Single Window clearance of cargo to make Kenya competitive in global trade

International trade has grown rapidly in recent years, thanks to the progressive reduction of tariffs and quotas through successive rounds of multilateral trade liberalisation.

More trade means more goods crossing borders and having to comply with customs formalities. The only major challenges that need to be solved at the multilateral levels are the subsidies, tariff peaks and escalation, standards and entry conditions which continue to hurt exports to developed countries.

Businesses suffer both direct border-related costs, such as expenses linked to supplying information and documents to the relevant authority, and indirect costs, such as those arising from procedural delays, lost business opportunities and a lack of predictability in the regulations.

Surveys aimed at calculating these costs suggest that they may range from two per cent to 15 per cent of the value of traded goods in developed countries and up to 30-42 per cent in production costs in developing countries such as Kenya.

Inefficient border procedures cost governments in terms of lost revenue, smuggling and difficulties in implementing trade policy, for instance, because of failure in determining the origin of products or in collecting accurate statistics. In Kenya we estimate that up to 25 per cent revenue is “lost” due to delay in collecting goods on time.

With increasing integration of economies around the world, facilitating the smooth flow of trade becomes a pressing requirement for governments and businesses. Efficient information systems and procedures can significantly reduce the time taken to move goods, reduce costs and improve business.

In Kenya, trade facilitation is carried out by a number of institutions whose roles include revenue collection, provision of services for cargo movement and ensuring that goods conform to the set standards and health regulations as well as efficiency.

The overall objective of the Kenya National Electronic Single Window System Project also known as Kenya TradeNet System is to facilitate international trade in Kenya by reducing delays and lowering costs associated with clearance of goods at the borders, while maintaining the requisite controls and collection of levies, fees, duties and taxes, where applicable, on imports or exports.

Despite recent reforms, trade procedures still remain lengthy, cumbersome and costly. This has negatively impacted on the competitiveness of Kenyan goods in the region. The rationale for implementing the Single Window clearance was based on weaknesses inherent in the current system.

Besides having almost 27 agencies, duplication of roles has become the order of the day among State agencies including Kenya Bureau of Standards, National Transport Safety Authority, Pharmacy and Poisons Board and Nursing Council of Kenya, National Biosafety Authority and Radiation Protection Board. Again the motivation does seem to be elsewhere — revenue generation.

Essentially, everyone stands to gain from making trading easier. Governments gain because efficient border procedures enable them to process more goods and improve control of fraud, thus increasing revenue.

Businesses gain because if they can deliver goods faster to their customers they become competitive. And consumers benefit because they are not paying for the costs of lengthy border delays. If a truck waits at the border for a week, ultimately the customer pays for its being off the road and unproductive during that time.

The benefits of Single Window clearance are numerous.

The World Bank rates economies that have adopted the system as more transparent, efficient and faster cargo clearance than those without. World Bank’s 2014 Logistics Performance Index ranking places Kenya at number 74 while our key competitors Egypt and South Africa placed at 62 and 34 respectively.

With a Single Window compliant economy, Kenya is set to benefit from increased competitiveness and reduced cost of doing business which is good for consumers who shoulder the burden of shipment delays in form of demurrage charges importers incur.

Based on the present volume of goods imported and transit through Kenya, it is estimated that the streamlined procedures would result in savings to the economy ranging between $150 million (Sh15 billion) and $250 million (Sh25 billion) annually during the first three years. This is expected to increase to between $300 million (Sh21 billion) and $450 million (Sh31.5 billion) annually in subsequent years.

It must also be emphasised that the Single Window system is relevant to implementation of eight of the 13 articles of the Trade Facilitation Agreement commonly known as the Bali Agreement.

However, for the gains already realised to be sustainable, Kenya must give priority to a number of success factors key of which is the legal framework for the Kenya TradeNet System.

The success of the Single Window system will be fully realised when the government strictly enforces the 24/7 economy through legislation that will allow 24-hour port operations as well as shippers fulfilling their obligations, including paying duties, providing documents on time, making accurate declaration, improving their systems (logistics audit) and employing best practices.

Mr Langat is the chief executive of Shippers Council for Eastern Africa and chairpeson of Mombasa Port Charter. He also represents shippers interest at KenTrade Board.