictability and transparency of the clearance process at the country’s borders. Finally, it will improve the streamlining and automation of BOC’s procedures. Above all, it will support the development of a world-class customs processing system (CPS).

“Improved efficiency at the Bureau of Customs will reduce trade costs. This improvement will support the 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, essential processes like trade management and registration, cargo inspection, duty payment, and clearance and release, among others, will integrate into a seamless online system. It will also improve adherence to international standards and conventions for customs processing. There will also be an audit trail for transactions. Thus, allowing for greater transparency and less opportunity for corruption.

Comparison with Customs of Neighbours

Before 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. These procedures were much higher than in neighbouring Vietnam (56 hours), Thailand (50 hours) or Malaysia (36 hours). Reduction in customs clearance provides a competitive advantage to firms in these countries vis-à-vis their Filipino counterparts.

The unfavourable business environment for firms in the Philippines reduces the incentive to engage in export. With fewer exports, there is less 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. This output is lower when comparing 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.

An outdated infrastructure and business practices attribute to the relatively low trade facilitation performance at the country’s borders. Recently embarking on a reform process, the BOC aims to improve its trade procedures. This improvement includes the digitalisation of its paper-based systems that are not in line with regional and international standards. It also includes 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.

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