The Tribune

By NEIL HARTNELL Tribune Business Editor THE Government is targeting a Customs regime that meets "international best practices", a minister yesterday saying there was "no evidence" that the agency's operational/institutional weaknesses had deterred foreign direct investment (FDI) into the Bahamas. Speaking after an Inter-American Development Bank (IDB) report warned that various inefficiencies at Customs were undermining FDI as the "main engine of economic growth", together with the business climate and economic competitiveness, Zhivargo Laing, minister of state for finance, said modernising the main revenue collection agency had been on the Ingraham administration's "list of priorities from day one". Explaining that it was the Government, not the IDB, that had identified the need to overhaul Customs via various initiatives, including the $16.5 million Trade Sector Support programme being funded by the Bank, Mr Laing said the goal was to improve the ease of doing business for the private sector and bolster revenue collections. Describing this as "not the sexy work, but the necessary work", the minister told Tribune Business: "From day one Customs was on our list of priorities. "From day one we recognised that Customs has a critical role to play in trade and business facilitation, and an important role in making advancements in the ease of doing business, an important role to play in revenue collection, and an important role to play in advancing our integration into the globalised trading environment." Mr Laing said the proposed reforms would focus on maximising the use of information technology (IT) in all Customs procedures and processes, so that the Bahamian private sector can speedily complete transactions involving the exportation/importation of goods. And they would also help Customs officers to make a smooth transition once the agency's role changed as a result of impending fiscal reforms, namely the switch from an import duty-dependent tax structure to one that will likely be based on a sales or Value Added Tax (VAT). "We expect we will have a more sound revenue collection mechanism to protect, and even enhance, government revenues," he explained. "We do know that the prospect exists that we can do a better job in the area of Customs. We think that we've been able to do a better job than in the past, due to adjustments we have made to the processes, but to quantify what leakages exist remains speculative at this point. "We also expect to have a cadre of professionals that can smoothly transition into a more modernised role in what will evolve with the Bahamas' fiscal regime as we move forward. "This will take into account our participation in the international trade system, and take account of new forms of revenue for the country." Apart from "significant investments" in IT, Mr Laing said the Government was seeking to build skills training for Customs officers when it came to understanding rules, protocols and procedures. "We expect to have a Customs regime that is in line with best international practices in the world, as defined by the Kyoto Protocol and the World Customs Organisation," the minister told Tribune Business. "In that way, we will improve the Bahamas' prospects for economic growth and development. Mr Laing, though, disagreed with the IDB's assertion that existing weaknesses at Customs could prove a deterrent to FDI inflows. "There's no evidence at this point to say the situation at Customs has been a handicap to that," he said. An IDB report, revealed by Tribune Business, said the Customs Department's "serious institutional and operational limitations", particularly an information management system more than 20 years-old, are undermining the Bahamas' trade competitiveness and ability "to attract high levels of foreign direct investment". It 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, also 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. 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."