Simple, accountable, and efficient trade procedures support economic growth, create jobs, attract private investment, and promote trade. Reforming existing trade procedures is particularly important for countries facing economic challenges. Liberia’s government worked with IFC’s Trade Logistics Advisory program to reduce and cut cumbersome and redundant import and export procedures. Throughout the process, Liberian Customs identified the components necessary for successful trade logistics reforms.
Fourteen years of civil conflict has devastated Liberia’s economy, as well as its public finance and physical infrastructure. Now, the country depends on food and fuel imports, but is currently increasing its exports of natural resources. International trade accounts for over one-third of the Liberian economy, and it is essential for the country to continue to find ways to attract foreign direct investment and stimulate local growth. To support these objectives, officials have undertaken the following reforms.
Between 2008 and 2011, Liberia’s government reduced:
- Customs user fees by half, from 3 percent to 1.5 percent.
- Economic Community of West African States trade levy from 1 percent to 0.5 percent.
- Luxury taxes on vehicles.
- The number of security agencies at the main port.
- Vehicle import permit clearance.
- Collateral requirements for vehicle imports.
- The tallying of container discharge with ship manifest.
- Ministry of Agriculture import/export permits.
- Forestry Development Agency export licenses.
- Shift work for customs officers, and new extended hours for its main port.
- Document approval at the port and not the ministry, requiring fewer signatures.
- Single location clearance for cargo preliminary risk-based inspections, doing away with 100 percent import checks.
- Border cooperation with the Guinean customs service.
Through simplification and harmonization of procedures, introduction of risk management, and automation and improvement of border clearance procedures, the number of days to export from Liberia was reduced from 20 days to 15 days from 2008 to 2012. The time to import to Liberia was reduced from 17 to 14 days during the same period.
The 4 C’s
As with any change, clear communication is essential for a successful reform process. It is particularly important in trade reforms, given the many agencies involved in import and export processes. Communication campaigns that highlight the benefits and possible savings from reforms will minimize resistance to change. Lack of clear and concise communication may lead target audiences to assume negative consequences of the reform and increase their resistance to change.
Communications outreach is not a one-time, one-size-fits-all undertaking. Continuous training and ongoing campaigns to raise reform awareness in the business community will ultimately ensure adaption of and commitment to new processes.
Successful reformers typically share a common characteristic: strong political and financial commitment from the highest level of the government, which drives the reform process in partnership with private sector stakeholders and trade practitioners. These approaches must bring together actors from across the political spectrum, as well as from the industry and trade sectors, in order to ensure sustained momentum for reform across administrations.
In Liberia, sustained political support from key senior government officials, including the minister of finance and key regulatory ministries and agencies, has been key to reform success. The public and private sectors were mobilized through the creation of the Trading Across Borders Working Group. The group identifies and implements reforms, meets regularly to discuss timely and efficient implementation of trade logistics reforms, and helps ensure stakeholder commitment.
Consistent application of laws, regulations, and procedures is necessary to build trust and promote compliance in the private sector, while enhancing transparency in trade transactions processes. Compared to large firms, small and medium enterprises are more affected by inconsistencies and lack of transparency in systems and services. Information technology solutions can help make trade logistics processes more consistent and transparent, as well as more efficient.
Common standards and removing barriers to cross-border and interregional trade translates into new or more open markets for trading goods and services. Traders that deal with border crossing procedures in several countries with little harmonization are faced with particular challenges. For example, in Rwanda, cargo moving in and out of the country usually passes several border crossings before reaching its final destination. Regional and international collaboration may contribute to improved logistics infrastructure and services which will attract investments and improve trade.
Although trade logistics reforms can be challenging, the potential benefits are significant. According to recent research, even a 10 percent reduction in time to export and import potentially increases trade in Sub-Saharan Africa by over 6 percent, and in South Asia by just under 6 percent. It can also enable significant savings for private firms through reduced charges, lower inventory levels, and fewer incidents of pilferage and damage.