Over three years ago, Mr Raj, the general manager of City Zone Express (CZE) Malaysia, a regional logistics company with branches in Singapore, Malaysia, Thailand, Myanmar, Vietnam, and China and a fleet of more than 260 vehicles, was proud of his GPS-equipped fleet. It had innovative security gadgets and an anti-hijacking system, and CZE looked destined to become one of the top logistics companies in the region.
He, however, still struggled with the challenge of cutting down transit times at border customs checkpoints due to their slow manual customs procedures, resulting in a lengthy transit process. This time-consuming procedure makes sea freight more preferable among businesses as they can move containers around without any such interruptions until they reach their final destination.
In the meantime, the EU has implemented a New Computerised Transit System (NCTS) which allows for the smoother movement of goods from one point to another. With its simplified procedures, including a single regional electronic transit declaration, it has struck a balance between the economic interests of operators and the requirements of customs. This enhanced connectivity has facilitated trade among neighbouring countries by reducing the cost of doing business while allowing governments to maintain social safety and security by applying automated controls to the movement of goods.
To address any bottlenecks, members of the Association of Southeast Asian Nations (Asean) began discussing the establishment of the Asean Customs Transit System (ACTS) in 2007, with the idea of adapting the successful EU system to serve the needs and context of this regional bloc. Over a decade later on Nov 2, 2020, six Asean members, namely Cambodia, the Lao PDR, Malaysia, Singapore, Thailand, and Vietnam, launched live operations on the ACTS.
The system aims to support Asean's commitment to reduce the cost of transporting goods by road between Asean member states by accelerating and simplifying official government control procedures using a modern digital system that implements a single digital declaration, process automation, and real-time information exchange.
Business users can lodge digital transit declarations directly with Asean customs authorities via the ACTS, and track cargo movement from loading at departure to unloading at destination. As operators no longer need to make customs declarations at borders, the ACTS generates administrative and cost savings, while opening up new and more competitive intra-regional trade lanes.
However, the Covid-19 pandemic caused unprecedented disruption to supply chains globally. Countries rushed to impose restrictions to keep their populations safe, presenting new challenges to the regional transport sector, especially in the area of moving goods. Consequently, the newly established ACTS had only a modest number of users in 2020 and 2021 with only two ACTS movements per year respectively. To improve its utilisation rate, Asean strengthened its private sector outreach in 2022, which resulted in 32 completed ACTS transit movements between January and July.
Recent discussions with the private sector revealed some roadblocks as to why the ACTS is under-utilised.
The first is that bank guarantees are not required in the national transit regimes of participating Asean members such as Cambodia and Vietnam, but they are still required in the ACTS transactions. Difficulties in obtaining a guarantee from a bank seem to have pushed some private sector entities to postpone the use of the ACTS in their regular transport operations.
Second is the absence of inland customs offices in some participating Asean members, which seems to discourage traders and logistics operators from using the ACTS scheme.
Third is the confusion over the interpretation and priority of the application of regional and national laws and regulations. These limitations raise a barrier to the participation of the private sector.
Fourth is the limited information on how to register as a principal in the ACTS and any additional requirements they have to meet to transport goods using the ACTS. Many companies cited a lack of information from their local customs departments and transport authorities.
In trying to ramp up the utilisation of the ACTS, several initiatives have been launched. A private sector outreach programme has been launched to increase awareness and provide on-the-ground support to those who are interested.
Regular meetings between customs and transport authorities of participating Asean members help to resolve any friction related to operations and simplify the requirements for joining and moving goods under the ACTS. A two-country transit pilot scheme between Cambodia and Vietnam is also ongoing.
While domestic consultations are taking place to address all the identified issues, Asean members should spearhead regional and national outreach programmes to enhance greater awareness of the ACTS.
Customs and transport authorities are advised to be more proactive in reaching out to stakeholders, including traders, logistics companies, transport operators, banks, customs brokers, and others, to provide information and training to help them join and use the ACTS.
Dr Ramlah Mochtar, senior assistant director of the Royal Malaysian Customs Department (RMCD), said recently that efforts have been made to increase the private sector's participation not only by conducting national outreach efforts to attract market players but also by conducting regular training for banks, stakeholders and customs officers at borders.
Malaysia is ready to take part in the ACTS operations upon request from the private sector.
With its commitments to digitalisation through the ACTS, Asean has a unique opportunity to serve as a model of digital integration and advance the digital trade community. To this end, the ACTS should be given top priority to facilitate the seamless cross-border movement of goods between Asean members.
Looking at the long-term plan, Asean Secretary-General Dato Lim Jock Hoi said a feasibility study on implementing the ACTS along the Borneo Corridor involving Brunei Darussalam, Indonesia (Kalimantan), Malaysia (Sabah and Sarawak), and the Philippines has been conducted to strengthen connectivity in the region.
Furthermore, discussions are underway with strong support from relevant stakeholders about the possibility of including other modes of transport into the ACTS, such as rail, which would help Asean leverage emerging opportunities from other modes of transport to develop a sustainable transport network in the region.
In conclusion, Asean still has room to improve trade facilitation, simplify customs and transport procedures, and cut down trade costs by adopting a proactive approach to servicing the needs of the private sector.
Closer coordination among the relevant authorities of Asean members both nationally and regionally, as well as frequent consultations with the private sector, will strengthen the support for the ambitious goal of doubling intra-Asean trade in the region by 2025.
Satvinder Singh is the Deputy Secretary-General of Asean for the Asean Economic Community.