Customs problems hampering investment flows to the Bahamas

NASSAU, The Bahamas, Thursday March 28, 2012 – An information management system more than 20 years-old and “serious institutional and operational limitations” in the Bahamas’ Customs Department is undermining the nation’s trade competitiveness and ability to attract high levels of foreign direct investment (FDI).

This warning has been issued by the Inter-American Development Bank (IDB) in a recent report on a proposed US$16.5 million project to upgrade customs and prepare the Bahamas for a more liberalised trade environment.

The report said the department’s reliance on outdated information technology and manual systems created the opportunity for fraud, data entry errors and the wrong rate of duty to be applied, all of which cost the government revenue.

This, the IDB added, often resulted in duty exemptions being incorrectly applied, while also handicapping the private sector in impeding the free-flow of physical goods into and out of the Bahamas.

Such problems are not insignificant, given that this nation was said to have exported US$709.7 million worth of goods in 2011, and imported some US$2.859 billion. And the IDB warned that they could also undercut “the major engine for economic growth” in the Bahamas, namely FDI.

The report also warned that these problems, together with “weak control and enforcement”, undermined the Government’s revenue collection ability, given that Customs collected 50 per cent of the total.

Noting that the Bahamas’ open economy gave it a trade-to-gross domestic product (GDP) ratio of 129.2 per cent, the IDB report added that the absence of a government unit/department dedicated to trade matters was also in danger of compromising this nation’s World Trade Organisation (WTO) accession and negotiations over other trade agreements.

Noting that the Bahamas had already signed on to the Economic Partnership Agreement (EPA) with the European Union (EU), and had begun the accession process to full WTO membership, the IDB report said CARICOM was also negotiating on this nation’s behalf for a new trade agreement with Canada.

Yet, given this backdrop, the IDB warned: “These trade engagement developments may be hindered by serious institutional and operational limitations at the Bahamas Customs Department (BCD) and other trade related institutions.

“At BCD, some of the main problems include: An obsolete Information and Communication Technology (ICT) management system to support modern Customs operational processes, given that the current information system, Customs Automated System (CAS), was designed in the late 1980s; very limited use of risk analysis model and its system (Trade Information Management System – TIMs); an outdated institutional/operational framework and business processes; a functional organisation structure and human resources model and management; inefficient cargo clearance and entry passenger processing; weak border control coordination and lack of an enforcement strategy; and a strained relationship with the private sector.”

As to the consequences of all this, the IDB report said: “These problems typically affect any country’s competitiveness performance and business climate and, if not resolved in the Bahamas, could also hinder the ability of the country to enhance its international trade performance and to attract high levels of foreign direct investment, which is the major engine for economic growth.

“Moreover, the current cumbersome, manual and lengthy procedures, together with a legacy IT system at Bahamas Customs, produce a twofold impact.

“It allows for frequent data entry errors, and provides an opportunity for improper classification/valuation and incorrect and unaccountable use of government exemptions, and negatively affects the time and cost of movement of goods across borders.

“All the above, together with contraband practices, due to weak control and enforcement, affect the revenue collection capacity, considering that currently Bahamas Customs is the main source of revenue, collecting 50 per cent of the total,” stated the report.

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