The IMF was created in 1945 to promote international monetary cooperation and stability. It oversees the global financial system and policies of its 187 member countries. The IMF carries out its mandate through surveillance of members' economic policies, providing financial assistance to countries with payment imbalances, and delivering technical assistance on fiscal, monetary, statistical and other policies. Technical assistance has grown and now represents 15% of IMF expenditures, with demand exceeding capacity. The IMF coordinates its assistance with other organizations to minimize duplication.

1. Background and History
The International Monetary Fund (the "IMF") is an intergovernmental organisation
that oversees the global financial system by following the policies of its member
countries, in particular those policies with an impact on exchange rates and the
balance of payments (being international monetary transactions e.g. a country's
exports and imports). Created in 1945, the IMF is governed by and accountable to
the 187 countries that make up its membership. The mandate of the IMF, in its own
words, is to "foster international monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and sustainable economic
growth, and reduce poverty around the world". The IMF is headquartered in
Washington, D.C.
The Role of IMF Technical Assistance
Following a brief background section that describes the role of the IMF, this paper
outlines the importance of technical assistance in IMF activities. It then focuses on
customs administration technical assistance, including an outline of the IMF’s advice
that supports both more effective revenue collections and improved service to the
trade community.
The IMF was created to: (1) promote international monetary cooperation; (2)
facilitate the expansion and balanced growth of international trade; (3) promote
exchange rate stability; (4) assist in the establishment of a multilateral system of
payments; (5) make its resources temporarily available to its members experiencing
balance of payments difficulties; and (6) shorten the duration and lessen the degree
of disequilibrium in the international balance of payments of members. In order to
carry out its mandate, the IMF has three primary areas of activity:
Surveillance is the process by which the IMF appraises its members’ exchange rate
spolicies within the framework of a comprehensive analysis of the general economic
situation and the policy strategy of each member. Surveillance is carried out through

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annual bilateral consultations with individual countries, multilateral consultations in
the context of the preparation of the World Economic Outlook, and enhanced
surveillance for certain members.
Financial assistance includes credits and loans extended by the IMF to member
countries with balance of payments problems to support policies of adjustment and
reform. As of January 2001, the IMF had financial arrangements with 57 countries
for an approved amount of approximately US$44 billion.
Technical assistance consists of expertise and aid provided to member countries in
several broad areas: design and implementation of fiscal and monetary policy;
institution building (such as the development of central banks and treasuries); the
handling and accounting of transactions with the IMF; collection and refinement of
statistical data; training of officials at the IMF Institute and, together with other
organizations, through the Joint Vienna Institute, IMF-Singapore Regional Training
Institute, and the Joint African Institute.

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Evolution of Technical Assistance Activities
The expansion of the IMF’s membership and the adoption of market-oriented
reforms by a large number of countries worldwide fueled a rapid growth of IMF
technical assistance activity during 1990–94. Since then, the activity has leveled off
to an annual expenditure of approximately 300 years of staff and expert time, plus
some US$10 million for scholarships and training. Technical assistance represents
some 15 percent of the IMF’s total administrative expenditures.
An emerging consensus on the elements required for sustainable growth—
macroeconomic stability, market reform, a liberalized exchange regime, and
accountable government—has facilitated the development of a more productive
relationship between macroeconomic policy and technical assistance objectives.
Member countries and the IMF have become increasingly convinced that the timely
provision of technical assistance is a key ingredient in supporting a government’s
efforts to sustain policy and introduce institutional reforms.
Setting priorities
Demand for the IMF’s technical assistance exceeds its capacity. This requires
prioritization and allocation of technical assistance resources among member
countries and regions. As part of this process, the IMF’s area (regional) departments
play an important role in helping to identify and prioritize countries’ technical
assistance needs, often in consultation with other donors. For example, one of the
priorities is to provide technical assistance to countries eligible for the IMF and World
Bank Heavily Indebted Poor Countries (HIPC) initiative.
The IMF’s Executive Board has paid increasing attention to technical assistance
matters in recent years. In addition to commenting on the importance of technical
assistance in individual country cases, the Board has provided guidance on
evaluation of technical assistance, financing arrangements, and areas of priority.

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Types of technical assistance
Technical assistance is provided through a number of IMF departments.
Monetary and Exchange Affairs Department focuses its assistance on central
banking and exchange systems issues and on designing and improving monetary
policy instruments.
Fiscal Affairs Department is chiefly responsible for providing advice on tax and
customs administration, public expenditure management and budgeting, tax policy,
pension reform and social safety net design, and public expenditure reviews.
Statistics Department helps members comply with internationally accepted
standards of statistical reporting.
Legal Department provides assistance to members in drafting legislation and
educating senior government lawyers, mainly in laws of central banking, commercial
banking, foreign exchange, and fiscal affairs.
Treasurer’s Department provides technical assistance on the IMF’s financial
organization and operations, the establishment and maintenance of IMF accounts,
and accounting for IMF transactions and positions by members.
As mentioned previously, there is also a large training program that addresses all
areas of interest to the IMF, that is provided in Washington, at regional institutes,
and, from time to time, in member countries by the IMF Institute.
Delivering technical assistance
Advisory missions provide an important component of the IMF’s technical assistance
activities. They offer advice on monetary, fiscal, and statistical problems that often lie
at the heart of the macroeconomic imbalances that countries wish to address. In
addition, the IMF places experts in the field for periods ranging from six months to
two years to assist in the implementation of policy reform recommendations.
Traditionally, IMF technical assistance has had a single, well-focused objective and
a relatively short time span. However, in recent years, technical assistance projects
have grown both larger and more complex. Time horizons have lengthened, and
multiple sources of financing have been needed to underwrite costs. Large projects
now may involve more than one IMF department and more than one donor.

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External cooperation and coordination
Beginning in 1989, the IMF took formal steps to coordinate its technical assistance
policies and cooperate with other multilateral and bilateral agencies to minimize
conflicting advice and redundant activities. It also began to explore ways of
complementing its own resources through various financing arrangements with other
technical assistance providers. The cooperation has led to a more integrated
approach to the planning and implementation of technical assistance. There are now
comprehensive multiyear programs of technical assistance that are being
implemented with the United Nations Development Program (UNDP), the World
Bank, and the European Union. The Japanese government has continued to make
annual contributions to the IMF technical assistance and scholarship programs.
Membership and Quotas
The IMF is comprised of the 187 member countries of the United Nations and
Kosovo. Notably, non-members include North Korea, Andorra, Monaco,
Liechtenstein, Nauru, Cook Islands, Niue, Vatican City and other states with limited
recognition. All members participate directly and are represented by a 24 member
executive board. Upon joining, each member of the IMF is assigned a quota, which
is roughly based on its relative size in the world economy (based on factors such as
GDP, current account transactions and official reserves). These quotas sometimes
need to be altered, to reflect changing global economic realities, as happened during
the recent financial crisis. A member's quota will determine its subscription,its voting
weight, access to IMF funding, and allocation of "Special Drawing Rights" ("SDR")
(the IMF's own unit of account).
Currently the USA has the largest share of quota, equalling 16.77% of the total
votesavailable; it is thus the only country able to veto member decisions on its own
(member decisions require an 85% majority). In contrast, India (with a population
three times as large as the USA) has 2.34% of the votes; this distinction has
prompted many to argue that the quota system should be reformed.
Subscriptions generate most of the IMF's financial resources. SDR is a reserve
asset allocated to members in proportion to each member's IMF quota. The main
function of the SDR is to serve as a unit of account of the IMF and a means of

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payment to settle any IMF financial obligations. SDR is neither a foreign tradable
currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable
currencies of IMF members. Holders of SDR can obtain these currencies in
exchange for their SDR in two ways: (a) through arrangement of voluntary
exchanges between members or (b) by IMF designating members with strong
external positions to purchase SDR from members with weak external positions.
Previously the use of gold played a central role in the IMF system. However, the IMF
has now generally abolished the use of gold in transactions between the IMF and its
members save that the IMF is permitted to sell gold or accept gold as payment by its
members (it has nopower to buy gold or engage in any other gold transactions).
Access to IMF financing is based on a country's quota: a member can borrow (under
Stand-By and Extended Arrangements) up to 200% of its quota annually and 600%
cumulatively (although more may be borrowed in exceptional circumstances). The
largest borrowers (as at 25 May 2011) are Greece, Portugal and Ireland, with the
largest precautionary loans in Mexico, Poland and Colombia.
Legal and Organisational Structure
The Board of Governors is the highest decision making body at the IMF. The Board
consists of one governor and one alternate governor for each member country,
selected by each member. The governors are usually the ministers of finance of
each country. The governors meet annually to determine policy decisions of the IMF.
Whilst the governors have the ability to make decisions during the year, the Board of
Governors delegates the day-to-day organisation of the IMF to the Executive Board.
The Executive Board is structured on a constituency basis and consists of 24
Executive Directors representing various members and a channel through which the
views and concerns of the members are passed on to the Board of Governors. The
Executive Board is responsible for selecting the IMF Managing Director (now
Christine Lagarde).
Other key advisory boards are the IMF Committee ("IMFC") and the Development
Committee. The IMFC is an advisory board consisting of 24 IMF Governors who
represent the same members as the 24 members of the Executive Board. They do
not have the same decision making powers but represent their members to the
Board of Governors and meetbiannually (in Spring and Autumn).

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The Development Committee is a joint World Bank and IMF body, consisting of 24
World Bank and IMF Governors. It provides advice on issues relating to the
economic development of developing countries, the resources required and any
factors which may have critical implications for development. The Development
Committee also meets biannually.
Specialist IMF initiatives which relate to development principles and aims can be
summarized as follows:
Poverty Reduction and Growth Trust
This aims to make the IMF's financial support more flexible and tailored to the
diversity of low-income countries. It is split into three 'lending windows':
• The Extended Credit Facility (replaces the Poverty Reduction and Growth Facility):
provides sustained support over the medium to long term;
• The Standby Credit Facility (replaces the Exogenous Shocks Facility's High Access
Component): provides flexible support to low-income countries with short-term
financing and adjustment needs;
• The Rapid Credit Facility: provides rapid financial support in a single, up-front
payout, for low-income countries with urgent financial needs.
Heavily Indebted Poor Countries Initiative
A joint IMF and World Bank initiative, with the aim of ensuring that no poor country
faces a debt burden it cannot manage. It was supplemented in 2005 by the
Multilateral Debt Relief Initiative, which provided for 100% relief on eligible debt from
three multilateral institutions (IMF, International Development Association and
African Development Fund) to a group of low-income countries.
Post-Catastrophe Debt Relief Trust
Established after the Haiti Earthquake, it allows the IMF to join international debt
relief efforts for very poor countries that are hit by the most catastrophic of natural
disasters
Policy Support Instrument
This supports low-income countries that do not want or need IMF financial
assistance but seek to consolidate their economic performance with IMF monitoring
and support. It helps countries design effective economic programmes that, once

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approved by the IMF's Executive Board, deliver clear signals to donors, multilateral
development banks, and markets of the Fund's endorsement of the strength of a
member's policies. Developmental Aims and Processes
The IMF has three main functions, summarised as follows:
Surveillance
There are two main aspects to the IMF's surveillance work: bilateral surveillance
(appraisal of and advice on the policies of each member country) and multilateral
surveillance (oversight of the world economy). The IMF's annual in-depth appraisal
of the economic situation of each of its member
countries and subsequent report is an example of the bilateral surveillance reports
(the member state has the option as to whether to make this report publicly
available).
Examples of multilateral surveillance are the World Economic Outlook and Global
Financial Stability Report (published biannually) and Regional Economic Outlook
reports.
Financial assistance
The IMF provides temporary financing to members in financial difficulties. Such
assistance is provided when members are unable to meet foreign exchange
requirements because their international payments exceed their earnings and
holdings. Financial support is conditional upon the member states' effective
implementation of a policy programme to ensure that the member country
undertakes certain actions to ensure the borrowed funds are primarily used to
resolve balance of payments problems ("conditionality").
Technical assistance
The IMF offers technical assistance and training (generally free) to assist its
members in building expertise and institutions required for economic growth and
stability. Assistance is offered in the areas of:
• fiscal policy and management;
• monetary and exchange rate policies;
• banking and financial supervision and regulation; and
• compilation, management, dissemination and improvement of statistical data.

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The IMF contributes to the achievement of the Millennium Development Goals
("MDGs") through the above functions and also through mobilising donor support;
together with the World Bank, it assesses progress toward the MDGs through an
annual Global Monitoring Report (being an annual report produced together with the
World Bank to monitor the progress made towards the 2015 Millennium
Development Goals).
In recent times, countries that have traditionally been recipients of the IMF support
have begun to seek alternative avenues of funding. As a result, the role of IMF as a
global lender to developing countries has decreased. In particular, Latin American
countries are no longer as dependent on funding from the IMF and have tried to
separate themselves from IMF support and guidance. The IMF is aware that it must
adjust to this changing reality by repositioning itself in the global market and has
begun to focus on the broad stability of the global financial markets rather than the
specific individual members. The IMF has also embarked on reforms to modernise
its internal governance with staff cuts and selling of financial reserves.
Leadership
Board of Governors
The Board of Governors consists of one governor and one alternate governor for
each member country. Each member country appoints its two governors. The Board
normally meets once a year and is responsible for electing or appointing executive
directors to the Executive Board. While the Board of Governors is officially
responsible for approving quota increases, Special Drawing Right allocations, the
admittance of new members, compulsory withdrawal of members, and amendments
to the Articles of Agreement and By-Laws, in practice it has delegated most of its
powers to the IMF's Executive Board.
The Board of Governors is advised by the International Monetary and Financial
Committee and the Development Committee. The International Monetary and
Financial Committee has 24 members and monitors developments in global liquidity
and the transfer of resources to developing countries. The Development Committee
has 25 members and advises on critical development issues and on financial
resources required to promote economic development in developing countries. They
also advise on trade and global environmental issues.

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Executive Board
24 Executive Directors make up Executive Board. The Executive Directors represent
all 188 member-countries in a geographically-based roster. Countries with large
economies have their own Executive Director, but most countries are grouped in
constituencies representing four or more countries.
Following the 2008 Amendment on Voice and Participation which came into effect in
March 2011, eight countries each appoint an Executive Director: the United States,
Japan, Germany, France, the United Kingdom, China, the Russian Federation, and
Saudi Arabia. The remaining 16 Directors represent constituencies consisting of 4 to
22 countries. The Executive Director representing the largest constituency of 22
countries accounts for 1.55% of the vote.This Board usually meets several times
each week.The Board membership and constituency is scheduled for periodic
review every eight years.
Managing Director
The IMF is led by a managing director, who is head of the staff and serves as
Chairman of the Executive Board. The managing director is assisted by a First
Deputy managing director and three other Deputy Managing Directors. Historically
the IMF's managing director has been European and the president of the World
Bank has been from the United States. However, this standard is increasingly being
questioned and competition for these two posts may soon open up to include other
qualified candidates from any part of the world.
In 2011 the world's largest developing countries, the BRIC nations, issued a
statement declaring that the tradition of appointing a European as managing director
undermined the legitimacy of the IMF and called for the appointment to be merit-based.

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IMF and globalization
Globalization encompasses three institutions: global financial markets
and transnational companies, national governments linked to each other in
economic and military alliances led by the US, and rising "global governments" such
as World Trade Organization (WTO), IMF, and World Bank. Charles Derber argues
in his book People Before Profit,"These interacting institutions create a new global
power system where sovereignty is globalized, taking power and constitutional
authority away from nations and giving it to global markets and international
bodies." Titus Alexander argues that this system institutionalises global inequality
between western countries and the Majority World in a form of global apartheid, in
which the IMF is a key pillar.
The establishment of globalised economic institutions has been both a symptom of
and a stimulus for globalization. The development of the World Bank, the IMF
regional development banks such as the European Bank for Reconstruction and
Development (EBRD), and, more recently, multilateral trade institutions such as the
WTO indicates the trend away from the dominance of the state as the exclusive unit
of analysis in international affairs. Globalization has thus been transformative in
terms of a reconceptualising of state sovereignty.Following US President Bill
Clinton's administration's aggressive financial deregulation campaign in the 1990s,
globalisation leaders overturned long-standing restrictions by governments that
limited foreign ownership of their banks, deregulated currency exchange, and
eliminated restrictions on how quickly money could be withdrawn by foreign
investors.

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Fiscal Affairs Department
The Fiscal Affairs Department (FAD) provides policy and technical advice on public
finance issues to member countries both indirectly through contributions to the work
of area departments and directly through technical assistance. FAD staff also review
the fiscal content of IMF policy advice and of adjustment programs supported by IMF
resources. FAD staff, consultants, and experts on contract provide direct technical
assistance to member countries on public finance.
Tax coordination and revenue administration divisions
The primary functions and responsibilities of the Tax Coordination and Revenue
Administration Divisions are to:
(1) support area departments in the design and implementation of the tax and
customs administration component of IMF programs;
(2) provide technical assistance through staff missions and long- and short-term
advisors, to design and implement reform strategies aimed at improving the
organization of tax and customs administrations, modernizing procedures for
assessment, collection of taxes and duties, and developing effective audit and
enforcement programs;
(3) conduct policy analyses to develop guidelines for improving tax and customs
administration based on experience gained in member countries;
(4) provide training to senior officials by organizing and conducting seminars and
workshops and by lecturing at courses organized by the IMF Institute and others.
Customs administration technical assistance
Most customs administrations are responsible for revenue collection, trade policy
administration, and protection of society from illegal imports. The three objectives
are all important, however, in the majority of countries receiving technical assistance
from FAD, revenue mobilization is a critical task. Therefore, FAD’s advice related to
customs administration reform focuses primarily on the legislative and procedural
changes required to secure revenue in the most effective and efficient way possible.
While OECD countries rely less and less on revenue from import duties, for low and
middle income countries, customs duties continue to produce significant revenue

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both as a percentage of GDP and of total tax revenue. This, combined with the
significant amounts of revenue from other taxes on imports, notably the value-added
tax, makes it clear that the role of customs administrations in collecting revenue has
not diminished. It is our view that the changes recommended to support more
effective revenue collection, also support the other objectives of trade policy
administration and protection.
Table 1 sets out the IMF’s customs administration missions and expert assignment
activities by region for the years 1998 to 2000. For this period, the activities have
totaled 73 missions and 218 months of expert assignments.

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Customs Administration Priorities for Reform
From FAD’s perspective, there are three major elements that must be included in a
strategy designed to develop a modern customs administration: (1) the existence of
appropriate and transparent legislation; (2) simple, up-to-date procedures; and (3) a
revenue control strategy based on an assessment of risk and selective controls
targeted at high-risk goods and enterprises. The revenue control strategy has, as its
center piece, effective post-release control.
Table 1. International Monetary Fund
Fiscal Affairs Department: Customs Administration Technical Assistance
IMF Region 1998 1999 2000
Missions1/
Expert
Mths.2/
Missions1/ Expert
Mths.2/
Missions1/ Expert
Mths.2/
Africa 5 54 8 17 10 34
Asia Pacific 2 14 5 8 4 11
Eastern and
4 27 3 -- 2 1
Central Europe
Baltics, Russia,
and other3/
1 -- -- -- 5 6
Middle East 2 12 7 12 3 10
Western
2 -- 4 12 6 --
Hemisphere
Total 16 107 27 49 30 62

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1/ Missions have, on average three members and are typically two weeks in
duration. In some cases, joint customs and tax administration missions are
undertaken.
2/ Expert assignments may be long-term (more than six months), short-term (less
than six months), or peripatetic (more than one short-term assignment).
3/ Commonwealth of Independent States, other than Russia.
At the outset and as the basic starting point for the reform of the customs
administration, each country should make a conscious decision to align its legislation
and procedures with international standards and practices. We encourage countries
to follow the advice of both the World Trade Organization (WTO) and the World
Customs Organization (WCO). By using agreed upon international standards, the
customs system will be aligned to international practices and a country will be more
fully integrated into the world trading community.
Appropriate and transparent legislation
A country’s economic characteristics and international trade relations may make
some degree of complexity unavoidable. For example, preferential trade
arrangements or implementation of a customs union introduces a degree of
complexity in customs administration through the need to apply differential tariff
rates and to validate the origin of imports. However, most complications for customs
administration result from restrictive and protective foreign trade policies, an
irrational tariff structure, and lack of coordination between domestic indirect taxes
and the import tariff.
Many tariffs are characterized by complex rate structures and/or high tariff rates
without economic justification. High tariff rates increase the incentives to evasion
(through undervaluation, misclassification, and outright smuggling) and the pressure
for exemptions. Multiplicity of rates facilitates evasion through the incentives and

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opportunities for the importer to classify imports in the lower rate categories, and
requires extra vigilance and control by the customs administration.
As in the case of the tariff and trade laws, the customs code can contribute to the
complexity of administration. Experience shows that operational inefficiency in many
customs administrations results from the application of antiquated provisions in the
customs code. While customs legislation is among the oldest in the world, over the
years, and especially the last few decades, it has had to adapt to far-reaching
developments in technology, international trade, and the economic environment in
general. The failure to update the customs code to allow for change impedes the
reform of the customs administrative system. Problems frequently encountered in
the legislation include: (1) requirement that every single importation be physically
checked; (2) requirement for paper documentation and signatures; (3) inadequate
provisions for the reporting of goods by transportation companies; (4) lack of clear
treatment of the various customs regimes (e.g., temporary importation); (5)
inadequate valuation provisions; (6) lack of authority for customs administrations to
audit the books and records of traders; and (7) out-of-date penalty provisions.
Simple, up-to-date procedures
Procedures related to the processing of goods should be simple, transparent, and
easily understood by the trade community. Customs administrations in most
developed countries understand that the costs imposed by inefficient procedures
may be as costly as the trade taxes that they collect. According to one study, prior to
the elimination of border controls among EU member countries, the costs of these
controls were between 3 and 4 percent of total trade, at a time when no customs
duties were being collected on trade among member countries. However, there is
less appreciation of the scope and significance of these costs in customs
administrations in developing countries.
As mentioned previously, the design of the customs procedures should be based on
an assessment of risk and selective controls targeted at high-risk goods and
enterprises. Administrations that have not implemented this approach continue to

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impose high, unwarranted costs on their importers and exporters, as the findings
from two FAD technical assistance missions illustrates.
Black pepper requires four separate laboratory tests by Customs, Ministry of Health,
Ministry of Agriculture, and the Atomic Energy Commission…Each one of these
tests must be completed before the pepper can be released.
The control systems are the same for all importers regardless of their record with
Customs. A large multi-national pharmaceutical manufacturer, with approximately
2,500 declarations a year must have samples taken for laboratory analysis from
every shipment prior to release.
Physical inspection of exports by Customs caused so many delays and congestion
that signs were posted denying access to the port to newly arrived export shipments
and the ships sailed empty.
The continued application of procedures, such as those described above, reduces
the competitiveness of the industries concerned, thereby impeding the economic
growth of the country. At the same time, there is evidence to suggest that these
types of controls are much less effective than the risk-based, selective controls that
are in place in modern customs administrations.
One approach to introducing simplified procedures for imports is to target large
importers who have a good compliance record.
An analysis undertaken during one FAD mission demonstrated that 9 importers
represented 21 percent of import transactions. The impact of developing new
procedures for these importers, based on reduced levels of physical inspections and
post-release controls with audit, was self-evident—the largest contributors to the
economy would immediately benefit from reduced costs of customs intervention;
significantly fewer staff would be required for physical and documentary control; and
customs control resources could be redirected to high risk goods and traders.

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Post-release controls
In modern customs administrations, the basic approach to control has changed from
100 percent pre-clearance control to a heavy reliance on post-release review. The
change has been driven by two factors: (1) the dramatic increase in trade (as shown
in Table 2, the value of world trade was 50 times higher in 1999 than it was in 1960);
and (2) the increased complexity of world trade, both in terms of the types of goods
being traded and the terms and conditions related to import and export transactions
(e.g., related party transactions).
Table 2. Value of International Trade, 1960–99
In billions of U.S. Dollars
1960 1975 1985 1995 1999
Global 110 806 1,809 5,068 5,644
Industrial countries 77 543 1,263 3,302 3,836
Developing
29 229 489 1,690 1,745
countries
Source: IMF Direction of Trade Statistics
Many customs administrations have now designed systems and procedures that
provide for certain basic verifications to be completed when the goods are under

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customs control supplemented by audit-based controls that are undertaken after the
goods have been released.
One FAD mission found that, with a staff of only 22, one division was responsible for
generating US$70 million in assessments from post-release activities over a five-year
period. Over the same period, hundreds of staff were involved in conducting
physical inspections, prior to release, at a cost of millions of dollars to the trade
community with no significant violations detected.
Controls prior to the release of the goods, including physical inspections, do have a
certain deterrent effect. Also, they have a role to play related to verifying quantity,
ensuring that the description of goods is sufficient for tariff classification purposes,
detecting contraband, and enforcing non-revenue related laws (e.g., phytosanitary,
drugs, intellectual property rights, and control of endangered species). However,
such controls are less effective for verification of tariff classification, origin, valuation,
drawback, and exemptions.
Post-release reviews should be designed to identify and correct inconsistencies in
the application of the legislation and procedures at the time of release of goods.
Typically, a selection of declarations is made for in-depth review based on criteria
designed to identify high-risk transactions. For example, declarations that claim zero
rate may be misclassified for tariff purposes, claims for duty and tax exemptions
require special attention, and drawback claims require verification.
E. Improving Competitiveness of the Trade Community
Release times
One of the most important issues that we address when we undertake a diagnostic
mission to review a customs administration is the time taken to release goods from
customs control. There are, of course, several issues to be addressed when
reviewing release times and it is important to remember that it is not only the

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customs administration that influences the time taken. For example, for goods
arriving by sea, the efficiency of the ports in unloading, handling, and storing goods
is a very important factor relating to how fast the goods can be released into the
economy.
In addition, the customs administration is, more often than not, responsible for
administering the legislation of other government departments. For example, the
customs administration identifies goods that require certificates for health or
agricultural purposes. Often enforcement of the regulations of other government
departments is more important than the revenue that is collected from the goods.
For example, the introduction of diseased plants may do great harm to the domestic
agriculture industry, if the customs administration is not able to identify that the
goods require inspection by the appropriate department.
In one country that we have worked in recently, we found the following:
Customs declarations are now processed using computers and selectivity
techniques have been introduced to identify high-risk consignments for physical
inspection. The average processing time for customs declarations has been reduced
from six days to less than one day. More than 70 percent of the shipments are
released without physical inspection and the objective is to reach 85 percent.
Nevertheless, the average time spent in the port is still 10 days, due not to delays in
customs processing, but inefficient port procedures and the difficulties importers had
in arranging credit from local banks.
The importance of addressing the total picture when looking at release times is
emphasized again by the following situation.
Release times at both a seaport and an airport were reviewed. At the airport, the
average release time was 10 days, including 1.5 days from the time of declaration
processing to release (i.e., it took 8.5 days from time of arrival of the aircraft to
presentation of the declaration). At the seaport, the average release time was 16
days including 5 days from presentation of the declaration to release. Most

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significantly, no shipment was released with the first five days of the arrival of the
ship.
In this case, we were able to identify many of the causes of the delays. For example,
the legislation required the keeper of the warehouse (a state-owned enterprise) to
provide 13 days free storage, thereby encouraging importers to leave goods at the
airport or seaport (3 days is more normal). There was also a requirement that the
manifest be translated into the local language before the declaration could be
presented. Therefore, even if the importer was desperate to receive the goods, the
declaration could not be presented until the complete manifest had been translated,
presented, and accepted (this can take a considerable length of time for a ship with
1,000 to 1,500 bills of lading).
Other Observations
During the course of our technical assistance work, we often identify other activities
or conditions that reduce competitiveness, as the following examples illustrate.
The customs administration insisted that signatures and supporting documents were
a legal requirement related by the need for evidence, in those few instances when a
case went to court. However, at the same time, almost all payments of duties and
taxes on imports take place through electronic funds transfer (EFT) requiring neither
paper nor a signature. Effectively, the most important part of the customs transaction
was paperless. We were somewhat baffled that the balance of the transaction could
not be handled in the same way.
When computerization of export transactions was implemented on a pilot basis, the
change in procedures brought to light a small fee that exporters had to pay to the
exporters’ association before a transaction could be processed by the customs
administration. In this case, under the new procedures, the exporters would have
had to print the declaration in the customs office, travel across the city to pay the
fee, and return to the customs office to process the declaration. This was not an
attractive proposition, given the huge size of the city with its terrible traffic jams.

22. - 22 -
Instead of the obvious answers of eliminating the fee or having it collected by the
customs administration, the exporters’ association set up an office in the customs
office to collect the fee. Hardly the solution that should be used in the additional 53
offices that were to be automated.
Successful modernization
In 1998, FAD had the opportunity to review the changes that had been introduced in
the Philippine customs administration. FAD had a role in assisting the administration
at the outset of the reform process, in 1993, but had not been back to the Philippines
for five years. From our point of view, the changes that had been implemented in the
Philippines were impressive and represented a very good example of successful
customs administration modernization.
The Philippine Customs Service invested heavily in information technology as one
means of addressing significant problems in the administration. Every significant
step in the import clearance process was now automated and the benefits
significant.
Diversion of duty and tax payments made through the banking system and customs
cashiers disappearing with the days receipts were two problems that were solved
with the implementation of an electronic “cashless” system that automatically links
payments made through the banks to the customs clearance documents. The same
system also ensures that payments collected by the banks are credited in a timely
manner to the government account.
Paper-based systems involving over ninety steps and 40 signatures have been
replaced with the electronic filing of documents and the elimination of the need for
face-to-face contact between importers agents and customs officers.
Physical inspections had been reduced from 100 percent to approximately
15 percent through the implementation of a computer-based selectivity system.

23. - 23 -
Goods not subject to inspection were now released in hours rather than days as was
the case previously.
Security of goods under customs control had been improved as warehouse
operators receive electronic messages that the customs clearance process has
been completed and the goods can be released.
In the Philippines Customs service, there was now rigorous standardization and, if
the transactions did not meet the required standards, they were simply rejected by
the automated system. The ability of individual customs officers to exercise
discretion has been largely eliminated.
Conditionality of loans
IMF conditionality is a set of policies or conditions that the IMF requires in exchange
for financial resources. The IMF does require collateral from countries for loans but
also requires the government seeking assistance to correct its macroeconomic
imbalances in the form of policy reform. If the conditions are not met, the funds are
withheld. Conditionality is perhaps the most controversial aspect of IMF policies. The
concept of conditionality was introduced in an Executive Board decision in 1952 and
later incorporated in the Articles of Agreement.
Conditionality is associated with economic theory as well as an enforcement
mechanism for repayment. Stemming primarily from the work of Jacques Polak in
the Fund's research department, the theoretical underpinning of conditionality was
the "monetary approach to the balance of payments."
Structural adjustment
Some of the conditions for structural adjustment can include:
· Cutting expenditures, also known as austerity.
· Focusing economic output on direct export and resource extraction,

24. - 24 -
· Devaluation of currencies,
· Trade liberalisation, or lifting import and export restrictions,
· Increasing the stability of investment (by supplementing foreign direct
investment with the opening of domestic stock markets),
· Balancing budgets and not overspending,
· Removing price controls and state subsidies,
· Privatization, or divestiture of all or part of state-owned enterprises,
· Enhancing the rights of foreign investors vis-a-vis national laws,
· Improving governance and fighting corruption.
These conditions have also been sometimes labelled as the Washington Consensus
Benefits
These loan conditions ensure that the borrowing country will be able to repay the
Fund and that the country won't attempt to solve their balance of payment problems
in a way that would negatively impact the international economy. The incentive
problem of moral hazard, which is the actions of economic agents maximising their
own utility to the detriment of others when they do not bear the full consequences of
their actions, is mitigated through conditions rather than providing collateral;
countries in need of IMF loans do not generally possess internationally valuable
collateral anyway.
Conditionality also reassures the IMF that the funds lent to them will be used for the
purposes defined by the Articles of Agreement and provides safeguards that country
will be able to rectify its macroeconomic and structural imbalances. In the judgment
of the Fund, the adoption by the member of certain corrective measures or policies
will allow it to repay the Fund, thereby ensuring that the same resources will be
available to support other members.
As of 2004, borrowing countries have had a very good track record for repaying
credit extended under the Fund's regular lending facilities with full interest over the
duration of the loan. This indicates that Fund lending does not impose a burden on
creditor countries, as lending countries receive market-rate interest on most of their
quota subscription, plus any of their own-currency subscriptions that are loaned out
by the Fund, plus all of the reserve assets that they provide the Fund.

25. - 25 -

26. - 26 -
Impact of IMF policies
Impact on access to food
A number of civil society organisations[105] have criticised the IMF's policies for their
impact on people's access to food, particularly in developing countries. In October
2008, former US president Bill Clinton presented a speech to the United
Nations World Food Day, which criticised the World Bank and IMF for their policies on
food and agriculture:
We need the World Bank, the IMF, all the big foundations, and all the governments
to admit that, for 30 years, we all blew it, including me when I was president. We
were wrong to believe that food was like some other product in international trade,
and we all have to go back to a more responsible and sustainable form of
agriculture.
—Former U.S. president Bill Clinton, Speech at United Nations World Food Day, October
16, 2008.
Impact on public health
In 2009 a study by analysts from Cambridge and Yale universities published on the
open-access Public Library of Science concluded that strict conditions on the
international loans by the IMF resulted in thousands of deaths in Eastern Europe
by tuberculosis as public health care had to be weakened. In the 21 countries to which
the IMF had given loans, tuberculosis deaths rose by 16.6%.
In 2009, a book by Rick Rowden titled The Deadly Ideas of Neoliberalism: How the
IMF has Undermined Public Health and the Fight Against AIDS, claimed that the
IMF’s monetarist approach towards prioritising price stability (low inflation) and fiscal
restraint (low budget deficits) was unnecessarily restrictive and has prevented
developing countries from being able to scale up long-term public investment as a
percent of GDP in the underlying public health infrastructure. The book claimed the
consequences have been chronically underfunded public health systems, leading to
dilapidated health infrastructure, inadequate numbers of health personnel, and
demoralising working conditions that have fuelled the “push factors” driving the brain
drain of nurses migrating from poor countries to rich ones, all of which has
undermined public health systems and the fight against HIV/AIDS in developing
countries.
Impact on environment

27. - 27 -
IMF policies have been repeatedly criticised for making it difficult for indebted
countries to avoid ecosystem-damaging projects that generate cash flow, in
particular oil, coal, and forest-destroying lumber and agriculture projects. Ecuador for
example had to defy IMF advice repeatedly to pursue the protection of its rain forests,
though paradoxically this need was cited in IMF argument to support that country.
The IMF acknowledged this paradox in a March 2010 staff position report which
proposed the IMF Green Fund, a mechanism to issue special drawing rights directly to
pay for climate harm prevention and potentially other ecological protection as
pursued generally by other environmental finance.
While the response to these moves was generally positive possibly because
ecological protection and energy and infrastructure transformation are more
politically neutral than pressures to change social policy. Some experts voiced
concern that the IMF was not representative, and that the IMF proposals to generate
only US$200 billion a year by 2020 with the SDRs as seed funds, did not go far
enough to undo the general incentive to pursue destructive projects inherent in the
world commodity trading and banking systems—criticisms often levelled at the World
Trade Organization and large global banking institutions.
In the context of the May 2010 European banking crisis, some observers also noted
that Spain and California, two troubled economies within Europe and the United
States respectively, and also Germany, the primary and politically most fragile
supporter of a euro currency bailout would benefit from IMF recognition of their
leadership in green technology, and directly from Green Fund–generated demand for
their exports, which might also improve their credit standing with international
bankers

28. - 28 -
Criticisms
Overseas Development Institute (ODI) research undertaken in 1980 pointed to five
main criticisms of the IMF which support the analysis that it is a pillar of what activist
Titus Alexander calls global apartheid.[86] Firstly, developed countries were seen to
have a more dominant role and control over less developed countries (LDCs) primarily
due to the Western bias towards a capitalist form of the world economy with
professional staff being Western trained and believing in the efficacy of market-oriented
policies.
Secondly, the Fund worked on the incorrect assumption that all
payments disequilibria were caused domestically. The Group of 24 (G-24), on behalf
of LDC members, and the United Nations Conference on Trade and
Development (UNCTAD) complained that the Fund did not distinguish sufficiently
between disequilibria with predominantly external as opposed to internal causes.
This criticism was voiced in the aftermath of the 1973 oil crisis. Then LDCs found
themselves with payments deficits due to adverse changes in their terms of trade,
with the Fund prescribing stabilisation programmes similar to those suggested for
deficits caused by government over-spending. Faced with long-term, externally
generated disequilibria, the Group of 24 argued that LDCs should be allowed more
time to adjust their economies and that the policies needed to achieve such
adjustment are different from demand-management programmes devised primarily
with internally generated disequilibria in mind.
The third criticism was that the effects of Fund policies were anti-developmental. The
deflationary effects of IMF programmes quickly led to losses of output and
employment in economies where incomes were low and unemployment was high.
Moreover, it was sometimes claimed that the burden of the deflationary effects was
borne disproportionately by the poor.
Fourthly is the accusation that harsh policy conditions were self-defeating where a
vicious circle developed when members refused loans due to harsh conditionality,
making their economy worse and eventually taking loans as a drastic medicine.
Lastly is the point that the Fund's policies lack a clear economic rationale. Its policy
foundations were theoretical and unclear due to differing opinions and departmental
rivalries whilst dealing with countries with widely varying economic circumstances.
ODI conclusions were that the Fund's very nature of promoting market-oriented
economic approach attracted unavoidable criticism, as LDC governments were likely

29. - 29 -
to object when in a tight corner. Yet, on the other hand, the Fund could provide a
'scapegoat service' where governments could take loans as a last resort, whilst
blaming international bankers for any economic downfall. The ODI conceded that the
fund was to some extent insensitive to political aspirations of LDCs, while its policy
conditions were inflexible.
Argentina, which had been considered by the IMF to be a model country in its
compliance to policy proposals by the Bretton Woods institutions, experienced a
catastrophic economic crisis in 2001,[88] which some believe to have been caused
by IMF-induced budget restrictions—which undercut the government's ability to
sustain national infrastructure even in crucial areas such as health, education, and
security—and privatisation of strategically vital national resources.[89] Others
attribute the crisis to Argentina's misdesigned fiscal federalism, which caused
subnational spending to increase rapidly.[90] The crisis added to widespread hatred
of this institution in Argentina and other South American countries, with many
blaming the IMF for the region's economic problems. The current—as of early 2006
—trend toward moderate left-wing governments in the region and a growing concern
with the development of a regional economic policy largely independent of big
business pressures has been ascribed to this crisis.
In an interview, the former Romanian Prime Minister Călin Popescu-
Tăriceanu claimed that "Since 2005, IMF is constantly making mistakes when it
appreciates the country's economic
performances. Former Tanzanian President Julius Nyerere famously questioned,
"Who elected the IMF to be the ministry of finance for every country in the world?"
and therefore described it as the International Ministry of Finance.He also claimed
that many of debt-ridden African states were losing their sovereignty to the IMF and
the World Bank by agreeing to their support measures.

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Conclusions
Even though FAD’s customs administration technical assistance concentrates
primarily on revenue enhancement, we treat the issue of competitiveness very
seriously. Providing good service to the trade community is important to the
economic well-being of a country and the customs administration has an important
role to play, not only to improve service, but also to ensure that other government
departments address the costs imposed on trade through excessive regulation and
bureaucracy. In order to improve competitiveness, in our view, the modernization of
customs administration activities should be based on selective, risk-based controls
that allow the majority of shipments to enter the economy with a minimum of delay.
This should be supported by post-release controls that rely on documentary checks
and the audit of the books and records of traders. By using this approach, the
administrations will achieve the two objectives of improving revenue collections and
providing better service to the trade community.