CONNECTING TO COMPETE - European Commission€¦ · 27-03-2014 · LPI is a survey scores are Confidence Intervals 20 2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU D BEL BR E X

March 27, 2014

Dr. Jean-François Arvis

Senior Economist, The World Bank

Prof. Lauri Ojala

University of Turku, Finland

CONNECTING TO COMPETE The 2014 Logistics Performance Index

Transport Business Summit 2014

Brussels

Outline

1. Why care about logistics?

2. What is the Logistics Performance Index?

3. LPI 2014 Results

4. Key messages

5. The LPI’s role in the policy dialogue

6. How the World Bank supports countries in

logistics pollicy-making

2 World Bank LPI, Transport Business Summit 2014, Brussels

Why care about logistics?


4

50%

70%

90%

110%

130%

150%

170%

190%

210%

230%

250%

2 2,5 3 3,5 4 4,5

LPI score (2010)

Country trade costs of goods value vs. LPI score

Why Logistics Matters

Supply chain bottlenecks are the primary cause of

friction in trade (trade costs). Reducing them by half

would raise trade by 15% and production by 5% globally.

World Bank LPI, Transport Business Summit 2014, Brussels

Ave

rag

e t

rad

e c

osts

of

go

od

s v

alu

e

Logistics Performance and Connectivity

Elasticity of trade costs

0 0,1 0,2 0,3 0,4 0,5 0,6

Distance

Common Border

Common Language

Same RTA

Tariffs

Shipping Connectivity

Air Connectivity

Logistics Performance

Cost of Starting Business

Exchange Rate

Domestic

Costs

Bilateral

Costs

Source: World Bank, Trade Costs in the Developing World 2013. (RTA = Regional Trade Agreement)

5

Besides distance, connectivity and logistics performance

matter more than other trade barriers in boosting trade.

Geography and

(most of) shipping

connectivity are

out of a country’s

control, but policy

decisions are not.


Logistics costs impact productivity

Reliability is often more important than freight costs

Logistics costs increase with decreasing logistics performance. Most of this increase

comes from lower reliability and the need to increase inventory (“other costs”).

6

Firm-level logistics expenditures as % of sales in 2011-2012

Sources: Authors, for Germany: TU Berlin, for Brazil: ILOS, for Finland: Turku School of Economics

7%

7%

5%

5%

13%

9%

7%

4%

0% 5% 10% 15% 20%

Kazakhstan

Estonia

Finland

GermanyTransport cost

Other logistics costs


What is the

Logistics

Performance

Index

(LPI)?


Point of Origin

Seller’s Factory

Alongside

Vessel Delivery

to Dock

Exporting Country

Delivered to

Buyer’s

Warehouse Frontier/

Border

Supply Chain Framework & the six LPI dimensions

Unloaded

on Dock

Importing Country

Customs

Infrastructure

Services

Quality

Timeliness

International

shipments

Tracking and Tracing


LPI outline

Built on > 5,000 country assessments

by over 1,000 freight forwarders &

logistics professionals worldwide

Survey in cooperation with partners

Respondents rate logistics performance

of own country and 8 other countries on

a scale of 1 to 5

Coverage: 160 countries in LPI 2014

Published every 2 years

LPI editions: 2007, 2010, 2012 & 2014

Partnerships


What do we measure?

Here’s a sample question of the Domestic LPI:

Source: LPI 2013/2014 Survey

10

The LPI survey is based on expert

assessments of logistics professionals

(perception-based) World Bank LPI, Transport Business Summit 2014, Brussels

LPI 2014 Results


12

LPI data and report at: lpi.worldbank.org


Good News: All countries performing better

13

With the right

investment and

policies, lower income

countries can also be

high performers.

30

40

50

60

70

80

90

Bottomquintile

Fourthquintile

Third quintile Secondquintile

Top quintile

Perc

en

tag

e o

f h

igh

est

LP

I sco

re

2014 2012 2010 2007

Countries in

bottom quintile

saw the largest

improvements

(2007-2014).

LPI score as percentage of highest LPI score by LPI quintile;

2007, 2010, 2012 and 2014 World Bank LPI, Transport Business Summit 2014, Brussels

Income level helps little without aligned policies

Countries by LPI 2014 overall score and GDP/capita


LPI 2014: Top 10 European performers

15

1

2

3

4

6

8

11

13

17

18

4,1

4,0

4,0

4,0

4,0

3,9

3,9

3,8

3,8

3,7

0 5 10 15 20

Germany

Netherlands

Belgium

United Kingdom

Sweden

Luxembourg

Ireland

France

Denmark

Spain

LPI rank LPI score


LPI 2014 rank out of 160 economies

LPI is a surveyscores are Confidence Intervals

16

2,5

2,7

2,9

3,1

3,3

3,5

3,7

3,9

4,1

4,3

4,5

DE

U

NL

D

BE

L

GB

R

SW

E

LU

X

IRL

FR

A

DN

K

ES

P

ITA

AU

T

FIN

PR

T

PO

L

CZ

E

HU

N

LV

A

SV

N

ES

T

RO

M

SV

K

GR

C

LT

U

BG

R

ML

T

HR

V

CY

P

Score 2014


EU 28 sorted by LPI 2014 score

LPI score range: 1 = lowest; 5 = highest


17

2,5

2,7

2,9

3,1

3,3

3,5

3,7

3,9

4,1

4,3

4,5

DE

U

NL

D

BE

L

GB

R

SW

E

LU

X

IRL

FR

A

DN

K

ES

P

ITA

AU

T

FIN

PR

T

PO

L

CZ

E

HU

N

LV

A

SV

N

ES

T

RO

M

SV

K

GR

C

LT

U

BG

R

ML

T

HR

V

CY

P

Score 2014

Score 2012





18

2,5

2,7

2,9

3,1

3,3

3,5

3,7

3,9

4,1

4,3

4,5

DE

U

NL

D

BE

L

GB

R

SW

E

LU

X

IRL

FR

A

DN

K

ES

P

ITA

AU

T

FIN

PR

T

PO

L

CZ

E

HU

N

LV

A

SV

N

ES

T

RO

M

SV

K

GR

C

LT

U

BG

R

ML

T

HR

V

CY

P

Score 2014

Lower bound 2014

Upper bound 2014





19

2,5

2,7

2,9

3,1

3,3

3,5

3,7

3,9

4,1

4,3

4,5

DE

U

NL

D

BE

L

GB

R

SW

E

LU

X

IRL

FR

A

DN

K

ES

P

ITA

AU

T

FIN

PR

T

PO

L

CZ

E

HU

N

LV

A

SV

N

ES

T

RO

M

SV

K

GR

C

LT

U

BG

R

ML

T

HR

V

CY

P

Score 2014

Score 2012

Lower bound 2014

Upper bound 2014





20

2,5

2,7

2,9

3,1

3,3

3,5

3,7

3,9

4,1

4,3

4,5

DE

U

NL

D

BE

L

GB

R

SW

E

LU

X

IRL

FR

A

DN

K

ES

P

ITA

AU

T

FIN

PR

T

PO

L

CZ

E

HU

N

LV

A

SV

N

ES

T

RO

M

SV

K

GR

C

LT

U

BG

R

ML

T

HR

V

CY

P

Score 2014

Score 2012

Score 2007-2014

Lower bound 2014

Upper bound 2014




Aggregated data for 2007-2014 less volatile


0

10

20

30

40

50

60

70

80

DE

U

NL

D

BE

L

GB

R

SW

E

LU

X

DN

K

FR

A

FIN

IRL

AU

T

ES

P

ITA

PR

T

PO

L

CZ

E

HU

N

SV

N

LV

A

SV

K

ES

T

RO

M

BG

R

LT

U

GR

C

CY

P

ML

T

HR

V

Rank 2014 out of 160

Rank 2012 out of 155

Weighted rank 2007-2014 out of 166

EU 28 sorted by weighted*

LPI 2007-2014 rank

*) Weights: 2014 = 53.3%; 2012 = 26.7%; 2010 = 13.3%; 2007 = 6.7 %

LPI 2014: Top 10 performers by income group

22

2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Malaysia

China

Turkey

Hungary

South Africa

Thailand

Romania

Panama

Bulgaria

Mexico

Top 10 upper middle-income

2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Vietnam

Indonesia

India

Philippines

Ukraine

Egypt, Arab Rep.

El Salvador

Pakistan

Nigeria

Guatemala

Top 10 lower middle-income 2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Malawi

Kenya

Rwanda

Cambodia

Burkina Faso

Liberia

Ethiopia

Nepal

Burundi

Bangladesh

Top 10 low-income

2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2

Germany

Netherlands

Belgium

United Kingdom

Singapore

Sweden

Norway

Luxembourg

United States

Japan

Top 10 overall By overall LPI score


Key messages


Key messages from the LPI 2014

• The gap between the best and worst logistics performers is

slowly narrowing, confirming trends from LPI 2007-2012 reports.

• Although a country's level of development plays an important role

in its logistics performance, policies do matter. Over-performing

countries such as Indonesia have carried out targeted reforms to

improve the efficiency of their logistics.

• In terms of trade facilitation, customs show a steady improvement

across the board but other border control agencies lag behind.

• Weakest link paradigm: The challenge is to get right a number

of reforms in parallel and in several areas. This explains a lot of

churning in scores and rank in the middle of the sample.


The “Services Gap”

25

0

2

4

6

8

10

12

Low income Lower middleincome

Upper middleincome

%-change in LPI

component as measured

against the highest performer, 2007-2014

Customs Infrastructure Quality of logistics and services

Supply chain efficiency depends

on the quality of private services

moving the goods.

If logistics service delivery is

poor, even good physical

connectivity is not enough.


Persistent & large differences in border process efficiency

26

The import lead

time for

port and airport

supply chains is

more than twice

as long in

low-performing

countries as in

high-performing

ones.

Import lead time in days (port/airport)

by LPI quintile

0

1

2

3

4

5

6

7

Bottomquintile(lowest

performance)

Fourth quintile(low

performance)

Third quintile(average

performance)

Secondquintile (highperformance)

Top quintile(highest

performance)

Imp

ort

Lead

Tim

e (

Days)


Key LPI messages for different income levels

Key message for low-income countries:

Progress in logistics performance is driven by improvement in

infrastructure and basic border management reforms.

Key message for middle-income countries:

Focus moves from infrastructure and border management to

development of logistics services with growing demand for

outsourced logistics.

In more sophisticated logistics environments, the “low hanging

fruits” have largely been reaped. The new generation of reforms is

more complex, involves many stakeholders, and takes time.

Key message for high-income countries:

The demand for environmentally friendly logistics services is

growing in advanced economies.


Looking for environmental logistics solutions

28

0%

5%

10%

15%

20%

25%

30%

35%

40%

Low income Middle Income High income:nonOECD

High income:OECD

2014 2012

The percentage of respondents looking for

environmentally friendly shipping alternatives is

growing, and is the highest in advanced economies.

Perc

en

tag

e o

f re

sp

on

den

ts l

oo

kin

g f

or

‘gre

en

’ sh

ipp

ing

alt

ern

ati

ves


The LPI’s role in the policy dialogue


What is the role of the LPI?

30

The LPI

• Is an overall metric of supply chain efficiency.

• Provides information of where a country stands

and a broad indication of problem areas.

• Is not a diagnostic tool and needs to be supported

by specific tools designed to perform that function.

The LPI has had a significant impact in raising

awareness and pushing for comprehensive

“connectivity” and logistics policies, e.g. in

the EU, Kazakhstan, APEC and Indonesia.


Policies matter to Logistics Performance

• Ports

• Road/rail corridors

• Airports

• PPP

Infrastructure

• Customs, payments etc.:

• Simplification & automation

• Harmonization & standardization

• Modernization & governance of border agencies

Procedures and

Trade Facilitation

• Forwarders, truckers, brokers etc.

• Regulation of entry

• Market structure and competition

• Competence and quality of service

Services

• «Green Logistics»

• City Logistics

• Food security

Sustainable Logistics

31

Regulations (customs, services) are increasingly

regional (e.g. EU), but implementation national.


How the World Bank supports countries

in Logistics policy-making


World Bank lending projects in logistics

World Bank Group lending in FY 2013 USD 52.6 bn

7-8% of the lending portfolio is logistics-related, e.g. in:

• International Trade corridors:

• Eastern Europe, Central Asia, Central Africa, India, Nepal, Central

America, East & South Africa

• Internal corridors, ports:

• Brazil, China, Argentina, Indonesia

• Customs & fiscal reforms:

• Kazakhstan, Russia, Laos, Philippines, Cambodia

• Export development:

• Tunisia, Latin America


World Bank advisory work in logistics

Advisory services to national governments and

increasingly to regions, for example, in:

• Greece, Eastern Europe, Central Asia

• Morocco, Tunisia

• Western Africa, East Africa, Zambia, Zimbabwe

• Colombia, Argentina, Brazil, Uruguay, Peru, Central America

• Indonesia, Vietnam, Philippines, Cambodia, Laos

Increasingly “fee for service”

34

Concept: Exploit synergies between institutional

reforms and infrastructure investment.


World Bank’s related indicators

• Doing Business Report

• Trading across Borders Indicator, a red tape metric

e.g. number of document vs. Supply Chain efficiency

• Bilateral Trade Costs Database

• Since 2013 with trade division of UNESCAP

• New cross-country indicators:

1. Aggregated trade costs by countries

2. Air Connectivity Index (with FAA and IATA)


Thank you!


Documents

CONNECTING TO COMPETE - European Commission€¦ · 27-03-2014 · LPI is a survey scores are Confidence Intervals 20 2,5 2,7 2,9 3,1 3,3 3,5 3,7 3,9 4,1 4,3 4,5 DEU D BEL BR E X