PSI system of imports to stay till 2009-end

The mandatory system for pre-shipment inspection of imports is to stay till 2009-end as the present contract with three companies expires in August amid uproar over irregularities in imports. "Let us go for re-tender up to 31 December 2009," states a recent government document obtained by The Daily Star. The National Board of Revenue (NBR) floated a tender Wednesday, seeking expressions of interest from aspiring PSI agencies. The government decision to retain the PSI system followed recommendations from a four-member NBR committee, which felt the customs department is not ready yet to take over the job despite the growing call to scarp the inspection system. There is strong logic to withdraw the PSI system, but reality-wise it should not be done right away, pointed out the committee, suggesting an interim period of one-two years for the phase-out. "In that case the customs authorities would get enough time to build up the institutional infrastructure required in absence of the PSI system," the committee observed. The government has also decided to increase the blocks outlining regions of imports from five to six, prescribing provision for stringent punishments to PSI companies for irregularities. NBR sought proposals from different business chambers and sat with them several times to conclude unanimously that PSI is no permanent system and it should be withdrawn after a provisional period on expiry of the present contracts, read the April 9 document of the Internal Resources Division of the finance ministry. In Asia, the mandatory PSI system exists only in Bangladesh and Cambodia, with Pakistan discarding the arrangement in late nineties after a brief stint. The voluntary PSI system was introduced in 1992 by then BNP government, and it was made mandatory 8 years later in a bid to help generate revenue by minimising widespread corruption in customs and ending hassle for importers in clearing goods quickly. "The PSI system is like a caretaker government. It is no permanent solution," NBR Chairman Muhammad Abdul Mazid told The Daily Star. He also hoped that the one-year target is quite realistic for his board to take over the charge, adding that it however depends on three ifs to complete capacity building. His three ifs include sufficient manpower, end to litigation and completion of automation. Meanwhile, the committee advised NBR to go for all-out drive in capacity the building of the customs during the interim period of two years, recommending it either to renew the present PSI contract or to initiate fresh appointments. Against a backdrop of controversy surrounding appointment of PSI agencies, the government wants to ensure transparency in the licence awarding process. PSI agencies this time will be selected in accordance with the procedure set out in the Public Procurement Act, 2006 and the Public Procurement Rules, 2008, and any persuasion will disqualify a contract aspirant. Different business chambers spoke against rushing back to non-PSI era as the customs department could not yet offer the kind of service businesses require to stay in the race of highly competitive market. Their worries were echoed in the analysis of the NBR committee, which felt that customs officials became too much dependent on the PSI system, lamenting the facts that no valuation database could be built as yet and the skill and training that require in customs to man corruption of this level is missing. The committee also stressed effective coordination between stakeholders and the customs authorities before saying bye to the mandatory PSI system after eight years. The government also reacts at reports of mind-blowing instances of corruption through the PSI system abuse by increasing financial penalties for irregularities in many folds. In an attempt to discourage PSI companies from the tendency of frequent litigation against customs penalties, the government has also decided to withhold the service charges of related companies till disposal of cases. "I'm sure these stringent provisions are going to discourage many PSI companies to vie for the job in Bangladesh," said a top PSI executive, preferring not to be named. "The sweeping allegations of irregularities against PSI companies are baseless. It's always not a fact that PSI companies were involved in under-invoicing to help cause revenue loss," he said, adding that there are a lot of instances where PSI companies upped the declared prices by importers significantly.