By Mithara Fonseka and Kavishka Indraratna
In 2016, Sri Lanka ratified its Trade Facilitation Agreement (TFA) with the WTO and in 2017, a secretariat was created for the National Committee for Trade Facilitation to drive much-needed trade reforms in the country. . Currently, Sri Lanka’s TFA implementation commitment rate stands at 34.9% with a period from 2017 to 2030. Reforms include trade information portal, streamlining of processes customs officers and the overhaul of post-clearance control systems. However, progress on one of the key reforms, the National Single Window (NSW), has stalled. Deviating from the original One-Stop-Shop completion schedule in December 2022, the target date was extended to 2030. NSW, a globally recognized trade portal, acts as a one-stop-shop for exporters and importers where customs documents, permits, registrations and other information can be submitted online immediately. The definition of a one-stop-shop, as provided by UN / CEFACT recommendation 33, is as follows: “A single window is defined as a facility that allows parties involved in trade and transport to deposit information and point documents to meet all regulatory requirements for import, export and transit. If the information is electronic, individual data elements need only be submitted once ”. Putting such a reform on the back burner will only delay Sri Lanka’s transition to a system of streamlined and paperless business processes and thus constitute a barrier to local and foreign investment.
Why should Sri Lanka implement an NSW?
Sri Lanka has underperformed in global trade rankings, where we sometimes rank in the bottom 50 countries. According to the Ease of Doing Business 2020, in the cross-border trade pillar, Sri Lanka ranks 96th out of 190 economies. While several indicators for Sri Lanka are outperforming the South Asian average, there is still a long way to go. Compared to OECD standards, Sri Lanka takes 72 hours for border compliance regarding imports and 48 hours for compliance of export documents while the OECD average is 8.5 and 2.3 hours. Long customs procedures and multiple inspections hamper efficiency. At the same time, we ranked 94 out of 160 countries according to the 2018 World Bank Logistics Performance Index and 103 out of 136 for the 2016 Enabling Trade Index of the World Economic Forum. Notably, one of the indicators of the Enabling Trade Index, the Customs Services Index, which takes into account factors such as the clearance of shipments through electronic data interchange and the separation of the physical release of goods from tax audit, ranks us 116 out of 117 countries. A lack of transparency, inter-agency coordination and long and cumbersome processes contribute to Sri Lanka’s poor business environment. An average business transaction can involve more than 30 different agencies and up to 200 pieces of data, many of which need to be repeated. There is therefore a clear need to streamline business processes through digitization, creating an enabling business environment that supports small businesses as well as foreign investors.
Context of the National Single Window
In 1989, the Singapore government introduced the world’s first NSW, known as Tradenet. It took two years for the model to become operational and has now grown into one of the most advanced models in the world. Since then, many countries have adopted similar models and an NSW has become an essential tool to facilitate efficient and paperless trade. The annual United Nations Trade Facilitation Survey identified that nearly 74% of countries surveyed in the Asia-Pacific region have some degree of commitment to establishing an NSW (this includes countries that are only at the pilot stage). While an NSW is universally known to facilitate the transition from paper-based customs processing to electronic customs processing, each window developed by a country is unique and varies depending on the country context. For example, in Chile and Malaysia, the NSW allows traders to submit their export and import declarations, manifests and trade-related documents to customs authorities electronically. In Korea and Hong Kong, private sector participants including banks, customs brokers, insurance companies and freight forwarders are also connected through the portal.
Single entry, single submission, standardized documents and data, information sharing (information dissemination), centralized risk management, coordination of agencies and stakeholders, analytical capacity and electronic payment facilities are some of the key functions included in a one-stop shop. In Sri Lanka, the World Bank carried out several studies on NSW, identifying different business models, best practices and a final guiding document was delivered to the Government and Customs of Sri Lanka (SLC) in July 2019. However, since then , there was no advancement news. While many countries, including Sri Lanka, wish to emulate Singapore’s pioneering model, the lack of clear targets and deadlines deteriorates the chances of implementing such a system.
The mutual benefits of an NSW
Businesses in countries without an integrated trading system find it difficult to compete internationally given the time and money spent simply getting approval. Streamlining the entire process from start to finish in a comprehensive and transparent manner, without bureaucracy, has a number of positive effects for traders. Singapore TradeNet has been estimated to save its traders around US $ 1 billion per year. Korea’s uTradeHub saved its business community around US $ 818.9 million. These were savings through the use of electronic documents, automated administrative work and the storage and retrieval of information through the use of ICT. A one-stop-shop automatically simplifies the compliance requirements that merchants face. In Mozambique, traders have benefited from faster customs clearance times, where across NSW the time has been reduced from 3 days to a few hours. Meanwhile, NSW of Thailand turned the customs clearance time (measured according to the declaration) to 95% in 5 minutes. Using a single portal allowed traders to avoid visiting multiple branches and simply submit a request at their convenience from any location. NSW has supported businesses by removing unnecessary costs, time and paperwork, factors which tend to be a strong deterrent to small businesses as well as foreign businesses.
The NSW system has also enabled government entities involved in the trade to achieve significant savings. Singapore Customs has claimed that for every US dollar earned in customs revenue, it only spends 1 cent, implying a profit margin of 9,900%. In Hong Kong, trade facilitation measures have saved them HK $ 1.3 billion per year. NSW has also reduced revenue leakage that can occur during transit. For example, Mozambique is a transit country to Swaziland, South Africa, Zimbabwe, Zambia and Malawi. By expanding their NSW to include value-added services such as GPS tracking of in-transit shipments, automatic detection of shipment infractions and deviations from assigned transit lanes, NSW prevents revenue leakage and risk corruption, thereby maximizing revenue collection. NSW has further led to improvements in productivity and efficiency. A one-stop-shop has made it easier for authorities to process a greater volume of requests. Mozambique, which once faced infrastructural weaknesses thanks to the establishment of its one-stop shop, is able to process around 1,500 customs declarations per day. Switching to paperless customs processes would reduce inventory costs and help better allocation of resources, as staff would not be needed for trivial and mundane tasks such as preparing and cross-checking many documents. Overall, a fully digitalized system provides government agencies with the means to remove inefficiencies that slow down the speed of the document processing, approval, communication and inspection stages. Further contributing to efficiency, an NSW has also facilitated the dissemination of data through multiple agencies ranging from border control authorities, freight forwarders, customs brokers, shipping agents, banks, etc. The result is better inter-agency coordination and increased transparency.
Besides a substantial increase in government revenue, NSW will help improve the business environment in Sri Lanka. Domino effects include an upward movement in the country’s global rankings, incentives for FDI and local businesses as well as global recognition.
Driving forces for implementation
While NSW on the surface appears to be an information technology-driven innovation, it is more of a platform for inter-agency and private sector collaboration. Since NSW is a system that requires the participation of government, the private sector and the transport community, ensuring collaboration between agencies is crucial. Ensuring the participation of the public-private sector, introducing mandates and a steering committee to oversee the implementation is crucial in the development of such a system. The system as a whole is a system that is constantly evolving without a final step. It requires continuous maintenance, support and improvement. This should be complemented by appropriate legislation, disclosure and publication, supported by tight training and data security policies. Thus, the governance of NSW must be executed in an appropriate manner so that new technologies, techniques and new modes of commerce can be exploited. In the best performing countries, a Single Window is not seen as a one-stop shop but rather as “a combination of trade-related platforms that serve diverse communities and trade modalities”. This has enabled leading countries such as Singapore and Hong Kong to facilitate smooth trade by creating an environment of interoperable trading systems.
Kavishka Indraratna is a research analyst at Lawyer Institute. She can be contacted at [email protected] Mithara Fonseka is a researcher at Lawyer Institute. She can be contacted at [email protected] The Advocata Institute is an independent public policy think tank. Learn more about Advocata’s work at www.advocata.org.