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ADB Helping to Boost Trade Through Customs Modernization in Kyrgyz Republic and Tajikistan

MANILA, PHILIPPINES (26 November 2004) - The Asian Development Bank (ADB) will help improve the regional trading environment and customs infrastructure in the Kyrgyz Republic and Tajikistan, through a loan package approved today totaling US$22.75 million to further support customs reform, modernization, and regional customs cooperation.

The new project will reinforce customs, legal and institutional reforms supported by program loans approved in December 2002 for the Regional Trade Facilitation and Customs Cooperation Program (RTFCCP) in the two countries.

The RTFCCP is promoting simplification and harmonization of customs procedures among ADB developing member countries in the East and Central Asia Region as part of the broad Central Asia Regional Economic Cooperation (CAREC) program supported by major multilateral institutions.

Since 1991, the two Central Asian republics, in their transition to private sector-led and market-oriented economies, have made significant progress in trade liberalization and trade-related policy reforms, as evidenced by the Kyrgyz Republic's accession to the World Trade Organization in 1998 and Tajikistan's preparations toward WTO membership.

"Since both countries are highly dependent on international trade, development of an outward-oriented trading environment is an integral part of the transition strategies," says Jeffrey Liang, an ADB Senior Trade Economist.

But the customs administrations of the Kyrgyz Republic and Tajikistan are relatively young, suffering weak institutional capacity, low efficiency, poor governance, and inadequate customs physical infrastructure.

"Both countries recently introduced new customs codes as a key measure for trade facilitation," Mr. Liang adds. "But the benefit of customs legal reforms cannot be fully realized unless there is commensurate development and modernization of customs physical infrastructure to improve efficiency and transparency of customs services."

Both countries lack adequate information and communication technology infrastructure to support automated customs services. Also, border-port conditions are poor because of inadequate budget support and the aftereffects of Tajikistan's civil war.

ADB's new project will address these issues through two main components.

The first will help develop core elements of the unified automated information system and associated operations-support systems; communications infrastructure to support the automated systems; and train staff and develop a public awareness campaign to ensure sustainability and broad-based support for customs modernization.

The second component will improve customs border posts and facilities, provide customs operations and anti-smuggling equipment, and strengthen and promote border interagency cooperation.

It will also encourage private sector participation in customs modernization, as regular consultations will be held between customs officials and private sector representatives to carry out the modernization plan and discuss major non-trade barriers and customs regulatory issues.

ADB's loans - $7.5 million for the Kyrgyz Republic and $10.7 million for Tajikistan - come from its concessional Asian Development Fund, with a 32-year term, including a grace period of eight years. Interest is 1% per annum during the grace period and 1.5% per annum for the rest of the term.

Supporting the loans are two technical assistance grants of $500,000 - one to each country - from the Japan Special Fund, financed by the Government of Japan. These will help manage the changes and ensure that customs modernization is supported by the institutional structure and business processes in the countries' Customs Services Departments.

The Ministry of Finance of Kyrgyz Republic and the Ministry of State Revenues and Duties of Tajikistan are the executing agencies for the project, which is expected to be completed at end-2009.

ADB is dedicated to reducing poverty in the Asia and Pacific region through pro-poor sustainable economic growth, social development, and good governance. Established in 1966, it is owned by 63 members - 45 from the region. In 2003, it approved loans and technical assistance amounting to US$6.1 billion and US$177 million, respectively.