The Tools: From Diagnostic to Implementation
Alina Antoci - IFC Trade Logistics Advisory ServicePractical
Implementation Examples
Impact Evaluation
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
Why does it matters to firms and countries?
33
Direct cost of transportation Lost days due to delays Cost of financing investment in
inventory (interest paid or opportunity cost of capital)
Taxes Insurance
Financial Risk Storage and Handling
• Market share
• Spoilage
• Shrinkage
• Obsolescence
• Warehousing and storage especially when large inventories require additional space
• Handling and transportation in general and to overflow facilities
Cost Categories
Poor trade logistics creates tremendous costs for businesses including inventory, transportation….
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com
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Sour
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FC..impacting the investment climate
29.4
11.36 10.636.9
12.7
6.28 7.3111
0
5
10
15
20
25
30
35
40
45
Less than US$ 5 M US$ 5 M to US$ 50 M US$ 50 M to US$ 500 M More than US$ 500 M
Inventory Management & Warehousing Transport & Distribution
42
18 18 18
Source: Centro Logístico de Latinoamerica, Bogota, Colombia. Benchmarking 2007: Estado de la Logística en America Latina Anexo, María Rey LogisticSummit 2008
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 timelinessand reliability
..impacting the investment climate
Cost breakdown for Pineapples imported from Costa Rica to St Lucia
10%
Producer Price
LandTransport
Ocean Transport+ Port CR
Port Miami
Wholesale Consolidated
Cost
Other Costs
OceanTransport + Port SL
Duties
LandTransport & Handling
Land Transport+ Storage
Retail Profits+ Other Costs
60%
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
Farm Gate(CR)
CR FAS Ocean toMiami
Miami Port MiamiWarehouse
Miami FOBPrice
Ocean to St.Lucia
St. Lucia PortWholesale DistributionRetail Price
Costa Rica (CR) ------------> --------------> St. Lucia (SL)
US
$/lb
60% of the cost related to the importation of pineapples CR to Saint Lucia is due to documentation preparation, border clearance, transportation and logistics.
Source: Adapted from : Logistics, Transport and Food Prices in LAC (2009) and OECS Backward Linkages Study (2008)
Farm Gate price
30%
Transport and Logistics Costs
Consumer Cost
Landed Cost
Why does it matter to firms? (3) High costs of inputs
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
…and these high costs are driven by “soft issues”
Developing country average import time
DAYS
14 days
4 days
5 days
4.5 days
DOCUMENTS ASSEMBLY AND PROCEDURES
CUSTOMS AND TECHNICAL CONTROL
TERMINAL AND PORT HANDLING
INLAND TRANSPORT
Sour
ce: D
B 20
13
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.
Soft issues Hard and soft issues
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
TRADE FACILITATION
Process of eliminating all unnecessary elements and duplications in formalities, processes and procedures
Simplification Harmonisation
Alignment of national procedures, operations and documents with international conventions, standards and practices.
Standardisation
Process of developing internationally agreed formats for practices and procedures, documents and information.
Trade supply chain performance and reliability determined by:
1. quality of trade related infrastructure2. efficiency of trade procedures and regulations3. quality and availability of private sector services
Firms depend on the entire supply chain to connect to regional and international markets
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
Source: DB database 2012, 2013
Distance
Logistics Costs(Value of Time & Service Charges)
International Jurisdiction
NationalJurisdiction
Collection, Marketing &Packaging
Inventoryof Semi-FinishedProduct
Land Transport
Port Handling& BorderClearance
Port Handling& BorderClearance
OceanShipping
Inland Transport
ProcessorWarehouse
Information Flow
Seller
In-house proceduresPoints of Interconnectivity
Changes in supply chain performance are realized through changes in:• In-house Procedures• Level of Interconnectivity• Regulation• Technology and systems• Infrastructure
Timely, cost effective, reliable and predictable connections
To Achieve This
Cooperation at the national level
• Between the government institutions concerned by foreign trade: Finance, Commerce, Transport
• With the trading community: importers and exporters
• With service providers: transport operators, banks, insurance companies…
Changes in supply chain performance are realized
through changes in:• In-house Procedures• Level of
Interconnectivity• Regulation• Technology and systems• Infrastructure
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
IFC Global Trade Logistics Advisory Program
14
Expected Results and Impact Reduce the time & cost to trade, leading to
increases in exports & savings to the private sector
Improve public agencies regulatory role for importing/exporting firms and their performance
Technical assistance to developing countries to build efficient trade logistics systems and services by improving: efficiency of border management coordination of Customs agencies
Objective Address binding constraints faced by the private sector across the supply chain
Partnerships with the public and private sectors
Emphasis on impact evaluation
Capital Carrying Charge
Cargo Loss and Damage
User Fees and Charges
Inventory Cost Savings
Capital Carrying Charge
Cargo Loss and Damage
User Fees and Charges
Inventory Cost Savings
Increases Export of … by …
Sub Saharan Africa 6.1%South Asia 5.8%East Europe & Central Asia 5.0%Middle East & N. Africa 4.1%East Asia and Pacific Islands 4.1%Latin America and Caribbean 3.5%OECD 1.7%
A 10% reduction export time
Impact on exports Impact on private sector savings
Source: Forthcoming research paper (Subramanian, Anderson and Lee (2012)
Program Core Areas
• Simplifying & harmonizing trade procedures and documentation• Conducting legal and regulatory reforms• Integrating risk management systems into border inspections and clearance• Implementing electronic processing/automation and Single Window Systems• Enhancing/implementing information and communication technology (ICT)
solutions, including e-payment
Economy-wide
• Improving trade logistics systems and services, order clearance at the regional level
• Technical Control for the cross border movement of cargo focusing on the implementation and mutual recognition of international standards, accreditation and certification
Regional Integration
• Improving national logistics efficiency of cargo movement and distribution services at ports, airports & dry-ports
• Improving access for the private sector to invest in logistics and distribution services
• Improving logistics services along the supply chain and/or specific Value Chains
• Improving trade logistics in agribusiness supply chains• Streamlining NTBs and thus offering market access for key agribusiness
products
Logistics Services
Supply Chain and Agribusiness
Source: DB database 2012, 2013
Implementation Model
Rapid Response Program 10-12 Months
•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
•Extend rapid response work and addresses key constraints•Promote best practices for efficient trade logistics supply chains
Industry Competitiveness Program 2-3 years
•Support regulatory frameworks for modern logistics and distribution services•Improve food security & enhance agribusiness competitiveness
Regional Program 3-4 years
•Ease access to regional and global markets•Provide solutions to land-locked, transit and island economies
Typical Engagement Program
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
Impact on the Ground – At the Country level
Rwanda
Enhanced risk-based inspections
process
Allow 60% of cargo shipments routed
through low /medium risk
channels
Reduced time to import by 55% and time to export by
25%
Liberia
Implemented Customs
automated system
Reduced Customs clearance from 3
weeks to 3-4 days
Colombia
Implemented a simultaneous
inspections regime across all border
agencies
Established a common
methodology for sharing risk data
Business process re-engineering
underway
To improve functionality of the Single Window for
Trade
Armenia
Removed export license and
technical certificates
Exporters no longer require Expertise Test
Reports to obtain a certificate of origin
Reduced export documents from 7 to 5 and time by 56% in 3 years
Saved 4 days and $100 per export
transaction
Impact on the Ground – At the Regional level
IFC South Asia Regional Project
aligned working hours between India and Nepal
automated transit processes
aligned processes and procedures at
land border stations
to improve movement of
goods across region
South Asia
South-Eastern Europe
Central America
the Caribbean
and most recently
West Africa
Our clients
Trade Logistics projects in over 50 countries
Caribbean Region - St Lucia, Antigua & Barbuda, St Kitts & Nevis, Grenada, Dominica
Central America RegionEl Salvador, Honduras, Guatemala, Nicaragua, Costa Rica
Liberia, Mali, Burkina Faso, Guinea Bissau, Benin, Sao TomeWest Africa Region (ECOWAS)
SE Europe Region - Serbia, Albania, Bosnia Herzegovina, Kosovo, Macedonia, Montenegro
Armenia
Kazakhstan, Mongolia
South Asia Region - India, Bangladesh, Nepal
PhilippinesTimor-Leste
Chad, Central African Republic, Cameroon, Gabon
Egypt, Ethiopia, Rwanda, Kenya, Zambia
Columbia, Peru
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
ChallengeHow can we get better at measuring
what we value
OpportunityWhat 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?”
Impact Evaluation of Investment Climate Reforms
Lower costs for firms (lower inventories) and higher returns
Higher trade volumes and more diversified trade
More trading firms and investment
1)Simplification of border procedures, e.g.Introduce single windowReduce/harmonize
documentation
2)Computerization of proceduresElectronic scanning
3)Introduce/improve risk management
4)Strengthen performance incentives for customs officials
REVENUE AND RENTSCustoms revenueIllegal payments
Measures of Economic activity
Measures of Economic activity
Measures ofBorder performance
Measures ofBorder performance
Pilot project: Impact of border-related reforms
TRADE FACILITATIONLower and predictable
trading costs and clearance times
RISKIllegal shipments
