CAMEROON ECONOMIC UPDATE July 2012 l Issue No.4 71652 STEPPING OUT INTO THE WORLD With a Focus on Trade Facilitation Cameroon Country Office July 2012 Stepping Out Into the World An Economic Update on Cameroon With a focus on trade facilitation Cameroon Country Office Table of Contents ABBREVIATIONS AND ACRONYMS ........................................................................................... 2 STEPPING OUT INTO THE WORLD ............................................................................................ 4 INTRODUCTION ..................................................................................................................................... 4 RECENT ECONOMIC DEVELOPMENTS ........................................................................................................ 6 2012 OUTLOOK ................................................................................................................................... 7 TRADE FACILITATION: OPPORTUNITIES AND CHALLENGES .......................................................................... 12 REFERENCES ............................................................................................................................29 Table of Figures Figure 1 : Selected Price Increases, 2007-11......................................................................................... 6 Figure 2 : Oil Production, 2002-12 ........................................................................................................ 8 Figure 3 : LPI Performance: A Comparison, 2012 ............................................................................... 17 Figure 4 : ETI Performance: A Comparison, 2012 ............................................................................... 17 Figure 5 : Average Transport Costs: A Comparison, 2007 .................................................................. 23 Figure 6 : Average Transport Prices: A Comparison, 2007 ................................................................. 23 Figure 7 : Intra Regional Trade, 2010 .................................................................................................. 25 Table of Boxes Box 1 : External Developments ............................................................................................................. 9 Box 2 : Evolving Trade Patterns .......................................................................................................... 13 Box 3 : Trade and Poverty: A Discussion of the Literature ................................................................. 15 Box 4 : (Un)ease to Trade: International Comparison, 2012 .............................................................. 16 Box 5 : Individual Performance Contracts in Cameroon Customs: A World Premiere ....................... 20 July 2012, Issue No. 4 / Page 1 ABBREVIATIONS AND ACRONYMS AMU Arab Maghreb Union ASYCUDA Automated System for Customs Data ATM Automated Teller Machine AVI Attestation de Vérification à l’Importation (Certificate of Import Verification) BGFT Bureau de Gestion du Fret Terrestre (Management Office of Land Freight) BEAC Banque des Etats d’Afrique Centrale (Central Bank of Central African States) BESC Bordereau Electronique du Suivi des Cargaisons (Electronic Cargo Tracking Note) CAR Central African Republic CEMAC Communauté Economique et Monétaire de l’Afrique Centrale (Economic and Monetary Community of Central Africa) CET Common External Tariff CFAF CFA Franc CMR Customs Management Regulations CNCC Conseil National des Chargeurs du Cameroun (National Shippers’ Council of Cameroon) COMESA Common Market for Eastern and Southern Africa CPI Consumer Price Index CTN Common Tariff Nomenclature CU Customs Union DGD Direction Générale des Douanes (Directorate General of Customs) DGTCM Direction Générale du Trésor et de la Coopération Monétaire (General Department of Treasury and the Monetary Cooperation) DRC Democratic Republic of Congo DSCE Document de Stratégie pour la Croissance et l’Emploi (Growth and Employment Strategy) ECB European Central Bank ECCAS Economic Community of Central African States ECOWAS Economic Community of West African States e-GUCE Electronic GUCE EITI Extractive Industries Transparency Initiative July 2012, Issue No. 4 / Page 2 ETI Enabling Trade Index GDP Gross Domestic Product GUCE Guichet Unique des Opérations du Commerce Extérieur (Single Window of Foreign Trade Operations) IMF International Monetary Fund LPI Logistics Performance Index LVI Lettre de Voiture Internationale (International Consignment Note) MINCOMMERCE Ministère du Commerce (Ministry of Commerce) MINFI Ministère des Finances (Ministry of Finance) PAD Port Autonome de Douala (port of Douala) POS Point-Of-Sale terminal TSA Treasury Single Account SADC Southern African Development Community SONARA Société Nationale de Raffinage (national refinery) SSATP Sub-Saharan Africa Transport Policy Program US United States USD United States Dollar VAT Value-Added Tax WAEMU West African Economic and Monetary Union WEO World Economic Outlook July 2012, Issue No. 4 / Page 3 STEPPING OUT INTO THE WORLD Introduction With this Cameroon Economic Update, the around which all stakeholders could be World Bank is pursuing a program of short, mobilized. crisp and frequent country economic Fostering greater trade both at the regional reports. These Economic Updates provide an and international levels would assist analysis of the trends and constraints in Cameroon achieving its goal of becoming an Cameroon’s economic development. Each emerging economy by 2035. Seizing trade issue, produced bi-annually, provides an opportunities in the regional context would update of recent economic developments, provide a good learning ground for as well as a special focus on a topical issue. becoming competitive on the international The Economic Updates aim to share scene. knowledge and stimulate debate among those interested in improving the economic management of Cameroon and unleashing its enormous potential. The notes thereby offer another voice on economic issues in Cameroon, and an additional platform for engagement, learning and change. This fourth issue of the Cameroon Economic Update is entitled “Stepping out into the World – A Special Focus on Trade Facilitation�. It reviews the challenges and opportunities related to trade facilitation in Cameroon. The coverage is not meant to be exhaustive, but puts an emphasis on particular areas that would require the Photo credit: Raju Jan Singh country’s sustained attention: a transformative trade facilitation agenda July 2012, Issue No. 4 / Page 4 In Cameroon, traders are, however, still Singh. Dominique Njinkeu coordinated the faced with burdensome procedures both for work for the chapter on trade facilitation. exports and imports. Port efficiency needs Other Team members included Gilberto de to be improved and movements of freight Barros, Paul Brenton, Maximilien Tiogang inland should be made easier and cheaper. Djomo, Patrick Eozenou, Abib Gaye, Olivier The latter would require, in addition to Hartman, Mombert Hoppe, Faustin Ange better roads, a more competitive transport Koyassé, Ranga Rajan Krishnamani, Taye sector and fewer roadblocks. Alemu Mengistae, Sylvie Ndze, Victoire Ngounoue, Carlo del Ninno, Peter Osei, and The CEMAC Customs Union (CU) should Gael Raballand. Greg Binkert (Country become a reality through the adoption of a Director for Cameroon), Eric Bell (Acting harmonized tariff nomenclature, standards, Sector Manager), and Cia Sjetnan (Senior common customs regulations, and a Country Officer) provided guidance and regional payment system. Beyond CEMAC, advice, and have been an invaluable source there would be a need to facilitate trade of encouragement. between CEMAC countries and the Democratic Republic of Congo (DRC), as well The Team also benefited greatly from as the rest of the ECCAS.1 Cameroon could consultations with Cameroon’s key policy also capitalize on the trading potential with makers and analysts, who provided the vast consumer market in Nigeria and, important insights, in particular the through Nigeria, access the entire ECOWAS following institutions: the BEAC, the regional market.2 Ministry of Finance, the Ministry of Economy and Planning, and the National The Cameroon Economic Updates are Institute of Statistics. The Team is also produced by the World Bank Country Office grateful to their colleagues at the in Cameroon by a Team led by Raju Jan International Monetary Fund. 1 CEMAC refers to the Economic and Monetary Community of Central Africa. Member countries include Cameroon, Chad, the Central African Republic, Equatorial Guinea, Gabon, and the Republic of Congo. ECCAS (the Economic Community of Central African States) is a wider grouping of Central African States and includes, in addition to the CEMAC countries, Angola, Burundi, the Democratic Republic of Congo, Rwanda, and Sao Tome and Principe. 2 ECOWAS (the Economic Community of West African States) includes Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone and Togo. July 2012, Issue No. 4 / Page 5 Recent Economic Developments Growth the headline inflation rate reached 2.7 Most recent estimates confirm the percent (year-on-year), stable compared expectations for economic growth in 2011 with the 2.6 percent observed last year over that we had presented in the January issue the same period. The stability of retail prices of our Cameroon Economic Updates (see for petroleum products has also contributed text Table below). Cameroon’s economic in containing inflationary pressures. recovery gained greater momentum in Figure 1 : Selected Price Increases, 2007-11 (year-on-year) 2011, after a slowdown of two years 14 12 following the global economic and financial 10 8 6 crisis. It is estimated to have reached 4.2 4 2 0 percent (compared with 2.9 percent in -2 -4 -6 2010) on the back of continued strong performance in non-oil activities, oil Total (Headline) CPI Food Price Index Fuel Price Index Sources: Cameroonian authorities and staff calculations production pursuing its decline. Fiscal performance % contribution towards GDP growth 2009 2010 2011 Primary sector 0.6 1.2 0.9 Secondary sector (excl. oil) 0.1 0.9 0.8 While revenue performance over the last Oil -0.8 -0.6 -0.3 Tertiary sector 2.0 1.4 2.8 quarter of 2011 turned out to be broadly in GDP Growth 2.0 2.9 4.2 Sources : Ca merooni a n a uthori ti es a nd Sta ff ca l cul a ti ons line with our expectations, spending was much higher. Pressure on current spending Inflation could not be contained and ended 2.3 Initiatives to boost agricultural production, percentage points of GDP above its subsidize food imports, and improve budgeted level, mainly on the back of higher distribution seem to have contained expenditure on goods and services (0.6 pressure on food prices in 2011 (Figure 1). percentage point of GDP), as well as greater These pressures were gaining momentum spending on subsidies (1.4 percentage over the summer (increasing at their peak points of GDP). Capital outlays accelerated by 5.8 percent year-on-year in July), but in the last quarter, reaching 6.4 percent of subsided in the later part of the year. Food GDP. As a result, the overall fiscal deficit on inflation is estimated to have reached 3.9 a cash basis (including grants and before percent (year-on-year) in 2011. As a result July 2012, Issue No. 4 / Page 6 payment of arrears) turned out to be a taxes that should go to municipalities are percentage point and a half of GDP wider transferred to the TSA. With cash-strapped than budgeted (see text Table below). local governments, such delays may lead to arrears and a further weakening of the Fiscal Performance, 2009-11 (in percent of GDP) budget process. 2010 2011 2011 2011 Jan. Est. Budget Proj. Est. Revenue and Grants 17.5 17.6 19.4 18.9 Furthermore, despite securitization and Oil Revenue 4.5 3.5 5.2 5.4 Non-oil Revenue 12.4 13.2 13.3 13.0 some cross-compensation, fewer payment Grants 0.6 0.9 0.9 0.5 Total Spending 18.6 18.9 18.9 21.7 obligations could be settled than budgeted Current Spending 14.5 13.1 13.6 15.4 Capital Spending 4.1 5.7 5.4 6.4 and new ones could not be prevented from Overall Balance -1.1 -1.3 0.4 -2.8 Arrears -1.1 -1.3 -1.3 -0.5 being accumulated, particularly with the Overall Balance on a cash basis -2.3 -2.6 -0.9 -3.4 Sources: Cameroonian authorities and staff calculations SONARA, the national oil refinery. The Meeting this larger financing requirement company is benefitting from assistance to has substantially drawn down government compensate it for its revenue shortfalls deposits at the regional central bank, the stemming from the government’s policy to BEAC. In addition, the central government freeze retail prices of petroleum products. seems to have been tempted to delay the This continued high stock of unsettled transfer to municipalities of local revenue payment obligations will weigh on the transiting through the Treasury Single liquidity position of the government and on Account (TSA). Since the introduction of a the execution of the 2012 budget. single declaration for taxpayers paying VAT, income tax, and patents (above a certain level), the share of the proceeds of these 2012 Outlook The economic momentum observed in temporarily), expanding by 8 percent in Cameroon in 2010 and 2011 is expected to 2012 (Figure 2). Private operators account carry over into 2012 with the construction for this increase, their production expanding of large infrastructure projects and to 10.1 million barrels (up from 6 million continued efforts to improve agriculture barrels in 2011), on the back of significant productivity. Furthermore, oil production is exploration in the past years and a more expected to rebound (although only July 2012, Issue No. 4 / Page 7 intense exploitation to take advantage of lower aid following fiscal austerity measures the current high international oil prices. in the Euro zone should be limited. Figure 2 : Oil Production, 2002-12 As discussed in the January issue of the (Millions of barrels) Cameroon Economic Updates, the main 40 35 transmission channel would thus be through 30 exports and remittances. The Euro zone is 25 still the largest market for Cameroon’s 20 exports. With slower economic growth, 15 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012* demand for products using Cameroonian Sources: SNH and staff calculations inputs such as housing (wood) or cars However, the continued unfolding of the (rubber) could decline. In this regard, the sovereign debt crisis in advanced recent dip in economic sentiment observed economies, particularly in the Euro zone, in the Euro zone and the continuous clouds the economic outlook. And at the downward revisions in growth forecasts are time of writing, these clouds seem to have sources of concern (Box 1). grown larger and darker. The potential The European Commission’s index of transmission channels of this crisis to consumer sentiment for the Euro Area Cameroon’s economy are expected to be showed in May a deep decline to a two-and- similar to those observed during the a half year low. Weak economic confidence 2008/09 global financial crisis, namely is likely to translate into a more cautious finance, trade, and remittances. As a result, behavior by consumers and businesses, economic growth in Cameroon could postponing investments for instance, amount to about 5 percent in 2012. thereby further depressing demand. The global linkages of the financial system of the CEMAC region are still limited and the banking sector remains sufficiently liquid to meet the credit needs of the government and the private sector. Furthermore, the budget of Cameroon does not rely heavily on aid flows, hence any adverse impact from July 2012, Issue No. 4 / Page 8 Box 1 : External Developments Although prices for Cameroon’s main commodities have broadly stabilized … 450 150 Rubber 400 140 Cotton 350 130 Petroleum 300 120 250 110 200 100 150 90 100 80 50 Cocoa Banana Logs Source: World Bank Source: World Bank … economic confidence in the Euro zone is dropping, pushing down growth expectations … Economic Sentiment Indicator 2 110 Third Quarter 2011 Survey 105 1,5 100 1 95 Fourth Quarter 2011 Survey 90 0,5 Second Quarter 2012 Survey 85 0 80 Jul-11 Jul-10 Sep-10 Sep-11 Jan-10 Jan-11 Jan-12 May-10 May-11 May-12 Nov-10 Nov-11 Mar-10 Mar-11 Mar-12 -0,5 2010 2011 2012 Source: European Commission Source: Survey of Professional Forecasters,European Central Bank … making Cameroon vulnerable to a decline in demand from its main export markets. Five main export markets (in total market share), 2011 Import volume projections (variation in %), 2012 Spain Spain Netherlands Netherlands China China France France Italy Italy -10 -5 0 5 10 15 20 0 5 10 15 20 WEO Apr-2011 WEO Sep-2011 WEO Apr-2012 Sources: Cameroonian authorities and staff calculations Source: International Monetary Fund July 2012, Issue No. 4 / Page 9 Fiscal Performance, 2012 The regular quarterly surveys of professional (in CFAF Billions) 2012 2012 2012 forecasters, carried out by the European LF Q1 Proj. Revenue and Grants 2273 573 2411 Central Bank, capture this growing gloom. Revenue 2207 572 2345 Oil revenue 557 104 699 Non-oil Revenue 1650 468 1646 Their average 2012 growth forecast for the Grants 66 2 66 Total Spending 2552 528 2727 Euro zone has continuously declined over Current Spending 1760 380 1945 Capital Spending 792 148 782 the past quarters, indicating now the Overall Balance Arrears -279 -26 46 -2 -316 -26 Overall Balance on a cash basis -305 44 -342 expectation of an economic contraction. Sources: Cameroonian authorities, Staff's estimates More worrisome, the latest vintages of the Inflation is expected to remain below the IMF’s World Economic Outlook indicate regional convergence criterion of 3 percent. continuous downward revisions for Despite the recent decision to adjust projected imports for Cameroon’s main electricity prices, the ongoing initiatives to export markets, with demand in most boost agricultural production and subsidize markets now expected to decline. Although the import of food are likely to continue remaining in positive territory, even demand having a moderating effect on price in China is slowing. pressures. Concerning fiscal performance, on the basis of the first quarter, the projections for 2012 would indicate that slippages in current spending (particularly because of an under- estimation of the cost of keeping retail fuel prices frozen) would offset higher-than- expected oil revenue (see text Table below). As a result, the overall deficit on a cash basis is expected to reach 2.7 percent of GDP. As in past years, the budgeted amount for compensating SONARA for its revenue shortfall is expected to fall short: an estimated CFAF 400 billion being needed in 2012 instead of the CFAF 170 billion budgeted. Photo credit: Raju Jan Singh July 2012, Issue No. 4 / Page 10 Against this backdrop, efforts to increase particularly for food and fuel, should be the economy’s resilience to shocks should openly and candidly discussed. Data show be strengthened. The reduced level of that these subsidies mostly favor the rich remaining government deposits at the and are largely ineffective in protecting the regional central bank will only provide a incomes of those most affected by price limited buffer, should matters become variations, as well as the incomes of the worse than currently projected. In this poorest. As mentioned in the January issue regard, the nascent domestic capital market of our Cameroon Economic Updates, the offers alternative sources of temporary richest 20 percent of the population financing, complementing any possible captures most the subsidies on gasoline and shortfall in fiscal savings. diesel, and over 40 percent of the subsidies on rice, wheat, and fish. Efforts to create a liquid secondary market for government bonds would help sustain A comprehensive and carefully planned investors’ interest in future bond issues. approach is necessary to reform the current Improvements in fiscal reporting would also system, and decide how much and when to foster investors’ confidence, since it will change prices, and about who to make the government’s fiscal position more compensate. These decisions should be transparent. made based on an analysis of the country’s context. Alternative programs and measures Too often, people perceive the oil sector as that target specific vulnerable groups and surrounded by opacity and related to poor those categories vulnerable to price governance. In this regard, a law on the increases will be more effective if implementation of the Extractive Industries accompanied by the introduction of a Transparency Initiative (EITI) and the targeted social safety net program. Policy introduction of a budget line dedicated to changes should be discussed with a broad this activity would be a strong signal of the range of stakeholders, and communicated country’s willingness to report in a effectively to the public in a way that takes transparent manner payments and income into consideration the perceptions and from its natural resources. expectations of different segments of The composition of public spending could society. also be examined. The need for subsidies, July 2012, Issue No. 4 / Page 11 Finally, Cameroon could also think about resilience of the economy and reduce its diversifying even further its export markets vulnerability to external shocks. In this away from its traditional partners. A more regard, trade facilitation – the topic of our diversified product base, as well as more special focus – plays a critical role. diversified markets, would increase the Trade Facilitation: Opportunities and Challenges Recent Trade Patterns economy is fairly diversified (with services Cameroon is ideally positioned to take representing about 48 percent of GDP in advantages of the economic opportunities 2011), the country remains a commodity offered by greater trade. Due to its strategic exporter (Box 2), focused on very few location neighboring Nigeria and Gabon, and products. Five products accounted for about potential crossing point to the landlocked ¾ of all its exports in value in 2011: crude countries of Central Africa (Chad and the and petroleum products, cocoa, logs and CAR), Cameroon is a natural hub for the processed wood. region with the port of Douala as the main entrance. In addition, the country is diverse with a geography that ranges from Sahelian semi- desert in the north through grassland to equatorial forest in the south, favoring varied economic and agricultural activities. Furthermore, Cameroon is endowed with significant natural resources, including oil, high value timber species, and agricultural products (coffee, cotton, cocoa). Untapped resources include natural gas, bauxite, diamonds, gold, iron, and cobalt. Despite this diversity, Cameroon’s export base remains narrow. Although the Photo credit: Raju Jan Singh July 2012, Issue No. 4 / Page 12 Box 2 : Evolving Trade Patterns (in percent of market share) Although Cameroon remains heavily dependent … and the European Union is still its main on commodity exports trading partner … Total trade, 2010 (in percent of market share) Others Oil& 22% petroleum Others products Countries European Bananas 39% 15% Union 3% 42% Rubber Africa 3% 25% Cotton 2% Wood United products China & States Cocoa 5% 12% India 19% 13% … trade to Asia and Africa has been expanding … and within Africa CEMAC has grown … Variation in market share, 2000-10 (in %) Variation in African market share, 2000-10 (in %) 15 15 10 10 5 5 0 0 -5 -5 -10 -10 -15 -15 -20 -20 European United China & Africa Others CEMAC Nigeria South Mauritania Others Union States India Countries Africa Africa … into Cameroon’s largest African market … while Nigeria remains its main import source. Exports, 2010 Imports, 2010 Others Others Africa CEMAC Africa 17% 10% 20% Benin Mauritania 7% 5% Congo (DRC) 8% CEMAC 60% South Nigeria Africa Nigeria 8% 7% 58% Sources: Cameroonian authorities and staff calculations July 2012, Issue No. 4 / Page 13 The European Union remains the country’s According to reported data, Nigeria has main trading partner, buying in 2011 about become Cameroon’s main import source, half of its exports in value (mainly crude to representing a bit less than a quarter of all Spain and Italy, cocoa to the Netherlands, imports in value in 2011 (ahead of France, processed wood to Belgium and Italy, and representing 13 percent of the Cameroon’s aluminum to France). The Union also imports). Within Africa, CEMAC has grown provides a third of Cameroon’s imports. to be Cameroon’s main export market, mainly petroleum products to Chad. The importance of Europe as trading partner has, however, been declining with the Seizing trade opportunities in the regional emergence of China, India, and African context would provide a good learning economies. China has become, for instance, ground for becoming competitive on the Cameroon’s most important market for world scene. The region seems to offer cotton and logs, buying more than half of promising markets for Cameroonian the country’s exports of these products. products, especially agriculture, and may be easier to enter, as their standards would be closer to those of Cameroon. For Cameroon, this would mean consolidating its position in the CEMAC market and then capturing opportunities in the wider regional market through the ECOWAS. For countries to take advantage of the opportunities offered by freer trade and for these benefits to be more inclusive, greater openness to trade should be accompanied by a number of policies that would ensure factor mobility (Box 3). This chapter will, however, focus only on the trade facilitation aspect. Photo credit: Raju Jan Singh July 2012, Issue No. 4 / Page 14 Box 3 : Trade and Poverty: A Discussion of the Literature A number of recent studies emphasize the importance of complementary policies in determining the benefits or costs of trade for developing countries. The way greater trade openness affects poverty depends on a variety of structural characteristics that may help or hamper a country’s ability to take advantage of international competition. Trade liberalization should therefore not be seen in isolation and additional policies are needed to enhance its beneficial impact, including on poverty. In its simplest form, trade theory suggests that the abundant factor should see an increase in its real income when a country opens up to trade. If the abundant factor in developing countries is unskilled labor, then this framework suggests that the poor (unskilled) in developing countries have the most to gain from trade. Krueger (1983) has used this insight to argue that trade reforms in developing countries should be pro-poor, since these countries are most likely to have a comparative advantage in producing goods made with unskilled labor. From a dynamic perspective, economic growth plays an important role in reducing poverty and trade is argued to lead to the needed increases in productivity to sustain growth. Freer trade provides greater incentives for investment, benefits of scale and competition, limitation on rent- seeking activities favored by trade restrictions, and openness to new ideas and innovations (Grossman and Helpman, 1991; Lucas, 1988). However, should the re-allocation of factors be hampered, the expected benefits from freer trade may not materialize. For incomes of the unskilled to increase, labor needs to be able to move out of contracting sectors and into expanding ones. Davis and Mishra (2006), Goh and Javorcik (2006) and Topalova (2006) suggest that labor in the real world may not be as mobile: there are too many barriers to entry and exit for firms, and too many barriers to labor mobility for workers. Against this backdrop, Winters et al. (2004) suggested that freer trade should be combined with other policies encouraging investment, allowing effective conflict resolution, and promoting human-capital accumulation. Bolaky and Freund (2008) show that trade reforms actually lead to income losses in highly regulated economies. Excessive regulations restrict growth because resources are prevented from moving into the most productive sectors and to the most efficient firms within sectors. Le Goff and Singh (2012) suggest that trade openness tends to reduce poverty in African countries, as their financial sector grows deeper, their education level higher, and their governance stronger. Challenges chain and take into account the fact that In a world characterized by trade in tasks during the manufacturing process rather than products undertaken by firms intermediate products cross many borders. located all over the world, there is a need In this regard, the trading across border to reduce barriers along the entire supply component of the World Bank’s Doing July 2012, Issue No. 4 / Page 15 Business Indicators provides an insight on environment facing traders. These are far the level of challenges faced by Cameroon. greater in Cameroon than in the other The procedural requirements for importing/ countries (Box 4). exporting are a reflection of the regulatory Box 4 : (Un)ease to Trade: International Comparison, 2012 Documents to import (number) Documents to export (number) Vietnam Vietnam Thailand Thailand Senegal Senegal Mozambique Mozambique Malaysia Malaysia Ghana Ghana Cameroon Cameroon 0 5 10 15 0 5 10 15 Time to import (days) Time to export (days) Vietnam Vietnam Thailand Thailand Senegal Senegal Mozambique Mozambique Malaysia Malaysia Ghana Ghana Cameroon Cameroon 0 20 40 0 5 10 15 20 25 Cost to import (US$ per container) Cost to export (US$ per container) Vietnam Vietnam Thailand Thailand Senegal Senegal Mozambique Mozambique Malaysia Malaysia Ghana Ghana Cameroon Cameroon 0 500 1 000 1 500 2 000 2 500 0 500 1 000 1 500 Source: World Bank July 2012, Issue No. 4 / Page 16 It takes 12 documents to import a arranging and managing international commodity and 11 documents to export a shipments. Cameroon’s performance is here commodity in Cameroon (as compared to an again lagging (Figure 3). average of about 6 to 8 in a sample of Figure 3 : LPI Performance: A Comparison, 2012 emerging economies and other African 4.5 4 countries aspiring to the emerging economic 3.5 3 status). With few exceptions, the time taken 2.5 2 for importing is more than in the selected 1.5 1 0.5 countries (23 days in Cameroon as 0 compared to an average of 16 days in the Source: World Bank other selected countries). It costs three times more to import a commodity in Finally, the Enabling Trade Index (ETI) Cameroon than in Malaysia, Vietnam or summarizes the situation. In 2012, Thailand. Cameroon was ranked 118 out of 132 countries on the basis of the ETI score A wider measure of the trade and logistics (Figure 4). Cameroon’s rank is lagging and environment of countries is the World substantial effort would be needed to catch Bank’s Logistics Performance Index (LPI). up. The LPI covers the entire supply chain, based on a survey of nearly 1,000 logistics Figure 4 : ETI Performance: A Comparison, 2012 (out of 132 countries) professionals (international freight 140 forwarders) across 155 countries. The 120 100 results may be considered to represent the 80 60 experience of a large number of logistics 40 20 providers and logistics buyers. The overall 0 LPI score is based on performance on six Source: World Bank aspects of logistics performance. These are: customs efficiency, infrastructure quality, This index has four components. The first ability to track and trace shipments, measures the extent to which the policy timeliness in reaching a destination, framework welcomes foreign goods into the competence of the domestic logistics country and enables access to foreign industry in the country, and the ease of markets for its exporters. The second is the July 2012, Issue No. 4 / Page 17 extent to which the administration at the aspiring to assume an emerging economy border facilitates the entry and exit of goods status. Maritime gateways are at the and services. The third is the availability of interface between the region and the rest of transport and communication necessary to the world. They are the locations in which facilitate the movement of goods within the several complex processes take place, country, and across the border. The fourth is including the physical transfer of cargo the quality of governance, as well as the between shipping and inland road transport. overarching regulatory and security Ports are also the locations where environment facing importers and information and financial exchanges exporters. between the wide range of operators involved in trade and transport facilitation Trade Facilitation and Logistics processes take place. Time is a key element From a trade facilitation perspective, of each of these processes. efficient movement of freight along the Container dwell time – the amount of time a corridor from the port to the inland shipment waits at port – is an indicator of commercial centers is crucial for the region’s port efficiency. Data based on the Douala- external competitiveness. This in turn N’Djamena corridor show that port delays depends on the efficiency of the port and account for more than half of the delivery the inland movement of road freight from time from arrival at the port to final inland the port to final inland destinations. Reform destinations. Recent statistics from the of both the physical aspects (transport container terminals indicate an average infrastructure) and the non-physical aspects dwell time at Douala of 18.6 days in 2010 as (regulatory and documentation processes of compared to average dwell time of 4 days in transit trade) are essential for an efficient Durban (South Africa), 11 days in Mombasa movement of freight – with efficiency (Kenya) and 14 days in Dar es Salaam assessed in terms of the cost, time and (Tanzania), and about 3 to 4 days in most predictable movement of freight along the international ports3. corridor. Port Efficiency Improved port procedures at the gateway 3 provide great opportunities for a country G. Raballand et al. (2012), Why does Cargo Spend Weeks in Sub-Saharan African Ports? July 2012, Issue No. 4 / Page 18 The container dwell time depends on three factors:  Operational dwell time which depends on the performance of physical operations at the port;  Transactional dwell time which depends on the performance of cargo clearance activities by customs and other regulatory agencies; and finally  Storage dwell time which depends on the voluntary storage of cargo in the container yard, as well as other environmental factors such as lack of finance, availability and efficiency of transport services. Photo credit: Raju Jan Singh In the port clearance process, customs play A sequential analysis of delays at the port an important role, and they have generally shows, however, that the time taken been perceived as the most important between the arrival of the vessel and source of delays. Accordingly, most efforts customs declaration lodging (operational to reduce port dwell-time in Cameroon has dwell time) and the time taken between the focused on improving the efficiency of payment of customs duties and gate exit customs, through the introduction of (storage dwell time) together account for automated systems, or an electronic single three-quarters of the container dwell time window. Customs officers have also been at Douala. In contrast, the time taken by encouraged to sign idividual performance customs (transactional dwell time) accounts contracts with the twin goals of enforcing for just about a quarter of the container compliance and expediting cargo clearance dwell time. (Box 5). These efforts have led to both improvements in revenue collection at customs and in import clearance time. July 2012, Issue No. 4 / Page 19 Box 5 : Individual Performance Contracts in Cameroon Customs: A World Premiere As in many developing countries, Customs revenue is an important component of fiscal revenue. About a quarter of government revenue is collected by Customs. Hence it is important for Cameroon to reconcile the goal of enforcing compliance with the trade facilitation goal of expediting cargo clearance of traders deemed to be usually compliant. Cameroon’s Customs administration has suffered from corruption and struggled to identify options for improving Dwell Time (Days) 19.8 governance. A customs reform program 19.6 was introduced, seeking to reduce 19.4 corruption, while simultaneously raising 19.2 revenue collection. The reform included 19.0 18.8 the installation of ASYCUDA (an 18.6 automated customs clearance system) 18.4 which would enable the administration to 18.2 not only track the processing of each 18.0 consignment, but also measure 2008 2009 2010 performance against a number of criteria Source: Cameroonian authorities relevant to the reform. A continuation of these efforts has been the introduction in 2009 of individual performance contracts – making Cameroon the first country in the World to adopt such an approach. These performance contracts use objective and quantifiable data from the automated computer system. The objectives of customs administration (facilitation and enforcement) are complemented by specific objectives, which aim at abolishing bad practices. The results are encouraging: higher revenue collection, shorter clearance times, and lower corruption (measured through systematic firm surveys of a representative sample of customs brokers undertaken before, during, and after the experimentation). This suggests that customs is just one of the operations from the port to final inland many regulatory agencies. An approach destinations for notable improvement to focused only on customs reforms needs, traders. Only a comprehensive approach to therefore, to be replaced by a more the problems encountered at the gateway comprehensive one involving the complete can lead to improvement of efficiency that July 2012, Issue No. 4 / Page 20 would enable the Cameroonian traders to compete with their African and international counterparts. While Cameroon through targeted interventions has been improving the physical operations of the Douala port, the critical mass of needed reforms is still lacking. Attention should be on streamlining the documentation process at the port through adequate coordination of the many actors (shippers, trade auxiliaries, border management agencies, facilities operators, and logistics services providers). One framework for that is an operational Single Window. Cameroon created in 1999 Photo credit: Raju Jan Singh the “Guichet Unique des opérations du The main objective of the electronic version Commerce Extérieur� (GUCE) in the form of of the GUCE is to replace paper-based cargo a joint association between the government clearance with automated procedures at the (including Customs, Ministry of Trade, Port Port of Douala (PAD) to reduce clearance- of Douala) and the private stakeholders related time and costs, and foster trade and involved in the clearance process of economic activity in Cameroon (and in the imported goods. Although the infrastructure CEMAC region). 2012 will be marked by a of the electronic version of the GUCE had move from a physical to an electronic single been in place by 2007, the implementation window as indicated by the schedule in the is still in progress (see text Table below, text Table below. presenting the expected automation schedule by procedure). July 2012, Issue No. 4 / Page 21 Schedule of Procedure Automation Procedure Expected reduction Actors Deadline Integration of the BESC ½ day CNCC April 2012 Registration (importers / exporters) 2 days MINCOMMERCE April 2012 Electronic payment 2 days DGD-DGTCM du MINFI May 2012 Improvement of the CIVIO ½ day DGD-PAD June 2012 Exchange of the Manifeste 1,5 days DGD-PAD July 2012 Taxes PAD 1 day PAD Sept. 2012 Attestation de Vérification des Importations (AVI)* 1 day DGD December 2012 Lettre de Voiture Internationale (LVI) 1 day BGFT December 2012 Inland Movement of Freight between the West of Cameroon and the Roads are the dominant mode of transport economic centre in the East of Nigeria in Cameroon, with the exception of the becomes largely impassible in the rainy Douala-Yaoundé and the Douala- season, forcing traders to use water ways Ngaoundere corridors where a multimodal along the coast and inland rivers to a larger road-rail option exists. Road rehabilitation degree. In the North, cross-border roads are and upgrading transport infrastructure has in a very bad condition, but flat dry-lands therefore been in the trade facilitation allow for smaller vehicles to cross the agenda of Cameroon for quite some time, border on non-marked tracks during the dry both at the national level and at the regional season. During the rainy season, traffic level. Furthermore, improved inland patterns change substantially because some movement would contribute to link the of the corridors become impassable, while different regions of Cameroon, in particular the quality of others deteriorates the North and the South, and create an significantly. actual single national market. Although improvements in road and Road conditions remain a key barrier to transport infrastructure have facilitated cross-border trade, particularly between road transport, average transport prices Cameroon and Nigeria. Mostly passable charged to traders remain high. While during the dry season, the main corridor operating costs in Africa are now broadly July 2012, Issue No. 4 / Page 22 similar to those in France, average transport adds to lengthy immobilization of trucks at prices are much higher (Figures 5 and 6). the extremities of the corridors, in terminals The average transport price on the Douala- and gateways, lengthening truck rotations N’Djamena corridor, for instance, is about and reducing the number of paid trips a 11 cents per ton Km. These road freight truck can make in a year. As a consequence, rates are almost double than that of China, transport prices charged to shippers are three times higher than in Brazil, and more high to make up for this inefficient use of than five times higher than in Pakistan.4 trucks. Figure 5 : Average Transport Costs: A Comparison, 2007 More importantly, however, over-regulation (USD per veh Km) plagues the transport systems with road 2.5 travel being the most afflicted. The 2 1.5 mechanisms linking over-regulation and 1 high transport costs have been analyzed in a 0.5 study. 5 It shows that in the absence of 0 adequate market regulation for road Central Africa East Africa West Africa Southern Africa France Source: World Bank transport, gains linked to better roads are Figure 6 : Average Transport Prices: A Comparison, 2007 not likely to be passed on to shippers and (US cents per ton Km) consumers in the form of reduced transport Africa: Douala-N'Djamena prices. Africa: Mombasa-Kampala Africa: Lome-Ouagadougou Africa: Durban-Lusaka For instance, road transport on the Douala West Europe Long Distance (France) China corridors is regulated through bilateral United States Brazil agreements which restrict competition. Pakistan 0 2 4 6 8 10 12 Agreements between Cameroon and Chad Source: World Bank and between Cameroon and CAR cover Why is that? The system is, first of all, cargo-sharing and enforcement largely inefficient in matching demand for mechanisms, and have kept transport prices with supply of transport services. Trucks high. wait for long periods for a contract. This 4 Teravaninthorn, S. and G. Raballand (2009), 5 Transport Prices and Costs in Africa: A Review of the Ibidem. The greatest disconnect between costs and International Trade Corridors. prices was along the Ngoundere-Moundou corridor. July 2012, Issue No. 4 / Page 23 Transport prices charged to shippers in for small traders. Recent research has Central Africa tend, therefore, to be tended to show that traders are likely to disconnected from the actual vehicle encounter a roadblock by a government operating costs. The system seeks to protect agency (such as customs, gendarmerie, the existing transport operators at the expense police, or the army) every 10-20 km in some of encouraging competition. Inefficient areas in Cameroon, interrupting the flow of operators are thus kept afloat, pushing goods and causing major delays. For down the quality of road transport services instance, the costs of transporting goods to the lowest level possible, since there is no from the Nigerian border in Ekok to incentive to offer better services. Worse, Bamenda are estimated to increase by shippers are even reported to have to pay about 100-150 percent. Initial analysis bribes in order to access the limited pool of suggests that in the area of the Western operators. corridor, removing these additional charges could reduce consumer prices for products The existing regulatory system is justified on imported from Nigeria by roughly 4 to 6 the grounds of fairness, since transport percent. profits could be shared with small-sized trucking operators. In many cases in Central Deepening Market in CEMAC Africa, however, the benefits of market Beyond improving port efficiency and inland regulation are captured by a few people at transport, a priority for Cameroon should be the expense of the whole economy. to make CEMAC an effective Customs Union A reform of the trucking industry would (CU). At the moment, policies and therefore be necessary to address these procedures at the regional level are little issues and must not be limited to liberalizing harmonized and very limited trade is taking freight access. Rather it must aim at place among member countries (Figure 7). transforming the industry itself to CEMAC accounts only for 2 percent of trade encourage the provision of high-quality of its member countries (as compared to 8 transport services. percent in ECOWAS, 10 percent in the SADC region and over 15 percent in the WAEMU Finally, a large number of roadblocks and high informal payments along the major corridors add to transport costs, especially July 2012, Issue No. 4 / Page 24 region).6 To become an effective CU, tariff to promote standardized interpretation; (ii) nomenclature and product standards would conduct a gap analysis of the differences need to be harmonized, common Customs between the nomenclature currently used Management Regulations adopted and an by each member state and the CTN; (iii) efficient regional payment system put in develop a national strategy and work plan place. for implementing the CTN, and (iv) establish a mechanism for maintaining a standardized Figure 7 : Intra Regional Trade, 2010 interpretation of CTN across the CEMAC 16 14 region. 12 10 8 6 4 2 0 Source: African Development Bank Tariff Nomenclature The Common Tariff Nomenclature (CTN) is a harmonized system for goods classification that would be applicable to all CEMAC member states. The system is designed for classifying goods with the same characteristics and similar duty requirements. This system is known to reduce delays, decrease transactions costs, and make the Common External Tariff (CET) easier to implement. Photo credit: Raju Jan Singh The specific activities necessary for CEMAC Common Customs Management Regulations to achieve this goal would be to (i) develop In any customs union, member states must and update the CTN, and prepare guidelines adopt a uniform set of trade requirements and formalities, including customs 6 Brenton, P. et al. (2012), Defragmenting Africa: Deepening Regional Trade Integration in Goods and procedures. Adoption of common standards Service. July 2012, Issue No. 4 / Page 25 helps to streamline bureaucratic procedures coverage and usage of these forms of and reduce time and trade costs. Common payment services. Such initiatives will Customs Management Regulations (CMR) contribute to improve the flow of resources provide for these standardized customs through formal transmittal channels, and procedures. extend access to a variety of payment services. For the CMR to be effective, CEMAC member states would need to align their There are currently, however, a limited national legislation and regulatory number of delivery channels and access frameworks with the CMR. Aligning national points (automated teller machines (ATM) legislation and regulatory framework would and point-of-sale (POS) terminals). Use of simplify regional trade customs procedures, mobile banking or branchless banking reduce red tape and prevent opportunities techniques by financial sector institutions in for corruption. CEMAC is also lacking. Regional Payments System Efforts at the regional and at the national The cost, speed, reliability, and accessibility levels to develop the payment system of payment systems have a major impact on should thus be strengthened by improving transactions costs. An efficient payment access points and delivery channels. The system is therefore essential for any country focus should be on meeting user needs and to participate in international trade. delivering accessible services through cost- efficient channels. Cross-border payments in the CEMAC region are, however, still characterized by the Widening market opportunities to Nigeria and ECOWAS predominance of cash. This is partly explained by the low acceptance of non- Cameroon and Nigeria share a common cash payment instruments. Costly, slow, border of nearly 1,700km, as well as strong unreliable, and difficult to access payments historical and cultural ties. According to systems encourage the use of cash over official statistics, the bulk of the current electronic payments. trade between Nigeria and Cameroon is dominated by oil and fuel. However, these Efforts are ongoing to integrate payment official statistics do not reflect the systems in CEMAC with a view to extend substantial commercial exchanges between July 2012, Issue No. 4 / Page 26 the two countries, with goods and services Recent analytical work has assessed the key being traded both through legal and barriers that small- and medium-sized informal channels. traders face when engaging in cross-border trade. While barriers differ somewhat Nigeria is the biggest economy in the region depending on the location along the border, with a GDP in 2009 of over USD 173 billion. road conditions and roadblocks, as With over 150 million people, it represents a discussed in the previous section, remain vast consumer market, nearly five times key barriers to cross-border trade. larger than the combined markets of the other CEMAC countries (excluding Cameroon). Improving the linkages with Nigeria would also give Cameroonian producers better access to all of West Africa. This should create trading prospects for larger companies from Cameroon, as well as chances for smaller niche producers. Cameroon is significantly smaller with around 20 million people and a GDP in 2009 of about USD 22 billion. But despite the difference in the market size both countries can benefit from better market access and reduced trading costs. Preliminary estimates suggest that official trade flows from Cameroon to Nigeria are only at about four Photo credit: Raju Jan Singh percent of the potential trade flows. While Administrative requirements further informal export flows from Cameroon to increase trading costs or generate delays. Nigeria are estimated to be significantly These include the negotiation of fees and above official statistics, the results of the duties at the border, visa fees, and meeting analysis still suggest that substantial product standards for distribution across additional gains remain. This means that borders. Administrative and informal exports could expand significantly, possibly payment arrangements relating to cross- generating additional employment. July 2012, Issue No. 4 / Page 27 border trucking result in trucks generally not Current procedures, requirements, and legal crossing borders, and goods being unloaded fees and payments should be clearly and re-loaded at borders, complicating the indicated, and to keep trading costs low for logistics chain and raising costs. small- and medium-sized traders, the introduction of a simplified customs scheme To reduce barriers to trade and allow for these groups could be considered. Such citizens on both sides of the border to a scheme would streamline procedures, benefit from differences in production reduce illegal payments by traders, and patterns, a comprehensive agenda of make payments more predictable. If infrastructure investment, reduction of carefully tailored and implemented, such a informal road blocks and payments, and scheme would ensure that effective trade improving border procedures is central. costs for small- and medium-sized traders While to date investment in infrastructure in would not increase. It would reduce or keep border areas particularly in the North seems constant the overall amount of payments to have been neglected and should be made by traders, while increasing official pursued, investment in the important receipts for the government and reducing corridor between Bamenda and Enugu is the time and uncertainty linked to crossing under way. It will be critical to supplement the border. If formal fees were reduced, the investment in physical infrastructure, traders would be less likely to make informal such as roads, by policy initiatives to reduce payments and prefer paying the lower the number of road blocks substantially, formal fees to avoid subsequent foster competition among transport harassments. Official receipts would also providers, and ensure compliance with increase, as traders currently avoiding existing regulations. Increasing transparency official border-crossings because of at borders will be important to minimize the administrative delays would start using opportunities for rent extraction. them and pay formal duties. July 2012, Issue No. 4 / Page 28 REFERENCES Bolaky, B. and Freund, C. (2008), “Trade, Regulations, and Income�, Journal of Development Economics, Vol. 87(2), pp. 309-21 Brenton, P. and G. Isik (2012), De-Fragmenting Africa: Deepening Regional Trade Integration in Goods and Services, The World Bank, Washington, DC. Chauffour, J.-P. and J.-C. Maur (2012), Preferential Trade Agreement: Policies for Development. A Handbook, The World Bank, Washington, DC. Davis, D. and Mishra, P. (2006), “Stopler-Samuelson Is Dead and Other Crimes of Both Theory and Data�, in Harrison, A. (ed.), Globalization and Poverty, University of Chicago Press for NBER, Chicago, IL Goh, C. and Javorcik, B.S. (2006), “Trade Protection and Industry Wage Structure in Poland�, in Harrison, A. (ed.), Globalization and Poverty, University of Chicago Press for NBER, Chicago, IL Grossman, G. and E. Helpman (1991), Innovation and Growth in the Global Economy, Cambridge, MA and London: MIT Press. Krueger, A. (1983), Trade and Employment in Developing Countries, 3: Synthesis and Conclusions, University of Chicago Press, Chicago, IL Le Goff, M. and R. Singh (2012), “Does Trade Reduce Poverty? A View From Africa�, paper presented at the Annual Conference of the Center for the Study of African Economies, Oxford, March 18-20, 2012. Likeng, M., M. Djeuwo, and S. Bilangna (2011), Gazing Into the Mirror II: Performance Contracts in Cameroon Customs, Good Practice Paper No 1, Sub-Saharan Transport Policy Program and World Bank, Washington, DC. Lucas, R. (1988), “The Mechanics of Economic Development,� Journal of Monetary Economics, Vol. 22, pp. 3–42. Raballand, G., S. Refas, M. Beuran, and G. Isik, (2012), Why Does Cargo Spend Weeks in Sub- Saharan African Ports? The World Bank, Washington, DC Teravaninthorn, S. and G. Raballand (2009), Transport Prices and Costs in Africa: A Review of the International Corridors, The World Bank, Washington, DC Topalova, P. (2006), “Trade Liberalization, Poverty and Inequality: Evidence From Indian Districts� in Harrison, A. (ed.), Globalization and Poverty, University of Chicago Press for NBER, Chicago, IL July 2012, Issue No. 4 / Page 29 Winters A., McCulloch, N. and McKay, A. (2004), “Trade Liberalization and Poverty: The Evidence So Far�, Journal of Economic Literature, Vol XLII, pp. 72-115. World Bank (2012), “Connecting to Compete: Trade Logistics in the Global Economy. The Logistics Performance Index and its Indicators�, Washington, DC. World Bank (2012), “Doing Business in a More Transparent World,� Washington, DC. July 2012, Issue No. 4 / Page 30