MANILA, Philippines (UPDATE 5:28 p.m., Oct. 29) — The Philippines is set to receive a fresh loan from the World Bank to fund the decades-long upgrade of customs procedures to reduce opportunities for corruption and trim trade costs.
In a statement on Wednesday, the Washington-based lender announced the approval of an $88.28 million credit line to the Philippines for the government's modernization program of the Bureau of Customs.
The loan will be payable for 30 years, inclusive of a grace period of 10 years. It is unclear how much would be the interest.
Funds would be used to automate trade procedures and accelerate the release or cargoes, the World Bank said. In particular, the project would assess and connect cargo registration, inspection, payment and release into one “seamless online system.”
“Improved efficiency at the Bureau of Customs will reduce trade costs and support Philippines’ competitiveness,” Ndiamé Diop, country director, was quoted as saying in the statement.
“Automation will reduce face-to-face interactions and delays, and increase accountability, all of which strengthens efficiency and improve the business environment,” Diop added.
Customs modernization is a project that gets carried over from one administration to the next. Measuring whether efforts to reduce smuggling and corruption in trade is a difficult task since it involves both cutting time in processing shipments while still collecting the correct amount of dues.
At least on time spent for cargoes, World Bank data showed the Philippines is lagging behind neighbors. A container shipped to Manila takes an average of 120 hours to clear customs procedures, much longer than Hanoi’s 56 hours, Thailand’s 50 hours and Malaysia’s 36. Inefficiencies had discouraged local firms and plunged the country’s exports.
On the flip side, there were some improvements in revenue collection. Before the pandemic struck and hit trade, thereby lowering tariff revenues, Customs collections rose by double-digit levels from 2017 to 2019 as valuations of products, used to calculate dues, were updated and monitoring improved.
As of September however, collections dropped 15.3% year-on-year to P398 billion.
“With the new CPS (customs processing system), important processes like trade management and registration, cargo inspection, duty payment, and clearance and release, among others, will be integrated in a seamless online system,” World Bank said.
“It will also improve adherence to international standards and conventions for customs processing, including an audit trail for transactions, allowing for greater transparency and less opportunity for corruption,” it added.
The World Bank loan to improve the Customs agency would come on top of the $1.67 billion granted by the lender to the Philippines for coronavirus response as of October 2.