Digitization of international trade in Nepal, Better late than never

On 26^th January 2021, the Government of Nepal launched the long-awaited Nepal National Single Window (NNSW) system, a digital platform that allows integration of trade procedures between the Department of Customs (DoC) and several government agencies/ stakeholders involved in foreign trade. The government had first announced its plans to launch the single window system back in 2016, which was supposed to come into operation in 2018.

What NNSW means for Nepal

Implementation of the new single window system has been taken as a milestone for Nepal’s foreign trade industry. Up till now, it took at least 32 days to import goods from third countries and 28 days to export goods. Importers had to bear an average cost of USD 1,320 for receiving each consignment of the imported goods. According to the DoC, this cost would now go down by up to 20 percent.[1] The new system would optimize import and export processes by acting as a one-stop-shop where stakeholders can digitally access all kinds of trade related government services like getting licenses, permits, certificates, making payments, submitting required documents, and accessing required information. As per stakeholders, the NNSW system would not only save time and reduce costs, but also increase transparency.

As the volume of trade gradually increases, the trading environment gets more complex, which makes managing the flow of information extremely complicated. Therefore, using advanced wed-based systems for filing, exchanging, processing, or transferring customs data provides long term benefits to all stakeholders by saving time and money while restructuring procedures and limiting interactions with government officials, which in turn helps keep the processes transparent. According to the World Bank’s Doing business reports, the economies with the most efficient international trade environment share a common feature, i.e., electronic exchange of information between traders and customs and other agencies.

Adoption of Single Window Systems by the world

By implementing a single window system, economies worldwide are increasing steps to digitally connect not only traders and government agencies but all stakeholders including banks and insurance companies as well.[2] Singapore was the first country to implement a single window system back in 1989, which connected 35 border agencies. By 2006, this system was able to process up to 99 percent of permits within 10 minutes, and in 2016, 9 million permits were issued through it.[3] The benefits brought by the single window system to Korea Customs services was estimated to be worth USD 18 million [NEF1] in 2010. It was estimated that a single window system implemented in Chongqing port of China in 2017 would eliminate all procedures by a third, save clearance time by 10 percent, and reduce 10 percent of the costs. Likewise, India also implemented its single window system called e-Sanchit in 2018, integrating several government agencies and fully digitalizing document submissions to decrease overall documentary and border compliances for import and export. The single windows systems are not only limited to national boundaries but incorporate entire geographical regions as well. The Association of South East Asian Nations (ASEAN) initiated to integrate all national single window systems of the ASEAN countries to allow exchange of customs data and accelerate cargo clearance within the region. This regional integration is expected to save overall trading costs by up to 8 percent. The increase in integrated systems within regions would further enhance free movement of goods, cutting inspection time and the number of checkpoints, ultimately deepening regional cooperation.[4]

Challenges in implementation

No matter how great the single window system might be, it would be quite difficult to realize the full potential of digitization and electronic information exchanges unless the system is implemented efficiently. Implementing this type of automated system presents several challenges for Nepal as it involves upgrading the required infrastructures, changes in operational practices, training of human resources, and probably in case of Nepal, the work habits of government employees. There might also be limitations regarding regulatory provisions such as inadequate policies, and institutional bureaucracies such as objections from trade associations or labor unions. inadequate infrastructures and technical expertise would also prove to be some of the main challenge for Nepal. The ability of custom points to ensure proper and timely transfer of information and cargo through the new system heavily depends upon how qualified the employees are to use the system as well as other technological infrastructures. A well-trained and knowledgeable workforce fitted with the right equipment increases the efficiency of the overall trade process.

While most high-income countries have already started advancing in automation, Nepal and a few other South Asian countries have just started implementing single window systems. With technologies developing at an exponential rate, and all other nations adopting new and improved technologies to improve their international trade, it would be a shame if Nepal cannot keep up its pace. Nepal has taken a small step into digitalizing trade, but we still have a long way to go to catch up with the rest of the world. The COVID-19 pandemic has further highlighted the importance of digitization and automated systems/ infrastructure, as the restriction of movement of people impacted trade heavily.[5] Therefore, technologically enhanced trade systems will provide Nepal a competitive edge in the region by enabling customs management practices that are swift, robust, and flexible enough to facilitate massive levels of international trade at any given point of time.

References:

[1] https://myrepublica.nagariknetwork.com/news/nepal-national-single-window-system-goes-online-from-today/

[2] https://www.doingbusiness.org/en/data/exploretopics/trading-across-borders/good-practices

[3] https://www.americanexpress.com/us/foreign-exchange/articles/digitizing-customs-for-international-trade/

[4] https://www.doingbusiness.org/en/data/exploretopics/trading-across-borders/good-practices

[5] https://blogs.worldbank.org/endpovertyinsouthasia/covid-19-highlights-need-digitizing-and-automating-trade-south-asia