The Hidden Cost: Examining Corruption in Bangladesh's Customs Clearance Sector by Istiaque Doza, Prorietor, B Doza & Company

Updated: Jan 27

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This article was first published on the B Doza & Company LinkedIn Page on the 8th of January, 2024.

I. Introduction

Corruption in customs clearance is a pervasive issue that plagues nations worldwide, significantly impacting their ability to benefit from global trade. Its effects are even graver in developing countries like Bangladesh, where the discrepancy between formal rules and the entrenched informal practices due to low wages in government service exacerbates corruption.

Critical Takeaways:

Prevalence and Causes of Corruption in Customs: Corruption is widespread globally, fueled by low wages, social norms, and informal practices in customs.
Types of Corruption in Customs: Various forms include misreporting, overcharging, and accepting bribes or “speed money.”
Consequences of Corruption in Customs: Impacts global trade with delays, higher costs, and reduced competitiveness for investors.
The Role of Intermediaries in Corruption: Customs brokers and logistics operators can facilitate corruption through close relationships.
Institutional and Political Factors: Political interference and accomplice networks contribute to institutionalized corruption in customs.
Social and Informal Practices: Power networks and state-public interactions encourage corruption through social norms and informal practices.
Challenges in Reforming Customs Administration: Comprehensive reforms addressing root causes and aligning legal practices with ethics are crucial.
Recommendations for Anti-Corruption Measures: Implement global initiatives, promote transparency, strengthen legal frameworks, and modernize customs procedures to reduce corruption.

II. The Prevalence and Causes of Corruption in Customs

A. Global Perspective

Corruption is rampant across customs administrations worldwide. It is triggered by several factors, including low wages in government service, particularly pronounced in developing countries.

B. Specifics in Bangladesh

In the context of Bangladesh, the situation is intensified due to deeply rooted social norms, traditional relations, and kinship that often overshadow formal bureaucratic structures.

C. Role of Low Wages in Government Service

Low wages lead to a discrepancy between the official rules and the established informal practices, making customs officers more vulnerable to bribery as a means of income supplementation.

III. Types of Corruption in Customs

A. Theft through Misreporting

Theft through misreporting is a prevalent form of corruption where customs officers manipulate or under-report the value of goods to pocket the difference.

B. Overcharging Traders

Customs officers often exploit their authority by overcharging traders, especially when there is a lack of clear information.

C. Bribes and “Speed Money”

Bribery is rampant, ranging from “speed money” to bypass bureaucratic red-tape to more substantial amounts for larger favors.

IV. Consequences of Corruption in Customs

A. Impact on Global Trade

Corruption hampers a country’s ability to benefit from global trade, thereby stifling its economic growth.

B. Delays in Processing

It also leads to significant delays in processing imports and exports, further hindering trade.

C. Increased Business Costs

Corruption in customs inflates the cost of doing business, thereby reducing competitiveness and discouraging entrepreneurship.

D. Reduced Competitiveness

A corrupt customs system makes the domestic market less attractive to international investors, thereby reducing competitiveness.

V. The Role of Intermediaries in Corruption

Intermediaries, such as customs brokers and logistics operators, add a layer of complexity, offering additional avenues for corruption. They often develop close relationships with officials and facilitate bribes.

VI. Institutional and Political Factors

A. Political Interference in Customs Administration

Political interference in customs administration compounds the issue, with appointments and promotions often influenced by corrupt practices.

B. Networks of Accomplices within Customs Administrations

This creates a network of accomplices within customs administrations, allowing corruption to become institutionalized.

VII. Social and Informal Practices

Social norms and informal practices can encourage corruption, dictating the interactions within power networks and between state actors and the public.

VIII. Challenges in Reforming Customs Administration

Tackling corruption calls for a comprehensive approach that goes beyond legal and regulatory reform. It is vital to address the root causes and align legal practices with ethical norms.

IX. Recommendations for Anti-Corruption Measures

A. Implementing Global Anti-Corruption Initiatives

Adopting globally recognized frameworks, like the Revised Arusha Declaration, can provide a roadmap to address corruption.

B. Improving Transparency and Accountability

Promoting transparency and accountability is crucial to ensure that officials adhere to their duties and are held responsible for their actions.

C. Strengthening Legal Frameworks

Strengthening legal frameworks can play a vital role in deterring corruption by imposing severe penalties.

D. Sectoral Reforms and Modernization

Modernizing customs procedures and enhancing staff training are key steps towards reducing corruption.

X. Conclusion

Addressing corruption in the customs clearance sector is a complex task that requires persistent efforts and a holistic approach. By adopting comprehensive, multi-pronged strategies, and ongoing evaluation of their effectiveness, Bangladesh can hope to mitigate the challenges posed by corruption in the customs clearance sector.