Electronic Data Interchange (EDI) and Trade
Facilitation:
Best Practice and Lessons from Experience
Benita Cox and Sherine Ghoneim
The Management School
Imperial College for Science, Technology and Medicine
INTRODUCTION
The increasing competitive pressures from both global and domestic markets are forcing
nations to adopt new trade practices and standards. Nations need to adjust to new methods
of trade information exchange, open up their telecommunications systems and learn to take full
advantage of harmonized procedures, standards, and practices for trade documentation. The
role of electronic commerce and electronic data interchange (EDI) in particular, is rapidly
evolving in the face of increasing pressure from global markets to provide standardized
methods and practices for international trade.
The general term for these changes in international trade administration is “trade facilitation”. A
World Bank study conducted in 1995 endorsed the use of EDI and electronic commerce as
critical components of a trade facilitation strategy (Schware and Kimberley, 1995).
EDI AND CHANGING TRADE REQUIREMENTS
With the gradual removal of international trade barriers and the increasing interdependence
between international organizations and markets, electronic data interchange (EDI) is expected
to play a significant role in facilitating international trade (Farhoomand & Pace, 1995). EDI is
the most prevalent form of electronic commerce supporting trade transactions across various
industry sectors on a national and international level. EDI, as a system of exchanging
standardized trade related information, is not only a fundamental IT business process
reengineering tool (Benjamin et al, 1990; Fowler et al, 1994; Swatman, 1994; Swatman et
al, 1994; Venkatramann, 1991), but also a key electronic commerce technique for the
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reengineered trade facilitation process (Schware and Kimberley, 1995), especially with
respect to customs and excise applications.
Experts forecast a million users of EDI by the end of the year 2000. Recent statistics suggest
that EDI users (excluding financial EDI users) are estimated to be in the region 170,000 users,
seventy percent of whom are in the United States and Europe (Kimberley, 1998).
At the national level the simplifying and speeding up of trade information flows offer significant
national benefits. Singapore claims that properly applied trade facilitation is already saving it in
excess of one percent of its gross domestic product (US$ 700 million in 1994) each year. As
a result, reengineered trade processes based upon trade facilitation principles and EDI have
become a global phenomenon (Schware and Kimberley, 1995).
Therefore, an increasing number of nations are in the process of developing their EDI industry
and there is an increasing requirement for the development of national frameworks and
implementation guidelines.
Developing nations, therefore, find themselves in the position of having to rapidly adapt their
traditional trading practices in order to participate in international free trade. For many of
these countries the barriers to achieving this are different and more complex than in more
developed nations.
Although Western countries have expended much energy in recent years defining international
trade standards and founding the EDI and electronic commerce infrastructure, for developing
nations, barriers to developing their national EDI industries and electronic trading communities
are more complex than in developed countries.
At the early stages of this research, the authors were particularly interested in applying a
national EDI implementation framework to Egypt. Policymakers were particularly keen to
develop the national electronic trading and information exchange infrastructure to serve the
trading requirements of the domestic market. As such there was a requirement for identifying
an EDI implementation model to address Egypt’s specific requirements. Research showed that
in-spite of the large number of initiatives undertaken both at a national and international levels
aimed at trade facilitation there remains a paucity in defining the factors critical to successful
EDI implementation in a national setting. Furthermore, there was no single EDI adoption
framework that addressed the complexity of developing a national EDI strategy.
It has been acknowledged that there are a number of lessons to learn from Western mature
EDI markets, yet it should be noted that these models are not necessarily appropriate for
developing countries. For example, the literature suggests EDI success in the UK was
primarily driven by the retail and manufacturing industry requirements and founded on the
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advanced state of EDI service provision and telecommunications de-regulation. Egypt did not
only lack the required EDI industry service provision and electronic commerce infrastructure,
but also the powerful inter-organizational relations enjoyed by industries such as retail and
manufacturing.
As such it was necessary to examine the extent of EDI global presence and define the factors
critical to successful EDI adoption in a national setting. At this stage it was also realized that
the analysis should not be confined to infrastructural requirements, but should be extended to
incorporate the nation-specific ‘contextual’ and ‘know-how’ requirements.
EDI RESEARCH PERSPECTIVES
Given EDI’s efficiency and strategic benefits, there has been a great deal of academic research
into its impact on business operations and competitiveness. To date, existing EDI literature
and research focused on a number of perspectives, each of which is typically addressed
independently of the others.
The first perspective considers the impact of EDI on inter-organizational structures (Cash &
Konsynski, 1985; Benjamin et al.,1990). It considers EDI’s ability to facilitate the
restructuring of industry as a whole as well as its ability to transform individual partnerships, for
example, EDI’s potential to transform relationships between trading partners by bringing them
closer (Johnston & Carrico,1988; Holland et al, 1992).
The second perspective focuses on the role of EDI in business process re-engineering, its role
as an enabling mechanism and vehicle for business process re-design and business scope redefinition (Benjamin et al., 1990; Fowler et al., 1994, Swatman, 1994, Swatman et al, 1994;
Venkatraman, 1991). The extent of EDI integration with internal and external business
processes (Bergeron & Raymond, 1992) as well as with core business activities (Cox &
Ghoneim, 1996) has been identified as a determining factor in achieving maximum business
benefit.
The third perspective is concerned with the impact of EDI on organizations. In particular,
organizational benefits associated with EDI implementation have been widely (Cox &
Ghoneim, 1996; Reekers & Smithson, 1993, 1994) investigated in terms of its impact on
reducing transaction costs, increasing operational efficiency and enhancing competitive
capacity.
The fourth perspective concentrates on implementation issues. The role of Strategic
Information Systems (SISP) planning in the successful adoption of EDI has been highlighted
(Galliers et al, 1995). Critical success factors in adopting EDI have been explored and various
implementation models have been described which highlight both internal and external
organizational requirements (Cox & Ghoneim, 1996; Holland et al, 1992).
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Finally, there is a further perspective which takes a technological approach to the discussion of
EDI (Borthwick & Roth, 1993). Here technological solutions are sought to technological
obstacles which are viewed as being the primary barrier to successful adoption.
Each of these perspectives highlights important aspects of the EDI implementation process.
However, there is no single, coherent theoretical framework which covers the complexity of
the entire process. The difficulty of establishing a single EDI adoption and implementation
model stems from the diversity of EDI applications across various business domains, EDI’s
inter-relatedness (dependence) with inter and intra-organizational business requirements, as
well as its impact on inter organizational systems and internal business processes.
Lack of guidance is a major impediment facing nations, sectors and organizations in the early
stages of adopting EDI. The situation is the result of the limited research into EDI specific
technology transfer issues and the limited efforts into developing generic EDI adoption models
or implementation guidelines to identify transferable organizational, sectoral and national
lessons from sophisticated and mature EDI markets.
OBJECTIVES
The main objectives of this paper are two fold:
First, to identify the factors that influence success in IT facilitated trade processes, particularly
within the framework of introducing EDI to nations in the early stages of formulating their EDI
and electronic trading policies.
Second, to clearly define nation-specific requirements within a clearly defined multidisciplinary
implementation framework, as in the case of Egypt, and determine the respective policy
implications.
SCOPE
This paper is based on research conducted in Britain into the critical success factors for
successful EDI implementation at an organizational, industrial and national level. The results of
this previous research (Cox & Ghoneim, 1994,1995,1996) have been compared, contrasted
and integrated with results of research conducted both in the United States of America and
Germany (Banerjee & Golhar, 1991; Reekers & Smithson, 1994). In this paper the CIC
framework is briefly described and applied in a case study of the Customs and Excise
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Authority in Egypt where intense pressure exists to move towards compliance with
international standards and changing trade practices.
This paper is founded on two major studies into developing a national EDI strategy: namely,
Schware and Kimberley - a World Bank study conducted in 1995, and Cox and Ghoneim research conducted over a five year period at Imperial College, London into the factors that
influence and are influenced by EDI adoption in a national setting. Both studies aim to define
‘best practice’ measures of introducing EDI within a trade facilitation framework. The
following section introduces briefly the salient features of the two studies.
Best Practice
As defined by Schware and Kimberley (1995) – “The purpose of best practice within the
context of trade facilitation is to replace paper documents with electronic equivalent,
but not in an exact substitution.”
Properly designed, an EDI system will streamline documentation procedures and retool
practices among the parties involved in the trade and transport procedures. The concept of
replacing paper documents with EDI, representing much of the detail with codes and
harmonized processes (trade facilitation), and the simplification of procedures (reengineering)
represents the complete IT facilitated trade process (Schware and Kimberley, 1995).
Schware and Kimberley (1995)
The study focused on examining the extent of EDI global presence and the various
implementation modalities. The authors defined the various implementation modalities as
follows:
w
w
w
w
w
An approach driven, funded and managed by the government;
A strong cooperative arrangement, driven either by a government department or by
a joint venture with the private sector;
A private sector-driven initiative based on existing competitive infrastructure,
possibly in cooperation with a nationally approved mandated facilitating
organization;
A range of random leaderless examples;
Very little or no activity.
Such classification is very valuable as it implicitly provides the various scenarios and
associated risks and gains. The authors also publish a separate report as a guide to best
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practice (Schware & Kimberley, 1995b) where they focus particularly on the implementation
aspects, namely:
the legal and regulatory requirements;
the skills and technology infrastructure;
local business considerations;
investment costs and benefits;
technology and cost options.
Cox and Ghoneim
Cox and Ghoneim suggest that developing a national EDI adoption framework should not be
confined to addressing technical transfer requirements. To maximize potential benefit, a
national strategy will have to take into account the context in which the development of the
EDI industry is undertaken. It must consider the nation’s particular political and economic
goals and constraints, the business culture, sectoral structure as well as the organizational
domestic and international requirements that may influence or be affected by the adoption of
EDI. The authors develop a set of independent principles for analyzing EDI which could serve
as a framework for undertaking an in-depth analysis of factors that influence and are
influenced by EDI adoption on a national, industrial and organizational level.
The authors discuss the importance of considering the 'Context' (political, economic and social
environments); the 'Infrastructure' (technical requirements and know-how) and the 'Capacity
to Change') in developing a national EDI strategy. These elements are integrated in the CIC
framework (Figure 1) which is applied to Egypt. The CIC is a multi-dimensional research
framework which attempts to convey the complexity and inter-relatedness of the business and
technical determinants of successful EDI implementation.
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Figure 1: CIC Framework
Context
Context
Infrastructure
Infrastructure
Technical
TechnicalImplementation
Implementation
Capacity
Capacity
totochange
change
EDI
EDIAdoption
AdoptionModel
Model
National
NationalEDI
EDIStrategy
Strategy
National
National
Organization
Organization
Characteristics
Characteristics&&Requirements
Requirements
Characteristics
Characteristics&&Requirements
Requirements
Industry
Industry
Characteristics
Characteristics&&Requirements
Requirements
The proposed framework establishes the major criteria to be considered when adopting EDI.
This study does not call for a universal EDI strategy, but asserts that a successful EDI strategy
must grow out of a sophisticated understanding of the surrounding business and technical
requirements and structure and how they are changing. Furthermore, only strategies tailored to
the particular business requirements, to the inter and intra systems and processes and flexibility
to accommodate change succeed.
THE CIC FRAMEWORK
Successful development of a national EDI strategy requires that an analysis be undertaken of
the Context, Infrastructure and Capacity to Change. We examine each of these factors in turn
and discuss their importance within the Egyptian context.
Contextual Environment for EDI
The proposed CIC framework is demand driven, and as such primary emphasis is placed on
clearly defining the ‘contextual’ business requirements driving EDI adoption.
Successful EDI implementations have been in response to demand pull conditions where
nations adopting EDI were either driven by increased Globalization and regional integration
pressures translated into trade facilitation initiatives, or by national business requirements. The
UK experience reflected the criticality of responding to national business requirements.
Business requirements on a national, industry and corporate level have been key to successful
EDI adoption.
It is crucial to acknowledge that the ‘contextual’ influences will not only vary from one nation
to another, but also according to specific industry requirements and different corporate
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objectives. Of primary importance, on a national level, are the political, economic, social and
business environments and the role of Government.
Infrastructure and Know-how
EDI technical infrastructure, by definition, involves not only information technology resources,
but also telecommunications platforms and legislative aspects to govern inter-organizational
relations. At the national level, the legislative aspects as well as the national information
technology and telecommunications infrastructure, in general, and the role of value added
networks and coordinating bodies, in particular, have to be investigated.
Capacity to Change
Change is continuous, and nations, industries and firms are all under pressures to
accommodate both changing business and technical requirements. On a national level there is
continuous change in policy to accommodate dynamic international trade requirements. Within
industry sectors, there is a continuous requirement for integrating new EDI applications with
existing or reengineered business processes. Meanwhile, organizations are under pressure to
provide better services/ products under stringent cost controls and highly competitive markets
and as such are continuously changing their production strategies and corporate processes and
practices.
Exploiting EDI’s technical capacity to accommodate changing business and technical
requirements has been identified as a critical success determinant in developing an EDI
strategy. In this paper ‘capacity to change’ refers to EDI’s technical ability to accommodate
changing business and technical requirements.
Applying the CIC framework is suggestive of the fact that although there are a number of
lessons to learn from the mature EDI markets in the West, criteria for technology transfer must
be well defined to ensure that nations gain maximum benefit from EDI adoption. For example,
applying the standard supply driven approach which focused only on infrastructural technology
transfer issues in developing a national EDI industry, substantially delayed the development of
the EDI industry in Egypt, because it failed to incorporate the nation-specific requirements.
THE CASE OF EGYPT
CONTEXTUAL ENVIRONMENT FOR EDI
As shown in Figure 2 and detailed hereunder, a number of motivational factors influence the
decision to adopt EDI on a national level. These factors stem from the political, economic,
social and technical environment.
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Figure 2 – EDI Contextual Pressures
Economic
Social
Technical
Political
External Environment
Business
Requirements
National
Regulations
National
Organisations
EDI
National
Strategy
Infrastructure
P
E
R
F
O
R
M
A
N
C
E
Political environment.
It is crucial that due attention be given to the political environment into which EDI is to be
introduced. Of primary importance is the role of Government in establishing successful
national EDI strategies. Singapore is a clear example of a successful Government sponsored
EDI initiative whereas Latin America has achieved limited success with trade facilitation
initiatives primarily due to the lack of serious Government intervention (Schware & Kimberley,
1995). In Europe there have been a number of initiatives both national and international, aimed
at establishing European-wide EDI policies and standards. The European Commission has,
for example, allocated ECU 30 billion to spend over the next 10 years to establish a panEuropean EDI infrastructure. Likewise, Egypt is under pressure to extend IT policy in general
and EDI specifically. A World Bank study conducted in 1995 endorsed the use of EDI and
electronic commerce as critical components in trade facilitation. Based on this study
recommendations were put forward to the Egyptian Cabinet of Ministers in May 1997 which
identified a number of immediate priorities to boost Egypt's trade performance as part of a
continued pursuit of trade and the promotion of foreign direct investment (FDI). These
recommendations were primarily concerned with introducing customs, inspection, regulatory
and procedural reforms to strengthen Egyptian competitiveness in the world markets,
accelerate the pace of moving goods into and out of the country, improve the reliability of
importing and exporting processes, and generally reduce the transaction costs of exporting.
Although, considerable effort has been made by the Egyptian Government to enhance the
transparency of trade procedures, this remains problematic. The Egyptian Government has
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now lent its support for the implementation of EDI but sees its role as a regulatory one,
securing funding and providing the required infrastructure, rather than implementational.
Economic environment.
Trade liberalization and economic transformations in recent years have necessitated the review
of existing systems used for processing trade documentation. In Europe, the emergence of the
Single European market is a good example of this. Prospects for faster economic growth in
the Middle East and North Africa, in particular, have been associated with the ability of policy
makers to hasten integration with the world commodity and capital markets through structural
adjustment and trade liberalization. Egypt as a member of the World Trade Organisation
(WTO) is committed to participation in the international markets for goods, services and
capital. This commitment involves liberalizing imports, promoting exports and encouraging
foreign direct investment. Such development strategies entail removing barriers to trade that
require reforming traditional standards, procedures and agreements, which facilitate
international trade. For example, members of the WTO must abide by the requirements for
custom valuation which implies that Egypt will have to alter existing customs valuation .
Social environment.
Studies in Europe and The United States of America have highlighted the power of the
business community to drive forward the adoption of electronic trading standards (Banerjee &
Golhar, 1991; Reekers & Smithson, 1994). For instance, in Britain the success of the
introduction of EDI may largely be attributed to the pressures exerted by the business
community to establish standards. The United Kingdom initiated EDI for trade facilitation
purposes early in the 1980's. The British Simpler Trade Producers Board (SITPRO) and the
UK Article Numbering Association worked towards developing TRADACOMS which is a
national standard and which caters for domestic business requirements.
Egypt is coming under increasing pressure from the business community to adopt information
technologies, which will allow it react more flexibly, and promptly to changing market demand.
Due to recent increased awareness of the business benefits associated with electronic
commerce in general and EDI in particular, members of the business community in the
Federation of the Egyptian Industries (FEI) and members of various chambers of commerce
are pursuing different avenues to acquire new trading technologies.
Technical pressures.
Egypt as a member of the United Nations Conference on Trade and Development
(UNCTAD), is a participant in the trade efficiency program which is designed to enhance
trade systems and services through the creation of a network of Trade Points in each of the
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participating nations. Besides creating trading networks, Trade Points also provide trading
facilities and linkages, and promote the introduction of EDI.
Egypt as an emerging market is also a recipient of aid, particularly allocated to electronic
systems upgrading and IT-specific technology transfer. Technical pressures to adopt
information technologies (such as electronic commerce and EDI) and new logistics (such as
JIT and QR inventory control) were primarily supply driven in the early 1990s by
international organizations in an attempt to exploit the funds allocated.
Lack of awareness of the potential business impact of such technologies on the one hand and
lack of domestically rooted demand driven initiatives on the other substantially delayed
serious developments to establish national value added service networks in Egypt.
INFRASTRUCTURE
The extent to which a nation is able to adopt a new technology is heavily dependent on the
state of its existing infrastructure. "In 1985, Egypt had the vision to develop solid strategy to
build the information infrastructure" (El Sherif, 1996). Part of this strategy was achieved
through establishing information and decision support centers at both central and local
government levels. In addition nationwide databases were developed and major improvements
in both telecommunications and informatics achieved. Strategic alliances were formed with
international high profile world leading organizations in information technology and close
bilateral co-operation with European Union countries was established to share experience and
know-how (El Sherif, 1996). In addition, Egypt has participated in the UNCTAD's Trade
Efficiency Program, aimed at establishing a worldwide network of trade facilitation centers
called Trade Points. These trade points are laboratories where the latest information and
telecommunications technologies, such as EDI, are applied to trade (UNCTAD, 1992). It is
interesting to note, however, that Trade Point's plans to introduce EDI to the Egyptian market
did not materialize. Trade and information technologies have been confined to data provision;
Trade Point, located within the Ministry of Industry, services are limited to the provision of
data sets and reports on national and international trade trends.
EDI services in Egypt are limited to access to international service providers. Neither the
philosophy nor the facility is available on a national basis. Use is confined to a limited number
of multinationals committed to communicating with parent companies or trading partners.
Dependence is primarily on one service provider. Experience in those countries where EDI
has been successfully implemented highlights the importance of the role of EDI coordination
authorities and value added network service providers. Organisations such as EDIform in the
Netherlands, and the EDIA (EDI Association) in the UK play a crucial role in co-ordinating
activities. Egypt, likewise, requires the appointment of a national EDI service provider as well
as a single, well funded, one stop trade promotion agency with strong affiliations and
networking capacity with various trade bodies.
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CAPACITY TO CHANGE
A major determinant to the success of a national EDI strategy is the initiators awareness of
EDI’s capacity to accommodate nation-specific changing business and technical requirements.
International trade processes are typically characterized by complexity and redundancy. Some
document handling procedures are surrounded by 500-year-old practices. A typical
international trade transaction can take as many as 150 different documents to process
(Schware & Kimberley, 1995). Meyers & Canis (1991) indicate that there are estimates of
paperwork in international trade costing some 7 percent of the value of the goods traded. This
complexity is not only as a result of the multiplicity of organisations involved in the supply
chain, but is also a product of multiple data entries.
Although EDI can play an effective role in reengineering such processes, the environment
constraints are likely to inhibit such changes. For example, India, where resistance to change is
strong committed itself in 1993 to domestic EDI usage, but in 1995 there were no more than
200 users in the region (Schware & Kimberely, 1995).
Meanwhile, where initiatives accounted for EDI’s capacity to change to accommodate
changing business and technical requirements, successful results were reported. For example,
Western countries such as France, Ireland, Germany, Spain , Switzerland and Benelux
countries have focused on defining EDI requirements ensuring connectivity and compatibility
as well as primarily adopting EDIFACT to ensure homogeneity and integration with
international standards to account for potential changes in the business and technical
requirements. The EDIFACT development in itself is an example of a regional initiative
reflecting a European orientation and compliance with business requirements and cross border
trade facilitiation objectives, which has influenced EDI adoption and organization migration
from national initiative to EDIFACT as in the case of the United Kingdom,. Developments and
changes in standards developments reflect on EDI’s flexibility in accommodating changing
business and technical requirements.
Furthermore, on a national level there is a continuous change in policy to accommodate
dynamic international trade requirements and as such appropriate appreciation of EDI’s
capacity to accommodate such changes are critical to success.
Competitiveness depends on the ability to meet changing market requirements and the
flexibility to meet changing demands for products and services. In particular, the infrastructure
and procedures that enable both importers and exporters to access and exchange products
and information efficiently and effectively are critical to a nation’s competitive position/
capacity. Yet, process change, in particular international trade procedures represent a major
challenge in trade facilitation initiatives.
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It is therefore recommended that initiators awareness is not confined to EDI’s technical ability
to streamline procedures as a part of a major reengineering strategy, but also encompasses
EDI’s potential to accommodate change and as such allow for a phased approach to account
for the existing environmental constraints. This understanding provided the foundation of the
proposed solution to the Customs and Excise Authority in Egypt suggested in the following
section of the paper.
THE EGYPTIAN CUSTOMS AND EXCISE AUTHORITY
Egypt's Customs and Excise Authority (CEA) was established in the early nineteenth century
(1819) as the legitimate gateway for imports and exports. The CEA mission has focused,
since its inception, on generating revenues for the national treasury through duties applied to
imports and exports. Customs duties alone have accounted for approximately 30% of tax
revenues over the past 5 years and 12% of all government revenues (World Bank Report,
1997). Consequently, the efficiency of customs revenue collection is crucial.
Egypt's CEA is organized along four geographical directorates, namely: Cairo, Alexandria,
Suez and Aswan. Each directorate is responsible for the gateways at Egypt's borders with the
outside world. Within each directorate, several CEA outlets exist, e.g. the Alexandria
directorate handles both Alexandria and Damietta seaports in addition to Egypt's Western
borders with Libya.
Each directorate is organized around two functional layers: the operational and financial layers.
The operational layer is mainly responsible for the validation of regulatory permits and
documentation as well as the valuation of goods and the application of various duties and
taxes, whereas the financial layer is primarily concerned with duty collection and management
of warehouse transactions.
Each directorate has distinct functions and features, dependent on the type and value of goods
exchanged. For instance, in terms of transaction volume, the Cairo directorate handles around
300,000 consignments each year, whereas Alexandria handles only 70,000 annually,
however, in terms of value, Alexandria handles 82% of the total value of goods imported and
exported. Consequently, automation was initially launched in Alexandria which has evolved as
the Central Computer Department (Zorkani, 1996).
Since the inception of the process of automation at CEA, initiated in the mid 1980s through a
French Government initiative, the focus has centered around Alexandria, being the largest
revenue generator. Since then, only 12 other outlets have been automated while the majority
of outlets are still based on manual processes.
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As Egypt embarks on a new era of economic reform, the accelerated need for exports to
offset the deficit in the trade balance on the one hand, and the challenges posed by GATT to
developing countries on the other has meant that, the role, mission and objectives of Egypt's
CEA is undergoing a rapid change. Progress in achieving this desired change is hindered by
numerous inspection agencies and layers of regulations which slow the movement of goods to
and from international markets, hinder trade promotion, administrative efficiency and
encourage theft and fraud.
Flow of Information Through Egypt's Customs and Excise Authority CEA
Problems of information flow within CEA are typical of those encountered by institutions
involved in international trade, namely, lack of detailed data and a series of complex processes
in need of streamlining utilizing state of the art technologies. Analysis of the existing flow of
information through CEA suggest that enhancements can take place with respect to logistics
and data handling which would result in substantial financial savings (Zorkani, 1997). Areas of
reform focused on:
A. Requirement for Detailed Data
There is a fundamental requirement for detailed product information. The existing systems
cater only partially for such requirement. As a result, there is often inconsistency and
discrepancy in the information reported particularly with respect to the estimated versus the
actual revenue collected.
B. Streamline Processes
A long and tedious paper based system, by definition, lends itself to error. The presence of
multiple agencies and multiple layers within each agency in the processing of information result
in inconsistency in the data reported.
Lack of systems transparency and consistency in procedures with respect to which regulations
apply and rationale for change contribute to systems complexity and ambiguity.
Customs officials indicate that clearance procedures could be streamlined and that substantial
savings in the attendant time and costs could be achieved. The Government is seeking to
introduce of new procedures that utilize modern information technology that will effectively
facilitate trade.
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C. Organizational challenges
Egypt's CEA would clearly benefit from the introduction of EDI, however, major strategic and
organisational barriers exist:
First, the CEA organizational and cultural setup, as with other customs authorities worldwide,
is fairly complex and rigid and there would be considerable resistance to alter inter and intra
organizational power relations.
Second, the peripheral outlets (which are still manually operated) and which report to the
centralized systems, have enjoyed a grace period of delay of one to three months to complete
any one operation and their fear of change is likely to inhibit any fundamental structural reengineering programs.
Third, the strategic alliance in place with the French organization in charge of operating and
maintaining the central computing department is funded by the French Government which has
recently renewed its funding and maintenance contract of the system till 1999. This alliance
does not allow for any tampering with the existing system nor is it flexible (Zorkani, 1997)
Given the national drive to integrate into the global economy and the existing organizational
and cultural constraints at CEA the following section proposes a staged approach to
introducing EDI within the Customs and Excise Authority in Egypt.
PROPOSED SOLUTION
Although a fully-fledged EDI implementation strategy together with a fundamental business
process re-engineering initiative may contribute significant benefits to the CEA, the given
constraints do not allow for such privilege. However, an initial phased approach leading
eventually to business process re-design may be introduced through the simple application of
an EDI system, external but parallel, to the CEA flow of information processes which
shadows the data processed. This would be transparent to the public, but avoid the major
threats associated with a new implementation.
A PHASED APPROACH:
A three- phased approach to meet CEA specific barriers and challenges is proposed:
Phase I - EDI Introduction.
This initial stage of EDI implementation aims at capturing detailed consignment details without
tampering with the existing systems. This introductory stage is proposed in which EDI is used
to shadow existing process. The warehouse audit control system will ensure the capture of
detailed consignment data which will then be electronically processed and await the goods
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release authorization which will in due course be deducted from the debit manifest according
to the consignment details. This minor alteration does not interfere with any of the operational
layer processes but provides the following benefits:
Detailed line items will be received from the shipper prior to docking which will provide
immediate access to information, cut down on time delays, include a complete record of
information including customs code and product description and provide control of
warehousing inventory.
The automatic tracking of products in process versus products released will be much better
controlled and thus reduce opportunities for inconsistent in data or discrepancy. Similarly,
dumping processes will be better controlled.
Audit for valuation of import goods could take place in advance, since details of a shipment
would be available prior to the actual docking of the goods. This will enhance systems’
transparency.
This proposed system would also provide a more centralised audit of the functions of the CEA
and help set the stage for expanding this pilot phase to a full and comprehensive EDI
implementation.
This pilot could be further extended to provide an enhancement to the existing paper process
by enabling a pre-set form to be printed for importers upon submission of consignment.
Although, the proposed initial phase is confined to producing accurate data and providing
initial information control, it provides the potential to streamline business processes, and
provide the initial control over the identified system loopholes.
Phase II - EDI Development/ Diffusion.
The second stage of the proposed solution aims at establishing the foundation for developing
the national EDI community. This phase would be set up at the operational level and would
entail the use of a PC terminal at the initial stage of the clearance process. A unique reference
could automatically be generated on the Import Clearance Application Forms, which would
result in the elimination of the final CEA central registration process in Alexandria. This will
also facilitate communication with the importer or his broker, increase efficiency (avoid data
inconsistency and procedural delays) and enhance the CEA services. Networking of PC's
may be considered at a later stage. Such application would, however, require development
and upgrading of the skills, knowledge and expertise of existing staff.
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Phase III: Establish an EDI Gateway
Ultimately the CEA would benefit from the implementation of a full-fledged EDI
implementation. Such implementation would, however, involve simplifying processes, removing
excessive and obsolete controls, shortening and easing lines of communication and using both
bar-coding and EDI for rapid, accurate transfer of data between computers. It would also
require alignment with trading partners' systems and the adoption of international electronic
commerce standards. However, given the existing constraints this may only be considered as a
long-term strategy.
Figure 3 – Full EDI solution
Discussion
The introduction of EDI within a trade facilitation framework would not only reap efficiency
gains, in terms of use of accelerated, simplified systems and EDI preclear imports and
exports, but would also provide the information necessary for decision making with respect
to problem solving, facilities scheduling, and planning for maximum use of infrastructure. Such
implementation would not only contribute towards Egypt’s integration in the global economy,
but would also cater for increasing the revenue generated by Egypt’s CEA as a result of
increased efficiency and enhanced transparency of the procedures involved in international
trade.
Egypt is an emerging market that is heavily investing in development and growth strategies
based on trade and foreign direct investment promotion and streamlining of associated
17
processes. EDI provides the capacity to cater to Egypt’s trade facilitation requirements and
offers the potential for some dramatic national performance as witnessed by the evidence of
success in Singapore.
EDI’s role in endorsing national strategies and safe guarding national interests should provide
the basis of developing a long-term strategy in spite of the presence of major implementation
barriers. As proposed, a simple EDI implementation scenario may be adopted in the short
term to overcome immediate problems, cater to information availability, and provide
management and control to serve the immediate trading process efficiency requirements.
Lessons Learnt
The issues discussed above contribute to the understanding of the issues critical in developing
a national EDI strategy. The following section highlights the salient features:
Business requirements.
In line with the CIC framework, the development of the EDI strategy is demand driven to
cater to national requirements. The proposal for a phased implementation solution, is driven by
business requirements to fulfil the trade facilitation initiatives, integrating the core business
application identified as the information contained within shippers documents, and considering
the inhibiting barriers a proposed flexible solution that may be potentially developed in the
future into a full-fledged EDI corporate gateway is proposed.
Inspite of acknowledgement of the role and impact of EDI in enhancing business operations,
the supply driven approach to develop a full-fledged EDI industry did not make progress in
Egypt. However, demand driven requirements to implement EDI as a trade facilitation tool in
order to further integrate the country into the world economy in general and to facilitate
international trade procedures in particular, is providing the project with the necessary national
and international endorsement to ensure its successful implementation. The debate today is no
longer about whether or not to adopt EDI, but how best to utilize EDI to integrate into the
world trade and financial markets. Consequently, EDI implementation is considered at the
highest policymaking and senior management levels.
Part and parcel of the requirements is a phased approach to meet CEA specific barriers and
challenges, which has been catered to proposing a three-phased approach. The first
introductory role includes a parallel shadow streamline to overcome existing barriers and
provide system accountability, enhancing CEA accessibility to detailed data and indirectly
controlling theft and fraud. In the second stage, community development, the use of EDI is
extended to importers to enhance efficiency and promote an electronic trading culture. In the
third stage, development of a CEA EDI Gateway will provide for a full-fledged EDI operation
18
based on a business process redesign and quality management strategy to bring Egypt in line
with international efficiency standards. Unlike the initial implementation phases, implementing a
corporate EDI gateway would involve fundamental changes in procedures and processes.
Role of Government.
The regulatory role of government and its endorsement of developing EDI through securing
funding and required infrastructure, will be instrumental in project ramp up. The Government
of Egypt played a leading referee role rather than an implementational one in the initial stage of
introducing EDI. Following on from the Singapore experience, Government endorsement of
electronic trade in general and EDI in particular is instrumental in promoting and
institutionalizing EDI adoption nation-wide.
Trading Partners Requirements.
To ensure successful implementation, incorporating trading partners requirements is also
crucial. The success of Her Majesty’s Customs and Excise Authority in the United Kingdom
in endorsing electronic trading has been in addressing and integrating its trading community
requirements in all activities related to the collection and dissemination of information
(Sawhney and Williams, 1994). Such partnership can be seen as a fundamental requirement to
facilitate later phases of EDI implementation and community development. Accommodating
for trading partners requirements, particularly in terms of standards compatibility is crucial in
developing the EDI community.
Technical strategy.
Technology transfer, with respect to actually developing a national EDI industry in general or
adopting EDI on an organizational or institutional level is not problematic. In fact, some
immediate technical alternatives, such as using EDI on the Internet, is available to hand.
However, in order to successfully and systematically develop a national EDI community, it is
important that to have a national vision and a clear strategy as in the case of Singapore. It is
also asserted that the strategy should not be confined to the technical aspects, but also include
the ‘know-how’ critical to successful development such as the role of Value Added Network
Services (VANS), EDI associations and co-ordinating bodies is founding a national EDI
industry.
It is worth noting that the wide-use of the Internet is also potentially providing small and
medium size enterprises with a cost effective means of adopting EDI. There are some serious
legal and security implications related to the use of electronic trading on the Internet, which lies
19
beyond the scope of this paper, yet technically the Internet may provide an interim stepping
stone towards the full appropriate adoption of electronic trading.
Policy Implications
The study conducted by the authors suggests that the success of outlining a national EDI
strategy will primarily depend on integrating business requirements, Government intervention,
infrastructure efficiency and capacity to change to cater for changing market and technical
requirements.
Estimated costs and changes to regulations are outside the scope of this study, given the
complexity in accounting for the anticipated variation across nations.
The main policy implications can be summarized as follows:
A demand-driven national EDI strategy must be based on well defined national
business and economic needs and requirements,
to incorporate international requirements to streamline trade processes to reduce the
trade information processing cycles to a minimum critical path thus achieving maximum
economies and optimum trade competitive advantage (Schware and. Kimberley, 1995) or to
cater to the requirements of national industry sectors, based on their perceived competitive
and efficiency benefits. Unless there is recognition of business drivers as the main motivational
factors to adopt EDI, limited benefits will be accrued.
INCREASE AWARENESS AND ENHANCE EDI-SPECIFIC EDUCATION .
Expert knowledge of business requirements and EDI capacity is a pre-requisite to successful
implementation. Schware and Kimberley (1995) endorse the requirement for increased
awareness and education and call for the establishment of an awareness and education
program as possibly the most important key to success. They assert that lack of such a
program is most likely to cause failure and delay EDI implementations.
Promoting EDI education will contribute towards human capacity building. It will not only help
develop the skills and expertise required for maximizing the use and potential of EDI
implementations, but also cater for tailoring EDI use to national requirements and constraints. .
Furthermore, a national EDI initiative must be based on a strategic plan and a shared vision of
the outcome and benefits. This form of leadership and commitment at the highest policymaking
levels, in collaboration with the business community having a unified commercial interest, will
ensure successful EDI diffusion across the various industry sectors.
20
Role of Government.
The role of Government is instrumental in developing the EDI industry infrastructure,
particularly in the early stages of development.
The Government’s capacity to alter regulations to accommodate electronic trading
requirements, to secure funds or act as a catalyst in developing the EDI community by
endorsing an intergovernmental and/ or public sector electronic trading strategy is invaluable.
Development of the infrastructure does necessarily need to be centrally funded by the
Government, but could be in the form of an endorsement or partnership with the private
sector. The most important aspect is to institutionalize electronic trading and ensure a
conducive environment for community development.
In some cases, such as in developing countries, because of the initial size of the market, or
because of technology transfer restrictions, it may be necessary for the Government to fund
the value added network service or undertake its duties in the initial stages of establishing the
EDI industry.
National Infrastructure Development.
A primary requirement for developing a national EDI industry is the availability of a sufficiently
sophisticated, competitive and reliable data communications network and value-added
network services as previously discussed.
Although the EDI technology itself is transferable, local expertise is still required to apply
domestic requirements, definitions and restrictions. This is applicable in terms of defining EDI
applications and standards as well as in developing the marketing and community development
strategies. Developing the infrastructure should also take into account the know-how transfer
to include factors critical to successful EDI adoption on a national level including the role of
VANS and EDI associations.
Capacity to Change.
The national strategy should include an institutional mechanism for monitoring and tracking
changing business and technical requirements in order to cater for the required changes, in
legislation for example, effectively and efficiently.
CONCLUSION
21
This paper discussed the issues critical to developing a national EDI strategy to aid nations in
the early stages of adopting EDI.
Introducing EDI within trade facilitation initiatives, in Customs and Excise applications
specifically will not only reap efficiency gains but also embrace national goals to integrate in the
global economy and increase revenues generated as a result of increased efficiency.
Critical to successful EDI implementation is accommodating the contextual environment and
not confining the strategy to technology transfer to building the EDI industry. The foundation
must be demand driven to cater to specific national requirements, defined within a clear
national strategy as in the case of Singapore. It is estimated that successful implementation of
EDI within the CEA in Egypt may result in increasing the revenue generated by the authority
by a $350 million annually (Zorkani, 1997).
The research findings also indicate that Government endorsement of electronic trading is
instrumental in founding the legal and technical infrastructure of the EDI industry at large.
Finally, careful consideration needs to be given to existing procedures and attitudes to change
as illustrated in the CEA case study. The extent of awareness of EDI benefits and capacity to
accommodate change is also critical in developing the national EDI strategy.
Acknowledgement
The authors would like to thank Mr. Hatem Zorkani for his invaluable input to the study of the
Customs and Excise Authority in Egypt.
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