Customs administration Nepal needs radical reforms

Madhukar SJB Rana

Many would, no doubt, be taken aback by this question given the folklore and myth of integrity in the customs offices. Customs administration is a national institution with a strategic role and importance in the affairs of any State. Liberalisation, globalisation and regionalisation will be ineffective, to say the least, if reform and modernisation are not duly implemented with the utmost priority and care. In the 21st century customs may be visualised as Nepal’s “eyes and ears” in the international market place for gauging the competitiveness of the Nepali economy.

Customs is one administration that is in the vortex of globalisation of international trade and commerce dealing with and collecting duties and taxes from innumerable export and import houses, clearing and forwarding agents, insurance and survey agents; equally dealing with masses of border peoples trading with each other for their daily livelihoods, not to mention the vast number of tourists that flow into the country. To be world class would require, first and foremost, downsizing the customs administration so as to achieve more for less. It would also require right sizing to keep abreast of the tempo of growth technology worldwide. The crying need for reform must, certainly, be the need for reforms in Nepal’s human resources mobilisation, utilisation and development.

Recruitment and placement; training and retraining, transfer and promotion sub-systems must be re-engineered to suit precise requirements of the customs. Respect must be given to the knowledge, skill and behavioural requirements for function and position therein. Attractive and adequate remuneration is crucial. To assure integrity a code of conduct is a must with full-fledged programmes for compliance by all level of staff, especially focused on supervisory and leadership rungs. A system of grievance handling should also be incorporated into the personnel administration system to allow for the recourse to immediate justice and for incorporating solidly a system of rewards and punishment and incentives and disincentives.

All employees must be made alive to market forces and learn to treat all citizens as customers and not people to be administered by rules. This calls forth a revolutionary change in attitude where public servants begin to see themselves as service providers and not simply legal or semi-legal administrators.

Peru presents a glaring case study of how it is possible to achieve world class status in customs administration through reforms. Re-engineering combined with the decrease in ad valorem tariff from 1990-98 by 45.0 percent, imports increased by 182 per cent and revenue by an astounding 353 per cent. The Peruvian Customs was considered to be perhaps the most corrupt in South and Central America. Yet, by now it is providing technical assistance to Bolivia, Cuba, Columbia, Costa Rica, Ecuador, El Salvador, Guatemala, and the rest.

How did that happen? There was steadfast political commitment. Additionally, the integrity programme was closely inter-linked with intelligence, post clearance audit, internal audit, external audit and risk management. There was also recourse to outsourcing for such services like pre-shipment inspection, skills in short supply, warehousing operators, security services, banking services etc.

It requires a new attitude in the Ministry of Finance where expenses are seen as investments and not simply as costs so that adequacy of financial resources is assured, and thus avoid recourse to the informal system of fees or dastur that has backfired to give a poor social image to customs administration. No world class customs service is possible unless infrastructure is improved and accountability assured. Deeply concerned about the lack of meaningful accountability by the tax authorities in India, the Report of the Task Force on Direct and Indirect Taxation has recommended that the tax departments be outside the Ministry of Finance as semi-corporate entities with full personnel and financial autonomy. Each tax authority would have its own Board which, it is suggested, should sign a five year Memorandum of Understanding with the central government to lay down very broadly the general conditions to guide the Board’s decisions with respect to strategy formulation; specify precisely the financial and personnel autonomy and powers; indicate clearly the financial commitment of government for five years and how funds are to be released for the authority’s annual budget; state the performance criteria for accountability, monitoring and evaluation.

So rapid is the change in transportation and communication that the days will not be far off when we find customs administration of landlocked Nepal providing transit and trans-shipment services to most of its regional neighbours. This is likely to happen by 2010, if not earlier, with the operationalisation of SAFTA and the Asian Highway and Asian Railway stretching from Japan to Istanbul. Re-organisation is fundamentally crucial since the past organisation structure is not in tune with the desired role of customs administration in tune with WTO provision. Nor is it abreast of the developments in the field of information technology and benefits accruing for accountability, transparency and integrity. Rana is convenor, HMG Task Force on Customs Administration