April 17, 2023

IRTI’s Interventions in Enhancing Intra-OIC Trade

Dr Abdelkader ChachiSenior Training Specialist & Economist Researcher

Islamic Research and Training Institute, Islamic Development Bank, Jeddah, KSA

Presented in the IDB Group Preparatory Seminar For the 5th Global Review of Aid for Trade

21-23 April 2015, Amman Jordan

April 17, 2023 2

1. About IRTI

2. Relationship between IRTI, GTRC & Intra-OIC Trade

3. Background on Intra-OIC Trade

4. IRTI Interventions on enhancing Intra-OIC Trade

5. BPA Studies carried out under GTRC initiatives

6. Way forward for this study

Outline of the Presentation

April 17, 2023 3

◊ IRTI established in 1401H (1981) to be the knowledge hub of the IDB Group.◊ It conducts research, training, advisory and knowledge dissemination activities

aimed at bringing the financial services in member countries in line with Islamic injunctions.

◊ It is made of Four (4) Divisions:ResearchAdvisoryTrainingInformation

About IRTI

April 17, 2023 4

About IRTI

April 17, 2023 5

◊ Apart from publishing books, journals, research papers and other publications, IRTI also undertakes a variety of programs designed to promote knowledge in Islamic finance. These include the IDB Prize for Islamic Economics, Banking and Finance; IRTI Scholarships and Research Grants Programs; as well as collection and publication of data on Islamic financial institutions.

◊ IRTI also partners with like-minded institutions globally, including universities and regulatory authorities, towards advancing knowledge in Islamic Finance through policy dialogues, workshops, seminars, lectures, etc.

About IRTI

April 17, 2023 6

About IRTI

April 17, 2023 7

◊ IRTI joined Group Trade Related Committee (GTRC) since its inception (2009). It, actively, participates in its meetings, events and initiatives

◊ GTRC Objectives include leveraging synergy among all IDB Group entities in enhancing Intra-OIC Trade under the leadership of ITFC

◊ ITFC is the entity that is mostly linked to the finance and facilitation of Intra-OIC Trade especially through its TCPP Division

◊ ICIEC is the other IDB Entity that facilitate Intra-OIC Trade by insuring imports and exports to and from OIC member countries

◊ ICD is also very much involved in enhancing Intra-OIC trade by taking care of the Private Sector and SMEs

◊ IRTI does not contribute directly towards the increase and enhancement of Intra-OIC Trade, however, it contributes positively indirectly

Relationship between IRTI, GTRC & Intra-OIC Trade

April 17, 2023 8

◊The intra-trade among OIC countries has been for a long time less than 10% of their total trade.

◊ It is only recently that it has reached around 17% due to the many attempts and efforts exerted at the country and international level.

◊The OIC Ten Year Program of Action adopted by the 3rd OIC Extraordinary Summit, held in Makkah Al-Mukkaramah in December 2005: call for accelerating OIC intra-trade to reach a share of 20% in total trade by 2015.

Background on Intra-OIC Trade

April 17, 2023 9

Source: WTO, SESRIC

Intra-OIC Trade

April 17, 2023 10

Source: ICDT & SESRIC

April 17, 2023 11

Difficulties facing Intra-OIC Trade

Mahmoud Sami Nabi, Constraints on the OIC intra-trade: Insights from experts‘ opinions

April 17, 2023 12

Degree of difficulty on a scale of 1 to 5 for the private sector of the region to trade with OIC countries belonging to the mentioned regions

Mahmoud Sami Nabi, Constraints on the OIC intra-trade: Insights from experts‘ opinions

April 17, 2023 13

The most strategic commodities (except petroleum and gas) for intra-OIC trade- (Higher score reflects higher importance)

Mahmoud Sami Nabi, Constraints on the OIC intra-trade: Insights from experts‘ opinions

April 17, 2023 14

◊ IRTI does not contribute directly towards the increase and enhancement of Intra-

OIC Trade, however, it contributes positively indirectly throughResearch & Publication of Books, Journal Papers, Working Papers, Articles, etc..

Seminars and Conferences

Forums and Workshops (COMCEC, IBF, ICDT, etc..)

Training Courses (Islamic Modes of trade Finance, Financing SMEs)

GTRC meetings, events and initiatives

IRTI Interventions on enhancing Intra-OIC Trade

April 17, 2023 15

◊ IRTI has published a number of books and articles on intra-OIC trade, the latest of which are:

◊ A joint research paper on “Enhancing Intra-Trade in OIC Member Countries Through T-SDRs”

By Mahmoud Sami Nabi, Sami Suweilem, Rami Abdelkafi and Imed Drine.

◊ Hired a consultant from Kazakhstan to undertake a study on “Business Process Analysis on

the Barriers of the Trade Process of Kazakhstan for the Strategic Agricultural Products”.

◊ A joint study on “The Constraints to Intra-OIC Trade” by Abdelkader Chachi, Mahmoud Sami

Nabi, Tengfei Wan, Ayhan Karaca, Yelena Vassilevskaya & Urmat takirov.

Research & Publications

April 17, 2023 16

◊ Completed a working paper on “The Challenges of Islamic Trade Finance in

Promoting SMEs in IDB Member Countries” by Abd elrahman Elzahi

◊ Completed the first draft on the study on “Business Process Analysis on the

Barriers of the Trade Process of Kazakhstan for the Strategic Agricultural

Products”

◊ Conducted a Workshop on Business Process Analysis in Bishkek in April 2014

◊ Next Workshop on BPA in Almaty, Kazakhstan on 4-6 May 2015

Research & Publications

April 17, 2023 17

◊ Within the framework of its program of technical assistance for the benefit of the OIC

Member States, the Islamic Research and Training Institute (IRTI) organised more than 30

training programs on different aspects related to the enhancement of trade or that have an

impact on trade generally and Intra-OIC trade especially.

◊ These courses have benefitted more than 1,000 trainees in different OIC Member Countries.

◊ Conducted a Workshop on Business Process Analysis in Bishkek in April 2014

◊ Next Workshop on BPA in Almaty, Kazakhstan on 4-6 May 2015

Advisory and Capacity Building

April 17, 2023 18

◊ IRTI, in collaboration with GTRC, ITFC and UNESCAP hired two

consultants from Kazakhstan and Kyrgyzstan to do BPA

studies on the constraints facing intra-trade among

Azerbaijan, Kazakhstan and Kyrgyzstan.

◊ BPA studies were conducted by using the approach presented

in the UNNExT Business Process Analysis Guide. Procedural,

regulatory, documental requirements were analyzed and

discussed with main stakeholders along supply chains.

Business Process Analysis (BPA)

April 17, 2023 19

◊ Diagnose and identify the barriers, constraints and difficulties facing intra-trade

and come up with the right recommendations to streamline trade processes

based on the Business Process Analysis (BPA) Methodology.

◊ BPA help identifying, recording and analysing existing “as-is” international trade

business processes, as well as generating recommendations for their

prospective optimization.

BPA Objectives

April 17, 2023 20

◊ The Consultant from Kazakhstan, Yelena Vissilevska and Urmat from Kyrgystan found:

◊ Crossing borders of commodities requires a lot of commercial, transport, customs and other

documents based on government legislation.

◊ Strict product safety requirements often create the potentially inefficient operations and

unnecessary delays and costs.

◊ Redundancies, bottlenecks and legal gaps were discovered.

Results of BPA Studies

April 17, 2023 21

◊ Despite of presence of the Free Trade Agreement in CIS Zone there are a lot of

legal mismatches in regulation of export from Kyrgyz Republic to the CU,

especially lack of mechanism of acceptance of Kyrgyz quality compliance

documents in Kazakhstan.

◊ The current situation leads to duplication of trade related procedures. It was

proposed that accession of Kyrgyz Republic to the CU will reduce barriers to

trade with countries-members of the CU.

Results of Kyrgyzstan BPA Study

April 17, 2023 22

◊ List of activities of Action plans include following dimensions of reforms:◊ Elimination of redundant processes and activities which are not value-adding.◊ Reorganization of processes and activities by combining joint cooperation at the

border-crossing control, harmonization of data exchange, modernization of infrastructure to conduct relevant processes etc.

◊ Improvement, development and adoption of national legal framework to international recommendations, standards, legislation of the Customs Union.

◊ Promotion of awareness and capacity building of business society regarding doing business (especially export and import conditions at the traditional markets and main supplying countries).

Recommendations from BPA Studies

April 17, 2023 23

◊ Government officials should develop appropriated regulations and standards for certification bodies, laboratories and inspections, as well as inter-governmental agreements. The implementation of these actions will reduce the delivery time of goods for 17-19 days.

◊ conduct the monitor of border checkpoints of the two countries, after monitoring it is necessary to develop and implement action plan to reduce the barriers on the border through using new technologies and equipment. The implementation of these actions will reduce the time on the border to 2 hours.

◊ It is also necessary to conduct the monitoring of compliance with the requirements of the international agreements on recognition of weight certificate and to facilitate the discussion at governmental bilateral meetings of Kazakhstan and Kyrgyzstan.

Recommendations from BPA Studies

April 17, 2023 24

◊ In order to facilitate Intra-OIC Trade further, enhance its growth and development and benefit from this in improving the balances of trade, the employment of human and financial resources and the OIC economies at large, there is a need to diagnose the difficulties, constraints and obstacles facing intra-OIC trade.

◊ To do that, I think it is very important to start at the beginning by taking the first step of the process which is to conduct BPA studies between countries similar to the one IRTI, GTRC, ITFC and UNESCAP sponsored.

The Way Forward

April 17, 2023 25

BPA: the first step to be taken before introducing other trade facilitation measures

e-Single Window and paperless trading

National Data Harmonization

Document Simplification & Standardization

Cross Border Data Exchange

Business Process Analysis for Trade Facilitation1

6

5

3

2

4

Process Simplification and Harmonization

Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

April 17, 2023 26

Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

Information captured by BPA

Who involved

Proceduresand Documents

required

Related Rulesand Regulations

Some quantitative

indicators

April 17, 2023 27

Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

BPA+: An Integrated Methodology

Trade-related procedures before cargo movement

Cargo origin

Border crossing point

Border crossing point

Cargo destination

Trade-related procedures after cargo arrival

TRS TRS

TCD

BPA of Trade Procedures

Business Process Analysis (BPA) for diagnosis of TF bottlenecks along entire supply chain

Time-Cost Distance Method (TCD) & Time Release Study (TRS) to Improve/verify BPA time and cost estimates

28

April 17, 2023

Shipping company

Shipping agentPort Authority,

etc.

Customs, Bank,Customs broker

Port AuthorityContainer Yard

Warehouse,Forwarder, etc.

Importer,Customs bro-

kerContainer

YardOGAs, etc.

Time Release Study (TRS): Measuring ‘time’ for border crossing procedures

Arrival of cargo

Unloading/Storage

Submission of Declaration Customs release

permissionRemoval of cargo

28Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

Time-Cost-Distance Method: record ‘time’ and ‘cost’ of physical movement of cargoes

April 17, 2023 29

Transport to border

Wait at border crossing/change transport mode

Transport to sea port

Wait at sea port

Sea transport

500 km 1000 km 2000 km1500 km

Day 4

Tim

e

Day 3

Day 2

Day 1

$400Cost

$300

$200

$100

Distance

Point of Origin

Destination

Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

April 17, 2023 30

◊ The main obstacles facing IRTI in expanding its trade related training courses and other

projects are:

◊ The budget constraints

◊ The shortage of professional staff

◊ However, IRTI, in its endeavour to face the challenges and become self-sufficient through its

income-generating programs, wishes to do more programs in the future, not only to enhance

trade among OIC member countries but also to contribute more effectively to the growth

and development of its member countries.

OBSTACLES AND CHALLENGES FACING IRTI

April 17, 2023 31

شكرا جزيالThank You very much

Merci Beaucoup

Muchas Gracias

Email: achachi@isdb.org

Tel. +966-12-646 6229

Fax. +966-12-637 8927

Website: irti.org