Mongolia’s customs system will be upgraded through a US$5mn equivalent project loan approved by ADB to improve efficiency, transparency, and sustainability in customs services and administration.
Mongolia is a link for transit trade between the People’s Republic of China and the Russian Federation. Foreign trade plays an important part in Mongolia’s economy, with turnover reaching US$2.2bn in 2005, from US$1.2bon in 2000, rising an average of 18.3% a year.
The current customs system is operated manually and intensive labour – ie, traders must move from one customs processing point to another to seek official stamping and signatures. Human intervention in this process causes delays in customs clearance and is vulnerable to corrupt practices. It leads to lack of transparency and to unpredictability.
The existing capacity of the server and network system is low. Modern customs business processes such as risk management and post-clearance audits cannot be effectively or widely introduced because of the lack of an internet-enabled system and a centralised database.
The loan will upgrade the system to an internet-based technology and integrate it into a national system for e-government. It will also finance the improvement of the facilities at selected major customs houses and border posts.
The loan is from ADB’s Special Funds resources (Asian Development Fund). It will have a repayment term of 32 years, including a grace period of eight years, with interest charged at 1% every year during the grace period and 1.5% thereafter.
The loan is supplemented by a US$500,000 grant from South Korea e-Asia and Knowledge Partnership Fund, which is funded by the Government of South Korea and administered by the ADB. The grant portion will finance institutional strengthening.
The Mongolian government will provide the remaining US$1.26mn as counterpart financing.
The project is a response to the recent accession of Mongolia to the International Convention on the Simplification and Harmonisation of Customs Procedures (Revised Kyoto Convention) and the forthcoming enactment of a new customs law in Mongolia. It will also support the government’s recent initiative toward e-government and its effort to gear up the fight against corruption.
The project will be implemented over three years by the Mongolian Customs General Administration.