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Thursday, November 29, 2012

Corruption in Customs: Strategies to Get More Out of International Trade

All countries, including Turkey, participating in the WTO believe that there has been some economic benefit in adopting the WTO agreements; however, there is considerable disagreement as to how much benefit the agreements have actually produced. A study by the University of Michigan found that if all trade barriers in agriculture, services, and manufactures were reduced by 33% as a result of the Doha Development Agenda, there would be an increase in global welfare of $574.0 billion. A 2008 study by World Bank Lead Economist Kym Anderson found that global income could increase by more than $300 billion per year, $250 billion of which would go to the developing world. Others had been predicting more modest outcomes, e.g. world net welfare gains ranging from $84 billion to $287 billion by the year 2015.

Corruption in customs as one of the trade barriers which act as an additional tax or fee impedes the free trade; therefore causes huge losses of share that the developing countries would have in benefits of international trade. If Anderson’s above mentioned estimate is true, basically we might content that 250 billion USD gets less and less at every corruption case occurring in the customs of developing countries.

Corruption also causes inefficiency in business having bad impact on international trade. When the customs officials harass firms with demand of bribery, firms spend human and monetary resources resulting in inflation of labor and operational costs. This problem is even worse for small and medium enterprises as the bribe amounts that they have to pay at customs might substantially affect their capacity to do business across borders. Even if my main focus is in Turkey, I think developing countries where corruption in customs is widespread share similar features with regards to main reasons of corruption and strategies to combat against it. In my opinion in order for the efforts to combat against corruption in customs to be effective we need an integrity and ethical government oriented approach to the problem. Ethical government requires all the powers – legislature, bureaucracy and judiciary – to act in conformity with ethical principles. An ethics system that excludes one of these powers or branches of government is ready to collapse any time; thus preventing our chance to make improvement in this fight. Only a comprehensive reform process starting from the restructuring of customs administration can break countries out of existing vicious circles linking corruption and under-development. In order to achieve that, we need to be reformist. In order to achieve this, we need strong intent of highest ranking administrators in our case, i.e. Minister of Trade and Customs- to eliminate all kinds of corruption and inefficiency at customs because attitudes, perceptions, and actions of them are fundamental to any efforts to initiate and sustain reform. High ranking administrators have to take determined positions against corruption to be models of integrity for low ranking officials who work at the heart of operations. Second, what we need is not partial projects targeting specific areas of customs like computerization or modernization projects. What we need in Turkey and other developing countries where corruption is widespread, is a more revolutionary approach which is restructuring the customs administration. First, we need to change our perception about corruption which will be conducted through training programs for customs officials, seminars for firm representatives doing business across the border, conferences for raising awareness of society that corruption is an epidemic, not a right, tax or usual course of business.

Second, we need to build a very clear and standardized procedural system through concise and accessible legislation, eliminating all grey areas that cause opportunities of corruption. Third, we need to make sure that if a customs official violates his ethical and criminal obligations under codes of conduct at various laws defining corruption, the penalty system is applied to everyone equally and strictly without any exemptions or exceptions. With regard to corruption investigations carried out by the Turkish Inspection Boards, the need for a prior authorization from the hierarchy when investigating some categories of public officials hampers the investigation. There is an urgent need for better co-ordination of the system currently in place for combating corruption. The designation of a body with sufficient independence responsible for promulgating and monitoring the implementation of anti-corruption measures could be helpful in this respect. Also in Turkey, asset disclosure records of customs officials are unavailable to the public and whistle-blower protections are virtually non-existent. Journalists investigating corruption face intimidation and harassment with one fatality occurring over the reporting period.
A recent empirical study on corruption at customs of Bolivia, Pakistan, and Philippine might be taken as an example of methods for eliminating corruption at customs because each one of the countries are highly different from each other and they carry some similar features with Turkey in sense of international trade and development.

The study shows that the strategies based on repression and positive incentives are effective in regulating a situation of low corruption and preventing its further development but experience shows that these tools cannot correct a situation of widespread corruption. Therefore, I advise, restructuring of the procedures that leads to an important reduction of the opportunities of corruption should be at the core of the strategy. Furthermore a high degree of transparency in design and implementation should be maintained. Obtaining the active support of groups benefiting from reform, proceeding step by step, combining restructuring with changes in management, monitoring implementation and securing computer systems are also crucial for the comprehensive reform. Above all, as I have mentioned before political will remains key for a successful implementation. The case studies showed that it is crucial to have strong commitments on the part of both political leaders and the customs director.

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