Creating

58 DOING BUSINESS IN 2006
from which to develop the necessary profiles of traders,
freight forwarders and the like. Reforms to introduce
risk assessment—for example, the one started in 2004 in
Timor-Leste—require patience.
Go regional with reform of customs and transport
Being landlocked is viewed as a curse. Yet in Europe
being a trader in a landlocked country is not that different
from being one elsewhere. It takes 1 day to get
imports to Berlin from the port of Hamburg, and just 2
extra days to get them to Bratislava in landlocked Slovakia.
European integration gets the credit. Once on land,
the cargo moves effortlessly across borders. There are no
further checks.
African entrepreneurs like Fabien face delays of 65
days if importing to landlocked countries, but only 38
days to countries with a port. Yet there is no reason why
landlocked Burkina Faso, Mali and Niger and the other
countries of West Africa cannot replicate some of Europe’s
reforms and move off the list of the most difficult
countries for importing (table 9.4). In southern Africa,
Botswana, Namibia, Lesotho and South Africa share customs
forms. This reduces paperwork and cost. The next
step for them is to remove border checks altogether and
introduce harmonized transport rules.
Beware of contracting out preshipment inspection
and customs management
When the reputation of the customs office is damaged,
because of long delays or corruption, reformers may
contract out the service to a private company. This reform
was successful in Bulgaria, where it started in 2002.
By the following year annual customs revenue rose by
18%, or nearly $500 million. 7 The number of fines for
smuggling increased threefold, to 12,000 a year.
It rarely works so smoothly. In Mozambique customs
were contracted out in 1996. Few of the goals set
in the management agreement had been met by 1999.
One bright spot: the seizure of smuggled shipments
tripled from 559 in 1997 to 1,709 in 1999. 8 But delays
remained the same. Customs revenue increased somewhat,
but mostly because of greater trade volume. The
management agreement was extended in the hope of
better results. In other countries contracting is blamed
for increased corruption: several high-profile cases have
made the news in recent years. 9
In many developing countries the contracting out
of preshipment inspection has been a disappointment.
Angola, Benin, the Republic of Congo, Côte d’Ivoire and
Togo, among others, all have concession agreements for
the management of cargo inspections. Two complaints
are heard most often. First, to increase revenue, private
inspection companies push for new regulation to make
preshipment inspection mandatory for all cargo. This
increases trade costs. Second, inspection companies
introduce their own forms to fill out, on top of the
documents already required by customs. If a trader
sends goods to a country where preshipment inspection
is contracted out to a company different from the one
in his country, he has to fill out nearly 3 times as many
forms. That’s the case for an entrepreneur in Angola
sending goods to Togo, for example.
Why reform?
For manufactured exports, the cost of trade transactions
in developing countries—which includes the cost of
dealing with customs and the cost of inland transport—
exceeds the cost imposed by tariffs in the European
Union and the United States. Red tape is estimated to
cost more than 10% of the value of exports in developing
countries. 10 Trade costs represent 14% of the value of
exports in Georgia and 18% in Nigeria. And inefficient
customs and trade transport mean that businesses must
hold larger inventories at their warehouse, adding 4–6%
to production costs. 11 “Just in time” manufacturing is
just a dream.
The countries that have efficient customs and trade
transport—fewer documents and signatures, less time
necessary to comply with procedures—export and import
more (figure 9.6). They also make it cheaper for
exporters to operate. Studies suggest that each additional
day in transport delays costs 0.5% of the cargo value
for goods transported by ship or rail. In other words,
if transporting a cargo now takes 20 days and reform
can reduce transport time to 10 days, it may save the
exporter 5% of the cargo’s value. 12 Even poor countries
can make rapid progress, as the burden imposed by
complicated procedures exceeds that imposed by poor
transport infrastructure.
Filing more documents is associated with more
corruption in customs (see figure 9.6). Faced with long
delays and frequent demands for bribes, many traders
avoid customs altogether. Instead, they smuggle goods
across the border. Smuggling defeats the very reason to