Trade Logistics in the Caribbean

1. Trade Logistics in the Caribbean • AnkurHuria • Investment Climate Advisory Services • World Bank Group • Port-au-Prince, Haiti OCTOBER 22 2009

2. Why improve trade logistics services in the Caribbean? Overarching rationale • Globalization and the desire to be part of global networks • Attracting private investment is a key objective for the Caribbean countries • Improved export potential and in some cases, to become trading hubs • Faster, leaner & responsive supply chains are essential for improving export/trade performance • Governments need to be energized to improve trade logistics services

3. What does it mean for Businesses? Poor trade logistics creates tremendous costs for businesses including inventory, transportation…. Cost Categories Financial Risk Storage and Handling • Warehousing and storage especially when large inventories require additional space • Handling and transportation in general and to overflow facilities • Direct cost of transportation • Lost days due to lack of daily vessel runs • Cost of financing investment in inventory (interest paid or opportunity cost of capital) • Taxes • Insurance • Market share • Spoilage • Shrinkage • Obsolescence

4. How does the current financial crisis affect demand for trade logistics services? • Impact on client countries will vary by typology: • Poor countries not integrated with world financial systems and commodity markets (many sub-Saharan countries); • Mineral rich countries (Angola, Nigeria) • Emerging economies integrated with world markets (China) • Middle income countries (South Africa, Brazil, Mexico) • Island nations (Caribbean) • Variation between primary importers (most Caribbean islands) versus primary exporters (China). • Higher protectionism in major markets, at least in the short term. Will have direct implications for regional/ preferential trade agreements and the pressures to shape up. • Lower bilateral donor funding .

5. How does the current environment affect demand for trade related services? • Pressure to become much more competitive; it becomes even more important for countries to reduce costs to trade. • Reducing supply chain costs to improve performance will be seen as a key element of firm level strategy (i.e. cost cutting on inventories) in a credit scarce market. • Rebuilding confidence in global markets would necessitate a larger role for improved trade logistics services. • Can be seen as time for emerging economies to prepare groundwork.

6. Doing Business: Trading Across Borders 2010 Source: Doing Business 2010

7. Import time: 50% - 60 % due to software… Source: Doing Business 2010

8. Key Challenges for the Caribbean • Geography – Small island nations tend to import significant amounts of foodstuff and other basic goods which are not produced locally, with high transaction costs. • Technology - Modern technology offers a number of benefits that could promote trade facilitation. While one of the key reasons for poor technology usage is lack of adequate financing, it is also clear that many customs administrations/ports do not have a strategy for effectively deploying technology. • Specific challenges that governments need to consider while making trade logistics improvements • Legislation - Trade related legislation is often outdated, for instance electronic commerce legislation is still not in place in most countries. • Conflicting Interests – Customs revenues are a key component of government revenue. As a result the facilitation function has played a secondary role to the revenue collection function for Customs administrations in the region.

9. Policy and Infrastructure issues Selected Policy Issues • Lack of coordination between border control agencies i.e. Customs and Port authorities in some islands. Also many countries don’t seem to have a forum i.e. a national body to discuss trade facilitation issues in a joint-coordinated manner. • Risk management implementation is at a nascent stage in most islands. • Low levels of automation and electronic processing. Reasons include lack of financing, electronic commerce laws, and lack of implementation capacity among others. • Selected Infrastructural Issues • Poor warehousing facilities causing delivery inefficiencies, increasing inventory costs • Lack of a regular feeder cargo service that serves the ports of the Caribbean • Inefficiencies in port/terminal services that cause inordinate delays or costs Governments in the Caribbean islands face a range of policy and infrastructural issues that need to be overcome to improve trade logistics!

10. Three Focus Areas of the Trade Logistics 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

11. Systemic Reform Regional Solutions Rapid Response Trade Logistics Advisory Program: Delivery Models • IFC • World Bank Group • Private Sector • Development Agencies: • WCO • IMF • OECS • Donors: • CIDA • DFID • NTF • NIPP

12. Questions and Comments tradelogistics@ifc.org