Analysis of the cost of transit and World Bank programme on transit facilitation in landlocked countries

Transcription

1 Expert Meeting on REGIONAL COOPERATION IN TRANSIT TRANSPORT: SOLUTIONS FOR LANDLOCKED AND TRANSIT DEVELOPING COUNTRIES September 2007 Analysis of the cost of transit and World Bank programme on transit facilitation in landlocked countries by Graham Smith World Bank This expert paper is reproduced by the UNCTAD secretariat in the form and language in which it has been received. The views expressed are those of the author and do not necessarily reflect the view of the United Nations.

2 Analysis of the cost of transit and World Bank program on transit facilitation in landlocked countries Regional Cooperation in Transit Transport Geneva September 2007 Graham Smith World Bank

3 A. The cost of transit Relationships between being landlocked and economic development The cost framework Cost of transportation Cost of logistics Cost of delays and unreliability Tentative conclusions on priority actions

4 Relationship between being landlocked and economic development Being landlocked is a characteristic of many of the poorest countries results in much lower trade: - 30% has a high impact on economic growth: - 1.5% Number # landlocked % Poorest countries Higher income countries

5 The cost framework There are three main components in total transit costs 1. Transportation cost per se: fees paid by the shipper to truckers or rail operators for actual transit transportation services 2. Other logistics costs: various fees and charges paid for transit procedures, freight forwarder cost, legal or illegal facilitation payments 3. Costs of time and delay: cost of inventory in transit, and cost of unreliability

6 1 - Cost of transportation Despite poor road condition, the cost of trucking services is not necessarily higher in less developed countries: Investment costs are much lower Labor costs are a small percentage of total operating costs (5% versus 50% in Western Europe) Other variable costs are higher (fuel consumption, maintenance costs) However Monopoly systems and queuing systems can increase substantially transportation cost Trade unbalances can reduce load factor

7 Cost of transportation (2) Comparison of truck operating costs in Western Europe, Eastern Europe, and Africa Western Europe Eastern Europe Distance/ Month (Km) Africa 4,000 Fixed cost per Km (US$) Variable cost per Km (US$) + 10, , ,000 8,000 Total cost per Km (US$)

8 2 - Cost of Logistics Freight forwarder cost: reflects the complexity of the transit process, sometimes the problematic structure of the profession Transit related fees: numerous because of the multiplicity of regulations,, and often overpriced «Facilitation» payments, especially at road blocks, border crossings,, and weighbridges

9 Costs of logistics Estimates for Lome Ouagadougou corridor (40 ft container) Total in CFA Francs Transport cost 1,100,000 % of TC Breakdown of logistics costs Fees in Togo 121, Fees in Burkina Faso Freight forwarder fee Mandatory Insurance 125, , ,000 8 Illegal payments 300, Avoidable costs Public procedures Private services Illegal payments Non avoidable costs CFA Francs 646,000 (58%) 186, , , ,000 (15%) Total logistics costs 806,000 73

10 3 - Cost of time and delay Cost of inventory in transit: Financing charges, damage and losses, container rental, demurrage charges, etc About 0.1% of the value of shipment per day Costs of delays and unreliability Excess inventory, disruption in the production chain, additional cost of alternative transport, loss of contract, loss of agriculture produce, etc About 0.8 % of the value of shipment per day

11 The skewed distribution of travel times Occurrence of long delays is unavoidable These are the most disruptive for the shippers and the costs are very high From Buenos Aires to Sao Paulo

12 A tentative summary of costs (40 ft container) Douala-Bangui Operating costs (Euro/km) Distance (Km) 1,450 3,000 Load Factor Transportation cost (Euro) 3,625 2,931 Overheads 66% 5% Transport and Logistics costs (Euro) 6,017 3,077 Los Angeles- Chicago Cost of time (Euro) (15 days) (5 days) Cost of delays (Euro) 3,200-4,800 (10days) Total Transit costs (Euro) 9,817-11,717 3,277-3,377

13 Tentative conclusions on priority actions The three areas with the largest possible gains in total logistics costs are the following: Measures that enhance supply chain predictability Measures reducing rent-seeking activities Reforms of market structure and elimination of cartels and syndicate freight associations

14 Political economy of transit: breaking the Vicious Circle Fraud and need for control Unfriendly Transit procedures Low security and integrity in supply chain Unreliable supply chain High cost of uncertainty Discourage investment in modern services Overregulation Rents Low quality and inefficient Services Inadequate market structure Disincentive to invest

15 B - World Bank Program on Transit Facilitation in Landlocked Countries Objectives Content Program schedule Thematic case studies Pilot activities

16 Program Objectivesbjectives 1. Provide capacity development for government and private sector agencies. 2. Strengthen partnerships with donors, and international organizations. 3. Foster cross-regional regional experience sharing. 4. Directly contribute to facilitation projects. 5. Contribute to other developmental objectives that are dependent upon good inland freight logistics.

17 Program Content: Fill Knowledge Gaps & Support Operational Work 1. Provide reliable Information on transit trade issues and practices (case and thematic studies). 2. Develop consistent performance measurement systems for major transport corridors. 3. Contribute to the implementation of improved transit systems.

18 Program Schedule Preparation, Initial Outputs q3 q4 q1 q2 q3 q4 q1 q2 q3 Knowledge: Thematic and Case Studies Pilot capacity building Projects Flagship and Dissemination

19 Thematic Case Studies Studies Completed: Corridor Management. Transit economics & trade costs. Studies Underway or being considered: Technology aimed at securing the supply chain (e.g. cargo tracking...). Management of guarantee systems. Impact of transit on the economy of transit countries. Supply chain management in LLDC s (shippers survey). Consolidation and small-scale scale shipments. Air freight. Border management.

20 Pilot Activities 1. Transit Regimes and Carnet Systems: Initial feasibility studies Capacity building at sub-regional level Global partnerships and capacity building under development 2. Corridor Performance Indicators Stock-taking taking of existing experiments Toolkit for the development of relevant cost-effective measures Pilot implementation

21 For additional information Please contact the Trade Logistics Group address:

22 Thank you for your attention