67869 POVERTY THE WORLD BANK REDUCTION AND ECONOMIC MANAGEMENT NETWORK (PREM) Economic Premise APRIL 2012 • Number 78 UN 010 • Numbe 18 Collaborative Border Management: A New Approach to an Old Problem Gerard McLinden Border clearance processes are among the most problematic links in the global supply chain and frequently undermine national competitiveness by increasing the cost of exports and reducing reliability of supply. As a result, securing meaning- ful reform of border management procedures has become an important issue for the development community. However, it remains an area where little effective guidance is available to reformers and development professionals. A recent publication released by the International Trade Department of the World Bank was developed in response to this need. The Border Management Modernization Handbook (World Bank 2011) outlines a new and more comprehensive reform and modern- ization agenda based on the concept of collaborative border management (CBM). The CBM concept shifts the focus beyond the traditional customs-specific trade facilitation agenda to a new and more comprehensive “whole-of-government� approach to reform that relies less on institution-specific reform and more on a wider trade supply chain–focused approach designed to tackle the major barriers traders face when navigating the frequently complex and opaque regulatory requirements that governments impose on international trade. Border clearance processes are among the most important and little effective guidance is available to reformers and develop- problematic links in the global supply chain. According to Do- ment professionals. Answers to key questions such as how to ing Business data,1 it takes three times as many days, nearly identify main reform priorities, where to start, what to do, how twice as many documents, and six times as many signatures to to secure genuine political commitment, what institutional import goods in poor countries than it does in rich ones. Delays structures are most appropriate, and how to best mobilize and and high transaction costs at the border undermine a country’s support constituencies for change remain at best only partially competitiveness by increasing the cost of exports and reducing answered. reliability of supply. Therefore, trade facilitation reform that A recent publication released by the International Trade improves border management procedures has become an im- Department of the World Bank was developed in response to portant development issue, as shown by the increased levels of these needs. The Border Management Modernization Handbook investment in trade facilitation reform by governments and the (World Bank 2011) is designed to provide practical advice to development community alike. development professionals, national policy makers, and govern- However, despite widespread recognition of the need to ment officials who are not themselves border management ex- improve border management regimes, it remains an area where perts, but are often charged with implementing trade facilita- 1 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise tion–related reform programs. The handbook outlines a new Border Management Reform Goes Far and more comprehensive reform agenda based on the concept Beyond Customs Modernization of collaborative border management (CBM). The CBM con- While improving the performance of customs remains a high cept shifts the focus beyond the traditional customs-specific priority for many countries, and it is certainly an unfinished trade facilitation agenda that has been supported by the devel- agenda for the development community, it is only one of the opment community for many years to a new and more compre- many agencies involved in border processing, and there is now hensive approach to reform focused on securing major trade strong evidence to demonstrate that it is often responsible for facilitation gains for developing countries. The model relies less no more than one-third of regulatory delays. For example, in on an institution-specific reform agenda and more on a trade many cases, logistics professionals have a higher level of satisfac- supply chain–focused approach designed to tackle the major tion with customs than with other border government agen- barriers traders face when navigating the frequently complex cies. Data from logistics performance indicators (LPI) suggest and opaque regulatory requirements that governments impose that logistics professionals across the world rate their level of on international trade. satisfaction with customs much higher than that of other bor- While the impact of poorly functioning border manage- der management agencies (figure 1; World Bank 2010). This ment procedures on national competitiveness is well under- highlights the need to focus attention on reforming and mod- stood, the fact remains that customs and other border manage- ernizing the systems and procedures employed by border man- ment agencies in many countries have frequently paid lip agement agencies other than customs, including health, agri- service to the trade facilitation agenda. As a result, implement- culture, quarantine, police, immigration, standards, and ing meaningful change in the control focus that has dominated myriad other organizations involved in regulating trade flows. the culture of border management institutions for literally While criticism of border clearance delays and high costs is thousands of years is not an easy task, but effective implementa- frequently directed at customs officials, the fact is that it is not tion of the CBM model has shown that government agencies uncommon for over 30 different government agencies to play a can actually improve regulatory control while at the same time role in the processing and clearance of goods. Recent experi- delivering trade facilitation dividends for the trading commu- ence sheds some light on the scale of the problem and suggests nity. Strong evidence is now available to prove that the appar- that clearance times are largely determined by the performance ently contradictory objectives of facilitation and control are in of the weakest link in the border processing chain. It matters fact two sides of the same coin, and both can be accomplished little if customs declarations can be submitted and processed through well-designed and effectively implemented reform electronically if a raft of documents still needs to be taken by and modernization programs. hand to other agencies, then examined and approved before Figure 1. Customs Often Performs Better Than Other Government Agencies Regulating Trade (since 2005) 70 customs agencies other border agencies 60 LPI respondents (percent) 50 40 30 20 10 0 a an ia be ca l A nd lo ion c r ric nd �c nd ve rat mi fo As ric ar rib eri an ra a sia Af t a ci a De ope no tion Af ah nt pe h Ca m Pa Asia en and a th as ut -S d A Ce uro co a or E So Co E anis b an atin N dle st Su t E Ea g L id pm Or M - Source: World Bank 2010. 2 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise customs can release the goods. Indeed, the United Nations While such initiatives offer real promise of delivering Conference on Trade and Development (UNCTAD) has esti- genuine benefits to both the trading community and govern- mated that: “A single trade transaction may easily involve 30 ments, the degree of complexity associated with their effec- parties, 40 documents, 200 data elements, and require re-cod- tive implementation has often been underestimated. To put it ing of 60–70 percent of all data at least once.� Achieving mean- simply, establishing a National Single Window is not a simple ingful trade facilitation gains therefore requires comprehensive “plug and play� activity, nor is it possible to simply replicate “whole-of-border� reform initiatives and effective cooperation, what has worked in one country in another country with information sharing, and genuine collaboration among all bor- quite different capabilities, resources, and institutional prob- der management agencies. lems. Development professionals recognize how difficult Understanding the problem and doing something mean- achieving institutional reform can be even when only one gov- ingful about it are quite different matters. Most efforts from ernment agency is involved, but the risks and challenges are the development community are still heavily focused on cus- multiplied exponentially when many agencies are involved. toms reform or building trade infrastructure; little effective The same is true for cross-border initiatives such as the estab- support has been directed at improving the performance of lishment of One Stop Border Posts, which involve achieving other border agencies. Moreover, noncustoms agencies typical- procedural harmonization and full integration between two ly lack the internationally agreed on reform instruments and or more countries. As a result, and far too often, extremely blueprints that have guided much of the customs reform agen- ambitious modernization programs are initiated and heavily da over the past few decades. In part, this is because noncus- supported by the development community without first toms agencies have no equivalent to the World Customs Orga- meeting the necessary preconditions for success. One of the nization, which has provided a focal point for modernization of most important preconditions is a practical vision described customs authorities throughout the world. In addition, little in clear and practical terms that is owned and fully supported analysis has been conducted on the political economy issues by all stakeholders. and complex interagency dynamics that impact on achieving Such a vision should not be a long and elaborate disserta- meaningful results in this important area of public sector re- tion, but rather a short and focused description of the goal that form. In effect, these agencies have largely continued to per- reformers are working to achieve. Box 1 contains an example of form their many regulatory functions in much the same way as a short but clear vision for border management that was devel- they have for years, and have not embraced automation nor the oped by a reform team as part of the preparation process for a selective risk-based approaches to managing regulatory compli- trade facilitation project. The team developing the vision con- ance used by customs agencies. The development community sisted of officials from all key border management agencies as has only recently realized the negative impacts of the some- well as members of the trading community. times hundreds of nontariff barriers administered by these While this all sounds like common sense, experience sug- noncustoms border agencies. gests ambitious reform programs are frequently launched with- out first developing a clear vision for the future. Rather, reform Toward a New Border Management programs frequently simply list or describe the activities that Paradigm will be financed based on a poorly articulated series of broad Partially because of the cross-country comparison data now trade facilitation objectives. Evidence from around the world available, many developing countries are recognizing the need definitively shows that it is critical to first develop a clear and to improve their border management performance and are unambiguous reform vision, which should be supported by re- keenly interested in working to harmonize, streamline, and alistic development objectives based on a pragmatic assessment simplify border management systems and procedures across all of implementation capacities and practical analysis of challeng- border agencies, not just customs. This has led to a range of new es reformers will almost certainly face. The challenges reform- and innovative approaches such as the establishment of Na- ers typically encounter include: tional Single Window systems, which allow traders to submit • Frequent changes in political and administrative all import, export, and transit information required by regula- leadership tory agencies via a single electronic gateway, instead of submit- • Rivalries between government agencies based on competi- ting essentially the same information numerous times to differ- tion for resources and influence ent government entities, including some that are automated • Inadequate incentives for officials to buy in to the reform and others that still rely heavily on paper. Indeed, in recent agenda times, requests for support for trade facilitation initiatives from • Insufficient physical, technical, and financial resources developing countries overwhelmingly mention the desire to es- • Lack of experience in project management and tablish National Single Window regimes. procurement 3 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise also include a robust cost-benefit analysis that will help con- Box 1. Border Management Vision Example vince decision makers that the merits of the comprehensive re- By the end of the project, the border management environ- form program are worth the costs. Using a range of hard and ment will be characterized by: soft data focusing particularly on regional comparisons will go • A paperless trading environment in which 90–100 per- a long way to demonstrating that the need for reform is press- cent of documentary requirements and approvals are transmitted to regulatory agencies electronically and ing, and that a comprehensive reform and modernization pro- where relevant government agencies share information gram is not a zero sum game, but a genuine win-win situation and rationalize processes to eliminate duplication and for all key stakeholders. overlapping mandates. The system should be compli- As with many contemporary reform and modernization ant with all regional and internationally agreed upon programs, technology provides the foundation for many of the standards. • A clear, concise, and transparent legal framework in initiatives that underpin the collaborative model, but these which traders know their rights and obligations and are need to be designed and/or procured to meet the individual able to challenge decisions through recourse to appro- needs, capabilities, and circumstances facing particular coun- priate administrative and legal agencies. tries. Well-designed information and communications tech- • A Single Window approach to allow traders to discharge nology (ICT) solutions can play a major role in changing the all regulatory requirements through one central point of strong silo culture that dominates many border management contact. • Adoption of a comprehensive risk-management and agencies. In effect, the intelligent use of ICT can facilitate coop- compliance-improvement philosophy leading to more eration among different agencies so that they can implement focused targeting of high-risk shipments and a radically their collective government mandates while at the same time reduced need for intrusive and time-consuming routine protect their individual mandates, administrative power, politi- physical verification of cargo. cal status, and resource allocations. Moreover, the collaborative • Close cooperation and genuine partnership between government agencies and the private sector. model doesn’t require forced organizational change—which in- • One World Trade Organization (WTO)–compliant ser- variably creates significant interagency conflict and strong resis- vice fee to replace the current range of fees and charg- tance—but instead relies on the creation of an overarching vi- es demanded by regulatory authorities. sion and a governance organization charged with ensuring that • Organizational structures and human resource man- all stakeholders are working together to achieve the agreed vi- agement approaches designed to ensure officials are sion and that all involved are accountable for their individual well trained, appropriately remunerated, and well re- garded by the general public. and collective efforts. However, while technology can facilitate adoption of a Source: Author’s compilation. CBM approach, it cannot be a substitute for the hard work that is needed to achieve major improvements in key processes and procedures. This requires careful analysis of existing business • Resistance to change because of elimination of opportuni- practices and information requirements across agencies and a ties to obtain unofficial fees genuine desire to work together to make it easier for compliant • Outdated and inadequate organizational structures traders to meet their regulatory requirements. Without these • Finally, and importantly, insufficient public awareness and improvements, there is a strong risk that old ways of doing busi- commitment to support the long-term effort needed to ness will simply be transferred into the new automated envi- achieve meaningful reform. ronment. This is especially the case in noncustoms agencies Careful analysis of these challenges may result in some that typically don’t manage regulatory compliance using con- lowering of the initial level of ambition or a more realistic im- temporary risk-based approaches. Reformers need to comple- plementation schedule, but it is also more likely to yield better ment investments in technology with sufficient technical assis- long-term results and be viewed as credible by stakeholders. tance to ensure that the technology leads to the use of modern Likewise, careful analysis will likely lead to a stronger focus on approaches. Indeed, recent work on the impact of nontariff ensuring an appropriate enabling environment exists before barriers suggests that many of the license and permit require- launching into a major reform project. ments imposed by different countries serve few legitimate pol- Building an effective and convincing business case for re- icy objectives, and even when they do, they could be managed form is a good starting place, and, if prepared carefully, it can be in a far less trade-restrictive manner if modern approaches to a catalyst for much of the supporting work needed to launch an managing compliance were better understood and carefully effective border management reform program. An effective implemented. These are the same kinds of approaches that cus- business case will identify key stakeholders and their respective toms agencies have been progressively, but sometimes reluc- interests and will frame the costs and benefits in terms that tantly, implementing for the last two decades. While the new closely correspond to the needs of all key stakeholders. It will CBM agenda offers significant potential for improving trade 4 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise facilitation outcomes for developing countries, it is neither a • An agreed lead agency (or agencies) tasked with establish- simple nor risk-free approach, and development professionals ing and supporting the committee and for achieving and need to recognize the enormous challenges involved and factor reporting results. these into project design. • A robust means of ensuring adequate participation of all Overcoming these challenges will require a stronger focus key stakeholders. on developing broad-based commitment during project design, • An agreed administration and governance model that sup- greater attention to identifying the individual accountabilities ports a strong and effective committee secretariat. and goals of all participating agencies, longer timeframes for • Clearly defined roles, responsibilities, obligations, and, implementation, and a good deal more face-to-face support most importantly, accountabilities for all participating during implementation. For development professionals, face- parties. to-face support presents a real challenge, because tight prepara- • An appropriate budget. tion and supervision budgets rarely finance the intensive • Dispute resolution mechanisms. hands-on approach required. However, involving development • An agreed and specific work program developed from a professionals at critical times can frequently help keep reform realistic analysis of needs, key priorities, and implementa- projects on track and help overcome entrenched interests that tion capacities. oppose reform. Careful analysis of likely risks and clear identifi- A Practical Example of Collaboration cation of project milestones and performance metrics can help identify challenges and establish appropriate design and super- Despite the challenges involved, practical examples now exist vision programs and budgets. throughout the world that demonstrate the extent of border reforms possible, even in relatively difficult environments with- Where to Start out a strong historical culture of interagency cooperation in the Not surprisingly, the CBM model depends principally on one trade area. Lao People’s Democratic Republic provides one ex- key ingredient: collaboration. It makes sense therefore to start ample of what can be achieved when government commits to a with activities designed to build trust and understanding be- program and establishes the necessary enabling framework. tween participating agencies. Designing a practical interagen- With support provided by the development community, the cy framework and supporting administrative infrastructure government of Lao PDR used a collective approach to improv- to encourage and facilitate interagency collaboration is a use- ing its border management system. ful starting point. But experience shows this is easier said than The government of Lao PDR developed and fully support- done: many attempts have been made throughout the world ed the National Trade Facilitation Strategy and established a to establish trade facilitation committees, often supported by National Trade Facilitation Secretariat to provide an institu- the development community, but the record is patchy at best. tional framework to support implementation. The secretariat Few have achieved their initial objectives and even fewer have is led by the Vice Minister, Ministry of Industry and Com- proved to be sustainable in the medium to long term. There merce, has a small permanent staff, and reports directly to the are many reasons for this failure, but in most cases it comes National Steering Committee for Economic Integration (NS- down to three key issues: (i) lack of a clear government man- CEI), headed by the deputy prime minister. The National date backed by genuine political commitment; (ii) lack of a Trade Facilitation Strategy has a vision and assigns clear roles, clear series of actionable tasks assigned to the committee and responsibilities, and obligations to all participating agencies. inadequate monitoring to ensure they are completed; and (iii) This framework facilitates coordination between all agencies, lack of human and financial resources necessary to achieve helps the government better align various trade facilitation–re- goals. lated initiatives, and provides a focal point for support from the In practice, such committees are often given extremely development community. vague terms of reference and/or are tasked with implementing As a result of the priority assigned to trade facilitation by a broad a range of new initiatives without the additional re- government and the collective approach it has established to sources required. Indeed, given the fact that such committees prioritize and guide reforms efforts, trade facilitation reforms are typically staffed by civil servants who owe their principal feature strongly in the World Bank’s Lao PDR development allegiance to their own ministries and agencies rather than the policy lending operations. In addition, the Bank is already fi- national development objectives of the committee, it is essen- nancing a customs and trade facilitation project and is begin- tial that certain prerequisites are in place to support the forma- ning preparatory work in support of the government’s program tion and operation of such a committee. These include: to establish a National Single Window. Moreover, several of Lao • A clear and unambiguous mandate from government to PDR’s development partners have utilized a multi-donor-fi- realize the its trade facilitation reform vision. nanced trade development support facility managed by the 5 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise Bank to prepare a trade information portal that allows traders facilitation outcomes for developing countries. The World to access all relevant trade rules, regulations, procedures, fee Bank’s (2011) Border Management Modernization Handbook schedules, forms, and so forth from all border management provides practical advice to development professionals, nation- agencies through a single user-friendly Web site. al policy makers, and government officials on how to effectively design and implement the CBM model to deliver win-win re- Conclusion sults for all. Governments, particularly in the developing world, face many About the Author challenges and intense competition for limited resources. Pri- orities have to be established and hard decisions made on where Gerard McLinden is a Senior Trade Facilitation Specialist in the limited resources can best be spent. Gaining genuine commit- World Bank’s International Trade Department. He is also the ment for border management reform therefore presents a sig- Convener of the Bank’s Customs and Border Management Prac- nificant challenge. To secure the necessary level of political and tice Group and a member of the technical team supporting the administrative support to embark on a major reform and mod- Trade Facilitation and Logistics Global Expert Team (GET-TFL). ernization program, a well-devised and carefully argued busi- ness case, including a sound vision and a robust cost-benefit Note analysis, must be prepared and effectively sold to key stakehold- 1. See http://www.doingbusiness.org/data. ers. The business case needs to be convincing and demonstrate that allocating resources and energy to border management re- References form represents a genuine “investment� rather than merely a McLinden, G., E. Fanta, D. Widdowson, and T. Doyle. 2011. “cost.� Fortunately, the CBM model outlined in this note pro- Border Management Modernization Handbook. Washington, vides a comprehensive approach to tackling the issue, and while DC: World Bank. http://issuu.com/world.bank.publications/ it is certainly more complex than the traditional customs-cen- docs/9780821385968. tric reform model pursued by the development community for World Bank. 2010. Connecting to Compete: Trade Logistics in the decades, it offers the potential to significantly enhance trade Global Economy. Washington, DC. The Economic Premise note series is intended to summarize good practices and key policy findings on topics related to economic policy. They are produced by the Poverty Reduction and Economic Management (PREM) Network Vice-Presidency of the World Bank. The views expressed here are those of the authors and do not necessarily reflect those of the World Bank. The notes are available at: www.worldbank.org/economicpremise. 6 POVERTY REDUCTION AND ECONOMIC MANAGEMENT (PREM) NETWORK www.worldbank.org/economicpremise