DHL reports that customs in the Eastern and Central Europe getting better, but still room for a lot of improvement

Published: 5/26/1999

A new report, published by DHL, the leading air express operator in central and eastern Europe, suggests that the “red tape curtain", preventing western investors from trading in the region, has only been partially raised. “DHL Customs Report 1999" reveals that, although some reforms have been implemented, customs difficulties remain throughout the region, causing as many problems to multinationals in central and eastern Europe as currency fluctuations or corruption. The report also shows a polarisation between most of central and Eastern Europe and the Commonwealth of Independent States (CIS). Businesses claim that free flow of goods in the CIS, especially in Russia, has become particularly difficult. Through the Industrial Research Bureau, DHL approached the 100 multinationals -most with a turnover of more than $2 billion -that took part in the first survey, in November 1997. The aim of the research was to establish whether western companies are experiencing a more business-friendly trading environment in the region. According to the report, customs delays are still a major concern for most western multinationals operating in central and Eastern Europe and the CIS. However, investors feel that the situation has improved in certain areas. 62% of businesses still experience customs difficulties in the region: down from 89% 18 months ago. 31% of businesses have lost revenue, owing to customs delays: a decrease of 23% compared to 1997. One in five shipments are held up, owing to customs delays, compared to one in three in November 1997. The survey also confirmed that, in terms of improvement, the region has split into three tiers. These are as follows: • The first wave of EU applicants. For these countries - the Czech Republic, Poland, Hungary, Slovenia, and Estonia - only 2% of respondents said that the situation had worsened, while the majority (52%) felt it had improved. The Czech Republic, Hungary and Poland were again perceived to have the most straightforward customs procedures. • Other Central and Eastern European countries. 27% of respondents said the situation had improved in these countries, while only 4% considered that the situation had deteriorated. Slovakia was seen as having the fourth most straightforward customs procedures, up from seventh in 1997; while 8% of the multinationals now consider Romania straightforward to trade with: up from only 1% in November 1997. • The CIS countries. In the CIS countries other than Russia, 14% of respondents considered that customs procedures had improved and 18% said they had deteriorated. Russian customs procedures were identified as problematic; only 9% said that Russian customs had improved, while 34% felt that the situation had worsened. No multinational described Russian customs procedures as straightforward. The report also highlights areas where excessive bureaucracy and outdated customs procedures are harming business. When asked why they felt there were still delays and logjams at customs points around the region, 43% of respondents said that the rules and regulations changed too frequently, making it difficult for them to plan ahead. 16% said that, in many cases, the rules were applied too zealously. Respondents cited a number of examples where the letter of the law was deemed more important than the spirit of the law. At one border crossing, the computer printout of the shipment details was in the wrong colour, forcing the return of the whole shipment. Another exporter was asked to declare his consignment of potatoes in Latin. 42% of those surveyed now feel that customs authorities at least partially acknowledge what businesses are trying to achieve. In November 1997, the figure was 22%. This suggests that, while customs problems are still severe, customs authorities are starting to address some of the issues raised by western investors in the region. 28% of multinationals still describe customs authorities in central and eastern Europe as “barriers" (from 35% in 1997), 23% see them as “duty collectors" (from 33%), and 18% as “policemen" (from 23%). 10% now see them as “partners" (from 4% in 1997) and 4% as “facilitators" (from 5%) Mr Doug West, Commercial Director for eastern and central Europe at DHL, said: “This [report] shows that the red tape curtain has been raised slightly. However, with six out of ten multinationals still experiencing regular customs problems, there is a lot that needs to be done. Constant rule changes and a piecemeal approach to reform remain a cause for concern". He added that: “The situation is particularly bad in Russia and a lot of the CIS. Working alongside other express carriers, we are doing our utmost to persuade the authorities there that raising customs barriers in response to the current economic crisis will in the long-term actually do more harm than good."

Article ID: 546