The World Bank Report No: ISR5086 Implementation Status & Results Russian Federation Customs Development Project (P072960) Public Disclosure Copy Operation Name: Customs Development Project (P072960) Project Stage: Implementation Seq.No: 15 Status: ARCHIVED Archive Date: 05-Jul-2011 Country: Russian Federation Approval FY: 2003 Product Line: IBRD/IDA Region: EUROPE AND CENTRAL ASIA Lending Instrument: Specific Investment Loan Implementing Agency(ies): Federal Customs Service Key Dates Board Approval Date 22-Apr-2003 Original Closing Date 30-Jun-2009 Planned Mid Term Review Date Last Archived ISR Date 05-Jul-2011 Effectiveness Date 31-Oct-2003 Revised Closing Date 30-Jun-2013 Actual Mid Term Review Date Project Development Objectives Project Development Objective (from Project Appraisal Document) The project development objective is to reform and modernize the Russian Customs administration, with a view to: (a) promote internationally acceptable practices for processing of international trade flows by Customs, so as to further integrate the country into the world trading community, improve the investment climate and secure the benefits from foreign and domestic investments in the economy; and (b) increase taxpayer compliance with the Customs Code and ensure uniformity in its application, to support macro-economic stability and increase transparency, timely transfer of collected revenues to the Federal budget, and equity and predictability in customs operations. The project would promote internationally acceptable practices for processing of international trade flows by Customs by: (a) adopting Customs standards that facilitate trade through the implementation of procedures to expedite the processing of low-risk transactions while improving the detection and prevention of contraband; (b) facilitating international commerce and accession of the Russian Federation to the World Trade Organization (WTO); (c) fostering a stronger partnership between Customs and participants of foreign economic activities; (d) transforming the mindset of SCC officers towards the trade activity from one of protection of the domestic economy to one of facilitating legitimate international commerce; (e) implementing improved business processes and automated systems designed to increase efficiency and reduce discretion and opportunities for rent seeking behavior; and (f) modernizing the Information Technology infrastructure of the SCC, and adopting standardized, highly automated operational procedures, including electronic filing of declarations, which would reduce the level of discretion by customs officers, and e-Government facilities for information and interaction with the trade community. The project would increase taxpayer compliance with the Customs Code and ensure uniformity in its application by: (a) adopting standardized and automated procedures countrywide to facilitate voluntary compliance and reduce compliance costs; (b) improving the knowledge and training of participants in foreign economic activities about the customs laws and procedures; (c) improving transparency, uniformity and predictability of Customs actions; (d) implementing efficient dispute resolution procedures; (e) improving enforcement capacity against smugglers and tax evaders through improved risk management, intelligence, investigation, improving efficiency of inspection activities, including post-release audit of goods and vehicles; (f) further developing the organization of the SCC and its management systems to increase overall organizational effectiveness; (g) enhancing Public Disclosure Copy professional integrity and skills of SCC officers; and (h) improving the conditions for countrywide training and retraining of SCC officers. Has the Project Development Objective been changed since Board Approval of the Project? Yes No Page 1 of 6 The World Bank Report No: ISR5086 Component(s) Component Name Component Cost CUSTOMS CONTROL AND CLEARANCE 4.02 Public Disclosure Copy TRADE FACILITATION 9.59 FISCAL POLICY 4.05 IMPROVE LEGAL FRAMEWORK FOR CUSTOMS ACTIVITIES 5.44 ORGANIZATIONAL STRUCTURE AND MANAGEMENT 10.23 FINANCIAL MANAGEMENT 6.48 HUMAN RESOURCE MANAGEMENT AND TRAINING 7.27 IMPROVING THE INTEGRITY OF THE CUSTOMS SERVICE 2.49 INFORMATION TECHNOLOGIES DEVELOPMENT 133.23 PROJECT MANAGEMENT 3.00 Overall Ratings Previous Rating Current Rating Progress towards achievement of PDO Satisfactory Satisfactory Overall Implementation Progress (IP) Satisfactory Satisfactory Overall Risk Rating Implementation Status Overview Key performance indicators show significant improvements through the second quarter of 2011 from the 2003 baseline values: 1. Values for the percentage of import and non-energy export declarations selected for physical inspection have declined 89% and 83% respectively over the life of the project - this exceeds end-of-project target values. 2. Average customs clearance times at the border have been reduced from 45 minutes to 16 minutes, an improvement in efficiency of 64%. 3. The average customs clearance time in lodging has been reduced from 40 hours to 7.3 hours, a reduction of 82% - exceeding the end-of-project target of a 50% reduction. 4. The compliance gap indicator has also exceeded the end of project target value. One indicator target remains to be met: the rate of enforced compliance. This showed progress in 2008 and 2009, but most recent data show a slippage in 2010. Data for 2011 is awaited. Public Disclosure Copy Overall, the indicators show that the Russian Federation has made significant progress in meeting the project objectives, specifically by increasing efficiency and reducing opportunities for rent-seeking behavior. Most procurement packages are procured and are in the process of being implemented. Locations Country First Administrative Division Location Planned Actual Russian Fed. Moscow Moscow ✔ ✔ Page 2 of 6 The World Bank Report No: ISR5086 Russian Fed. Leningradskaya Oblast' Leningradskaya Oblast' ✔ ✔ Results Public Disclosure Copy Project Development Objective Indicators Indicator Name Core Unit of Measure Baseline Current End Target Using the risk-based approach, reduce no. of Text Value 30% and 15% respectively 3.3% and 2.5% respectively 23% and 12% respectively by import declarations & no. of non-energy export end 2006. 10% and 8% declarations for physical inspection, at respectively by end of project. designated sites. Date 01-Jan-2003 01-Nov-2011 30-Jun-2011 Comments Data shows an 89% reduction in import declarations and an83% reduction in export declarations selected for inspection across both pilot regions through the second quarter of 2011. Reduce average Customs clearance time at Text Value 45 minutes 16.2 minutes Reduction by 7% by end-2006 the border, at designated sites. Reduction by 10% by end of (CCA = selected posts in Central Customs project. Admn; NWCA = North-West Customs Admn) Date 01-Jan-2003 01-Nov-2011 30-Jun-2011 Comments Data shows a 64% reduction in time across pilot sites through the second quarter of 2011. Average Customs clearance time, as Text Value 5 days. (Assumption: 5 days 7.3 hours across all sites. Reduction by 25% by measured from the lodging of the Customs of 8 working hours each, i.e. end-2006 and by 50% by the declaration to the issue of the release note. 40 hours. Assuming a higher end of the project. (CCA = selected posts in Central Customs number of hours per day will Admn; NWCA = North-West Customs Admn) yield greater improvements) Date 01-Jan-2003 01-Nov-2011 30-Jun-2011 Public Disclosure Copy Comments Data shows an 82% reduction in time across pilot sites through the second quarter of 2011. Reduce the compliance gap measured by the Text Value 40% Reduction by 5% by use of mirror statistics with the EU. end-2006; by 10% by the end of the project. Date 31-Dec-2004 01-Jun-2011 30-Jun-2011 Page 3 of 6 The World Bank Report No: ISR5086 Comments End of project target value was exceeded in 2006, when the compliance gap was 32.3%. There was continual Public Disclosure Copy improvement through 2010, when the compliance gap was 16.0%. This corresponds to a 60% decrease in the compliance gap through 2010. Increase enforced compliance in the collection Text Value 1% Increase to 1.5% by the end of taxes and duties, as measured by the ratio of 2006 and 3% by the end of of additional revenues (revised assessments, the project. interest and penalties) to total revenue Date 01-Jan-2003 01-Jan-2011 30-Jun-2011 collected by the FCS Comments Although there was progress in this indicator in 2009, there was slippage in 2010. Intermediate Results Indicators Indicator Name Core Unit of Measure Baseline Current End Target Improve perceptions of traders & other Text Value 2003 Customs-related No target value was fixed in stakeholders regarding the quality of service, BEEPS responses provide a the PAD. responsiveness to complaints and integrity baseline. ofCustoms administration as indicated by Date 31-Dec-2003 01-Jun-2011 30-Jun-2011 periodic surveys. Comments The 2009 FCS stakeholder survey showed an improvement in stakeholders' perceptions of the customs service, increasing from 73% to 87% from 2006-2009. Other indicators such as BEEPS also show improved perceptions of customs Public Disclosure Copy regulations and a 45% decrease in bribe frequency for customs. Operational efficiency: Legal database of Text Value No such database exists decisions related to Customs laws and Date 31-Dec-2003 01-Sep-2010 30-Jun-2011 regulations developed and staff trained in its Comments use Page 4 of 6 The World Bank Report No: ISR5086 Organizational structure of Customs HQ Text Value Customs HQ inadequately Completion of FCS HQ improved; functional reorganizational structure structured; Customs posts reorganization and implemented in Customs posts and offices and offices yet to be implementation of functional throughout the country. reorganized. structure across FCS posts Public Disclosure Copy and offices. Date 31-Dec-2003 09-Jun-2009 30-Jun-2011 Comments This indicator can be considered completed and is not being updated in ISRs. A new Code of Ethics to complement the Text Value No Code of Ethics for Code of Ethics developed, Customs Code is implemented. Customs implemented and impact measurable. Date 31-Dec-2003 09-Jun-2009 30-Jun-2011 Comments This indicator can be considered completed. Improved policies and systems for recruitment, Text Value The above policies are No targets have been fixed. promotion, rotation, performance evaluation, unreformed and there are discipline and professional plans to reform them aspart of developmentimplemented. broader public administration and civil service reforms. Date 31-Dec-2003 30-Nov-2008 30-Jun-2011 Comments This indicator can be considered completed. Unified Automated Information System (UAIS) Text Value No UAIS exists. UAIS generates timely in place (details in PAD Annex 1) information for FCS operations and management decision-making. Date 31-Dec-2008 26-Sep-2010 30-Jun-2011 Comments Public Disclosure Copy Data on Financial Performance (as of 25-Jan-2012) Financial Agreement(s) Key Dates Project Loan No. Status Approval Date Signing Date Effectiveness Date Closing Date P072960 IBRD-46890 Effective 22-Apr-2003 27-Aug-2003 31-Oct-2003 30-Jun-2013 Disbursements (in Millions) Project Loan No. Status Currency Original Revised Cancelled Disbursed Undisbursed % Disbursed P072960 IBRD-46890 Effective USD 140.00 140.00 0.00 123.10 16.90 88.00 Page 5 of 6 The World Bank Report No: ISR5086 Disbursement Graph Public Disclosure Copy Key Decisions Regarding Implementation The project continues to be implemented well. Disbursements stand at USD 123.1 million or 88 %, up from 67% in November 2010. Developments on the ground warranted another two-year extension of the project in June 2011. The Customs Union of Russia, Belarus and Kazakhstan is resulting in changes to the Customs Code and other regulations which have to be reflected in the business applications funded under the project. In particular, changes have to be made to components and sub-systems of the Unified Automated Information System currently being implemented under the project. The revised closing date is now June 30, 2013. Restructuring History Level two Approved on 24-Jun-2011 Related Projects Public Disclosure Copy There are no related projects. Page 6 of 6