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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.

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Presentation on theme: "Easing Access to Global Markets through Trade Logistics Advisory Program Conference on Moving Products from Firms and Farms- Themes in Trade Logistics."— Presentation transcript:

1 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

2 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 2 What is the rationale for the Trade Logistics Advisory Program? Governments and private sector energized to improve trade logistics services Overarching rationale Globalization 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

3 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Time to trade: Selected LAC Countries

4 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Doing Business 2010 – Trading Across Borders Very high trade transactions Low trade transactions High-medium trade transactions Time to trade: Selected African Countries

5 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 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

6 THE WORLD BANK World 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 Africa6.1% South Asia5.8% East Europe & Central Asia5.0% Middle East & N. Africa4.1% East Asia and Pacific Islands4.1% Latin America and Caribbean3.5% For Colombia this is equivalent to US $740 millions At 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

7 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 7 Import Procedures (days) (DB) Documents preparation Customs clearance and tech control15733 Ports and terminal handling13788 Inland transportation and handling Total (days): 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)

8 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 8 At least 40%-60% of time to trade is due to ‘software’ HondurasPeruKenya Tanzania Rwanda Days% % % % % Documents processing1470%1253% Customs clearance/ tech.control420%521% Port and terminal handling15%313% Inland transport15%313% Total

9 THE WORLD BANK World 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 implementation 9 Objective: to assist countries improve access to markets through efficient, easy and accountable import and export procedures

10 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 10 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

11 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 11 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 implementation Greater reach and cost-effective solutions Caribbean Full Fledged projects and Solutions to systemic issues (3-4 years) Colombia Systemic Reform

12 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Results: 54 improvements since launch July CountriesImprovements 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 countries in FY11. Corp. Performance Award First 2 pilots in post conflict countries with results Begun with 5 donors! Corp.Performance Award Rwanda, Liberia, Colombia, Burkina Faso, Sudan (First half of FY10) Rwanda, Liberia, Colombia, Burkina Faso, Sudan, Mali, Yemen, Honduras, Peru

13 THE WORLD BANK World 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

14 THE WORLD BANK World 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.

15 THE WORLD BANK World 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

16 THE WORLD BANK World 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

17 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Rapidly Expanding Reach… 17 EAC – Kenya, Burundi Colombia Liberia, Mali, Burkina Faso Rwanda Armenia Peru Caribbean (reg) S.E.Europe (reg) Yemen Honduras Zambia South Asia (regional) Malawi

18 THE WORLD BANK World 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

19 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Collaborations across WBG 19 RegionCountryStatusPartnership AFR Burkina FasoSystemic reform project ongoingWB Transport project LiberiaSystemic reform project ongoingPort reform project, PREM, IMF RwandaSystemic reform project ongoingEATTFP, SME project MaliRapid response interventionDBRA, MNA Facility KenyaWork beginningEATTFP, WB PREM EACScoping ongoing WB Transport, PREM Trade AFR PREM LAC ColombiaSystemic reform projectDPL, IFC Port project CaribbeanInitiating trade workstreamWB PREM DPL, DBRA, IFC Honduras Rapid response intervention Systemic project being developed DBRA Peru Systemic reform project being developed IFC, WB PREM ECA ArmeniaRapid response projectWB PREM, IFC, DBRA Kazakhstan Short policy note as cross support to WB WB PREM, DBRA, WB PSD MontenegroRapid response interventionDBRA AlbaniaRapid response interventionDBRA, WB MNAYemenInitiating workMNA Facility

20 THE WORLD BANK World 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.

21 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Supply Chain Analysis of Pineapples Imported into St. Lucia 10% Producer Price Land Transport Ocean Transport + Port CR Port Miami Wholesale Consolidated Cost Other Costs Ocean Transport + Port SL Duties Land Transport & Handling Land Transport + Storage Retail Profits + Other Costs 90% Farm Gate (CR) CR FASOcean to Miami Miami PortMiami Warehouse Miami FOB Price Ocean to St. Lucia St. Lucia PortWholesaleDistributionRetail 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

22 THE WORLD BANK World 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.

23 THE WORLD BANK World 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

24 THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency 24 Thank you!


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