Easing Access to Global Markets: Trade Logistics Advisory Program Washington DC,April 6, 2011 Uma...

Easing Access to Global Markets: Trade Logistics Advisory Program

Washington DC,April 6, 2011

Uma Subramanian Global Product Leader, Trade LogisticsInvestment Climate Advisory Services

World Bank Group

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

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


The Case of Rwanda: 69 days to import (2008 data)

Documentation and Pre-arrival

procedures 25 days

SEA

MOMBASSA PORT

MOMBASSA PORT GATE

MALABA (KENYAN BORDER)

MALABA (UGANDAN BORDER)

GATUNA (UGANDAN BORDER)

RWANDAN BORDER

DRY PORT (KIGALI)

DRY PORT GATE

10 days

7 days

15 days 2 days

5 days

1 day

2 - 3 days

Over 50% time accounted

for by regulatory

procedures

Source: Trade Logistics project baseline

1 day


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


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


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%OECD 1.7%

For Colombia this is equivalent to US $740 millions

Source: Forthcoming research paper (Subramanian, Anderson and Lee (2011)

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

8


What is the focus and business model?

• Identifies quick wins to jump-start deeper systemic reforms in response to client demands

• Explicit focus on investment climate with strong synergies with World Bank Group departments and potential IFC investments (cold chains, ports, etc.), trade finance and others

• Ties 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

Objective to assist countries improve access to markets through

efficient, easy and accountable import and export procedures

Focused and targeted areas of work:

Simplification and harmonization of procedures including documentation

Risk-based management systems for inspections

Automation/ Single Window Systems for trade


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

S. Asia, Caribbean, S.E.Europe

Full Fledged projects and Solutions to systemic

issues (3-4 years)Colombia

Systemic Reform


Results: over 80 improvements since launch July 2007

11

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

Corp.Performance Award2008

2009

2010

Rwanda, Liberia, Colombia, Burkina Faso, Sudan

32

Over 35 Rwanda, Liberia, Colombia, Burkina Faso, Sudan, Mali, Yemen, Honduras, Peru


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

12

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


Quick response, quick wins helped generate reform momentum – we achieved 5 reforms in the first 8 months of the program

Strong political support at the highest level. The RICP Program had the President’s support in Rwanda.

Committed counterparts that have vision, credibility and mandate to bring multiple agencies together. The Rwanda Revenue Authority led an extremely reform minded Trade Logistics Working Group

Dynamic private sector pushing for change. Importers/Exporters, freight forwarders etc provided critical inputs into what they wanted to see improved.

Regular stakeholder dialogue ensured right priorities for action. Have had 2 workshops with a third scheduled in mid March.

What Have We Learned in Rwanda?

Partnership driven: Mobilize world class expertise from across WBG, international agencies (IMF, WCO) etc and the private sector to deliver solutions.


Effective public-private dialogue has allowed for greater momentum in the implementation of reforms. All parties feel part of the decision and implementation process.

Strong support from central and local government has made the implementation of changes easier. Clear communication at all levels of government keeps people informed in a transparent manner.

Government has requested broadening the initial scope of the program given the effectiveness of the program in demonstrating results.

What have we learned in Colombia?

Facilitate internal champions to support reforms: through strong communication among stakeholders at all levels


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)

15


Metrics:

Increases in exports/trade

Cost savings to firms

Increase in private investment

Emphasis on Impact Evaluation-

16


Measuring Results in Colombia

This includes: reduced inventory holdings (raw, intermediate, finished) in storage and reduced capital carrying charge in transit, and cargo loss/damage.

Indirect benefits such as induced growth would add to this benefit well in excess of the estimates above.

What does this reduction in time to trade mean for one

Colombian firm?

Time to Trade (days) Exports Imports

2008 24 20

2009 14 15

Even conservative partial estimates of direct cost savings to a medium sized firm with $150 million revenue is $3.5 million

Inferred value for the industry: $28 million

Source: Ongoing research (Subramanian (2010))

Estimates of direct cost savings to a fertilizer plant with $260 million revenue is $2.7 million


Rapidly Expanding Reach…

18

Kenya,Colombia

Liberia, Mali, Burkina Faso

Rwanda

Armenia

Peru

Caribbean (regional) S.E.Europe (regional)

Yemen

Honduras

Zambia

South Asia (regional)

Malawi Mauritius


Aligning with new corporate priorities:

19

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.


Aligning with new corporate priorities:

20

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.


Thank you!

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