INTERNATIONAL FORUM ON TRADE FACILITATION

GENEVA, MAY 2002

P UB LIC - P RI VAT E
SEC T OR C OOP E R AT I ON
IN TRADE
FAC I L I TAT I O N
COMMUNITY NETWORKS FOR TRADE
FACILITATION - AN IMPLEMENTER’S
PERSPECTIVE

RAYMOND WEE

FORMER MANAGER OF
MAURITIUS NETWORK SERVICES LTD

IN APPRECIATION OF
THE PUBLIC AND PRIVATE SECTORS OF
THE REPUBLIC OF MAURITIUS

29 MAY 2002

®ALL RIGHTS BELONG TO THE RESPECTIVE PROPERTY OWNERS.

ALL OPINIONS EXPRESSED AND ERRORS ARE THOSE OF THE AUTHOR ONLY.
FOR FEEDBACK, KINDLY WRITE TO : raymondwee@senyum.com
 PUBLIC-PRIVATE SECTOR COOPERATION IN
TRADE FACILITATION
COMMUNITY NETWORKS FOR TRADE FACILITATION – AN
IMPLEMENTER’S PERSPECTIVE

I N T RO D U CT I O N

Information and communication technologies (ICT) has often been used and perceived
by many enterprises, administrations and governments as a “cool” tool or way to attain
competitive or “comparative advantage”1. Some even go further to embrace and promote
that ICT is essential for “economic survival”.

Community networks (e.g. those between buyers and sellers) had been around for over 30
years for commercial efficiency purposes. From trade to logistics to finance to regulatory
compliance requirements, various communities and countries have used different
methodologies and technologies to achieve the same end - facilitate business and trade by
reducing the documentation effort and time. However, the more successful models took the
opportunity to streamline their processes and automate as much as is possible. Like any ICT
implementation, most benefits are derived not from mimicking the manual processes or
blindly adopting so-called “international best practices” but by those who are able to apply
only relevant “best practices” and if necessary, adapt them to suit local context and
development pace.

This paper hopes to share with policy makers a few insights drawn from past experiences
with the one model of community network implementation. They are presented from an
implementer’s perspective with special focus given to the role of public and private sectors.

EL EM ENT S OF A SU C C ES SF UL D EP LOYM EN T O F C O M M UN I T Y N ETWO R K S

F OR T R AD E FA CI LI TAT IO N

TO AN IMPLEMENTER, a successful community network for the purposes of trade

facilitation should bear some or better yet, all of the following characteristics (in increasing
level of success) :

1. Achieve the basic Objectives that such networks bring at a nation-wide or

community level : process automation (through the use of real time selectivity
or risk management tools), reduction in the errors by reducing human
intervention and paperwork, and reducing the need for physical trips to
various agencies and stakeholders so as to achieve faster processing of
trade/regulatory-related documentation. The even more successful ones
achieve it at the shortest time possible with the lowest costs and causing
minimal social uneasiness, while involving as many stakeholders in trade. This
means more actions and results, but less argument.

2. Built on a flexible, proven technology platform complete with as much source

codes, training, transfer of technical know-how including finally taking over
 of the systems, support, operations and management. The self-accountable
network is then “totally free” to develop and enhance the technology platform
to keep pace with the ever-changing business environment. Infrastructure
investment is optimal, benefiting from “technology shifts” in the long term2.

3. Deliver benefits in terms of on-time, real-time information and in terms of

returns on investments to both public agencies and private sectors. The latter
may be in the form of costs savings or increased revenue as a result of better
international competitiveness or information needed for formulating
fiscal/budgetary policies.

4. Self-sustainable in the long term (5 - 7 years and above) with its own
operations and profit center without the need for additional technology
support, investments, public funding or international financial assistance, after
its launch. In some instances (e.g. after being profitable for a good number of
years), the network should also be in the position to consider fulfilling its
social responsibility by reducing its fees or apportioning part of the profits to
generate more savings to the community it serves.

5. Export of know-how, sharing of experiences with other communities,

administrations or countries in need of such network systems, skills,
experiences and methodologies; while continuously innovating and extending
and expanding the benefits to the other local business community or sectors
(e.g. taxation, legal, healthcare, etc).

T H R EE MO D ELS OF C O M MU N I T Y N ET WO R K I MP L EM ENTATI O N

In order to achieve the “promised land” of community networks that actually facilitates
commerce by serving the needs of both the trade and government, there are possibly three
main models or approaches:

a. Public sector initiatives where the government undertakes the responsibility of setting
up, funding, maintaining and enhancing the community network consisting of both
public and private sector users.

b. Private sector enterprises where one or more companies, usually stakeholders in trade
with or without participation from technology solutions provider/s. Users are likely to
be existing or new customers of the enterprise and primarily set up to offer a
“comparative advantage” against their competitors and with the objective of
generating profits directly or indirectly.

c. Hybrid or cooperation model with participation from both public and private sectors,
with even foreign participation – solutions providers and/or international institutions.

PUBLIC SECTOR INITIATIVES

Countries or communities that subscribe to this model usually have a strong and stable
government, with an established public administration consisting of well educated and good-
salaried civil servants. They also tend to have built strong and reliable infrastructure

PAGE 3 OF 8
(telecommunications, high level of education and ICT skills, etc). With a high level of civic
awareness, a strong legislation and strict enforcement, the trading community understands
that their trade will be facilitated by being compliant. Non-conformance will be dealt with by
the rule of law and ignorance of the law is generally not accepted as an excuse. The level of
inter-agency cooperation within the public sector also tends to be high.

It is noted that this model is also used by some agencies who feel that they want to fully
control the facilitation process and/or can rely on international funding institutions to
support its initial setup.

However, with the passage of time, the number of users and volume of transactions
increases, and with technological obsolescence always imminent, such initiatives can gradually
become a financial burden to the public sector agencies and government. It may in some
cases deteriorate to the point where trade is obstructed because of the delays caused by the
obsolete system or network.

PRIVATE SECTOR ENTERPRISES

Those that implement based on this model normally have a well-established free-market-
oriented government. The public administration is also one that is consisting of very well
educated and good-salaried civil servants who may even be pioneers in setting clear standards
and technical regulations. The public sector approach is usually one of “non-interventionist”
and fully supportive of the free enterprise concepts.

The trading community is also one that is innovative and enterprising. With appropriate
legislations and enforcement, the trading community also understands that their trade will be
facilitated by being compliant. These enterprises are purely market and profit-driven and will
set up almost immediately if there is a market and close down (or divest) if it is loss-making.

This model is used by some administrations who feel that they may not have the means to
set up such community networks and wish to rely mainly on foreign direct investments
and/or international funding institutions to support its setup and upgrade.

However, since duplication of products and services is inevitable, such networks may not
be suitable in countries or communities where resources are scarce. It also cannot guarantee
long term sustainability and continuation of service. There may also be little incentive to
return additional savings to the community after the initial investments for its set up has been
paid off or to build local capacity for its continuous operation. The community may also grow
to be more reliant rather than being more self-sufficient.

HYBRID OR COOPERATION TRHOUGH JOINT VENTURES

Countries or communities that implement using this model usually have a mixture of
factors : relatively stable government with reasonably efficient & effective administration and
an infrastructure that is in the process of being built up. The level of education and availability
of ICT skills also tend to be moderate or low.

The trading community, through past experiences, sometimes does not see the benefits of
being compliant, as they see their competitors benefit from the “gaps” and inefficiencies.
They make use of the fact that processes and legislations may be non-existent or unclear,
enforcement not always consistent due to the long lead time in trial hearings (and
convictions).
 With the implementation of a trade community network, its introduction presents an
opportunity to both the public and private sector (especially those yearning to stay within the
rule of law) to cooperate and establish a common platform that is mutually beneficial in the
long term. The government benefits by having accurate, real time information for policy
making and execution, while the trade enjoys shorter document processing times by being
responsible and accountable for the information and by being compliant.

Such cooperation can be frequently helped by experienced solutions, technology

implementers or change agents who are able and willing to share their experiences and know-
how. It is particularly the responsibility of the country and community to evaluate carefully
the options available (e.g. visiting countries implementing the various models) and decide if
the particular model or solution suits their needs in the long term.

CO O P ER AT IO N AS A PR E-R EQU I SIT E

An example of one such successful public-private cooperation model resulting in a

successful community network implementation as defined earlier is Mauritius.

FACTORS THAT CONTRIBUTED TO A SUCCESSFUL IMPLEMENTATION

Public-Private Sector Cooperation

The company, Mauritius Network Services Limited, was set up to uphold

cooperation in the best & worst of times. Public sector was represented by
four government related companies and the private sector was represented by
the Chambers of Commerce with funding from stakeholders in the trade. The
foreign partner is another government linked company who is providing the
technology solution. All have long term interests to ensure its ultimate success.

This setup was put to the test and proven in times of political uncertainty where within 3
years of set up, the company saw 4 Ministers of Finance and a total change in government
(plus another split in a coalition). Originally the first Minister of Finance had wanted the
pilot to be ready within its first year of set up. However, the trade community network was
only finally launched (with a locally-developed automated customs system) after 3 years.
With greater public sector confidence, private sector acceptance and political stability, the
network ultimately achieved total cutover within one year handling over 1,000 electronic
declarations or Bills of Entries a day.

Strong National vision or Public-Private sector conviction to deploy ICT as a

key enabler for business efficiency and trade facilitation

PAGE 5 OF 8
During its early days of community network implementation, there was
already a strong inclination from both the public and private sectors to
replicate the economic success of other resource-scarce but developed
economies like Hong Kong and Singapore. As such, ICT and Internet
deployment was widely perceived as an important enabler to better business
and comparative advantage. The economy was in the process of a transition
from an agricultural and low-skills based industries (e.g. textiles) to higher
value, knowledge based economic sectors.

During the implementation period, the government lowered its normally high duties and
taxes on imports for computer and communications-related items like personal computers
and modems. In the private sectors, ICT jobs became the “dream job” for some tertiary
graduate. However, the problem then was the lack of quantity and quality of local ICT
professionals that could be trained to undertake the operations and maintenance of the
network systems. Fortunately, there were enough overseas graduates or returning IT
professionals to fill the gap. By launch date, over 80% of the local IT staff were graduates
from France, Russia, South Africa, United Kingdom.

Phased approach with clear and achievable objectives

While the concept of such community networks may seem simple (e.g.
exchanging structured messages), its implementation is not (especially if
process automation to bring about true facilitation and paperless operations is
envisaged). Working in an environment where structure, consistency and
compliance is not always prevalent, the team had to start from scratch – from
defining existing processes and procedures to job description and personnel
reallocation.

The initial set up assumed a particular timeline that was not possible to achieve as the
implementers did not realize then the magnitude of the work involved. There were 3 attempts
to fully launch the community network but was not successful because of one or more factors
beyond their control. Some policy decisions originally thought feasible was later found to be
neither practical nor desirable from the Government’s perspective. In the end, equilibrium
was reached where trade documentation was sufficiently facilitated without the Government
ceding too much “transactional” control.

Basic Infrastructure and Legal Framework

Another important factor for the success of such networks is the availability
and reliability of basic telecommunications and other infrastructures (e.g.
banking and port community networks). The implementation team had to
work with regions where the telephone still uses the pulse dial and old
switches; and with communities that still uses manual processes and
procedures. There was also a lack of the necessary legal framework for
 enforcing the trade community’s electronic transactions with the government
agencies. Existing trade-related regulations which were based on a
combination of French and English law were also in need of review and
change.

As part of the business streamlining and re-engineering process, a legal committee consisting
of public sector officials and private sector professionals was set up to review all affected and
relevant legislations. As the process of going through Parliament for a major legislation or
change was thought to be too onerous and time consuming, minor changes and subsidiary
legislations were enacted instead. In addition, while the network system was fully equipped to
handle fully paperless transactions and processes, some manual processes had to be
maintained (e.g. supporting documents submission). Today, Computer Misuse Act to
control illegal access to computer materials is in force while the Electronic Transaction Bill to
make contracts via electronic means enforceable is being discussed. More legislation is being
considered to enable the electronic transfer of funds in time to introduce the automated
clearing system for the banking community.

Strong sense of urgency for Change at the community and national level

Another key factor that enhances the success of trade community network
implementation is the collective motivation for change. There must be enough
“driving force” for such change as people are naturally resistant to change.
There are also many in both the public and private sectors who have
flourished under existing status quo and would feel out-of-place and out-of-
pace with new technologies and methodologies. Some public officials and
non-complaint traders are known to dread such implementation where
learning of new skills, process transparency and information & decision
accountability is inevitable.

There has been more than one occasion where the implementers were asked whether cargo
clearance would really be faster if the port and banking community are not yet automated
and online. The implementation team put in a great amount of effort to build the awareness
that without one initiative taking a lead and showing the results of the new possibilities,
others will not follow.

The Mauritius model possibly exemplifies the commitment and importance of

cooperation between the public and private sectors. Without a strong commitment to manage
change, sufficient funding and policy execution in the face of political changes, the trade
community network would not have been a reality today. While loss-making during its initial
setup, the community network is now profitable and sustainable for the long term. See table
below.

PAGE 7 OF 8
 Key Financial Figures End of Year 1 End of Year 4 End of Year 5
(Local Currency) (1995) (1998) (1999)
Income 2,083,781 15,542,851 39,002,713
Expenditures ( 8,914,926 ) ( 15,719,086 ) ( 13,240,722 )
Profit/Loss ( 6,831,145 ) ( 176,235 ) 25,761,451
Dividends Paid - - ( 2,500,000 )
Cumulative Profit / Loss ( 6,831,145 ) ( 23,988,838 ) ( 727,387 )

Table: Some financial indicators during set up and upon full implementation in year 4-5.

The Mauritius model is currently being replicated in Ghana and again in this instance,
cooperation among the public and private sectors will enhance its chances of success.

There are certainly other models of successful community network implementation that
resulted in true facilitation for trade in terms of reducing paperwork, errors, time and costs,
and reducing the number of trips to government agencies and stakeholders.

However, those implementations that are sustainable in the long term by being self-reliant
and truly flexible in their technology platform will likely have a slight comparative edge over
those who continuously rely on foreign funds, expertise and/or tax dollars to upgrade or
maintain their community networks. The latter may also be forgoing rare opportunities to
help grow the local ICT expertise and industry.

In conclusion, this paper seeks only to share those experiences and observations that
illustrated how a cooperative climate among the public and private stakeholders, coupled with
proven implementation methodologies can deliver benefits for the community.

It is hoped that the lessons learnt here will be of use to various policy makers and
decision makers for their own implementation of trade community networks.

Thank you for your attention.

Raymond Wee
May 2002, Geneva

1 Carl A. Nelson, “International Business : A Manager’s Guide to Strategy in the Age of Globalism”, 1999.

2Stefan Van Overtverldt, “Creating an infrastructure for e-Business : Computing in the e-Business world”, IBM Corporation,
April 2001.