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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
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 WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency7
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency8
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency10
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency11
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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 WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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.
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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.
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency
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
THE WORLD BANKWorld Bank Group Multilateral Investment Guarantee Agency24
Thank you!