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IN TE RNATION AL FORUM ON T RADE FACILITATION

GE N E VA, M AY 2002

PUBLIC-PRIVATESE CTO R CO O PE RATIO N

IN TRAD EFACILITATION

COMMUNITY NETWORKS FOR TRADE

FACILITATIO N - AN IMPLEMEN TE RS

PERSPECTIVE

RAYMOND WEE

FORMER MANAGER OFMAURITIUS NETWORK SERVICES LTD

IN APPRECIATION OFTHE PUBLIC AND PRIVATE SECTORS OF

THE REPUBLIC OF MAURITIUS

29 MAY 2002

ALL RIGHTS BELONG TO THE RESPECTIVE PROPERTY OWNERS.ALL OPINIONS EXPRESSED AND ERRORS ARE THOSE OF THE AUTHOR ONLY.

FOR FEE DBACK, KINDLY WRITE TO : raymondwee@senyum.com

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PUBLIC-PRIVATE SECTOR COOPE RATION IN

TRADE FACILITATION

COMMUNITY NETWORKS FOR TRADE FACILITATION ANIMPLEMENT ERS PE RSPECTI VE

I N T R O D U C T I O N

Information and communication technologies (ICT) has often been used and perceived

by many enterprises, administrations and governments as a cool tool or way to attaincompetitive or comparative advantage1. Some even go further to embrace and promote

that ICT is essential for economic survival.

Community networks (e.g. those between buyers and sellers) had been around for over 30

years for commercial efficiency purposes. From trade to logistics to finance to regulatorycompliance requirements, various communities and countries have used different

methodologies and technologies to achieve the same end - facilitate business and trade byreducing the documentation effort and time. However, the more successful models took the

opportunity to streamline their processes and automate as much as is possible. Like any ICTimplementation, most benefits are derived not from mimicking the manual processes orblindly adopting so-called international best practices but by those who are able to applyonly relevant best practices and if necessary, adapt them to suit local context anddevelopment pace.

This paper hopes to share with policy makers a few insights drawn from past experienceswith the one model of community network implementation. They are presented from animplementers perspective with special focus given to the role of public and private sectors.

E L E ME N T S O F A SU C C E S SF U L D E P L O YME N T O F C O MMU N I T Y N E T WO R K S

FOR TRADE FACILITATION

TO AN IMPLEMENTER, a successful community network for the purposes of tradefacilitation should bear some or better yet, all of the following characteristics (in increasinglevel of success) :

1. Achieve the basic Objectives that such networks bring at a nation-wide orcommunity level : process automation (through the use of real time selectivity

or risk management tools), reduction in the errors by reducing human

intervention and paperwork, and reducing the need for physical trips tovarious agencies and stakeholders so as to achieve faster processing oftrade/ regulatory-related documentation. The even more successful ones

achieve it at the shortest time possible with the lowest costs and causingminimal social uneasiness, while involving as many stakeholders in trade. Thismeans more actions and results, but less argument.

2. Built on a flexible, proven technology platform complete with as much sourcecodes, training, transfer of technical know-how including finally taking over

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of the systems, support, operations and management. The self-accountablenetwork is then totally free to develop and enhance the technology platformto keep pace with the ever-changing business environment. Infrastructure

investment is optimal, benefiting from technology shifts in the long term2.

3. Deliver benefits in terms of on-time, real-time information and in terms ofreturns on investments to both public agencies and private sectors. The lattermay be in the form of costs savings or increased revenue as a result of betterinternational competitiveness or information needed for formulatingfiscal/ budgetary policies.

4. Self-sustainable in the long term (5 - 7 years and above) with its ownoperations and profit center without the need for additional technologysupport, investments, public funding or international financial assistance, afterits launch. In some instances (e.g. after being profitable for a good number ofyears), the network should also be in the position to consider fulfilling itssocial responsibility by reducing its fees or apportioning part of the profits togenerate more savings to the community it serves.

5. Export of know-how, sharing of experiences with other communities,administrations or countries in need of such network systems, skills,experiences and methodologies; while continuously innovating and extendingand expanding the benefits to the other local business community or sectors(e.g. taxation, legal, healthcare, etc).

T H R E E M O D E L S O F C O M M UN I T Y N E T W O R K I M P L E M E N T AT I O N

In order to achieve the promised land of community networks that actually facilitatescommerce by serving the needs of both the trade and government, there are possibly threemain models or approaches:

a. Public sector initiatives where the government undertakes the responsibility of settingup, funding, maintaining and enhancing the community network consisting of bothpublic and private sector users.

b. Private sector enterprises where one or more companies, usually stakeholders in tradewith or without participation from technology solutions provider/ s. Users are likely tobe existing or new customers of the enterprise and primarily set up to offer a

comparative advantage against their competitors and with the objective ofgenerating profits directly or indirectly.

c. Hybrid or cooperation model with participation from both public and private sectors,with even foreign participation solutions providers and/ or international institutions.

PUBLIC SECTOR IN ITI ATIVES

Countries or communities that subscribe to this model usually have a strong and stablegovernment, with an established public administration consisting of well educated and good-salaried civil servants. They also tend to have built strong and reliable infrastructure

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(telecommunications, high level of education and ICT skills, etc). With a high level of civicawareness, a strong legislation and strict enforcement, the trading community understandsthat their trade will be facilitated by being compliant. Non-conformance will be dealt with by

the rule of law and ignorance of the law is generally not accepted as an excuse. The level ofinter-agency cooperation within the public sector also tends to be high.

It is noted that this model is also used by some agencies who feel that they want to fullycontrol the facilitation process and/ or can rely on international funding institutions tosupport its initial setup.

However, with the passage of time, the number of users and volume of transactionsincreases, and with technological obsolescence always imminent, such initiatives can graduallybecome a financial burden to the public sector agencies and government. It may in somecases deteriorate to the point where trade is obstructed because of the delays caused by theobsolete system or network.

PRIVATE SECTOR E NT ERPRISES

Those that implement based on this model normally have a well-established free-market-

oriented government. The public administration is also one that is consisting of very welleducated and good-salaried civil servants who may even be pioneers in setting clear standardsand technical regulations. The public sector approach is usually one of non-interventionistand fully supportive of the free enterprise concepts.

The trading community is also one that is innovative and enterprising. With appropriatelegislations and enforcement, the trading community also understands that their trade will befacilitated by being compliant. These enterprises are purely market and profit-driven and will

set up almost immediately if there is a market and close down (or divest) if it is loss-making.

This model is used by some administrations who feel that they may not have the means toset up such community networks and wish to rely mainly on foreign direct investments

and/ or international funding institutions to support its setup and upgrade.

However, since duplication of products and services is inevitable, such networks may notbe suitable in countries or communities where resources are scarce. It also cannot guaranteelong term sustainability and continuation of service. There may also be little incentive toreturn additional savings to the community after the initial investments for its set up has been

paid off or to build local capacity for its continuous operation. The community may also growto be more reliant rather than being more self-sufficient.

HYBRID OR COOPERATION TRHOUGH JOINT VENTURES

Countries or communities that implement using this model usually have a mixture offactors : relatively stable government with reasonably efficient & effective administration and

an infrastructure that is in the process of being built up. The level of education and availabilityof ICT skills also tend to be moderate or low.

The trading community, through past experiences, sometimes does not see the benefits ofbeing compliant, as they see their competitors benefit from the gaps and inefficiencies.They make use of the fact that processes and legislations may be non-existent or unclear,enforcement not always consistent due to the long lead time in trial hearings (andconvictions).

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With the implementation of a trade community network, its introduction presents anopportunity to both the public and private sector (especially those yearning to stay within therule of law) to cooperate and establish a common platform that is mutually beneficial in the

long term. The government benefits by having accurate, real time information for policymaking and execution, while the trade enjoys shorter document processing times by beingresponsible and accountable for the information and by being compliant.

Such cooperation can be frequently helped by experienced solutions, technologyimplementers or change agents who are able and willing to share their experiences and know-how. It is particularly the responsibility of the country and community to evaluate carefullythe options available (e.g. visiting countries implementing the various models) and decide ifthe particular model or solution suits their needs in the long term.

C O O P E R AT IO N A S A P R E -R E Q U IS IT E

An example of one such successful public-private cooperation model resulting in a

successful community network implementation as defined earlier is Mauritius.

FACTORS TH AT CON TRI BUTED TO A SUCCESSFUL IMPLE MEN TATION

Public-Private Sector Cooperation

The company, Mauritius Network Services Limited, was set up to upholdcooperation in the best & worst of times. Public sector was represented by

four government related companies and the private sector was represented by

the Chambers of Commerce with funding from stakeholders in the trade. Theforeign partner is another government linked company who is providing thetechnology solution. All have long term interests to ensure its ultimate success.

This setup was put to the test and proven in times of political uncertainty where within 3

years of set up, the company saw 4 M inisters of Finance and a total change in government(plus another split in a coalition). Originally the first M inister of Finance had wanted the

pilot to be ready within its first year of set up. H owever, the trade community network was

only finally launched (with a locally-developed automated customs system) after 3 years.W ith greater public sector confidence, private sector acceptance and political stability, the

network ultimately achieved total cutover within one year handling over 1,000 electronic

declarations or Bills of E ntries a day.

Strong National vision or Public-Private sector conviction to deploy ICT as akey enabler for business efficiency and trade facilitation

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During its early days of community network implementation, there wasalready a strong inclination from both the public and private sectors toreplicate the economic success of other resource-scarce but developed

economies like Hong Kong and Singapore. As such, ICT and Internetdeployment was widely perceived as an important enabler to better businessand comparative advantage. The economy was in the process of a transition

from an agricultural and low-skills based industries (e.g. textiles) to highervalue, knowledge based economic sectors.

During the implementation period, the government lowered its normally high duties andtax es on imports for computer and communications-related items lik e personal computers

and modems. In the private sectors, ICT jobs became the dream job for some tertiarygraduate. H owever, the problem then was the lack of quantity and quality of local ICT

professionals that could be trained to undertak e the operations and maintenance of the

network systems. Fortunately, there were enough overseas graduates or returning ITprofessionals to fill the gap. By launch date, over 80% of the local IT staff were graduates

from France, Russia, South A frica, United Kingdom.

Phased approach with clear and achievable objectives

While the concept of such community networks may seem simple (e.g.exchanging structured messages), its implementation is not (especially ifprocess automation to bring about true facilitation and paperless operations isenvisaged). Working in an environment where structure, consistency andcompliance is not always prevalent, the team had to start from scratch fromdefining existing processes and procedures to job description and personnelreallocation.

The initial set up assumed a particular timeline that was not possible to achieve as the

implementers did not realiz e then the magnitude of the work involved. There were 3 attempts

to fully launch the community network but was not successful because of one or more factorsbeyond their control. Some policy decisions originally thought feasible was later found to be

neither practical nor desirable from the Governments perspective. In the end, equilibriumwas reached where trade documentation was sufficiently facilitated without the Government

ceding too much transactional control.

Basic Infrastructure and Legal Framework

Another important factor for the success of such networks is the availabilityand reliability of basic telecommunications and other infrastructures (e.g.

banking and port community networks). The implementation team had towork with regions where the telephone still uses the pulse dial and oldswitches; and with communities that still uses manual processes andprocedures. There was also a lack of the necessary legal framework for

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enforcing the trade communitys electronic transactions with the governmentagencies. Existing trade-related regulations which were based on acombination of French and English law were also in need of review and

change.

A s part of the business streamlining and re-engineering process, a legal committee consistingof public sector officials and private sector professionals was set up to review all affected and

relevant legislations. A s the process of going through Parliament for a major legislation orchange was thought to be too onerous and time consuming, minor changes and subsidiary

legislations were enacted instead. In addition, while the network system was fully equipped tohandle fully paperless transactions and processes, some manual processes had to be

maintained (e.g. supporting documents submission). Today, Computer Misuse A ct tocontrol illegal access to computer materials is in force while the E lectronic Transaction Bill to

mak e contracts via electronic means enforceable is being discussed. M ore legislation is being

considered to enable the electronic transfer of funds in time to introduce the automated

clearing system for the bank ing community.

Strong sense of urgency for Change at the community and national level

Another key factor that enhances the success of trade community networkimplementation is the collective motivation for change. There must be enoughdriving force for such change as people are naturally resistant to change.There are also many in both the public and private sectors who haveflourished under existing status quo and would feel out-of-place and out-of-pace with new technologies and methodologies. Some public officials andnon-complaint traders are known to dread such implementation wherelearning of new skills, process transparency and information & decision

accountability is inevitable.

There has been more than one occasion where the implementers were ask ed whether cargo

clearance would really be faster if the port and bank ing community are not yet automatedand online. T he implementation team put in a great amount of effort to build the awareness

that without one initiative tak ing a lead and showing the results of the new possibilities,

others will not follow.

The Mauritius model possibly exemplifies the commitment and importance ofcooperation between the public and private sectors. Without a strong commitment to managechange, sufficient funding and policy execution in the face of political changes, the trade

community network would not have been a reality today. While loss-making during its initialsetup, the community network is now profitable and sustainable for the long term. See tablebelow.

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Key Financial Figures(Local Currency)

End of Year 1(1995)

End of Year 4(1998)

End of Year 5(1999)

Income 2,083,781 15,542,851 39,002,713

Expenditures ( 8,914,926 ) ( 15,719,086 ) ( 13,240,722 )

Profit/ Loss ( 6,831,145 ) ( 176,235 ) 25,761,451

Dividends Paid - - ( 2,500,000 )Cumulative Profit / Loss ( 6,831,145 ) ( 23,988,838 ) ( 727,387 )

Table: Some financial indicators during set up and upon full implementation in year 4-5 .

The Mauritius model is currently being replicated in Ghana and again in this instance,cooperation among the public and private sectors will enhance its chances of success.

There are certainly other models of successful community network implementation thatresulted in true facilitation for trade in terms of reducing paperwork, errors, time and costs,and reducing the number of trips to government agencies and stakeholders.

However, those implementations that are sustainable in the long term by being self-reliant

and truly flexible in their technology platform will likely have a slight comparative edge overthose who continuously rely on foreign funds, expertise and/ or tax dollars to upgrade ormaintain their community networks. The latter may also be forgoing rare opportunities tohelp grow the local ICT expertise and industry.

In conclusion, this paper seeks only to share those experiences and observations thatillustrated how a cooperative climate among the public and private stakeholders, coupled withproven implementation methodologies can deliver benefits for the community.

It is hoped that the lessons learnt here will be of use to various policy makers anddecision makers for their own implementation of trade community networks.

Thank you for your attention.

Raymond WeeMay 2002, Geneva

1 Carl A. Nelson, International Business : A Managers Guide to Strategy in the Age of Globalism, 1999.

2 Stefan Van Overtverldt, Creating an infrastructure for e-Business : Computing in the e-Business world, IBM Corporation,April 2001.