6th August 2022

Digital Transformation in the Public Sector Week – Border Control

Guest blog written by Edward C. Cole, CEO, Founder at Katlas Technology as part of the Digital Transformation in the Public Sector Week #techUKDigitalPS

Source acknowledgement- The United Nations Centre for Trade Facilitation and Electronic Business (UN/CEFACT)

Governments around the world are responding to the democratic desire to use global resources more responsibly and sustainably. This manifests itself in regulations and guidelines that are open to interpretation and punishable with reputational risk and penalties that dramatically increase the ‘cost of trade’.

Problems identified:

  1. Measurement Neither carbon footprint nor human rights (UFLPA) are included in the all-in fulfilment metrics.
  2. Verification Computer readable regulations to support automation are missing. All paper today.
  3. Compliance Reporting & Audit Screening, monitoring and ‘classification’ change management for export licences is not connected and automated. Identity & consent is missing.
  4. Exclusion / Cost SMEs are priced out of international markets due to a lack of shared services and in-house expertise.

The UK government is seeking ways to reduce the cost of trade with Commonwealth relationships that have been somewhat secondary and inefficient since EU membership in 1973. Th challenge is to tackle these inefficiencies – and to justify the all-in environmental costs and ensure that UK human rights values are adhered to.

Cost of Trade

The “cost of trade” roughly doubles the landed price of goods in export markets (compared to domestic wholesale prices) with around one third of that cost related to non-tariff border costs.

Trade Finance: At around $1.7 Trillion USD, the trade finance gap (i.e. trade finance requested but not approved) is heavily weighted against small and medium enterprises (SMEs) and acts as one of the most significant barriers to SME participation in cross-border trade.

Counterfeit Goods:
At around 3% of world trade volume, the value of fake / illicit goods trade is at least $600Bn and rising. The consequences include market losses for exporters of genuine goods and potential reputational damage for entire market segments.

With annual carbon emissions at around 25 billion tons and with approximately 25 million people in forced labour, and 400 million tons of hazardous waste produced annually, there is a rapidly increasing consumer demand for sustainable products.

Border Control:
With border authorities only able to inspect around 1% of around 1 billion sea container and a much smaller proportion of 100 billion parcel shipments per year, the challenge of managing border risk against illicit goods and biosecurity threats has never been greater.

Cost of trade breaks down: 

  • Just under half of the cost of trade is retail & wholesale distribution costs (i.e. intermediary markup)
  • Approximately 20% of the cost of trade is international freight and transit transport costs.
  • The remaining 30% is traceable to various border related barriers including tariffs, compliance, currency, language, information, and security. Only a small proportion are tariffs

The OECD found SMEs contribute around 60 percent of goods traded and represent 80 percent of consignments shipped. Therefore, improving the availability of trade finance to SMEs (and hence to export markets) can have a large impact on national balance of trade.

Solutions Found:

Required is a common system for computer sharing of verifiable credentials across multi-stakeholder, multi-regulated, licenced international trading activities.  For this 3 essential pillars for self-service and automation on web 3.0 must be in place: 

  1. Zero-trust: ability to separate issuer from verifier without human eyeball. 
  2. Interoperability: open attestation and an absence of walled gardens
  3. Secure network by design: safety and surety as a shared ‘public’ infrastructure

Leadership (Government):

Individual companies cannot deliver efficiencies in the supply chain single-handedly and would not be trusted to do so. Building collaborative systems require leadership and integrity – it is the time for the Public Sector to influence and support the design of frameworks for collaboration across government and enterprise in the spirit of The Rochdale Pioneers and Lloyds of London, to deliver the benefits of membership participation and shared ownership.

Previously membership clubs, institutes of excellence, mutual societies and charitable foundations have facilitated common services that lacked sustainable democratic representation and the technology tools to support such governance. Today, blockchain secured DLT promises to make Web3.0 the future for enterprise efficiency.

Should the government look to the metaverse as a paradigm for service delivery?

It all comes down to TRUST or better still TRUSTLESS. How do you deliver systems that are not controlled by one central authority with the power to control who sees what, where, how and when, to discriminate according to personal and departmental prejudice and to sit on knowledge as a means of influence.

The Web3.0 dream is a blockchain secure distributed ledger technology (DLT) where authority is dispersed across the ecosystem in such a way that services can be accessed without intermediaries, with micro-payments to incentive even the smallest contributions and information made available to anyone who plugs-in using a set of shared permissions. A future where everyone has multiple digital personalities tied to one digital entity with smartphone access to your data and functional capabilities – calling AI through Hero Avatars such as Usain Bolt and Emma Raducanu to inspire behavioural change and better health.

In future the government won’t store individual and population data in antiquated systems, it will instead request permission to access entity and individual wallets running the reports and metrics they need remotely and respectfully.

In this metaverse, the government is able to monitor the effectiveness and adherence of regulations and predict the outcomes of policy change – a positive ROI.

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