Uma Subramanian Program Manager, Trade Logistics Investment Climate Advisory Services , WBG Preston Auditorium , Ju

1. Easing Access to Global MarketsthroughTradeLogisticsAdvisoryProgramConferenceonMovingProductsfromFirms and Farms- Themes in TradeLogistics • UmaSubramanian • Program Manager, TradeLogistics • InvestmentClimateAdvisoryServices , WBG • Preston Auditorium, June 7, 2010

2. What is the rationale for the Trade Logistics Advisory Program? 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 • Governments and private sector energized to improve trade logistics services

3. Time to trade: Selected LAC Countries

4. Doing Business 2010 – Trading Across Borders Time to trade: Selected African Countries Very high trade transactions High-medium trade transactions Low trade transactions

5. Domestic logistics costs: Disproportionate burden on small firms Source: Centro Logístico de Latinoamerica, Bogota, Colombia. Benchmarking 2007: Estado de la Logística en America Latina Anexo, María Rey LogisticSummit 2008

6. Reducing Transactions Time Has a Direct Impact on Trade 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 Islands 4.1% Latin America and Caribbean 3.5% A 10% reduction export time For Colombia this is equivalent to US $740 millions At a global level this implies increased trade by over $600 billions Direct implications for growth, private investment, jobs and poverty reduction Source: Forthcoming research paper (Subramanian, Anderson and Lee (2010)

7. Measuring Results- in Rwanda 2007 2008 2010 2009 Rwanda What does this reduction in time to import mean for one Rwandan firm? 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. Source: Ongoing research (2009)

8. At least 40%-60% of time to trade is due to ‘software’

9. Basics of the Trade Logistics Advisory Program Objective: to assist countries improve access to markets through efficient, easy and accountable import and export procedures • 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

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. Rapid Response Regional Solutions Trade Logistics Advisory Program: Delivery Models • Catalyze reform momentum through quick wins and high level championship • (1 year program) Systemic Reform 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

12. Results: 54 improvements since launch July 2007 Highlights Countries Improvements • First 2 pilots in post conflict countries with results • Begun with 5 donors! • Corp.Performance Award Rwanda, Liberia 10 2008 • Has become a core product of advisory services • Partnering with over 7 agencies/departments Rwanda, Liberia, Colombia, Burkina Faso, Sudan 32 2009 • Identified by IFC for global scale up • Presence in 9-10 countries + 3 Regional. 12-15 countries in FY11. • Corp. Performance Award 18 (First half of FY10) Rwanda, Liberia, Colombia, Burkina Faso, Sudan, Mali, Yemen, Honduras, Peru 2010

13. 22 improvements till Dec 2009: What do results mean in Liberia? 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 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…

14. Rwanda: Reforms for the private sector • 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. Focus on Reform Implementation: Practical reforms that make a difference that are linked to private sector activities.

15. Colombia: A model for aspiring countries 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. Results and measurement driven: Donors, clients and internal stakeholders can all measure the bang for the buck

16. What worked in making these improvements/ reforms happen? 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

17. Caribbean (reg) Liberia, Mali, Burkina Faso Armenia EAC – Kenya, Burundi Colombia Rwanda Peru Rapidly Expanding Reach… S.E.Europe (reg) Yemen South Asia (regional) Honduras Zambia Malawi

18. 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)

19. Collaborations across WBG

20. Aligning with new corporate priorities: • 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. Supply Chain Analysis of Pineapples Imported into St. Lucia 60% of the landed cost is due to transportation and logistics Retail Profits 2 + Other Costs Landed cost 1.8 Land Transport Land + Storage Transport 1.6 & Handling Duties 1.4 Ocean Transport + Port SL 1.2 US$/lb 90% 1 0.8 Other Costs Wholesale 0.6 Ocean Consolidated Transport Port Cost 0.4 + Port CR Miami Land Producer Transport Price 0.2 10% Farm Gate price 0 Farm Gate CR FAS Ocean to Miami Port Miami Miami FOB Ocean to St. St. Lucia Port Wholesale Distribution Retail Price (CR) Miami Warehouse Price Lucia Costa Rica (CR) ------------> --------------> St. Lucia (SL) Source: Logistics, Transport and Food Prices in LAC (2009) and OECS Backward Linkages Study (2008)

22. Aligning with new corporate priorities: • 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. Product Development and KM • 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. Thankyou! Usubramanian@worldbank.org