Streamlined Customs to Increase Central Asian Trade

Impeded growth

Before the Asian financial crisis hit in 2008, Central Asia enjoyed an annual average growth of 9%. Today, the effects of the crisis have lingered, with the region’s average growth nearly halved at almost 5%.

Historically, the world’s trade volume has grown 1.5 times faster than gross domestic product. However, since 2012, trade volume has barely kept pace with growth. In the Central Asia Regional Economic Cooperation (CAREC) region, there was an even sharper decline in trade, from a trade-to- gross domestic product ratio of 1.8 in 2003 to 2007 to below 1.0 since 2013. Nevertheless, early signs of recovery in the region are now seen, with a 15% growth in total exports and a 14% growth in imports between 2020 to 2021 for CAREC countries excluding the People’s Republic of China.

CAREC countries set out strategies to expand trade and improve competitiveness to unleash their untapped trade potential and expand opportunities for workers, farmers, and consumers. For example, Uzbekistan initiated reforms to support economic diversification, particularly export diversification, by expanding trade in non-energy and resource-intensive sectors. CAREC countries remained committed to achieving the goals of the CAREC Integrated Trade Agenda (CITA) 2030 to expand trade through enhanced market access, diversify their economies, and strengthen institutions for trade. 

The lack of intraregional trade, investment, and movement of people makes Central Asia among the least integrated regions in Asia and the Pacific. Trade costs are high in the CAREC region. For example, in 2021, significant border delays yielded an average border-crossing time of 13.6 hours, and 7 of the 11 CAREC countries ranked in the bottom half of the World Bank’s logistics performance index in 2020. Additionally, documentary compliance costs an average of $178 for exports and $222 for imports in 2020. 

CAREC customs agencies are vital players in increasing trade, improving competitiveness, and ensuring the smooth flow of people and goods across borders. However, CAREC customs’ slow adoption of modern technology solutions perpetuates cumbersome paper-based clearance procedures at the border instead of developing paperless trade systems in line with international best practices.

CAREC countries have a huge opportunity to strengthen their economic growth by being better integrated through trade. 

Significant challenges to the efficient and rapid transport of goods include inadequate border facilities; nontransparent, complex, and excessive procedures at border-crossing points; and weak coordination of border agencies at national and cross-border levels.

Adding to the problem are underdeveloped transit systems, which impede countries’ ability to move cargo rapidly and securely and participate in global supply chains. The single window system, which uses a single point of entry and submission of relevant trade data, could make trade processes faster and more efficient.

Enhanced capacities on the border

CAREC countries should modernize physical border-crossing point infrastructure and older border-control facilities, which cannot accommodate new transport and trading models.

ADB and its financing partners—the United Kingdom Fund for Asia Regional Trade and Connectivity, People’s Republic of China Poverty Reduction and Regional Cooperation Fund, and Republic of Korea e-Asia and Knowledge Partnership Fund—approved the technical assistance (TA) program Regional: Better Customs for Better Client Services in Central Asia Regional Economic Cooperation Countries. The TA supports the implementation of the CAREC Integrated Trade Agenda 2030 and the activities of the Customs Cooperation Committee (CCC).

The program aims to enhance the capacity of customs agencies and the CAREC CCC to better respond to the rapidly evolving trade environment in CAREC countries and increasing private sector demand for better services. Additionally, it will help expand trade by adopting more open trade policies, building customs-to-customs cooperation, and strengthening institutions for trade through increased public-private sector dialogue and cooperation.

Financing partners are helping CAREC countries enhance their on-the-border processes to encourage trade among its neighbors. 

Established in 2002, the CCC is the responsible body for all customs-related matters under CAREC and serves as a regional forum to address issues of common interest relevant to trade facilitation. Over 20 years, the CCC has made significant strides in customs modernization and facilitation of trade in the region.

The program is aligned with CAREC’s long-term strategic priorities where trade is a priority and builds on past ADB support and responds to the CCC’s new, emerging needs to help further reform, modernize national trade facilitation environments, and strengthen intraregional trade among CAREC countries.

Unleashing the region’s potential

The TA ultimately aims for the smooth flow of goods and people across the CAREC region. The program is conducting scoping studies at select border-crossing points to improve customs infrastructure, facilities, use of technology, and logistics. This scoping includes the assessment of the adequacy of physical infrastructure, use of information and communication technology (including the single window), and logistics support capacities to meet international standards and client demand for quality border-crossing services. It also works to better understand and implement necessary customs reforms.

Another outcome includes supporting the initiatives in modern customs technologies and best practices. The TA will promote the development of e-customs systems, paperless trade, use of modern transit and risk management systems, and new technology innovations to eliminate trade-hindering paper-based procedures to enhance supply chain security, help trade flow more smoothly, and reduce costs.

Thirdly, the TA will conduct capacity building and technical skills training to strengthen customs at the border. Study visits, inter-subregional learning opportunities, and joint training with the private sector are covered under this outcome. Knowledge partnership for customs cooperation and trade facilitation activities with development partners is also pursued.