18 November 2012

Ethiopia: Long Awaited Update for Customs Software, Worth 162m Br

The Ethiopian Revenues & Customs Authority (ERCA) is to introduce a new software system for customs management that will replace the existing Automated System for Customs & Data (ASYCUDA++) with an estimated cost of around 162 million Br.

The ASYCUDA system is a computerized customs management system introduced in 1981 that enables custom authorities like the ERCA to control the goods that enter into the country and check whether the necessary taxes and duties are paid. It also generates statistical data for the country that can be used for economic analysis.

The existing ASYCUDA++, which is the third version of the system, handles foreign trade procedures. It calculates the list of taxes that a trader should pay to clear goods after entering necessary data including where the good is procured, where it originated from and its intended use.

However, because the system is very old technology and hence did not allow the authority to integrate new systems that it is introducing as part of its customs reform program, a change is initiated. The ERCA has been using the system for the past 12 years.

"The system is not flexible and we could neither integrate nor interface with the new custom reforms that we are undertaking," Nigussie Seid, Software Development team coordinator of the ERCA told Fortune.

In order to study the flaws of the existing system and recommend solutions, the European Union (EU), which has granted 10 million euro for projects related to trade facilitation, has hired a consultant to conduct a study a month ago. The 10 million euro is to be shared by the ERCA and the Ministry of Trade (MoT), which is also in the process of implementing Online Business Registration & Licensing System (OBRLS) at the national level.

The hired British consultant, Ian Thomas, who consulted around seven countries has 20 years of experience in IT, 10 of which are spent in the area of customs, identifies that the current system did not allow the various customs and IT reforms that the Authority has already undertaken and plan to undertake in the future.

"We want the system to follow us, not otherwise," Nigusse said.

One of the reforms that the ERCA's undertake was the voucher system, an incentive given to exporters who import raw materials to produce the export commodities.

In the scheme, an exporter who have the voucher document issued by the Ministry of Finance & Economic Development (MoFED) will not pay any duty or tax when raw materials are imported but the taxes will be calculated because the ERCA will claim the taxes if the exporter sold the commodities for the local market.

However, because ASYCUDA++ did not allow such procedure, the ERCA is processing all these duty calculation manually.

"This has a high error of margin as the government either forgoes or over-collects revenue," Nigussie said.

The ERCA is also undertaking a pilot project on three other new reforms.

In a bid to facilitate trade and increase the revenue collection, the ERCA is in the process of introducing various modern information systems since last year including valuation database and cargo tracking system. Aiming at encouraging the industrial sector, the Authority has also selected manufacturers as an Authorized Economic Operators (AEO) and allows their imports without following the stringent customs procedures.

The ERCA is also finalizing automation of its price valuation system for around 3.5 million Br, replacing the existing price setting using a CD database in which the price of good is based on information collected from importers as well as the Internet.

The Authority is also to deploy an electronic cargo system on the 887km Addis Abeba-Djibouti corridor aiming at combating the pilfering of goods locally known as Kisheba.

Since the existing system did not allow the integration of these new procedures, the consultant has decided that the ERCA needs a new customs management system that allows the integration all these reforms together.

The other problem of the existing system identified is accessibility. Since the system is not web-based that needs special configuration that can be downloaded by the ERCA, traders and forwarders did not access it via Internet.

It is also expensive for a trader to install the software, according to Nigusse. The company should invest around 4,000Br for the configuration and software and have to pay 2,000 on monthly basis to Ethio-Telecom for using such system only.

Considering the current and future plan of the ERCA, the consultant has come up with detail specifications that the system should fulfill.

The specifications were discussed and accepted by the ERCA.

The study document is to be presented to the EU tomorrow for evaluation and decision.

The EU is expected to give a final say on the project and release the fund in June 2013 tentatively, according to the expert.

If the EU approves the project thus the ERCA will invite international bidders to install the system.

The new system will simplify the customs procedures, facilitate trade and ensures that all goods are declared with a correct calculation and hence increase the revenue collection.

The ERCA that plans to collect 101.6 billion Br in 2012/12 fiscal year has collected 22.2 billion Br in the first quarter of the fiscal year, of which revenue collected from customs contributed 14.7pc.

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