In examining trade facilitation in the South and Southeast Asian regions, it is important to recognize the economic and overall development differences between the sub-regions, as well as the significant differences within the respective sub-regions. A key issue to remember is that most trade facilitation procedures and processes are governed by national, not international, legislation. Thus, the various border “control” agencies are mandated by the various national acts, regulations, or instructions issued by the respective ministries. The net result is that trade facilitation constraints are not necessarily standardized.
International organizations and conventions represent the standards to which these agencies should ideally aspire to in terms of establishing “benchmarks,” but compliance with such standards is dependent on national policies. Consequently, while there may be similar constraints among the member countries, their relative impacts could differ significantly. Differences in trade facilitation environments present significant problems for donor agencies developing regional and even sub-regional initiatives because of this lack of commonality.
Variations in trade facilitation environments in South and Southeast Asia are shown in the World Bank’s Doing Business survey, which is often used as an international benchmark for the relative performance of economies by providing quantitative indicators across 189 economies over time. The survey covers a spectrum of aspects including starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, enforcing contracts, and resolving insolvency, as well as a “trading across borders” section.
The 2012–2014 rankings for this “trading across borders” section, which is relevant to trade facilitation, show quantum differences between the more advanced and less advanced countries in the two regions. They also suggest that in the geographic center—Singapore, Malaysia, and Thailand—trade facilitation is better and with fewer constraints, which, based on rankings in previous years, indicates a relatively stable pattern of excellence. However, as one extends either east or west from this central north– south core, the much lower rankings suggest the trade facilitation environment becomes appreciably more problematical. The three most advanced countries at the center of the region, which also have some of the best-rated customs organizations, appear to have the best trade facilitation environment. Also, the rankings suggest that to the east and west the constraints in both the GMS and SASEC sub-regions are potentially equal. According to the rankings, improvements are slow to materialize and in some countries the situation may becoming worse rather than better.
Identifying specific issues in South and Southeast Asia, consisting of up to 15 countries, each with their individual trade facilitation environments is difficult. Consequently, the focus is on identification of a number of key issues present in most of the countries. In practice, these constraints or NTBs are most prevalent in those countries with the lower rankings. While the high number of NTBs highlighted below reflects the complexity of the issues and the number of countries involved, it should not be interpreted as indicating that problems abound. While there is general recognition that both regions have ongoing trade facilitation issues, this situation should not denigrate the gradual improvements in trade facilitation being achieved in many of the countries. These issues merely indicate that further progress is needed to keep pace with changes in an increasingly competitive global trade environment, whose standards are being set by countries such as Singapore and Malaysia.
As indicated, many of these trade facilitation constraints are common throughout both regions, but their specific impact may vary nationally due to differences in legislation, the presence of bilateral or free trade agreements, and the types of products being traded. The main constraints are concentrated around import and transit traffic, where the “control” aspects are most prevalent. With the removal of duties and other charges, the processing of exports should become increasingly an administrative exercise, thus rarely incurring delays, with relatively low transaction costs. The importance of the issues discussed below varies from country to country and are not in any specific order based on their adverse impact on regional connectivity, or their priority in being resolved. It is also recognized that given the large number of countries and their different trade facilitation environments, it is only possible to highlight a small number of the key issues.
Excessive Documentation is one of such issues. It is predominantly required by the customs, immigration, quarantine, and security (CIQS) organizations for clearance and processing purposes. Importers and exporters have to provide predefined documentation to confirm the shipment complies with appropriate import, export, or transit regulations. It is generally recognized that customs act as the lead agency at the border for the processing of freight traffic, but at most borders there are at least four to five other public service agencies also present with a clearance role requiring the production of documentation.
There have been some improvements in both regions, generally, in relation to excessive documentation, particularly in terms of standardization and harmonization of their formats, mainly driven by the automation process within the customs environment. Most automated customs systems are based on variants of the Single Administrative Document (SAD), which was the standardized customs declaration developed in the European Union (EU). However, this standardization has not been adopted by agencies covering other areas such as sanitary, phytosanitary, veterinary, and standards certification, where there is still a high reliance on individual national certification systems. The degree of standardization of documentation or certificates is significantly lower outside of the non-customs environment.
However, various ADB studies have identified that the core problem is the overall volume of documentation required to achieve clearance, rather than its particular format; the more documents required, the longer clearance takes and the higher the border transaction costs. Delays often appear to depend more on the size of the document “pack” than on the actual processing times at the frontiers. Interviews with clearing and forwarding (C&F) agents reveal that collecting of all the necessary paperwork at one physical location to lodge a clearance entry is the greatest obstacle.
(Adapted from ADBInstitute working paper series No.489, July 2014: Policies to Enhance Trade Facilitation in South Asia and Southeast Asia)