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The Tools: From Diagnostic to ImplementationAlina Antoci - IFC Trade Logistics Advisory Service

1ContentsWhy does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory ProgramPractical Implementation ExamplesImpact Evaluation of Investment Climate Reforms

2Why does it matters to firms and countries?

33Direct cost of transportationLost days due to delaysCost of financing investment in inventory (interest paid or opportunity cost of capital)TaxesInsuranceFinancialRiskStorage and HandlingMarket shareSpoilageShrinkageObsolescence

Warehousing and storage especially when large inventories require additional spaceHandling and transportation in general and to overflow facilitiesCost CategoriesPoor trade logistics creates tremendous costs for businesses including inventory, transportation.

Source: blog.allstate.com

Source: dipity.com

Source: IFC..impacting the investment climate3

Source: Centro Logstico de Latinoamerica, Bogota, Colombia. Benchmarking 2007: Estado de la Logstica en America Latina Anexo, Mara Rey LogisticSummit 2008Why does it matter to firms? (2) Logistics costs have a disproportionate burden on small firmsAverage logistics cost as a % of firm salesInventory a function of timelinessand reliability..impacting the investment climate4Cost breakdown for Pineapples imported from Costa Rica to St Lucia 10%Producer PriceLandTransport Ocean Transport+ Port CRPort MiamiWholesale Consolidated CostOther CostsOceanTransport + Port SL DutiesLandTransport & HandlingLand Transport+ StorageRetail Profits+ Other Costs60%00.20.40.60.811.21.41.61.82Farm Gate(CR) CR FASOcean toMiamiMiami PortMiamiWarehouseMiami FOBPriceOcean to St.LuciaSt. Lucia PortWholesaleDistributionRetail PriceCosta Rica (CR) ------------> --------------> St. Lucia (SL)US$/lb60% 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 price30%Transport and Logistics CostsConsumer Cost

Landed CostWhy does it matter to firms? (3) High costs of inputs 5Why does it matter to countries? Logistics directly affect the poorLogistics costs make up large part of food prices20 to 60 percentDepending upon product and trade route

Food is the primary purchase of households20-30 percent of expenditures on averageFor the poor, 60 to 70 percent of HH expenditures

6and these high costs are driven by soft issues

Developing country average import time DAYS14 days 4 days 5 days4.5 daysDOCUMENTS ASSEMBLY AND PROCEDURESCUSTOMS AND TECHNICAL CONTROL TERMINAL AND PORT HANDLINGINLAND TRANSPORTSource: DB 2013 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 7ContentsWhy does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory ProgramPractical Implementation ExamplesImpact Evaluation of Investment Climate Reforms

8TRADE FACILITATIONProcess of eliminating all unnecessary elements and duplications in formalities, processes and proceduresSimplificationHarmonisationAlignment of national procedures, operations and documents with international conventions, standards and practices.StandardisationProcess of developing internationally agreed formats for practices and procedures, documents and information.Trade supply chain performance and reliability determined by:quality of trade related infrastructureefficiency of trade procedures and regulationsquality and availability of private sector servicesFirms depend on the entire supply chain to connect to regional and international markets9 What do traders want ?Simple and smooth processing of formalitiesA seamless process (minimal intervention)Means to allow goods to proceed promptly to their final destination. No longer itineraries, no unpacking, no delaysA single control point for all public servicesStandard forms, assembled into a single bunch of documents, compatible with trade documents and transport contractsPredictable and transparent rules and proceduresConsistency even if not so simple, at least be consistent

Timely, cost effective, reliable and predictable connections critical for commercial competitiveness1011Source: DB database 2012, 2013DistanceLogistics Costs(Value of Time & Service Charges)International JurisdictionNationalJurisdiction

Collection, Marketing &PackagingInventoryof Semi-FinishedProductLand TransportPort Handling& BorderClearancePort Handling& BorderClearanceOceanShippingInland TransportProcessorWarehouse

Information FlowSellerIn-house proceduresPoints of InterconnectivityChanges in supply chain performance are realized through changes in: In-house Procedures Level of Interconnectivity Regulation Technology and systems InfrastructureTimely, cost effective, reliable and predictable connections11To Achieve This12ContentsWhy does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory ProgramPractical Implementation ExamplesImpact Evaluation of Investment Climate Reforms

13IFC Global Trade Logistics Advisory Program14

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 managementcoordination of Customs agenciesObjective Address binding constraints faced by the private sector across the supply chainPartnerships with the public and private sectors14Emphasis on impact evaluationCapital Carrying ChargeCargo Loss and DamageUser Fees and ChargesInventory Cost SavingsCapital Carrying ChargeCargo Loss and DamageUser Fees and ChargesInventory Cost Savings

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%OECD1.7%A 10% reduction export timeImpact on exportsImpact on private sector savingsSource: Forthcoming research paper (Subramanian, Anderson and Lee (2012)15Program Core Areas16Source: DB database 2012, 2013Implementation ModelRapid Response Program 10-12 MonthsIdentify and achieve quick wins that build trust and catalyze reformsEstablish the basis for medium and long term reforms

Systematic Reform Program 1-2 YearsExtend rapid response work and addresses key constraintsPromote best practices for efficient trade logistics supply chains

Industry Competitiveness Program 2-3 yearsSupport regulatory frameworks for modern logistics and distribution servicesImprove food security & enhance agribusiness competitivenessRegional Program 3-4 yearsEase access to regional and global marketsProvide solutions to land-locked, transit and island economies

Typical Engagement Program 17ContentsWhy does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory ProgramPractical Implementation ExamplesImpact Evaluation of Investment Climate Reforms

18Impact on the Ground At the Country level19Impact on the Ground At the Regional levelSouth AsiaSouth-Eastern Europe Central Americathe Caribbean and most recently West Africa20Our clients

Trade Logistics projects in over 50 countriesCaribbean Region - St Lucia, Antigua & Barbuda, St Kitts & Nevis, Grenada, DominicaCentral America RegionEl Salvador, Honduras, Guatemala, Nicaragua, Costa RicaLiberia, Mali, Burkina Faso, Guinea Bissau, Benin, Sao TomeWest Africa Region (ECOWAS)SE Europe Region - Serbia, Albania, Bosnia Herzegovina, Kosovo, Macedonia, MontenegroArmeniaKazakhstan, MongoliaSouth Asia Region - India, Bangladesh, NepalPhilippinesTimor-LesteChad, Central African Republic, Cameroon, Gabon Egypt, Ethiopia, Rwanda, Kenya, ZambiaColumbia, Peru 21ContentsWhy does it matter to firms and countries? What do traders want? IFC Global Trade Logistics Advisory ProgramPractical Implementation ExamplesImpact Evaluation of Investment Climate Reforms

22ChallengeHow can we get better at measuring what we valueOpportunityWhat gets measured gets doneDevelopment Impact Evaluation (DIME) WBGInvestment Climate Department (IC) Trade and InvestmentDevelopment Research Group (DEC) TradeInternal Client Impact and Results working groupHow 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 Reforms23Lower costs for firms (lower inventories) and higher returnsHigher trade volumes and more diversified tradeMore trading firms and investmentSimplification of border procedures, e.g.Introduce single windowReduce/harmonize documentation

Computerization of proceduresElectronic scanning

Introduce/improve risk management

Strengthen performance incentives for customs officialsREVENUE AND RENTSCustoms revenueIllegal paymentsMeasures of Economic activityMeasures ofBorder performancePilot project: Impact of border-related reformsTRADE FACILITATIONLower a