Cross Border Transport & TruckingACMECS March 13, 2007

Paul Apthorp

Cross Border Transport & Trucking

• Overview of Global Network development

• The importance of the GMS as a “Cross road “

• The current situation along the EWEC

• Opportunities Missed

• SMEs

• What we need to do !

TNT - Road Network Development

12

34

5

ITITESES

FRFR

TRTR

ATAT

PLPL

CHCH

BGBG

ROROHUHUSISI

CZCZSKSK

HRHR

ALALMKMK

GRGR

YUYU

UAUA

BYBY

BABA

MDMD

DEDE

GBGB

IEIE LTLT

FIFI

SESE RURUNONO

EEEE

LVLVDKDK

MAD

GNQ

NXH

DFTBZQ

HLB

TKU

QAR WAW

DNG VIE

MIL

HNJ

TSR

SOFPTPT

TNT European Road NetworkTNT European Road Network

European Road Network – in numbers • Network coverage:

– 2,000,000 km per week (50 times around the earth) – 93 million km per year (2325 times around the earth)

• Network capacity– 700 trucks daily – 4,500 Europe-wide international line-haul trips per week– 17,500 tons weekly– 620,000 pieces weekly

• Resources employees– 12 RMC offices with 150 employees– 85 International own drivers– 1250 International drivers in total

TNT Middle East Road Network

BAHRAIN

Kuwait

Jeddah

Riyadh

Dhahran Doha

Muscat

AUHDXB

JBA

Saudi Arabia

Yemen

Oman

United Arab Emirates

Sila/Batha

IRAN

Jordan/Levant

TNT - Road Network Development

12

34

5

Future2006Existing

Illustrative

South East Asia (5)

Middle east/Africa (2)

Asian Road Network Development

Existing2006Future

South East Asia (5)

China (4)

Modes of Transportation% freight moved on road, air & sea/ton-km (US, 2003)

Sea20%

Air2%

Road78%

% Freight moved on road,air & sea/ton-km (EU, 2003)

Air1%

Sea20%

Road79%

% Freight moved on road, air & sea/ton-km (Asia, 2003)

Air1%

Road22%

Sea77%

Existing Economic Corridors

Asian Road Network

• Phase 1 – Opened December 2005 – Daily SIN – KUL – BKK– Extra capacity added in First year

• Phase 11– Opened September 2007– BKK- ZVK- DAD – SGN / HAN

• Phase 111– Due Quarter 3 2007– HAN – NNG … linking to China Network

VTE

Singapore

Kuala Lumpur

Phnom Phen

Hanoi

Malaysia

Bangkok

Ho Chi Minh

ThailandVietnam

Cambodia

Laos

Myanmar

China

Danang

Nanning

ARN Phase 2

Phase 11

• Bangkok – Savanaket – Da Nang– Via EWEC

• The Current Situation !!

BKK Mukdahan(Border)

Savanaket(Laos)

DaNang(VN)

HCM

D1900 (D0) A0700(D1)

D1000

A1100

D1300

Lao Bao(Border)

HANA1600

D1800

A00.30(D2)

D0600 (HAN/HCM)

A0400(D3)

A0600(D3)

D0800

Bangkok – Savanaket- Vietnam

11hrs 1hrs 4hrs 5hrs

22hrs

24hrs 6hr

BKK 19.00 Day 0-----DAD 00.30 Day 2------SGN 06.00 Day3

Total 60 hours

BKK--------------------------------------DADTotal 30 hours

BKKMukdahan

(Border)Savanaket

(Laos)Danang

(VN)

HCM

A1900(D1) from HAN

A2100(D1) from HCM

D23.59(D2)

Lao Bao(Border)

HAN

A1900(D0)

D2100

D2100(D0)

Vietnam – Savanaket- Bangkok

A0700

D0900

A1200

D1400

A1600

D1800

A0600(D3)

950km

770km

250km 280km 800km20km

22hrs

24hrs DAD--------------------------------------BKK

Total 30 hours

SGN 19.00 Day 0-----DAD 19.00 Day 1------BKK 06.00 Day3

Total 60 hours

EWEC Transit & Clearance

MUKA 15.45D 17.00

DSWA 16.30D 17.00

ZVKA 10.45D 11.45

DSWA 09.15D 09.45

ZVKA 14.00D 15.00

MUKA 07.00D 10.30

LBOA 07.00D.09.00

LBOA 17.15D 19.00

Seno ( LAO )Seno ( LAO )

MUK- LBO Driving Time 4 hours

MUK- LBO Customs Time 6 hours

TH 12.15- VN 13.30

Transshipment & Customs Inspection & Reseal

TH- 13.30- VN 12.15

ARN Border Transit ClearanceBKK MUK SVK SENO DSW LBO DAD

Customs Clearance

Cross Bridge 10:00 A.M.15:00 P.M.

BKK customs clearance and

Declared

Send Information For

Pre-Clearance

LAO Customs Clearance to

Get permission of customs entry

Customs Inspection

and Seal The Truck

DAD customs clearance and

Declared

VN customs clearance

and Entry declared

ETA 07:00 A.M.ETD 10:30 A.M.

ETD 24:00 P.M.ETA 10:45 A.M.ETD 11:45 A.M.

Customs Check Seal and Switch CARGO

ETA 12:15 P.M.ETD 13:30 P.M.

Send Information For

Pre-Clearance

DSW customs clearance

with check Seal and

Entry declared

ETA 16:30 A.M.ETD 17:00 A.M.

ETA 17:30 A.M.ETD 18:30 A.M.

3 Hrs 1 Hr 1.30 Hrs 1.30 Hrs 2 Hrs

ETA 12:00 P.M.ETD 13:30 P.M.

ETD 07:00 P.M.

Pre- ClearanceBKK ( Day 0 ) MUK (Day 0) SVK ( Day 0 ) SENO DSW ( Day 0) LBODAD ( Day 0 )

BKK customs clearance and

Declared

Send Information For

Pre-Clearance

LAO Customs Clearance to

Get permission of customs entry

Customs Formality

Process

DAD customs clearance and

Declared

DSW customs clearance

and Entry declared

Customs Check Seal

and Switch CARGO

ETA 12:00 P.M.ETD 13:30 P.M.

ETA 12:00 P.M.ETD 13:30 P.M.

Send Information For

Pre-Clearance

ETA 14:00 P.M.ETD 15:00 P.M.

ETA 16:00 P.M.ETD 18:00 P.M.

ETA 06:00 A.M.

Customs clearance

with check Seal and

Entry declared

ETA 9: 00 A.M.ETD 9 :30 A.M.

ETA 5:30 A.M.ETD 8:30 A.M.

Prepare TRUCK permission

Prepare Customs Entry for clearance at

SVK/DSW

Get Permission 16:00 P.M.( Day 0 )

Original send by Car to DSW before Truck

Arrival

VN customs clearance

and Entry declared

Get TRUCK permission

Customs Entry and Customs clearance at

DSW

3 Hrs30 Min1.30 Hrs.1 Hrs.2 Hrs.

• Lao Transit Tax

– Still a “ local’ issue

• Customs Clearance at Dansawan Border

– Pre Clearance required at Savanaket 250 kms away– Original clearance papers must be sent from Savanaket to Dansawan– This is a two day process and requires a 500 km drive !!

• Crossing the Mekong

– The new bridge has only saved 45 minutes– The Customs process has not improved at Mukdahan or Savanaket

The Reality of the EWEC 2007 Its 45 minutes faster than before !Its 45 minutes faster than before !

• Air Freight

– Road feeder services

• Road Freight

– Unnecessary cost burden

• SMEs

– Joining the regional supply chain

Is The EWEC Missing Opportunities ?

• Time is more expensive than distance ( asset utilisation)

– The easiest and quickest route is generally cheaper than a slower shorter route.

– Transport takes the route of least resistance

• Freight rates are driven by market forces not distance

– Airfreight BKK – LAX $ 2.50 / kg – Airfreight LAX– BKK $ 0.90 / kg

Transport Cost in the Supply Chain

• Market forces are determined by route capacity

– BKK – SIN half the cost of KUL – SIN– 1600 Kms vs 400 Kms – More flights ; more carriers

• Air Freight

– GMS region has limited freighter capacity – Regional capacity limited… expensive– Road access to high capacity routes essential – Feeder services to Bangkok’s lift capacity

Transport Costs in the Supply Chain

• Transport costs can undo the benefits of Labour Costs

– Ho Chi Minh to Tokyo US $ 3.00 / kg shorter route.– High demand for freight space – Limited air freight capacity

• Alternative Lift from Bangkok

– Bangkok – Tokyo $ 1.80 / kg– Road Freight HCM –BKK $ 0.40 / kg …. Via EWEC ( no tax)

– Saving $ 0.80 / kg or $ 800 a ton– Based on a 10 ton shipment

Transport Cost in the Supply Chain

• Large vehicles are cheaper to run (per kg) than small

• Major costs elements of transport– Vehicle depreciation / capital cost– Driver– Maintenance – Fuel

• The only Major cost eliminated in a standing vehicle– Fuel

• Holding up vehicles Increases Transport costs

• This cost goes back to the ( customer) SMEs ! – Reducing their competitive edge

Transport – Achieving Economies of Scale

Top 10 Customers by Weight (Kilo)

33%

67%

Top 10 Others

Top 10 Customers by Revenue (€)

11%

89%

Top 10 Others

Wide Range of Customers

Customer Segment by Accounts

60%28%

5%1%

3%

3%

Adhoc

Small

Medium

Large

Major

GAM

Customer Segment by Revenue (€)

26%

27%7%

4%

15%

21%Adhoc

Small

Medium

Large

Major

GAM

Customer Segment by Weight (Kilo)

34%

25%5%

2%

8%

26% Adhoc

Small

Medium

Large

Major

GAM

Customer Segmentation

What SMEs need from Transport ?What SMEs need from Transport ?

• Access to Markets– The ability to send samples and trial shipments– Consolidation services– Regular scheduled services– Guaranteed , time definite services– Understandable and transparent customs services

• Competitive Transport service– Unit ( kg / m3) based costing for LCL cargo– The benefits of co-loading through economies of scale– Access to lower cost / higher capacity air routes– Local consolidation and ICD centers …for own account delivery

What do we need to do to help SMEsWhat do we need to do to help SMEs

• Border Crossings & Customs

– Smooth and Consistent Customs Clearance– Inland Clearance Depots … in FTZs and population centers– “Express” Clearance for documents and parcels– Bonding arrangements for transit to ICDs– Bonded Warehouse facilities to off load and store un-cleared

goods– 24 hour transit for bonded or ICD transit vehicles– Long opening hours for customs ..16 hours ?

For SMEs to be part of the Value ChainFor SMEs to be part of the Value Chain

• They need

– The ability to ensure on time delivery every time– Competitive transport with easy connections to Global routes– Consolidated feeder services for economies of scale– ICDs for local consolidation / distribution– Ease of import / export procedures

• They don’t need

– Uncertain transit times– Expensive feeder services due to lack of capacity– Paying for dedicated vehicles to ensure smaller quantities are dispatched in time to meet deadlines

• London to Paris 1981 $ 900 One way

– No channel tunnel …….. Ferry costs $ 300 one way.– No open market– Permits required– Customs clearance .. With costs– 12 meter Trailers ( 40 ft)– 18 ton maximum pay load– $ 0.05 per kilo

• London Paris 2006 $ 900 One way – Channel tunnel– No permits– Reduced customs procedures– 13.6 Meter Trailers– 24 ton maximum pay load– $ 0.0375 per kilo

Updating Transport – Competition and Moderisation

• London to Paris 1981 $ 900 One way

– @ 18 tons = $ 0.05 per kg

• Using UK inflation

– $ 900 in 1981 = $ 2300 in 2006

– 2006 price should be $ 0.1275 per kg

• Current Price $ 0.0375 per kg

Updating Transport – Competition and Moderisation

Transport Reality in the GMS

Thesis Thesis

• “The lack of an affective Transport Industry in Laos makes it difficult for the country to take advantage of the available regional supply chain”

– …made possible by the EWEC ( & NS)

Laos is LandlockedLaos is Landlocked

• Without a rail system

• Without an affective cross border transport system

• Without the ability to send its own vehicles to major regional ports or airports with competitive freight lift.

• Without reciprocal the rights that allow Thai and Vietnamese trucks to run in Laos.

• Without the ability or capacity to become part of the regional supply chain…….

Laos HasLaos Has

• Common borders with 4 other GMS countries

• Greatly improved trunk routes

• Light traffic and good transit times

• A four hour transit time from Thailand to Vietnam !

• Low labour costs

• Trucks from 3 neighbouring countries on its roads !

• No access to neighbouring countries !!

Laos Should be…Laos Should be…

• A base for Cross border International Trucking

• The Automatic choice for Foreign Trucking companies wanting to service the wider GMS region.

• A Flag of Convenience for International Transport

The Road Transport Industry The Road Transport Industry as a percentage of GDPas a percentage of GDP

• USA 1.2 %

• Japan 1.9 %

• Australia 4.9 % ……accentuated by Ton / Kilometres

• Thailand 5 %

• China 5.5 %

• India 7 %

• Laos 2 %………………….Why not 7 % ?

• Cambodia ?

•

What is Missing ?What is Missing ?

• A Competitive Cross Border Transport Sector

– Poor vehicle Standards• Overloading• Breakdowns• Poor driving standards

– Lack of access for Lao Vehicles of Good quality

• Smooth and efficient Border Processes

• Easy Market Access for SME exports

• Regional ICDs and Consolidation Points

Cross Border Transport Agreement Cross Border Transport Agreement

• Signed but Not Implemented ……

• It Covers

– Annex 2 “ registration of Vehicles in International traffic”

– Annex 9 “ Criteria for Licensing of Transport for Cross Border operations “• Eligibility, reliability, professional competency, financial solvency ..all covered !

- Annex 12 “ Border Crossing and Transit Facilities’

- Annex 13b “ Criteria for Licensing Inter-modal operators’

- Protocol 2 “ Transit Traffic”

– It is there… it needs to be implemented !

Things ARE Improving

Great New Infrastructure In PlaceGreat New Infrastructure In Place

But Only 45 minutes faster …thus far !

Don’t Waste the Investment !

• Implement the CBTA

–Urgently !