The World Bank approved on Wednesday a $88.28-million (around P4.2 billion) loan for the Philippine Customs Modernization Project to improve the Bureau of Customs’ (BoC) administration, reduce transaction costs, and enhance the predictability and transparency of the clearance process.
In a statement, the Washington, D.C.-based financial institution said the loan would improve the bureau’s administration by enhancing the streamlining and automation of its procedures and supporting the development of a world-class customs processing system (CPS).
“Improved efficiency at the Bureau of Customs will reduce trade costs and support [the] Philippines’ competitiveness,” Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Thailand and the Philippines, said in the statement.
“Automation will reduce face-to-face interactions and delays, and increase accountability, all of which strengthens efficiency and improves the business environment,” he added.
With the CPS, important processes, including trade management and registration, cargo inspection, duty payment, and clearance and release, would be integrated into a seamless online system.
The loan would also improve adherence to international standards and conventions for customs processing. This includes an audit trail for transactions, which allows for greater transparency and fewer opportunities for corruption.
According to the World Bank, the Philippines, before the coronavirus pandemic, was one of the most dynamic economies in East Asia and the Pacific, but its 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). This provides a competitive advantage to firms in these countries vis-à-vis their Filipino counterparts,” it said.
The World Bank also said an unfavorable business environment for firms in the Philippines reduced the incentive to engage in exports, thus losing the opportunity to expand markets and create more jobs in the country.
Citing an enterprise survey data, the multilaterial lender said local companies exported only 3.5 percent of their output, compared to 26 percent in Malaysia and Thailand.
It added that 78.7 percent of foreign firms in Vietnam, 84 percent in Malaysia and 93 percent in Thailand directly or indirectly export, compared with 25.5 percent in the Philippines.
“Relatively poor trade facilitation performance at the country’s borders can partly be attributed to outdated infrastructure and business practices,” the World Bank said, noting that the bureau “recently embarked 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; and the improvement of its critical capabilities, such as risk management, intelligence and postclearance audit, and other transaction processes that were vulnerable to corruption.”
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