connectivity and supply chain performance
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Presented by
Akhmad Bayhaqi
APEC Secretariat (Policy Support Unit)
Copyright 2013 APEC Secretariat
Connectivity and Supply Chain Performance
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Introduction APEC connectivity blueprint APEC supply chain connectivity framework Infrastructure investment to support Supply
Chains Global connectivity Outlook and Key issues
Outline
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APEC Member Economies
APEC Official Observers Association of South East Asian Nations (ASEAN) Secretariat Pacific Economic Cooperation Council (PECC) Pacific Islands Forum (PIF) Copyright 2013 APEC Secretariat
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Copyright 2013 APEC SecretariatSource: APEC in Charts, 2014 (PSU).
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Source: APEC in Charts, 2014 (PSU).
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Integrating the region and ensuring that goods, services and people move easily across
borders is at the core of APECs work. Members facilitate this trade through faster
customs procedures at borders; more favorable
business climates behind the border; and
aligning regulations and standards across the
region.
For example, APECs initiatives to synchronize regulatory systems is a key step to integrating
the Asia-Pacific economy. A product can be
more easily exported with just one set of
common standards across all economies.
Source: http://www.apec.org/About-Us/About-APEC/Fact-Sheets/Regional-Economic-Integration-Agenda.aspx
Regional Integration
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APEC Connectivity Blueprint
Physical connectivity that improves supply chain performance, connects
and integrates logistics, transport,
energy, and telecommunication
infrastructure in the APEC region.
Institutional connectivity that advances regulatory and procedural
cooperation and coherence among
our economies.
People-to-people connectivity that enhances interaction, mobility and
joint endeavors.
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Key Initiatives for Enhanced
Physical Connectivity
Copyright 2013 APEC Secretariat
Public-Private Partnerships Multi-Year Plan on Infrastructure Development and Investment (MYPIDI)
Designed to alleviate private sector concerns such as an unclear regulatory environment and reduce long-term risks
Long-term aim is to create a regional infrastructure financing market by stitching together these enhanced local institutions and joining them together into a regional network
PPP Expert Advisory Panel Group of PPP experts have begun providing assistance to Indonesia as they
implement the APEC PPP Pilot Center PPP Guidebook
Project under the Investment Experts Group Aims to compile information on the variety of PPP frameworks already in place
in each APEC economy Will provide a general overview of the process and requirements to establish a
PPP project
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Workstream 1: Fostering a business friendly environment
for infrastructure development and
investment, through a solid regulatory framework, that
minimizes uncertainty and
maximizes transparency and
predictability.
Workstream 2: Development
and Refinement of an Integrated planning system
mechanisms
Workstream 3: Development of
government capacity to identify and generate a pipeline of bankable
infrastructure projects
Workstream 4: Development or
further improvement of
financing and funding
environment to encourage long term investors
Multi-Year Plan on Infrastructure Development and Investment (MYPIDI)
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Key Initiatives for Enhanced
Physical Connectivity
Source: Railway Handbook 2013
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Key Initiatives for Enhanced
Physical Connectivity
Land Transportation Global passenger and freight travel is expected to double from 2010-2050 requiring a
land transport network 60% larger than 2010 levels 25 Road Infrastructure Projects and 3 Rail Projects submitted by Member Economies Examples of APEC work include the Energy Working Groups Maximizing Energy
Efficiencies of Supply Chain Connectivity by Improving Rail-Waterway Intermodal Transport in APEC Economies project
Air Transportation Enhanced airport capacity is a key initiative to enhance both trade and tourism 22 ongoing or recently completed Air Infrastructure Projects submitted Examples of potential future APEC work streams include enhanced tracking and
monitoring of goods traded by air and air transport market liberalization
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Key Initiatives for Enhanced
Physical Connectivity
Maritime Transportation Cargo ships carried over nine billion tons of traded goods in 2012 representing 80% of
global merchandise trade, demonstrating the importance of quality port infrastructure 25 Maritime Infrastructure Project submitted by Member Economies Examples of potential future APEC work streams include building on a pilot project that
examined Real-Time Tracking and Monitoring of Cargo Containers
Telecommunications and ICT Development and Energy Infrastructure A 10% increase in broadband internet access is associated with a growth in per capita
GDP of roughly 0.2%, demonstrating real results for personal economic development, according to the United Nations
US$ 1.7 trillion of energy infrastructure investment is needed globally by 2035 with 60% of the total coming in the electricity sector
14 ICT Infrastructure Projects and 10 Energy Infrastructure Projects submitted by Member Economies
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Key Initiatives for Enhanced
Institutional Connectivity
Customs and border agency (trade facilitation) The goal of encouraging each member economy to develop its own Single Window system
by 2020 APEC Customs 3M Strategic Framework that encourages member economies to cooperate
through mutual assistance, mutual recognition, and mutual sharing (abbreviated as 3M) The 2014 APEC MRT: the formulation of the Guidelines for APEC Customs Transit and
continuing work on the Time Release Study
Supply-chain connectivity APEC Pathfinder to Enhance Supply Chain Connectivity by Establishing a Baseline De
Minimis Value APEC's Strategies and Actions Toward a Cross-Border Paperless Trading Environment: to
enable the electronic transmission of trade-related information across the region by 2020 The 8th APEC Transportation Ministerial Meeting instructed the TPTWG to develop a
transportation Connectivity Map that will visualize APECs ideal of physical and institutional integration to be reached by the year 2020
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Key Initiatives for Enhanced
Institutional Connectivity
Finance: The Asia Region Funds Passport provided the following common
objectives (among others):a) A more diverse range of investment opportunitiesb) Deepen the regions capital market to attract finance for growthc) Grow the pool of funds available for investment in the region
Structural Reforms Economic Committee also outlined the importance of establishing a
competitive market, by supporting and facilitating more open, well-functioning, transparent, and competitive markets.
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Key Initiatives for Enhanced People-to-People Connectivity
Business Mobility APEC Business Travel Card: helps accredited business travelers move
across the region; 152,543 holders as of 2013 BMG is working on extending ABTC validity from 3 to 5 years and
improving end-to-end administration Need to reduce time to obtain ABTC and harmonize requirements
Cross-Border Education Cooperation Scholarship grants, bilateral student exchange programs, and education
cooperation, APEC Study Centers HRDWG: Education Cooperation Project (2013-2016); Higher Education
Diploma Supplement Need to promote developing economies as destinations for student
exchange. Also need a more coordinated approach to cultural exchange: partnerships with private sector could help
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Key Initiatives for Enhanced People-to-People Connectivity
Tourism Facilitation Tourism outreach and promotion Visa facilitation and immigration/customs streamlining TWG: harmonization of visa/immigration policies, tourist-friendly airports,
Smart Traveller Program, air connectivity and open skies Need to do more on easing visa restrictions, exchange of security
information (e.g., trusted travellers), passengers bill of rights
Professional and Labor Mobility Bilateral MRAs, working visa facilitation, MOUs on protection for workers HRDWG: standards harmonization for TVET; qualifications benchmarking
for transport and logistics industry workers; Skills Mapping Project; TWG: MRAs for workers in tourism industry
Need to coordinate on APEC-wide MRAs, establish monitoring mechanism for labor imbalances, and expand ABTC to cover professional and technical workers
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Clusters Action Plan Chokepoints
Building infrastructure& capacity
Infrastructure 2Inefficient or inadequate transport infrastructure; lack of cross border physical linkages (e.g. roads, bridges).
Logistics capacity
3 Lack of capacity of local / regional logistics sub-providers
Connectivity 6Underdeveloped multi-modal transport capabilities; inefficient air, land, and multimodal connectivity
Streamliningprocedures
Clearance 4Inefficient clearance of goods at the border; lack of coordination among border agencies, especially relating to clearance of regulated goods at the border
Documentation 5Burdensome procedures for customs documentation and other procedures (including for preferential trade).
Strengthening rules & institutions
Transparency 1Lack of transparency/ awareness of full scope of regulatory issues of affecting logistics; lack of awareness and coordination among government agencies on policies affecting logistics sector; absence of single contact point or champion agency on logistics matters.
Regulations & standards
7Variations in cross-border standards and regulations for movements of goods, services and business travelers.
Transit 8 Lack of regional cross-boarder customs-transit arrangements
Overall objective: 10% reduction of trading time, cost & uncertainty by 2015
Supply chain Connectivity
Framework Action Plan
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Global demand for the funding of infrastructure investments: $57 trillion by 2030.
Long-term investors: hold around $85 trillion in assets under management
[Brookings Institute]
Financing Gap
Source: The Economist
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Importance of Infrastructure
Copyright 2013 APEC Scretariat
Three aspects of (physical) infrastructure that are important for business and
trade:
1. Costs: efficiency of the existing infrastructures and services
2. Infrastructure quality services: speed and reliability of delivery.
3. Accessibility or extensiveness: wider coverage means wider access
Base case Downside Upside
Total need through
2030
$57 trillion $57 trillion $57 trillion
Government
spending
3% of GDP 2% of GDP 3.5% of GDP
Total gap $8.4 trillion $24.6 trillion Zero
Annual gap $500 billion $1.5 trillion Zero
Source: OECD; McKinsey & Co.; Global Insight in Standard and Poors.
Scenarios For Global Infrastructure Investment Needs Versus Public Sector Funding SourcesTo 2030
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Importance of Infrastructure
Copyright 2013 APEC Scretariat
Indicator APEC OECD GapQuality of overall infrastructure 4.96 5.48 0.52
Quality of roads 4.86 5.17 0.31
Quality of railroad
infrastructure
4.2 4.48 0.28
Quality of port infrastructure 4.91 5.18 0.27
Quality of airport
infrastructure 5.20 5.41
0.52
Availability and quality oftransport infrastructure 4.62 4.69 (0.07)Availability and quality oftransport services 4.89 5.16 0.27
Assessing the Gap in the Infrastructure between the APEC
Region and the OECD
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Indicator APEC OECD GapTechnological adoption, 1-7(best) 5.18 5.41
0.23
Availability of latest
technologies 5.44 5.910.47
Firm-level technology
absorption 5.23 5.460.23
FDI and technology transfer 4.88 4.86 -0.02
ICT use , 1-7 (best) 4.62 4.69 0.07
The Gap in the ICT between the APEC Region
and the OECD.
Source: WEF (World Economic Forum): Global Competitiveness Report 20132014 data
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APEC Transport Infrastructure Quality
Source: World Bank 2014.
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Infrastructure Expenditure Needs (%GDP)
Source: Yepes (2008) (quoted in Fay et al. 2011) in Inderst and Stewart 2014.
Infrastructure needs
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Estimated Infrastructure Investments in Developing Countries
Source: Bhattacharya et al. (2012) in Inderst and Stewart 2014.
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Impact to growth capacity
Source: Estache and Garsous (April 2012)
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Intra-APEC trade accounts for around two-thirds (67%) of
APECs total merchandise trade (exports and imports)
Value added in APEC Exports
Source: World Bank 2014.
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World Trade Network in Gross Value
Terms, 2009
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Graphical Representation of the
World Trade Network in Value
Added Terms, 2009
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VALUE CHAIN CONNECTEDNESS
Figure 8 Simple Average Connectedness Score for Total Value Added Trade, by Economy Group, 2009
Source: APEC PSU (2014c)
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Global Connectedness: Pole of Growth
Source: DHL Global Connectedness Index 2014
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Source: DHL Global Connectedness Index 2014
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Important issues for global
connectivity
1. Trade costs2. Global value chains3. New normal for global trade?
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Source: ESCAP-WB Trade Costs Database (from ESCAP website: http://www.unescap.org/tid/artnet/trade-costs.asp) and PSU calculation.
Trade Costs for Manufacturing Goods, APEC Economies,excluding tariff costs, percent ad valorem equivalent
Trade Costs
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Trade Costs for Manufacturing Goods, selected Regional Groupings, excluding tariff costs, percent ad valorem equivalent, 2009
Note: APEC LA: consist of Chile, Mexico and Peru; APEC NLA: consist of the remaining APEC economies where data is available; ASEAN-4: consist of Indonesia, Malaysia, the Philippines and Thailand; EA-3: consist of China, Japan and Korea.Source: ESCAP-WB Trade Costs Database (from ESCAP website: http://www.unescap.org/tid/artnet/trade-costs.asp) and PSU calculation.
Trade Costs
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Nominal Costs to Trade
0
200
400
600
800
1000
1200
APEC Import(LPI)
APEC Import(DB)
OECD Import(LPI)
OECD Import(DB)
APEC Export(LPI)
APEC Export(DB)
OECD Export(LPI)
OECD Export(DB)
Costs to Trade, APEC and OECD
2009 2013
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Global Value Chains play a dominant role in global trade and business. The increase in global trade has been attributed to the increased activity of GVCs,
with multinational corporations (MNCs) contributing around 80% of global
exports (WEF 2013). Growth in GVCs also encourages FDI.
Global Value Chains
Table 1 Selected key performance indicators, foreign affiliates of TNCs, 2013
2013 Level Change over 2012
71 million of employees +5%
$35 trillion of sales +9%
$7 trillion of value added (~10% of global GDP) +6%
$97 trillion of managed assets +8%
$8 trillion of exports +3%
Source: World Investment Report 2014.
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Twenty years ago, 60% of world trade was between developed countries (NorthNorth), 30% was between developed and developing countries (NorthSouth) and 10% was SouthSouth. By 2020, we are expecting it to be split equally three ways, so the relative weight of NorthNorth trade will have been halved in just 30 years or so.
Interestingly, almost 60% of trade in goods is now in intermediates, i.e. goods used as inputs in the production process.
[Pascal Lamy, Future of Trade, 18 December 2013]
Global Value Chains
Source: Oxford Economics, 2014 PwC APEC CEO Survey
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Entering Value Chains
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Entering Value Chains
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New normal for global trade?
Source: WTO World Trade
Report 2014.
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Figure 1. Trade in global value chains has decelarated more rapidly than total trade
Source: Datastream, International Trade Commission (ITC), World Bank in Ferrantino and Taglioni 2014.
New normal for global trade?
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Figure 2. Motor vehicles and parts trade has led the decline in the current and previous slowdowns
Source: International Trade Commission (ITC), World Bank in Ferrantino and Taglioni 2014.
New normal for global trade?
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Source: OECD; Johansson and Olaberra (2014).
New normal for global trade?
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