PH officially drops World Bank loan for Customs modernization project

The World Bank Group logo is seen on the building of the Washington-based global development lender in Washington on January 17, 2019. (FILE photo by Eric BARADAT / Agence France-Presse)

The Philippines has officially abandoned its $88.28-million loan from the World Bank (WB) to fund the modernization of the Bureau of Customs after the project faced multiple delays amid legal obstacles.

In a restructuring document, the Washington-based letter said the Department of Finance (DOF)—acting on behalf of the government—had requested the cancellation of the loan for the Philippine Customs Modernization Project (PCMP) in a letter dated Nov. 7.

The WB said the PCMP is “no longer viable”, adding that the project had suffered from “multi-faceted delays” while overall implementation progress had been “unsatisfactory”.

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The concessional financing was approved in October 2020, with the government shouldering the remaining $16.1 million needed for the project, which had a total cost of $104.38 million.

But the lender noted that procurement of some parts of the PCMP took two years.

At the same time, a lawsuit filed by Omniprime Marketing Inc.—an unsuccessful bidder under a different project that was also meant to boost the efficiency of Customs—had prevented the bureau from procuring the Customs Processing System, the most important part of the WB-backed modernization plan.

The Bank said that out of its $88.28 million financing for the PCMP, only $4.48 million or 5.07 percent of the total amount had been disbursed. The unspent money will be returned within four months of project closing.

Customs had hoped to completely automate its operations by the first quarter of 2023 in a bid to increase efficiency, curb rampant smuggling and cut trade costs. Legal obstacles, however, have prevented it from procuring certain parts of the project, forcing it to move the completion target to 2024.

But the DOF said the bureau was able to attain a digitalization rate of 97 percent so far with the implementation of three new systems in 2024, namely the Overstaying Cargo Tracking System; the Enhanced e-Travel System; and the ATA Carnet Monitoring.

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For years, the Philippines’ growth potential was constrained by inefficiencies in trade facilitation and customs administration, which created an unfavorable business environment that reduced the incentive for companies to engage in export.

Based on WB data, prior to digitalization efforts, a container in the Philippines took 120 hours to clear customs and other inspection procedures, longer than neighboring Vietnam’s 56 hours, Thailand’s 50 hours and Malaysia’s 36 hours.

Latest figures showed Customs raked in P72.4 billion in revenues last November, down by 1.69 percent due to lower collections from tariffs and excise taxes, as slowing global inflation brings down import costs.

In the first 11 months of 2024, Customs generated P850 billion, still below the P940-billion goal for last year.