$82-M loan to modernize Customs

The World Bank will extend to the Philippines an $82-million loan to modernize the Bureau of Customs (BOC), the country’s second-biggest tax-collection agency, and ultimately bring down trade costs.

Since the Philippines Customs Modernization Project will cost $97.82 million, the government will shell out counterpart funding of $15.82 million from the national budget, documents showed.

The board of the Washington-based multilateral lender is expected to approve the loan on July 7.

This investment project financing forms part of the recently approved 2019-2023 World Bank Group-Philippines Country Partnership Framework, which will make available up to $4.42 billion worth of loans in the next three years.

According to the World Bank, the financing was aimed at not only improving the BOC’s efficiency but also reducing trade costs in the Philippines.

At present, “the country’s export competitiveness is impeded by high trade costs,” the World Bank said, as its Doing Business 2020 report showed that “investors in the Philippines face the highest import costs and the second highest export costs, just behind Myanmar” in the Asean region.

Also, the processing and clearance of imports and exports remained relatively inefficient and time-consuming in the Philippines, the bank said.

“For example, a container takes 120 hours to clear Customs and associated inspection procedures, much higher than in neighboring Vietnam (56 hours), Thailand (50 hours) or Malaysia (36 hours),” it noted.

“Furthermore, the recent Mandanas ruling will add further pressure for the BOC to increase revenue collection. By 2022, the internal revenue allotment to local government units will begin to include a share of import duties and other levies by the BOC. The current poor performance of the BOC hampers the Philippines’ capacity to use trade as a vehicle for inclusive economic growth, job creation and poverty reduction,” it added.

The World Bank blamed the BOC’s poor trade facilitation to outdated infrastructure and inadequate business practices.As such, the World Bank loan will help the BOC “by investing in modern information and communications technology systems and installing ICT equipment (such as computers and servers) around the country.”

Specifically, the BOC plans to modernize its core customs processing system, which remained unchanged since 2005; modernize inspection through a nonintrusive process involving remote image analysis centers; as well as upgrade its data centers (to be located in seismic- and typhoon-proof areas) and network connectivity.