47022-001: Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program

Project Data Sheet (PDS): Details


Project Rationale and Linkage to Country/Regional Strategy

The Doing Business Report by the World Bank estimates that it takes 25 days in Bangladesh to complete all procedures to export and 31 days to import. Cost of transporting a 20-foot container is an average of $1,025 for export and $1,430 for imports. High costs and time to trade greatly reduce prospects for trade in Bangladesh and ranks the country 119 on efficiency in trading across borders. Data indicates that a significant portion of time to trade is due to institutional barriers, such as the time taken to prepare documentation and complete customs clearance. Key factors for such inefficient trade procedures include: (i) Large Number of Trade Documents. Documentation takes considerable amount of time and constitutes a major barrier to trade facilitation in Bangladesh. A large number of documents, multiple copies and multiple signatures are required for customs clearance. For example, exporting a standard container of goods requires 6 documents, takes 25 days and costs $965. Importing the same container of goods requires 8 documents, takes 31 days, and costs $1,370 . Standardization of trade documents to international standards and harmonization of documents across agencies/ministries and across countries will reduce the burden on traders. (ii) Lack of Full Customs Automation. Bangladesh currently uses ASYCUDA++ for the operation of customs. To date three ports Chittagong, Dhaka, and Benapole have been automated through the adoption of ASYCUDA++. Dhaka is the main commercial and administrative center of Bangladesh; Chittagong is the primary seaport, accounting for 90% of imports and exports. In practice, however, automation is partial at best, with several key functions still conducted manually and therefore with low levels of efficiency. Procedures in all other ports are conducted manually, which is followed by ex-post data entry that are collected in CD ROMs sent to the central customs office in Dhaka at the end of each month. This is an inefficient and outdated method of customs processing. Customs is unable to interface with the other border agencies (Quarantine, Immigration, and Bangladesh Land Port Authority), which use other systems, notwithstanding the lack of connectivity with banks, freight forwarders and importers and exporters. There is no pre-arrival declaration facility. In effect, the customs declaration can only be entered into the system when the goods arrive. (iii) Absence of Risk Based Inspection. Currently 100% of cargo needs inspection at the borders since no risk based inspection procedures is yet established. Borders cannot yet facilitate highly-compliant traders with pre-arrival clearance, post-clearance audit, and other methods for non-intrusive inspections. In addition, valuation of goods is a major source of dispute at borders which lead to goods being detained for long time. Bangladesh has made significant efforts to implement trade facilitation measures. In September 2012, Bangladesh acceded to the Revised Kyoto Convention (RKC) of the World Customs Organization (WCO) with full commitment to simplify and modernize customs laws, rules, and regulations. This requires Bangladesh to comply with the international standards as stated in the General Annex of the RKC. With accession, Bangladesh needs support the next few years to implement international standards. At the same time, Bangladesh is part of the SASEC (South Asia Subregional Economic Cooperation) Trade Facilitation Program supported by ADB. As part of the Program, the Government of Bangladesh in principle agrees to a set of trade facilitation policy reforms, for which it needs technical assistance, including the development of risk management (RM) systems, authorized economic operators (AEO), and other areas to enhance transparency and speed up transactions at borders. Bangladesh is also in the process of upgrading customs management system from the ASYCUDA++ to ASYCUDA World. The new system will allow electronic data interchange system (EDI) across border/centralized customs, electronic national single window (NSW), and other e-customs facilities. Through the SASEC Trade Facilitation Program, Bangladesh has also agreed to pilot a scalable NSW led by the National Board of Revenue (NBR). To implement these policy actions, Bangladesh is in need of adequate resources to put the new systems in place. One of the ongoing initiatives that the Government of Bangladesh is undertaking to promote accelerated trade and investment is to make key information on trade regulations and procedures easily available to the trading community. With guidance from the Ministry of Commerce, Bangladesh is in the process of developing a trade portal that can be accessed through a website by traders and logistics operators. Private sector representatives in Bangladesh, including the Chambers of Commerce are also working actively in Bangladesh to provide information to businesses, including on market access, and bank and finance opportunities. The Government has requested ADB s support in providing timely and relevant information to traders. ADB s strategy is to support improvements in trade facilitation though a combination of interventions at the policy and institutional level, as well as in developing the physical infrastructure that enables trade. The SASEC Trade Facilitation Program loan for Bangladesh ($21 million) was approved in 29 November 2012 to provide assistance in reducing policy, institutional and technical constraints to trade facilitation. The Program loan has the objectives of: (i) establishing a modern and effective customs management system through accession to, and alignment with the RKC and the Framework of Standards to Secure and Facilitate Global Trade (SAFE); (ii) streamlined and transparent trade processes and procedures through support to the implementation of the ASYCUDA World and National Single Windows; and (iii) improved services and information for traders through the establishment of trade portals and trade facilitation committees. The funds from the Program loan will be released in two tranches and are anchored on Bangladesh s compliance to agreed tranche conditions. The first tranche release is expected by 31 March 2013 and the second tranche will be 18 months after the 1st tranche release. The proposed TA will provide need assistance to Bangladesh in fulfilling the conditions set in the loan agreement. The proposed TA for Bangladesh is consistent with South Asia s Regional Cooperation Strategy (RCS) 2011 2015 and the ADB s Country Partnership Strategy for Bangladesh, both of which accord high priority for regional connectivity and trade facilitation projects. Through consultations during the SASEC Working Group Meetings and those conducted for the SASEC Trade Facilitation Program Loan, the proposed TA on Supporting Bangladesh s Participation in the SASEC Trade Facilitation Program was conceptualized. The SASEC TFTWG Meeting in Thimphu, Bhutan on 8 November 2012 discussed and requested ADB to explore the possibility of providing TA to respond to specific trade facilitation needs of SASEC countries. Hence, the main purpose of the TA is to support Bangladesh customs to strengthen their institutional capacity in delivering the agreed policy reforms in the ADB program loan for SASEC Trade Facilitation approved in November 2012. Initially, the proposed CDTA will involve Customs but in the course of implementation, other government agencies may be involved in varying degrees.

Impact

Reduction in time and cost to trade in Bangladesh

Project Outcome

Description of Outcome

Better alignment of Bangladesh Customs procedures and practices to enhance transparency and speed up transactions and in conformity with practices of the World Customs Organization.

Progress Towards Outcome

The New Customs Act, which was drafted with assistance from the TA and will be considered by Parliament, will be in line with the Revised Kyoto Convention and SAFE Framework of Standards of the World Customs Organization.

Implementation Progress

Description of Project Outputs

1. Improved border clearance mechanisms 2. Improved automation of customs 3. Enhanced trader access to information

Status of Operation/Construction or Implementation Progress

Assisted the National Board of Revenue in (i) drafting the New Customs Act; (ii) preparing the Regulatory Impact Assessment of the New Customs Act; and (iii) preparing the standard operating procedures on on Risk Management (RM), Post Clearance Audit, Assessment (PCA), Physical Inspection, and Non-Intrusive Inspection, which are compliant with the SAFE Framework of Standards of the World Customs Organization (WCO).



Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.

Project Data Sheets (PDS)

Timetable

Concept Clearance
14 May 2013

Approval
20 Aug 2013

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