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Authorized Economic Operator Programs

In the Islamic Countries:

Enhancing Customs-Traders Partnership

77

in voluntarily joining an AEO program and thereby obstructing improvements in its own and

country’s supply chain security.

Challenge 7- Inflexibility and prescriptive nature of security requirement may become

insurmountable barriers for SMEs and prohibit their participation in the program.

Traditionally, small and medium-sized enterprises are defined as firms with 10-250

employees. WTO (2016) reports that SMEs made up two-thirds of formal non-agricultural

private employment in 99 emerging and developing countries using World Bank Enterprise

Surveys. Moreover, export intensity (export/sales) of SMEs is just 7.6 percent in the

manufacturing sector, as opposed to 14.1 percent for large manufacturing companies.

According to WTO (2016), Africa has the lowest export intensity of SMEs at 3 percent,

compared to 8.7 percent for developing countries in Asia. Services export intensity of SMEs is

very small (0.9 percent) as opposed to 31.9 percent for large companies.

The OIC AEO programs seem to favor large businesses. This is due to the fact that the costs

involved in upgrading security systems to meet AEO requirements seem astronomical for

SMEs. Requiring all-over fencing for all AEOs, 24-hour security services and constant tracking

technology for cargo may become prohibitive barriers for the SMEs.

There is a low level of convergence in terms of SMEs’ involvement in the OIC AEO programs.

This may be due to lack of connection between SMEs and Customs Authorities during AEO

design and implementation. The percentage of programs in the OIC economies with specific

SME participation during design is not high. However, many countries do have outreach plans

as discussed in Chapter 4.

A Brief Evaluation of the Convergence Analysis

In the previous sections of this Chapter, a very detailed horizontal (variable level) and vertical

(country level) analyses of the comparator matrix that has emerged as a result of the survey

responses were presented.

The results of these analyses can be used to assess the regional MRA readiness of OIC Member

States with each other. Furthermore, APEC comparisons can be employed to gain insights

about how these two blocs stand with respect to each other in terms of AEO design and

implementation. There may be lessons to be learnt for both parties.

The calculated average of 75 percent vertical convergence among OIC Member States shows

that these 8 countries resemble each other in many ways. Some of these countries have

already involved in regional MRAs (Agadir Agreement) with each other and they show a higher

degree of convergence.

For future MRAs, the horizontal (variable-level) reading of the matrix gives clues about the

success and challenge factors in the design and implementation of AEO programs across

countries. As a result, the horizontal readings provide insights about AEO features where there

is a pressing need for harmonization before attempting a bilateral/regional MRA between OIC

Member States.