Regional: South Asia Subregional Economic Cooperation (SASEC) Trade Facilitation Program

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Lessons

A well−defined focus strengthens the implementation of policy reforms.

The program’s focus on 3 specific outputs, identified in consultation with all the key stakeholders, provided a clear direction to the policy actions taken by the participating governments. Supported by targeted technical assistance (TA), this focus helped strengthen program implementation and enable the governments to achieve the necessary milestones in customs reform.

Promoting customs reform at the regional level is advantageous to developing better understanding and a common vision of customs modernization.

The program’s promotion of customs reform at the regional level facilitated conceptual clarity and a common vision of customs modernization in the 3 participating countries. Specifically, through their participation in the various platforms provided by the South Asia Subregional Economic Cooperation (SASEC) Program, Bangladesh, Bhutan, and Nepal developed broad support for their reform agendas. The strategic guidance and knowledge they gained from the SASEC south–south exchange directly benefited program implementation and capacity building.

Aligning the program design to existing capacities and country−specific requirements minimizes the risk of the program being ambitious in scope and timeframe.

The capacity to implement the national single window (NSW) concept seemed to have been overestimated under the program. A proper definition was not developed and agreed upon, and the timeframe for complex activities related to NSW was not adequately assessed to ensure correct configuration and sequencing of actions. In addition, country differences in the time and procedural requirements for adopting institutional and legal changes were not carefully considered. Country−specific considerations should be embedded in the design of future similar projects to ensure that they will be realistic in scope and implementation timeframe.

Including in the program scope the delivery of outputs that are contingent on nonprogram activities can pose implementation risks to the program.

Caution should be exercised in planning the delivery of outputs that are contingent on the implementation of an activity beyond the control of the program. In Bhutan, for example, program formulation should have anticipated the potential risks in basing the development of the automated customs management module (CMM) on the timely implementation of the nationwide Revenue Administration and Management Information System project whose significant delays and technical issues negatively impacted the development of the CMM. Coordinating with the implementers of the nonprogram activities the most feasible implementation phasing of the linked outputs right at program design could minimize possible delays and other implementation risks to the program.

Clear−cut definition of outcome indicators and availability of baseline data facilitate a reliable assessment of program performance.

Reliable assessment of program performance was hindered by ambiguous outcome indicators and the absence of baseline data. For instance, the outcome indicator that border transit would improve by 15% was not only vague; it was also to be measured against baseline data wrongly assumed to be available from a time release study to be completed in 2013. To ensure reliable assessment of end−of−project performance, future project preparations should include the development of clear-cut outcome indicators and the generation of baseline data at design stage.

Background

Due to high transaction costs, poor logistics performance, and a proliferation of nontariff barriers, South Asia was one of the least integrated regions in world trade until 2012. Major challenges in the area of trade facilitation included cumbersome customs procedures and long processing times for cross-border transactions, limited automation of customs operations, inadequate cross-border facilities, and poor information and communications infrastructure. Physical remoteness from ports and global trading hubs were an additional challenge for landlocked Bhutan and Nepal. The region consequently accounted for only 2% of world trade and 1.7% of world foreign direct investment in 2010.

Against this backdrop and in line with the goals of the South Asia Subregional Economic Cooperation (SASEC) Program countries, the Asian Development Bank (ADB) approved in November 2012 a total of $47.7 million policy−based loans and grants for the SASEC Trade Facilitation Program, which aimed to assist Bangladesh, Bhutan, and Nepal in facilitating cross−border trade. The program’s intended impact was increased trade by reducing or removing nontariff barriers to trade, specifically institutional, administrative, and technical ones. Its intended outcome was a more efficient, transparent, secure, and service-oriented processing of trade in the subregion. It had 3 outputs: (i) modern and effective customs administration and/or management; (ii) streamlined and transparent trade processes and procedures; and (iii) improved services and information for private sector traders and investors, including women entrepreneurs.

By completion, the program facilitated full accession by all 3 participating countries to the Revised Kyoto Convention (RKC), which promotes faster release of goods, reduced trade costs, increased revenues, higher foreign direct investments, and economic competitiveness. Amendment of national legislation and rules and regulations to make them RKC-compliant was also supported. Web-based customs management systems were implemented in Bangladesh and Nepal and expected to be launched in Bhutan in 2017. Reduced import and export trade documentation, aligned to the World Customs Organization’s standards, was introduced in Bhutan while measures were underway in all 3 countries to reduce this further through effective risk management practices, simplified release, and full roll−out of automated procedures. The national single window concept was piloted in Bangladesh, being developed in Nepal, and scheduled for prefeasibility study in Bhutan in 2017. Trade information portals were launched in Bangladesh and Nepal, and a feasibility study was due for completion in Bhutan in 2016 with development planned for 2017.

The program outputs laid the legal, institutional, and technical foundation for comprehensive trade facilitation reforms in the 3 participating countries. However, because of vague indicator definitions and data insufficiencies, it was not possible to assess program performance in relation to its intended outcome. Notwithstanding this, ADB’s South Asia Department rated the program successful.

The program was executed by Bangladesh’s National Board of Revenue (NBR), Bhutan’s Ministry of Finance, and Nepal’s Department of Customs (DOC). It was implemented in Bangladesh by the NBR, the Ministry of Commerce, and the Ministry of Shipping; in Bhutan by the Department of Revenue and Customs, and in Nepal by the DOC and the Ministry of Commerce and Supplies.

Project Information

Project Name:

South Asia Subregional Economic Cooperation (SASEC) Trade Facilitation Program

Report Date:

April, 2017

Main Sector:

Country:

Project Number:

Project/Modality:

Loan

Grant

Themes:

Inclusive Economic Growth

Private Sector Development and Private Sector Operations

Regional Integration

Sub Sector:

Industry and trade sector development

Loan Number:

Loan 2954 (Bangladesh): 15 November 2015 Loan 2955 (Bhutan): 15 November 2015 Grant 0321 (Bhutan): 26 March 2013 Grant 0322 (Nepal): 10 April 2013

Report Rating:

Successful