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The World Bank is proposing to restructure the Philippines Customs Modernization Project by cancelling the balance of the project loan amounting to $83.8 million
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The action will effectively shut down the PCMP, plagued by problems since its launch in October 2021
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In a restructuring paper on the project dated December 20, the WB said the PCMP “is no longer viable”, noting its “unsatisfactory” implementation progress and the “multi-faceted delays encountered due mainly to a court case
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In addition, the Department of Finance had also confirmed the proposed cancellation in a Nov 7, 2024 letter
The World Bank (WB) is proposing to restructure the Philippines Customs Modernization Project (PCMP) by cancelling the balance of the project loan amounting to $83.8 million.
The action will effectively shut down the PCMP, plagued by problems since its launch in October 2021.
In a restructuring paper on the project dated December 20, the WB said the PCMP “is no longer viable”, noting its “unsatisfactory” implementation progress, and the “multi-faceted delays” encountered due mainly to a court case.
In addition, the Department of Finance had “confirmed the proposed cancellation in a Nov 7 letter,” the paper said.
The PCMP implementation period was from October 2020 to June 2025, with the Bureau of Customs (BOC) as the implementing agency.
The total PCMP cost was $104.38 million, with $88.28 million to have been funded by the WB International Bank for Reconstruction and Development (IBRD) loan, and the rest shouldered by the Philippine government.
Of the total WB loan, $4.475 million (5.07%) had already been disbursed in 2022 and 2023.
The projected date for full disbursement of the loan was February 2025.
Any remaining unspent amount upon project closing will be returned to the WB within four months of project closing.
The restructuring paper said the “project can no longer achieve the PDO (project development objective)” of improving BOC efficiency and reducing trade costs.
It noted procurement of the Project Support and Quality Assurance (PSQA) alone took two years. And then later the BOC decided to discontinue the PSQA contract signed on November 15, 2023.
The PSQA contract had been awarded to Spain’s Quality Institute, Belgium’s Emerging Markets International (formerly Cardno Emerging Markets), and Spain’s GT Capital.
Another problem was “a lawsuit filed by Omniprime, an unsuccessful bidder under a different, non-IBRD-related customs processing modernization project.” This has “prevented the BOC from procuring the Customs Processing System (CPS).”
The paper described the CPS as the “project’s most important activity”, noting that “without a foreseeable resolution, the BOC decided to cancel the project in a letter sent to the Department of Finance (DOF) on May 31, 2024.”
The CPS would have improved adherence to international standards and conventions on customs processing; provided audit trail for transactions; and allowed for greater transparency and less opportunity for corruption.
The restructuring paper also said “agreed actions at the Mid-Term Review on June 5-16, 2023, and subsequent Implementation Support Missions on November 13-17, 2023, and May 8-10, 2024, were never fully met due to the low capacity of the Project Management Unit.”
Project design
PCMP’s technical design formed an interlocking set of reforms to address challenges the BOC faces, with focus on automation to improve processes and integrated systems.
The project was expected to create a simplified, faster, and more user-friendly experience for compliant traders, with the CPS supporting enhanced intelligence in targeting and discovering high-risk cargo as well as compliant traders. This was expected to expand the country’s tax and duty base and lead to higher government revenue without the need for additional taxes.
World Bank country director Ndiamé Diophad had said similar customs reform projects of the Bank in other countries have led to an increase of between 11% and 300% in revenue collections.
In the latest National Feasibility Study on Cross-border Electronic Exchange of Trade-related Data and Documents conducted by the United Nations Economic and Social Commission for Asia and the Pacific and BOC, the Philippines was found to have made significant progress in implementing paperless trade and trade digitalization although more effort is needed in enhancing the paperless trade environment.
The study, published in September 2024, said challenges exist that hamper the digitalization of trade processes, such as the lack of standardized data formats and interoperability among different trade-related systems across government agencies.
READ: PH needs more effort in enhancing paperless trade environment – UNESCAP
