The Tools: From Diagnostic to Implementation

1. The Tools: From Diagnostic to Implementation • Alina Antoci - IFC Trade Logistics Advisory Service

2. Contents Why does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory Program Practical Implementation Examples Impact Evaluation of Investment Climate Reforms

3. Why does it matters to firms and countries? Poor trade logistics creates tremendous costs for businesses including inventory, transportation…. Cost Categories Source: blog.allstate.com Source: dipity.com Source: IFC Risk Storage and Handling Financial • 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 delays • Cost of financing investment in inventory (interest paid or opportunity cost of capital) • Taxes • Insurance • Market share • Spoilage • Shrinkage • Obsolescence ..impacting the investment climate 3

4. Why does it matter to firms? (2) Logistics costs have a disproportionate burden on small firms Average logistics cost as a % of firm sales Inventory a function of timeliness and reliability ..impacting the investment climate Source: Centro Logístico de Latinoamerica, Bogota, Colombia. Benchmarking 2007: Estado de la Logística en America Latina Anexo, María Rey LogisticSummit 2008

5. Why does it matter to firms? (3) High costs of inputs 60% of the cost related to the importation of pineapples CR to Saint Lucia is due to documentation preparation, border clearance, transportation and logistics. Retail Profits 2 + Other Costs Costa Rica (CR) ------------> --------------> St. Lucia (SL) Consumer Cost Landed Cost Cost breakdown for Pineapples imported from Costa Rica to St Lucia 1.8 Land 30% Transport Land + Storage Transport 1.6 & Handling Duties 1.4 Ocean Transport + Port SL 1.2 US$/lb Transport and Logistics Costs 1 60% 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 Source: Adapted from : Logistics, Transport and Food Prices in LAC (2009) and OECS Backward Linkages Study (2008)

6. Why does it matter to countries? Logistics directly affect the poor… • Logistics costs make up large part of food prices • 20 to 60 percent • Depending upon product and trade route • Food is the primary purchase of households • 20-30 percent of expenditures on average • For the poor, 60 to 70 percent of HH expenditures

7. …and these high costs are driven by “soft issues” Developing country average import time 4.5 days 5 days 4 days Source: DB 2013 DAYS 14 days DOCUMENTS ASSEMBLY AND PROCEDURES CUSTOMS AND TECHNICAL CONTROL TERMINAL AND PORT HANDLING INLAND TRANSPORT Hard and soft issues Soft issues Categories accounting for more than 50 – 60% of the total time to export and import in many countries around the world. Categories accounting for 40% or less of the total time to export and import around the world.

8. Contents Why does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory Program Practical Implementation Examples Impact Evaluation of Investment Climate Reforms

9. Firms depend on the entire supply chain to connect to regional and international markets TRADE FACILITATION Simplification Harmonisation Standardisation Process of developing internationally agreed formats for practices and procedures, documents and information. Process of eliminating all unnecessary elements and duplications in formalities, processes and procedures Alignment of national procedures, operations and documents with international conventions, standards and practices. Trade supply chain performance and reliability determined by: quality of trade related infrastructure efficiency of trade procedures and regulations quality and availability of private sector services

10. What do traders want ? • Simple and smooth processing of formalities • A ‘seamless’ process (minimal intervention) • Means to allow goods to proceed promptly to their final destination. No longer itineraries, no unpacking, no delays • A single control point for all public services • Standard forms, assembled into a ‘single bunch of documents’, compatible with trade documents and transport contracts • Predictable and transparent rules and procedures • Consistency even if not so simple, at least be consistent Timely, cost effective, reliable and predictable connections critical for commercial competitiveness

11. Timely, cost effective, reliable and predictable connections International Jurisdiction NationalJurisdiction Distance ProcessorWarehouse In-house procedures Points of Interconnectivity Port Handling& BorderClearance Inland Transport OceanShipping Port Handling& BorderClearance Land Transport Inventoryof Semi-FinishedProduct • Changes in supply chain performance are realized through changes in: • In-house Procedures • Level of Interconnectivity • Regulation • Technology and systems • Infrastructure Collection, Marketing &Packaging Information Flow Seller Logistics Costs (Value of Time & Service Charges) Source: DB database 2012, 2013

12. To Achieve This

13. Contents Why does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory Program Practical Implementation Examples Impact Evaluation of Investment Climate Reforms

14. IFC Global Trade Logistics Advisory Program • Improve public agencies regulatory role for importing/exporting firms and their performance • Technical assistanceto developing countries to build efficient trade logistics systems and services by improving: • efficiency of bordermanagement • coordination of Customs agencies Objective • Address binding constraints faced by the private sector across the supply chain • Partnerships with the public and private sectors Expected Results and Impact Reduce the time & cost to trade, leading to increases in exports & savings to the private sector

15. Emphasis on impact evaluation Impact on exports Impact on private sector savings A 10% reduction export time Inventory Cost Savings User Fees and Charges Inventory Cost Savings Cargo Loss and Damage User Fees and Charges 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% OECD 1.7% Cargo Loss and Damage Capital Carrying Charge Capital Carrying Charge Source: Forthcoming research paper (Subramanian, Anderson and Lee (2012)

16. Program Core Areas

17. Implementation Model Rapid Response Program 10-12 Months Industry Competitiveness Program 2-3 years • Support regulatory frameworks for modern logistics and distribution services • Improve food security & enhance agribusiness competitiveness • Identify and achieve quick wins that build trust and catalyze reforms • Establish the basis for medium and long term reforms Systematic Reform Program 1-2 Years Regional Program 3-4 years • Extend rapid response work and addresses key constraints • Promote best practices for efficient trade logistics supply chains • Ease access to regional and global markets • Provide solutions to land-locked, transit and island economies Typical Engagement Program Source: DB database 2012, 2013

18. Contents Why does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory Program Practical Implementation Examples Impact Evaluation of Investment Climate Reforms

19. Impact on the Ground – At the Country level

20. South Asia • South-Eastern Europe Central America • the Caribbean • and most recently • West Africa Impact on the Ground – At the Regional level

21. Our clients SE Europe Region - Serbia, Albania, Bosnia Herzegovina, Kosovo, Macedonia, Montenegro Liberia, Mali, Burkina Faso, Guinea Bissau, Benin, Sao Tome West Africa Region (ECOWAS) Armenia Kazakhstan, Mongolia Caribbean Region - St Lucia, Antigua & Barbuda, St Kitts & Nevis, Grenada, Dominica South Asia Region - India, Bangladesh, Nepal Philippines Timor-Leste Central America Region El Salvador, Honduras, Guatemala, Nicaragua, Costa Rica Columbia, Peru Chad, Central African Republic, Cameroon, Gabon Egypt, Ethiopia, Rwanda, Kenya, Zambia Trade Logistics projects in over 50 countries

22. Contents Why does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory Program Practical Implementation Examples Impact Evaluation of Investment Climate Reforms

23. Impact Evaluation of Investment Climate Reforms Challenge How can we get better at measuring what we value Opportunity What gets measured gets done • Development Impact Evaluation • (DIME) – WBG • Investment Climate Department • (IC) – Trade and Investment • Development Research Group • (DEC) – Trade • Internal Client • Impact and Results working group • “How to integrate impact assessments or build feedback loops into our projects?” • “What do we need to do less of to increase our focus on results and reduce the burden of process?” • “How do we strengthen incentives to focus on long-term results?” • “How to design appropriate impact indicators?”

24. Measures of Economic activity Measures of Border performance Pilot project: Impact of border-related reforms • Simplification of border procedures, e.g. • Introduce single window • Reduce/harmonize documentation • Computerization of procedures • Electronic scanning • Introduce/improve risk management • Strengthen performance incentives for customs officials Higher trade volumes and more diversified trade REVENUE AND RENTS Customs revenue Illegal payments Lower costs for firms (lower inventories) and higher returns TRADE FACILITATION Lower and predictable trading costs and clearance times More trading firms and investment RISK Illegal shipments

25. Thank you! For further information: aantoci@worldbank.org