Bangladesh: South Asia Subregional Economic Cooperation Integrated Trade Facilitation Sector Development Program

Industry and trade / Industry and trade sector development

The proposed South Asia Subregional Economic Cooperation (SASEC) Integrated Trade Facilitation Program (the Program) will help improve Bangladesh's border infrastructure and trade facilitation environment, thereby contributing to the national goals of promoting and diversifying exports. The Program will support Bangladesh's implementation of the World Trade Organization's (WTO's) Trade Facilitation Agreement (TFA), a set of new, binding international standards, and related best practices on transport and trade facilitation. The Program will also support for the Government of Bangladesh to establish and improve border infrastructure, which will reduce the cost and time of cross-border transactions. This aligns with the government's ongoing customs reform and modernization initiatives, the SASEC Operational Plan 2016-2025, and one of the country partnership strategy's (CPS) priority areas, deepening regional cooperation and integration.

The proposed Program will help speed up clearances, improve compliance, focus essential resources on cargo carrying higher risk, strengthen infrastructure, and lead to better administration of customs laws and regulations (by initial introduction or by supporting more effective and deeper implementation). The key measures in this regard could include (i) pre-arrival and paperless processing; (ii) strengthened risk management; (iii) post-clearance audit; (iv) authorized economic operator (AEO)/trusted trader programs; (v) establishment of national single window; (vi) expedited shipments; (vii) improvements in inland clearance system, transit and transshipments; (viii) temporary importation systems; (ix) expanding the scope of advance rulings; and (x) equipping customs laboratories. These measures provide opportunities to enhance trade facilitation sector efficiency and performance, consistent with the objective of the government.

The Doing Business Survey by the World Bank shows significant inefficiencies in border operations in Bangladesh, ranked as 176 out of 190 countries. Specifically, there is excessive physical examinations of cargo, (almost 100%), manual input of documents, including duplication of documents previously submitted, even though a customs information technology (IT) system exists and little use of pre-lodgement and assessment of customs declaration and associated documents before the cargo arrives at the border post. This indicates an absence of the implementation of World Customs Organization (WCO) and WTO international standards relating to risk assessment of cargo, and the use of the WCO data model to improve efficiency of customs procedures.

Modernization of customs and trade facilitation are essential in the current competitive trade environment, but the country is behind other South Asian countries. In the World Bank's logistics performance index (LPI), weakness is apparent in many areas of the global performance of Bangladesh. Its overall LPI score in 2018 was 2.58 out of 5. Its country rating is 100, as compared to 160 countries. For the same reasons previously mentioned, specifically the lack of the use of risk management principles, the need to submit manual documents for every shipment, the lack of use of pre-lodgement of information, adequate personnel and effective IT facilities, Bangladesh showed weakness in 4 out of 5categories of logistics performance index (LPI); namely, customs, infrastructure, international shipments, quality logistics services and tracking and tracing. It showed average score in one category, timeliness. Customs, for example scored 2.3 out of 5 and ranked overall 121 out of 160 in the 2018 LPI study.

Thus, there is need to implement the next phase of customs modernization reforms, as part of the wider trade facilitation agenda to improve the efficiency of trade, promote exports, support the implementation of the WTO TFA and make the reforms sustainable through capacity building and institutional strengthening. The impact of the reforms already initiated can be made more beneficial by promoting better on-the-ground implementation.

Customs legal framework improved and aligned with international standards.

Cargo clearance processes made efficient, predictable, transparent, and automated

Institutional capacity strengthened

Trade and transport infrastructure improved