Export Procedures Reform

Executive Summary

Afghanistan faces significant challenges to successful international trade and corresponding private sector development. As a result of poor infrastructure, corruption, non-tariff barriers, excessive paperwork, and complicated customs procedures, Afghanistan scores only 30.6 out of 100, ranking it 177th out of 190 countries on the ease of Trading Across Borders. Furthermore, Afghanistan ranks 160 out of 160, with a 1.95, the lowest-scoring country in the Logistic Performance Index (LPI).[1] In 2018, to make Afghanistan a more viable business environment, PriSEC, the national governmental platform for private sector development, brought together line ministries, private sector representatives, and other key stakeholders to introduce critical reforms.

 

This case study examines the implementation, efficacy, and impact of a reform to the export procedures implemented by the government, with the support of PriSEC, in 2018. The reform reduced the mandatory steps and documents required for traders to export goods from ten documents to five to create an enabling environment for exports.

 

As part of this case study, key informant interviews (KIIs) were conducted with five exporters from Badakhshan, Herat, Nangarhar, and Kabul, representing the carpet, pine nuts, fresh and dry fruits and vegetables sectors.

 

Our findings were as follows:

  • The reform has been implemented introduced at some, but not all, customs offices;
  • Other requirements added to the export process negate the reform’s benefits;
  • The reform does not equally benefit all traders.

 

This case study is based on anecdotal interviews and does not have the research basis for drawing definitive conclusions on the status of the selected export. However, we believe it provides a strong foundation for preliminary recommendations. On this basis, we recommend that PriSEC pursue:

  1. Ensuring comprehensive implementation of this reform;
  2. Training and awareness-raising for customs staff and traders;
  3. Eliminating new procedural steps outside of reformed procedures;
  4. Taking steps towards the systematic elimination of corruption;
  5. Improving coordination and information-sharing; and
  6. Focusing on monitoring and evaluation for existing reforms.

 

Introduction

 

Background

The government of Afghanistan has prioritized private sector development through initiatives such as the National Export Strategy (NES), the National Development Program for Private Sector Development (NPP PSD), and the market-building pillar of the Afghanistan Peace and Development Framework II (ANPDF II). Despite these positive indicators, poor infrastructure, corruption, non-tariff barriers, excessive paperwork, and complicated customs procedures continue to hinder export growth.

 

The World Bank Group (WBG) has highlighted trading goods across borders as one of the most challenging areas of doing business in Afghanistan. Globally, the country ranks 177th out of 190 countries with a score of 30.6 out of 100 on the ease of trading across borders, one of the lowest rankings in the region.[2]

 

In 2018, to make Afghanistan a more viable business environment, PriSEC, the national governmental platform for private sector development, brought together line ministries, private sector representatives, and other key stakeholders to introduce critical reforms.

 

 

Selected Reform: Export Process Simplification

The reform’s objective was to reduce the time and cost of exporting for Afghan businesses and potentially increase exports and Afghanistan’s Trading Across Borders DBI ranking. In this light, the Ministry of Industry and Commerce (MoIC), with the support of PriSEC, developed an export simplification mechanism to improve Afghanistan’s ranking in the World Bank Trading Across Borders DBI. The Plan for Improving Afghanistan’s Position in the Trading Across Borders Ranking of the Doing Business Indicators was developed by MoIC in March 2018 and approved by the High Economic Council in its 23rd meeting on 23 December 2018. At that time, the Afghanistan Customs Authority (ACA) required exporters to submit ten documents, involving a costly and time-consuming process. According to primary data collection by MoIC and confirmed by this case study, private sector representatives confirmed that it took an estimated average of 228 hours and USD 800 to prepare the required documents for each consignment exported, regardless of the size or amount of the cargo.

 

ACA introduced the reform in May 2019. According to official sources, except for a few months when international transactions were disrupted due to the COVID-19 pandemic, it has been implemented. Nearly one year after the ACA introduced the reform, we interviewed traders from different sectors to learn their before and after experiences of trading across borders.

 

Before this reform, the below ten documents were required for Afghan traders to export goods from the country:

 

Mandatory Export Documents Pre-Reform

No. Document Issuing Entity
1 Customs Declaration Customs Department
2 Commercial Invoice ACCI
3 Certificate of Origin ACCI
4 Packing List Exporter
5 Quality and Quarantine Certificate ARFVPA and MAIL
6 Jawaz Nama (Business license) ACBR-MOIC
7 Bill of Lading Freight Forwarder
8 Customs Transit Declaration Customs Department
9 Insurance Certificate National insurance company
10 Purchase Order Buyer
Time (hours) DBI 2018 228
Cost (USD) DBI 2018 344

 

The approval of the Plan by the HEC paved the way for reducing the number of mandatory documents from ten to five, detailed below:

 

 

Required Export Documents Post-Reform

No. Document Issuing Entity
1 Packing List Exporter
2 Commercial Invoice ACCI
3 Bill of Lading Freight Forwarder
4 Custom Declaration Customs Department
5 Jawaz Nama (Business License) ACBR-MoIC
Time (hours) PriSEC Mapping-2020 11
Cost (USD) PriSEC Mapping-2020 327

 

According to the approved plan, the remaining documents are only required upon the importing country’s request, detailed below:

 

 

Optional Export Documents Post-Reform

No. Document Issuing Entity
1 Certificate of Origin ACCI
2 Quality and Quarantine Certificate ARFVPA and MAIL
3 Insurance Certificate National insurance company
4 Customs Transit Declaration MoIC
5 Purchase Order Buyer
Time (hours) PriSEC Mapping-2020 4
Cost (USD) PriSEC Mapping-2020 97

 

Traders we interviewed also recommended the following:

  • Making One Stop Shops (OSS) fully operational at airport customs;
  • Synchronizing working hours at land crossings with neighboring countries;
  • Establishing a separate door at Kabul airport for export;
  • Synchronizing working hours between customs and banks;
  • Building capacity of custom staff to work with ASYCUDA effectively;
  • Installing scanners at customs; and
  • Establishing a trade information portal.

 

Case study purpose, rationale and scope

The rationale for this case study is to determine whether the procedural export reform described in this document has been implemented comprehensively:

  • On paper and in practice;
  • in all locations (Kabul and in the provinces);
  • for all types of border crossings (air and land); and
  • for all sectors (carpets, dry fruit, etc.).

 

This reform was selected because private sector actors raised concerns about its implementation on the ground during Public Private Dialogue (PPD) events in Herat and Kandahar in September and October 2019, respectively.

 

This case study seeks to anecdotally assess whether the selected reformed export procedure is indeed in place and implemented by ACA offices and customs officials across Afghanistan. It aims to evaluate the reform’s impact on simplifying the export process by reducing associated time and costs anecdotally.

 

For the case study, we interviewed five traders from different sectors to learn their before and after experiences of trading across borders.

 

 

Research Questions

  1. Effectiveness: Has the document reduction reform been introduced across all customs points in Afghanistan?
  2. Impact: Has the reform been implemented? If yes, has it improved traders/exporters’ experiences by saving time and/or money in the international export process?
  3. Impact: Are there factors external to the reform that negatively or positively affect the experience of traders/exporters, in terms of time and money saved, in the international export process?

Methodology

Using the above research questions, we conducted a limited set of qualitative interviews with key stakeholders, supplemented by a literature review of relevant documents regarding the reform’s enactment.

Accordingly, we conducted KIIs with five exporters from Badakhshan, Herat, Nangarhar, and Kabul, representing the following sectors: carpet, fresh vegetables, pine nuts, dry fruits, and fresh fruits. Four interviewees export their goods through the Kabul airport customs port, while one interviewee exports their goods to Pakistan through the Torkham dry port. Interview questions gathered information about the exporters’ experience before and after 2019, when the reform was introduced. We also consulted relevant stakeholders in the PriSEC team involved in the passage of the reform regarding the process for passing the reform, implementing actors/entities, chains of command for implementation, and other relevant details.

 

 

Findings

1.      Effectiveness: Has the document reduction reform been introduced across all customs points in Afghanistan?

Previously, traders spent, on average, 228 hours obtaining the ten mandatory export documents, according to the MoIC. According to information gathered by PriSEC, after the ACA introduced this reform, the time necessary to complete all customs documents substantially reduced to around 60 hours.

However, this case study’s data collection suggests that this reform has only been partially implemented across the country.

One interviewee reported that the reforms were only introduced and implemented at the Kabul airport custom and not at the dry ports, where traders export via land. We asked interviewees if they knew about the new reform that reduced the required documents to five, making the other five optional. An interviewee who exports fresh vegetables and fruit to Pakistan via Torkham dry port, for example, said that while they had heard about this reform through TV ads, nothing had changed on the ground. He noted that the Torkham dry port authorities still require exporters to submit all ten documents and go through the same steps as before. Based on information gathered by PriSEC, other dry ports, such as Islam Qala and Spin Boldak, have not yet reduced the documentary requirements from ten to five.

 

2.      Impact: Has the reform been implemented? If yes, has it improved traders/exporters’ experiences by saving time and/or money in the international export process?

Interviewees who use Kabul Airport for exporting air cargo said that reducing the number of mandatory documents has helped them save time and money. However, beyond being implemented differently at different ports, the reform does not equally benefit all traders at the same port. Specifically, it appears that the optional documents are, at times, not truly optional for traders in some sectors. For example, our interviewee in Kabul noted that fresh and dry fruit exporters must obtain a certificate of origin and a certificate of quality for any goods exported to Asian countries; these documents are not required for export to European countries. Importantly, dry fruit exporters must obtain a certificate of quality from the Afghan Raisins, Fruits, and Vegetables Authority, located outside the Kabul airport OSS.

 

3.      Impact: Are there factors external to the reform that negatively or positively affect the experience of traders/exporters, in terms of time and money saved, in the international export process?

Our interviews revealed factors that both positively and negatively impact the experience of traders. These are outlined below.

 

Positive:

Market expansion: All our interviewees reported exporting a higher quantity of goods now compared to two years ago. This increase, however, is largely attributed to air cargo subsidies.[3] Interviewees also reported that growing exports are driven by expanded market demand and their desire to broaden their customer base.

Airport One Stop Shop: Interviewees who export their goods via the Kabul airport noted that the customs OSS, which allows them to process their documents in one day and at one place, has had a positive impact.

 

Negative:

Corruption: Interviewees reported that corruption remains a critical challenge at the Torkham dry port. An interviewee said that if a trader pays a bribe, their cargo will be allowed to clear customs quickly. However, a trader who does not pay a bribe might have to wait several days before their cargo can clear customs. Traders who export perishable goods, such as fresh fruits and vegetables, can ill afford for their cargo to be held at the border, leaving many exporters little choice but to accept the added cost of paying a bribe.

Because additional export costs associated with bribery are not direct payments to the government, our interviewees reported little change in this regard since new export procedures were introduced. However, the specific amount of the bribe does vary from one instance to another.

Similarly, interviewees reported bribery issues at the Kabul airport, noting that there are always bribe demands at police checkpoints between the traders’ entrance to the airport and the arrival of goods at the customs table. For example, of the five police checkpoints between the Kabul Airport’s customs gate and the OSS, traders could be asked for bribes at two to three of these five checkpoints. If a trader refuses to pay the bribe, they are asked to remove their good from the vehicle for inspection. In addition to delays and added labor costs, goods/packaging are likely to be damaged during this process which means that traders are compelled to bring skilled workers to execute the removal and inspection of the goods carefully.

Sector-specific additional costs: Interviewees noted that necessary steps and their associated costs vary from sector to sector. For example, in the carpet sector, one interviewee complained that the Carpet Association has made it mandatory for exporters to obtain an official maktoob (letter) from the Association when they take their goods to customs. They have also introduced a person at the Kabul Airport OSS to sort through carpets, for which the traders are charged 2 Afghani per square meter.

Though this step and its related cost are not directly associated with, or a result of, the export procedure reform, it did not exist before the reform was introduced. It has been in place since 2019. Furthermore, a trader must take a maktoob from ACCI to the Border Police for their signature, along with the invoice and a letter to Kabul Airport customs. This is where interviewees reported the greatest delay. The maktoob is often not signed on the same day. The trader must leave the maktoob with the Border Police and pick it up the next day, losing a full day in the process. While we have no documentary notification, there are reports that this requirement has been recently abolished.

 

 

Conclusion and Recommendations

According to the anecdotal interviews conducted for this case study, the reform in question has been implemented at Kabul airport, but not at Afghanistan’s dry ports (though notably only Torkham was examined for this case study). Furthermore, additional requirements outside the scope of the procedures targeted by this reform, such as the new requirement for a maktoob from the Carpet Association, have been introduced since the reform was approved. While two of the traders interviewed using the Kabul airport customs reported that the reduced mandatory documents had saved them time and money, the on the ground experience of most traders is either that (1) very little has changed in terms of time or monetary cost or (2) their situation has, in fact, worsened.

 

To summarize, our findings suggest that:

  • The reform has been introduced at some but not all locations across the country (for example, Kabul airport customs has implemented it, but Torkham dry port has not)
  • Other required steps have been added to the export process by various actors at Kabul airport and Torkham dry port, negating any benefits from the export reform.
  • The reform does not equally benefit all traders: The mandatory documents – and as a result, required steps – remain nearly the same for traders in some sectors (such as gemstone, dry and fresh fruits and vegetables), who must still submit all ten documents.
  • As a result, for many Afghan traders, the experience of trading across borders from the time before and after the export reform’s implementation remains unchanged.

Our interviews also suggested that several factors external to the export reform have positively changed exporters’ experience. These include:

  • The One Stop Shop at the Kabul airport; and
  • Increased exports due to a broadening of their customer base outside the country.

Meanwhile, several factors external to the export reform have negatively changed exporters’ experience. These include:

  • Corruption and its associated costs of time and/or money; and
  • Sector-specific additional costs, such as documents required by sectoral associations.

 

Recommendations

This case study is based on anecdotal interviews, and, as such, its recommendations should be taken as preliminary. However, based on our interviews and desk review, we believe that an additional and more comprehensive study of the reform’s implementation would likely be in line with these findings. As such, we believe that this case study provides a solid direction for considering the next steps. On this basis, we make the following recommendations:

  1. Comprehensive implementation: Emphasis should be placed on its full implementation at all the country’s ports, including developing and implementing ACA export procedure guidelines in line with the MoIC simplification process. Though air cargo shipments only use the Kabul airport, there are several land ports in Afghanistan. To truly change Afghan traders’ experiences, the reform must be fully implemented at all ports.
  2. Capacity-building and awareness-raising: Steps should be taken to ensure that all customs staff have been trained on the new and simplified ACA guidelines and that traders are aware of these procedures. The Ministry of Finance has recently banned the use of customs brokers, making this a pressing issue.
  3. Elimination of new procedural steps outside the reformed procedures: The role of requirements such as the Border Police maktoob in the export procedure is unclear. These additional documentary burdens have effectively canceled the timesaving benefits of the export reform. Steps should be taken to ensure that additional procedures, which negate the benefits of reforms, are not introduced. Also, eliminating the 0.01% invoice fee and replacing it with a streamlined fixed amount could help address under-invoicing issues.
  4. Systematic elimination of corruption: Corruption remains a significant and ubiquitous part of many traders’ export experiences. It imposes enormous burdens in terms of cost and time on traders. Unless it is addressed, corruption will likely continue to ‘eat-up’ any costs or time saved by reforms. The government of Afghanistan is committed to rooting out corruption and has taken significant steps in this regard. To improve its DBI ranking and enhance the exporters’ experience, the government should expand its efforts to fight corruption and illegal extortion at borders by continuing to implement international best practices such as opening a single customs window, provisions for electronic document submission and e-paymen facilities.
  5. Coordination and information sharing: To prioritize and succeed in private sector development, the Afghan government must facilitate better coordination and information sharing between relevant bodies, including ministries, the private sector and other Non-governmental stakeholders. Most notably, care should be taken that other ministries and state institutions do not create or implement policies that effectively negate the MoIC’s reforms without prior coordination. It is challenging to find Information on export rules and procedures. For example, at the time of this writing, credible and up to date information and guidance about export procedures was not available online; the ACA website is no longer functioning. Thus, broad priorities, specific policies, implementation plans, strategies, goals, and up to date guidance on procedures should be available to all relevant stakeholders by creating an accessible centralized online database.
  6. Increasing Focus on Monitoring and Evaluation: The results of this case study revealed that this reform had been implemented partially and inconsistently. As such, PriSEC would do well to focus not primarily on developing and implementing new and innovative reforms but rather on the successful implementation of existing reforms. To do so, rigorous and geographically comprehensive M&E plans should be developed to ensure that reforms are implemented uniformly at all ports.

 

Resources:

[1] International LPI, World Bank Group (WBG)

[2] Doing Business Indicators 2020, World Bank Group

[3] Govt Subsidizing Exporters By 70% If They Ship by Air, Tolo News

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