Enabling Smart Borders:
2. Best Practices along the Path to Smarter Borders
Different countries are at different stages of border process improvement and IT development (Figure 2). Some countries, such as South Korea, have a long history of reforming border management, resulting in fully integrated and digitized border management systems (the phase of “smart borders”). Other countries, such as Kenya and Cambodia, are still at an early stage of reform, having begun border control improvements only recently. Finally, there are those countries which have made some progress with border control reform, but which have yet to fully integrate and digitize their systems, and which are still engaged in the streamlining and automation process necessary for this step.
Figure 2: Case Studies Reflect Varying Degrees of Progress towards Smart Borders4
Note: (*) Customs clearance and document preparation only
Source: World Bank; Doing Business dataset
Donor funding appears to be fairly readily available to support reforms. For its part, the private sector is willing in some cases to provide free border management software and systems, through appropriately structured public-private partnerships in order to expand the flow of trade.
Often, however, the institutional and change-management challenges are even greater than the technical and resource constraints. In the end, systems are used by people. The underlying logic of laws and processes, combined with the realities of administrative and institutional structures, need to support efficient border management. For an overview of the border management process, see Figure 3.
Figure 3: Border Management Process
Source: Illustration from the World Economic Forum and Bain & Company
Digitization is a powerful tool to improve border management processes.
At relatively low cost in both financial and political terms, digitization reduces both direct compliance costs and the perception of inconvenience for smaller traders. Replacing multiple paper documents with a single electronic form can reduce border-crossing times significantly. Exchanging data electronically between stakeholders (e.g. government agencies, traders, banks) can allow more transactions at a lower cost compared to human-based systems.
One of the choices governments face in implementing new information systems is whether to develop bespoke solutions or use one of a variety of off-the-shelf systems. Such off-the-shelf systems tend to have lower maintenance and lower costs to upgrade, and may be more appropriate where fewer resources are available. The Automated System for Customs Data (ASYCUDA), provided by the United Nations Conference on Trade and Development, is used in over 90 territories; various other private-sector or government-supported systems are available on the market (e.g. MicroClear, TIMS, SOFI, TATIS, with providers including CrimsonLogic, Crown Agents and Agility). The WCO has developed ready-made systems for exchange of data and for risk management purposes, which are currently being implemented in a number of countries and are available to all 179 WCO members. Some success has occurred with port-centric systems designed to speed progress through border-crossing points, while regional systems provide another alternative to the national approach.
Irrespective of the choice made, interoperability and flexibility of the system is of great importance. The WCO Data Model provides a standard set of data elements to facilitate automated information exchange generally, including in a single-window environment, while the Globally Networked Customs programme aims to bolster information interchange between countries.
Development of IT must be accompanied by ongoing process improvements. Without an ongoing effort to redesign process and methodology, fully leveraging an IT system is not possible. South Korea is a major importer/exporter in the global economy. Efficiency is at a premium, and the Korean customs agency must continuously improve methodology and processes for border control. For example, an analysis of the customs agency demonstrated that the identity of traders is more correlated with the risk of an item being in violation than with information on the goods themselves. Furthermore, the top 1% of traders are responsible for up to 80% of total exported/imported goods. Therefore, the customs agency has changed its strategy from item-based to operator-based risk management, creating significant time savings without changing its IT infrastructure.
Impacts on various stakeholder groups must be understood and managed proactively. It is important to consider the potential impact of the reform on stakeholders during the design phase. Often, customs agents fail to support organizational or systemic changes because of possible job loss or financial de-incentivization. In South Korea, when fully automated screening systems were introduced for risk management, the need to manually inspect packages was reduced significantly. To counteract any negative impact on customs-agent motivation, the Korean government decided to set up performance-based incentives for staff, incentivizing agents based on the number of prohibited items identified by more targeted manual inspection.
Continuous and consistent communication with all stakeholders is critical throughout the reform process. A good example is Thailand. Whenever a new customs reform plan is introduced, the Thai government notifies stakeholders in advance and organizes meetings and seminars to disseminate information about the reform and to solicit feedback. Thus, the process is not only about informing stakeholders, but also about including them as part of new system design and working together to make the reforms successful.
For the deployment of reform, ongoing training and education of staff members is required. One option that numerous countries take is the smooth transition of operating ownership. A corporation takes initial ownership of the new system while agency staff is being trained; then, the customs agency gradually takes over operational ownership. In Kenya, the new customs system will be managed by CrimsonLogic until local staff is fully trained for takeover.
The government should put forth clear vision and direction throughout the reform. Reforms often occur when a government’s perspective on customs changes – from viewing foreign trade as an opportunity to collect revenue, to seeing it as a catalyst for promoting the local economy. However, this initial motivation must be accompanied by sustained follow-through.
The role of the private sector matters. There will always be certain functions better performed by the private sector; in each of the best practices cited here, there was at least some degree of private-sector involvement. Most commonly, private sectors act as solution providers; they assist the customs agency with developing and embedding new IT systems, and often take operating ownership at the launch until local staff are completely trained (e.g. Agility, CrimsonLogic).
Firms have another common role as knowledge providers. This is an especially important function, as risk management policies and de minimis regimes become more important methods for accelerating the border control process. And, a need develops for collaboration between government and firms to build and implement appropriate criteria and methodology. In particular, goods such as food and drugs have complex and specific compliance guidelines, thus requiring significant knowledge transfer from the private sector. For example, in Thailand, food and drug associations have helped government to develop risk management standards, which in turn have allowed local producers to benefit by exporting their items more efficiently.
Finally, the private sector often engages in the role of adviser. While the World Bank plays a leading role in this area, many private firms also contribute to the process of ensuring that optimal border-control strategies are developed and implemented.
In parallel, a shared cross-industry vision of the harmonization requirements and value of data-enabled smart logistics would help guide further needed reform of both government and private-sector processes and systems. As recommended by many international organizations, including the WCO, involving the private sector in the reform process is crucial. In recognition of the need for close interaction, work is underway in the WCO to develop more specific guidance on how to set up a proper and regular consultation mechanism between customs and other border agencies and trade.