Making Trade Corridors Work

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1 WORLD BANK Making Trade Corridors Work C H A R L E S K U N A K A S E N I O R T R A D E F A C I L I T A T I O N S P E C I A L I S T I N T E R N A T I O N A L T R A D E D E P A R T M E N T Trade Facilitation and Logistics Day, May

2 Local to Global Connectivity 2

3 What are the local obstacles? Small volumes over a limited period, long distances Limited opportunity to benefit from scale economies Limited availability of storage facilities Vicious cycle: leading poor logistics infrastructure and services 3 Response: improve rural infrastructure especially roads Also some integrated approaches >> such as Economic corridor approach in GMS and Spatial Development Initiatives in Southern Africa Questions: How are logistics services provided? Do we have the right measures of logistics performance at the local scale?

4 What are the logistics intermediaries? Not typical intermediaries Third party logistics service providers - freight forwarders, warehouse operators, export trading companies etc. Different players Itinerant traders Cooperatives Contract production Private sector innovations But role is controversial Allegations that they rip off small producers by buying at low prices Yet in some cases play a positive role in facilitating trade 4

5 Work on logistics in lagging regions Two case studies sisal chain in NE Brazil and soybean chain in Madhya Pradesh in India Covered: spatial patterns of flows, costs and prices And network dynamics of links between logistics service providers Working Paper being finalized 5

6 What roles do they play? 6 Evidence of both positive and negative impacts but typically: Consolidation of buyer demand or seller products to achieve economies of scale or scope and reduce bargaining asymmetry Facilitation of the market by reducing operating costs Match buyers and sellers Managing risks associated with trading Quality assurance Facilitating payments Location of infrastructure, especially for storage is important

7 International Trade Corridors 7 What are the measures of performance of corridors? How can their performance be improved? What is the nature and role of corridor management?

8 What is a corridor? 8 Two distinct concepts: A corridor as a bundle of infrastructure between two or more centres of economic activity, and A Corridor as a spatial entity for institutional collaboration challenge: How to overcome the high level of institutional fragmentation Emphasis is on institutional links - getting them to work together linking policies and infrastructure - it is a strategic planning concept Its designation is to focus attention on improving the performance of the route and the level of service

9 New Trade Corridor Management Toolkit Under preparation Based on large body of existing knowledge from Bank operations, and from several other agencies and countries Designed to support increasing volume of corridor-based operations 13 modules addressing how to assess, measure and design interventions for a corridor and for its sub-components Part 1 Corridor Monitoring Part 2 Corridor Performance Part 3 Corridor Context Module A: Corridor Indicators Module A: Transit regimes Module A: Trade Agreements Module B: Corridor Assessments Module B: Maritime transport Module B: Institutional arrangements Module C: Evaluation of actions Module C: Border Management Module C: Capacity building 9 Module D: Road transport Module E: Rail transport Module F: Port access Module G: Air freight

10 Trade Corridors in all regions 10

11 Institutional arrangements Interoperability of Infrastructure and Equipment Building blocks 11 Make the best use of existing physical infrastructure Address the soft issues through: improving the performance of transport operations and related services introducing innovative relations between public institutions and transport providers and users Eliminating cumbersome procedures, and multiple, non-standardized documents, which result in additional transaction costs and unnecessary delays. Coordination at two levels: corridor-specific: to address local challenges and exploit opportunities Corridor development requires strong local central coordination (to deal with urbanization, congestion, charges, propagation of disease, etc.)

12 Corridor performance assessment Macro Tool Purpose Micro Logistics Benchmarking Trade modeling Freight flow analysis Survey of Private Sector Sector Diagnostic Supply Chain Analysis Point Surveys & Travelogues 12 To compare relative performance To estimate the potential benefits of integration To map existing movements To consider firm priorities To benchmark sector performance To identify cost and time bottlenecks To validate check points/stoppages Source: Based on Schwartz, 2010 Transport Canada presentation on corridor logistics costs assessment

13 Bamako - Rotterdam Lusaka Rotterdam Kigali - Rotterdam Ndjamena - Rotterdam Ulaanbaatar - Los Angeles Vientiane - Los Angeles Katmandu - Rotterdam La Paz - Los Angeles Almaty - Los Angeles Almaty - Berlin Measures of corridor performance % 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Maritime Port Land Transport Border crossings

14 Improving corridor performance 14 Concept: Complementary mechanisms to enable movement of vehicles, goods and people across borders High cost of transit in part due to: Lack of customs guarantees Delays at border posts Immaturity of domestic financial systems Difficulties in determining values without customs inspection Poor quality of transport services Not capable of providing guarantees Convoys Customs suspect fraudulent practices so accompany transit vehicles Corrupt practices Fraud and extortion Weak enforcement Enforcement is not easy

15 Corridor Management 15 Emphasis is on institutional links - getting them to work together linking policies and infrastructure - it is a strategic planning concept Create an appropriate organ to coordinate in a proactive manner, interventions to remove obstacles to movement. Scope of corridor management: Trade and transit agreements, Infrastructure and facilities, Transport and logistics services, Standards, Regulations and Procedures and Security. Operation and management of a corridor has three components: legal, physical, and operational. Typical Objectives: Promote economic activity along the corridor Provide an international gateway for one or more landlocked countries Increase activity at the international gateway Promote or expand an economic union Facilitate bilateral and multi-country trade

16 Key Messages 16 The chain starts at the local level The facilitation needs are different Core regional infrastructure is in place in most regions But transport and logistics services costs are very high There are numerous trade facilitation instruments that have been concluded But implementation has been poor It is important to tackle constraints along the chain Develop and implement effective regulatory regimes Design modern transit regimes But No easy fix. In many cases incremental changes and investment (e.g. IT) may not work, and new design should be considered. Understanding the principles is important focus needs to extend to non-traditional areas of intervention such as the market for logistics services, the coordination of border processes, and the case for joint cross-border initiatives bilateral or regional cooperation is critical to reduce costs. Utilize meaningful performance indicators

17 Contacts 17 The World Bank International Trade Department Washington Office 1818 H Street NW Washington DC Contact: tradefacilitation@worldbank.org

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