TRADE FACILITATION
RATE Summary
This document presents the findings of the Regional
Agricultural Trade Environment (RATE) assessment
conducted in the ASEAN region in 2012 by the Maximizing
Agricultural Revenue through Knowledge, Enterprise
Development, and Trade (MARKET) Project.
TRADE FACILITATION
Regional Agricultural Trade Environment (RATE)
Summary
USAID Maximizing Agricultural Revenue through Knowledge, Enterprise
Development and Trade (MARKET) Project
SUBMITTED TO
USAID Regional Development Mission for Asia
UNDER CONTRACT
486-I-01-07-00008-00
Task Order AID-486- T0-11-00009
SUBMITTED BY
Nathan Associates Inc.
www.nathaninc.com
December 2013
On the cover: A port near Haiphong, Vietnam
Photo credits: Nathan Associates Inc.
DISCLAIMER
This document is made possible by the support of the American people through the United States Agency for International
Development (USAID). Its contents are the sole responsibility of the author or authors and do not necessarily reflect the
views of USAID or the United States government.
TRADE FACILITATION: RATE SUMMARY
In Brief
TRADE FACILITATION
Why Trade Facilitation?
Efficient facilitation of trade in food and other agricultural products promises myriad benefits including improved
food security, more export income, increased access to productivity advancements, and nutritionally varied diets.
Because many foods are highly perishable, they require efficient trade regimes and border crossings. Food security
is enhanced when cross-border flows of food cargo are “facilitated” to minimize time spent in trade and thereby
reduce physical losses and costs. Moreover, there is enormous potential for growth in regionally produced
agriculture and food products in ASEAN to help achieve harmonization objectives for trade in goods.
ASEAN’s Approach
Regional Findings
The ASEAN Economic Community will establish the ten
Member States as a single market and production base.
The ASEAN Free Trade Area, with its Common
Effective Preferential Tariff scheme (1992), is
implemented under the ASEAN Trade in Goods
Agreement (2009).
The influence of international and regional trade has led
ASEAN Member States to increasingly bring their core
customs laws, regulations, and operating procedures
into harmony with one another. The fulfillment of
national single window commitments is critical to the
achievement of the ASW. The ASW/NSW framework
makes paperless clearance in ASEAN a possible, though
still distant, objective.
Recognizing the importance of coordinated activity,
Member States agreed in 2005 to establish an ASEAN
Single Window (ASW) and signed a protocol the
following year to establish and implement the ASW.
The protocol defined the ASW as “the environment
where National Single Windows of Member Countries
operate and integrate,” and recognized national single
windows as systems with a single point of submission of
trade data.
Domestic enterprises that trade in agricultural products
are particularly harmed by the persistence of
corruption among many border agencies in ASEAN.
Application of risk management techniques can help
reduce corruption at borders. The private sector is
eager to add its perspective on domestic and regional
reforms to trade facilitation.
Opportunities for ASEAN
• Coordinate streamlining of regional trade facilitation with harmonization of food safety standards.
• Continue region-wide harmonization of customs laws, particularly as they address risk-management in facilitating
movement of agricultural products.
• Develop and implement an anticorruption plan for cross-border trade of agricultural products.
Opportunities for Member States
• Join the Revised Kyoto Convention.
• Promote risk-management in border processes.
• Strengthen efforts to counter border fraud and informal trade.
• Take serious action against corruption at the border.
• Strengthen national single windows and exchange of electronic data through the ASW, including health
certificates, phytosanitary and veterinary certificates, and lab analysis certificates.
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TRADE FACILITATION: RATE SUMMARY
AT ISSUE: IMPROVING BORDER OPERATIONS IN SUPPORT OF
SAFE AND EFFICIENT AGRICULTURAL TRADE
Members of the Association of Southeast Asian Nations (ASEAN) have long acknowledged that
facilitating trade in food and other agricultural products promises myriad benefits. These benefits include
increased income through exports, access to
productivity advancements, and nutritionally varied
Trade is an excellent buffer for domestic
diets, all of which contribute to food security. Major
fluctuations in food supply. There is no global
trade policy developments affecting food trade in the
food shortage: the problem is regional or local
and one of moving food, often across borders,
region have come by way of the ASEAN Free Trade
from surplus production areas to deficit ones
Area (AFTA), established in 1987, and the need to
coupled with affordability. World output of a
conform to requirements of the World Trade
given food commodity is far less variable than
Organization (WTO). (As of February 2013, all ASEAN
output in individual countries. Thus increased
Member States belong to the WTO.) Member states
trade integration holds considerable potential to
have also been implementing their commitments to
stabilize food prices, boost returns to farmers
trade facilitation, which pertains to procedures and
and reduce the prices faced by consumers.
controls governing the movement of goods across
—World Bank, Global Monitoring Report 2012
borders. Responsible for trade facilitation are customs
agencies and other border control authorities—including
those with jurisdiction over food, agriculture, public
health, the environment, intellectual property, and others—as well as “behind the border” agencies that
develop standards for trade in certain products.1
. As food systems increasingly rely on trade—to supply homogenized commodities such as grains and
oilseeds for publicly managed bulk markets, and to supply processed, branded, and high-value food
products for commercially owned supermarkets—the private sector is demanding transparent and
efficient trade facilitation. Perishable foods must be handled efficiently and quickly at border crossings
Seed, plantings, fertilizers, pesticides, and farm equipment also require fast and predictable treatment at
the border. In all cases, trade is easier and cheaper if trade facilitation systems (such as the ASEAN
Single Window, discussed below) can initiate shipment processing long before goods arrive at the border.
Inefficiencies in trade facilitation can drive up costs, incurring margins as high as 15 percent above trade
transaction value. 2 In addition to tariffs and duties, costs include the value of time in transit, freight and
storage charges, and costs associated with the search for information about trade regulations, filing of
paperwork, correcting errors, and inconsistent treatment at borders by customs and food-inspection
authorities. Reducing inefficiencies can boost investment, government revenue, and economic growth and
eliminating costs that do not produce benfits lowers the cost of food without reducing farmer income.
2
TRADE FACILITATION: RATE SUMMARY
Elements of a Comprehensive Food Trade Facilitation Regime
•
•
•
•
•
Simplified trade laws and regulations
•
Easy access to tariffs, laws, regulations, and pertinent
guidance, including through national trade repositories
•
Competent, knowledgeable institutions with trained
professionals to implement and oversee food trade
•
Implementation of harmonized standards (e.g., tariff
nomenclature, certificate of origin and customs
paperwork) and common systems for sharing trade
information
•
•
Conformity assessment systems to certify food safety
and animal/plant health inspection/audit practices and
facilities (laboratories)
Mutual recognition of trade partners’ inspection practices
and testing facilities
Easy access to certified third-party conformity
assessment organizations (farm and factory audit
organizations) for foreign food supplier verification
Authorized food importer programs
Risk-based health and safety inspections of cargo arrivals
Efficient ports and the transport modes into and out of
them, as well as of trade logistics in and around border
crossings.
To gauge the efficiency of trade regimes, analysts use tools such as the World Bank’s Logistics
Performance Index (LPI) and Doing Business reports from the International Finance Corporation (IFC).
Based on a survey of freight forwarders worldwide, the LPI ranks countries’ logistics performance on
such criteria as efficiency of customs clearance, quality of trade- and transport-related infrastructure, ease
of arranging competitively priced shipments, quality of logistics services, ability to track and trace
consignments, and how often shipments reach consignees on schedule. 3 Seven out of 10 ASEAN Member
States (Singapore, Malaysia, Thailand, Bahrain,
Philippines, Vietnam, and Thailand) were
comfortably in the top half of the 155 countries
ranked in 2012. 4 IFC’s Doing Business reports
track the average time and cost (excluding
tariffs) for cargo shipments in transit assuming a
standard 20-foot, full container of goods. The
nine ASEAN Member States surveyed by
Doing Business (all but Burma) require 50
percent more documents and their cargo takes
60 percent more time to export and import than
in OECD countries (although estimated costs
per shipment are lower than the OECD
average). Still, all but Laos and Cambodia rank
in the top half. In fact, the region fares very well
on “Trading across Borders,” thanks to
improved trade facilitation services in ASEAN
in recent years (see table below).
A poster in a Vietnamese Extension Office
illustrates the importance of regional trade.
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TRADE FACILITATION: RATE SUMMARY
ASEAN Rankings in World Bank’s Doing Business Report 2013: Trading Across Borders
Export
Rank
No. of
Documents
Import
Cost
(US$/
container)
Days
No. of
Documents
Days
Cost
(US$/
container)
Singapore
1
4
5
456
4
4
439
Malaysia
11
5
11
435
6
8
420
Thailand
20
5
14
585
5
13
750
Indonesia
37
4
17
644
7
23
660
Brunei Darussalam
40
6
19
680
6
15
745
Philippines
53
7
15
585
8
14
660
Vietnam
74
6
21
610
8
21
600
Cambodia
118
9
22
755
10
26
900
Lao PDR
160
10
26
2,140
10
26
2,125
ASEAN-9 Average
6.2
16.7
765.6
7.1
16.7
811.0
OECD Average
4.3
10.5
1013.7
5.0
10.3
1067.0
SOURCE: World Bank, Doing Business in 2013(2012).
WHAT IS ASEAN’S CURRENT APPROACH TO TRADE
FACILITATION?
ASEAN recognizes the relationship between trade and economic growth, and has set milestones to
integrate economically, facilitate trade, and promote food security. These actions span a number of
sectoral ministerial bodies, as summarized below, and represent a generally unified political commitment
and harmonized approach to achieving an integrated regional market.
The vision of an integrated ASEAN Community is to be realized by December 2015. This vision was
originally expressed in the 1992 Framework Agreement on Enhancing ASEAN Economic Cooperation,
which was amended in 1995 and then reaffirmed in 1997. As described in the ASEAN Economic
Blueprint (2007), the ASEAN Economic Community (AEC) will establish the ten Member States as a
single market and production base, and make the ASEAN economic region competitive in world markets.
The ASEAN Free Trade Area (AFTA), with its Common Effective Preferential Tariff (CEPT) scheme
(1992), was implemented under the ASEAN Trade in Goods Agreement (ATIGA) (2009). ATIGA
foresees the elimination of import duties on products traded among Member States in two rounds: by
2010 for the ASEAN-6 and by 2015 (with flexibility to 2018) for Cambodia, Burma, Lao PDR, and
Vietnam.
ASEAN’s goal is to eliminate import duties or reduce tariffs to 5 percent or less for traded products, with
some exceptions. According to the Protocol to Provide Special Consideration for Rice and Sugar (2007),5
a Member State may, in exceptional cases, request a waiver from ATIGA obligations, as reviewed and
approved by the AFTA Council. Member states have also agreed on a harmonized tariff nomenclature and
signed the Framework Agreement on Facilitating Goods in Transit (1998) to harmonize the transit
transport system.
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TRADE FACILITATION: RATE SUMMARY
Responsibility for Facilitation of Trade in Agricultural Products in ASEAN
Sectoral Ministerial Body
Area of Responsibility
AFTA Council
Oversees the AFTA, which has lowered intraregional tariffs through the CEPT scheme.
ASEAN Economic Ministers
Supports development of trade facilitation in cooperation with related initiatives in ASEAN and
East Asia, such as the Asian Development Bank-Greater Mekong Sub-region (ADB-GMS)
programs, the Master Plan on ASEAN Connectivity, the Comprehensive Asian Development
Plan, and the Asia Cargo Highway Initiative.
ASEAN Ministerial Meeting
on Agriculture & Forestry
Supports ASEAN Integrated Food Security Framework & Strategic Plan of Action with
commitment to promote markets and trade; food safety standards; animal/plant health
standards; and consideration of trade facilitation in sector working groups.
ASEAN Transport Ministers
Meeting
Addresses harmonization of cross-border transport mechanisms, including trucks, ships, and
rail.
Recognizing the importance of coordinated activity in realizing the AFTA vision, Member States signed
the ASEAN Single Window (ASW) agreement in 2005 and then signed a protocol to establish and
implement the ASW. The protocol defines the ASW as “the environment where National Single Windows
(NSWs) of Member Countries operate and integrate.” NSWs are systems that provide a single point of
submission for trade documentation and information, synchronous processing of data and information,
and a single decision point for customs clearance and release of cargo. With USAID’s support, ASW
Gateway software has been installed, NSWs and the ASW Gateway are being integrated, and data
exchanges between and among seven Member States via the ASW Gateway are being tested.
ASEAN Member States aim to implement the full ASW architecture in 2013-2014, with full roll-out
envisioned for 2015. The ASW experience—which has included consensus-building and harmonized
implementation at the regional and country level—has
provided lessons on how ASEAN can meet other
Five working groups support the
commitments to regional trade harmonization. In particular,
Meeting of the ASEAN Directors
the private sector has welcomed opportunities to discuss its
General of Customs by providing
perspectives on how best the ASW can be implemented, and
guidance on policy and strategy:
has engaged in dialogue with ASW implementers about the
1. Coordinating Committee on Customs
scope and functions of the project. 6
The lead agency for border trade in most products is the
national customs authority, usually situated in ministries of
finance. For many years, including in the context of the
ASW, ASEAN customs authorities have worked together to
strengthen and harmonize practices at borders. The ASEAN
Directors-General of Customs endorsed the Strategic Plan of
Customs Development 2011-2015 for the integration and
modernization of ASEAN customs for establishment of the
AEC by 2015.
5
2. Customs Procedures and Trade Facilitation
Working Group
3. Customs Enforcement and Compliance
Working Group
4. Customs Capacity Building Working Group
5. ASW Steering Committee.
TRADE FACILITATION: RATE SUMMARY
TRADE FACILITATION IN ASEAN: HIGHLIGHTS FROM THE RATE
ASSESSMENT
RATE reviewed four aspects of trade facilitation in ASEAN: legal framework, implementing institutions,
supporting institutions, and social dynamics. 7 Questions centered on the presence of formal legal and
institutional frameworks in Member States and the relationship between border authorities and traders. To
a significant extent, the RATE findings represent the perspective of private-sector actors—ranging from
small traders to multinational companies—on how efficiently and transparently agricultural goods may
cross Member State borders.
Building on Experience: Integration of International and Regional Best Practice
into Domestic Trade Law and Policy
A number of external forces have impelled reform of basic laws affecting customs and trade in ASEAN.
These forces include WTO requirements, advances in trade facilitation encouraged by ASEAN and AsiaPacific Economic Cooperation (APEC), 8 and the ASW initiative. Member States that started reform from
positions of strength—in institutional capacity and human resources, demand for goods, and willingness
to engage the private sector—have tended to make rapid progress toward simple, predictable, and
efficient trade facilitation systems.
Thailand
Thailand’s main customs legislation, the Customs Act, dates to 1926, but has been amended many times ,
including to reflect WTO principles. In the past, amendments to Thai laws and regulations were not well
publicized, with private traders often having little notice or information about changes that would affect
them. In 2011, the Thai Customs Department committed to “always conducting public hearings to listen
to public comments and concerns, particularly on sensitive or controversial issues” when enacting or
amending laws and regulations. 9 A major concern about the Thai Customs Act is that it gives the
Customs Department Director General the authority and discretion to increase the customs value of
imports. Responding to complaints about this, the government proposed reforms of customs laws and
regulations, including removal of this discretion, to the Thai Parliament in 2011. Since the change of
government in August 2011, however, the proposed reforms have stalled and, as of January 2013, have
not been reintroduced. Perhaps reflecting the uncertainty of its customs environment, Thailand is the only
ASEAN Member State that has fallen in the Doing Business ranks on “Trading across Borders” since
2010. Still, on that measure, the country ranks third highest in ASEAN. 10
Malaysia
Although Malaysia’s main law addressing cross-border trade in goods—the Customs Act—dates to 1967,
the country has made a concentrated effort to implement a legal and regulatory framework that supports
effective logistics, customs, and other trade facilitation functions. Certain areas of trade facilitation,
including health inspections and quarantines, have moved away from the customs authority and into the
jurisdiction of other ministries. In 2012, the new Malaysian Quarantine and Inspection Service (MAQIS)
began to handle issues of food safety, quarantine, and other health inspections at the borders. In addition,
in its 10th Malaysia Plan, the government committed to reducing transaction costs arising from customs
procedures and logistics. The government further aims to promote use of information technology in the
provision of cross-border customs and logistics services and has announced plans to review regulations
and procedures pertaining to trade.
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TRADE FACILITATION: RATE SUMMARY
Vietnam
Vietnam’s Law on Customs 2001 (amended 2005) moved customs to a risk-based system of inspection.
Inspections are conducted on the basis of an assessment of the good owners’ compliance and of the risk of
a breach of the law. Vietnam’s progress can be attributed to its conscientious matching of procedural
guidance—from the WCO’s Revised Kyoto Convention, the WTO, APEC, and the ASW initiative—to
priorities for implementation, as well as to various sources of funds, internal and external.
The Revised Kyoto Convention: Three ASEAN Member States are Signatories
•
•
•
•
In June 1999, 114 customs administrations attending the
World Customs Organization's 94th Session adopted the
International Convention on the Simplification and
Harmonization of Customs Procedures, known as the Revised
Kyoto Convention (RKC). It came into force on February 3,
2006, three months after India became the 40 signatory to the
Protocol of Amendment.
•
The convention pays particular attention to the principles for
trade facilitation in customs as follows:
The RKC establishes key components of modern customs law
and is an excellent basis on which to facilitate trade, ensure
economic growth, and improve the security of the
international trade system. The WCO Revised Kyoto
Convention discusses all modern elements of customs:
•
•
•
•
•
•
Automated systems
Targeted examinations
Coordinated interventions
Information on customs requirements, such as laws, rules
and regulations
Systems of appeals
•
•
•
•
Standards, procedures, and practices
Continuous improvement mentality
Maximum use of information and communications
technology
Customs/trade partnerships
Pre-arrival information
Risk management techniques
•
Simplifying formalities and procedures
Standardizing documents used in international trade and
transport
Using risk management techniques and information
technology in customs
Moving from transaction-based controls to audit-based
controls
Introducing legal frameworks for trade facilitation.
Three ASEAN Member States are signatories to the RKC:
Vietnam (2008), Malaysia (2008), and the Philippines (2010).
SOURCE: OECD, Trade and Customs, the International Legal Framework (2011).
Laos
Laos was ranked 160 out of 185 countries on the “Trading across Borders” indicator, making it the lowest
ranked among ASEAN Member States surveyed for Doing Business in 2013. Still, the time to import or
export and the number of documents required continues to fall. In 2012, exports took 26 days, down from
66 in 2006, and the number of documents fell from 11 to 10. In 2008, Laos established a National Trade
Facilitation Secretariat and in July 2011 approved the National Trade Facilitation Strategy and Action
Plan. The proposed implementation structure includes an NSW, clear responsibilities for lead agencies,
and predefined performance indicators. Customs reform and modernization has progressed with the
completion of the ASYCUDA prototype in mid-2011, the start of parallel pilot operations in October
2011, and deployment of ASYCUDA at Thanaleng in January 2012. In December 2011, the Customs
Law was revised to introduce innovations in keeping with WTO and WCO best practices. Laos now faces
the same challenge faced by Cambodia and Vietnam after they joined the WTO: building the capacity of
implementing and supporting institutions (e.g., Trade Facilitation Secretariat, Customs, traders,
universities, lawyers, business associations).
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TRADE FACILITATION: RATE SUMMARY
A new bridge across the Mekong in Pakse, Laos built to facilitate trade with Thailand.
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TRADE FACILITATION: RATE SUMMARY
Cambodia
After joining the WTO in 2004, Cambodia enacted a
new Customs Law in 2007. Pursuant to the law, the
government has encouraged the use of a single
administrative document system and one-stop service
mechanism to facilitate trade and risk management,
although implementation of an NSW has not gathered
much momentum. As of 2005, the government
committed to integrating its NSW processes into the
ASW. Under the one-stop-service mechanism, there is
to be only one inspection by the interministerial body,
while customs operations are more facilitative,
imposing less bureaucracy and paperwork on investors.
In 2009, customs launched Automatic System for
Customs Data (ASYCUDA) operations at the
Sihanoukville Autonomous Port, Phnom Penh
International Airport, the Phnom Penh Dry Port, and
the Exports Office and Excise Department, to facilitate
customs procedures as part of one-stop service
implementation.
Thus, the influences of international and regional trade,
along with significant donor guidance and support,
have led several ASEAN Member States to bring their
core customs laws, regulations, and operating
procedures into harmony with one another. Steady
improvement of most domestic legal frameworks is a
promising basis for continued growth in regional trade.
National Single Windows: Strengthening
Coordination at National Level as a
Prerequisite to ASW Success
Cambodia
Trade
Facilitation
and
Competitiveness project (2005-2012): A
“Moderately
Successful”
Effort
to
Strengthen
Conditions
for
Trade
Facilitation and Investment
Customs automation (ASYCUDA World) in
Cambodia has benefited traders by reducing and
making more predictable the times for clearing
declarations and releasing goods, simplifying
trade documents, and making border processes
more consistent and transparent.
• The number of documents required to clear
imports has fallen to 10, down from 44 in
2005 and 15 in 2009.
• The share of declarations processed through
"ASYCUDA Automated System" rose to
nearly 100 percent by July 2012 compared to
the target objective of 80+ percent (the
baseline was 29 percent).
• The time required for customs to clear a
shipment fell from 6.5 days in 2004 to 5.1 days
in 2012.
• The share of shipments selected for physical
inspection (secondary inspection) at the port
of Sihanoukville fell to 14.2 percent by July
2012.
• Cambodia jumped 28 places in the Logistics
Performance Index in 2012, making it the 12th
fastest reformer in the world in two years and
a star performer among low-income countries
(9th place).
• One small setback was the failure to
In 2010, a report by the U.S. International Trade
computerize the Certification of Origin under
Commission stated that the ASEAN Single Window
the Ministry of Commerce, a setback rooted
activity represents the “most visible effort to facilitate
in a lack of compliant and responsive bids
trade among [ASEAN] members” and that, “by
during procurement.
enabling the rapid exchange of standardized data
SOURCE: World Bank, Implementation Status &
among members’ Customs agencies, it has the potential
Results, Cambodia Trade Facilitation and
to bolster trade and support the emergence of
Competitiveness (October 2012).
intraregional supply chains.” The report noted that
“development of the ASW has proceeded slowly,”11
but development has since gained momentum and the ASW is an “emerging ASEAN success story” as
documented in October 2012 by an independent review of the AEC Blueprint.12
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TRADE FACILITATION: RATE SUMMARY
Indeed, reconciling the different levels of Member State commitment to the ASW, as well as varying
domestic capacities to absorb and implement changes, is an enormous challenge. On the basis of
comments of traders, the RATE assessment observes that protracted implementation of the ASW can be
attributed largely to problems implementing NSWs. All Member States accept the concept of NSWs, but
managing the sharing of information among multiple border agencies has proven difficult in practice.
Leadership and staff in agencies addressing diverse matters such as customs, public health, food safety,
and national security must be willing to cooperate and able to share capacity and resources in integrating
border functions. Agencies need professional skills in resource and project management, information
technology, human resource management, interagency communications, data oversight, and more.
As of 2013, Singapore is the only ASEAN Member State with a fully operational NSW. Brunei,
Indonesia, Malaysia, the Philippines, and Thailand have partially completed their NSWs, while Vietnam
is in the early stages of development in concert with its participation in the ASW. Cambodia, Laos, and
Burma have made considerably less progress in coordinating and integrating border functions among
national agencies.
Packing coffee for shipment. The faster it clears customs, the less it costs the trader.
Malaysia
Malaysia’s solid reputation for trade facilitation is due in significant part to its ability to coordinate border
agencies. A National Trade Facilitation Council helps coordinate major issues while trade in agricultural
products is regulated mainly by the
•
Ministry of Agriculture and Agro-based Industry, which is responsible for the agri-food sector
including crops, livestock, and fisheries;
10
TRADE FACILITATION: RATE SUMMARY
•
•
Ministry of Plantation Industries and Commodities, which is responsible for the development of
the plantation and the commodities subsectors including pepper, coca, palm oil, rubber, timber,
and tobacco; and the
Ministry of Rural and Regional Development, which is responsible for raising the incomes of
rural residents.
Special committees, such as the Economic Planning Unit, ensure ministry coordination. Other related
ministries include the Ministry of Health for food safety, the Ministry of Domestic Trade, Co-operatives
and Consumerism for food prices, and the Ministry of Natural Resources for the environment. Drawing
on the resources of several ministries, the new Malaysian Quarantine and Inspection Service (MAQIS)
will be the single stop for goods that must be processed for health, quarantine, and other food safety and
quality purposes of food safety and quality. Malaysia’s NSW initiative has endeavoured to coordinate and
streamline how documents relating to each agency are transmitted during import and export. However, a
new NSW model is now being put into place that will more closely integrate border agencies.
Indonesia
Indonesia started work on its NSW in 2007. The goal is to reduce the time and cost for exporting and
importing through “a single submission of data and information, single and synchronous processing, and
single decision-making for Customs clearance and release of cargoes.” 13 Indonesia’s NSW “operates well
on paper,” according to RATE private-sector interviewees, “but not in practice.” A common complaint is
that traders must routinely submit paper copies of trade documents to customs and other agencies,
notwithstanding the simultaneous electronic entry of the same information into Indonesia’s information
management systems. Though requirements to submit hard copy documents are being reduced, and
traders can easily look up tariffs and regulations in Bahasa on the National Trade Repository,
international traders have called for a fully paperless electronic clearance through a single application and
single approval system. 14 Traders are especially concerned about the heavy restrictions on the entry of
food products into Indonesia. Indonesia’s food safety agency must grant import approval for every
shipment of processed food, food raw materials, food additives, processing aids, and food ingredients. For
seeds and plants, SPS and plant health certificates from the country of origin must be presented.
Registration of food products is generally conducted by a local agent or importer, but the time and cost of
the process—as long as nine months—typically takes longer than the mandated time of 45 days. As noted
in 2011 by the European Chamber of Commerce in Indonesia, a license to import a food item for a
specified period of time (i.e., one year) should be sufficient to protect the health and safety of Indonesia’s
consumers. 15
Thailand
In Thailand, 35 agencies signed a memorandum of understanding for implementation of the NSW.
Progress in achieving shared processes and use of technology is communicated to traders and other
stakeholders through an NSW website. Still, as of 2013, a number of functions have not yet been
streamlined to take advantage of shared information. For example, commodities entering Thailand must
pass through customs before they are inspected for quarantine issues, resulting in duties being charged to
importers even if the commodity is ultimately rejected. Several agencies are involved in import
quarantine control and in general they work well together. However, communication is not always
seamless between the agencies, according to traders.
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TRADE FACILITATION: RATE SUMMARY
Philippines
In the Philippines, about 40 agencies are involved directly or indirectly in the NSW, including with
respect to the issuance of import and export licenses, permits, and clearance to bring products into the
country. The introduction of “e2m”, an electronic platform based on ASYCUDA, has raised hopes for a
single, internet-based interface with border agencies. Reports of corruption and other irregularities in
customs processing persist, including assertions of undue and costly delays, irregularities in valuation
(e.g., use of reference prices rather than declared transaction values), 100% inspection and testing of some
products, and customs officials seeking unrecorded “fees.”
Implementing an NSW is complex, requiring consensusbuilding and long-range planning among agencies,
consultation with the private sector, a commitment to
cooperate, and the capacity and resources to set up new
systems. In spite of certain growing pains and complaints, a
great deal has been achieved. The vast majority of the 100
or so licenses required by Indonesia’s Ministry of Trade are
now solely electronic, a change that involved tremendous
political will. (One outstanding issue is that smaller traders
often do not know enough to benefit from the changes). In
the Philippines, most permits and licenses pertaining to
cross-border trade are now fully electronic. In Thailand,
every document required by Thai Customs is now submitted
and processed in electronic format. As determined by a
survey conducted as part of a mid-term review by a private
think tank on the ASEAN Economic Blueprint, “The private
sector in ASEAN has been noticing favorably the
improvements in customs and import/export clearance in
many [ASEAN Member States] in recent years.” 16
Indeed, Member States that are advanced in trade
facilitation should share lessons learned, particularly as
they relate to agricultural and food products, with officials
across ASEAN who are charged with building NSWs. As
ASEAN begins harmonizing laws on food safety and food
security, this information should be routinely communicated
to implementers of NSW systems and the ASW initiative.
How Trade Facilitation Relates to
Other RATE Topics
Infrastructure. The quality of roads, bridges, ports
and even access to information technology may
significantly impact the time and cost of trade
across borders.
Intellectual Property. Failure to provide adequate
and effective protection of intellectual property
rights is a non-tariff trade barrier. Domestic
enterprises need intellectual property protection
to compete in foreign markets, and infringing
goods, or goods in infringing packaging, may be
refused entry to foreign markets.
Nontariff Barriers. Where certain trade facilitation
measures are regarded as unduly burdensome,
they can amount to NTBs that nations in trading
relationships strive to prevent.
Transparency and Accountability. ASEAN has
worked vigilantly in recent years to bring greater
transparency and accountability to trade
facilitation processes.
Food Security. Promoting and facilitating trade in
food and other agricultural may improve food
security, export-based income, access to
productivity advancements, and diets.
Integration of Risk Management into Border Systems
Truly facilitative environments systematically identify, assess, plan for, and communicate risk. Risk
management is rooted in a legal and regulatory framework allows customs and other agencies to move
from total control of each shipment’s documents and goods to a data-driven process of selecting cargo for
inspection. To run a risk management program, an agency must be committed to using best practices, be
able to store information about traders and shipments, and be able to use that information to judge risk.
Once a risk management system is in place and functioning well, many more shipments cross borders
12
TRADE FACILITATION: RATE SUMMARY
quickly, often with no inspection and minimal formal requirements; processes become more transparent;
and opportunities for bribe solicitation and payment decrease.
Risk management has positive
implications
for
trade
in
agricultural products. For example,
risk management ensures that
imported
foods
presenting
particular risks to health and safety
are scrutinized as necessary while
foods that meet international safety
standards are permitted to move
more quickly. The integration of
risk management procedures into
NSWs especially helps reduce the
time perishable items spend at the
border.
Officials in ASEAN Member States
are well aware of the benefits of
risk
management,
and
risk
management is being instituted at a
number of border crossings. The
commitment of Vietnam, Malaysia,
and the Philippines to the RKC
represents a significant stake in risk
management, and these Member
States are poised to learn from one
another and share lessons with
others.
Indonesia
With
international
assistance,
Indonesia has been strengthening
its risk management procedures for
several years. Its NSW initiative
has improved aspects of automation
and bolstered efforts to manage
risk. Risk management, however, is
fragmented among agencies, Simple and expeditious border procedures are especially
each of which has its own important to small farmers who do their own exporting.
electronic system. Its NSW,
therefore, is not yet useful in identifying, analyzing, or managing risk and interagency coordination is
largely by means of face-to-face meetings. The food safety authority (BPOM) is integrating risk
13
TRADE FACILITATION: RATE SUMMARY
management into its practices, but integration is impeded or undermined by bureaucratic requirements for
hard copy documents and other procedures. 17 As noted by the World Bank,
Imports of empty containers clear in less than half the time needed for full containers,
showing that most of the delay is caused by border control and inspection procedures as
opposed to inadequate infrastructure. Burdensome and unclear administrative procedures
contribute to import delays and invite corruption, undermining the competitiveness of
industries that use imported components. 18
Malaysia
Malaysia’s customs authority does not have a dedicated risk management unit, but reportedly exercises
risk management in all activities. The other agencies that work at the borders do not apply risk
management. And though Malaysia gets high marks for trade facilitation, some traders believe that
authorities should trust risk management more and further reduce the number of containers undergoing
full inspection. Importers assert that there are not enough scanners at the ports. On this last point,
however, Malaysia compares favorably to its neighbors.
Thailand
Thailand established a risk management unit in its customs authority in June 1999. Customs officers
attend training events and seminars and the profiling system is continually being improved. Decisions to
conduct physical inspections do not depend exclusively on the profiling system. The inspection rate is
also driven by compliance levels and risk levels associated with each product. Risk management systems
and x-raying of containers have reduced inspections of imported and exported goods. To guide risk
management, Thailand uses the International Standards for Phytosanitary Measures, developed under the
International Plant Protection Convention by the FAO. Stakeholders interviewed by the RATE team did
not voice any concerns about export delays or other customs matters.
Vietnam
In Doing Business in 2012, the World Bank highlighted Vietnam for risk-based border inspections. For
several years, the country’s customs authority has operated “red,” “yellow,” and “green” lines for import,
which set inspection requirements based on perceived risk. According to the Ministry of Finance, in 2011,
the customs branch launched a modernization program, under which the time for goods examination and
clearance will be shortened to bring them to average times in the region’s four advanced economies—
Indonesia, Thailand, Malaysia, and the Philippines.
Report from Private Sector: Persistent Corruption at Certain Borders
A recurring theme in the RATE assessment for most Member States is the persistence of corruption.
Conditions for trading across borders have improved markedly but processes are marred by petty
corruption. Traders report that representatives of many different border agencies as well as the police
routinely demand “informal fees.” Corruption takes many forms. Importers or customs brokers may have
to pay a bribe to secure a normal or trouble-free release. Or they may try to pay less in duty, taxes, and
fees than law-abiding competitors, or try to pay nothing by circumventing procedures entirely. Or traders
bribe officials so they can use customs channels for illicit purposes (e.g., moving everything from drugs
to spoiled, expired, or otherwise prohibited food products). 19
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TRADE FACILITATION: RATE SUMMARY
Freight forwarders in Cambodia report that all documents filed with customs must be accompanied by a
facilitation fee—and that fees have gone up since enactment of the Anti-Corruption Law in 2012. One
importer of food ingredients has calculated that bringing one container into the port at Phnom Penh and
then transporting it to his manufacturing facility costs $480. Only $50 is for a legitimate fee; all the rest is
paid “under the table” to local and national government officials encountered en route.
Malaysia’s border agencies have worked diligently to institute integrity standards. The customs agency
has a code of conduct, customs officers receive training on professional integrity, “client charters”
defining rules of operation are posted publicly, and customs officers and other border officials must
pledge integrity. Malaysia’s Institute of Integrity was established in 2005 to “ensure a successful
implementation of the National Integrity Plan (PIN).” The PIN has a number of goals, among them to
“minimize corruption, malpractice and abuse of powers; to strengthen the effectiveness of public-service
delivery systems and to overcome bureaucratic red tape; and to improve good governance and promote
business ethics.” Most private companies that use the services of border agencies say that doing so is
generally straightforward and free of corruption. Others say that customs is not yet free of official
corruption.
Trade facilitation systems present a great opportunity for ASEAN and ASEAN Member States to advance
integrity, promote transparency and predictability, and combat corruption. With respect to trade in
agricultural products, border agencies should be encouraged to share their experience with integrity,
transparency, and anticorruption measures for the benefit of regional counterparts.
Consulting Stakeholders: Public-private Consultation on Border Reform
ASEAN’S ambitious approach to trade facilitation springs from the need for continued private sector
growth grounded in trade. To be effective, government’s response to private sector needs should be
driven by sustained public-private consultation. The RATE study team observed that private traders share
their views with the government by many means. The most important lesson, however, is that one-off
consultations are not enough: consultation must be regular and supported by public access to information
on the status of reforms and free discussion in the press and other venues.
Indonesia
As in many economies, the private sector in Indonesia does not speak with one voice on agricultural
trade. Multinationals are eager to see Indonesia comply with international trade commitments and
promote these interests accordingly. Domestic firms support the promotion of exports, but are less
committed to a simple and nondiscriminatory system for imports of agricultural goods. In fact, domestic
firms wield significant influence over government actors such that policies they support are increasingly
subject to challenge before the WTO. 20 The private sector also influences agricultural trade policy on a
regular and meaningful basis. General business associations include several foreign chambers of
commerce and the Indonesian Chamber of Commerce and Industry (KADIN), as well as many
associations representing the interests of producers and exporters of coffee, cocoa, palm oil, rubber, fish,
meat, and flowers. Larger companies consider the government accessible, but those engaged in
international trade are often stymied by the government’s protectionist stance. Agribusiness associations
have reportedly had some success in having export taxes reduced although such taxes persist
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TRADE FACILITATION: RATE SUMMARY
Laos
In Laos, communication between agribusiness associations and trade facilitation authorities is not
sufficient. The largest industrial producers have access to lawmakers and can influence government, but
organizations representing small enterprises lack the capacity and resources to advocate on behalf of their
members.
Malaysia
In Malaysia the relationship between associations of importers and exports, and private-sector
associations generally, and the Ministry of International Trade and Industry, including the customs
authority, are robust. A wide variety of active private sector associations lobby on behalf of their own
interests.
Thailand
Communication between traders and trade facilitation authorities in Thailand is open and regular. Some
trade associations communicate regularly with the Board of Investment, which provides tax incentives.
Associations inform members of trade opportunities, support members’ participation in trade shows, and
keep members informed about quality standards. In 2011, the Thai Seed Trade Association protested a
regulation from the 1999 Plant Variety Protection Law on the usage of wild and domestic seed varieties
for commercial development. The regulation was suspended. The Food and Agribusiness Committee of
the American Chamber of Commerce represents multinational and Thai agribusinesses and monitors
policies on food production and trade, commenting on laws and regulations as required to the Thai
government. The Thai Fresh Fruit and Vegetable Association has been working with the government to
meet EU standards. The Palm Oil Association communicates with the government on palm oil policies.
Cambodia
Thanks in part to the support of donor agencies such as USAID, Cambodia’s private sector is increasingly
connected and active in trade facilitation. From 2008-2012, USAID’s Micro-Small-Medium-sized
Enterprise project helped firms understand their business issues and then communicate that understanding
to government representatives. As a result, organizations representing small, domestic traders are
increasingly well organized and participate in the national Government Private Sector Forum and similar
provincial forums. Local activities have reportedly led to more responsive government activity, but
representatives of small and mid-sized firms say that their influence at the national level is very limited
relative to large companies.
OPPORTUNITIES FOR ACTION
There are many pathways to change in ASEAN and its Member States. Reforms can be advanced by a
single, visionary champion or a by a groundswell of influential stakeholders. Some reforms take root after
many years, while others happen quickly once empowered people act quickly and decisively in a way that
reflects public demand and best practice. In most cases, a “big idea”—including the type often promoted
by the World Bank or the World Customs Organization—can be broken down into many smaller tasks
that can be executed by a variety of public and private actors. Accordingly, the Opportunities for Action
set forth below are multifaceted. They may be viewed as a foundation for regional or domestic policy
development, as a resource for private sector initiatives, as a benchmark for tracking change, as a
16
TRADE FACILITATION: RATE SUMMARY
reference for academic instruction, and, most immediately, as a “jumping off point” for stakeholder
discussion and consensus-building.
Opportunities for ASEAN and Regional Entities
Coordinate Streamlining of Trade Facilitation and Harmonization of Food Safety
Standards
ASEAN is devoting substantial resources to developing the ASW and harmonizing regional and domestic
food safety standards with each other and with international standards. Standards harmonization is
proving to be very challenging and involves at least four ministerial groups—the ASEAN Economic
Ministers, ministers of agriculture and forestry, health ministers, and ministers of science and technology.
Coordinating with ASEAN sectoral groups that oversee advances in regional trade facilitation, such as
ASW development, would support standards harmonization. After all, the standards and information on a
trader’s compliance with them will be vital at NSWs. Coordinating activities could include the following:
•
•
•
•
•
Each quarter, have ASW and food standards harmonization representatives brief each other on
progress (e.g., exchanging regulatory or commercial documents pertaining to food standards).
Disseminate details on ASW implementation and food standards harmonization and invite
comment from stakeholders in regional trade in agri-food products (e.g., make use of ASEAN,
NGO, university, or private-sector websites).
Have ASW and food standards implementers commit formally to Good Regulatory Practice and
regulatory impact assessment as they pertain to the integration of harmonized food standards and
ASW/NSW platforms.
Promote regular consultation with private sector associations on how food standards
harmonization can and should affect ASW implementation.
Benchmark and monitor standards harmonization and integration of standards into ASW
protocols.
Continue Region-wide Harmonization of Customs Laws, Particularly as They Address
Risk Management in Facilitation of Agricultural Products
Most ASEAN Member States have strengthened domestic law pertaining to trade facilitation, particularly
customs laws, so that laws reflect best practice set forth by WTO agreements and WCO guidelines,
including the RKC. Reforms are not complete, however, and differences between the advanced and
nascent frameworks are stark (e.g., compare Singapore and Malaysia with Burma and Cambodia). In
addition, simply passing a law or regulation does not ensure reform. To further strengthen the legal and
institutional environment for trade facilitation, ASEAN and Member States can do the following:
•
•
Encourage dialogue between policymakers and traders about how risk management can facilitate
trade in agricultural products. Integrate Member States’ best practices into domestic laws as they
are reformed or updated.
Analyze experience with and best practices in “Known/Trusted Trader” programs (also known as
Authorized Economic Operator programs), particularly as they have affected traders of
agricultural and food products.
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TRADE FACILITATION: RATE SUMMARY
•
•
Encourage the private sector to raise awareness of gaps in customs laws among policymakers and
implementers.
Identify and support regional champions of regional trade in agricultural products, including
private sector associations that support reform efforts.
Develop and Implement an Anticorruption Plan for Cross-border Trade of Agricultural
Products
ASEAN’s goals in combatting corruption are spelled out in Section A of the 2009 ASEAN Political
Security Blueprint, under which all members are encouraged to take action. Most Member States have
improved conditions for transparency and accountability—passing anticorruption laws, posting
bureaucratic fees and “zero-tolerance for bribes” notices, setting requirements for financial disclosure by
public officials, and holding regulators to professional standards. Still, petty corruption is endemic at
border crossings, blocking ASEAN’s expressed goal of achieving free flowing food markets and trade.
Regional actors could work together to promote a frank regional discussion of border corruption and its
potential solutions. Activities could include the following:
•
•
•
Sponsor regional anticorruption activities, such as “no bribe” border initiatives launched and
publicized by associations of traders, commodity stakeholders, and food companies.
Make anticorruption an aspect of national or regional certifications of trade professionals, such as
customs brokers and freight-forwarders.
Conduct regional discussions of the potential for a “trade ombudsman,” an official charged with
receiving public complaints about trade practices at the national or regional level.
Opportunities for Member States
Join Revised Kyoto Convention
The RKC is the international blueprint for trade facilitation. Its provisions outline principles for customs
practices and provide a basis for implementing regulations once a legal framework is in place. Joining the
convention signals to investors and trading partners that a country is committed to trade facilitation.
Before a country joins, however, reformers must understand the border process described in the
convention, agency officials must understand new goals for their organizations, and managers must
understand how to develop and implement trade facilitation processes. Training in all these areas is
readily available through donors and international experts. The steps for joining the RKC are consistent
with ASEAN’s trade facilitation initiatives, including implementation of the ASW. Member states that
join the RKC will be well prepared thereby to realize ASW goals.
Promote Risk Management in Border Processes
Risk management helps officials strike the proper balance between trade facilitation and import control.
Customs agencies across ASEAN are instituting risk management, with food products arguably subject to
the least rigorous approaches, but resistance is strong, particularly where border officials personally
benefit from delaying or inspecting imports. Regardless, a major objective for low-risk goods is
immediate release upon verification and payment of electronic declarations. Success indicators include
increase in paperless releases, decrease in number of inspections, and increases in discrepant findings
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TRADE FACILITATION: RATE SUMMARY
during the inspection process. Here, postclearance audits (PCAs) are useful. In the context of NSWs
especially, they provide an in-depth view of transactions or clients and a means for gauging compliance.
Member states can improve trade facilitation by using PCAs to identify candidates for immediate or
expedited clearance. To strengthen risk management and PCA regimes Member States can do the
following:
•
•
•
•
•
Use risk management techniques to identity high-volume compliant traders whose goods are
eligible for immediate release on arrival; and use random, system-generated inspections to
periodically verify compliance.
Direct at least 50 percent of customs’ audit workload at high-volume clients until a substantial
portion of the workload has been reviewed.
Reward compliant traders with fast-track clearance to give other traders an incentive to follow
rules and regulations.
Through formal and informal channels, promote interaction among third-party audit firms,
between government and third-party audit firms, and between private firms and third-party audit
firms.
Encourage stakeholders engaged in auditing to share information about auditing standards and
procedures and to integrate mechanisms for mutual recognition among firms so that food
exporters aren’t subject to multiple audits.
Strengthen Efforts to Counter Border Fraud and Informal Trade
At many land borders, informal trade in basic food products is rampant and unchecked. This trade
undercuts the ability of legal traders to compete in the local market, hurts national revenue collection, and
threatens public health. All border control agencies should be helping to curb smuggling of food products,
especially products that present health risks. The following steps can be taken to counter or discourage
informal trade:
•
•
•
•
In each region, identify high-risk locations and commodities and conduct threat assessments, then
prioritize national anti-fraud actions.
Develop intelligence channels and plan to allocate resources to them.
Seek the assistance of experienced fraud investigators and strategic planners in assessing threats.
Make monitoring and evaluation integral to any plans to counter informal trade so resource
allocation can be adjusted as needed.
Take Serious Action against Corruption at the Border
Most ASEAN Member States have taken steps to ensure transparency and accountability—passing
anticorruption legislation, posting bureaucratic fees and “zero-tolerance for bribes” notices, requiring
financial disclosure by public officials, and requiring regulators to meet professional standards. Petty
corruption persists, however, particularly in the poorest states. In the agricultural arena, Member States
can curb corruption by doing the following:
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TRADE FACILITATION: RATE SUMMARY
•
•
•
•
•
•
Tap into anticorruption resources offered by international donors, such as the ADB, the World
Bank, and USAID. The transparent practices encouraged by these groups are intended to reduce
poverty, which correlates directly with high rates of corruption.
Give national anticorruption authorities full independent enforcement authority.
Set examples for eradicating corruption in border agencies that have the most power over small
traders.
Require all border offices to post fees and timetables for provision for service.
Support independent offices of ombudsmen or inspectors general.
Support anticorruption activities sponsored by the private sector, such as “no bribe” initiatives
launched and publicized by local traders.
Endnotes
1
This paper discusses trade facilitation chiefly in terms of activity at the border; other RATE papers detail
“behind the border” activity.
2 Engman, Michael. 2005. “The Economic Impact of Trade Facilitation.” OECD Trade Policy Working
Papers, No. 21. Paris: OECD Publishing.
3
See TradingEconomics.com (last accessed February 19, 2013).
4
World Bank, “Connecting to Compete: Trade Logistics in the Global Economy” (2012).
5 ASEAN has long recognized the political sensitivity of certain basic commodities, especially those
pertaining to food security and self-sufficiency. The Rice and Sugar Protocol was preceded by the Protocol on
the Special Arrangement for Sensitive and Highly Sensitive Products (Singapore, 1999), as amended by the
First Protocol to Amend the Protocol on Special Arrangement for Sensitive and Highly Sensitive Products
(Jakarta 2004), and outlined in the Protocol Regarding the Implementation of the CEPT Scheme Temporary
Exclusion List (Singapore 2000).
6 United States International Trade Commission, ASEAN: Regional Trends in Economic Integration, Export
Competitiveness, and Inbound Investment for Selected Industries (2010).
7 For a full description of the methodology, see the RATE methodology document.
8 See APEC, Trade Facilitation Action Plan (2002). All ASEAN Member States except for Burma, Cambodia
and Laos are members of APEC.
9 Thailand’s Comments in The 2011 National Trade Estimate Report (NTE) for the incoming 2012 NTE
Report Submitted to the United States Trade Representatives (September 2011).
10
World Bank, Doing Business in 2013 (2012).
11 United States International Trade Commission, ASEAN: Regional Trends in Economic Integration, Export
Competitiveness, and Inbound Investment for Selected Industries (2010).
12 Economic Research Institute for ASEAN and East Asia (ERIA), Mid-Term Review of the Implementation of
AEC Blueprint (October 2012) (Executive Summary) at 27.
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TRADE FACILITATION: RATE SUMMARY
13 Indonesia National Single Window Blueprint (Minister of Finance Decree KEP-08/KET.NSW/08/2007).
14 European Business Chamber of Commerce in Indonesia, Position Papers, “National Single Window” at 5359 (2011).
15 Id. at 58.
16
ERIA, Mid-Term Review of the Implementation of AEC Blueprint, at 7.
17 European Business Chamber of Commerce in Indonesia, at 57.
18 World Bank, Trade Development in Indonesia (2011).
19 USAID/SEA CLIR-Trade, Regional Report (Trade Facilitation) (2007).
20 See Office of the U.S. Trade Representative, United States Challenges Indonesia’s Import Restrictions on
Horticultural Products, Animals and Animal Products (January 10, 2013).
21