FEBRUARY 2017 ABOUT THE AUTHORS MUPELWA SICHILIMA Opening Opportunities: is a Senior Trade Facilitation Expert. He led the Trade Logistics component of the Kenya Kenya’s Electronic Single Window Investment Climate Program 2 (KICP2), which supported the implementation of the Kenya Connects East Africa to Global Value Chains National Electronic Single Window System (KNESWS) through the Kenya Trade One of the most challenging experiences for businesses involved in cross- Network Agency (KenTrade). border trade along Kenya’s border points is the clearance of imports and exports. Until 2015, the process of clearing cargo was largely manual. AKNYI GIKONYO is a Customs Consultant. She More than 29 different government agencies with different roles in provided technical assistance to KenTrade as part of KICP2’s the clearance of international trade goods required businesses to apply support to the implementation of the KNESWS. for and submit different sets of cargo clearance documents. The World Bank Group’s Trade and Competitiveness team, through the Kenya APPROVING MANAGER Investment Climate Program 2, has supported the government of Kenya in implementing the Kenya National Electronic Single Window System, also known as the Kenya TradeNet System. This SmartLesson describes the system, how it works, its accomplishments, and lessons learned along the way. BACKGROUND To address this market failure, the gov- ernment of Kenya sought a compre- Before the implementation of the hensive approach based on effective Kenya National Electronic Single information sharing, streamlining of Window System (KNESWS), a typical processes and procedures, and genu- business in Kenya—for example, one ine collaboration among stakeholders exporting agricultural products such involved in trade logistics. The result as fruits—would be required to ap- was establishment of the Kenya Trade ply for at least four permits from four Network Agency (KenTrade), with the different institutions to export its pro- mandate to set up and manage the duce. Each of the four agencies exam- KNESWS. ined and approved the documents be- fore the goods were released. In some On May 2, 2014, a year after the instances, the agency positions were KNESWS went live, President Uhuru interdependent, thus making the next Kenyatta of Kenya, together with his agency only as efficient as the first regional counterparts, President Paul agency. These burdensome require- Kagame of Rwanda and President ments often resulted in unpredictable Yoweri Museveni of Uganda, officially delays and inefficiencies as well as as- launched the KNESWS. Implementa- sociated compliance costs. Ultimately, tion of the electronic single window this red tape negatively affected Ke- for trade is aligned with Kenya’s Vi- nya’s competitiveness both regionally sion 2030 development strategy. It is and internationally. also one of the recommendations of SMARTLESSONS — FEBRUARY 2017 1 the World Trade Organization Trade Facilitation for this purpose. Thus the best option was to in- Agreement. tegrate the KNESWS with the KRA system. The Kenya National Electronic Single These improvements have led to greater efficiency, Window System transparency, and effectiveness in trade logistics to enhance revenue collection for the government The overall objective of the KNESWS is to facilitate while reducing the costs of doing business for both international trade in Kenya by reducing delays the government and the private sector. and lowering costs associated with clearance of goods at Kenyan entry points, while maintaining Status of implementation requisite controls. The KNESWS’s target is to reduce The process of implementing the KNESWS was com- the time to import to a maximum of three days at plex. It involved the implementation of 20 modules, the port of Mombasa, one day at airports, and one streamlining and automation of approximately 42 hour at land borders. processes, and establishing connectivity with 29 government agencies—with and without ICT sys- The KNESWS provides a single interface between tems. For this reason, implementation was phased. more than 29 government agencies, the private By June 2016, two final modules were implement- sector, and other stakeholders involved in inter- ed, and the remaining government agencies were national trade. It further allows applicants to sub- connected to the system. mit documents for processing and receive approv- als online. In addition, it provides an interface KEY ACHIEVEMENTS between the multiple government agencies by automatically collecting all the relevant permits Implementation of the KNESWS has resulted in approved for any particular consignment. The streamlined import and export processes and pro- cedures and effective information sharing, and system also enables traders to monitor progress it has facilitated genuine collaboration among of the different stages of processing. Payment of stakeholders involved in international trade. The related fees has been simplified through use of initiative enables importers and exporters to con- the single window, which is integrated with the veniently submit documents from the comfort of Kenya Revenue Authority (KRA) customs manage- their offices or homes. Below are some of the key ment system. The revenue collected through this achievements. e-payment system increased substantially. (See Figure 1.) 1. Improved connectivity, processes and proce- dures, and governance: Connectivity to the KRA, the main entity in Kenya responsible for single window has been established with 22 clearance of import and export cargo at all bor- government agencies that issue various per- der points, had a robust system already in place mits and 32 procedures that are fully auto- Figure 1: E-Payment Revenue Collection mated. Twelve government agencies boast 100 percent use of the KNESWS for receipt and is- suance of permits. An e-payment system is now operational and has streamlined payment ar- rangements for permits. The system also has improved governance, as demonstrated by comments from the public and private sectors. 2. Time reduction for processing pre-import documents: The KNESWS has contributed to marked improvements in time taken to obtain pre-import/export permits. Data from a sam- ple of agencies (see Figure 2) reveal that the time for processing permits has been reduced in some cases by as much as 200 percent; for 2 SMARTLESSONS — FEBRUARY 2017 others the reduction ranges from 20 percent 4. Cost reduction: The automation of processes and to 50 percent. procedures has resulted in convenience and sub- stantial savings as traders’ costs associated with transportation, time, and telecommunication “Adoption of KNESWS in the trade facilitation have been reduced or eliminated. For instance, process has shown savings in terms of costs for the number of trips between agencies and the traders and the Kenya Dairy Board, reduced banks has been significantly reduced. Prelimi- time to process licenses by over 18 days and nary assessments of the costs show significant eased the workload. Ultimately this has in- annual savings for the trader. (See Figure 3.) creased compliance by stakeholders using the system.” Figure 3: Estimated Annual Savings —Rachel Gatei, Kenya Dairy Board Figure 2: Time Comparisons Before and After the Single Window 1 Kenyan shilling (K Sh) = $0.01. 5. Efficiency in operations of government: The KNESWS has increased efficiency of govern- ment agencies, making it simpler and easier for the agencies to receive and access permit application forms, process them online, and deliver approved or rejected permits to the traders. The permits are available in real time 3. Reduction in clearance time: In the past, physi- as soon as they are approved. This has entirely cal hard-copy permits had to be scanned and removed the need for going from office to of- then submitted at the time of clearing goods. fice, a requirement that existed before the ad- Today, soft copies of permits are available for vent of the KNESWS. seamless use by customs through the KNESWS. This has eliminated the need to submit hard- 6. Improved governance: The KNESWS has re- copy permits at the time of clearance of cargo. duced, and in some cases eliminated, personal This initiative, coupled with others, has con- interaction between officers in trade facilita- tributed to reduction of clearance time by 53 tion agencies and the business community, percent and cargo dwell time by 39 percent, leading to improved governance and trans- as shown in Table 1. parency in the way business is con- ducted. Both public and private sectors Table 1: : Cargo Dwell and Clearance Time (in Hours) at the Port of Mombasa (2012 –2015) have reported enhanced integrity of Time documentation and governance. The Year 2011 2012 2013 2014 2015 Reduction tracking of time taken to process docu- (%) ments has also had a positive impact Cargo dwell time 170 172 114 88 104 39 on the response rates of the govern- ment agencies. Customs release 73 54 62 44 49 8 to cargo pickup 7. Improved revenue collection: The Clearance time 97 118 72 44 55 53 KNESWS has enhanced the collection SMARTLESSONS — FEBRUARY 2017 3 of revenue, because traders can no longer the cabinet secretary issued a directive for stake- work outside of—or find ways around—the holders to do so. Because of this commitment, set- established payment procedures. ting up the system and gaining compliance took much less time. LESSONS LEARNED Lesson 3: Consider institutional Lesson 1: Anticipate resistance—the benefits arrangements. are not obvious. Another key factor in the quick establishment of Despite the clear benefits that a system such as the an electronic single window in Kenya was the es- KNESWS offers to both businesses and government tablishment of a dedicated institution, KenTrade, agencies, the sovereign interests of the differ- with dedicated staff to execute and manage the ent individual agencies sparked resistance to the system. In setting up a new and independent insti- new way of doing business. There were signs that tution to implement the single window, the gov- some agencies feared that the new system would ernment may have taken into account the high encroach on their operations and responsibilities. number of agencies—over 25—involved in trade Also, the old system provided opportunities for facilitation. rent-seeking.1 To address this resistance, the Trade and Competitiveness (T&C) Trade team proposed The implementing agency is often one with know- and supported the establishment of a high-level how in trade facilitation and other international steering committee to enable collaboration and trade systems. In Kenya, the lead agency and its buy-in from stakeholders. This platform brought staff were all new, with limited knowhow on elec- together chief executive officers of all key govern- tronic single-window systems as well as on import ment agencies for genuine collaboration and a and export clearance processes and procedures. shared vision owned by all stakeholders. To address these shortcomings, the T&C Trade team helped build the capacity of dedicated staff Once the steering committee was in place, implemen- through workshops, peer-to-peer learning, and tation of KNESWS began to gain momentum. Under- study tours. The T&C Trade team also provided standably, KenTrade subsequently focused more on hands-on support to KenTrade throughout the im- implementing the system than on coordination of plementation process, without being prescriptive, the steering committee. With time, the committee to ensure sustainable knowledge transfer. became inactive, which slowed implementation. The T&C Trade team has advised KenTrade to revive the Lesson 4: Be flexible. committee, not only to regain the earlier momentum but also to ensure sustainability of the KNESWS. Implementing an electronic single-window system is complex; it involves many parties, often with In particular and not surprisingly, the project en- varied interests, processes and procedures, regu- countered resistance from the so called “big broth- lations, and so on. This means that cooperating ers” of Kenya’s regulatory environment. Conven- partners supporting the implementation must ex- tional wisdom is that these agencies needed to be ercise flexibility in responding to the client needs onboard with any major reforms. But the team was as the situations unfold. In Kenya, this proved dif- able to implement the KNESWS by starting with ficult, as some of the key agencies implemented other regulatory agencies, and the big brothers reforms concurrently and without consultations, had no option but to come onboard. which ultimately affected the timely delivery of the KNESWS implementation plan. For instance, Lesson 2: Secure top-level government some agencies began to implement or upgrade commitment. their own systems without taking into account how this would affect the implementation. This Top-level government commitment is key. In Ke- meant that some of the positions taken earlier nya, the government funded KenTrade. And had to be reviewed, revised, undone, and then when there was reluctance to use the KNESWS, implemented after further consultations between 1 Rent-seeking is the practice of manipulating public policy or economic the different agencies. Ultimately, this delayed conditions as a strategy for increasing profits. implementation of the new system. 4 SMARTLESSONS — FEBRUARY 2017 Part of these challenges could be at- Reforms such as the KNESWS contrib- tributed to lack of communication ute to reductions in time and cost, between stakeholders. Appropriate making it convenient for traders to and timely communication is critical to undertake import and export trans- ensure that correct messages are sent actions. Ultimately, it improves the from the beginning. In Kenya, miscom- competitiveness of countries, which munication led agencies to believe that places them in a good position to KenTrade’s use of the KNESWS would take advantage of regional trade and “swallow” the other border agencies participation in global value chains. and systems (that is, take over the func- tions of some of the agencies), which is These lessons from the Kenyan expe- not the case. The result was resistance rience can be applied in other coun- and no buy-in during the initial stages. tries and regions, with minor modifi- cations to suit the environment. From CONCLUSION a regional perspective, the KNESWS has the potential to make a huge dif- Implementation of an electronic single ference in the way international trade window in Kenya was complex. It re- transactions are conducted, not only quired open-mindedness, innovative for Kenya but also for the East Afri- thinking, listening to the client, and can Community bloc, with significant structuring solutions that took best benefits to inland countries. It has practice into account. At this writing, had a critical impact on time and cost 16 out of 17 modules have been im- of obtaining a permit. The KNESWS plemented. The outstanding module has even greater potential to link to a has been delayed because one of the regional East Africa Community elec- agencies is upgrading its system. How- tronic single-window system. This will ever, as a result of the lessons gathered provide considerable impetus in en- over time, KenTrade has come up with suring greater regional connectivity, an approach that will operationalize and it can serve as a springboard for the last module even as the upgrade countries in the region that want to is concluded. participate in global trade. DISCLAIMER SmartLessons is an awards program to share lessons learned in development-oriented advisory services and investment operations. The findings, interpretations, and conclusions expressed in this paper are those of the author(s) and do not necessarily reflect the views of IFC or its partner organizations, the Executive Directors of The World Bank or the governments they represent. IFC does not assume any responsibility for the completeness or accuracy of the information contained in this document. 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