Inventory Approach to Improve Supply Chain Connectivity APEC Symposium on Supply-Chain Connectivity Measurement Framework April 1 2012, Singapore International Trade and Integration Unit Development Economics Research Group, World Bank 1
Overview Joint World Bank-APEC Project to Improve Supply Chain Connectivity in APEC region Background and Project Components Bank Research - Benefits to Trade Facilitation Reform World Bank Trade Assistance/Strategy Inventory Project Expected results 2
Joint World Bank-APEC Inventory Project - Background Led by World Bank Research Group Trade Team, in collaboration with experts in East Asia and Pacific (EAP) region Synthesize World Bank and other research and learning into policy suggestions to address chokepoint 1 (and chokepoints 4 and 5) of SCAP Develop a tool to inform trade facilitation capacity building and benchmark progress Contribute to APEC goal of 10% improvement by 2015 in Supply Chain Performance Act as model for addressing other chokepoints within APEC SCAP 3
Joint World Bank-APEC Inventory Project Project Components 1. Supply Chain Inventory A list of mutually agreed upon reforms/policies that advance the action plan for chokepoint 1 of the supply chain connectivity framework 2. Diagnostic Reports Analytical and empirical analysis that identifies variances to SC inventory in member economies and suggests policy action 3. Capacity Building - Technical assistance in implementing recommendations of diagnostic report; Capacity Building seminars; 4
Bank Trade Research Data, analytical tools, research to inform operations and policy Key focus on trade facilitation Projects with APEC over past decade 5
Supply Chain Connectivity in APEC - Past World Bank Work 2007 Bank Report for APEC Trade Ministers Transparency and Trade Facilitation in Asia- Pacific: Estimating the Gains from Reform No single indicator measures everything; Combined existing indicators using factor analysis Sources include: Doing Business Report (World Bank) Global Competitiveness Report (WEF) Logistics Perception Index (World Bank) MAcMap (ITC-CEPII) Global E-Government Readiness Report (UN) 6
Transparency and Intra-APEC Trade Flows The Bank s analysis suggest that: Improvements to transparency, tariffs, and NTMs all have the potential to boost trade Impact of transparency is stronger in differentiated goods sectors Impacts driven in particular by corruption, hidden trade barriers, and import/export procedures 7
Transparency and Intra-APEC Trade Flows Simulations to compare the gains from different reform possibilities Scenario I: Improve transparency to the regional average. Significant gains for APEC in Transparency and Trade Facilitation 8
Percent of Baseline Scenario I Results: +$148bn (7.5%) 120 100 80 60 40 20 0 AUS CAN CHL CHN HKG IDN JPN KOR MEX MYS NZL PER PHL RUS SGP THA USA VNM Imports Exports Scenario I: Improve importer transparency within the APEC region such that no economy is below the current regional average (0.54). 9
An Intuitive Example: Efficiency gains from streamlining and simplifying trade processes Imagine if the contents of a ship can be processed in half a day instead of a day Infrastructure capacity effectively doubled Twice the cargo Twice the # of ships Twice the number of containers Increased harbor duties, excise and revenue Considerably lower cost to traders even more benefits: These efficiencies offer wider attraction to trading partners Efficiency in vessel turnaround attracts new trading, market center, distribution business. 10
Policy Inference from Bank Research Potential APEC trade gains with improved transparency are large compared with other steps Gains come from own reforms + reforms by trading partners Capacity building and investment in reform matters 11
Trade Facilitation in APEC Economies Policy Implication = Potential gains in trade from improvements in trade facilitation are significant World Bank Trade Strategy World Bank partnership to help improve supply chain productivity in APEC economies Supply Chain Inventory/Checklist Diagnostic Reports Regional Capacity Building
World Bank Trade Assistance In FY 2011, the World Bank provided a total of US$2.6 billion in trade-related lending to help developing countries achieve their trade-reform objectives FY 2011 represents an almost five-fold increase from FY 2003 levels, when lending amounted to US$566 million Trade-related lending in total Bank lending also showing a rising trend in recent years, from an average of 2% for FY02-FY03 to an average of about 6% for FY09-FY11 Overall Bank lending for FY2011 reached US$43 billion
World Bank Trade Lending Trade Lending by Region & Activity, FY2010 Source: PREM-Trade, 2011. 14
Evidence on Outcomes-- Trade transaction is a complex process Many documents Many players A typical trade transaction can take as many as 150 different documents to complete Raw material and component supplier Manufacturer/assembler Customs agents/brokers Customs authorities Government authorities- export promotion/approval/stat. Local transport and warehousing companies Container handlers Port and harbor authorities Shippers (sea, air, road, rail, canal, ) Bank and insurance companies Each have own set of paper forms and interactions with other organizations (incl. counterparts in importing countries. 15
Pay Taxes /Dues Clear Customs Release Goods Air, Sea, Land International Customs Port Transport Ship s Documents Manifest Bills of Lading Sea/AW Bill Container Plans Foreign Chambers Commerce Overseas Embassies Post/ Courier IMPORT Certificates Of Origin Legal Invoices Informal Processes Invoice Packing List Declaration Delivery Note Licenses Certificates Government Approvals Storage IMPORTER P.O. Contract Terms Delivery Instructions L.O.C. Bank MANUFACTURING/ VALUE ADD DOMESTIC SUPPLY CHAIN Raw Materials Packaging Transport Storage Quotations P.O.s Delivery Notes Con. Notes Invoices Statements Chamber of Finance Commerce Ministry Pay Payments Remittance Advice MANUFACTURER EXPORTER Government Departments Pay Taxes /Dues Clear Customs Release to Port Customs Port Processes Internal Transport Storage Container Handling Loading Book/Confirm Transport Invoice Packing List Declaration Delivery Note Certificates Of Origin Form A EUR.1 Licenses Certificates Government Approvals Port Informal Processes EXPORT Port Shipping Documents Receive Goods Customs FOREIGN BUYER Bank L.O.C. Packing List Invoice LOC Approval LOC Courier 16
Trade Facilitation What works? Automation Lowers compliance costs for traders Reduces processing time Reduces face to face contact between officials and traders Limits discretionary powers Increases transparency and accountability
Single Window Shipping Agents Traders Customs Freight Forwarders Ministry of Commerce Shipping Agents Traders Customs EDI Server Freight Forwarders Ministry of Commerce Customs Brokers Figure A Cargo Handling Port Authority Banks Customs Brokers Figure B Cargo Handling Port Authority Banks 1
Processing of TCE 2-3 D Validation, Amendments, Data Capture of Manifest 2 D Goods discharged from vessel Prior to Trade Facilitation Initiative Shiping Agent reconciles discrepancies regarding cargo unloaded Importer / Broker Payment of prepares customs duty, customs declaration.and storage charges delivers to Customs and port dues Deliver Manifest hardcopy to Customs and STAM 2-4D STAM submits hardcopy report of unloaded cargo discrepancies to ship agent 2-5 D Shipping Agent delivers final manifest to Customs and STAM 0-2 D Confirmation of goods landed byshipping Agent and issue of delivery note 2-3 D 1 D Importer / Broker picks up processed declaration. Goods removed from port area After Trade Facilitation Initiative 1 D 1/4 D 1-2 D 1/2 D Figure C 15 1/4 D mins Goods Arrival 0 1 2 3 5 10 15 Days
Some Analytical and Financial Tools Corridor Assessment Trade and Transport Facilitation Audits Supply/Value Chain Analysis Peer Learning Networks and other Knowledge Platforms Technical Assistance for Implementation Lending Operations 20
Joint World Bank-APEC Inventory Project Expected Outcomes Endorsed inventory outlining reform policies to enhance supply chain productivity Useful tool to coordinate reform policy and benchmark progress Approach is blueprint for other chokepoints Contribution to APEC-wide target of a 10% improvement by 2015 in Supply Chain performance 21
Next Steps CTI to Review Draft Inventory (April) Finalization of Inventory and Bank Develops Framework for Diagnostic Report (May-June 2012) Questions: John S. Wilson, Lead Economist, World Bank jswilson@worldbank.org 22
Summary Transparency and Trade facilitation key to trade enhancement, growth and development in APEC Inventory approach blends research and operations in a forward looking manner; Successful implementation can promote action-oriented reform and help accomplish SC Action plan prior to 2015 amongst APEC economies 23
Thank You Hamid R. Alavi Coordinator, Trade and Private Sector Development The World Bank Email: halavi@worldbank.org http://econ.worldbank.org/projects/trade_costs