Trade Facilitation: Breaking Down Barriers to International Trade in Sri Lanka

Marking the International Customs Day 2015, Suwendrani Jayaratne highlights key Trade Facilitation measures that need to be implemented in Sri Lanka and the importance of  pursuing such measures. 

 

Sri Lanka has undertaken key initiatives to facilitate trade and transport over the years. Vital agencies in the trading process such as the Sri Lanka Customs and the Sri Lanka Ports Authority have taken measures to facilitate trade through the automation, infrastructure expansions and others. While acknowledging the initiatives by relevant agencies, Sri Lanka still has a lot to achieve if it is to reach the facilitation levels of Singapore which is often cited by policy makers and the private sector to be the country’s benchmark.

 

Trade Facilitation Priorities for Sri Lanka

The Institute of Policy Studies of Sri Lanka (IPS) recently concluded a ‘Trade and Transport Facilitation Audit’ in Sri Lanka. As part of the study, a survey was carried out among 121 stakeholders in the country including key government agencies and the private sector to find out the current status of trade facilitation (TF) in the country and related priorities. This included exporters, importers, shipping lines, freight forwarders, chambers and relevant agencies.  Following are some of the TF issues and priorities highlighted in the survey and a stakeholder consultation meeting held recently.

 

Publication and Administration of Policies: There is a need for prompt and comprehensive publication of international trade related information. Many stated the availability of information for example in the Customs website to be inadequate to get a comprehensive understanding of the total import/export and clearance processes in Sri Lanka. Information provided in the Sri Lanka Customs website was rated as ‘average’ by a majority of the respondents, with the effectiveness of information on changes in regulation, applicable customs duties, and applicable fees and charges  identified to be ‘low’.

 

Setting up/Strengthening Enquiry Points:  While there are enquiry points in different agencies such as the Customs, these are generally perceived to be inefficient and difficult to access.  While the existing enquiry points at different institutions could be strengthened, a national enquiry point can function as a coordinating body between the trading community and the relevant regulatory bodies. It can collect requests, direct them to relevant regulatory bodies, compile their responses and inform the requesting party of the responses. Currently, enquiries are often directed at the wrong agency as traders are unaware of the relevant agency to address a specific issue.

 

Having an Institutional Mechanism for the Implementation of TF Measures:  There is no agency in the country which takes responsibility to implement TF measures. However, the recently appointed National Trade Facilitation Committee is expected to remove this vacuum and actively take up TF recommendations that have been highlighted by stakeholders over a long period of time in many forums. Some of the high priority areas related to/procedures for imports/exports, identified in the survey are given in Figure 1.

 

Change of Mindset and Culture at both Government Agencies and the Private Sector:  While recognizing the recent TF initiatives undertaken by the relevant authorities such as Sri Lanka Customs, some traders are of the view that they do not function well in practice mainly due to the lack of change in mindset to accept and adapt to new ways of conducting business, etc. Likewise, the need for the private sector to produce correct and required documentation without resorting to irregular payments as a relatively easier means of clearing goods was also highlighted.

 

Figure 1_High Priority Areas related to Rules_Procedures for Imports_Exports
 

Legal Amendments to the Customs Ordinance: Sri Lanka’s Customs Ordinance is over 200 years old and certain provisions need to be amended to facilitate the implementation of identified TF measures such as the extension of the pre-arrival processing facility to all goods  whereas, currently the facility is only available for perishable goods.

 

Trade Related Infrastructure: The need to improve quality and efficiency of ports, roads, the quality of warehouses and the need to reduce loss and damage of cargo are some the main trade related infrastructure and infrastructure requirements in the country (Figure 2). For example, while acknowledging the improvements in infrastructure in the recent past, the need to give a face-lift to the Colombo Port with modern equipment was highlighted by traders. Furthermore, problems such as congestion at the Colombo Port can be reduced if more gates at the Port can be opened; currently only 2-3 gates are open for container traffic at any given time.

 

Figure 2_High Priority Areas of Trade Related Infrastructure and Services

Having a Non-Judiciary Review/Appeal Procedure:  72 of 121 respondents of the survey mentioned that there is no non-judiciary review or appeal procedure available in the country if traders are not satisfied with a decision taken by the Customs or any other border management agency. However, according to the Customs, traders can appeal to the Director General of Customs if they are not in agreement with decisions taken at the operational level, and then to the Minister of the Ministry of Finance and Planning under whose purview Customs functions.  Nonetheless, having an ombudsman that is specialized in customs and tariff regulatory matters that could assist the trading community to review/appeal a particular decision taken by a regulatory authority can enhance the transparency of the system.

 

Improving Inadequate Warehouse Facilities: More than the inadequacy of warehouse in terms of numbers, traders highlighted the lack of adequate facilities available at warehouses. Lack of proper storage racking systems, poor conditions within them, poor handling and inadequate security are some of the pertaining issues of traders.

 

Use of ICT for Exports and Imports: A majority of 107 of the 121 respondents highlighted the need for a single window in the. Such a system is required to minimize human intervention in the trading process. The need for electronic/online submission of customs documents were also identified to be high. While the export process is almost entirely automated in the country, the import process is yet to be completely automated.

 

In conclusion, the importance of trade facilitation has been recognized at the multilateral level with the wrapping up of the WTO Trade Facilitation Agreement in December 2013. This Agreement will come into force once two-thirds of the WTO’s 160 members (107 members) complete their ratification process. Countries such as Hong Kong and China have already ratified the Agreement.  Many of the TF measures highlighted above can be implemented at a relatively low cost and are not contentious in nature. Therefore, it is important that Sri Lanka pursues pertinent TF issues without further delay and enjoy early mover advantages that these reforms offer.

 

 

Note: This article is based on the findings of the study ‘Trade and Transportation Audit: Sri Lanka’ carried out by IPS research staff Janaka Wijayasiri, Suwendrani Jayaratne and Dharshani Premaratne.