1. Inter-Regional Trade and Transport Facilitation between Europe, Central Asia, South Asia and East Asia Graham Smith The World Bank, Beijing Office.

2. Outline Previous studies in Central Asia (TTFCA) and South-east Europe (TTFSE) Focus on land-locked Central Asia Region Trade corridors linking Central Asia, Europe, East Asia, and South Asia Trade related logistics costs Transport infrastructure issues Recommendations Future studies

3. Main Findings of TTFCA (2003) Foreign trade: 48 % of regional GDP Movement of imports and exports characterized by two features Significant transit traffic (i.e. due to being land-locked countries) Freight carried predominantly by rail Russia continues to be the major trading partner for both imports and exports, but China, Europe and Middle East is increasing

4. Main Findings of TTFCA (2003).. Existing transport networks and services are insufficient to serve the needs of a region that needs to integrate with the global economy Road and rail networks run north-south with significant maintenance backlogs Transport fleet is generally in poor condition Significant trade barriers of neighboring countries with long and costly customs procedures and other border inspections

5. Main Findings of TTFSE (2003) Program countries: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Moldova, Romania, Serbia & Montenegro Objectives: Reduce non-tariff costs to trade and transport Reduce illicit trade and unofficial payments at border crossings Project Focus: Reform Customs procedures Improve inter-agency cooperation at borders Implement performance monitoring for Customs and trade flows

6. Main TTFSE Results Significant reduction of waiting time at borders and inland pilot points (>50%) Improved dialogue among Customs Agencies within the region Implementation of transparent Customs performance monitoring system A collaborative culture of partnership between the public and private sectors Revenue collected by Customs doubled through risk management and selectivity approach Significant increase in trade volumes

7. TTFSE Performance Monitoring (1999 – 2003): Customs Clearance time

8. Objectives of the Inter-Regional TTF Study Review current trade and transport volumes between the three regions Identify the key impediments to trade and transport facilitation Outline a broad range of actions required to improve trade and transport links between the three regions Recommend the "inter-regional" cooperation framework that would enhance trade and transport between the three regions

9. Trade Characteristics of Land-locked Central Asia Region Exports and services contribute between 37% - 60% of GDP Export trade is concentrated on a few primary products, e.g. Oil & gas, cotton, grain, coal, etc. Imports are mainly consumer goods There are several multilateral and bilateral trade agreements, but key international conventions are not respected (e.g. TIR consignments, etc.) Most promising regional trade dialogue is through CAREC umbrella Customs barriers to be removed by 2007

10. Regional Agreements involving Central Asian Countries

11. Trade by Volume and Mode to Main Trading Partners

12. Main Trade Corridors 2a. NW China 1a) Russia, CIS 7. Western Europe 5. Turkey, MENA 6a. SE & W Europe 6b. SE & W Europe 2b. NW China 1b. E Russia, East Asia 4. Iran, Bandar Abbas, 3. fghanistan, Pakistan

13. Transport Corridor Performance

14. Key Trends in Trade Exports from Central Asia to Western Europe and to “ the rest of the World ” is rapidly increasing Russia remains the largest single trade partner Trade with China rapidly increasing especially consumer goods & oil Rail dominates with 89% of export volume and 81% of import volume (excluding pipeline & air) Road transport mainly comprises micro firms and SMEs who encounter protective policies from neighboring countries and unofficial rents.

15. Trade Logistics Costs Exports from CAR in 2003 was valued at US$ 20.6 bn, with imports at US$14.9 bn Direct transport related costs estimated at 11.5% of export value, 8.0% for imports; equivalent to direct costs of US$2.4bn for exports, and US$1.3 bn for imports Estimated costs of other trade barriers for land- locked counties would add 7-10%, thus CAR spends US$5.8-6.7 bn on transport costs High logistics costs and poor services limit SME participation, suppressing additional 10% of trade

16. Drivers of Logistics Costs Time sensitive trade (e.g. perishable goods) are mostly transported by road Freight by wagon-loads have fewer border crossing problems with lower costs from rail, but mainly used for bulk cargo Imbalance in trade results in significant empty legs Transport services for SMEs very expensive Few inter-modal services (e.g. trailers on rail) Air freight services not fully developed Poor services from international freight forwarders

17. Transport Infrastructure Issues Major ongoing projects involve rehabilitation of existing infrastructure A few new links to avoid transit through neighboring countries Need for improved institutional capacity and sustainable financing for infrastructure maintenance Need to restructure railways to improve operational efficiency and focus on core business Air transport needs to be restructured to separate airlines from air traffic control and airport services

18. Key Recommendations - Technical Improve private sector provision of logistics services particularly for SMEs Create logistics centers offering efficient groupage, clearing, forwarding, and multi-modal services Improve border crossing facilities Integrate domestic transport networks with international trade corridors Monitor corridor performance through transparent measures Modernize road haulage fleet & services

19. Key Recommendations – Policy Issues Close cooperation within CAR and with the neighboring countries; Russia, China, Afghanistan, Iran, Ukraine Observance of international agreements and regulations on TTF (e.g. WTO, TIR) Non-discrimination of transit traffic from other countries Improve customs clearance and border agency inspections Reduce illicit trade and eliminate unofficial payments (especially for road transport)

20. Thank You “Xie-Xie” (in Chinese) CПECИБO