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Afghanistan: Modernizing Customs Control

espite Significant   Challenges, Afghanistan Improves Collection of Customs Revenue

Additional Support for Revenue Collection in a Challenging Environment

May 26, 2009 - Computerization at major border crossings has boosted Afghanistan’s customs revenues from $50 million to over $399 million in five years with help from a World Bank funded project. But in a country facing extraordinary challenges, much remains to be done still to raise revenue collection further. Key among the challenges is addressing allegations of corruption in the service and putting a stop to illegal trade in dangerous goods across borders.

Afghanistan remains heavily dependent on international aid. Over the past seven years, the country’s entire development budget and a significant share of the government’s operating budget have been financed by the international community. Although there have been some improvements in the past several years, Afghanistan’s domestic revenue to GDP ratio - excluding the drug economy - is still one of the lowest in the world. In 2007, this ratio stood at a mere 7 percent.

Not surprisingly, greater mobilization of revenues has been one of the Government of Afghanistan’s highest priorities. As customs collections account for a substantial part of domestic revenues - in 2006/2007 they made up about 55 percent of total revenues - the Afghan Government, with donor assistance, has focused on reforming and modernizing the customs administration. The aim has been to improve the valuation of goods, reduce leakages of revenues, and decrease the waiting time at major border crossings.


Increasing Customs Revenues and Facilitating Trade

To assist the government in this endeavor, the World Bank’s US$31.2 million Emergency Customs Modernization and Trade Facilitation Project has been helping to computerize the customs processes at four major border crossings through which a wide variety of essential goods - ranging from wheat, rice, sugar, tea, vegetable oil, cement, scrap iron and motor vehicles - are imported into Afghanistan. These goods are imported into the country through the Torkham-Jalalabad-Kabul trade corridor from Pakistan in the east; the Islamqala-Herat-Kabul and the Torghundi-Herat-Kabul corridors from Iran in the west; the Heiratain-Mazar-e-Sharif-Kabul corridor from Uzbekistan in the north; as well as through three Inland Clearance Depots (ICD) at Kabul, Jalalabad, Herat, and the Kabul Airport.

The introduction of the Automated System for Customs Data (ASYCUDA) at these points has tightened controls and removed the human interface in customs transactions, thereby increasing the speed of clearance and reducing the opportunities for corruption.

Since 2004, when the project began, customs revenues have soared from US$50 million to reach over US$ 399 million in 2008 - an increase of over 700 percent in just five years. In fact, in the past two years alone, customs revenues have increased by about 25 percent each year. The waiting time for trucks at the major border crossings has also decreased. For example, at the eastern border with Pakistan at Torkham, over 90 percent of trucks are now cleared in less than one and a half hours, down from 18 hours in 2003. At the Kabul Inland Clearance Depot (ICD), the average waiting time for trucks is now a quarter of what it was before computerization.


Challenges

Despite these gains, concerns remain that considerable potential customs revenues are being lost due to interference by other entities. Political interference is common with allegations of political appointments, rehiring of dismissed staff under pressure from influential people, and preferential treatment of those who have a nexus with political parties. The tighter controls at these points have also led to some trade being diverted to border crossings where systems are not yet automated, causing loss of revenue.


Additional Financing

To prevent this leakage of revenues, the World Bank is providing additional financing to extend computerization to customs checkposts at all the trade corridors in the country. For this purpose, on May 26, 2009, the World Bank’s Board of Executive Directors approved additional financing of US$6.81 million to further rollout computerization and complete the on-going construction at the Jalalabad ICD.


Additional Resources

- Afghanistan: Development Data
A wide range of social and economic measures on Afghanistan, including links to the World Bank's most important online development databases. (Read More »)

- Afghanistan: Analysis and Research
Compilation of all the World Bank's publications on Afghanistan, with 'search' options and links to analysis and research on other South Asian countries. (Read More »)

- World Bank Program in Afghanistan
Launching pad to all information on World Bank activities in Afghanistan. (Read More »)




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