Towards South Asian Economic Union- Trade Facilitation ... Priya.pdfTax, Patna . Linkage between TF and Trade Growth • Several Studies show positive Linkage between trade facilitation

Towards South Asian Economic Union- Trade Facilitation including

Customs Cooperation

Shashank Priya

Commissioner of Central Excise & Service Tax, Patna

Linkage between TF and Trade Growth

• Several Studies show positive Linkage between trade facilitation and growth of trade Djankov, et al (2006)

i. 1-day delay in product shipment reduces trade by 1% ii. 1 day’s delay reduces relative export competitiveness of time-

insensitive goods by 1% and time sensitive goods by 7% Wilson 2007

a. 10% reduction in time at the border of importing country, increases trade by 6.3%

b. 10 reduction in required number of signatures on import documents could increase trade by 9.9%

c. 10 reduction in number of documents required by importer generates 11% increase in trade

Linkage between TF and Trade Growth

Dollar and Kraay (2001); Duval and Utokhtam (2009)

Expansion in trade due to enhanced trade facilitation could lead to increase in per capita GDP in Asia and Pacific economies by 2.5%

OECD (2009)

Decreasing direct and indirect trade transaction costs by 1% can result in an average of 0.25% - 0.4% increase in GDP

Martincus et al (2013)

One additional day of delay in customs could cause 2.8% decline in growth rate of exports (based on firm level export data from Uruguay)

Country Ranking Country Ranking

Singapore 1 Philippines 108

HK China 2 Pakistan 110

Malaysia 6 Indonesia 120

Republic of Korea 7 Bangladesh 130

China Taipei 16 India 134

Thailand 18 Cambodia 137

Sri Lanka 85 Bhutan 141

China 96 Lao PDR 159

Vietnam 99 Afghanistan 164

Nepal 105 Myanmar 182

WB Ease of Doing Business Report-2014 Country Ranking (out of 189)

Time and Cost of Import & Export across regions (WB

Doing Business Report 2013)

Economy

Name

Documents to export

(number)

Time to export (days)

Cost to export (US$ per

container)

Documents to import

(number)

Time to import (days)

Cost to import (US$ per

container)

East Asia & Pacific 6 21 923 7 22 958

Eastern Europe & Central Asia 7 26 2,134 8 29 2,349

Latin America & Caribbean 6 17 1,268 7 19 1,612

Middle East & North Africa 6 19 1,083 8 22 1,275

OECD high income 4 10 1,028 5 10 1,080

South Asia 8 32 1,603 9 33 1,736

Sub-Saharan Africa 8 31 1,990 9 37 2,567

5

Time and Cost of Import & Export across regions (WB Doing Business Report 2014)

Economy Name

Documents to export

(number)



container)

Documents to import

(number)



container)

East Asia & Pacific 6 20.2 864.0 7 21.6 895.6 Eastern Europe & Central Asia 7 23.6 2,154.5 8 25.9 2,435.9 Latin America & Caribbean 6 16.8 1,299.1 7 18.7 1,691.1 Middle East & North Africa 6 19.4 1,166.3 8 23.8 1,307.0 OECD high income 4 10.5 1,080.3 4 9.6 1,100.4

South Asia 8 33.4 1,922.9 9 34.4 2,117.8 Sub-Saharan Africa 8 30.5 2,200.7 9 37.6 2,930.9

6

Time and Cost of Import & Export across regions

(WB Doing Business Report 2013)

Time and Cost of Import and Export in Asia Pacific -2013


Economy Name

Rank Documents to

export (number)



container)

Documents to import

(number)



container)

Bangladesh 119 6 25 1,025 8 34 1,430

Bhutan 172 9 38 2,230 12 38 2,330

Cambodia 118 9 22 755 10 26 900

India 127 9 16 1,120 11 20 1,200

Indonesia 37 4 17 644 7 23 660

Lao PDR 160 10 26 2,140 10 26 2,125

Malaysia 11 5 11 435 6 8 420

Mongolia 175 10 49 2,555 11 50 2,710

Nepal 171 11 41 1,975 11 38 2,095

Pakistan 85 8 21 660 8 18 705

Papua New Guinea 120 7 23 949 9 32 1,130

Philippines 53 7 15 585 8 14 660

Solomon Islands 86 7 24 1,070 5 20 1,037

Thailand 20 5 14 585 5 13 750

Vietnam 74 6 21 610 8 21 600 7

Time and Cost of Import & Export across regions (WB Doing Business Report 2014)

Time and Cost of Import and Export in Asia Pacific -2013


Economy Name Rank

Documents to export

(number)



container)

Documents to import

(number)



container)

Bangladesh 140 6 28.3 1,281.0 9 33.6 1,515.0

Bhutan 165 9 38.0 2,230.0 11 37.0 2,330.0

Cambodia 124 8 22.0 795.0 9 24.0 930.0

India 126 7 17.1 1,332.0 10 21.1 1,462.0

Indonesia 62 4 17.0 571.8 8 26.0 646.8

Lao PDR 156 10 23.0 1,950.0 10 26.0 1,190.0

Malaysia 11 4 11.0 525.0 4 8.0 560.0

Mongolia 173 11 44.0 2,745.0 12 45.0 2,950.0

Nepal 171 11 40.0 2,545.0 11 39.0 2,650.0

Pakistan 108 8 20.7 765.0 8 18.4 1,005.0 Papua New Guinea 138 7 23.0 1,335.0 9 30.0 1,350.0

Philippines 65 6 15.0 755.0 7 15.0 915.0

Solomon Islands 87 7 22.0 840.0 5 20.0 785.0

Thailand 36 5 14.0 595.0 5 13.0 760.0

Vietnam 75 5 21.0 610.0 8 21.0 600.0

Sri Lanka 69 7 16.0 560.0 7 13.0 690.0 8

Features of Trade in South Asia

• Trade costs one of the highest in South & Central Asian Countries

• Compared to G-7 countries, it takes 3 times longer to complete export procedures in developing countries in Asia Pacific

Reasons:

i. Greater documentation requirements

ii. Greater trade costs because of more and sometimes non- transparent trade procedures

iii. Poor trade infrastructure

iv. Illegal & informal payments

v. Problems greater for Asian landlocked countries lack of intra regional trade facilitation.

vi. Export & Import Cost in landlocked countries: US $ 2,600 to $ 3000 per

vii. Container

Asian Average: US $ 1,300 to US $ 1,500

• Traders in South Asia tend to trade more with distant markets such as North America, Japan and Europe also because they are relatively stable and generate “hard” currency

• Largely not part of GVCs

Features of Trade in South Asia (contd.)

• South Asian (and SE Asian) countries (except landlocked Nepal and Bhutan) are highly dependent on maritime trade through their ports

• TF efforts largely oriented towards seaports/airports as opposed to land borders

• Automated customs processes first commenced at the airports and seaports- much later spread to key land borders

Issues in Trade Facilitation

• Excessive documentation- required by customs, immigration, quarantine and security (CIQS) organizations- an Economic Union can help in standardization and harmonization of formats like Single Administrative Document (SAD) of EU- may be take it a step further to harmonise sanitary, phytosanitary, veterinary and standard certification- will particularly help trade facilitation of landlocked countries

• B’desh-Nepal Trade with India as transit point: Export/import from Nepal-12 docs; Export from B’desh- 7 docs/import-9 docs

Issues in Trade Facilitation(contd.)

• Implementation of Modern Customs Procedures- will encourage harmonization and standardization of procedures by using international instruments like the Revised Kyoto Convention of WCO (as in 2014, only Bangladesh, India and Sri Lanka are signatories)- will encourage implementation of risk management, audit-based controls, advance rulings


• Greater use of Information and Communication Technology (ICT) systems: Use of Direct Trader Input (DTI) like India’s ICEGATE; use of automation, tracking system for movement of transit goods to landlocked countries

• Establishing National and Regional Single Window- will promote automation of other agencies- example of ASW targeted by 2015 but likely to be implemented by 2018


• Improved and faster compliance with National Technical Standards: Mutual Recognition Agreements for accreditation and certification activities; online transmission of test results; assistance in developing national quality infrastructure systems – studies show that SPS and TBT barriers most frequent NTB in South Asia

• Improved Border Infrastructure-Indian govt. developing a no. of large Integrated Check Posts (ICPs) at main land borders with Bangladesh, Bhutan, Myanmar, Nepal and Pakistan - “form follows function” approach desirable; coordinated border management; harmonized working hours


• Transport Facilitation- allow movement of vehicles registered in one country into another upto the unloading point of goods- issue of transport imbalance to be addressed through annual permit schemes