Two Decades of World Bank Lending for Customs Reform: Trends in Project, Dsign, Project Implementation,and Lessons Learned

Over the past 20 years the World Bank has provided substantial support for reforming customs administrations in developing countries. While this support was seldom provided in the form of customs-specific technical assistance operations, many projects in trade facilitation, infrastructure, and public sector included customs reform components. In addressing customs reforms, the Bank has accumulated a significant amount of knowledge and experience, which should be used in designing new projects as well as in improving existing ones.

The chapter is structured as follows: The first section, Bank Assistance in Customs-Related Projects, summarizes the level, format, and regional distribution of World Bank lending for customs reform. The analysis is based on the project database (Trade Assistance Evaluation Project Database-TAEPD) compiled by the World Bank's Operations Evaluation Department (OED) and project-specific documentation including staff appraisal reports (SARs), project appraisal documents (PADs), implementation completion reports (ICRs), and OED evaluation summaries.1 The second section, Pre-Project Diagnostic Work and Project Design, provides a detailed discussion of issues, trends, and patterns in setting objectives, selecting performance indicators, and defining project activities. The third section, Project Implementation and Outcomes, identifies key problems in diagnostic work, project design, implementation management, and supervision that affect final project outcomes and sustainability. The concluding section discusses the design and process issues of projects with customs reform activities and draws key lessons for future Bank operations to support customs modernization.

Bank Assistance in Customs-Related Projects

The World Bank has been active in providing support for customs reforms in all geographical regions. A variety of lending instruments was used for these assistance projects, and the distribution of projects differed across region.

Rationale and Lending Instruments

World Bank customs modernization activities have generally been part of broader reform programs to facilitate trade, support general revenue mobilization, enhance public finance management, strengthen public sector human resources management, support infrastructure development, or enhance competitiveness. In many cases, customs is just a small component in a complex reform program.2 At the other extreme, in very few cases, such as the Russian Customs Development Project (RCDP), customs reform has been the sole focus of an operation.

Customs reform components are embedded in investment and technical assistance loans (TALs) as well as in structural adjustment loans and credits (SALs). In the case of a technical assistance (TA) operation, the project document specifies the allocation of funds to each particular project component. Structural adjustment operations are generally designed to provide financial support for a policy program such as in fiscal reform or public resource management. The operations do not require an in-depth specification of project components nor do they specify the allocation of the funds to different components. Given the different nature of SALs, the following analysis focuses solely on the Bank's TA components to distill lessons for future customs modernization activities.

Scope and Distribution of Bank Assistance

During 1982-2002, the Bank engaged in 117 projects with a customs reform component 38 of these were TA projects and 29 were SALs. Annex 7.A summarizes the distribution of these projects across regions and periods.

In the SALs with customs components, two-thirds of the policy reforms retained were trade related, while one-third were public finance related. With respect to the customs-related components, 75 percent aimed at process simplification, 16 percent at improvements in legislation, and 9 percent at human resources development.

The customs-related conditionalities and scope of activities included in the SALs vary widely from the very specific to the most ambitious. Some SALs developed specific conditionalities related to specific customs procedures and operations (Georgia Third Structural Adjustment Credit Project, Jordan Third Economic Reform and Development Loan Project, and Morocco Policy Reform Support Loan Project), specific aspects of human resources management and training (Haiti Second Technical Assistance Project, Tunisia Development of the Capacity to Administer Foreign Trade), revision of the Customs Code (Nigeria Trade and Investment Policy Loan Project), and targets for simplification of procedures to facilitate trade (Morocco Second Industrial and Trade Policy Adjustment Loan Project). Some SALs imposed broad and ambitious conditions for customs modernization, such as strengthening customs administration (Sao Tome and Principe Strengthening Planning Budgeting Implementation and Control Projec...

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