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
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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
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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
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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
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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
$/lb
60% of the landed cost is due to transportation and logistics
Source: Logistics, Transport and Food Prices in LAC (2009) and OECS Backward Linkages Study (2008)
Farm Gate price
Landed cost
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At least 40%-60% of time to trade is due to ‘software’
Honduras Peru Kenya Tanzania Rwanda
Days % Days % Days % Days % Days %
Documents processing 14 70% 12 53% 13 45 14 58 17 40
Customs clearance/ tech.control 4 20% 5 21% 6 21 4 17 2 5
Port and terminal handling 1 5% 3 13% 6 21 4 17 6 14
Inland transport 1 5% 3 13% 4 14 2 8 17 40
Total 20 23 29 24 42
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29.4
11.36 10.636.9
12.7
6.28 7.3111
0
5
10
15
20
25
30
35
40
45
Less than US$ 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
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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
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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
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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
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Results: over 80 improvements since launch July 2007
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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
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Over 35 Rwanda, Liberia, Colombia, Burkina Faso, Sudan, Mali, Yemen, Honduras, Peru
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22 improvements till Dec 2009: What do results mean in Liberia?
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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
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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.
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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
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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)
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Metrics:
Increases in exports/trade
Cost savings to firms
Increase in private investment
Emphasis on Impact Evaluation-
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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
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Rapidly Expanding Reach…
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Kenya,Colombia
Liberia, Mali, Burkina Faso
Rwanda
Armenia
Peru
Caribbean (regional) S.E.Europe (regional)
Yemen
Honduras
Zambia
South Asia (regional)
Malawi Mauritius
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Aligning with new corporate priorities:
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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.
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Aligning with new corporate priorities:
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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.
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Thank you!