Boosting ASEAN Prosperity and Integration With Efficient Regional Customs Transit Systems

By Aivaras Pigaga, Lead ACTS IT Implementation Expert, ARISE Plus Programme

ASEAN is a perfect example of a region that is greater than the sum of its individual parts, or countries. It comprises ten member states, each offering significant competitive advantages by way of trade that neighbouring states can tap upon. Its strategic geographical position means seven of its member states are connected by land. This lends credibility to road freight as the optimal mode of trade between these countries, representing a middle ground between air and ocean freight that offers savings to shippers in terms of costs, transit time, flexibility, and carbon emissions.

However, the diversity that makes the ASEAN region such an attractive business destination also poses threats to its success if not managed well. Differing cultures, languages, and nuances has led to each country being very different from one another in terms of its rules and regulations, posing a highly fragmented landscape for intra-ASEAN road logistics. This has long term implications to the region’s integration and prosperity, something that the ASEAN Customs Transit System (ACTS) aims to solve.

Challenges Faced in Intra-ASEAN Road Logistics

Land transport is expected to account for an increasing proportion of the goods moved within the region. However, in the 2020 EU-ASEAN Business Council’s Business Sentiment Survey, only four percent of respondents found ASEAN customs procedures to be speedy and efficient, a decrease from eight percent in 2019.

Intra-ASEAN road logistics are often hindered by non-standardised Customs border clearance procedures, as well as documentary and procedural requirements. These not only lengthen timelines, but give rise to steep transaction costs that can negatively affect cross-border trade. Obstacles brought about by inefficient customs procedures impacts the ability of ASEAN member states to realise their collective economic potential, impacting integration efforts and overall progress towards the ASEAN Economic Community.

Infrastructure improvements have already stimulated some trade growth but regulatory bottlenecks risk continuing to limit potential by adding direct costs and making journey times unreliable. Developing an efficient logistics service would have a pervasive and favourable effect on the ASEAN economies because of their usage in the priority sectors and more generally throughout the economies.

The ACTS as a Transformative Force for ASEAN Integration and Prosperity

In the same EU-ASEAN Business Council survey, 66 percent of its respondents indicated that ASEAN should modernise customs procedures to ease the movements of goods in order to take advantage of changes in the global supply chain. To this end, the ACTS was developed and launched in a collaborative effort between the European Union and ASEAN, aimed at streamlining the movement of goods across the ASEAN Member States.

The ACTS is an automatedonlineCustoms transit management system that links all Customs offices on the transit routes with Customs offices at the points of departure and destination via a secure closed communication network throughout the six participating land connected ASEAN Member States. In a nutshell, this simplifies customs processes, accelerates transit movements, and reduces the time and expenses involved in ASEAN cross-border trade.

The benefits of the ACTS can be divided into four categories that are broadly aligned with ASEAN’s long term growth plans:

  1. Shorter timelines by standardising Customs clearance procedures and documentary requirements for movements of goods crossing multiple countries – a single digital Customs transit declaration is required at departure.
  2. Reduced costs from simplified processes, minimal checks at the borders, use of a single truck for the whole journey, and a single regional guarantee to protect the duties and taxes at risk as the goods being transported are free of duties and taxes until their final destination in the region. For example, a trader moving goods from Malaysia to Cambodia via Thailand reported a 27 percent overall reduction of cost while using the ACTS. 
  3. Enhanced visibility from the digitalisation of customs and road logistics, allowing shippers and authorities to monitor regional transit movements for better management of timelines, and to combat illicit trade.
  4. Green logistics from more efficient Customs processes that reduce congestion and idling of trucks, lowering emissions. Regional systems such as the ACTS can also facilitate the adoption of greener standards for trucking.

Other than benefitting the government and businesses, the implementation of the ACTS will also benefit ASEAN’s consumers by providing them with enhanced access to a wider range of products at potentially better prices and quality.

Potential Challenges to Implementation

Despite its holistic benefits to the government, business and consumers, the ACTS is an optional system, and the challenge to its success relies on the willingness of all stakeholders to work together to ensure maximum take-up.

Another challenge could be posed by the recent resurgence of Covid-19 cases in the region, with pandemic containment measures potentially creating restrictions for cross-border movement. However, it is not all doom and gloom as ASEAN member states have embarked on their vaccination programmes, opening the doors to a swift restoration of essential cross-border trade.

However, from a broader economic perspective, the ACTS can play an essential role in supporting the economic recovery and growth targets set by the ASEAN Economic Ministers (AEM), potentially accelerating its adoption. Continuous awareness and visibility programmes are also being implemented at both national and regional levels across ASEAN to ensure that public and private stakeholders are aware that the ACTS is operational and of its benefits, boding well for its adoption.

The Road Ahead

Currently operating in six ASEAN member states, with additional countries scheduled to join the system in the coming years, ASEAN and EU will work together to achieve the AEM’s goal to double intra-ASEAN trade and reduce cross-border trading costs by ten percent by 2025. The ARISE Plus team has also carried out a feasibility study into using ACTS to manage the movement of goods by rail, sea, air, inland waterways and rivers. In the near future, the ACTS could also be adapted for multimodal consignments, further boosting its relevance and ability to drive a tighter knit, economically robust ASEAN.

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