Mongolia: Customs Modernization Project

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Lessons

Strengthening interagency coordination for policy consistency and harmonization is key to the success of a customs modernization program.

Implementing a customs modernization program entails efforts not only by the customs authority, but also by the various other government agencies involved in regulating international trade. Cognizant of this, the Mongolian Customs General Administration (MCGA), the project implementing agency, with support from the Ministry of Finance (MOF), the executing agency, took a strong lead in coordinating the project steering committee. Coordination between agencies brought about a more synchronized regulatory framework and reduced inconsistencies in the application of rules and procedures. Coordination with the trading community likewise facilitated the acceptance of the private sector and business groups of customs automated information system (CAIS) that propelled the success of customs modernization in the country.

Project Cycle Stage:

Preparation

Implementation

Business process reengineering, supported by technological upgrade, is crucial in improving the efficiency, transparency, and governance of customs services.

Upgrading the GAMAS into the CAIS supported a business reengineering process that would put in place the critical systems for making customs services and administration more efficient and transparent. The upgrade enabled the establishment of a nationally integrated and web-based data processing, which has reduced the risk of clearance errors, minimized human intervention that often results in delays and provides the springboard for corruption, and led to a more accurate detection of customs offenses and higher uniformity in the application of customs rules in the country. Centralization of data collection and consolidation and the creation of a central data warehouse have protected customs data and information, ensured data accuracy, minimized data loss, and substantially improved the communication and transmission of all data and information relevant to enhancing cross-border trade operations. Overall, the project’s success in modernizing customs business processes, especially through the incorporation of audit-based control and risk management modules into the CAIS have exceeded design expectations and set a model for the country in developing e-government and a national single electronic window. While commitment to customs reform has remained strong, as of project completion review, several government agencies have also expressed strong interest in replicating the MCGA experience.

Project Cycle Stage:

Preparation

Implementation

Borrower ownership of projects is critical to their successful implementation.

The government, and particularly the MCGA, demonstrated strong ownership of the project, from design to implementation. It facilitated a bilateral agreement with the Korea International Cooperation Agency for a parallel grant that would further upgrade the technical capabilities of CAIS. The MCGA leadership provided strategic guidance and timely operational instructions to the execution of the business process reengineering activities and the development of CAIS. In coordination with the MOF and other relevant agencies, it also saw to it that the reform of the Customs Law and related regulations was proceeding in earnest to facilitate the business process reengineering and information and communication technology (ICT) upgrade. Strong government ownership of the project was also evident in the formation of task forces comprising experienced customs experts and other key stakeholders to support the implementation of some of the project’s activities, when necessary.

Project Cycle Stage:

Implementation

A pilot operation period of at least 1 year needs to be included in the design of customs modernization projects with high ICT content.

CAIS, the customs information platform developed under this project, was completed and put into pilot operation in July 2009. The 1-year pilot operation allowed the system developers and project designers to gather feedback from various users and factor these into system improvements. The government officially accepted CAIS in July 2010 and since then, CAIS has been operating smoothly. Building on this experience, it would be sound to include in the design of customs modernization projects with high ICT content a pilot operation period of at least 1 year to give system developers and project designers a chance to factor in user feedback and ensure the user-friendliness and efficacy of the system in responding to various users’ needs. (Implementation: customs modernization programs/projects, , customs modernization Mongolia)

Project Cycle Stage:

Implementation

Attracting and retaining high-caliber engineers is a challenge for ICT-related projects in the public sector of Mongolia.

The international and national consultants engaged by this project performed satisfactorily. They delivered their outputs with the required quality in a timely manner. However, the national ICT specialist resigned before completing his contract. His resignation was not because of performance issues, but due to a much higher offer from a private company. This highlights the reality that attracting and retaining high-caliber engineers remains a challenge in the country’s public sector. Special solutions may be required to address this challenge. Among these solutions, the Mongolian government can consider developing special incentive packages.

Project Cycle Stage:

Preparation

Implementation

Background

In December 2006, the Asian Development Bank (ADB) approved a $5 million loan and $500,000 grant for Mongolia’s Customs Modernization Project. The project reflected government’s efforts to promote trade and improve the investment climate through customs reform and modernization. It also supported the country’s accession to the Revised Kyoto Convention of the World Customs Organization and the expected enactment of the new Customs Law.

Overall, the project aimed to increase the volume and ease the flow of Mongolia’s external trade by improving the efficiency, transparency, and sustainability of customs services and administration. It had three components at appraisal: (i) migration and upgrade of GAMAS, the automated system for customs services and administration used by the Mongolian Customs General Administration (MCGA) since 2002; (ii) improvement of customs-related infrastructure; and (iii) institutional strengthening. A parallel grant of $2.5 million from the Korea International Cooperation Agency allowed the MCGA to introduce some extended technical functions and enhance the technical features of GAMAS.

Under the project, GAMAS was replaced with the customs automated information system (CAIS), a substantially improved customs information platform that enabled a nationally integrated customs data processing and the maintenance of a centralized database and data warehouse. After a year of pilot operation, the government officially accepted the system in July 2010. CAIS has been operating smoothly since then, with technical capabilities that were more than anticipated in the original design.

Because of the project, the MCGA was the first agency in the Mongolian government to be equipped with a highly automated information system, setting a model for the development of e-government and a national single electronic window in the country. Advanced tools such as X-ray inspection equipment, infrared detection instruments, and closed-circuit television provided, along with analytical and testing equipment for the MCGA Central Laboratory and four regional laboratories, improved the cargo detection and surveillance capacity of the customs authorities. The new Customs Law, which incorporated the latest international standards in trade facilitation, particularly those stipulated in the Revised Kyoto Convention, became effective in July 2008. Trainings funded by the ADB-administered e-Asia and Knowledge Partnership Fund of Korea improved the technical capacity and usage of the CAIS by the MGCA’s information technology staff and customs officers as well as customs brokers, customs-authorized carriers and freight forwarders, banks, and other business and private sector users.

By fully delivering its intended outputs, the project achieved its planned outcome of greater efficiency, transparency, and sustainability of customs services and administration. It increased the speed of customs clearance, reducing the average time of clearing a shipment to less than 5 minutes. It also decreased the number of supporting documents for customs declaration from 10 for imports and 11 for exports in 2007 to 6 for imports and 4 for exports in 2013. The nationally integrated and web-based data processing reduced clearance error risks and allowed more uniformity in applying customs rules in the country. It also helped improve transparency and minimize human interventions in the process thus reducing the chances of corrupt activities. As a result, in the corruption perception survey organized by the government and the Mongolian National Chamber of Commerce and Industry in 2013, MCGA’s rank improved and was above the average of peer agencies—81% of traders saw improvement in law enforcement by the MCGA; 85% viewed customs services as adequate; and 95% of traders acknowledged the MCGA’s progress in facilitating international trade.

Furthermore, the project substantially contributed to modernizing customs business processes, especially through the adoption of audit-based control and risk management techniques. It succeeded in cultivating a new work culture of electronic processing among customs officers, and motivated the MCGA to further modernize practices and improve service quality. It also enhanced interagency coordination in government and forged a strong partnership between government and the trading community. At the regional level and together with other ADB regional technical assistance projects, pilot joint customs control activities undertaken with the People’s Republic of China Customs promoted dialogue and cooperation, and this could provide the springboard for simplifying and harmonizing clearance procedures for cross-border trade.

The project had the Ministry of Finance as executing agency and the MCGA as implementing agency.

Project Information

Project Name:

Customs Modernization Project

Report Date:

March, 2014

Main Sector:

Industry and Trade

Country:

Mongolia

Project Number:

35376-033