Two Customs Projects

Map of Russia

Russia (SCC- effective)

Loan Amount: $140.0 million

Project Amount: $187.2 million

Terms: 17-years, with 5-year grace period

Responsible Agency: RF State Customs Committee

Expected Closing Date: 30 June 2009

Afghanistan (ACD - preparation)

Emergency Customs Modernization and Trade Facilitation

Project Amount: $30 millionDuration: 39 monthsImplementation: UN Office for Project

Services (UNOPS)In addition to 7 different donors

Objectives

RussiaAccede to the WTOPromote best

practiceImprove complianceIntegrityRisk management

AfghanistanPost conflict

recoverySecure revenueImprove complianceIntegrityRe-establish transit…and security

Russian indicators2002 Russia Average SEETotal Customs revenue (USD million) 18,300.00 1,169Total Customs cost (USD million) 349.15 16.73Total Customs staff 62,802 2,212Total Customs salaries (USD million) 90.78 10.42Annual number of declarations 2,200,000 796,516Value of recorded imports (USD million) 41,200 5,552Value of recorded exports (USD million) 100,700 3,332Trade volume (USD million) 141,900 8,884

Revenue collected/ Customs staff (USD) 291,392 528,693Total Customs cost/ Revenue collected (%) 1.91% 1.43%Salaries/ Revenue collected (%) 0.50% 0.89%Trade volume/ Staff (USD) 2,259,482 4,016,812Declarations/ Staff 35 360Economic cost per declaration (USD) 158.71 21Average monthly salary cost 120 393

Afghan Indicators2002 - US Dollars KZK KRG TJK AFG SEE Total Customs revenue (US$ million) 1,013.67 91.70 22.41 1,169Total Customs cost (US$ million) 20.08 1.03 16.73Total Customs staff 5,539 1,308 1,500 1,100 2,212Total Customs salaries (US$ million) 10.77 0.25 10.42Annual number of declarations 330,121 69,740 25,914 100,000 796,516

Imports (US$Milion) 6887.9 632.8 693.42 1271.07 5,552Exports (US$Million) 9001.5 500 692.39 3,352Total (US$Million) 15889.4 1132.8 1385.81 8,884

Revenue collected/Customs staff 183,006.20 70,109.66 20,374.09 528,481.01Total Customs cost/Revenue collected 1.98% 1.13% 1.43%Salaries/Revenue collected 1.06% 0.89%Trade volume/Staff (USD) 2,868,641 866,055 923,873 4,016,275Declarations/Staff 59.60 53.32 17.28 90.91 360.09Cost per declaration 60.82 14.81 21.00Average monthly salary 162.01 13.70 392.56

Two different contexts with project similitude

ApproachOrganizationDesign

Lessons learned from past experience

Focus on objective rather than institution

Involve closely the private sectorTargets and performance indicatorsClear strategic approachMinimal pre-requirements

Project - Russia

ComponentsCustoms control and clearanceTrade facilitationFiscal policyLegal frameworkOrganizational structure and operational mngtFinancial managementHR managementIntegrityITProject management

Investment

4.029.594.055.0410.236.487.272.49133.233

Integrity

Customs inevitably are blamed for whatever goes wrong at the border

Customs are more vulnerable to corruption than other comparable agencies because they have immediate discrete control over tangible wealth

Russia – Strategy to promote integrity

MotiveElite ethos and esprit de corpsPositive career developmentHigh skill oriented trainingIncentives for high

performanceStronger supervision and

controlsSanctions for corruptionStakeholder surveys

OpportunityValuation proceduresAutomationInspection based on risk analysisReduction in discretionary

authorityTransparent clearance

requirementsRotation of officersFunctional organizationInternal anti-corruption strategy Audit unitStakeholder surveys

Russia - Risk Management

Selectivity is at times misunderstood “Greenn” can mean “Red” Negative selectivity: “White lists”

Risk management is at the core of the project Automation but not yet artificial intelligence Feedback

It expands beyond cargo processing Fully integrated in SCC management approach Drives the business process and administration

What is important

NEEDED:CommitmentUnderstandingIT supports, not an endJob process re-assessmentSocial pactPerformance measurementPilot sitesRegional?

RUSSIA:PreparedRisk managementIT system upgradeableMappingSpecificity factoredIndicatorsCorridorsEVRAZES support

How does this apply to Afghanistan?

Use Persuasion rather than ImpositionRespecting the Afghan Social PactsInternational performance standards may not be directly applicable without heeding the Afghan cultural contextPolitical and “informal” commercial realities cannot be ignored

Afghanistan - Building on efforts to-date

New WB-supported staff policyNew Customs declaration (ACCD) implemented in KabulChanging role of Chambers of Commerce—valuation at Kabul now done by CustomsDecree for new tariff regime with rationalized exchange rate awaiting decreeKey Afghan Customs Managers being recruitedProvincial/Regional customs consultants in-place in Herat and MazarOverall decision to roll-out reforms to provinces/regions

Like everywhere, problems remain in Afghanistan

Valuable but scattered assistance/inputsLimited ACD recipient capacity (has been slow in emerging)--in HQ, DG, Directors; in regions, Directors, operations staff; under-resourced HQ administration (human, equipment, communications, environment)Missing link between budget and policy—direct funding of TA by donors a problemThe strategic role of Afghan Customs still to be defined—both in terms of revenue and public administration and socio-economic (i.e., protecting society and promoting trade)Under-developed synergies with Commerce, Transport, and Police (Interior)

Redefining the role of Afghan Customs which…

Secure revenueHelp protect societyFacilitate trade and thus economic development and job creation

Hopefully, this will generate (i) interest, (ii) motivation, (iii) recognition, and even (iv) enthusiasm…

Reforming the Customs and Trade Regime—To build upon the good work to-date, we need….

Clear definition of, and an agreement on, the role of Customs in the development of AfghanistanEmpowered and supported Afghan leadership in CustomsBetter Donor CoordinationEnhanced Communication and Trust between all stakeholders and change process enablers (MoCommerce, MoInterior, MoTransport, MoF/ACD)Well targeted, coordinated, and enhanced resources

The donors

DFID – HR, training, management advice, change management processUSAID – Implementation and Operations (Valuation and classification,Procedures and documentation, Customs code, Customs brokers) and Enforcement (Border control and management, Drugs/smuggling, Corruption)EC – Transit development and facilities (preferably at borders)And the Bank

The World Bank

Customs Policy and overall strategic framework Performance based Budget management Customs automation (ASYCUDA) Implementation advisors (officers from various

customs services to work with Afghan line-staff) ACD HQ restructuring implementation and roll-out to

regions Infrastructure (preferably regional ICDs, HQ, and

Regions) Information and communications infrastructure Incremental operating costs for the overall program

The World Bank (continued)

Trade Facilitation Policy and overall strategic framework for restructuring Alignment of national trade documents (ASYCUDA

related first) Transit treaties (bringing reality into “political”

agreements+corridor agreements) Bureau of Standards (through UNIDO) Measurement of trade and transport logistics costs and

time Incremental operating costs and some infrastructure

and information and communications support to the above

WTO accession assistance through UNCTAD Review role of state-owned enterprises

Some directions

Why ASYCUDA?What about infrastructure?Staffing / redundanciesLegislation

The legislative critical path

Agency Activity

Customs MoF MoInt MoT Commerce Chamber

Ind

Cargo control

(x) X

Transit X

Valuation (x) X

Passenger control

X

Standards

X

Petroleum

X

A cautious approach

There is control, but it does not look like what we are used toReporting mechanisms are different, but solidEven without bank guarantees, trucks arrive at destinationCommunication does not follow our standards

The chances of success

Russia: Voluntarist, necessary steps taken, skills exist, private sector is on board, but hoist Customs to Western levelA case of transition

Afghanistan: Coordinate, build on social factors, use society’s mechanisms, create incentives and build an imageA regional integration