Country Director Remarks at Trade Facilitation Seminar

 

Seminar on Trade Facilitation and Customs Reform in South Asia

Sponsored by the World Bank and the European Union

June 8-10, 2004

Opening remarks by Christine Wallich, Country Director,

World Bank, Bangladesh

 

 

Good Morning. It is a great pleasure to welcome you all to this regional seminar on trade facilitation and customs reform which the World Bank has jointly organized with the European Union.   As Bangladesh will very soon face the challenge of global competition with the phasing out of the Multi Fiber Agreement (MFA), the setting of this seminar in Dhaka is very timely. To state the obvious, there is much to do in the areas of trade and customs procedures to further expedite processing of import and export cargo in this country. 

 

At the global level, with the steady fall in tariffs in most countries and the globalization of supply chains,   the non-tariff cost of moving goods across borders has become increasingly important. Countries can price themselves out of the market very easily via high costs of moving goods.   Trade facilitation is concerned precisely with lowering such costs, whether due to domestic policies, poorly functioning institutions, or weak infrastructure associated with ports, customs administration, transit, and transportation systems for trade. 

 

According to recent Investment Climate Surveys, Bangladesh compares poorly with China and India in several areas of trade facilitation, for example, in the number of days it takes to clear import and export cargo through ports and customs.  The turn-around times for feeder vessels at the Chittagong port is about a week compared with two days in Bangkok and a few hours in Singapore. Such differentials raise the cost of doing business with Bangladesh and the cost of doing business in Bangladesh, and help to undermine the competitiveness of Bangladesh’s exports.

 

With a better functioning port and better road/rail infrastructure, Bangladesh could reduce lead times for garment exports by at several weeks.   In the post-MFA world, this would translate into additional exports of several hundred million dollars (due to lower costs and higher market share. )   To re-state the obvious, time is money: transport and customs delays reduce the competitiveness of Bangladeshi exports, while also adding to the lead time for those who need imports for the production of goods for export.  

 

A modern customs administration, with transparent  & expedited customs clearance procedures further enhance trade logistics.  With less discretionary power for customs officials, the scope for corruption is reduced, as are the costs that go with it.

 

In sum, better customs logistics and infrastructure reduce the costs of doing business and would make Bangladesh a more attractive place for investment –  by domestic or foreign firms.  With the increasing globalization of production  -- intra-firm global trade now makes up 33 percent of total world trade -- the efficiency of a county’s trade logistics are a more and more important  factor in multi-national firms’ decisions on plant locations and operations.  Trade logistics are easily as important as tax privileges in such decisions, and indeed, one can imagine that in some cases, no amount of tax privileges can make up for the costs of poor trade logistics.

 

Unfortunately, trade facilitation has become more of a challenge given the now-heightened concerns for security and terrorism.  Many countries have introduced programs of enhanced container cargo inspections, advanced airport security equipment, and strengthened customs administrations.  But security is not incompatible with trade facilitation objectives, and countries that learn to cope with this new challenge will clearly have an advantage.

 

As you know, trade facilitation has emerged as one of the most important new issues proposed for inclusion in the Doha Development Agenda.  While there is no agreement yet  to include it in the WTO framework, many members are now leaning in that direction.  In principle, it should be possible to use this mechanism to further everyone’s mutual interest in simplifying cross-border trade.

 

At Cancun in September 2003, the World Bank announced a program to step up trade-related assistance in support of trade facilitation and logistics with more resources dedicated to research, analysis, and projects.  Now, one-third of Bank member countries have projects in this field, and 25 more countries are expected to be added in the next three years.  Going forward, the Bank will expand also its efforts in technical assistance and capacity-building in this crucial arena in Bangladesh, since  trade facilitation and related issues are critically important for this county’s future.

 

In the past, the Bank has promoting trade reforms through its adjustment lending,  investment projects and technical assistance. The Industrial Sector Adjustment Credits I & II, in the late 80s and early 90s, provided budgetary support for the trade liberalization measures that the then-Government undertook under the leadership of the Finance Minister.   This was followed by an Export Diversification Project,  whose largest component, Customs Modernization, was a major step in trade facilitation. We intend to carry this initiative forward with more support in bolstering the competitiveness of Bangladeshi exports in the post-MFA world.

 

Recently, the Bank has committed $4 million IDA grant support to the National Board of Revenue (NBR) to set up a centralized IT system, and to complete the remaining modules of ASYCUDA to ensure swift, transparent and completely automated customs processing.   The Bank is also supporting the Government’s plan to modernize the NBR administration, in order to facilitate the greater volume of trade that is expected over the medium term, and we are exploring further support to trade facilitation through physical infrastructure projects in this area. 

 

Along with the Government’s trade policy reforms of lowering tariffs and removing quantitative restrictions, better trade logistics could easily   raise trade to 35 percent of GDP, from its rather low level of 31 percent now, in the next years. 

 

Let me conclude by saying the World Bank is very pleased to host  this seminar together with the European Union.  We hope it will lead to a better understanding of the importance of trade facilitation, the role of customs administration in enhancing trade logistics, and the potential benefits that could come from  a multilateral agreement on trade logistics.  Going beyond the workshop, the Bank will continue to provide assistance to Bangladesh as well as other countries to help them achieve growth and prosperity in a vastly more competitive world.    Thank you.