By Mohamed Gurhan
Traditionally, customs administrations all over the world operate mainly as gatekeepers for collection of import, export and other revenues to support government. Their role in ensuring security at border crossings and ports was peripheral to their main function of protecting the financial and fiscal interest of the government.
Somaliland is no exception; because the national government budget is extensively dependent on customs revenue, rather than direct taxes from domestic businesses and individuals.
Customs’ revenue to the central government budget averaged to 75-80%. While this is the case, the trading community who are keen to see the ministry reform its customs services are mainly Somalilanders, who are trading just for local use and do not participate in international trade as importers and exporters though the quality of customs services as part of international trade transaction costs has an impact on the price of goods. Multinational companies and academia are not yet active or interested in Somaliland as an investment destination due to lack of understanding of its strategic location and natural resources. National experts in customs administration and modernization within the Ministry of Finance are either old, with little experience in the workings of modern customs administrations, or have found employment in the private sector, international organizations, or Non-Governmental Organizations.
From 2011, the Ministry of Finance set a vision for the need to reform in Public Finance and, then the Minister took the lead in seeking Public Finance Management(PFM) technical assistance programmes from bilateral donors (such as the UK Department for International Development) and the World Bank. It is through the assistance of the World Bank that Somaliland developed and enacted six Public Finance bills, including a best practice Customs Bill. These Bills were enacted in July 2016.
Unfortunately, capacity building and on the job training on the new law to both management level and front-line customs officers was not implemented. Though implementation decrees were signed officially by the relevant government officials, operationally none of these have been implemented in customs except ASI (Adam Smith International) customs reform and modernization experts’ short period training in 2015 – 2016 covering Tariff Classification, Origin, Customs Valuation and use of the Single Administrative Document. The reforms introduced by the new Customs Act 2016 can only be properly implemented and sustained with competent and professional management and leadership, specifically within the Customs Department Headquarters of the Ministry of Finance.
Lack of adequate leadership and managerial skills in the top Customs management has prevented the initiation of successful capacity building and training programmes to the employees, and other stakeholders including customs brokers and the Financial Guard..Training on leadership, visioning, people management, delegation, motivation, negotiations, communication, change management, and decision-making are essential for Customs Managers in the regions and those in headquarters. The Customs Organizational Structure has not yet been aligned with the new Customs law and regulations in a manner which demonstrates a political commitment to reform and modernization.
The leadership and managerial resources to be built in Somaliland Customs need to show these capabilities:
1) Competent, multi-skilled and specialist customs experts,
2) Efficient and modern customs functions with streamlined organizational structure,
3) Development and training on Laws/Regulations/ Policies/ Guidelines that promote an efficient, transparent and modern customs administration, and
2) Comprehensive Customs Performance Guidelines and Evaluations standards.
Frontline managers in border stations and operational supervisors are not selected by their competencies and skills as required by the new customs law and regulations and the imperatives of modern global supply chain management. Legal requirements in dealing with customs brokers or other stakeholders are not applied. For example, there are no guidelines to facilitate resolution of customs disputes and appeals against the decisions of customs. Lack of predictability, harmonization and standardization in customs clearance procedures and documents, written policies and procedures as well as trained human capital in customer interface areas, impacts negatively on efficient revenue collection and does not facilitate legitimate trade. A significant number of customs brokers are illiterate and are not able to complain and debate with customs officers within the provisions of the Customs law and regulations. This situation is exacerbated by the fact that private legal firms with competence and interest in customs matters have not yet been established, so the brokers are compelled to act according to the unstructured instructions from customs officers.
Building modern customs management and leadership knowledge and skills will contribute to the customs reform programme and facilitate the creation of a successful and employee-owned reform road map. . Technical operational tools would easily be developed and distributed to not only customs staff, but all other customs stakeholders with appropriate training. Better Management and leadership will help harmonize the comprehensive customs standards and operational requirements. These would influence, convince and direct all employees to focus on the mission of customs to collect revenue in accordance with the law, ensure public security, the health of citizens, and administer preferential agreements and facilitate trade for economic growth.
The Ministry of Finance has recognized the importance of building contemporary management and leadership skills throughout customs rather than developing laws and regulations that would be hard to implement without the requisite managerial and leadership skills. Lessons learned from successful case studies where the operational efficiency of some customs stations managed by properly qualified and skilled young custom officers, can be used as a pilot for future roll out throughout customs.
Somaliland revenue reform projects financed by the international community and international organizations primarily require highly committed managers and leaders in the field of revenue, as studies from other countries that have successfully implemented reforms show. Good project management skills and competent and skilled human resources are the centre for success.
In the past, donors and some governments have supported implementation of sustainable revenue and trade facilitation projects. Unfortunately, many of these projects did not lead to positive changes in the operational areas, rather sessions and debates in top level offices or hotels, and development and distribution of beautiful documents to participants. But the skills and knowledge do not transfer to the fields of operations and to project end beneficiaries.
Implementing international organizations standard of project evaluation sheet and templates are filled and attached as a means of verification. The level of education and knowledge of government counterpart officials are usually much lower. Other Somaliland experts, who used to be in the projects, may not continue to be in the project for ownership. Lastly, the political figures in the field of the project usually do not set a framework for monitoring and evaluation of the results of projects and programmes. .
The Somaliland Government has recently signed trade and transit agreements with Ethiopia and plans to sign similar agreements in the near future with other countries in East Africa. Similarly, international investors either from governments or from private companies are coming into the country after DP World signed the largest investment project with Somaliland government. The Project, which cost around $442million for Berbera Port development and its expansion, will immediately attract other potential investors into Somaliland. DPW investment is expecting to make Berbera Port a hub and gateway connecting the Horn of Africa to Europe and Far East Asia.
As aresult of these projects, cross border movement of goods will greatly increase in volume and in terms of monetary value, and there will be greater trade complexity and competitiveness. Traders and investors will closely study in the efficiency and effectiveness of Somaliland customs operations to avoid high trade transaction costs and delays as compared to using other trade routes such as Djibouti, Eritrea, Sudan etc.
The Ministry of Finance has an opportunityto accelerate and make commitments in revenue reform and modernization in terms of building the management and leadership competencies and skills of its top to bottom people in revenue fields.It would also be useful for Somaliland project staff to have the required competencies and knowledge in dealing with international implementing agencies and companies.
Mohamed Gurhan, MBA
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