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Trade Facilitation and Sector Governance in the Philippines


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A presentation by Benedikt Madl: Programme Manager for Trade at the EU Delegation to Philippines

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Trade Facilitation and Sector Governance in the Philippines

  1. 1. Trade Facilitation and Sector Governance in the Philippines The current TRTA 2 & towards a sector governance analysis
  2. 2. The Current TRTA 2 in brief  Overall objective: To support sustainable poverty reduction in the Philippines through further integration into the international trade system  Project purpose: To enhance the capacity of selected agencies and non-state actors in the Philippines to implement deeper integration into the international trading systems
  3. 3. Components of TRTA 2 Component 1: Trade Policy and Export Development Component 2: Standards Harmonisation and SPS Conformity Component 3: Trade Facilitation Component 4:Rapid Response Facility
  4. 4. Target results TRTA 2 - TF  Successful implementation of enhanced risk management system  Enhanced trade facilitation by integration into the NSW of 35 agencies concerned in the Customs clearance process  An effective and internationally recognized authorized economic operator scheme available to the business community while continuing to enhance all aspects of supply chain security
  5. 5. Target results TRTA 2 - TF  Increased accuracy in applications and speed of issue or verification of COO  Simplified Customs clearance process to produce faster clearance and lower costs for compliant members of the business community  Substantial enhancement of the national and international perception of the BOC’s standards of integrity
  6. 6. Target results TRTA 2 - TF  Successful implementation of enhanced customs transit system in all ports by end 2010  Institutionalisation of a comprehensive and effective capacity building mechanism for BOC by end 2011  Comprehensive change management plan/ programme adopted by BOC and initially implemented by end 2011 as a strategy for implementing the BOC Strategic Plan
  7. 7. Sector Governance: Recalling Key Features of the Analytical Approach  Step 1: Assessing the context of sector governance  political attention of sector; broader public sector reform context; strong judiciary; decentralisation; international context; etc.  Step 2: Mapping the actors: interests, power, incentives  six clusters of actors: focus on key interests and relationships  Step 3: Assessing accountability relations  who accounts to whom; who depends on whom, who can pressure whom; who is voiceless; who are agents of change  Step 4: Summing up: analysing reform readiness  strengths, opportunities, weaknesses, threats
  8. 8. Step 1: The Governance Context of Trade Facilitation in the Philippines  ASEAN laggard, consumption driven economy, heavy reliance on remittances (>10% of GDP), significant drop in applied tariffs from over 40% to 8%, trade to GDP ratio 62%, strong reliance on one export sector (electronics), Business Process Operations (outsourcing) on the rise, managed crisis relatively well  Market governance: weak governance, high corruption levels and constitutional investment restrictions hamper FDI. Legislation usually in place but enforcement weak and political intervention high.  World Bank ‘Doing Business’: weak rankings across the board (above 100) with “trading across boarders” relatively better at rank 68. Philippines ranks 139 in TI CPI index behind Nigeria, Pakistan etc.  Political attention of sector: Customs reform has high priority (e2m, NSW) and is well funded but progress is very slow. International (RKC) and ASEAN obligations help trigger reform
  9. 9. Step 1: Key features of the Context Level Features Indicators Sector (a) Importance: Trade is important for growth and poverty reduction but BoC’s emphasis is more on revenue generation than TF (b) Performance: Better performance in TF than other business areas, convincing strategic plan but slow progress; “talk the talk but don’t walk the walk”, strong internal resistance (c) Structure: BoC mistrusted within government esp. As driver for change, many TF actors generally favour better TF but some key conflicts of interes Status of trade in National Development Plan, Philippines Export Development Plan World Bank ‘Doing Business’ Indicators Strategic Action Plan of the Bureau of Customs National Economy is generallly heavily regulated; informal sector dominates Corruption is constanly high Government has close ties to business, as business is supporting political campaigns Public sector reform is slow Congress has little oversight of decisions EC country assistance reviews, governance assessments, TI index Regional / Int’national International (RKC) and ASEAN commitments are important but are not systematically enforced at national level ASEAN TF Programme; WTO Trade Policy Review
  10. 10. Step 2: Mapping the Actors in the Philippines  Non-state actors: private sector operators are important, including buyers, exporters, producers/farmers and the full range of ‘middlemen’ including transporters, logistical support services, etc.  Core public agencies: BoC, DTI, DA (with various agencies), Presidential Anti Smuggling Group  BoC still very much focused on revenue generation (contributing over 23% to treasury), TF plays a secondary role. HR management in BoC highly politicised. Change resistant in BoC high given attractive rent-seeking opportunities. Currently IT driven change ongoing with potentially strong governance impacts  While only at the level of a Bureau customs is a very strong player within the government system  Ethnical devide between Malay dominated government sector and Sino dominated business sector.  Negative Public Opinion vis-à-vis BoC, TF not very high on Business Chambers agenda but corruption/governance in general is  Donors: US Aid reduced engagement, MCC finally pulled out, EC and JICA main TA providers, Worldbank and Eximbank interested to support NSW
  11. 11. Step 2: Mapping the Actors Cluster of Actors Key Actors Power / Interests Driver of change Core Public Agencies Customs Authority Holds key TF powers Interests: greater efficiency in TF, subject to budget and capacity constraints, need to improve image Potentially, with varying degrees depending on who in the top management Trade Ministry Interest in improvingTF, but little power to influence policy or performance; also prefers to concentrate on trade negotiations Limited (but potenital) driver of change Frontline Service Providers Customs officials Interest: interst to keep status quo for rent seeking, but image problem Overall resitance to change Non-State Actors: Private Sector Operators Exporters Interest: improved TF (while maintaining cosy status quo relationship with government) Weak driver of change Frieght/shippin g companies Improved TF due to lower costs Driver of change Port operating companies Resist TF reform due to loss of revenues from container storage at port Resistance to change Customs Agents Maintain status quo: improved TF threatens core business Resistance to change
  12. 12. Step 2: Mapping Actors (cont.) Cluster of Actors Key Actors Power / Interests Driver of change? Non-state actors Farmers/ Producers Little power to affect policy: lack of organisation, information on TF and capacity to build positions and lobby Driver of change Checks and Balance Organisations Exporter associations, consumer groups Little power to affect policy: lack of organisation, information on TF and capacity to build positions and lobby Driver of change Political System / Government Congress, Senate Difficulty to pass TF legislation due to vested interest groups Limited driver of change International Organisations ASEAN, WCO, WTO Interest in TF harmonisation but little power at nat’l level Potentially, if mandate strengthened Donors EC, JICA, US Aid Improved TF, leading ulitmately to increased trade and development Driver of change
  13. 13. Step 3: Analysing Governance Relations  Exporters and importers generally in favor of TF reform (case study: DHL) but complain about lack of involvement in the reform process and often short lead time to adapt  BoC has traditionally easy and quick access to the president and a good bargaining position to get budgets for reforms given its revenue generating status  President is both under pressure from “below” (voters very bad perception of BoC corruption levels) as well as from “above” (international & ASEAN obligations)  Among logistics and support services TF will produce loosers and winners, hence their position will depend on the concrete reform initiative
  14. 14. Step 4: Conclusions on Reform Readiness This slide will give some final impressions form the analysis, for example these might be:  Need for alliance building of reform engines to achieve ciritical mass  Industry needs to be involved at an early stage to make reforms realistic and userfriendly  All reforms need to be accompanied by change management measures internally  Technical reforms need to be complemented by soft reforms (culture, training, attitude, recruitment procedures etc)  Internally the potential loss of “personal income” needs to be compensated by gain in “social status and professional prestige”  Outside obligations can be used (but only to a limited extent) to enhance reform willingness.  Long term gains of trade facilitation need to gain more public voice compared to revenue collection and security (anti smuggling) considerations.