Easing Access to Global Markets through Trade Logistics Advisory Program Conference on Moving...

Easing Access to Global Markets through Trade Logistics Advisory

Program

Conference on Moving Products from Firms and Farms- Themes in Trade Logistics

Uma Subramanian Program Manager, Trade Logistics

Investment Climate Advisory Services , WBG Preston Auditorium, June 7, 2010

THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency2

What is the rationale for the Trade Logistics Advisory Program?

Governments and private sector energized to improve trade logistics services

Overarching rationaleGlobalization and the desire to be part of global networks

Attracting private investment is a key objective for developing countries

Faster, leaner & responsive supply chains that are essential for Improving export/trade performance

Improved export competitiveness

THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency

Time to trade: Selected LAC Countries

Brazil Argentina Colombia Bolivia Uruguay Ecuador Chile Peru Paraguay0

5

10

15

20

25

30

35

1213

14

19 1920

2123

33

16 1614

2322

29

21

24

33

2010 Export 2010 Import


Doing Business 2010 – Trading Across Borders

Mauritius

Kenya

Tanzania

Uganda

South Africa

Rwanda

Ethiopia

Sudan

DRC

Zambia

Burundi

0 10 20 30 40 50 60 70 80

DB 2010 Time to import (days) DB 2010: Time to export (days)

Very high trade transactions

Low trade transactions

High-medium trade transactions

Time to trade: Selected African Countries


29.4

11.36 10.636.9

12.7

6.28 7.3111

0

5

10

15

20

25

30

35

40

45

Less than US$ 5 M US$ 5 M to US$ 50 M US$ 50 M to US$ 500 M More than US$ 500 M

Inventory Management & Warehousing Transport & Distribution

42

18 18 18

Source: Centro Logístico de Latinoamerica, Bogota, Colombia. Benchmarking 2007: Estado de la Logística en America Latina Anexo, María Rey LogisticSummit 2008

Domestic logistics costs: Disproportionate burden on small firms


Reducing Transactions Time Has a Direct Impact on Trade

A 10% reduction

export time

Increases Export of … by …Sub Saharan Africa 6.1%South Asia 5.8%East Europe & Central Asia 5.0%Middle East & N. Africa 4.1%East Asia and Pacific Islands 4.1%Latin America and Caribbean 3.5%

For Colombia this is equivalent to US $740 millionsAt a global level this implies increased trade by over $600 billions

Source: Forthcoming research paper (Subramanian, Anderson and Lee (2010)

Direct implications for growth, private investment, jobs and poverty reduction

6


Import Procedures (days) (DB)

Documents preparation 37 2513

11

Customs clearance and tech control 15 7 3 3

Ports and terminal handling 13 7 8 8

Inland transportation and handling 30 30 18 13

Total (days): 95 69 42 35

2008 2009

Measuring Results- in Rwanda

Rwanda

Even conservative partial estimates of direct cost savings to the firm is $1 million (14% of net revenue).

This includes reduced inventory in storage and reduced capital carrying charge in transit.

Indirect benefits such as induced growth would add to this benefit well in excess of 14% of revenue.

What does this reduction in time to import mean for one Rwandan firm?

Source: Ongoing research (2009)

20102007


At least 40%-60% of time to trade is due to ‘software’

Honduras Peru Kenya Tanzania Rwanda

Days % Days % Days % Days % Days %

Documents processing 14 70% 12 53% 13 45 14 58 17 40

Customs clearance/ tech.control 4 20% 5 21% 6 21 4 17 2 5

Port and terminal handling 1 5% 3 13% 6 21 4 17 6 14

Inland transport 1 5% 3 13% 4 14 2 8 17 40

Total 20 23 29 24 42


Basics of the Trade Logistics Advisory Program

Simplification and harmonization of procedures including documentation;

Technical support to introduce risk-based management systems for inspections

Automation of trade clearance procedures/ Single Window System

Focus on reform implementation9

Objective: to assist countries improve access to markets through efficient, easy and accountable import and export procedures


What is our business model?

• Implement quick wins in Phase 1 to jump-start deeper systemic reforms

• Engage private sector right through the project cycle

• Tie results to objective outcome measurements.

Examples: time, cost, number of signatures, number of documents, percentage of

containers inspected.

• Ex-ante articulation of feasibility vs. relevance matrix with framework to measure Cost- Benefit ratio


Trade Logistics Advisory Program: Delivery Models

Rapid Response

Regional Solutions

Catalyze reform momentum through quick wins and high

level championship(1 year program)

Regional framework combined with country level

implementationGreater reach and cost-effective

solutions

Caribbean

Full Fledged projects and Solutions to systemic

issues (3-4 years)Colombia

Systemic Reform


Results: 54 improvements since launch July 2007

12

10

Countries Improvements Highlights

Rwanda, Liberia

Has become a core product of advisory services

Partnering with over 7 agencies/departments

Identified by IFC for global scale up Presence in 9-10 countries + 3

Regional. 12-15 countries in FY11. Corp. Performance Award

First 2 pilots in post conflict countries with results

Begun with 5 donors! Corp.Performance Award

2008

2009

2010

Rwanda, Liberia, Colombia, Burkina Faso, Sudan

32

18

(First half of FY10)

Rwanda, Liberia, Colombia, Burkina Faso, Sudan, Mali, Yemen, Honduras, Peru


22 improvements till Dec 2009: What do results mean in Liberia?

13

The growth and profitability of her business relies on the speed at which she can clear her imported goods through Monrovia’s Freeport. But in the past, Choko says, this process has not been easy. “Clearing customs used to be hard, it could take almost 3 months to get the goods from the container with lots of people asking for money for various things.” Liberia is a highly import oriented country, relying on the port of Monrovia, ‘Freeport’, to provide key commodities and staples. Yet the customs and excise system in use was rife with constraints and challenges and it could take months before businesses could take delivery of their containers.

Cont…

Choko Harris – Entrepreneur and Small Business Owner

Choko Harris has been involved in a family business since she was a teenager. Encouraged by her mother to start a business in 1982, with $10 in her pocket she began selling palm oil off a table on the street. Today she owns two stores selling plastic goods and regularly visits China and Thailand to procure products while employing 9 members of her family.

“Clearing customs used to be hard, it could take almost 3 months to get the goods from the container with lots of people asking for money for various things.”

- Choko Harris


A total of 17 reforms since 2008! Examples include: Implementation of automatic cancellation and validation procedures for

inward and outward transit bonds.

What does it mean? Frees up working capital for traders.

Creation of risk management and intelligence unit, and implementation of risk based inspections and clearance regime.

What does it mean? Compliant low risk traders get speedy border clearance saving time and money.

Launch of a one bank counter for Majerwa (dry port) and Customs.

What does it mean? Simplifies the trade payment system for firms.

Removal of the import and export license.What does it mean? One less document and less red tape.

Rwanda: Reforms for the private sector

14

Focus on Reform Implementation: Practical reforms that make a difference that are linked to private sector activities.


The Colombia program was the pilot for the LAC region. To date, the program has achieved 15 trade logistics related reforms including:

More than 25 pieces of individual legislation have been issued aimed at facilitating trade.

Approvals and requests channeled through the Single Window for Foreign Trade have implied a 30% reduced time for trade transactions.

Implementation of risk based inspections system will allow for further reductions in time and the damage done to cargo.

Colombia: A model for aspiring countries

15

Results and measurement driven: Donors, clients and internal stakeholders can all measure the bang for the buck


We’ll get that straight from the reformers and innovators!

Some insights:

Quick response, quick wins helped generate reform momentum

Effective public-private dialogue allowed for ensuring right priorities for action.

Strong top level leadership and committed counterparts with vision, credibility and mandate to bring multiple agencies together

Clear and regular communication at all levels.

World class expertise technical support bringing global good practice

What worked in making these improvements/ reforms happen?

16


Rapidly Expanding Reach…

17

EAC – Kenya, BurundiColombia

Liberia, Mali, Burkina Faso

Rwanda

Armenia

Peru

Caribbean (reg) S.E.Europe (reg)

Yemen

Honduras

Zambia

South Asia (regional)

Malawi


Advisory Panel

Project

Delivery

Team

Core Team

Provide Clients with World Class Expertise by…

Leveraging partnerships and expertise both within and outside the World Bank group

Core Product Development and delivery team -- includes staff from FIAS, IFC Facilities, DBRA team and the World Bank

PRODUCT SUPPORT GROUP

For Project Delivery a larger group includes:

Donors (Norway, Netherlands, DFID, Spain, SIDA, CIDA, SECO, Italy, Japan)

WBG (Doing Business, WB and IFC Facilities, WB trade, GICT, WB transport, IFC Investment and Advisory groups)

Development agencies (WCO, IMF, US Dep of Commerce)

Private sector experts drawn locally and globally

An Advisory Panel of experts -- WBG internal as well as development / International agencies (donors, IMF,WCO)

18


Collaborations across WBG

19

Region Country Status Partnership

AFR

Burkina Faso Systemic reform project ongoing WB Transport project

Liberia Systemic reform project ongoing Port reform project, PREM, IMF

Rwanda Systemic reform project ongoing EATTFP, SME project

Mali Rapid response intervention DBRA, MNA Facility

Kenya Work beginning EATTFP, WB PREM

EAC Scoping ongoing WB Transport, PREM TradeAFR PREM

LAC

Colombia Systemic reform project DPL, IFC Port project

Caribbean Initiating trade workstream WB PREM DPL, DBRA, IFC

Honduras Rapid response interventionSystemic project being developed DBRA

Peru Systemic reform project being developed IFC, WB PREM

ECA

Armenia Rapid response project WB PREM, IFC, DBRA

Kazakhstan Short policy note as cross support to WB WB PREM, DBRA, WB PSD

Montenegro Rapid response intervention DBRA

Albania Rapid response intervention DBRA, WB

MNA Yemen Initiating work MNA Facility


Aligning with new corporate priorities:

20

Trade Logistics with Agribusiness/ Food security:• Regional and national supply chains bridging gap between food

production and food security by creating and linking growth nodes and markets.

• Streamlining NTBs and thus market access for key agribusiness produce in client countries

• Regional projects which aim to harmonize and rationalize trade supply chain activities across countries to maximize impact and reduce duplication.

• Benefits in particular will accrue to small poor economies whether landlocked (Rwanda in the EAC) or island nations (Caribbean region) where food imports are a large part of trade volumes.


Supply Chain Analysis of Pineapples Imported into St. Lucia

10%

Producer Price

LandTransport

Ocean Transport+ Port CR

Port Miami

Wholesale Consolidated

Cost

Other Costs

OceanTransport + Port SL

Duties

LandTransport & Handling

Land Transport+ Storage

Retail Profits+ Other Costs

90%

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Farm Gate(CR)

CR FAS Ocean toMiami

Miami Port MiamiWarehouse

Miami FOBPrice

Ocean to St.Lucia

St. Lucia PortWholesale DistributionRetail Price

Costa Rica (CR) ------------> --------------> St. Lucia (SL)

US

$/lb

60% of the landed cost is due to transportation and logistics

Source: Logistics, Transport and Food Prices in LAC (2009) and OECS Backward Linkages Study (2008)

Farm Gate price

Landed cost


Aligning with new corporate priorities:

22

Trade Logistics with Climate Change: McKinsey study on climate change for India showed commercial vehicles were the largest contributor to carbon emissions.

Exploring green supply chains- reduction of carbon footprint along the supply chain

Conflict affected countries: First 2 pilots, Liberia & Rwanda. Continued engagement with other conflict affected countries.


Product Development and KM

23

Smart Lessons Competition – Results will be announced today!

Peer to peer learning events

Impact evaluation approach being tested in the project countries (Direct cost savings to firms; indirect projections of increases in private investment)

Research paper on impact measures of trade logistics improvement to be finalized (FY 2010)

Guidelines to help with rapid assessment, standardization and replicability;

Case Studies on Trade Logistics: Best-Practices on Technical and Reform processes

Post-crisis response: Identifying high-impact, quickly deployable solution packages


Thank you!

[email protected]

mailto:[email protected]

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