Bangladesh, Bhutan, Nepal: South Asia Subregional Economic Cooperation (SASEC) Trade Facilitation Program

Transcription

1 Completion Report Project Number: Loan Numbers: 2954 and 2955 Grant Numbers: 0321 and 0322 April 2017 Bangladesh, Bhutan, Nepal: South Asia Subregional Economic Cooperation (SASEC) Trade Facilitation Program This document is being disclosed to the public in accordance with ADB s Public Communications Policy 2011.

2 CURRENCY EQUIVALENTS Bangladesh Currency unit taka (Tk) At Appraisal At Project Completion (5 September 2012) (15 November 2015) Tk1.00 = $ $ $1.00 = Tk81.78 Tk78.09 Bhutan Currency unit ngultrum (Nu) At Appraisal At Project Completion (8 September 2012) (31 December 2015) Nu1.00 = $ $ $1.00 = Nu55.36 Nu66.39 Nepal Currency unit Nepalese rupee (NRe/NRs) At Appraisal At Project Completion (1 September 2012) (15 November 2015) NRe1.00 = $ $ $1.00 = NRs88.36 NRs ABBREVIATIONS ADB Asian Development Bank ASYCUDA Automated System for Customs Data CMM Customs management module CSD client service desk DMF design and monitoring framework DOC Department of Customs NSW national single window NTTFC National Transport and Trade Facilitation Committee PMU program management unit PSC program steering committee RAMIS Revenue Administration Management Information System RIA regulatory impact assessment RKC Revised Kyoto Convention SAFE Framework of Standards to Secure and Facilitate Global Trade SASEC South Asia Subregional Economic Cooperation TA technical assistance TRS time release study WCO World Customs Organization

3 NOTES (i) (ii) The fiscal year (FY) of the Governments of Bhutan and Bangladesh and their agencies ends on 30 June, e.g., FY2015 ends on 30 June The fiscal year of the Government of Nepal and its agencies ends on 15 July, e.g., FY2015 ends on 15 July In this report, "$" refers to US dollars. Vice-President W. Zhang, Operations 1 Director General H. Kim, South Asia Department (SARD) Director R. Butiong, Regional Cooperation and Operations Coordination Division, SARD Team leaders Team members R. Butiong, Director, SARD (Bangladesh) R. McKenzie, Senior Regional Cooperation Specialist, SARD (Bhutan) S. Sunayama, Senior Economist, SARD (Nepal) A. Pangilinan, Programs Officer, SARD L. Reyes-Tayag, Senior Operations Assistant, SARD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

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5 CONTENTS Page BASIC DATA i I. PROGRAM DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Program Outputs 4 C. Program Costs 6 D. Disbursements 7 E. Program Schedule 7 F. Implementation Arrangements 7 G. Conditions and Covenants 9 H. Related Technical Assistance 9 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 10 K. Performance of the Borrower and the Executing Agency 10 L. Performance of the Asian Development Bank 10 III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 12 D. Preliminary Assessment of Sustainability 12 E. Impact 12 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 14 C. Recommendations 15 APPENDIXES 1. Performance Against Design and Monitoring Framework Status of Tranche 1 and Tranche 2 Policy Conditions Status of Compliance with Covenants Technical Assistance Related Activities Key General Indicators Trade Facilitation Indicators List of Persons Met 58

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7 BASIC DATA: BANGLADESH A. Loan Identification 1. Country Bangladesh 2. Loan Number Program Title South Asia Subregional Economic Cooperation Trade Facilitation Program 4. Borrower People s Republic of Bangladesh 5. Executing Agency National Board of Revenue 6. Amount of Loan SDR million ($21.0 million at design stage) 7. Program Completion Report REG 1614 Number B. Loan Data 1. Appraisal Date Started 2 September 2012 Date Completed 5 September Loan Negotiations Date Started 1 November 2012 Date Completed 1 November Date of Board Approval 29 November Date of Loan Agreement 20 January Date of Loan Effectiveness In Loan Agreement 20 April 2013 Actual 19 April 2013 Number of Extensions 0 6. Closing Date In Loan Agreement 31 December 2015 Actual 15 November 2015 Number of Extensions 0 7. Terms of Loan Interest Rate 1.0% per annum during the grace period, and 1.5% per annum thereafter Maturity 24 years Grace Period 8 years 8. Terms of Relending (if any) None Interest Rate Maturity (number of years) Grace Period (number of years) Second-Step Borrower

8 ii 9. Disbursements a. Dates Initial Disbursement 3 May 2013 Effective Date 19 April 2013 Final Disbursement 22 December 2014 Original Closing Date 31 December 2015 Time Interval (months) Time Interval (months) b. Amount ($ million) Last Revised Allocation Net Amount Available Tranche Original Allocation Amount Canceled Amount Disbursed Undisbursed Balance Tranche Tranche Total Local Costs (Financed) - Amount ($) 0 - Percent of Local Costs 0 - Percent of Total Cost 0 C. Program Data 1. Program Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost Total Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 0 0 ADB Financed Other External Financing 0 0 Total IDC Costs Borrower Financed 0 0 ADB Financed 0 0 Other External Financing 0 0 Total 0 0 ADB = Asian Development Bank, IDC = interest during construction.

9 iii 3. Cost Breakdown by Program Component ($) Component Appraisal Estimate Actual Total Not Applicable 4. Program Schedule Item Appraisal Estimate Actual First tranche release 3 May 2013 Second tranche release 22 December 2014 Source: Asian Development Bank. 5. Program Performance Report Ratings Ratings Development Objectives Implementation Progress Implementation Period From November 2012 to December 2015 S S D. Data on Asian Development Bank Missions Name of Mission Consultation mission Fact-finding mission Inception mission Review mission 1 Review mission 2 Review mission 3 Review mission 4 Review mission 5 b Date 7 10 May September January July March October March March 2016 No. of Persons No. of Person-Days Specialization of Members a a(2), b, c a(2), b(2), c a, b(2), c(2) a, c(2), d, e a, c, e(4) a, c a, c, e(2) a, c, e(3) a a = specialist, b = economist, c = Bangladesh Resident Mission staff, d = director, e = consultant. b This is the final review mission, and can be considered as program completion report for the loan.

10 iv BASIC DATA: BHUTAN A. Project Identification 1. Country 2. Grant and Loan Numbers 3. Program Title 4. Borrower and Recipient 5. Executing Agency 6. Amount of Grant and Loan 7. Program Completion Report Number B. Loan/Grant Data 1. Appraisal Date Started Date Completed 2. Loan/Grant Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Grant and Loan Agreement 5. Date of Grant/Loan Effectiveness In Loan Agreement Actual Number of Extensions 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity Grace Period 8. Terms of Relending (if any) Interest Rate Maturity (number of years) Grace Period (number of years) Second-Step Borrower Bhutan 0321 and 2955 South Asia Subregional Economic Cooperation Trade Facilitation Program Kingdom of Bhutan Ministry of Finance (MOF) $3.33 million (grant) and SDR5.412 million (loan) ($8.34 million at design stage) REG September September November November November January April March December March 2013 (grant) and 15 November 2015 (loan) 0 1.0% per annum during the grace period and 1.5% per annum thereafter 24 years 8 years None

11 v 9. Disbursements a. Dates Initial Disbursement G0321: 26 March 2013 L2955: 26 March 2013 Effective Date 26 March March 2013 b. Amount ($ million) Final Disbursement Not applicable 29 December 2014 Original Closing Date G0321: 26 March 2013 L2955: 15 November 2015 Time Interval 0 months months Time Interval 0 months months Tranche Original Allocation Last Revised Allocation Amount Canceled Net Amount Available Amount Disbursed Undisbursed Balance Tranche Grant Loan Tranche Total Local Costs (Financed) - Amount ($) 0 - Percent of Local Costs 0 - Percent of Total Cost 0 C. Program Data 1. Program Cost ($ million) Cost Appraisal Estimate Actual Foreign Exchange Cost Local Currency Cost 0 0 Total Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 0 0 ADB Financed Other External Financing 0 0 Total IDC Costs Borrower Financed 0 0 ADB Financed 0 0 Other External Financing 0 0 Total 0 0 ADB = Asian Development Bank, IDC = interest during construction.

12 vi 3. Cost Breakdown by Program Component ($) Component Appraisal Estimate Actual Total Not Applicable 4. Program Schedule Item Appraisal Estimate Actual First tranche release 26 March 2013 Second tranche release 29 December 2014 Source: Asian Development Bank 5. Program Performance Report Ratings Ratings Program No. Implementation Period Development Objectives Implementation Progress Loan 2955-BHU From November 2012 to November 2015 S S D. Data on Asian Development Bank Missions Name of Mission Fact-finding mission Consultation mission Review mission 1 Review mission 2 Review mission 3 Review mission 4 Review mission 5 Review mission 6 Review mission 7 Review mission 8 Review mission 9 Review mission 10 Program completion report Date 6 8 September November February April January June August October February , April July December April, 4 5 May 2016 No. of Persons No. of Person-Days Specialization of Members a a(2), b(2) a, b(2), c b a, b, d a(2) a, d(2) a, d(3) a, e a, d(2) a, d(2) a, d(2) a, d(4) a, d(5) a a = specialist, b = economist, c = assistant, d = consultant.

13 vii BASIC DATA: NEPAL A. Project Identification 1. Country 2. Grant Number 3. Program Title 4. Recipient 5. Executing Agency 6. Amount of Grant 7. Program Completion Report Number B. Grant Data 1. Appraisal Date Started Date Completed 2. Grant Negotiations Date Started Date Completed 3. Date of Board Approval 4. Date of Grant Agreement 5. Date of Loan Effectiveness In Grant Agreement Actual Number of Extensions 6. Closing Date In Loan Agreement Actual Number of Extensions 7. Terms of Loan Interest Rate Maturity (number of years) Grace Period (number of years) 8. Terms of Relending (if any) Interest Rate Maturity (number of years) Grace Period (number of years) Second-Step Borrower Nepal 0322 South Asia Subregional Economic Cooperation Trade Facilitation Program Government of Nepal Department of Customs (DOC) $15.0 million REG August September November November November February May April December November N/A N/A

14 viii 9. Disbursements a. Dates Initial Disbursement 10 May 2013 Effective Date 10 April 2013 Final Disbursement 22 December 2014 Original Closing Date 15 November 2015 Time Interval (months) Time Interval (months) b. Amount ($ million) Last Revised Allocation Net Amount Available Tranche Original Allocation Amount Canceled Amount Disbursed Tranche Tranche Total Local Costs (Financed) - Amount ($) 0 - Percent of Local Costs 0 - Percent of Total Cost 0 C. Program Data 1. Program Cost ($ million) Cost Appraisal Estimate Actual Undisbursed Balance Foreign Exchange Cost 0 0 Local Currency Cost Total Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 0 0 ADB Financed Other External Financing 0 0 Total IDC Costs Borrower Financed 0 0 ADB Financed 0 0 Other External Financing 0 0 Total 0 0 ADB = Asian Development Bank, IDC = interest during construction.

15 ix 3. Cost Breakdown by Program Component ($) Component Appraisal Estimate Actual Total Not Applicable 4. Program Schedule Item Appraisal Estimate Actual First tranche release 10 May 2013 Second tranche release 22 December 2014 Source: Asian Development Bank 5. Program Performance Report Ratings Ratings Development Objectives Implementation Progress Implementation Period From November 2012 to November 2015 S S D. Data on Asian Development Bank Missions Name of Mission Consultation mission Consultation mission Fact-finding mission Consultation mission Review mission 1 Review mission 2 Review mission 3 Review mission 4 Review mission 5 Review mission 6 Review mission 7 b Date 2 4 May Jul Aug 1 Sep Nov Feb Apr Dec Sep Nov Jan Apr 2015 No. of Persons No. of Person-Days Specialization of Members a a, b, c, d a, c, d a, b, c, d a, b, c, d b, c, d a, b, c, d, e a, b, c, d b, d(2) b, d b, d(2) b, d a a = specialist, b = economist, c = Nepal Resident Mission staff, d = consultant, e = procurement officer. b This is the final review mission, and can be considered as the program completion review mission for the grant.

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17 I. PROGRAM DESCRIPTION 1. In 2012, South Asia was one of the least integrated regions in the world for trade, hindered by high transaction costs, poor logistics performance, and a proliferation of nontariff barriers. In the area of trade facilitation, major challenges included cumbersome customs procedures and long processing times for cross-border transactions, 1 limited automation of customs operations, inadequate cross-border facilities, and limited and poor infrastructure for providing information to the private sector. Physical remoteness from ports and access to global trading hubs was an additional challenge for landlocked Bhutan and Nepal. As a result, the region accounted for only 2.0% of world trade and 1.7% of world foreign direct investment in Bangladesh, Bhutan, and Nepal also ranked low in terms of cross-border trade performance, 3 and were classified logistics unfriendly in several categories of logistics performance, including customs clearance Against this backdrop and in line with the goals of the South Asia Subregional Economic Cooperation (SASEC) Program countries, the SASEC Trade Facilitation Program was approved in November 2012 as a regional initiative to assist Bangladesh, Bhutan, and Nepal in facilitating cross-border trade. 5 The program s intended impact was to increase trade, including intraregional trade, of SASEC countries by reducing or removing nontariff barriers, specifically institutional, administrative, and technical barriers to trade. The intended outcome was to support a more efficient, transparent, secure, and service-oriented processing of trade in the subregion. To achieve this, the program supported activities under three outputs: (i) modern and effective customs administration and/or management; (ii) streamlined and transparent trade processes and procedures; and (iii) improved services and information for private sector traders and investors, including women entrepreneurs. II. EVALUATION OF DESIGN AND IMPLEMENTATION A. Relevance of Design and Formulation 3. The program design was relevant at appraisal and remained so during implementation. The report and recommendation of the President correctly identified weaknesses related to intraregional trade in South Asia, and intended program outcomes were largely aligned with respective national development priorities. The program was consistent with Asian Development Bank (ADB) policies and strategies, including ADB s South Asia Regional Cooperation Strategy , 6 which indicates the need to boost cross-border trade and improve logistics performance in support of emerging global supply chains. Approved after program 1 For instance, in 2012, it took six documents and 25 days to complete normal export processing in Bangladesh, nine documents and 38 days in Bhutan, and 11 documents and 41 days in Nepal. International Finance Corporation World Bank Doing Business 2012: Doing Business in a More Transparent World. Washington, DC. 2 International Monetary Fund Direction of Trade Statistics. Washington, DC. 3 According to the Doing Business survey, Bangladesh ranked 119 out of 185 countries in the Trading Across Borders indicator set in 2012, with Bhutan ranked 172 and Nepal 171. International Finance Corporation World Bank Doing Business 2012: Doing Business in a More Transparent World. Washington, DC. 4 According to the World Bank s Logistics Performance Index, a score that is lower than 2.35 classifies a country logistics unfriendly. For customs clearance, all three countries scored under 2.35 in both 2010 and 2012: 5 Asian Development Bank (ADB) Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Loans and Grants: South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila. SASEC is a project-based partnership established in 2001 by Bangladesh, Bhutan, India, and Nepal, and was joined in 2014 by the Maldives and Sri Lanka. The goal of SASEC is to strengthen regional economic cooperation through improved cross-border connectivity in transport, trade facilitation, and energy. India did not participate in the SASEC Trade Facilitation Program as it allocates national budget in support of trade facilitation reform. 6 ADB South Asia: Regional Cooperation Strategy, Manila.

18 2 effectiveness, the SASEC Trade Facilitation Strategic Framework included elements of the SASEC Trade Facilitation Program policy-based loans and grant, thus creating greater complementarity of actions across trade facilitation initiatives at the regional level. 7 At the country level, the program was well aligned with ADB country partnership strategies Respective national development priorities for customs modernization reform were likewise reflected in the SASEC Trade Facilitation Program: Bhutan s Eleventh Five-Year Plan stressed the need to strengthen trade policies and regulatory frameworks to address deteriorating terms of trade, excessive reliance on imports, and low-value exports. 9 In Nepal, the 2010 National Trade Integration Strategy and the Thirteenth Plan FY2014 FY2016 highlighted the priority need to address weak connectivity, upgrade customs management, and improve export competitiveness and trade facilitation arrangements. 10 The Seventh Five-Year Plan FY2016 FY2020 of Bangladesh seeks to aggressively undertake trade facilitation at land and sea borders and promote adequate investments in trade and transport logistics and infrastructure to facilitate growth of trade and investment In addition, the SASEC Trade Facilitation Program design was well-aligned with international frameworks and best practice for modern and efficient customs procedures, including the Revised Kyoto Convention (RKC) and the Framework of Standards to Secure and Facilitate Global Trade (SAFE) Program formulation was satisfactory, with preparatory work helping align actions with the needs expressed by stakeholders, obtain buy-in from stakeholders, and seek complementarity with the interventions of other donors. 13 The programmatic approach based on three specific outputs was adequate to address the needs of Bangladesh, Bhutan, and Nepal in forging ahead with reform and modernization in trade facilitation. ADB scoping missions were useful to more precisely define the scope of intervention and help key stakeholders take ownership of their respective roles and responsibilities under the program. No major change was required in program scope. 7. However, weakness was identified in program formulation and implementation, relating to the causal link between indicators and policy conditions. For example, one design and monitoring framework (DMF) output called for the reduction of required import and export trade documents in all countries, yet program formulation did not include policy actions that directly 7 ADB South Asia Subregional Economic Cooperation Trade Facilitation Strategic Framework, Manila. 8 ADB Country Partnership Strategy: Bangladesh, Manila; ADB Interim Country Partnership Strategy Bhutan, Manila; and ADB Country Partnership Strategy: Nepal, Manila. 9 Government of Bhutan Eleventh Five-Year Plan Document, Gross National Happiness Commission. Thimphu. 10 Government of Nepal, Ministry of Commerce and Supplies Nepal Trade Integration Strategy Kathmandu; Government of Nepal, National Planning Commission Approach Paper of the Thirteenth Plan, FY2014 FY2016. Kathmandu. 11 Government of Bangladesh, Planning Commission Seventh Five-Year Plan FY2016 FY2020. Accelerating Growth, Empowering Citizens. Dhaka. 12 The World Customs Organization (WCO) adopted the RKC in June 1999 as the blueprint for modern and efficient customs procedures in the 21st century. The RKC promotes trade facilitation and effective controls through legal provisions that detail the application of simple yet efficient procedures. The WCO adopted the Framework of Standards to Secure and Facilitate Global Trade (SAFE framework) in 2005 to, among others, establish standards that provide supply chain security and facilitation at a global level, enable integrated supply chain management, strengthen cooperation between customs administrations, and promote the seamless movement of goods through secure international trade supply chains. 13 For instance, the SASEC Trade Facilitation and Transport Working Group, which met in Bangkok in October 2011, Kolkata in March 2012, and Thimphu in November 2012, discussed priority activities and technical assistance needed in the area of transport and trade facilitation. A SASEC Trade Facilitation Week was also held in March 2013 in Bangkok to exchange knowledge and best practices on trade and transit facilitation.

19 supported business process reengineering, which most likely contributed to the less robust results for this output indicator (para. 14). Similarly, one outcome indicator called for at least 20% of shipments to be green-channeled (i.e., not physically inspected) by Yet only one country (Bangladesh) out of the three included a policy action in support of this desired outcome; Bhutan made no progress in green-channeling during the lifetime of the project. Outcomes should have been measured at most 12 months after program completion, and indicators and monitoring sources should have been more adequately defined. For instance, the first outcome indicator expected that border transit would improve by 15% against baseline data provided by a time release study (TRS) to be conducted in Not only was it unclear what the 15% was referring to, but also the program design and DMF wrongly assumed that TRS findings would be available in Neither were TRSs included as first tranche policy conditions. TRSs were ultimately completed at the earliest in 2014 in Bangladesh (under the International Finance Corporation South Asia Regional Trade and Investment Project 14 ), as a second tranche policy condition. It was overly ambitious to have assumed that all countries would have been ready to produce rigorous TRS baseline data at program inception. Secondly, reporting systems to measure outcome performance were not designed for effective and reliable reporting. For instance, the methodology to measure the second outcome indicator the percentage of green-channeled shipments was not in place in the countries at program inception, and the use of benchmark data from the international Logistics Performance Index could not accurately gauge effective progress in the three countries. The DMF also included an indicator to pilot national single windows (NSWs) in Bangladesh, Bhutan, and Nepal by No definition was provided for piloting an NSW, however, leaving the indicator open to national interpretation in each country. It is, thus, difficult to accurately measure achievement of the outcomes. 8. Other factors likely to have impeded progress include implementation phasing challenges with development partners and nonprogram activities. For instance, the World Bank Nepal India Regional Trade and Transport Project in Nepal financed implementation of the NSW 16 concurrently with the ADB-financed program. However, implementation schedules of the Nepal India Regional Trade and Transport Project and the SASEC Trade Facilitation Program could have been better synchronized to avoid phasing challenges in NSW development. Although Nepal complied with the NSW-related program policy condition, 17 implementation of the Nepal India Regional Trade and Transport Project NSW output was delayed at the procurement stage. In Bhutan, program formulation could have better anticipated potential risks in basing the development of the automated customs management module (CMM) on the timely performance of the nationwide Revenue Administration and Management Information System (RAMIS) Project, which fell outside the direct control of program implementation. 18 Significant delays and technical issues in RAMIS development negatively impacted the development of the CMM under the program (para. 13) A national single window is a facility that allows parties involved in trade and transport to lodge standardized information and documents with a single entry point to fulfill all import, export, and transit-related regulatory requirements, thus helping reduce excessive paperwork and procedures. 16 A World Bank combined loan and grant package of $99.0 million was approved for the Nepal India Regional Trade and Transport Project in 2013, $14.4 million of which was allocated to NSW design and implementation. A national Trade Information Portal was developed under the program by the Ministry of Commerce (MOC) and launched in September ADB Progress Report on Tranche Release. Nepal: South Asia Subregional Economic Cooperation Trade Facilitation Program (Second Tranche). Manila. 18 ADB Technical Assistance to Bhutan for Developing a Revenue Administration Management Information System. Manila. RAMIS intended to replace the existing stand-alone Bhutan Automated Customs System with a web-based online system comprising four modules: direct tax, sales tax, revenue and accounting, and customs and excise (including the CMM). Customs and excise was added to the original technical assistance (TA) design, which focused only on tax. The TA completion date has been extended to 31 July 2017.

20 4 9. The two-tranche disbursement design was appropriate for the SASEC Trade Facilitation Program. Essential groundwork in the three countries was carried out to both accelerate preparation of necessary legislative reform, and to trigger disbursement of the first tranche upon program effectiveness. The second tranche encouraged the three governments to sustain the pace of customs reform, and make significant additional progress within the first 18-months to meet the necessary policy actions to trigger the release of the second tranche. B. Program Outputs 10. The program s objective was pursued through three outputs, summarized in paras A list of outputs and achievements against the performance targets is in Appendix 1. Status of the first and second tranche policy compliance is in Appendix 2. The program outputs laid the legal, institutional, and technical ground for comprehensive trade facilitation reform in the three participating countries. In each, critical customs legislation was prepared or approved to enable implementation of modern best practice, information management systems were implemented or upgraded to streamline customs processes, and better-quality trade information was provided to a broader base of the private sector through well-structured mechanisms. 1. Output 1: Modern and Effective Customs Administration and/or Management 11. The first program output was designed to support the customs administrations develop modern systems and procedures, in line with international best practice. Accession to and compliance with the provisions of the RKC was successfully achieved, with Bangladesh, Bhutan, and Nepal all recognizing the RKC as an appropriate international framework for the modernization of customs regimes. This output was instrumental in helping all three governments put in place strategic frameworks to facilitate the implementation of modernization and reform measures. 19 The program also assisted in developing a systematic approach for building capacity and making steady progress on RKC implementation in each country. 12. Although the three countries started from different points of RKC accession and implementation, the program enabled major progress in simplifying and harmonizing customs procedures around a common benchmark of modern customs standards to ease the movement of bilateral and transit trade in the subregion. In Bangladesh, the program supported the National Board of Revenue in drafting key amendments to the existing Customs Act (1969) to make it fully compliant with the General Annex of the RKC. 20 It further assisted in preparation of the RKC accession proposal, regulatory impact assessment (RIA), gap analysis, specific standard operating procedures for high-priority provisions of the RKC, and a translation of the new rules into Bengali. Similarly, in Bhutan, extensive preparatory work for RKC accession included a gap analysis to identify necessary amendments to the rules, orders, and regulations of the Sales Tax, Customs and Excise Act of 2010; and an RIA to ensure Bhutan s compliance with the General Annex of the RKC. Bhutan formally acceded to the RKC in September 2014, and put in motion a phased series of customs-based reforms, including preparation and 19 Nepal finalized the Customs Reform and Modernization Strategies and Action Plan, the E-Customs Master Plan, and the Client Service Desk implementation plan under the first tranche policy actions of the program. Government of Nepal. Ministry of Finance. Department of Customs Customs Reform and Modernization Strategies and Action Plan (CRMSAP) Kathmandu; Government of Nepal. Ministry of Finance. Department of Customs E-Customs Master Plan. Internal document. Kathmandu. Many of the RKC-related activities listed in Bangladesh s 2013 Customs Strategic Action Plan were included as tranche conditions under the program. In Bhutan, the program provided substantial support for planning RKC accession, and the development of the Bhutan Customs Reform and Modernization Strategic Plan In Bangladesh, accession to the RKC took place in September 2012, before program effectiveness.

21 submission to Parliament of a new independent Customs Act and Rules and Regulations. 21 In September 2016, the Parliament of Nepal ratified the RKC and formally acceded in February This process has been supported through the SASEC Trade Facilitation Program by completion of an RIA, a gap analysis of the Customs Act 2007, and the drafting of amended customs legislation and related legal documents. 13. In addition to compliance with international frameworks and best practice, modern customs administrations seek to optimize information and communication technology options to expedite border formalities, reduce excessive paperwork, improve the efficiency of the clearing process, and increase transparency. Bangladesh and Nepal made robust progress under the program in automating their respective customs systems. In Bangladesh the government upgraded to ASYCUDA World, 22 with successful installation of the new system at 18 locations during , including the container terminal management system of Chittagong Port, which laid the technical ground for implementation of the pilot NSW. 23 In Nepal, the government piloted ASYCUDA World at Sirsiya Dry Port (Birgunj) and Mechi Customs (Jhapa) in In Bhutan, the government embarked on an ambitious project to develop a tailor-made CMM under the nationwide RAMIS initiative. 24 However, technical challenges affected the performance of the wider RAMIS project launched in 2015 and led to significant delays in the development of the CMM, as resources shifted towards the stabilization of the tax modules. Despite these issues, a pilot CMM was produced and tested in Output 2: Streamlined and Transparent Trade Processes and Procedures 14. The second program output aimed to address long delays and high transaction costs faced by traders in the region by initiating the reengineering of business processes and trade documentation to comply with international best practice and reduce time and costs incurred. This output proved challenging within the program period. Ultimately, only Bhutan managed to reduce the combined number of import and export documents (Appendix 1). However, robust progress was made in streamlining processes and procedures. For example, in Bangladesh the program supported establishment of an authorized economic operator program under the SAFE framework in 2014, in compliance with World Customs Organization (WCO) supply chain security standards, reducing data requirements and expediting processing. The National Board of Revenue also updated its standard operating procedures on risk management, postclearance audit, assessment, physical inspection, and nonintrusive inspection. A business process analysis provided valuable inputs to the document audit process and helped outline options for improving the efficiency of clearance at border points. In Bhutan, alignment of customs forms and trade documentation with the WCO data model and United Nations Layout Key standards was completed in December The program sought to pilot NSWs in the three countries. As noted, this was difficult to measure as no clear definition of NSW was provided (para. 7). Progress toward piloting NSWs, however, was demonstrated. In Bangladesh, the installation of ASYCUDA World at the Chittagong Port container terminal management system prepared the technical ground for 5 21 After adoption by the National Assembly (lower house), the Act was considered by the National Council (upper house) in December It will be considered by the joint houses in June 2017, and is expected to be fully ratified. 22 ASYCUDA is a computerized customs management system developed by the United Nations Conference on Trade and Development and is used by over 90 customs administrations worldwide. Covering most foreign trade procedures, the system handles manifests and customs declarations, accounting procedures, and transit and suspense procedures, as well as generating trade data for use in statistical economic analysis. 23 Installation is planned for a further 28 locations in Bangladesh. 24 ADB Technical Assistance for Developing a Revenue Administration Management Information System. Manila. 25 ADB Progress Report on Tranche Release. Bhutan: South Asia Subregional Economic Cooperation Trade Facilitation Program (Second Tranche). Manila.

22 6 implementation of the pilot NSW. In Bhutan, despite the delays in developing the automated CMM, strategic planning for an NSW began in December 2015, together with WCO-assisted capacity building in coordinated border management and the single window, and an NSW prefeasibility study is planned for In Nepal, the e-customs Plan formulated under the program included government commitment to embark on upgrading the customs management system to a web-based version and establishment of an NSW. While the roll-out of the webbased ASYCUDA World pilot successfully commenced in January 2016, the phasing challenges experienced in Nepal subjected NSW development to delay (para. 8). 3. Output 3: Improved Services and Information for Private Sector Traders and Investors, Including Women Entrepreneurs 16. Under the third output, the program assisted in providing better services to importers and exporters, including accurate and detailed information on trade- and customs-related laws, regulations, procedures, and documentation. Starting from different points of readiness to launch trade and market access information portals, the countries achieved varying degrees of progress. In Bangladesh, the Ministry of Commerce successfully launched a national trade portal in March 2016 and undertook activities to implement the Online Licensing Module. 26 In Bhutan, the government established the National Trade Facilitation Committee in February 2013, 27 to facilitate interagency and public private engagement in the trade facilitation reform and modernization processes and the effective exchange of trade information. The program also commissioned a feasibility study for implementation of a web-based trade information portal, likely to be developed in In Nepal, the Department of Customs (DOC) established client service desks (CSDs) at several customs border posts, 28 to provide information on customs-related procedures, facilities, and tariffs to exporters and importers, women entrepreneurs, noncorporate sector clients, foreign investors in Nepal, and Nepalese working abroad returning home. At least 994 inquiries made to the six CSDs (8.7% of the total 11,422 inquiries made in person) in FY2016 were made by women entrepreneurs. Additionally, more female entrepreneurs are assumed to have made use of the and telephone inquiry service of the CSDs, on which no gender-disaggregated data is available. 29 C. Program Costs 17. The ADB Board of Directors approved the equivalent of $47.7 million in policy-based loans and grants for the SASEC Trade Facilitation Program to Bangladesh, Bhutan, and Nepal. The program was made effective in Bangladesh on 19 April 2013 (SDR13.58 million loan), in Bhutan on 26 March 2013 (SDR5.41 million loan and $3.33 million grant), and in Nepal on 10 April 2013 ($15.00 million grant). Program costs totaled $47.67 million at final appraisal, and $46.50 million at program closure (Table 1). No additional resources were mobilized. All loans and grants were from Asian Development Fund resources. Each government committed counterpart funding and resources according to their respective loan agreements. An explicit clause in the grant agreement for Nepal referred to counterpart funding, and the government ensured that annual budget allocation to the DOC fulfilled this commitment from FY The 26 The Bangladesh Trade Portal is available at The MOC made the online licensing module function fully operational during The National Trade Facilitation Committee was expanded to include transport in 2015, following the signing of the Motor Vehicle Agreement between Bangladesh, Bhutan, India, and Nepal. The committee was renamed the National Transport and Trade Facilitation Committee (NTTFC). 28 Birgunj, Biratnagar, Bhairahawa, DOC headquarters, Mechi Customs (Kakarvitta), and Tribhuvan International Airport Customs (Kathmandu). 29 It is also worth noting that whenever a mixed-gender group submitted an inquiry at a CSD, the registration was made under the gender of the group representative, who in almost all cases was male, according to DOC sources. 30 Approximately $15 million equivalent to the grant amount was allocated additionally to the DOC operating budget during FY2014 FY2017 to implement the Customs Reform and Modernization Strategies and Action Plan.

23 Government of Bangladesh likewise provided counterpart funding for implementation of ASYCUDA World, the national single window, and establishment of the trade portal. The Government of Bhutan allocated funding for implementation of the RAMIS automation project. Each government also fulfilled its commitments for provision of human resources and other assets (including office space, equipment, and logistical support) to ensure successful implementation of the program. D. Disbursements 18. Table 1: Program Costs Financed by ADB Program Costs At appraisal Actual Country Loan/Grant ($ million) ($ million) Bangladesh Loan 2954-BAN Bhutan Grant 0321-BHU Loan 2955-BHU Nepal Grant 0322-NEP Total Source: Asian Development Bank. 18. The proceeds of the loans and grants were disbursed in accordance with ADB's Simplification of Disbursement Procedures and Related Requirements for Program Loans. 31 The program was designed to be released in two tranches per country the first upon loan and/or grant effectiveness, the second 18 months later upon verified compliance of secondtranche actions. Each country s disbursements were not cross-conditional to the policy actions of other countries. Disbursement took place on schedule in the three countries and no corrective measures were required on the disbursement process. 32 The two-tranche disbursement approach was deemed appropriate for the program (para. 9). E. Program Schedule 19. The program was designed to become effective in 2013 and be fully disbursed by the end of Following timely program effectiveness, the program was closed on target: 15 November 2015 in Bangladesh, 26 March 2013 (grant component) and 15 November 2015 (loan component) in Bhutan, and 15 November 2015 in Nepal. There were no program extensions. Notably, Nepal and Bhutan fully complied with all second-tranche policy conditions more than 1 year before the program completion date of 31 December 2015, demonstrating strong national commitment to pursuing key trade facilitation reforms for expanded trade and improved competitiveness. F. Implementation Arrangements 20. Implementation arrangements were adequate to achieve the program objectives. The program was implemented by government departments, committees, and institutions (Table 2). All program steering committee (PSC) and program management unit (PMU) mechanisms 7 31 ADB Simplification of Disbursement Procedures and Related Requirements for Program Loans. Manila. 32 The first tranche was released on 3 May 2013 for Bangladesh (loan of $10.74 million); on 26 March 2013 for Bhutan (loan of $3.09 million and grant of $3.33 million), and on 10 May 2013 for Nepal (grant of $8.00 million). The second tranche was released on 22 December 2014 for Bangladesh (loan of $9.47 million), on 29 December 2014 for Bhutan (loan of $4.87 million), and on 22 December 2014 for Nepal (grant of $7.00 million), reflecting compliance with the policy conditions stipulated in the policy matrix of each country.

24 8 performed satisfactorily, with each country developing their respective implementation arrangement model. In Bangladesh, the PSC and PMU were created in February 2013 and provided adequate guidance and support to the implementation of the program. In Bhutan, the Department of Public Accounts was responsible for implementation of the required policy actions, while the Department of Revenue and Customs and the PMU created in January 2013 were responsible for daily operations, planning, and monitoring. The National Transport and Trade Facilitation Committee (NTTFC), set up as the PSC in February 2013, developed into a successful forum bringing government agencies involved in trade facilitation together with representatives of the private sector. The PMU served well as the NTTFC secretariat. In Nepal, the DOC was responsible for the program s overall implementation and timely achievement of the policy actions. The PSC and the PMU, established in April 2013, were superseded by the Customs National Trade Facilitation Committee, a broader group involving many stakeholders from the private and public sector. The DOC ensured that the agreed policy actions were carried out on time. These national implementation arrangements were valuable in creating platforms for both interagency and public private consultation and cooperation. They are likely sustainable in the post-program completion phase. For example, in the case of Bhutan, national budgetary allocation has been secured to ensure continued operations of the NTTFC (Appendix 3), and in Nepal, the Customs National Trade Facilitation Committee continues to hold meetings every 3 4 months and discusses the most contemporary issues on trade facilitation. Table 2: Implementation Arrangements for the SASEC Trade Facilitation Program Implementation Bangladesh Bhutan Nepal Executing agency NBR MOF DOC Implementing agency NBR, MOC, MOS DRC DOC, MOCS PMU NBR DRC DOC Steering committee PSC NTTFC DOC DOC = Department of Customs, DPA = Department of Public Accounts, DRC = Department of Revenue and Customs, MOC = Ministry of Commerce, MOF = Ministry of Finance, MOCS = Ministry of Commerce and Supplies, MOS = Ministry of Shipping, NBR = National Board of Revenue, NTTFC = National Transport and Trade Facilitation Committee, PMU = program management unit, PSC = program steering committee. Source: Asian Development Bank. 21. At the regional level, the program benefited from regular interaction of senior and midlevel officials through two established SASEC platforms: (i) the SASEC Trade Facilitation and Transport Working Group, a high-level forum to review transport and trade facilitation issues in South Asia; 33 and (ii) the SASEC Customs Subgroup, which focuses on issues relevant to customs cooperation, including institutionalization of regular customs administration meetings, development of automated customs management systems and NSWs, and implementation of the RKC. 34 The Trade Facilitation and Transport Working Group provided overall guidance in the formulation and early stages of the program (footnote 13), and regular SASEC Customs Subgroup meetings during ensured alignment of customs reform agenda with program implementation; several program activities, for example, were directly supported by capacity building programs under the SASEC Customs Subgroup. 33 Trade Facilitation and Transport Working Group meetings were convened in Bangkok (2011), Kolkata (2012), Thimphu (2012), Singapore (2013), Kathmandu (November 2014), and Tokyo (2015) to review and discuss ongoing and planned projects, as well as progress made under the STFP. 34 SASEC Customs Subgroup meetings were convened in March 2013 (Bangkok), May 2014 (Kathmandu), March 2015 (Goa), October 2015 (Cebu), and May 2016 (Maldives).

25 9 G. Conditions and Covenants 22. All countries complied with the policy conditions associated with the first and second tranches as per the provisions and schedules of the loan and grant agreements. 35 The three governments remained strongly committed to the program over the period of implementation (Appendix 2). There were no major delays in meeting the conditions for effectiveness, and policy actions were adequately designed to support the majority of program outputs and outcomes. Loan covenants were relevant and in line with program requirements. All covenants under the loan and grant agreements were complied with. No covenants were modified, suspended, or waived during the program (Appendix 3). H. Related Technical Assistance 23. The program was supported by country-specific and regional technical assistance (TA) projects. An ADB-administered TA project funded by AusAID provided support to the program design phase, 36 and three ADB-administered Japan Fund for Poverty Reduction national TA projects focused on a set of common areas that helped the countries achieve their respective policy actions. 37 National TA activities and outputs were closely aligned with the program and contributed significantly to efficient and effective implementation of the program, helping keep the reforms on track. They also enabled ADB to strengthen trade facilitation policy dialogue with the three countries. Implementation of the program further benefited from a regional TA project that strengthened the program s interaction with overall SASEC program strategic planning and capacity building activities. 38 This regional resource enabled the three program countries to benefit from the sharing of knowledge and experience on the wider SASEC platform, such as the field visit made by Nepal Department of Customs to Sri Lanka Customs to study and better understand the practical implementation requirements and associated risk factors of ASYCUDA World, and helped formulate an implementation and sustainability action plan for use in Nepal. 39 I. Consultant Recruitment and Procurement 24. There were no consultants or procurement activities under the program. 35 In the case of the policy-based loan to Bangladesh, three policy conditions were included for the first tranche and seven for the second tranche. For the policy-based loan and the policy-based grant to Bhutan, three policy conditions were included for the first tranche and four for the second tranche. For the policy-based grant to Nepal, three policy conditions were included for the first tranche and five for the second tranche. 36 ADB Technical Assistance for the Development Partnership Program for South Asia. Manila. This TA funded Subproject 28 (Capacity Building for SASEC Trade Facilitation). AusAID became part of the Australian Department of Foreign Affairs and Trade in 2015 and was renamed Australian Aid. 37 ADB Technical Assistance to Bangladesh for Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila; ADB Technical Assistance to Bhutan for Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila; and ADB Technical Assistance to Nepal for Supporting Participation in the South Asia Subregional Economic Cooperation Trade Facilitation Program. Manila. 38 ADB Technical Assistance for Trade Facilitation in South Asia. Manila. At a strategic level, this regional TA supported the SASEC Trade Facilitation and Transport Working Group (Kathmandu, November 2014), the Third Meeting of the SASEC Customs Subgroup (Goa, January 2015), and SASEC Trade Facilitation Week: Sanitary and Phytosanitary Measures and Technical Barriers to Trade (Bangkok, December 2014). It supported the ADB World Customs Organization Customs Valuation multiyear capacity building program in Bangladesh (Dhaka, 2015), Bhutan (Phuentsholing, 2016), and Nepal (Nagarkot, 2015), and Customs Valuation and Risk Management capacity building workshop, in partnership with India s Central Board of Excise and Customs (Mumbai, 2015). 39