EDITORIAL: Why We Need Transparency in Trade Facilitation

Without transparency, goods crossing borders are prone to corruption, and subject to redundant and lengthy clearance processes.

Without transparency, goods crossing borders are prone to corruption, and subject to redundant and lengthy clearance processes.

By Lee Kok Leong, Executive editor, Maritime Fairtrade

Transparency across the trade facilitation process is important to the growth of a country’s economy. Without transparency, goods crossing borders are prone to corruption, and subject to redundant and lengthy clearance processes. There are also multiple documents requirements in different formats and with different data elements. All these obstacles increase the cost and time of doing trade.

Trade facilitation refers to a specific set of measures that streamline and simplify the technical and legal procedures for goods entering or leaving a country.

It covers the full spectrum of border procedures from the simplification of processes, harmonization of procedures, operations and documents with international practices, to the standardization of formats internationally agreed by all trading parties.

In a globalized world where goods often cross borders many times as both intermediate and final products, transparent trade facilitation helps lower overall trade costs and increase economic competitiveness, in particular for developing and emerging economies.

According to the World Bank, it usually takes three times as many days to export goods for developing economies as it does for developed ones. Also, exports from developing countries require nearly twice as many documents and six times as many signatures.

The OECD finds that every extra day required to ready goods for import or export decreases trade by around 4.5 percent. For the APEC region, reforms in countries that perform below the regional average could increase intra-APEC trade by US$245 billion.

A transparent and simple trading procedures not only promote economic competitiveness, but more importantly, it also removes incentives and opportunities for border-related corruption, a consistent problem in the maritime industry, where 90 percent of global trade is conducted.

This is a more efficient delivery of public services that will allow the government to maintain high security levels and effective control, thus diminishing opportunities for corruption.

Transparency is the starting pointing for ensuring efficiency and is a pillar supporting good governance and integrity. A reputation for transparency will help a country to attract foreign direct investment.

Whether exporting or importing goods, transparent trade facilitation benefits all countries.

Vietnam's success story

Let’s take a look at the case study of Vietnam, which received help from the United States Agency for International Development (USAID) in reforming customs regulation to enhance trade. This is a good example of a developing economy where the government conferred with the industry to improve transparency.

Vietnam has had considerable success with export-led economic growth in recent years. However, problems with governance and competitiveness presented challenges to continued growth and international integration.

The issues, according to Nguyen Anh Tuyet, leading the Customs and Logistics Department at automotive company Ford Vietnam, stemmed from inconsistencies in customs procedures, and excessive amounts of red tape.

“We had to process customs declaration forms at 11 separate ports, which resulted in multiple address and payment mistakes as well as significant delays,” said Tuyet, describing a typical example.

These issues were not just affecting Ford Vietnam, but were increasing costs for thousands of businesses across the country. In the World Bank’s 2016 Doing Business indicators, Vietnam was ranked 108 out of 190 countries in its performance on “trading across borders.”

As a result, the Vietnamese government made determined efforts to cut red tape and simplify procedures, including working with USAID to strengthen consultations between the government and the business community to revise burdensome regulations.

Tuyet said, “Not only my company, but thousands of others have benefited from the growing transparency of the customs sector.”

This transparency has also translated into improved World Bank’s ranking. The latest Doing Business report saw Vietnam jumped 15 places, from 108 in 2016, to 93 in 2017. Vietnam now ranks fourth among Southeast Asian countries for “trading across borders,” behind Singapore, Thailand and Malaysia.