6 August 2012

Rwanda: New Imports Clearing System Makes Doing Business Easier

Importers will no longer have to wait for a long time to have their goods cleared to enter the market after Rwanda Revenue Authority (RRA) last week eased the process by introducing an electronic clearing system.

The Rwanda Electronic Single Window links traders with government clearing bodies such as RRA, Rwanda Development Board, Magasins Generaux du Rwanda (MAGERWA), the Ministry of Health, and Rwanda Bureau of Standards.

A statement issued after the launch last week said that this is the first electronic clearing system in sub-Sahara Africa designed to reduce the time cross-border traders spend clearing goods and cut the cost of doing business.

"This is a ground-breaking scheme to cut the red tape snarling trade and I am confident it will pave the way for similar systems in other EAC countries as well as making Rwanda an even cheaper place to do business," RRA commissioner general, Ben Kagarama said.

The World Bank's Doing Business Report 2012 ranks Rwanda as the best country to do business in East Africa, the third best in Africa and one of the top two global reformers. However, the country's business environment would probably be ranked even much better had it not been for cross-border bottlenecks.

Indeed, among the 10 indicators on which countries were surveyed, it on the one about trading across borders that Rwanda scored poor having been ranked number 155 in the doing business survey.

The electronic single window will complement previous reforms aimed at easing the flow of goods in and out of the country such as introduction of 24-hour border operations at Gatuna and Gisenyi.

This is in addition to electronic scanners installed at Gatuna, Rusumo and Gikondo. The RRA has also previously reduced the mandatory import documents to only three for payment of import duties.

The $3.3 million Rwanda Electronic Single Window, expected to cut the amount of time traders spend while clearing goods by more than half, is therefore seen as a major reform that will help improve Rwanda's ranking in this particular doing business indicator.

With the new system, clearing agents will no longer need to physically carry documents from one government agency to another in the process of clearing goods. Instead they will load all information online on a web page to be accessed by all stakeholders.

The system was developed with support from Trademark East Africa (TMEA), a multi-donor funded organization that seeks to help the region modernize trade links together with the United Nations Conference on Trade and Development (UNCTAD).

"We are delighted to be funding this major trade facilitation measure which is anticipated to reduce the time it takes to clear goods by an estimated 3. Not only will this bring Rwanda several steps closer to the ports of Dar es Salaam in Tanzania and Mombasa in Kenya but will lead to direct savings for business estimated to be $6-9 million a year and introduce greater transparency and accountability into the whole chain of clearing goods," said TMEA Rwanda country director, Mark Priestley.

According to a statement issued after the launch, Rwanda Electronic Single Window uses the ASYCUDA world platform, which is a combined customs management system and integrated border management systems developed by UNCTAD.

As a landlocked country, Rwanda faces many challenges in its trade with the outside world.

For example, there are not less than 25 police check points, 15 roadblocks and 13 weighbridges along the northern corridor route (from Mombasa to the hinterland)--with seven of them between Mombasa and Malaba alone. All these contribute to the high cost doing business through delays and bribes.

According to a study done by United States Agency for International Development (USAID), in Kenya and Tanzania, the average bribe paid per transaction to a policeman or a customs official is $30 (about Frw18, 000).

In Uganda it is between $100-150 (Frw60, 000-90,000) per consignment of goods, according to the 2007 assessment study on corruption at the Northern Corridor transit points. All this is meant to "facilitate" faster clearance or the driver risks spending days without being cleared to proceed. According to the same study, transporters are forced to pay "entertainment fee" of $45-60 to customs officers in Mombasa Port if they are to have their goods cleared quickly to avoid accumulating demurrage.

The list of bottlenecks for a landlocked country like Rwanda are endless and perhaps that explains why despite having the best environment to do business in the East Africa region, the third best in Africa and the second best reformer in the world, the country still receives the lowest foreign direct investments (FDI) compared to Uganda, Kenya or Tanzania.

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