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Regions and Countries Regional Cooperation Greater Mekong Subregion Publications Proceedings of Ministerial, Forum, and Working Group Meetings 3rd Meeting of the Trade Facilitation Working Group, December 2003
3rd Meeting of the Trade Facilitation Working Group, December 2003Introduction1. The Third Meeting of the Trade Facilitation Working Group (TFWG-3) was held on 2-3 December 2003 at the ADB Headquarters in Manila, Philippines. The Meeting was was chaired by Mr. Robert Boumphrey, Director, Governance, Finance and Trade Division, Mekong Department (MKGF), ADB. The objectives of TFWG-3 are to (i) review recent developments in the GMS and their implications on trade cooperation, in particular, the results on the 12th GMS Ministerial Conference held in Dali City, Yunnan Province, PRC on 17-19 September 2003; (ii) review the status of priority projects agreed upon during the first and second meetings of the Trade Facilitation Working Group; (iii) review the composition and terms of reference of the TFWG: and (iv) formulate a TFWG work plan for 2004-2006. The Meeting agenda is in Appendix 1. 2. GMS senior officials responsible for trade and customs attended the Meeting. A representative from the European Commission in Manila attended the Meeting as an observer. ADB staff and consultants also participated in the Meeting. The list of participants is in Appendix 2. Opening Session3. Mr. Arjun Thapan, Advisor, Mekong Department, ADB welcomed the participants on behalf of ADB during the first day of the Meeting. In his opening remarks, Mr. Thapan highlighted the importance of TFWG-3 in the context of developments in the subregion. He pointed out that the GMS has become more interconnected as a result of infrastructure developments in the subregion over the past decade. The development of transport corridors has created immense opportunities for economic activities, including trade, which is essential to growth. At the same time, deepening regional integration, combined with the acceleration of the reform process in the transition economies, will require that the GMS become more competitive as a regional production base. He emphasized that trade facilitation will be a critical dimension of enhancing the competitiveness of the subregion. He reminded the TFWG that no less than the GMS Leaders have called for the formulation of an action plan of trade and investment during the first GMS Summit in November 2003, and the 12th GMS Ministerial Conference again emphasized this in September 2003. He expressed the hope that the participants will be ale to draw up a strategic program for the next three years that could help realize the vision of the GMS as a dynamic, prosperous and equitable subregion. Session I. Review of Trade Facilitation Issues in the GMS4. Mr. Robert Boumphrey, ADB lead the discussion on the review of priority projects and activities on trade cooperation as agreed upon in the two prior meetings of the TFWG. The objective of the session was to solicit the views of the GMS countries on whether these priority projects are still relevant and should therefore be pursued further. He reported that at the first meeting of the TFWG in 1999, nine subregional projects were identified for cooperation, with priority accorded to four projects, namely: (i) establishment of national institutional arrangements for trade facilitation in the GMS; (ii) national studies and seminars on regulatory, procedural, and documentation systems for international trade: (iii) pilot-testing trade facilitation arrangements in the GMS countries; and (iv) customs cooperation in the GMS. Among these four priority projects, ESCAP implemented the first two, while ADB implemented the third and fourth projects, which were combined later under one project on the pilot-testing of single-stop customs inspection in priority GMS economic corridors. An ad hoc subgroup on customs was convened during the Senior Officials' Meeting prior to the 9th Ministerial Meeting to further carry forward the activities envisaged on GMS customs facilitation. 5. Mr. Boumphrey cited that at TFWG-2 tin 2001, the GMS countries discussed other project proposals that included: (i) agricultural cooperation in the GMS; (ii) establishment of a payments system; (iii) development of a common information system in the GMS, including e-communications for trade facilitation; (iv) establishment of a dispute settlement mechanism in the GMS; and (v) "subregionalization" of bilateral trading arrangements. Except for the development of a common information system, which was subsequently included as a component of RETA 6020, none of these proposals were implemented. 6. Mr. Boumphrey reminded that the Joint Summit Declaration issued by the first GMS Summit called for an action plan on trade and investment facilitation in order for the GMS countries to reap the benefits of regional integration. The 12th Ministerial Conference echoed this mandate, where the GMS Ministers agreed that the three important building blocks into the future would be connectivity, competitiveness and community, and that trade facilitation should be given high priority. The 12th Ministerial Conference called for (i) acceleration of present pilot border sites through a testing-by- learning approach to facilitate cross-border movement of goods, (ii) areas of training for customs officials, (iii) IT application in customs and impact on trade facilitation, (iv) awareness raising of new customs procedures with the private sector, and (v) mechanisms to improve involvement of private sector and other issues related to enhancing the competitiveness of the economic corridors. 7. In reviewing the current TFWG priorities, the countries made the following comments:
Session II. Facilitation of Cross-Border Trade and Investment in the GMS --- Status of Implementation of Priority Activities under RETA 6020.A. Pilot-testing of Single Stop Customs Inspection in Selected Border Crossings in the GMS8. Ms. Madeleine Varkay updated the participants on the status of implementation of single-stop customs inspection (SSCI), which is being piloted in four border-crossings. The pilot sites for SSCI were agreed upon by the concerned countries (Thailand, Cambodia, Laos and Viet Nam) and endorsed at the 10th Ministerial Conference. She reported that as a result of three workshops that have been held so far, steady progress has been made towards implementing SSCI procedures in the four pilot sites --- (i) Bavet and Moc Bai; (ii) Mukdahan and Savannakhet; (iii) Poipet and Aranyaprathet; and (iv) Lao-Bao and Denh Savanh. The GMS countries have agreed that the implementation of SSCI will proceed on a two-track/site-specific basis that takes into account the differences in the state of preparedness of customs authorities at each border crossing. The first track will involve pilot sites for which customs authorities at the pilot border sites are relatively well prepared (such as in Bavet and Moc Bai) both in terms of infrastructure and development of procedures. Implementation at the other sites will proceed as the relevant authorities complete their preparatory actions. Although steady progress is being made on the technical and procedural aspects of SSCI, the implementation cannot proceed on account of the legal and institutional impediments. 9. The GMS countries shared the view that progress has been made on the technical aspects of implementing SSCI but noted that legal and institutional issues remain to be resolved. The following specific comments were made:
10. On the basis of the suggestions made, Ms. Madeleine Varkay, ADB indicated that the next SSCI workshop would be organized along the lines suggested by Cambodia, with a plenary session followed by bilateral meetings. The GMS countries agreed on the following schedule for implementation:
11. The Meeting noted that the SSCI workshop is planned for early March 2004, with a follow-on workshop scheduled for July 2004 to finalize implementation of Bavet-Moc Bai and identify the sequencing of implementation of 6 other pilot sites in the GMS. 12. Ms. Varkay also explained the need to link the SSCI to the review of the trade logistics study. The would involve a review of the trade logistics study, discussion of policy constraints during the trade facilitation and customs experts group July 2004 side meeting of the SSCI workshop, and use these discussions as inputs to review the policy and project agenda and required revisions to the development matrix. B. Establishment of a Cross-Border Trade and Investment Database 12. Ms. Varkay explained that the consultant under RETA 6020 has submitted an interim report with the finding that the establishment of cross-border trade database would be extremely difficult on the basis of existing information on account of the large degree of informal trade. To address this constraint, the consultant suggested that a survey would need to be conducted at selected borders. Ms, Varkay however indicated that such a survey would require considerable resources and may be too difficult to implement. 13. Thailand requested for a copy of the consultant's report for their review and comments. ADB indicated that the consultant's report would be circulated to all the GMS countries for their review. Session III. Trade Transaction Processes: Cooperation Possibilities in the GMS14. Mr. Peter Yee, Consultant, RETA 6020 gave a presentation on international trade transaction process. He traced the main elements of international trade transactions and identifying the key participants. He explained that judgements regarding the efficiency or inefficiency of the trade transaction process are made possible through the application of "international trade logistics costs" analysis. The efficiency or inefficiency of international logistics can affect the delivered price of a product, and ultimately consumer satisfaction. Logistics is measured by the quantity of resources consumed (usually in terms of time and/or money) in performing the cycle of activities from the point of ordering the goods to the point of delivery. Mr. Yee cited illustrative examples to demonstrate the importance of logistics costs. He cited the critical role of participants in the trade intermediation process, both governmental and non-governmental agents (e.g. carriers and freight handling enterprises. 15. Using the trade transaction process framework, Mr. Yee outlined the possible trade facilitation mechanisms that could be pursued under the GMS Program. These mechanisms would involve: (i) bringing international buyers closer to GMS sellers; this could be done possibly through the establishment of an export promotion fund, market access fund, and the involvement of international trading companies; (ii) providing GMS sellers the capacity to fill international purchase orders; this could be pursued through the development of an international quality industrial standards compliance program and trade finance and insurance schemes; and (iii) taking the GMS sellers closer to international buyers by speeding up the trade transaction process; this could be pursued through customs transit transport regimes, multimodal transport operations, modern border management (single stop, single window), enhancing the proficiency of exporters, and e-commerce. 16. The GMS countries expressed the view that the trade transaction process provided a useful framework for identifying possible areas of focus of the TFWG. The GMS countries agreed that a comprehensive study should be conducted to identify the areas that could be addressed through the GMS Program framework. In this regard, the following specific comments were made:
17. Ms. Pamela Bracey, Investment Officer, Private Sector Specialist, Operations Department, presented the features of ADB's Trade Finance Facilitation Program (TFPP) approved in November 2003. The TFPP was conceived in response to constraints faced by many local banks in ADB's member developing countries (DMCs) in providing trade finance to their importers and exporters in the aftermath of the Asian financial crisis, thus inhibiting trade and economic expansion. The TFFP's objectives are: (I) to support and develop intra- and interregional trade; (ii) provide liquidity to the international trade finance system especially during periods of crisis; (iii) help local banks to establish track records and institutional strength; and (iv) develop and strengthen relationships with local regional and international banks. Ms. Bracey highlighted the TFFP's components, program limits, tenor, eligible confirming banks and issuing banks, eligible goods, and pricing. The presentation outlined the roll-out plan for the Facility, including the scheduled due diligence missions to some of the GMS countries. Session IV. Institutional Mechanisms to Enhance Cooperation in Trade Facilitation18. The Meeting discussed ways of enhancing the TFWG by involving more actively the development partners and the private sector. Mr. Boumphrey informed the Meeting of the World Bank's desire to participate in TFWG meetings and to provide resources and analytical inputs. The GMS countries shared the view that development partners and the private sector should be invited in future meetings of the TFWG. Private sector representatives from a broad spectrum of concerns should be considered as invitees (i.e., regional chambers, bankers, manufacturers, freight forwarders, insurance brokers, etc.). Cambodia reminded the meeting that it would be useful to be selective on the private sector invitees depending on the nature of the topic to be discussed. Responding to a query from Thailand, ADB indicated that it might be difficult to provide financial support to private sector representatives. Myanmar suggested two categories of private sector participants, one financed by ADB, and the other, self-financed. Session V. TFWG Work Plan for 2004-200619 Prior to the discussion of the TFWG work plan during the second day of the Meeting, Mr. Rajat M. Nag, Director General, MKRD gave introductory remarks. Mr. Nag reminded the Meeting that no less than the GMS Summit of Leaders, in their Joint Summit Declaration called for an action plan on trade and investment facilitation. The 12th GMS Ministerial Conference also stressed the importance of trade facilitation in the context of the greater degree of connectivity in the GMS and the emerging focus on enhanced competitiveness of the subregion. He indicated that the TFWG work plan should be pragmatic and results-oriented, and should be geared towards the needs of the private sector. The work plan should also be doable and implementable, considering resource constraints. The GMS Ministers' mandate to accelerate the implementation of single stop customs inspection poses a big challenge to the GMS countries and efforts to resolve outstanding legal and institutional issues should be given priority. Finally, Mr. Nag reminded the Meeting of the need to be always mindful of trade facilitation initiatives under other regional cooperation programs such as ASEAN and APEC so that GMS initiatives can complement them. 20. Thailand was requested to brief the TFWG on the Economic Cooperation Strategy (ECS) Initiative, which held its first Summit on 12 November 2003 in Bagan, Myanmar. Cambodia, Lao PDR, Myanmar, and Thailand are participating in the ECS. The following points were highlighted:
21. Thailand informed that coordination between the ECS and the GMS Program is done through the NESDB, which is a key agency involved in both programs. A. Key Elements of the TFWG Work Plan 22. The GMS countries identified the objectives of trade facilitation mechanism to be covered by the TFWG as follows:
23. It was agreed that the above objective will provide a guiding framework fo the development matrix and this assist in the focus on technical assistance lending activity and donor coordination; 24. Cambodia suggested that in formulating the work plan for TFWG, it is important to recognize trade facilitation initiatives under other regional cooperation programs. For instance, under the ASEAN framework, cooperation in industrial standards is targeted towards attaining minimum standards rather than harmonization. 25. PRC emphasized the need to identify those activities suitable for regional cooperation under the GMS Program framework and which at the same time could complement trade facilitation initiatives under ASEAN, APEC and other regional cooperation programs. In formulating the TFWG work plan, PRC also stressed the need to distinguish between trade policy and trade facilitation. The GMS Program is basically concerned with trade facilitation, which focuses on procedural aspects (e.g. harmonization, simplification, and post clearance audit procedures. 26. Lao PDR, Thailand, and Viet Nam addressed various issues on harmonization of customs procedures. Lao PDR raised the need to define more clearly what is envisaged in cooperation on customs harmonization; Thailand cited the importance of harmonizing tariff nomenclature as a basis for valuation; and Viet Nam indicated that it is moving towards risk assessment to facilitate customs inspection. 27. In the context of trade logistics, the TFWG recommended a study on the characteristics and inefficiencies of specific supply chains in the GMS. This will include the measurement of value-added at various key segments along the supply chain of a product from sourcing of inputs to marketing in the trade logistics system. The objective of the study is to investigate logistics costs and to prescribe solutions and recommend interventions concerning policy and administrative reforms, as well as physical infrastructure needs, with the greatest impact on costs along supply chains. The study would recommend concrete project interventions to pimprove domestic productivity and strengthen forward and backward linkages, as well as possibilities for integration of the domestic private sector with regional and global supply chains where applicable. They study could be initiated by March 2004 and completed by May 2004. B. Review of Projects in the Development Matrix 28. Mr. Myo Thant, Principal Regional Cooperation Economist, MKRD, ADB gave a briefing the development matrix. The concept of the development matrix was initiated by the GMS countries and endorsed at the 10th Ministerial Conference in November 2001 in Yangon, Myanmar. The development matrix is a compilation of projects supporting the 11 GMS flagship programs and contains information on project scope, estimated cost, financing plan, implementing agencies, implementing schedule and issues and constraints. It is intended to serve as a planning tool, an information source for public and private investments, and as a basis for determining physical and financing gaps. At present, systems development for updating the matrix and transforming it into a user-friendly database is ongoing. In response to Cambodia's query, Mr. Thant explained that under the system being developed, the inclusion and exclusion of projects from the development matrix would be responsibility of the working groups and for this purpose guidelines will have to be developed. Thailand proposed that these guidelines be discussed in the next meeting of the TFWG. 29. The Meeting reviewed the individual projects that are presently included in the development matrix for the flagship program on Facilitating Cross-Border Trade and Investment. The key elements of the trade facilitation work program mentioned in paragraph 21 were used as a framework for reviewing the matrix. The proposals made at the 12th Ministerial Conference were also considered in the process of review. The following comments were made (number references correspond to numbers in the development matrix):
PRC stressed the importance of this initiative. A similar activity was started under the APEC framework but the activity was not sustainable on account of lack of resources. Therefore, unless ADB is able to provide resources for a continuing period, this activity may not be sustainable. PRC also raised the need for translation of relevant documents. Thailand agreed that the trade data should be initially linked with the implementation of the SSCI but the product coverage will have to be determined in due course. The information in the database should include trade and investment laws, which would be useful for the private sector. The compilation of laws that are already available at the ASEAN Secretariat or the WTO may be used as starting points. Viet Nam suggested that information in the database should be accessible to the private sector via the Internet. Cambodia proposed the inclusion of capacity building component for the collection of cross-border data to help local officials overcome present constraints in data collection. Cambodia supported Thailand's suggestion to include information on legal regimes in the database. Lao PDR indicated that a foreign--assisted project concerning trade database development has met with ADB indicated that it would explore possible collaboration with UNCTAD and ITC in the database project. ADB indicated that a cross-reference to the GMS BF website will be made. Cambodia proposed the inclusion of GMS investment boards as implementing agencies. ADB likewise added the local chambers of commerce as implementing agencies. Myanmar indicated that it is prepared to propose the border site at Muse for inclusion in the SSCI scheme. Viet Nam informed that ASEAN has already developed a manual on customs valuation and that any GMS initiative in this area should consider the ASEAN initiative. Cambodia and PRC suggested a reformulation of the project description to refer to "the development of an operations manual for single-stop customs inspection in accordance with the Kyoto Protocol". Cambodia proposed that GMS customs administrations be designated as implementing agencies. Cambodia further proposed that this project include the compilation of trade and customs procedures in the GMS for the private sector as suggested at the 12th Ministerial Conference in Dali. Myanmar should be added to the list of signatories to the GMS Cross-Border Transport Agreement. Thailand will further review these projects and provide updates in due course to ADB and all other GMS countries. PRC suggested the following: (i) the TIR-CARNET component should be moved to 3i on customs harmonization: (ii) dispute settlement is not a trade facilitation issue and should therefore not be a component of the project on GMS trade and investment facilitation. Cambodia indicated any dispute settlement mechanism should be part of a framework agreement on trade, such as the ASEAN Framework. Cambodia also proposed that the reference to ASYCUDA be deleted since no GMS country is currently implementing this system; instead the reference should be to a "customs-related data interchange". Thailand requested ADB to provide more information on the dispute settlement mechanism for the SSCI. ADB indicated that it would be able to provide this once the legal issues have been resolved. s 30. ADB requested the GMS countries to review the development matrix and submit any further comments that they may have y mid-December 2003. Concluding Remarks31. Mr. Boumprhey and Ms. Varkay concluded the Meeting by thanking the GMS participants for their excellent cooperation and hard work. Mr. Boumphrey was pleased that the TFWG was able to resuscitate cooperation in trade facilitation. He indicated that the next meeting of the TFWG would be held around August 2004 to discuss among others: (i) review of SSCI implementation; (ii) develop an activity roadmap for trade facilitation; and (iii) review and update the development matrix.
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