The World Bank has approved a new loan to help the Philippines modernize the operations of the Bureau of Customs (BOC).
In a statement, the World Bank’s Board of Executive Directors has approved an $88.28-million (about P4.27 billion) loan to improve the country’s customs administration and reduce transaction costs.
The project called “Philippines Customs Modernization Project” also aims “to enhance predictability and transparency of the clearance process at the country’s borders by financing the development of a world-class customs processing system [CPS].”
“Improved efficiency at the BoC will reduce trade costs and support Philippines’ competitiveness,” Ndiamé Diop, World Bank country director for Brunei, Malaysia, Thailand and the Philippines, was quoted in the statement as saying. “Automation will reduce face-to-face interactions and delays, and increase accountability, all of which strengthens efficiency and improves the business environment.”
The new CPS, the World Bank said, important processes like trade management and registration, cargo inspection, duty payment and clearance and release, among others, will be integrated in a “seamless” online system.
It is also expected to improve the BOC’s adherence to international standards and conventions for customs processing, including an audit trail for transactions, allowing for greater transparency and less opportunity for corruption.
The World Bank said the Philippines’s growth potential was constrained by inefficiencies in trade facilitation and customs administration.
For example, a container in the Philippines takes 120 hours to clear customs and associated inspection procedures, much higher than in neighboring Vietnam (56 hours), Thailand (50 hours) or Malaysia (36 hours).
“The unfavorable business environment for firms in the Philippines reduces the incentive to engage in export, thereby foregoing the opportunity to expand markets and create more jobs in the Philippines,” the World Bank said.
Based on enterprise survey data, the World Bank said domestic firms in the Philippines export only 3.5 percent of their output, compared to 26 percent in Malaysia and Thailand.
Among foreign firms, the World Bank said only 25.5 percent of these firms in the Philippines directly or indirectly export. This is also significantly lower than the 78.7 percent in Vietnam; 84 percent in Malaysia; and 93 percent in Thailand.
The World Bank said this was largely due to poor trade facilitation that can be traced to outdated infrastructure and business practices.
This has prompted the BOC to embark on a reform process to improve its trade procedures including the digitalization of its paper-based systems that are not in line with regional and international standards.
The World Bank also said the BOC is also improving its critical capabilities such as risk management, intelligence and post clearance audit, and other transaction processes that were vulnerable to corruption.