63809 Enhancing the Recent Growth of Cross-Border Africa Trade Policy Notes Trade between South Note #21 Sudan and Uganda Yutaka Yoshino, Grace Ngungi and Ephrem Asebe June, 2011 This note describes the recent trend and the Agreement (CPA) in 2005 between the pattern of trade between South Sudan and Government of Sudan and Sudan People’s Uganda, which showed a dramatic growth Liberation Army (SPLA) brought to an end of initially but remains vulnerable to changing the decades-long conflict in South Sudan. The local security conditions. It analyzes how cross- peace and the stability have led to a significant border trade is still costly for South Sudan due demand expansion in South Sudan. The oil to several key constraints at the border as well windfall, which was driven by the new flow of as behind the border. Customs processing in oil revenue to the Government of South Sudan South Sudan remains cumbersome largely due to (GoSS) based on the wealth sharing agreement weak staff capacity and inefficiency in customs between the North and the South, coupled with administration. Poor road quality and numerous foreign aid, allowed a large increase in public roadblocks and informal payments between expenditure in the South. Population growth border posts and Juba drive up the trading cost from resettlement of returnees and former further. The current trade pattern between the refugees as well as increased business presence two economies is highly asymmetrical—the by foreign investors in South Sudan also rapid growth comes solely from a skyrocketing contributed to the demand growth. increase in Ugandan exports to South Sudan. It is also largely informal, where women play The demand growth in South Sudan together significant roles and sensitive to local security with lack of local production capacity then conditions. Even with the recent growth in led to a sharp increase in cross-border trade trade, physical and institutional constraints in between Sudan and Uganda. The Uganda trading are still substantial and addressing Bureau of Statistics and the Bank of Uganda those issues would further enhance trading have undertaken a series of surveys of informal opportunities for South Sudan with its neighbors cross-border trade between Uganda and its and sustain its trade ties with them neighboring countries. Informal trade here means trade that is not recorded officially by The restoration of peace has led to a customs at the border and does not necessarily significant growth in demand in South Sudan. mean illegal trade. Many informal trading The signing of the Comprehensive Peace activities are totally legal, going through 1 customs but not officially recorded due to small The rapid growth in Ugandan has stalled quantities traders carry. Combining their after 2008 and even declined in 2010 due to estimation results of informal trade, bilateral increased insecurity in South Sudan faced by exports from Uganda to Sudan have experienced Ugandan traders. Uganda’s exports to Sudan skyrocketing grown since 2005—from $ 60 declined in 2009 due to the reasons including the million in 2005 to $ 635 million in 2008 (figure import controls imposed by the Central Bank of 1). The consumption and the construction Sudan to lessen foreign exchange pressures and booms in the post-conflict Southern Sudan—a safeguard foreign exchange reserve position of sharp increase in demand coupled with the lack the Republic of Sudan as a whole, which led to a of local production capacity—are the driving decline of Sudan’s overall formal imports by 20 force behind this increase. percent in 2009. Slight recover in formal imports is recorded in 2010 in light of The stability of Northern Uganda in recent normalized level of the oil revenue. However, years is additional factor which has informal exports from Uganda to Sudan dropped contributed to the growth of cross-border substantially from 2009 to 2010 (figure 1). A trade between Sudan and Uganda. The Juba substantial number of Ugandan traders withdrew Peace Talk between the Lord’s Resistance Army from South Sudan as they faced their business (LRA) and the Ugandan government by the environment in South Sudan at the border as mediation by GoSS has resulted in the cease fire well as in Juba deteriorating through increasing in 2006, putting an end to the two-decade-long harassments and a series of violence against internal conflict that seriously affected the them. There were also fears of potential economy of the Northern Uganda. While the insecurity from the Sudanese general election in peace and stability of South Sudan and Northern April 2010 as well as the run-up to the Uganda has led to the skyrocketing growth of referendum in early 2011. While there have been trade between the two, South Sudan’s trade with signs of return of Uganda traders to South Sudan other neighbors is relatively small, largely due to since the peaceful conclusion of the referendum lack of security in the areas on the border with in early 2011 and the drop in 2010 may be a those countries. Direct cross-border transactions one-year phenomenon, the magnitude of decline with Northeastern Democratic Republic of is nonetheless significant, implying how Congo (DRC) and Kenya are limited at the informal trade is sensitive to changes in local moment due to the deteriorating security security conditions. condition in Northeastern DRC due to LRA activities, Western Equatoria State in South Figure 1: Trade between Sudan and Uganda ($ million) Sudan, which faces border with Northeastern 700 DRC, as well as Eastern Equatoria of South 600 Sudan which faces border with Kenya.1 500 2005 400 2006 300 2007 2008 200 2009 1 While both South Sudan and Northern Uganda were 100 2010 under the conflicts until the mid 2000s, Lokichogio, a town 0 Formal Informal Total Formal Informal Total in Northwestern Kenya, was the principal logistical hub for transporting international humanitarian supplies to South From Uganda to Sudan From Sudan to Uganda Sudan, which were air-lifted from Lokichogio to Juba. Source: IMF, Uganda Bureau of Statistics and Bank of Uganda Relative improvement of security condition in Northern Uganda, Uganda is by far the largest origin of the inbound trucks to South Sudan in terms of vehicle traffic volumes as Even with the recent decline in informal registered at the customs. As much as 88 percent of inbound cross-border registered vehicles coming though exports from Uganda to Sudan, Sudan Nimule and Kaya, South Sudanese border posts with remains Uganda’s largest trading partner, Uganda. On the other hand, direct traffic from Kenya dominated by South Sudan. For both formal through Nadapal is limited to 12 percent. and informal trade combined, Sudan has been the single largest destination of Uganda’s 2 exports since 2007, larger than any other significant shares in the total informally destination in the world (figure 2). exported products from Uganda to South Sudan. Figure 2: Exports (Formal and Informal) from There is some complementarity between Uganda by Destination formal trade and informal trade, which 700 600 underlines the similarity in products traded 500 formally and informally. Informal trade US $ million 400 activities can take place as stand-alone cross- 300 border transactions such as crossing borders 200 100 outside of the areas covered by border posts. 0 But in many cases, informal trade takes place 2005 2006 2007 2008 2009 2010 next to formal trade at border posts and in ways, D.R.Congo Kenya EU Sudan informal trade activities are linked with formal Source: Uganda Bureau of Statistics trade activities. Same goods can cross the border formally or informally—by foot, bicycle, The bilateral trade between Uganda and motorbike, passenger car, bus, carried in small South Sudan is highly asymmetric with the quantities thus exempted from the procedures at volume of exports from Uganda being the customs. In some ways, informal trade is disproportionately larger than the volume of connected with formal trade. Trucks unload exports from Sudan to Uganda and largely some of their consignments between Uganda informal. As shown in figure 1, Sudanese and Sudan check points on the border and sell them to foot, bicycle, or motorbike transporters, exports to Uganda are negligible compared to presumably in order to reduce customs duties as Ugandan exports to Sudan. While formal and tax payments when they enter Sudan. imports from Uganda were $246 million in 2008, informal imports were estimated to be as Monitoring regional trade—trade in much as $389 million in the same year. regionally produced and regionally consumed products—including informal trade, has The leading exports, both formal and become more relevant than ever as each informal, from Uganda to South Sudan economy in the sub-region has become more include food and other consumer non- integrated. The boom in informal exports from Uganda, primarily to South Sudan, partially durables and construction materials. A range offset the negative impact of the global financial of products are exported from Uganda to Sudan crisis on Ugandan economy, being a crucial with food (e.g., beer, water, food products, contribution to the current account of the sugar, cooking oil) and construction materials balance of payments at a time when most other (e.g., cement, iron sheets) being the leading sources of foreign exchange earnings were under exports. While South Sudan used to export a pressure. Economic interdependence through range of products such as cow, hides and skin, regional trade also affects food security at the regional level. Given the short-term supply honey, coffee beans, ground nuts, sesame, beans, capacity constraint in Uganda, the export boom horn and hoofs, and gum arabic, the only to South Sudan has raised domestic prices in product currently exported is timber. Based on Uganda. The high demand on agricultural food the survey data, the major informal unrecorded products in South Sudan has created supply exports from Uganda to South Sudan are similar shortages in some districts in Uganda and a rise to those in recorded formal exports. For both in food price. It has induced an expansion of Oraba-Kaya and Bibia-Nimule border posts, two agricultural production in Uganda but also principal posts along the Sudan-Uganda border, attracted more imports of agricultural products from DRC. agricultural crops and industrial products have 3 At the same time, informal trade remains regionally traded, such as maize, water, beer, sensitive to changes in local security and cement, which the study covered, the size of conditions. Even relatively small scale trading costs is similarly significant. security incidents, if targeted to specific Figure 4: Costs of Trading from Kampala to groups such as Ugandan traders, could Juba: Case of Beans generate a substantial withdrawal of trading 1075 1025 US $ per ton activities given little fixed investments 975 925 875 825 associated with informal trading. 775 725 675 VAT Wholesale-Juba Warehousing Numule/Juba Third Party Insurance Other Off. Charges Wholesale-Kampala Misc expenses on Misc expenses on Duty-Nimule Loading and Unloading Loading and Unloading Communication Communication Kampala/Nimule Transport- Transport- COSTS AND CONSTRAINTS AT THE BORDER transit transit AND BEHIND THE BORDER Uganda Sudan There are significant gaps in the food prices Source: Original data collection as in Asebe (2010) between Juba and Ugandan cities. Figure 3 presents the price levels of same agricultural While behind-the-border trading cost is products (maize and beans) both at the retail higher inside Uganda in an absolute term, the level as well as wholesale level in Juba as well unit cost of behind-the-border trading cost as three transport hub cities in Uganda—Arua inside Sudan is much higher than in Uganda. (Northwestern Uganda), Odramachaku (Western As shown in figure 5, unit cost of the behind- Uganda), Mbarara (Western Uganda), and Gulu the-border cost—aggregate of various costs (Northern Uganda). Maize in Juba is about three incurred after good pass the border post up to the times more expensive than in Ugandan cities for final market—is roughly 40 percent higher in both at the retail and wholesale levels, while South Sudan than in Uganda. This is largely due beans in Juba is about twice more expensive to the poor transport infrastructure condition in than in Uganda cities for both levels. South Sudan such as poor road quality and limited transport routes. Figure 3: Prices of Agricultural Products in South Sudan and Uganda (USh per kg) Figure 5: Behind-the-border costs in South Juba (S.Sudan) Arua (NW.Uganda) Odramachaku (W.Uganda) Mbarara (W.Uganda) Gulu (N.Uganda) Sudan: Unit Cost (cent/ ton-km-ton)Total and 2,700 Unit Costs 35 2,141 30 1,713 1,500 25 1,400 1,300 1,350 1,183 1,200 1,150 1,100 20 15 500 550 450 343 400 375 400 10 N/A N/A 5 Maize (Retail) Maize (Wholesale) Beans (Retail) Beans (Wholesale) 0 Source: Original data collection as in Asebe (2010) Uganda Sudan Source: Original data collection as in Asebe (2010) One factor for the large gap is a high total trading cost between Uganda and South Costs and Constraints at the Border Sudan. Figure 4 below illustrates how trading costs build up as a ton of beans being Lack of consistent implementation of trade transported from a market in Kampala to a policies at the Sudanese customs raises cost of market in Juba. Transport and logistics costs trading. In the case of Sudan, there is ($145 per ton; with $93 inside Uganda and $52 significant confusion and lack of clarity and inside South Sudan) as well as duty and other consistency in implementing trade policies official charges ($218.33 per ton) are the including tariff rates to be applied. The categories in which a substantial portion of the background to this situation is the gradual total trading cost is accrued. For other products enforcement of CPA which gives the Khartoum- which are similarly regionally produced and based Government of National Unity (GoNU) 4 the mandate over the border controls for the the South Sudanese border customs points, entire Republic of Sudan—transition from based on the GoSS inter-ministerial meeting’s SPLA-administered customs operation during decision in September 2010. Overall, the tariff the Civil War—as well as the existing lack of applied in the South is only about 30-40% of the clarity in the division of labor between GoNU rates set by GoNU based on the GoSS and GoSS in formulating the tariff policies and intervention based on the rationale to protect enforcing them. Under the current regime, Southern consumers from high prices. Some GoSS has a power to intervene in the tariff rates anecdotal evidence leads one to suspect that at the South Sudanese customs, reflecting the actual rates applied may vary among the border continued sense of autonomy from the SPLA points. time. Currently, agriculture faces zero tariff at Figure 6: Number of Vehicles Registered at Sudanese and Ugandan Customs per Day: November 2009 (A) Outbound Traffic to Sudan Registered by Ugandan Customs (B) Inbound Traffic from Uganda Registered by Sudanese Customs 100 90 80 70 60 60 50 50 40 40 Kaya 30 30 Nimule 20 20 Oraba 10 10 Bibia 0 0 Source: Customs records at Kaya, Nimule, Oraba, and Bibia customs as in Asebe (2010) Note: The two Sudanese customs points, Kaya and Nimule, are located on the other side of the border from the two Ugandan customs points, Oraba and Bibia respectively. The limited opening hours of the Sudanese capacity of customs. This also creates customs cause significant fluctuations in the congestion at the South Sudanese customs. daily volume of traffic passing through the customs, hence the volume of customs work, Poor customs infrastructure and staff with high concentrations on Mondays. Albeit capacity are serious binding constraints at its manual processing, average customs South Sudanese customs. There is a system is clearance time at the Sudanese customs appears in place in administering customs procedures to be relatively short when there is no within each customs point. However, the lack of documentation problem. In reality, there are modern data management and communication many cases with problems with documentation system makes customs administration in which case it takes up to one week to clear if inefficient, particularly in terms of inter-office the problems are serious. A few trucks data verification and communication among encounter problems with their cargo seals different customs offices.2 Also the lack of broken when they enter Sudan. The South sheltered areas for inspections (open-air Sudanese customs are closed during the inspections) makes the customs more exposed to weekend. The customs closure during weekends weather-related liability risks from rain damages on the Sudanese side makes trade flows more to consignments during their inspections. Also, volatile as goods cross the border from Uganda to Sudan (figure 6). The large fluctuations of 2 For example, the customs office in Yei in South Sudan, traffic recorded by the Sudanese customs imply located at a middle point between Kaya and Juba, verifies large fluctuations in the work load on the side of customs declaration forms with Kaya for inbound consignments from Uganda to Juba, which is now done customs officials, putting pressure on the staff only by telephone calls. 5 customs staff, the majority of whom were empty, making one-way cost of shipping goods former SPLA soldiers, is poorly trained. from Uganda to South Sudan much more expensive. Bringing back empty trucks back Security is still weak at the border area for from Sudan to Uganda is associated with high traders particularly those from Uganda, opportunity cost for transport service providers. inhibiting their business incentives in South Per km cost from Mombasa to Juba and from Sudan. Harassment by the Sudanese customs Kampala to Juba, are more than twice as officials against traders, in particular those from expensive as from Mombasa to Kampala. Also, Uganda, is growing concern among the private limited competition of transport services in sector in Uganda. Small-scale incidents such as South Sudan and high risk factor also contribute robbery and confiscation of properties to the high unit cost of transport in South Sudan. repeatedly occur. Kampala City Traders Association (KACITA) and Joint Action Numerous nuisance fee payments faced by Redemption of Uganda Traders in Southern traders exacerbate behind-the-border trade Sudan reports that there are approximately 320 costs in South Sudan on top of already high official complaints between 2007 and 2010 transport cost. Among several cases collected regarding on murder, rape, confiscation, and for the study, trucks transporting goods from the under-payment. two border posts, Kaya and Nimule, to Juba were stopped for paying nuisance fees every 7 to Costs and Constraints behind the Border 15 kilometer, 5 to 10 times, as presented in Table 1. The average total amount is SDG 200, On top of constraints at the border, more which is not very high if it is paid all at once. constraints in regional trade are found However, being broken down to small amounts behind the border with the poor road to be paid 5 to 10 time along the routes, the time condition. Behind-the-border costs include high cost of the payments is substantial. Specific transport cost due to poor road condition, items being charged for in some of those cases multiple check points and roadblocks, multiple include payments to traffic police, to the army taxes (state tax, VAT, county fees), as well as for public security, road blocks, and waraga non-tariff barriers such as product standards, (travel permit) payments. The most of the import licenses. The major driver behind the payments are of an informal nature and also high trading cost comes from high transport cost small in amount (e.g., SDG 10). due to poor road condition, particularly in South Sudan. The poor road condition is single most Additional taxes imposed by the States within significant reason for high cost of cross-border South Sudan, raising not only monetary cost transport to South Sudan. The road condition of trading but also time cost from congestion between Yei and Kaya is in particular bad. The at inter-state border such as Juba Bridge. In majority of vehicles which are released at Kaya the case of Nimule-Juba route, the state taxes of Customs, for example, do not arrive at Yei Central Equatoria State (CES) are imposed at Customs, which is just 90 km away from Kaya, Juba Bridge when goods cross the border on the same day but arrive the next day or later. between Eastern Equatoria State and CES. The analysis of data collected at Juba Bridge reveals Also, load factor contributes to the high that roughly two-fifth of tariff and VAT transport cost in South Sudan. As discussed payments paid at Nimule is being charged at earlier, the trade patterns between South Sudan Juba Bridge by CES (Atil 2010).3 With those and Uganda are highly asymmetric in the sense multiple taxes and charges that are imposed at that the amount of goods exported from South Juba Bridge, the Bridge becomes a major Sudan to Uganda (or through Uganda to elsewhere) is significantly less than goods 3 exported from Uganda to South Sudan. This This consists of one-fifth for CES tax and another one- implies that many trucks transporting goods fifth for additional charges including cargo verification, standards verification, driver and vehicle registry, from Uganda to South Sudan return to Uganda commerce check, Sudan customs policy, and parking fee. 6 bottleneck in transporting goods from Nimule to Ethiopia. Kenyan Commercial Bank and Equity Juba, creating congestion at the Bridge. The Bank are the two largest banks issuing L/Cs in import cargo spends, on average, extra two days South Sudan. However, the number of clients is at the Juba Bridge (World Bank and very limited. L/Cs are mainly issued to clients International Finance Corporation 2011). known to the bank and backed by 100 percent cash collateral in US dollar and the bulk of these Table 1: Miscellaneous Formal and Informal are issued to traders that supply government Payments during Transit between Border and with the government acting as guarantor (Atil Juba 2010). Businesses also face difficulty in terms of Total Amount high rates of daily charges associated with L/Cs. Amount per Payments Distance payment (SDG) No. of Route On the other hand, many services are Case (km) provided informally. Due to the high cost of 1 Kaya-Juba 233 285 11 25.91 L/Cs, businesses often resort to other informal 2 Kaya-Juba 233 205 8 25.63 ways to finance their imports. Informal trade 3 Kaya-Juba 233 165 9 18.33 financing is accessed through friends and 4 Kaya-Juba 233 200 7 28.57 personal contacts where buyers can provide 5 Nimule-Juba 193 145 8 18.13 upfront payments to traders for purchases, 6 Nimule-Juba 193 205 6 34.17 and/or where suppliers are willing to wait for the 7 Nimule-Juba 193 135 5 27.00 payments or accept partial payments. More often than not, businesses send their employees 8 Nimule-Juba 193 285 10 28.50 to Uganda and elsewhere to make purchases Source: Original data collection as in Asebe (2010) directly, thus minimizing the risk. In such a case, cash in dollar is kept outside of South Sudan for For formal trade, the cumbersome purchases abroad (Atil 2010). Other sources of documentation process for importation trade finance include loans from family, friends, multiplies the constraint behind the border in or informal moneylenders. The cash-based South Sudan. The recent Doing Business report cross-border settlements of informal trade have for South Sudan (World Bank and International attracted a significant number of informal Finance Corporation 2011) found that an currency exchange service providers at the entrepreneur in Juba needs to submit 11 border areas as well. documents, wait 60 days, and spend US$ 9,420 to import a standardized container of cargo through the port of Mombasa. While this is the case of imports outside of the sub-region, a WOMEN S PARTICIPATION IN INFORMAL similar story applies for regionally produced BORDER TRADE regionally traded products which are the focus of this note. Better coordination of process among Women’s participation in border trade is Customs, Ministry of Commerce and Industry largely informal. Like in most developing (MCI) and Sudan Standard and Metrological countries, women are prominent players in Organization as well as state governments would informal trading activities in South Sudan and facilitate importation process by cutting down Uganda. Trading activities play a crucial role in the time cost of importation in Juba. improving their household incomes. Among those who were interviewed by the original data Costly Trade Financing collection for the study (Ngungi 2010), 77 percent of traders were from female-headed households as widows or bread winners, Formal trade financing services are costly in depending solely on cross-border trade as a South Sudan. Formal letters of credit (L/Cs) source of income. Typical age was between 35- are available from banks located in South Sudan 45 years, age that allowed women to be away and Uganada, mostly branches of foreign banks, from family responsibilities such as childcare. including regional banks from Kenya and Instead, they face increased needs for cash, for 7 example, for school fees and other household their economic livelihood by stepping up their needs, which drive their participation in cross- business from retailers to wholesalers (Ngungi border trade. 2010). However, they are constrained in terms of obtaining sufficient capital to start buying There are largely two types of women traders commodities in bulk and sell them to retailers at engaged in informal border trade between competitive prices. They have only limited South Sudan and Uganda: local Sudanese at access to microfinance institutions (MFIs). the border areas and Ugandan and Kenyan Among the respondents, only 10 percent have traders. The first type is local Sudanese women obtained services from financial institutions at border towns, mostly in Kaya, where they including MFIs to finance their start-up costs, walk to cross the border from South Sudan to while 90 percent have financed either from their Uganda (Oraba) to purchase commodities to sell own savings or from family members. during the market days in South Sudan. Most women participating in cross-border trade in this Lack of security at the border areas affects way are illiterate and lack basic education. women more than men. A number of incidents Another type is women traders who purchase of rapes and other violence against women were commodities in Ugandan and Kenyan markets reported at the border area of Bibia-Nimule. and use regular bus services which connect Juba There is an ongoing effort to establishment of in South Sudan and cities in Uganda and Kenya markets at border, which will likely help reduce to transport the commodities to Juba and sell occurrence of those incidents. them there.4 The study found that 70 to 80 percent of their passengers are Kenyan and Ugandan women who engage in cross-border INDEPENDENT SOUTH SUDAN AND AGENDA trade (Ngungi 2010). Most of traders of this FOR REGIONAL TRADE type are literate. The forthcoming independence of South The vast majority of the local women Sudan will bring both opportunities and participating in border trade use the agents challenges with uncertainty exists how the for clearing the customs. Those agents are not border management of South Sudan, necessarily based on professional permits or including customs, will be handled. The licenses but simply based on personal overwhelming majority of South Sudanese voted recognition by customs officials. Therefore, the in favour for independence in the referendum agents are naturally those who have been around that took place in January 2011. The immediate doing the work at the border posts and know agenda for the independent South Sudan is to how to get around with the system. Use of quickly set up an initial independent border agents is not officially required; however, management arrangement including customs. customs officials have preference to deal with Under the post-CPA arrangement, GoNU has clearing agents who understand the procedures controlled the overall border management better than the women in business. The negative including customs operations. It is still under perception was that the customs officers looked the discussion how the transition of the border down on the women because they were poor and management from GoNU and GoSS will be they perceived informal businesses as illegal handled and how the border between North and smugglers. South Sudan will be set up. Access to credit is a significant constraint for The drive for integration with East African informal women traders. There seems to be a Community (EAC) further complicates the vision for carrier development among women process of creating a new customs regime in traders engaged in cross-border trade to improve South Sudan. GoSS has already announced its intension to seek membership in EAC once it 4 becomes independent. As South Sudan aspires to There are total nine passenger bases pass through the Nimule border (eight from Kampala and one from Kenya). join the regional body, there will be an obvious 8 question of how the harmonization with EAC efficiency, and lowering the transparency in countries in terms of trade policies and other their routine handlings thereby increasing risks trade-related domestic regulations will be of informal payments. Even under the control of handled in conjunction with establishing GoNU, the customs in South Sudan have been possibly a new regime of border control and staffed by South Sudanese, mostly former SPLA customs. During the five years of the post-CPA soldiers. The majority of them require proper customs regime, dialogue between South training. Also, simply providing sufficient Sudanese and Ugandan (and Kenyan) authorities opening hours during the weekend for the was rather limited, given that GoNU has been customs services would enormously alleviate the formally representing the Southern customs. delay at the border crossing. Staff capacity More intensified interactions between GoSS and building and ensuring sufficient amount of hours regional counterparts (e.g., Uganda Revenue for customs operations should have a higher Authority) need to take place quickly.5 priority than investments in hardware infrastructure and upgraded system (e.g., Maintaining security in business environment ASYCUDA) and perhaps simpler first steps the is a critical step to sustain growth in cross- new independent government can take. Regional border trade. Some dialogue between GoSS training opportunities—cross-country learning and the Government of Uganda has started since from other Eastern African countries—may be the series of violence against Ugandan traders in an effective way to build staff capacity in South South Sudan, which has led to the idea to Sudan this regard. establishment of border markets as well countering the existing antagonistic sentiment Improved clarity and coordination in various against foreign traders in South Sudan, taxes and charges, both at the central as well maintaining security in business environment as state levels, are needed to reduce trade- through proper law enforcement is a critical related transaction costs at the border as well foundation for cross-border trade. A step-up as behind the border. The lack of clarity in effort on both sides may be helpful to sensitize administrating duties and taxes at the border their populations on the merit of trading to build charged by different government offices stability in the region. including the state government has led to cases of multiple taxes. There is need for more Improving quantity and quality of services harmonization in the revenue regime of provided at the customs through building Southern Sudan. Also uncoordinated issuance staff capacity and extending hours of of exemptions from duties and taxes was also operation is an utmost important priority in mentioned as a growing concern. increasing efficiency at the border. The study found that the manual nature of the procedure at Efforts should be placed in removing the customs itself is not necessarily the most roadblocks along with investments to binding constraint. Weakness exists rather in improve road quality. In reducing trading making consistent application of policies by the costs, traders face trade off in the environment customs staff. The weak staff capacity is the with multiple trading constraints. Poor most binding constraint in the efficient customs infrastructure will make small loads more operations, reducing staff morale and their economical. Roads are still too bumpy for large trucks as in the case of extremely poor road 5 For instance, growing issue for Uganda Revenue condition between Kaya and Yei and the limited Authority (URA) is loss in tax revenues for local capacity of Juba Bridge which can accommodate governments by informal, unrecorded purchases and cross- trucks only up to 45t. On the other hand, small border trade. Southern Sudanese traders come to buy agricultural products directly from farms, where local loads make trading more costly due to transit authority cannot capture. URA held three meeting with bottlenecks since various payments, official or GoSS in December 2009, April and June 2010 to prepare unofficial or both, are made per truck not by common custom documents to smooth cross-border trade. amount. Time costs are also high. While Progress is slow because under current trade policy regime GoSS does not have mandate in trade policy-making. improving road quality in South Sudan is critical 9 investment to be made to reduce costs of trading, the government needs to step up its efforts to Atil, Melody. 2010. “Supplementary Data Collection reduce the number of roadblocks along major Juba.� World Bank, Mimeo. corridors for miscellaneous expenses during International Monetary Fund. Various Years. transit. If payments are collected for legitimate Direction of Trade Statistics. International Monetary reasons, it is better that those are collected all Fund, Washington, D.C. together once to save time. Ngungi, Grace. 2010. “Assessment of the Gender As alternative corridors which may be Implications of Cross-Border Trade between South developed in medium to long terms, Sudan and Uganda.� World Bank, Mimeo. improving competitiveness along Juba- Kampala corridor is important for Uganda to Nishiuchi, Toru. 2011. “Impact of post-referendum keep its position as a transit hub. With the confusion in Southern Sudan on Ugandan economy.� independence of South Sudan and improved World Bank, Mimeo. security conditions in the country in the future, Uganda Bureau of Statistics and Bank of Uganda. South Sudan would possibly start developing 2008. The informal Cross Border Trade Survey alternative corridors to sea ports. Once the Report 2007, Kampala, Uganda. security condition in East Equatoria improves, investments will likely be made to develop a ------------- 2007. The informal Cross Border Trade corridor directly to Kenya to get access to Survey Report 2008, Kampala, Uganda. Mombassa rather than going through Uganda. There is already a plan to establish road Uganda Bureau of Statistics. 2009. The Informal connection from Malakal in Upper Nile State to Cross Border Trade Qualitative Baseline Study 2008, Gambera in Western Ethiopia to develop a Kampala, Uganda. corridor to Djibouti. For Uganda to maintain its Uganda Bureau of Statistics, Various Years. position as a transit hub for South Sudan, and Statistical Abstract. Kampala. other landlocked economies such as DRC, Rwanda, and Burundi for that matter, World Bank and International Finance Corporation. maintaining its cost competitiveness and 2011. Doing Business in Juba, World Bank, efficiency of trade-related services are critical. Washington, D.C. About the Authors Yutaka Yoshino is a senior economist Africa Poverty Reduction and Economic Management unit. Grace Ngungi and Ephrem Asebe are consultants. This work is funded by the Multi- Donor Trust Fund for Trade and Development supported by the governments of the United Kingdom, Finland, Sweden and Norway. 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 Asebe, Ephrem. 2010. “Regional Trade and Transportation Facilitation Assessment in Southern Sudan and Northern Great Lakes Region� World Bank, Mimeo. 10