Governments are making slow progress in improving the efficiency of customs and border procedures – with many small businesses and entrepreneurs cut off from the global trading system as a result. This is a central finding of the World Economic Forum’s Global Enabling Trade Report, issued today in conjunction with the Global Alliance for Trade Facilitation.
“There are so many processes, so much documentation. A centralized place of clearance could solve anything.” These are the words of Sharon Kimanini, head of logistics for a Kenyan garment exporter. Her message is clear.
As the Global Enabling Trade Report 2016 points out, improving the efficiency of process and reducing the red tape around cross-border trade remains an easy win for international trade. While progress on multilateral trade talks looks dim and overall infrastructure investment lags, focusing on regulatory efficiency can help governments enable trade quickly, doing more with less.
According to UNCTAD and OECD estimates, the implementation of the WTO Trade Facilitation Agreement costs between $4 to $20 million per country, while the impact on exports, and hence jobs, would be many times greater. The WTO estimates it could boost developing country exports by up to $730 billion per year.
A number of countries across Africa have made important strides on the efficiency front.
Botswana leads the region on the Enabling Trade Index’s border administration pillar, seen below. Its compliance with import procedures requires only eight hours on average, on a par with major global traders such as South Korea and the United States. On the cost side, Kenya has managed to radically cut the price of import compliance, from an average of $550 to $115 per container. These types of efficiency drivers – reducing time and cost for red tape – are critical when it comes to enabling trade, especially for small and medium-size companies, which often face the most significant hurdles.
However, more needs to be done. Governments must work hand-in-hand with the private sector to identify key bottlenecks and agree on ambitious roadmaps for reform. Governments must also coordinate with regional counterparts to ensure coherent and coordinated implementation, which can support regional integration, including those at the continental level, such as the African Union’s Boosting Intra-African Trade agenda. These reforms can also help to better position economies as attractive destinations for foreign investment, particularly as manufacturing opportunities open up with increasing costs in Asia.
The Global Alliance for Trade Facilitation is engaging with companies, government agencies and private-sector organizations in Ghana and Kenya to support this critical joint process, and plans to explore future partnerships with other countries in the region in 2017.
From speaking with traders such as Sharon Kimanini, it appears there are a number of concrete solutions that can address these bottlenecks. Although these solutions may not call for big financial investments, they will require champions from both government and business to ensure they are fit for purpose and sustainable. With momentum picking up with the imminent entry into force of the Trade Facilitation Agreement, we look forward to seeing continued progress and finding out which economies will lead the way in 2018, when the next Enabling Trade Index comes out.
Ilmari Soininen is an economist with the Global Alliance for Trade Facilitation, based at the World Economic Forum in Geneva, Switzerland. This blog originally appeared on weforum.org.
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