Is privatization or outsourcing the solution to the woes facing the Bureau of Customs?

Published November 14, 2018, 12:10 AM

by Charissa Luci-Atienza & Bernie Cahiles-Magkilat

GOVERNANCE MATTERS

By FORMER VICE PRESIDENT  JEJOMAR C. BINAY

There have been renewed calls to privatize the Bureau of Customs (BOC) in the wake of a major organizational revamp ordered by Malacanang which saw the customs chief, a former military officer, being replaced by yet another former military man and senior bureaucrats placed on floating status.

The top to mid-level shake-up was triggered by the belated admission, in the face of incontrovertible testimonies and evidence, that billions of pesos worth of shabu entered the country hidden inside magnetic lifters that passed customs inspection. The blatant act would not have happened without the involvement of corrupt customs personnel.

In many countries, specific revenue functions are being managed by or have been outsourced to the private sector primarily to narrow the so-called tax gap — or the difference between potential revenues and the actual amount collected.

The private sector approach, proponents argue, is more flexible and objectives-based. There are standards for performance and incentives. More importantly, it allows for greater efficiency, accountability and transparency.

Common examples of privatized or outsourced revenue functions include data processing, debt collection, information technology, and tax payments through banks.

Again, it need not be full privatization. Concerns have in fact been raised about turning full control over our revenue collections to the private sector, especially access to confidential information like intelligence reports and revenue records. These are valid concerns. The solution is to identify functions that can be outsourced, and provide strict guidelines for monitoring and evaluating performance.

During the time of former President Cory Aquino, the inspection, classification, and valuation of shipments to the Philippines were handled by a private firm, the Société Générale de Surveillance (SGS) of Switzerland.

All these were done at the ports of origin, before they are shipped to the Philippines. The work of customs personnel was purely ministerial, thereby removing discretion in the inspection and valuation of cargo.

Observers noted that during this period, revenue collection increased and smuggling incidents declined. However, the privatization program became a casualty, say some reports, of alleged irregularities involving an agency with oversight functions. The contract with SGS was not renewed.

Over the course of several administrations, there have been proposals to engage the services of private companies for pre-shipment inspections and disposal of seized goods. The proposals were made by incumbent and former finance and customs officials. However, these proposals were rejected by Malacanang.

During the previous administration, it was estimated that government was losing P230 billion a year from smuggled agricultural products, P30 billion from oil smuggling, and P12 billion from tobacco smuggling. The infamous “tara” system was being used not only to line the pockets of corrupt customs officials but allegedly to raise funds for some political personalities.

But now, smuggling is not just about revenue losses. It takes on social and political dimensions because of the entry of illegal drugs through our ports. This hits at the core of the administration’s war on drugs. The relentless anti-drug drive being waged in the streets is now perceived as pointless when billions of pesos in shabu continue to flood the market because of the connivance of customers personnel.

Thus, the major shakeup at the customs management and the pronouncement of a “military takeover” of the BOC. Malacanang had to walk back the latter after questions were raised on its constitutionality.

I think it is about time that the government seriously consider the option of privatizing some function of the customs bureau.

Senate President Tito Sotto recently revived the proposal. With the Senate president backing privatization, I see no reason for the administration to delay the matter any longer.

Besides, privatizing some agency functions would be consistent with the leadership’s policy pronouncements. As early as 2015, the President was quoted by Sun Star as saying that should he be elected, “he would like to see a radical overhaul of government, including the privatization of the graft-ridden Bureau of Customs (BOC).”

“The Bureau of Customs should be privatized. That is the only way we could dismantle and end the systemic corruption in that agency,” the Sun Star quoted the President as saying in a speech delivered in Cebu City.

With these policy positions made as early as 2015 — policy changes which I also advocate — tapping the private sector to ensure professionalism, transparency, and accountability in the customs bureau should be the logical step.

Frustration with the BOC need not translate into sending armed soldiers to our ports to make sure customs employees behave.

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