76220 POLICY NOTE NO. 35 FEBRUARY 2013     Africa Trade Policy Notes     How to Push Efficiency Enhancing Reforms at the Port of Dar Es Salaam? by Jacques Morisset, Charles Moret, and Julie Regolo The Port of Dar Es Salaam, the second largest in East Africa after Mombasa, is one of the least efficient on the planet, hindering trade and economic expansion not just for Tanzania but also for neighboring HIGHLIGHTS landlocked countries. The cumulative delays at anchorage and dwell time can exceed 20 days, while international standards are around 3-4 days. In addition, official and non-official payments are high and prevalent. These CONGESTION AND inefficiencies are well known and mitigating them has been a priority in DELAYS… recent national strategies. However, the implementation of necessary The cumulative delays at policy reforms and investments has been slow and inadequate. anchorage and dwell time can exceed 20 days, while The lack of enthusiasm for reforms is explained by the asymmetric international standards are distribution of benefits and costs associated with the current inefficiency of around 3-4 days. the port. While gains are concentrated in the hands of a few well- connected players, costs are diffused among multiple consumers, firms, and households across the country. Other contributing factors include the lack of awareness of costs by most consumers and firms, the unequal COST OF distribution of these costs, time inconsistency between costs and benefits INEFFICIENCY… associated with reforms, and the lack of coordination for decisive actions. The total global welfare loss These basic lessons of political economy help not only to understand why is estimated to be USD 1.76 the Port of Dar Es Salaam has remained underperforming but also offer new directions on how to encourage the faster implementation of billion per year for the efficiency enhancing reforms. Tanzanian economy and USD 830 million per year The  Port  of  Dar  Es  Salaam  is  inefficient  but  how  bad  is  it?   for neighboring countries. Today, about 90 percent of Tanzanian trade transits through the Port of Dar es Salaam. This port is also a hub for the international trade of East African landlocked countries such as Zambia, Uganda, DRC, Rwanda and Burundi with the rest of the world. But to what extent is the port of Dar Es Salaam efficient in moving goods in and out the country? How does it WORLD BANK compare to other ports in the region, notably Mombasa? |  www.worldbank.org/afr/trade   1   Efficiency for a port is to facilitate trade of Lack of efficiency can be measured by the extra merchandise in and out of the country at the lowest delays and payments that shipping companies or costs and as fast as possible. For imports, these traders have to deal with in the port of Dar es include the following chain of operations: (i) Salaam in comparison to those they would face in anchorage; (ii) berthing; (iii) merchandise the port of Mombasa. The main symptoms of the unloading; (iv) customs clearance, and (v) exiting port inefficiency are long delays, first at anchorage, the merchandise from the premises. The chain is and second in the series of operations necessary to simply reversed for exports. The more cost-efficient exit merchandise from the port (the so-called dwell the port is in handling these operations, the lower time). Port tariffs are also much higher than in the costs for importers and exporters and greater Mombasa. For the five operations described above, the benefits for the economy. the total cumulated costs of extra delays and additional monetary payments compared to The performance of the Port of Dar es Salaam has Mombasa are equivalent to a tariff of 22 percent on varied over time. As a result of privatization in the container imports and about 5 percent on bulk 1990s, the port became one of the most efficient in imports (see Table 1). For energy imports, which Sub-Saharan Africa, but its performance make up 35.5 percent of total imports, the tariff deteriorated gradually up to mid-2000s and equivalent of extra delays and fees on liquid bulk efficiency is now low despite renewed efforts of the could be as high as 37 percent. Inefficiencies for port authorities to implement reforms aiming to exports, however, are low due to limited custom accelerate operations like establishment of an process related congestion and cheaper freight rate electronic single window system and facilitation of that outbound cargos face. direct delivery of cargo. Table 1: Total additional costs due to the inefficiency of the port compared to Mombasa (USD per ton or indicated)1     Bulk   Container   Direct  monetary  costs   11.4   16.2   Cost  of  waiting  at  anchorage   8.6   57   2 Local  Imports   Cost  of  storage  in  the  port   None   5.40   Inventory  cost   3.4%   15.9%   Tariff  equivalent  (total)   5.2%   21.7%   Direct  monetary  costs     7.9   13.9   Cost  of  waiting  at  anchorage     8.6   57   Transit   Cost  of  storage  in  the  port   None   2.8   Inventory  cost   3.4%   17.6%   Tariff  equivalent  (total)   4.9%   22.8%                                                                                                                               1  The tariff equivalent is computed as the sum of the direct monetary costs, the cost of waiting at anchorage and the inventory cost, based on an average value of USD1’358 per ton for container exports and USD1’137 per ton for dry bulk imports (TRA) 2   For bulk imports, direct delivery has become the norm. This means that the vessels cargo is directly loaded into trucks for onward delivery to the receiver and therefore there dwell time is minimized. |  www.worldbank.org/afr/trade   2   The first delay faced by shipping companies is the observe a longer dwell time in period of intense time at anchorage. As of May/June 2012, container activity due to congestion (second half of the year). 3 vessels were queuing for 10 days on average (up to 25 days) waiting for a berth in Dar es Salaam, while Excessive dwell time at the port of Dar es Salaam is the waiting time was less than one day in Mombasa due to slow custom clearance and excessive storage (see Table 2). This delay was mainly explained by 4 periods. Customs clearance seems to deteriorate, or the congestion at the berth due to non-adapted at least vary significantly over time, as only 24 unloading equipment, e.g. slow crane movements percent of declarations were cleared in 24 hours in (14 MPH against 18 MPH compared with April 2012 (against 87 percent in February 2010). Mombasa) and sub-optimal call sequencing of Long storage periods are partly explained by vessels (first come, first serve). It has to be noted lengthy customs clearance procedures, low storage that bulk imports were indirectly affected by the fees, inadequate inland container depots (ICDs) long waiting time for containers vessels, since and congestion at the gate of the port. On top of conventional berths have become increasingly excessive delays, shippers in the port of Dar es congested due to the relocation of several container Salam have to pay higher fees than in Mombasa to services in the TPA conventional terminal. Waiting port operators and agencies for their services. The time at anchorage then also reached an average of official port fees are on average 74 percent higher 4.5 days for dry cargo whereas it is null in in Dar es Salaam than in Mombasa, principally as a Mombasa. result of higher wharfage charges, which are proportional to the merchandise value while they The second delay for container imports is dwell are flat fees in Mombasa. The total extra direct time since on average it was taking 10 days for monetary cost is approximately USD 16 per ton for unloading merchandise, clearing and exiting it from container imports (USD 11.1 per ton for bulk). the premises in mid-2012. The delay for transit in 2012 was equal to 17 days on average . By 5 These inefficiencies in terms of extra delays and comparison, its takes about 3-4 days in Mombasa financial surcharge in comparison to Mombasa are and only 48 hours in many East Asian ports. These equivalent to an additional tariff of 22 and 5 average figures mask significant variations in delays, percent respectively on container and bulk imports. not only by type of transactions (unfortunately the However, these costs do not include the unofficial detailed information is not yet available) but also payments paid by shippers and clearing agents, over time. For example, the average dwell time in which are likely to be significant in the port of Dar 6 the TPA terminal was as low as 5 days in October es Salaam . If corruption is a source of inefficiency, 2011, while it exceeded 23 days in February 2011. it is also the direct result of existing inefficiencies These variations are surprisingly not correlated to where non-official payments become necessary to the traffic volume whereas one could expect to speed up or go around the existing process.                                                                                                                           3  Source TPA   4   Contraryto West Africa where several ports are in proximity, vessels cannot go to a neighboring hub port to discharge their cargo. In other words, their options is to wait or not to come to the port of Dar Es Salaam, both having significant costs for importers and the local economy.                                                                                                                             6   The firing of key TPA officials by the Minister of Transports 5   Based on TICTS and TPA data, the average local container on corruption charges in September 2012 and recent surveys dwell time in 2011 was 9 days in the container terminal and 15 indicate that TPA and TRA – two of the main public operators days in the conventional terminal, which gives an average of 10 in the port – are certainly among the most corrupted agencies days for the port once weighted by their market shares in the in Tanzania (National Survey on Governance and corruption, container traffic.   2009).   |  www.worldbank.org/afr/trade   3   Table  2.:  Comparison  of  port  efficiency  for  containers  between  Dar  es  Salaam  and  Mombasa.     Note:  These  figures  have  been  collected  during  a  field  mission  in  May/June  2012  with  the  collaboration  of  the  main  port  operators   (TPA  and  TICTS)  and  interviews  with  several  port  users  (see  references).     Using the rent-seeking approach of corruption, the The Cost of Inefficiency: W inners and magnitude of this phenomenon within the port of Losers of Perverse Incentive Structures Dar Es Salam can be illustrated by estimating how much an importer would be ready to pay to reduce The inefficiency of the Port of Dar Es Salaam is delays. In principle, an importer with a equivalent to a trade barrier of 22 and 5 percent on merchandise value of USD 1358 per ton would be the merchandise imported by containerized and indifferent to pay up to USD 17.4 per ton to speed bulk cargo respectively. This extra-cost has up the process of its container by one day. This obviously significant implications on the Tanzanian amount is equal to the cost associated to one more economy and neighboring countries. day of waiting time. (For bulk, an average of USD 1137 per ton will be equivalent to USD 10.6 per The cost inefficiency for the economy ton for one day less of waiting time). At the aggregate level, the estimated total welfare loss generated by inefficiency at the port can be One way to illustrate the potential corruption in the calculated by examining the impact associated with port is to examine the variations in the valuation of the tariff equivalent on local producers, consumers, import invoices at customs. Data from the Tanzania and the Government in Tanzania. Each of these Revenue Authority (TRA) reveal that the custom agents is losing as the result of higher final prices values associated to a set of relatively homogenous and lower volumes of imports. As a result of the goods varied significantly in 2011. For example, the tariff equivalent of the port inefficiency, the cost of value for one kilogram of imported fertilizer ranges imported intermediary products is higher for local from USD 0.39 to USD 5 per kilogram, while the producers and the purchasing power of final world price is around USD 0.6-0.8 per kilogram. consumers is eroded. As imported goods are less The ratio between the highest and lowest reported affordable, the import demand decreases and the price was 152 and 33 for rice and palm oil society’s welfare is substantially reduced. The tariff respectively. While variations in values of imports equivalent due to the port inefficiency contributes are to be expected due to changes in international to an estimated reduction in the amount of prices and in quality, such orders of magnitude may imported goods by USD 2.4 billion, i.e. 25 percent reflect poor reporting or suspicious behavior by of total Tanzanian imports recorded in 2012. TRA. These « missing imports » also reduce tariff revenues for the Tanzanian state as well as they lower benefits for the port operators, who handle |  www.worldbank.org/afr/trade   4   less merchandise than they could with an efficient and USD 830 million per year for neighboring port. Finally, the port inefficiency affects similarly countries. As part of these losses, the revenue the landlocked neighboring countries, increasing collected by government agencies (TPA and TRA) the transit costs and so lowering their trade are reduced by approximately USD 157 million. activities. All these losses are summed up in Table These amounts represent around 3 percent of 3. annual public revenues, which could have been used to finance additional investments in in The total global welfare loss is estimated to be USD education, health or other vital public expenses to 1’759 million per year for the Tanzanian economy improve Tanzanian citizens’ welfare. Table  3:  The  global  cost  associated  to  the  port  inefficiency,  in  USD  million   Impact   Local  Imports   Transit   Total   Welfare  loss     1’759.1   830.1   2’589.2   Excluding  liquid  bulk  (petrol)   772.1   297.4   1’069.5   Imports  decline     1’758.5   649.8   2408.3    Container     865.2   291.9   1167.1   Bulk     74.6   33.0   107.6   Liquid  bulk(petrol)     818.7   324.9   1’143.6   Government  revenues  losses   154.6   2.4   157.0   TRA     148.8     148.8                Import  duties     54.2     54.2                Tax  revenues     84.6     84.6   TPA       5.8   2.4   8.2   TICTS  revenues  losses   12.0   5.4   17.4   Additional import tariffs due to port inefficiency Tanzanian imports, and is the main input for a have significant implications on households. Based number of domestic activities, most notably on the average share of goods in Tanzanian construction (8 percent of total costs) and the glass household expenditures, it is estimated that a factory (5 percent). The extra-tariff of 5 percent due Tanzanian household could save 8.5 percent of its to port inefficiency not only increases the price of total expenditures, or USD 147 per year, if the port the imported cement, but also is an extra-protection of Dar Es Salaam could become as efficient as in for local producers who are able to increase their Mombasa. This finding illustrates that the port has prices. As a result, the price of cement is much not only a significant negative impact on the higher in Tanzania than in Kenya or other 7 country’s growth performance but also on the lack producer countries. The close relationship of progress in reducing poverty rates. Port between local and imported prices in the cement inefficiency contributes to an increase in the price sector has been confirmed in many recent studies. of food and energy expenses that account for three As an example, local cement prices decreased from quarters of low- income household’s consumption TsH 15,500 in June 2008 to Tsh 10,500 in basket. October 2009 when the Government decided to temporarily remove duty on the importation of The above two approaches aiming to estimate the cement from outside EAC in 2008. global impact of the port inefficiency on the Tanzanian economy can be complemented by a                                                                                                                           7   In 2008, the retail price of cement was 45 and 60 percent more detailed description of the channels at play higher in Tanzania than in Kenya and Ghana respectively. It for two strategic goods. The first example is was also 2.5 and 4 times higher than in Bangladesh and Vietnam. More recently, the price difference between cement, which represents an important share of Tanzania and Kenya was reported in the range of 5-20 percent.     |  www.worldbank.org/afr/trade   5   For fertilizers, port inefficiency is equivalent to an distorted incentive structure in the port; (ii) the extra-tariff of 5.2 percent, which, due to the little widespread use of corruption; and (iii) the extra- competition faced by importers on the local protection for local producers. market, is almost fully passed through higher retail prices. Higher price of fertilizers leads to their The first source of gain from inefficiency under-use and contributes to low productivity and is linked to the conflict of interests in the lack of competitiveness in the agricultural sector. existing incentive structure at the port. The This sector is central for the Tanzania economy as well-known example is the storage tariff structure it represents 25 percent of the GDP and 75 percent that does not encourage importers to remove their of total employment. Port inefficiency also offsets merchandise from port premises. This structure, the expected impact of the Government’s subsidies on the other hand, works at the benefit of the programs on the use of fertilizers. These programs Tanzania Port Authority (TPA), Tanzania aim at reducing the price of fertilizers for farmers International Container Terminal Services while the port inefficiency contributes to increase (TICTS) and ICDs, since when dwell time exceeds these prices at the same time. From the the free storage period of 7 days, each additional Government’s perspective, it might be more day of storage represents a direct additional profit rational to improve efficiency of the port (a one- for them. The total revenue from additional storage time cost) than to spend significant amount of collected by the TPA and TICTS was around USD public resources on farmers’ assistance programs 14.5 million in 2011. Besides, many ICDs remain every year. profitable only because of long storage time as it is estimated that merchandise should be stored for at Gains for targeted groups least 14 days to cover the operating costs of most Ports are generally good businesses if two ICDs. Another example of perverse incentive is conditions are met. First, there is sufficient volume that the TPA is able to earn more revenues when of transactions to guarantee economies of scale and TICTS becomes less efficient. When the berths returns on initial investments. Second, there is managed by TICTS are congested, a portion of limited competition from other ports or other container traffic is redirected to the TPA berths. transport networks as well as internally between The issue is that TICTS’ efficiency is impeded by port operators. These two conditions are met in the the lease contract of old TPA cranes. It might not port of Dar Es Salaam. The main port authorities be a coincidence that the TPA has not renewed the and operators in Dar Es Salaam are Tanzania Port cranes over the past few years. The additional Authority (TPA) which own the port infrastructure, revenue generated by container traffic for the TPA operate the conventional terminal and a share of was estimated around USD 36.5 million in 2011. the container traffic; the Tanzania International Container Services (TICTS) which is the only The second source of gain from the terminal operator and the Surface and Maritime current inefficiency is visible through the Transport Authority (SUMATRA), a multi-sectorial widespread presence of corruption. Rent- regulatory agent. seeking behavior has been exacerbated by the use of discretionary rules that contributes to the typical While there is no doubt that the port of Dar Es asymmetric information problem between Salaam is an important source of revenues, it administration and users. Custom duties, invoice becomes more difficult to identify who is taking valuations, and port rules are frequently modified advantage of its current inefficiency. Our analysis by agencies without any detailed explanations. Not suggests that significant gains can be extracted from only are users not well informed but also many the current inefficiency as the result of: (i) the agents who continue to apply old rules, or worse, |  www.worldbank.org/afr/trade   6   their own rules. This rent-seeking behavior is also their prices to the highest levels possible even if favored by the quasi-absence of controls. TICTS those are variable over time. Such profit has no real competitor except for TPA. Customs maximizing behavior is more likely for goods that officials have substantial discretionary powers on have relatively low price elasticity values such as clearing goods since only one quarter of the food. These importers could also store their cargo imported goods goes through the green channel. In in the port until the price peaks in an upward addition, internal and external supervision is limited season. They can also create artificial shortages in with ineffective appeals mechanisms. As a the local market and delay early deliveries until consequence, discouraged traders often prefer to market prices rise. (Raballand et al, 2012) negotiate on the spot. Towards an explanation of the resistance The opportunities for corruption gains are also to reform facilitated by the presence of several conflicts of interests. For example, TICTS is a joint venture Tanzania and its neighbors could gain over USD between an international private company and a 2.5 billion a year if the port of Dar Es Salaam was number of local private investors but there is no to become as efficient as the port in Mombasa. information regarding their identity (one of the Given that this should be a realistic target in the major scandals in 2008 was that one of these short to medium term, why are efficiency investors turned out to be the Minister of Transport enhancing policy reforms moving so slowly? The himself). The TPA plays a dual role of operator conventional response is that the Government (or and landlord. The Surface and Marine Transport TPA) does not have the sufficient financial Regulatory Authority’s (SUMATRA) vast resources to implement the necessary reforms. discretionary powers, especially on charge levels Several studies conducted by the government, and port fees , creates a high risk of corruption by supported by donors, have estimated that the total agents and operators since neither formula nor cost of reforms should range between around USD 8 benchmark is used to justify decisions. Other 1-2 billion to be distributed over five years. These conflicts are found in the cumulating roles of some costs include new infrastructure and rehabilitation local shipping agents that are also involved in within and outside the port as well as the forwarding and ICD operations in contradiction to modernization of existing systems. Despite the Tanzanian law. Whereas there is no reason that large costs involved, several private investors have shipping agents/lines cannot participate into already lined up to finance most of investment, and logistical activities, the law should apply to all. donors have been ready to finance part of the reforms. In addition, there are several reforms in The third source of gain associated with the soft infrastructure of the port, which are not port inefficiency is the extra-protection for expensive and would greatly improve the situation local producers. For containerized cargo, this (e.g. vessels’ calls sequencing, ). protection is equivalent to a tariff of 22 percent or about three times the weighted average duty tariff While financial constraints are part of the on total merchandise trade in Tanzania (WDI, explanation behind the slow progress in 2012). Such protection allows local firms to implementing reforms in the port of Dar Es increase their margins or to produce without the                                                                                                                           maximum efficiency, with customers having to 8   Port related main infrastructures are estimated at USD 1.1 absorb the cost. The extra-protection also favors Billion with the construction of DSM Container Terminal importers, especially those who can act collusively. berth 13 &14 including dredging (USD 700 Million), the conventional terminal upgrading (USD 250 Million), and Monopolist importers could take advantage of Kisarawe dry port (USD 185 Million).   variations in delays and operating costs by setting   |  www.worldbank.org/afr/trade   7   Salaam, it can be argued that the main reason players, with often conflicting roles (such as the behind current resistance can be found elsewhere. TPA which acts as both the operator and the The lack of progress can be embedded in the landlord of the port). The second level is in port asymmetric bargaining power between winners and operators’ failure to incorporate the costs arising losers. In other words, the status quo is to a large from inefficiency in their decision process. This extent maintained because winners are more typical "public good" problem leads to under- powerful than losers in influencing decision investment because the negative effects resulting makers, even if their gains are much lower than the from the status quo are not taken into account by losses for the global economy (Baldwin and R. the port operators. Another example is found in Nicoud (2008)). In the port of Dar Es Salaam, the TRA. Greater efficiency in tax collection will some major winners (TRA, TPA and their increase substantially tax revenues. However, employees) are part of the State themselves, and individual staff may be losing as the result of lower the close connection between TICTS and power opportunities for rent-seeking behavior. circles raises suspicion. Most of those benefitting Consequently, there is no sense of urgency in favor from the extra-protection provided by port of reforms. inefficiency are among the largest firms operating in the country, with significant market power and Finally, time inconsistency also matters for linkages with political elites. understanding the resistance of some port actors to efficiency enhancing reforms. While the gains will The lack of bargaining power of current losers is be significant in the long term, these agents might rooted in several explanations. First, the losses are lose in the short term. For example, TICTS and diffused among many end-users (consumers and TPA would benefit from higher traffic volume in investors) that have little direct connections with the longer term but in the short-term might lose up policymakers. For example, in the cement sector, to USD 14 million per year in storage revenues if the consumers are a large number of firms and dwell time is reduced below the 7 days free period. households all over the country, while there are only three main local producing firms who have Recommendations access to the country’s elites. Second, many consumers are not fully aware of the negative If Tanzanian leaders had to select one action to impact of port inefficiency on their welfare. The transform their country, the modernization of the marketing chain is long with multiple intermediaries port of Dar es Salaam should be their priority. between the port and the consumers, including Bringing the port efficiency to the level observed in wholesalers and retailers. Third, the costs Mombasa (average in class for African ports) could associated with inefficiency are not only difficult to generate about USD 1.7 billion of additional capture for end users but their magnitude is also revenues per year to the Tanzanian economy, and uncertain over time. For example, the cost about USD 800 million to regional economies. The associated with dwell time varies substantially across Government should act decisively on the political 9 transactions and over time. economy front to accelerate the pace of reforms. The cost of inaction is already too big for the Beyond the asymmetric distribution of bargaining power between winners and losers, there are                                                                                                                           9   Since September 2012, under the direction of the new coordination failures and time inconsistency issues. Minister of Transports, a number of actions have been Coordination failures operate at two levels. The implemented with the objective to improve the port efficiency. first level is within the port where the The port performance has improved due to the arrival of three new cranes. Actions have also been taken to combat corruption responsibilities are diffused among different through the recent replacement of the TPA Board as well as its top management. .   |  www.worldbank.org/afr/trade   8   Tanzanian and regional economies, around USD Promoting greater competition could also reduce 2.6 billion per year, and the port of Dar Es Salaam the monopolistic power of current port operators. might lose its existing market share in regional trade This can be achieved by a “big bangâ€? or through an when other ports and railways become operational incremental approach. The former would in neighboring countries. Proposed are five introduce new port operators and/or privatize the objectives or principles that should be viewed as operating arm of TPA. The latter approach can be possible directions for enhancing the implemented by privatizing some activities (e.g., implementation of reforms in the port of Dar Es handling operations and maintenance) or by Salaam. While each objective is important, we modifying some existing practices in the port that believe that their combination is critical to push for reduce competition. The following measures could the rapid implementation of efficiency-enhancing be taken as a priority: (a) modify the call reforms. sequencing system for vessels from “first come, first serveâ€? to fixed berthing windows for shipping lines; (i) Increasing end-users’ awareness of costs (b) reconsider the role of SUMATRA which related to port inefficiency. Many end should focus on its role of regulator rather than consumers and small farmers are not aware of the controlling shipping rates. The current system with negative direct effects of the port on their welfare a uniform rate across all shipping companies and fail to realize that they are paying an excessive reduces competition; (c) revisit the legal restriction price for their inputs due to port inefficiency. There that shipping companies cannot be involved in any is a need to better explain and quantify the costs logistics activities since the fragmentation of logistics associated with the current situation in the port to services is a key source of inefficiency; (d) improve all stakeholders in Tanzania, as well as those in the the efficiency of freight forwarder/clearing agents by sub-region. The Government should take the lead removing inappropriate regulations, increasing in proceeding with economic studies, mobilizing transparency of their tariffs and activities, and consumer groups and small business associations, penalizing those who operate outside the law. conduct end-user surveys, and create a public There is no clear reason why only local agents can awareness campaign. clear cargo in Tanzania and that shipping agents/lines cannot participate into logistical (ii) Reducing the bargaining or activities. monopolistic power of current winners who profit from the status quo. This (iii) Reducing corruption which is the objective can be achieved by reducing existing main channel exploited by beneficiaries of conflict of interests that contribute to increase the the status quo. This would impose a zero- risk of collusive behavior at the expense of end- tolerance corruption policy through a clear users. The first action should be to bring commitment from the top authorities. The use of transparency to connections between TICTS and benchmarks through an automated system should decision-makers. This can be done by making help monitor performance of port operators and public the names of the main local stakeholders of the TRA. To reduce corruption, procedures this company. The second action should be to should be simplified as well as the tax system, by eliminate the dual role of the TPA, which currently introducing a one-step clearing process, and the acts as both the landlord and one of the two number of taxes and exemptions should be operators in the port. It would also be important to reduced. There is also a need to provide good promote greater transparency in the financial compensation and working conditions for customs accounts of the TPA. agents (to reduce temptations), and to intensify internal and external controls as well as to |  www.worldbank.org/afr/trade   9   implement credible sanctions in case of abuses or due to the conflicting interests of its members, and misuses. Customers should have access to the dual role of the port authority. At the same independent and inexpensive appeal mechanisms. time, there is a need to involve key players that are The methodology used to calculate wharfage fees not directly involved in the functioning of the port should be modified from a value to a fixed based but are affected by its performance. The cost of system. This would prevent agents from negotiating port inefficiency is not absorbed by the port with clearing agents and importers and contribute operators or authorities, but end-users such as not only to speeding up the process but also to ordinary consumers, traders and farmers. Our reinforce collaboration between private and public recommendations are to (i) include the voices of operators within the port. Another important action end-users in the committee; (ii) transfer the role of would be to revisit the structure of storage fees that Chairman to the Minister of Transport (or a does not encourage importers to exit their Champion outside of the port); and (iii) strengthen containers on time. The fee structure should make the mandate of the Committee that should excessive storage time more expensive except if the supersede that of individual agencies operating in cause of the delay is due to a lengthy clearance the port. process. Importers who repeatedly abandon cargo should be penalized, the government should instruct the TRA to auction all abandoned cargo in a timely manner, and TRA should set a budget for the destruction of cargo that cannot be auctioned or 10 re-exported to origin after a delay . (iv) M otivating reformers. The staff of the TPA and TRA could be motivated by the introduction of performance-based incentives. Such an approach was implemented in the port of Douala in 2010 with successful results. The number of transactions cleared by tax and customs administration has increased by more than 10 percent and tax revenues have gone up by USD 16.5 million. (v) Improving coordination. Coordination failures have long been recognized and justified the creation of the Port Improvement Committee that attempts to regroup the most important players involved in the functioning of the port. However, this Committee chaired by the TPA is not efficient                                                                                                                           10   As per international law, if a consignee does not take the Delivery Order, the shipper at origin is responsible for all costs associated to the re-export of the cargo. Custom approval to re- export should however be expedite. As per local law, when a container is stored by more than 60 days, TRA is authorized to auction it so that the cargo will be evacuated from the port premises by the winner of the auction. A number of containers, generally with low values, are not auctioned and so remain stored in the port for very long period.   |  www.worldbank.org/afr/trade   10   About the Authors This note has been derived from a report of the same title complied by a team led by Jacques Morisset (World Bank) and comprising Charles Moret (World Bank consultant), and Julie Regolo (University of Geneva). This note was edited by Gozde Isik (World Bank). This research that this note is based on has been funded by DANIDA and the World Bank. The views expressed in this paper reflect solely those of the authors and not necessarily the views of the funders, the World Bank Group or its Executive Directors. References* Arvis, Jean-François, Gaël Raballand, and Jean-François Marteau (2010). « The Cost of Being Landlocked: Logistics Costs and Supply Chain Reliabilityâ€?, World Bank. Baldwin R. and F. Robert-Nicoud, (2007). "Entry and Asymmetric Lobbying: Why Governments Pick Losers", Journal of the European Economic Association, MIT Press, vol. 5(5), pages 1064-1093, 09. Cantens T., G. Raballand, N. Strychacz and T. Tchouawou, (2010). « A revised approach to customs reforms in Sub-Saharan Africa based on lessons from a performance contracts pilot in Cameroon? », World Bank. Dar es Salaam port identification of key constraints critical for improving economic growth and reducing poverty, January 2009. Tanzania National Audit Office and Public Financial Management Working Group. Fair Competition Commission of Tanzania, (2010). “Assessment of competition in the Tanzania Cement marketâ€?, research and advocacy division. Feasibility study for new container berths Dar-es-Salaam, (2009). CPCS Transcom International Limited. Fernandez, Raquel and Rodrik, Dani (1991). “Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty.â€? American Economic Review, 81(5), pp.1146–55. Hummels, D. (2007). “Calculating Tariff Equivalents for Time in Trade,â€? USAID Report. Kent P. E. and A. Fox (2004). “The Broad Economic Impact of Port Inefficiency: A Comparative Study of Two Portsâ€?, USAID. Leyaro V. (2009). “Commodity Price Changes and Consumer Welfare in Tanzania in the 1990s and 2000sâ€?, School of Economics, University of Nottingham, UK. Pre-feasibility study, review of PPP options and recommendations concerning the optimum option for establishment of a container freight station in Dar es Salaam (Kisarawe Freight Station), December 2010, Ecorys Nederland BV. SUMATRA regulations on ports, tariffs and fair competition. Tanzania Ports Master Plan Final Report, February 2009, Royal Haskoning. Tanzania Port Authorities, Annual Report and Accounts 2009 – 2010. Tariff Book of Port Dues and Charges. |  www.worldbank.org/afr/trade   11   “The One Billion Dollar Question: How can Tanzania Stop losing so much tax revenuesâ€?, 2012. The Interfaith Standing Committee on Economic Justice and the Integrity of Creation (Tanzania Episcopal Conference (TEC), National Muslim Council of Tanzania (BAKWATA) and Christian Council of Tanzania (CCT)).   United Republic of Tanzania Country Strategy Paper 2011-2015, June 2011, African Development Bank. World Development Indicators (2012), The World Bank. * The main source is a series of face–to–face interviews with port authorities, terminal operators, ICD/CFS operators and shipping agents during June of 2012. Interviews included: African Shipping Limited General Manager, Diamond Shipping Services Managing Director, GAPCO Managing Director, Maersk (Nyota) Managing Director, MOL (Inchcape) Operation Manager, NYK (Wosac) General Manager, Rais Shipping Services Operations Manager, SDV (AMI) Managing Director, Seaforth Managing Director, Sturrock Operation Manager, Tanzania Freight Forwarder Association Management, Tanzania Railways Limited Managing Director, Tanzania Zambia Railway Managing Director, TICTS Commercial Manager, TPA Principal Planning Officer, TRA Trade Facilitation Manager. |  www.worldbank.org/afr/trade   12 Â