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Electronic Data Interchange (EDI) and TradeFacilitation:

Best Practice and Lessons from Experience

Benita Cox and Sherine GhoneimThe Management School

Imperial College for Science, Technology and Medicine

INTRODUCTION

The increasing competitive pressures from both global and domestic markets are forcingnations to adopt new trade practices and standards. Nations need to adjust to new methodsof trade information exchange, open up their telecommunications systems and learn to take fulladvantage of harmonized procedures, standards, and practices for trade documentation. Therole of electronic commerce and electronic data interchange (EDI) in particular, is rapidlyevolving in the face of increasing pressure from global markets to provide standardizedmethods and practices for international trade.

The general term for these changes in international trade administration is “trade facilitation”. AWorld Bank study conducted in 1995 endorsed the use of EDI and electronic commerce ascritical 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 interdependencebetween international organizations and markets, electronic data interchange (EDI) is expectedto play a significant role in facilitating international trade (Farhoomand & Pace, 1995). EDI isthe most prevalent form of electronic commerce supporting trade transactions across variousindustry sectors on a national and international level. EDI, as a system of exchangingstandardized trade related information, is not only a fundamental IT business processreengineering tool (Benjamin et al, 1990; Fowler et al, 1994; Swatman, 1994; Swatman etal, 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 withrespect to customs and excise applications.

Experts forecast a million users of EDI by the end of the year 2000. Recent statistics suggestthat 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 significantnational benefits. Singapore claims that properly applied trade facilitation is already saving it inexcess of one percent of its gross domestic product (US$ 700 million in 1994) each year. Asa result, reengineered trade processes based upon trade facilitation principles and EDI havebecome a global phenomenon (Schware and Kimberley, 1995).

Therefore, an increasing number of nations are in the process of developing their EDI industryand there is an increasing requirement for the development of national frameworks andimplementation guidelines.

Developing nations, therefore, find themselves in the position of having to rapidly adapt theirtraditional trading practices in order to participate in international free trade. For many ofthese countries the barriers to achieving this are different and more complex than in moredeveloped nations.

Although Western countries have expended much energy in recent years defining internationaltrade standards and founding the EDI and electronic commerce infrastructure, for developingnations, barriers to developing their national EDI industries and electronic trading communitiesare more complex than in developed countries.

At the early stages of this research, the authors were particularly interested in applying anational EDI implementation framework to Egypt. Policymakers were particularly keen todevelop the national electronic trading and information exchange infrastructure to serve thetrading requirements of the domestic market. As such there was a requirement for identifyingan EDI implementation model to address Egypt’s specific requirements. Research showed thatin-spite of the large number of initiatives undertaken both at a national and international levelsaimed at trade facilitation there remains a paucity in defining the factors critical to successfulEDI implementation in a national setting. Furthermore, there was no single EDI adoptionframework 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 matureEDI markets, yet it should be noted that these models are not necessarily appropriate fordeveloping countries. For example, the literature suggests EDI success in the UK wasprimarily 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 notonly lack the required EDI industry service provision and electronic commerce infrastructure,but also the powerful inter-organizational relations enjoyed by industries such as retail andmanufacturing.

As such it was necessary to examine the extent of EDI global presence and define the factorscritical to successful EDI adoption in a national setting. At this stage it was also realized thatthe analysis should not be confined to infrastructural requirements, but should be extended toincorporate 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 researchinto its impact on business operations and competitiveness. To date, existing EDI literatureand research focused on a number of perspectives, each of which is typically addressedindependently 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 therestructuring of industry as a whole as well as its ability to transform individual partnerships, forexample, EDI’s potential to transform relationships between trading partners by bringing themcloser (Johnston & Carrico,1988; Holland et al, 1992).

The second perspective focuses on the role of EDI in business process re-engineering, its roleas an enabling mechanism and vehicle for business process re-design and business scope re-definition (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 businessprocesses (Bergeron & Raymond, 1992) as well as with core business activities (Cox &Ghoneim, 1996) has been identified as a determining factor in achieving maximum businessbenefit.

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 onreducing transaction costs, increasing operational efficiency and enhancing competitivecapacity.The fourth perspective concentrates on implementation issues. The role of StrategicInformation 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 variousimplementation models have been described which highlight both internal and externalorganizational 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 ofEDI (Borthwick & Roth, 1993). Here technological solutions are sought to technologicalobstacles 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 ofthe entire process. The difficulty of establishing a single EDI adoption and implementationmodel stems from the diversity of EDI applications across various business domains, EDI’sinter-relatedness (dependence) with inter and intra-organizational business requirements, aswell 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 earlystages of adopting EDI. The situation is the result of the limited research into EDI specifictechnology transfer issues and the limited efforts into developing generic EDI adoption modelsor implementation guidelines to identify transferable organizational, sectoral and nationallessons 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, particularlywithin the framework of introducing EDI to nations in the early stages of formulating their EDIand electronic trading policies.

Second, to clearly define nation-specific requirements within a clearly defined multidisciplinaryimplementation framework, as in the case of Egypt, and determine the respective policyimplications.

SCOPE

This paper is based on research conducted in Britain into the critical success factors forsuccessful EDI implementation at an organizational, industrial and national level. The results ofthis previous research (Cox & Ghoneim, 1994,1995,1996) have been compared, contrastedand integrated with results of research conducted both in the United States of America andGermany (Banerjee & Golhar, 1991; Reekers & Smithson, 1994). In this paper the CICframework 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 withinternational 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 thatinfluence 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. Thefollowing 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 thecontext 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 retoolpractices among the parties involved in the trade and transport procedures. The concept ofreplacing paper documents with EDI, representing much of the detail with codes andharmonized 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 variousimplementation modalities. The authors defined the various implementation modalities asfollows:

w An approach driven, funded and managed by the government;w A strong cooperative arrangement, driven either by a government department or by

a joint venture with the private sector;w A private sector-driven initiative based on existing competitive infrastructure,

possibly in cooperation with a nationally approved mandated facilitatingorganization;

w A range of random leaderless examples;w Very little or no activity.

Such classification is very valuable as it implicitly provides the various scenarios andassociated 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 implementationaspects, 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 beconfined to addressing technical transfer requirements. To maximize potential benefit, anational strategy will have to take into account the context in which the development of theEDI industry is undertaken. It must consider the nation’s particular political and economicgoals and constraints, the business culture, sectoral structure as well as the organizationaldomestic and international requirements that may influence or be affected by the adoption ofEDI. The authors develop a set of independent principles for analyzing EDI which could serveas a framework for undertaking an in-depth analysis of factors that influence and areinfluenced by EDI adoption on a national, industrial and organizational level.

The authors discuss the importance of considering the 'Context' (political, economic and socialenvironments); the 'Infrastructure' (technical requirements and know-how) and the 'Capacityto Change') in developing a national EDI strategy. These elements are integrated in the CICframework (Figure 1) which is applied to Egypt. The CIC is a multi-dimensional researchframework which attempts to convey the complexity and inter-relatedness of the business andtechnical determinants of successful EDI implementation.

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Figure 1: CIC Framework

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 strategymust grow out of a sophisticated understanding of the surrounding business and technicalrequirements and structure and how they are changing. Furthermore, only strategies tailored tothe particular business requirements, to the inter and intra systems and processes and flexibilityto accommodate change succeed.

THE CIC FRAMEWORK

Successful development of a national EDI strategy requires that an analysis be undertaken ofthe Context, Infrastructure and Capacity to Change. We examine each of these factors in turnand 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 onclearly defining the ‘contextual’ business requirements driving EDI adoption.

Successful EDI implementations have been in response to demand pull conditions wherenations adopting EDI were either driven by increased Globalization and regional integrationpressures translated into trade facilitation initiatives, or by national business requirements. TheUK experience reflected the criticality of responding to national business requirements.Business requirements on a national, industry and corporate level have been key to successfulEDI adoption.

It is crucial to acknowledge that the ‘contextual’ influences will not only vary from one nationto another, but also according to specific industry requirements and different corporate

EDI Adoption ModelEDI Adoption Model

ContextContext InfrastructureTechnical Implementation

InfrastructureTechnical Implementation

Capacityto change

Capacityto change

National EDI StrategyNational EDI Strategy

NationalCharacteristics & Requirements

NationalCharacteristics & Requirements Organization

Characteristics & Requirements

OrganizationCharacteristics & Requirements

IndustryCharacteristics & Requirements

IndustryCharacteristics & Requirements

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objectives. Of primary importance, on a national level, are the political, economic, social andbusiness 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-organizationalrelations. At the national level, the legislative aspects as well as the national informationtechnology and telecommunications infrastructure, in general, and the role of value addednetworks and coordinating bodies, in particular, have to be investigated.

Capacity to Change

Change is continuous, and nations, industries and firms are all under pressures toaccommodate both changing business and technical requirements. On a national level there iscontinuous change in policy to accommodate dynamic international trade requirements. Withinindustry sectors, there is a continuous requirement for integrating new EDI applications withexisting or reengineered business processes. Meanwhile, organizations are under pressure toprovide better services/ products under stringent cost controls and highly competitive marketsand as such are continuously changing their production strategies and corporate processes andpractices.

Exploiting EDI’s technical capacity to accommodate changing business and technicalrequirements has been identified as a critical success determinant in developing an EDIstrategy. In this paper ‘capacity to change’ refers to EDI’s technical ability to accommodatechanging business and technical requirements.

Applying the CIC framework is suggestive of the fact that although there are a number oflessons to learn from the mature EDI markets in the West, criteria for technology transfer mustbe 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 technologytransfer issues in developing a national EDI industry, substantially delayed the development ofthe 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 thedecision 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

Political environment.

It is crucial that due attention be given to the political environment into which EDI is to beintroduced. Of primary importance is the role of Government in establishing successfulnational EDI strategies. Singapore is a clear example of a successful Government sponsoredEDI initiative whereas Latin America has achieved limited success with trade facilitationinitiatives 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, aimedat 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 pan-European EDI infrastructure. Likewise, Egypt is under pressure to extend IT policy in generaland EDI specifically. A World Bank study conducted in 1995 endorsed the use of EDI andelectronic commerce as critical components in trade facilitation. Based on this studyrecommendations were put forward to the Egyptian Cabinet of Ministers in May 1997 whichidentified a number of immediate priorities to boost Egypt's trade performance as part of acontinued pursuit of trade and the promotion of foreign direct investment (FDI). Theserecommendations were primarily concerned with introducing customs, inspection, regulatoryand 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 ofimporting and exporting processes, and generally reduce the transaction costs of exporting.Although, considerable effort has been made by the Egyptian Government to enhance thetransparency of trade procedures, this remains problematic. The Egyptian Government has

External Environment

Political

EconomicSocial

Technical

BusinessRequirements

NationalRegulations

NationalOrganisations

EDINational Strategy

PERFORMANCEInfrastructure

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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 reviewof existing systems used for processing trade documentation. In Europe, the emergence of theSingle European market is a good example of this. Prospects for faster economic growth inthe Middle East and North Africa, in particular, have been associated with the ability of policymakers to hasten integration with the world commodity and capital markets through structuraladjustment and trade liberalization. Egypt as a member of the World Trade Organisation(WTO) is committed to participation in the international markets for goods, services andcapital. This commitment involves liberalizing imports, promoting exports and encouragingforeign direct investment. Such development strategies entail removing barriers to trade thatrequire reforming traditional standards, procedures and agreements, which facilitateinternational trade. For example, members of the WTO must abide by the requirements forcustom 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 thebusiness community to drive forward the adoption of electronic trading standards (Banerjee &Golhar, 1991; Reekers & Smithson, 1994). For instance, in Britain the success of theintroduction of EDI may largely be attributed to the pressures exerted by the businesscommunity to establish standards. The United Kingdom initiated EDI for trade facilitationpurposes early in the 1980's. The British Simpler Trade Producers Board (SITPRO) and theUK Article Numbering Association worked towards developing TRADACOMS which is anational standard and which caters for domestic business requirements.

Egypt is coming under increasing pressure from the business community to adopt informationtechnologies, which will allow it react more flexibly, and promptly to changing market demand.Due to recent increased awareness of the business benefits associated with electroniccommerce in general and EDI in particular, members of the business community in theFederation of the Egyptian Industries (FEI) and members of various chambers of commerceare 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 enhancetrade 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 tradingfacilities and linkages, and promote the introduction of EDI.

Egypt as an emerging market is also a recipient of aid, particularly allocated to electronicsystems upgrading and IT-specific technology transfer. Technical pressures to adoptinformation technologies (such as electronic commerce and EDI) and new logistics (such asJIT and QR inventory control) were primarily supply driven in the early 1990s byinternational organizations in an attempt to exploit the funds allocated.

Lack of awareness of the potential business impact of such technologies on the one hand andlack of domestically rooted demand driven initiatives on the other substantially delayedserious 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 thestate of its existing infrastructure. "In 1985, Egypt had the vision to develop solid strategy tobuild the information infrastructure" (El Sherif, 1996). Part of this strategy was achievedthrough establishing information and decision support centers at both central and localgovernment levels. In addition nationwide databases were developed and major improvementsin both telecommunications and informatics achieved. Strategic alliances were formed withinternational high profile world leading organizations in information technology and closebilateral co-operation with European Union countries was established to share experience andknow-how (El Sherif, 1996). In addition, Egypt has participated in the UNCTAD's TradeEfficiency Program, aimed at establishing a worldwide network of trade facilitation centerscalled Trade Points. These trade points are laboratories where the latest information andtelecommunications technologies, such as EDI, are applied to trade (UNCTAD, 1992). It isinteresting to note, however, that Trade Point's plans to introduce EDI to the Egyptian marketdid 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 ofdata sets and reports on national and international trade trends.

EDI services in Egypt are limited to access to international service providers. Neither thephilosophy nor the facility is available on a national basis. Use is confined to a limited numberof multinationals committed to communicating with parent companies or trading partners.Dependence is primarily on one service provider. Experience in those countries where EDIhas been successfully implemented highlights the importance of the role of EDI coordinationauthorities and value added network service providers. Organisations such as EDIform in theNetherlands, and the EDIA (EDI Association) in the UK play a crucial role in co-ordinatingactivities. Egypt, likewise, requires the appointment of a national EDI service provider as wellas a single, well funded, one stop trade promotion agency with strong affiliations andnetworking 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 ofEDI’s capacity to accommodate nation-specific changing business and technical requirements.

International trade processes are typically characterized by complexity and redundancy. Somedocument handling procedures are surrounded by 500-year-old practices. A typicalinternational trade transaction can take as many as 150 different documents to process(Schware & Kimberley, 1995). Meyers & Canis (1991) indicate that there are estimates ofpaperwork in international trade costing some 7 percent of the value of the goods traded. Thiscomplexity is not only as a result of the multiplicity of organisations involved in the supplychain, but is also a product of multiple data entries.

Although EDI can play an effective role in reengineering such processes, the environmentconstraints are likely to inhibit such changes. For example, India, where resistance to change isstrong committed itself in 1993 to domestic EDI usage, but in 1995 there were no more than200 users in the region (Schware & Kimberely, 1995).

Meanwhile, where initiatives accounted for EDI’s capacity to change to accommodatechanging business and technical requirements, successful results were reported. For example,Western countries such as France, Ireland, Germany, Spain , Switzerland and Beneluxcountries have focused on defining EDI requirements ensuring connectivity and compatibilityas well as primarily adopting EDIFACT to ensure homogeneity and integration withinternational standards to account for potential changes in the business and technicalrequirements. The EDIFACT development in itself is an example of a regional initiativereflecting a European orientation and compliance with business requirements and cross bordertrade facilitiation objectives, which has influenced EDI adoption and organization migrationfrom national initiative to EDIFACT as in the case of the United Kingdom,. Developments andchanges in standards developments reflect on EDI’s flexibility in accommodating changingbusiness and technical requirements.

Furthermore, on a national level there is a continuous change in policy to accommodatedynamic international trade requirements and as such appropriate appreciation of EDI’scapacity to accommodate such changes are critical to success.

Competitiveness depends on the ability to meet changing market requirements and theflexibility to meet changing demands for products and services. In particular, the infrastructureand procedures that enable both importers and exporters to access and exchange productsand information efficiently and effectively are critical to a nation’s competitive position/capacity. Yet, process change, in particular international trade procedures represent a majorchallenge in trade facilitation initiatives.

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It is therefore recommended that initiators awareness is not confined to EDI’s technical abilityto streamline procedures as a part of a major reengineering strategy, but also encompassesEDI’s potential to accommodate change and as such allow for a phased approach to accountfor the existing environmental constraints. This understanding provided the foundation of theproposed solution to the Customs and Excise Authority in Egypt suggested in the followingsection 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 toimports and exports. Customs duties alone have accounted for approximately 30% of taxrevenues 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 theoutside world. Within each directorate, several CEA outlets exist, e.g. the Alexandriadirectorate handles both Alexandria and Damietta seaports in addition to Egypt's Westernborders 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 anddocumentation as well as the valuation of goods and the application of various duties andtaxes, whereas the financial layer is primarily concerned with duty collection and managementof warehouse transactions.

Each directorate has distinct functions and features, dependent on the type and value of goodsexchanged. For instance, in terms of transaction volume, the Cairo directorate handles around300,000 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 andexported. Consequently, automation was initially launched in Alexandria which has evolved asthe Central Computer Department (Zorkani, 1996).

Since the inception of the process of automation at CEA, initiated in the mid 1980s through aFrench Government initiative, the focus has centered around Alexandria, being the largestrevenue generator. Since then, only 12 other outlets have been automated while the majorityof 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 tooffset the deficit in the trade balance on the one hand, and the challenges posed by GATT todeveloping countries on the other has meant that, the role, mission and objectives of Egypt'sCEA is undergoing a rapid change. Progress in achieving this desired change is hindered bynumerous inspection agencies and layers of regulations which slow the movement of goods toand from international markets, hinder trade promotion, administrative efficiency andencourage 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 institutionsinvolved in international trade, namely, lack of detailed data and a series of complex processesin need of streamlining utilizing state of the art technologies. Analysis of the existing flow ofinformation through CEA suggest that enhancements can take place with respect to logisticsand data handling which would result in substantial financial savings (Zorkani, 1997). Areas ofreform focused on:

A. Requirement for Detailed Data

There is a fundamental requirement for detailed product information. The existing systemscater only partially for such requirement. As a result, there is often inconsistency anddiscrepancy in the information reported particularly with respect to the estimated versus theactual revenue collected.

B. Streamline Processes

A long and tedious paper based system, by definition, lends itself to error. The presence ofmultiple agencies and multiple layers within each agency in the processing of information resultin inconsistency in the data reported.

Lack of systems transparency and consistency in procedures with respect to which regulationsapply and rationale for change contribute to systems complexity and ambiguity.

Customs officials indicate that clearance procedures could be streamlined and that substantialsavings in the attendant time and costs could be achieved. The Government is seeking tointroduce of new procedures that utilize modern information technology that will effectivelyfacilitate trade.

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C. Organizational challenges

Egypt's CEA would clearly benefit from the introduction of EDI, however, major strategic andorganisational 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 intraorganizational power relations.

Second, the peripheral outlets (which are still manually operated) and which report to thecentralized systems, have enjoyed a grace period of delay of one to three months to completeany one operation and their fear of change is likely to inhibit any fundamental structural re-engineering programs.

Third, the strategic alliance in place with the French organization in charge of operating andmaintaining the central computing department is funded by the French Government which hasrecently renewed its funding and maintenance contract of the system till 1999. This alliancedoes 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 organizationaland cultural constraints at CEA the following section proposes a staged approach tointroducing EDI within the Customs and Excise Authority in Egypt.PROPOSED SOLUTION

Although a fully-fledged EDI implementation strategy together with a fundamental businessprocess re-engineering initiative may contribute significant benefits to the CEA, the givenconstraints do not allow for such privilege. However, an initial phased approach leadingeventually to business process re-design may be introduced through the simple application ofan EDI system, external but parallel, to the CEA flow of information processes whichshadows the data processed. This would be transparent to the public, but avoid the majorthreats 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 withouttampering with the existing systems. This introductory stage is proposed in which EDI is usedto shadow existing process. The warehouse audit control system will ensure the capture ofdetailed 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 accordingto the consignment details. This minor alteration does not interfere with any of the operationallayer processes but provides the following benefits:

Detailed line items will be received from the shipper prior to docking which will provideimmediate access to information, cut down on time delays, include a complete record ofinformation including customs code and product description and provide control ofwarehousing inventory.

The automatic tracking of products in process versus products released will be much bettercontrolled 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 shipmentwould 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 CEAand help set the stage for expanding this pilot phase to a full and comprehensive EDIimplementation.

This pilot could be further extended to provide an enhancement to the existing paper processby 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 providinginitial information control, it provides the potential to streamline business processes, andprovide 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 developingthe national EDI community. This phase would be set up at the operational level and wouldentail the use of a PC terminal at the initial stage of the clearance process. A unique referencecould automatically be generated on the Import Clearance Application Forms, which wouldresult in the elimination of the final CEA central registration process in Alexandria. This willalso facilitate communication with the importer or his broker, increase efficiency (avoid datainconsistency and procedural delays) and enhance the CEA services. Networking of PC'smay be considered at a later stage. Such application would, however, require developmentand 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 EDIimplementation. Such implementation would, however, involve simplifying processes, removingexcessive and obsolete controls, shortening and easing lines of communication and using bothbar-coding and EDI for rapid, accurate transfer of data between computers. It would alsorequire alignment with trading partners' systems and the adoption of international electroniccommerce standards. However, given the existing constraints this may only be considered as along-term strategy.

Figure 3 – Full EDI solution

Discussion

The introduction of EDI within a trade facilitation framework would not only reap efficiencygains, in terms of use of accelerated, simplified systems and EDI preclear imports andexports, but would also provide the information necessary for decision making with respectto problem solving, facilities scheduling, and planning for maximum use of infrastructure. Suchimplementation 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 ofincreased efficiency and enhanced transparency of the procedures involved in internationaltrade.

Egypt is an emerging market that is heavily investing in development and growth strategiesbased on trade and foreign direct investment promotion and streamlining of associated

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processes. EDI provides the capacity to cater to Egypt’s trade facilitation requirements andoffers the potential for some dramatic national performance as witnessed by the evidence ofsuccess in Singapore.

EDI’s role in endorsing national strategies and safe guarding national interests should providethe basis of developing a long-term strategy in spite of the presence of major implementationbarriers. As proposed, a simple EDI implementation scenario may be adopted in the shortterm to overcome immediate problems, cater to information availability, and providemanagement 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 developinga 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 tocater to national requirements. The proposal for a phased implementation solution, is driven bybusiness requirements to fulfil the trade facilitation initiatives, integrating the core businessapplication identified as the information contained within shippers documents, and consideringthe inhibiting barriers a proposed flexible solution that may be potentially developed in thefuture 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 inEgypt. However, demand driven requirements to implement EDI as a trade facilitation tool inorder to further integrate the country into the world economy in general and to facilitateinternational trade procedures in particular, is providing the project with the necessary nationaland international endorsement to ensure its successful implementation. The debate today is nolonger about whether or not to adopt EDI, but how best to utilize EDI to integrate into theworld trade and financial markets. Consequently, EDI implementation is considered at thehighest policymaking and senior management levels.

Part and parcel of the requirements is a phased approach to meet CEA specific barriers andchallenges, which has been catered to proposing a three-phased approach. The firstintroductory role includes a parallel shadow streamline to overcome existing barriers andprovide system accountability, enhancing CEA accessibility to detailed data and indirectlycontrolling theft and fraud. In the second stage, community development, the use of EDI isextended to importers to enhance efficiency and promote an electronic trading culture. In thethird stage, development of a CEA EDI Gateway will provide for a full-fledged EDI operation

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based on a business process redesign and quality management strategy to bring Egypt in linewith international efficiency standards. Unlike the initial implementation phases, implementing acorporate 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 securingfunding and required infrastructure, will be instrumental in project ramp up. The Governmentof Egypt played a leading referee role rather than an implementational one in the initial stage ofintroducing EDI. Following on from the Singapore experience, Government endorsement ofelectronic trade in general and EDI in particular is instrumental in promoting andinstitutionalizing EDI adoption nation-wide.

Trading Partners Requirements.

To ensure successful implementation, incorporating trading partners requirements is alsocrucial. The success of Her Majesty’s Customs and Excise Authority in the United Kingdomin endorsing electronic trading has been in addressing and integrating its trading communityrequirements in all activities related to the collection and dissemination of information(Sawhney and Williams, 1994). Such partnership can be seen as a fundamental requirement tofacilitate later phases of EDI implementation and community development. Accommodatingfor trading partners requirements, particularly in terms of standards compatibility is crucial indeveloping the EDI community.

Technical strategy.

Technology transfer, with respect to actually developing a national EDI industry in general oradopting EDI on an organizational or institutional level is not problematic. In fact, someimmediate 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 isimportant that to have a national vision and a clear strategy as in the case of Singapore. It isalso asserted that the strategy should not be confined to the technical aspects, but also includethe ‘know-how’ critical to successful development such as the role of Value Added NetworkServices (VANS), EDI associations and co-ordinating bodies is founding a national EDIindustry.

It is worth noting that the wide-use of the Internet is also potentially providing small andmedium size enterprises with a cost effective means of adopting EDI. There are some seriouslegal and security implications related to the use of electronic trading on the Internet, which lies

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beyond the scope of this paper, yet technically the Internet may provide an interim steppingstone towards the full appropriate adoption of electronic trading.

Policy Implications

The study conducted by the authors suggests that the success of outlining a national EDIstrategy will primarily depend on integrating business requirements, Government intervention,infrastructure efficiency and capacity to change to cater for changing market and technicalrequirements.

Estimated costs and changes to regulations are outside the scope of this study, given thecomplexity 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 nationalbusiness and economic needs and requirements,

to incorporate international requirements to streamline trade processes to reduce thetrade information processing cycles to a minimum critical path thus achieving maximumeconomies and optimum trade competitive advantage (Schware and. Kimberley, 1995) or tocater to the requirements of national industry sectors, based on their perceived competitiveand efficiency benefits. Unless there is recognition of business drivers as the main motivationalfactors 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 successfulimplementation. Schware and Kimberley (1995) endorse the requirement for increasedawareness and education and call for the establishment of an awareness and educationprogram as possibly the most important key to success. They assert that lack of such aprogram is most likely to cause failure and delay EDI implementations.

Promoting EDI education will contribute towards human capacity building. It will not only helpdevelop the skills and expertise required for maximizing the use and potential of EDIimplementations, 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 ofthe outcome and benefits. This form of leadership and commitment at the highest policymakinglevels, in collaboration with the business community having a unified commercial interest, willensure successful EDI diffusion across the various industry sectors.

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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 tradingrequirements, to secure funds or act as a catalyst in developing the EDI community byendorsing an intergovernmental and/ or public sector electronic trading strategy is invaluable.

Development of the infrastructure does necessarily need to be centrally funded by theGovernment, but could be in the form of an endorsement or partnership with the privatesector. The most important aspect is to institutionalize electronic trading and ensure aconducive environment for community development.

In some cases, such as in developing countries, because of the initial size of the market, orbecause of technology transfer restrictions, it may be necessary for the Government to fundthe value added network service or undertake its duties in the initial stages of establishing theEDI industry.

National Infrastructure Development.

A primary requirement for developing a national EDI industry is the availability of a sufficientlysophisticated, competitive and reliable data communications network and value-addednetwork services as previously discussed.

Although the EDI technology itself is transferable, local expertise is still required to applydomestic requirements, definitions and restrictions. This is applicable in terms of defining EDIapplications and standards as well as in developing the marketing and community developmentstrategies. Developing the infrastructure should also take into account the know-how transferto include factors critical to successful EDI adoption on a national level including the role ofVANS and EDI associations.

Capacity to Change.

The national strategy should include an institutional mechanism for monitoring and trackingchanging business and technical requirements in order to cater for the required changes, inlegislation for example, effectively and efficiently.

CONCLUSION

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This paper discussed the issues critical to developing a national EDI strategy to aid nations inthe early stages of adopting EDI.

Introducing EDI within trade facilitation initiatives, in Customs and Excise applicationsspecifically will not only reap efficiency gains but also embrace national goals to integrate in theglobal economy and increase revenues generated as a result of increased efficiency.

Critical to successful EDI implementation is accommodating the contextual environment andnot confining the strategy to technology transfer to building the EDI industry. The foundationmust be demand driven to cater to specific national requirements, defined within a clearnational strategy as in the case of Singapore. It is estimated that successful implementation ofEDI within the CEA in Egypt may result in increasing the revenue generated by the authorityby a $350 million annually (Zorkani, 1997).

The research findings also indicate that Government endorsement of electronic trading isinstrumental 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 changeas illustrated in the CEA case study. The extent of awareness of EDI benefits and capacity toaccommodate 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 theCustoms and Excise Authority in Egypt.

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