Malagasy customs introduced performance-based payfor customs inspectors in Madagascar’s main port of Toamasina, incentivizing them to curb tax evasion andillicit financial flows, and expedite customs clearance.
... See More + While performance pay has been associated with positive outcomes in education, health, and tax collection when objectives are clearly defined (Hasnain, Manning, andPierskall 2014; Prentice, Burgess, and Propper 2007),little is known about its usefulness in motivatingcustoms agents to achieve multiple objectives, including facilitating trade while maximizing revenue collected andminimizing fraud. Initial evidence suggests that individual inspectorperformance contracts improves customs performanceand service delivery by reducing clearance times. Thereform’s success to date reflects effective managementin customs, strong support from the Minister of Finance and Budget, extensive stakeholder consultation,application of data mining techniques, more intensivemonitoring, and deep collaboration between Malagasy customs and the World Bank. If the early results prove robust, public servant performance contracts couldbe a cost-effective approach to improving revenue administration and service delivery in other contexts,including fragile countries. Malagasy customs, under the leadership of a newdirector general, initiated reforms from 2015 to address customs performance, including deep collaboration with the World Bank.World Bank support included a study of tariff evasionchannels using mirror trade statistics. Based on this study, the Malagasy authorities identified two priorities: reforming the accelerated clearance program and improving human resource management by introducing performance contracts.
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Brief 119867 SEP 01, 2017
Raballand,Gael J. R. F.; Chalendard,Cyril Romain; Fernandes,Ana Margarida; Mattoo,Aaditya; Rijkers,BobDisclosed
In early 2011, the citizens of countries across the Middle East and North Africa (MENA) took to the streets to demand change in an enduring movement unprecedented in its scope and momentum.
... See More + Protesters sought more opportunities to participate in governance, including the right to representation, assembly, public debate, and legal recourse. They also demanded equitable treatment by their governments, access to decent jobs and reliable public services. Most importantly, they forcefully demanded an end to undue economic privilege, discrimination at the hands of bureaucrats, and asymmetries in business opportunities. The volume examines three cases from the Middle East and North Africa that extend the application of the concept of rule of law beyond its traditional home of legal and judiciary reform and into core economic sectors: taxation in Morocco, customs in Tunisia, and land inheritance in Jordan. Each case carries economic consequences on the macro scale, and each has implications for social justice. In Morocco, the study finds that tax obligations may be renegotiated between influential taxpayers and the administration. In Tunisia, despite a decade of acclaimed legal and regulatory reforms for customs law, corruption and discretion remain rampant. In Jordan, women are being denied their right to property, enshrined in laws drawing on the Islamic Sharia, due to social pressure to relinquish these rights in favor of male relatives. This study provides a wider theoretical lens, reinforced with empirical evidence, which provides a tool for policy makers to identify factors that may further or hinder the effective implementation of laws and regulations. At stake in understanding the process behind rule-of-law outcomes more deeply is the formulation of more nuanced and context-specific reform alternatives for enhanced social justice, economic growth, and political stability.
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Publication 107158 JUL 22, 2016
Al-Dahdah,Edouard; Corduneanu Huci,Cristina; Raballand,Gael J. R. F.; Sergenti,Ernest John; Ababsa, MyriamDisclosed
Rule of Law is a theoretical concept social scientists use to describe a political order where laws are predictable and applied equally to all citizens, regardless of their political or economic influence.
... See More + However, the drafting and implementation of laws and regulations compatible with principles of the Rule of Law depend on the incentives that lawmakers, implementing agencies, and ruling elites have. Realigning the incentive structures among key actors and organizations is therefore necessary to improve the chances for Rule-of-Law institutions to take root. Building the capacity of organizations without first changing institutional incentives is likely to lead to perverse outcomes, with the capacity ultimately channeled toward goals the reformers never envisioned. This book tells the story of how Rule of Law is applied in some countries in the Middle East and North Africa region.
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To carry out their various missions (collecting revenue, facilitating trade, and ensuring security), many customs administrations have established a risk management unit.
... See More + In developing countries, however, because of the lack of dedicated human and material resources, intelligence and risk analysis remain insufficiently developed. In view of the lack of resources, this paper proposes a simple methodology aiming at detecting risky import operations. The mirror analysis first helps to identify and target products or sectors with the greatest risk. Based on the examination of customs declarations patterns (data mining), it is possible to identify and target higher risk economic operators (importers and customs brokers). When implemented in Madagascar, this method has helped to reveal probable fraud cases in the present context of customs reform. Estimates suggest that, in 2014, customs fraud reduced non-oil customs revenues (duties and import value-added tax) by at least 30 percent.
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Policy Research Working Paper WPS7625 APR 06, 2016
Chalendard,Cyril Romain; Raballand,Gael J. R. F.; Rakotoarisoa,AntsaDisclosed
The state-owned enterprise (SOE) landscape has become increasingly diverse. There used to be some relatively well-defined criteria, but with the growing complexity of state participation in the economy, there is no longer a uniform definition, and especially because the definition of a SOE has always been country-specific.
... See More + SOE reforms can have major positive impacts not only by reducing fiscal risks by decreasing hidden subsidies, direct transfers, and overstaffing, but also by strengthening competition and developing capital markets. SOE reforms in developing countries began in the 1960s because of the poor performance of many of the SOEs. The reform movement sought to strengthen the internal capacity of SOEs. To enrich the discussion about possible avenues for performance-enhancing SOE reforms, this report presents the main principles of good governance of SOEs with references to the Organization for Economic Co-operation and Development (OECD) guidelines on corporate governance of SOEs (OECD 2005). This document is divided into six parts: (1) an effective legal and regulatory framework for SOEs; (2) the state as an owner; (3) equitable treatment of shareholders; (4) relations with stakeholders; (5) transparency and disclosure; and (6) the responsibilities of the boards of SOEs.
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Are politically connected firms more likely to evade taxes? This paper presents evidence suggesting firms owned by President Ben Ali and his family were more prone to evade import tariffs.
... See More + During Ben Ali’s reign, evasion gaps, defined as the difference between the value of exports to Tunisia reported by partner countries and the value of imports reported at Tunisian customs, were correlated with the import share of connected firms. This association was especially strong for goods subject to high tariffs, and driven by underreporting of unit prices, which diminished after the revolution. Consistent with these product-level patterns, unit prices reported by connected firms were lower than those reported by other firms, and declined faster with tariffs than those of other firms. Moreover, privatization to the Ben Ali family was associated with a reduction in reported unit prices, whereas privatization per se was not.
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Policy Research Working Paper WPS7336 JUN 25, 2015
Rijkers,Bob; Baghdadi,Leila; Raballand,Gael J. R. F.EnglishDisclosed
Are politically connected firms more likely to evade taxes? This paper presents evidence suggesting firms owned by President Ben Ali and his family were more prone to evade import tariffs.
... See More + During Ben Ali’s reign, evasion gaps, defined as the difference between the value of exports to Tunisia reported by partner countries and the value of imports reported at Tunisian customs, were correlated with the import share of connected firms. This association was especially strong for goods subject to high tariffs, and driven by underreporting of unit prices, which diminished after the revolution. Consistent with these product-level patterns, unit prices reported by connected firms were lower than those reported by other firms, and declined faster with tariffs than those of other firms. Moreover, privatization to the Ben Ali family was associated with a reduction in reported unit prices, whereas privatization per se was not.
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Policy Research Working Paper WPS7336 JUN 24, 2015
Rijkers,Bob; Baghdadi,Leila; Raballand,Gael J. R. F.FrenchDisclosed
This study discusses the impact of economic geography and (low) population density on development outcomes in Mali and explores how policies to reduce poverty can be made more effective by taking these two factors into account.
... See More + The crisis in north Mali which started in 2012 and continues to date has brought questions of economic geography to the center of attention. To help answer such questions, and to analyze how to reduce poverty in Mali as a whole, this study uses different sources of information to analyze the diversity of livelihood patterns, in access to services and in living standards. The study uses quantitative information from household surveys, population and firm censuses, administrative and geographic data, and qualitative information about livelihoods. This study argues that the authorities will need to employ all three policy instruments, while emphasizing that if the objective is poverty reduction, most attention should be focused on spatially blind approaches. The study is organized as follows: chapter one gives introduction. Chapter two emphasizes differences in population density which allows distinguishing between types of agglomeration from villages, to rural town, to large cities. Chapter three categorizes the country into various livelihood zones and considers how the agro-physical environment affects the way people live. In chapter four authors turn to household welfare. Chapter five considers access to services. Chapter six is forward looking.
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This paper estimates the volume of informal trade between Algeria and Mali and analyzes its determinants and mechanisms, using a multi-pronged methodology.
... See More + First, the authors discuss how subsidy policies and the legal framework create incentives for informal trade across the Sahara. Second, the authors provide evidence of the importance of informal trade, drawing on satellite images and surveys with informal traders in Mali and Algeria. The authors estimate that the weekly turnover of informal trade fell from approximately United States (U.S.) 2 million dollars in 2011 to U.S. 0.74 million dollars in 2014, but continues to play a crucial role in the economies of northern Mali and southern Algeria. Profit margins of 20-30 percent on informal trade contribute to explaining the relative prosperity of northern Mali. The authors also show that official trade statistics are meaningless in this context, as they capture less than 3 percent of total trade. Finally, the authors provide qualitative evidence on informal trade actors and mechanisms for the most frequently traded products.
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Working Paper 101137 MAR 22, 2015
Bensassi,Sami; Brockmeyer,Anne; Pellerin, Matthieu; Raballand,Gael J. R. F.EnglishDisclosed
This paper estimates the volume of informal trade between Algeria and Mali and analyzes its determinants and mechanisms, using a multi-pronged methodology.
... See More + First, the authors discuss how subsidy policies and the legal framework create incentives for informal trade across the Sahara. Second, the authors provide evidence of the importance of informal trade, drawing on satellite images and surveys with informal traders in Mali and Algeria. The authors estimate that the weekly turnover of informal trade fell from approximately United States (U.S.) 2 million dollars in 2011 to U.S. 0.74 million dollars in 2014, but continues to play a crucial role in the economies of northern Mali and southern Algeria. Profit margins of 20-30 percent on informal trade contribute to explaining the relative prosperity of northern Mali. The authors also show that official trade statistics are meaningless in this context, as they capture less than 3 percent of total trade. Finally, the authors provide qualitative evidence on informal trade actors and mechanisms for the most frequently traded products.
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Working Paper 101137 MAR 22, 2015
Bensassi,Sami; Brockmeyer,Anne; Pellerin, Matthieu; Raballand,Gael J. R. F.FrenchDisclosed
This paper examines public sector size and performance management in post-revolution Tunisia, drawing on macro-empirical, legal, and qualitative analyses.
... See More + The paper first shows that public sector employment figures and the wage bill have increased significantly since the 2011 revolution, but that this represents merely an acceleration of the previous trend. The paper then examines de jure and de facto performance management in Tunisia's public sector, covering incentives through recruitment, evaluation, compensation, and promotion. The examination shows that Tunisia's legal framework is well-designed for recruiting the most skilled candidates into the public sector and promoting the most high-performing employees. De facto, the link between an employee's performance and evaluation, compensation, and promotion is weak. Performance evaluation is virtually nonexistent and promotions are automatic or awarded through a process that emphasizes seniority over performance. This is particularly true during the post-revolution period, in which a number of ad-hoc arrangements multiplied divergences between the legal basis for performance management and its application. These ad-hoc changes allowed the state to act as employer of last resort, significantly increasing direct (noncompetitive) recruitment and regularizing temporary staff. The increase in and proliferation of allowances have added to the complexity of the compensation system. In a qualitative review of past reform attempts, the paper demonstrates that reformers had identified the weaknesses of Tunisia's public sector performance system as early as 1989, but failed to achieve major change.
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Policy Research Working Paper WPS7159 JAN 01, 2015
Based on extensive interviews with informal importers and brokers in Cameroon, this paper explains why customs reform aimed at reducing fraud and corruption may be difficult to achieve.
... See More + Informal traders and brokers (without licenses) follow various business models and practices, which are product-specific. Overall, what matters first are customs brokers' practices. Information asymmetries mark transactions between brokers and importers and are accompanied by misperceptions of the costs and risks of informal brokers working among informal importers. In a low-governance environment with widespread informal practices, blanket policies should be avoided in order to discourage activities of unprofessional and systematic bribe-taker brokers. It is also essential that customs officials disrupt information asymmetries and better disseminate information to informal importers on customs processes and official costs. Finally, customs should more strongly sanction some informal brokers in order to reduce collusion with some customs officers.
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Policy Research Working Paper WPS6788 FEB 01, 2014
The report follows the diagnostic methodology as outlined in Rajaram et al. The diagnostics is based on interviews, a survey questionnaire with government officials, central statistical office (CSOs), and private sector and desk review of related documents.
... See More + The paper identifies the weaknesses in processes and institutions that contribute to poor outcomes of public spending. The government has been conducting a number of reforms in this field, such as overarching public financial management and procurement reforms. However, the public investment management (PIM) remains largely inefficient and certain key functions of project evaluation are missing or in rudimentary forms. To succeed, all the pieces of reforms have to be woven into a coherent framework targeting the weakest links in the PIM system. Multiple factors, including the absence of necessary institutions, unclear institutional mandates, weak capacity, lack of vertical and horizontal coordination, and misaligned incentives drive the inefficiency of PIM. This also implies that pure technical solutions do not guarantee success. As a result this paper suggests that strengthening of the challenge function of the ministry of finance in Zambia is critical for better PIM but a gradual, incentive compatible approach is probably necessary in the current context.
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Working Paper 93365 JAN 01, 2014
Le, Tuan Minh; Raballand, Gael; Palale, PatriciaDisclosed
This paper uses mirror statistics and research in the field to estimate the magnitude of Tunisia's informal trade with Libya and Algeria. The aim is to assess the scale of this trade and to evaluate the amount lost in taxes and duties as a result as well as to assess the local impact in terms of income generation.
... See More + The main findings show that within Tunisian trade as a whole, informal trade accounts for only a small share (5 percent of total imports). However, informal trade represents an important part of the Tunisia's bilateral trade with Libya and Algeria, accounting for more than half the official trade with Libya and more than total official trade with Algeria. The main reasons behind this large-scale informal trade are differences in the levels of subsidies on either side of the border as well as the varying tax regimes. Tackling informal trade is not simply a question of stepping up the number of controls and sanctions, because differences in prices lead to informal trade (and to an increase in corruption levels among border officials) even in cases where the sanctions are severe. As local populations depend on cross-border trade for income generation, they worry about local authorities taking action against cross-border trade. At the same time, customs officials are concerned about the risk of local protests if they strictly enforce the tariff regimes in place. This issue will become even more significant if fuel prices in Tunisia rise again as a result of a reduction in the levels of domestic subsidies.
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Policy Research Working Paper WPS6731 DEC 01, 2013
Starting with the hypothesis that behaviors are the critical (and often overlooked) factor in public sector performance, this paper explores the notion of how behavioral change (and thus institutional change) might be better motivated in the public sector.
... See More + The basis for this study is "an accidental experiment" resulting from the World Bank's operational engagement in Cameroon. In 2008, World Bank staff successfully concluded preparation on a project to support the Government of Cameroon to improve transparency, efficiency, and accountability of public finance management. The US$15 million project supported a number of ministries to strengthen a broad range of management systems and capacities. Independently and concurrently, other Bank staff initiated a low-profile, technical assistance project to improve performance in Cameroon's Customs, supported by a small trade facilitation grant of approximately US$300,000. One approach appears to have succeeded in initiating change while the other has signally failed. The two projects of different scale, scope and design in the same governance environment offer a very interesting natural experiment (unplanned but accidental for that reason) that allows insights into the nature of institutional change and the role of behavior and incentives and approaches that offer greater prospects for making reform possible. The paper confirms the value of using ideas from behavioral economics, both to design institutional reforms and to critically assess the approach to institutional reform taken by development agencies such as the World Bank.
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Policy Research Working Paper WPS6595 SEP 01, 2013
This brief summarizes the results of a gender impact evaluation study, entitled Are rural road investments alone sufficient to generate transport flows?
... See More + Lessons from a randomized experiment in rural Malawi and policy implications, conducted between the months of July to December 2009 in Malawi. The study observed that using randomly allocated prices for use of the bus; this experiment demonstrates that at very low prices, bus usage is high. Bus usage decreases rapidly with increased prices. However, based on the results on take-up and minibus provider surveys, the experiment demonstrates that at any price, low (with high usage) or high (with low usage), a bus service provider never breaks even on this road. More than 60 percent of households used the bus at least once with an average of 2.85 rides. There is a sharp decrease in ridership among those required to pay a positive price, especially above 100 Kwacha. Results are similar amongst men and women.
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This paper uses Zambia as a case study to assess empirically whether political interference in a low-governance environment has diminished in the past years as expected after a semi-autonomous agency model was set up ten years ago.
... See More + The road sector in Zambia has experienced some significant developments since then. The paper uses data on contract from 2008 to 2011 and analyses a number of key trends related to Road Development Agency governance and staffing dynamics as well as procurement and project selection within the institution. The main findings indicate that, after some years of implementation of these reforms, there is reason to question whether the model of semi-autonomous agency enables road management to be shielded from political interference. Zambia may be an isolated case but, so far, this model does not seem to have been able to decrease political interference in the selection or supervision of projects and there seems to have been an increased lack of accountability of civil servants working in this sector.
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Policy Research Working Paper WPS6585 AUG 01, 2013
This paper is organized as follows. In chapter two, Samson Bilangna and Marcellin Djeuwo from the Cameroon customs administration present the history and the outcomes of the performance measurement policy launched by their administra-tion: the General Directorate of Customs signed 'performance contracts' with the frontline customs officers in 2010 and with some importers in 2011.
... See More + In chapter three, Jose-Maria Munoz, an anthropologist, offers a complementary view of the introduction of figures in the Cameroon tax administration. The fourth chapter ends the book's first part, which focuses on performance measurement. Xavier Pascual from the French customs administration describes the system implemented by his administration to measure the collective performance of customs units and bureaus. In chapter five, Anne-Marie Geourjon and Bertrand Laporte, who are both economists, and Ousmane Coundoul and Massene Gadiaga, who are from the Senegalese customs administration, present the use of data mining to select imports for inspection. This project is being developed in Senegal and embodies the concept of risk analysis. Sharing the same global aim to make controls more efficient, economists Gael Raballand and Guillermo Arenas from the World Bank and anthropologist Thomas Cantens from the World Customs Organization suggest, in chapter six, using mirror statistics to detect potentially fraudulent import flows. Mirror statistics calculate the gaps of foreign trade statistics between two trading partner countries. To conclude the second part on the integration of measurement in information systems, Soyoung Yang from the Korea Customs Service (KCS), in chapter eight, offers a case study on KCS's implementation of a single window system. With respect to risk analysis, the concept of single window is widespread in the trade and customs environments, but few concrete achievements have been presented and analyzed.
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The international community has been increasing investment in projects that promote trade facilitation and improve logistics in the developing world, including in ports.
... See More + In Africa, a key motivation for such projects has been a presumption that poor infrastructure and inefficient border control agencies are the major causes of extended delays in sub-Saharan Africa (SSA) ports. Based on new data and analysis, this note argues that collusion between controlling agencies, port authorities, private terminal operators, logistics operators, and large shippers is an important part of the problem. Decreasing dwell times in ports requires governments to combat collusive practices between the private sector and public authorities and recognize that large-scale investments in infrastructure are not sufficient to reduce logistics delays.
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Brief 68665 MAY 01, 2012
Raballand, Gael; Refas, Salim; Beuran, Monica; Isik, GozdeDisclosed
Long cargo dwell times in ports are a critical issue in Sub-Saharan African countries since they result in slow import processes and are bound to dramatically reduce trade.
... See More + The main objective of this study is to analyze long dwell times' causes in ports in Sub-Saharan Africa from a shipper's perspective. The findings point to the crucial importance of private sector practices and incentives. The authors argue in the case of Sub-Saharan African countries that private operators, rather than being advocates of reforms in this area, might be responsible for the failures of many of these initiatives. It seems that in Sub-Saharan Africa importers' and freight forwarders' professionalism, cash constraints and operators' strategies are some of the factors that have a major impact on cargo dwell time. Low competency, cash constraints and low storage tariffs explain why most importers have little incentive to reduce cargo dwell time since in most cases, this would increase their input costs. However, monopolists/cartels may have a stronger incentive to reduce cargo dwell time but only in order to maximize their profit (and would not adjust prices downward).
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Policy Research Working Paper WPS6014 MAR 01, 2012
