|IDB approves $16.5M to bolster customs|
Guardian Business Editor
Published: Jul 20, 2012
The Inter-American Development Bank has approved a $16.5 million loan to modernize country's customs department and bolster revenue by tens of millions each year.
"Although The Bahamas is a vibrant economy, the country is somewhat isolated from international trade circles," said Mario Umana, IDB team leader for the project. "As a result of the changes and the technical support to be implemented under the program, The Bahamas have will modern and agile customs operations, and the country will be in a better position to join the World Trade Organization."
The loan, approved on Thursday, comes just a few months after the completion of the $83 million Nassau Container Port (NCP) on Arawak Cay, effectively centralizing all trade operations coming in and out of the country. A $16.5 million loan from the IDB is expected to now bring the Bahamas Customs Department (BCD), an essential component at the port, into the 21st century.
In a recent report from the IDB, it noted that WTO accession process may be seriously hindered by the operational and institutional limitations of the BCD. The Bahamas has sought WTO status for years. According to WTO's website, the country is now in the seventh stage of its application process, which represents the market access negotiations phase.
In other words, there is still a long way to go.
Perhaps most significantly, at least for the immediate future, is the IDB loan's potential to boost government revenue. BCD currently stands at 50 percent of the total income collected by the government, according to the report.
"There is also the fiscal impact of the inefficiencies in trade facilitation. A study by the Organization of Economic Cooperation and Development (OECD) presents a loss that ranges from one to five percent of GDP caused by inefficient procedures," the IDB report stated. "In the case of The Bahamas, this loss will equal to $65.8 million, almost four times the total cost of this program."
Michael Maura Jr., the CEO of APD Limited, said the $16.5 million loan is desperately needed now that the country has launched its single port of entry for international freight.
He felt the $83 million Arawak Cay development will make any changes made by BCD that much more effective.
"I would say we were almost a prerequisite. I am not aware of what customs is planning, but I would imagine what we have done is a step in terms of helping them get the kinds of results they need," according to Maura.
That said, the port's CEO noted that the overhaul of infrastructure will be a "huge undertaking". He pointing out, when talking about customs in another country, it's not as simple as just Nassau. They will have to implement these procedures for other areas of The Bahamas.
"I know senior management in customs are eager to see this kind of process. It has always come down to money," he said. "They have been eager and anxious, and it comes down to timing and resources."
By the end of the program, the IDB said the cost of collecting revenue should decline 15 percent. Cargo manifests submitted electronically will dramatically rise from just 25 percent now to 85 percent, the report claimed. Customs declarations submitted electronically would surge from a minuscule two percent to 80 percent.
If successful, the revamp of customs could go a long way to reducing the government's national debt. This year's deficit, according to the recent budget communication, stands at $550 million.
Overall government debt is forecast at $4.607 billion, or 54.57 percent of GDP, by the end of the upcoming fiscal year.