Investment

,

Trade and Transport Facilitation in ACMECS The Southeast Europe Experience

Baher El-Hifnawi East Asia Pacific World Bank March 13, 2007

(I) What is trade and transport facilitation?

No standard definition- TF, TTF,… The “plumbing” of international trade TTF broadly defined goes beyond the standard issues of administration, procedures, and logistics at ports and customs; regulatory environments and standards, and IT to include transport covering land access to ports and airports, maritime and aviation services, multi modal transport and services and transit and more recently transport security

(II) Why the Fuss about TTF?

Transport costs often exceed tariffs

20

45 °

18 16 14 12 10 4 2 8 6 0 0 2 4 6 8 10 12 14

Transport cost incidence

16 18 20 Source: U.S. Bureau of Census

Shipping cost cannot be explained by distance Shipping a container from Baltimore to …

4500 Brasilia (Brazil) Lima (Peru) $4,000 $4,000 Ankara (Turkey) Asuncion (Paraguay) $6,500 $4,000 Ashkhbad (Turkmenistan) $13,000 Bujumbura (Burundi) $10,000 Mbabane (Swaziland) $12,000 Durban (South Africa) $2,500

kilometers

5500 6500 7500 8500 9500 10500 11500 12500 13500 14500 LaPaz (Bolivia) $6,500 Niamey (Niger) $7,000 Vienna (Austria) $4,000 Yerevan (Armenia) $7,800 Peking (China) $13,000 Dar es salam (Tanzania) Kathmandu (Nepal) $13,000 $1,000

Source: Carsten Fink, Development Research Group, World Bank

Potential Benefits of TTF

Benefits to Government

Increased effectiveness of control methods More accurate, & most likely increased, tariff revenues

Benefits to the Private Sector

Lower administrative and compliance costs Reduced processing/clearance time Potential increase in investment

Society at Large

Faster growth due to – Lower cost of imported capital goods & increased investment – Increased exports as a result of the lower cost of trading – Enhanced competitiveness & a faster shift towards higher-value commodities due to reduction in inventory holding costs Reduction in poverty

Empirical Estimates TTF Benefits

Electronic Documentation for trade can save 1.5% 15% of landed cost of an imported item; a 3% savings for intra-APEC trade translates into US $60 billion .

* A 1% reduction in maritime and air transport services could increase Asian GDP by US $3.3 billion.

* 1998 estimate of trade facilitation benefits in Asia Pacific region is 0.26% of GDP, compared to 0.14% for from trade liberalization . Facilitating trade in less-efficient APEC countries (by raising their capacity halfway to the average) would increase global trade by about 10%.

*. Source: Trade Note, The World Bank, December 8, 2003

A)

(III) World Bank Efforts in Trade and Transport Facilitation

Analytical Work/Research/Dissemination

Global

Trade Logistics Group within the World Bank Toolkits and Handbooks Seminars and Publications Global Facilitation Partnership (GPF) for Trade and Transportation

Global Facilitation Partnership for Trade and Transportation (GFP)

Objective is to develop and disseminate latest knowledge, and to provide a platform for discussion Its core partners include UNCTAD, WCO, UNECE, UNIDO, the IRU, TIAC It has over 150 partners from developing and developed countries Over 250 documents on web site (gfptt.org) Fora for discussion

The World Bank

A)

(III) World Bank Efforts in Trade and Transport Facilitation

(cont’d) Analytical Work/Research/Dissemination Regional (within East Asia) East Asia Integrates, 2004 Trade and Logistics in East Asia: A Development Agenda, 2003 East Asia Ports in their Urban Context, 2003 Vietnam: Logistics Development, Trade Facilitation & the Impact of Poverty Reduction Philippines Logistics Study Logistics Development and Trade Facilitation in Lao PDR China’s Lagging Provinces: Logistics Development/ Trade Facilitation and impacts on poverty reduction Logistics Centers in China Trade Facilitation in the context of the Integrated Framework (Cambodia 2001, Lao PDR 2006) Transport and Logistics Regulatory Review in Vietnam

B)

(III) World Bank Efforts in Trade and Transport Facilitation

(cont’d) Projects (a sample) Regional Trade and Transport Facilitation in South East Europe (TTFSE) Marine Electronic Highway in the Malacca Straits East Africa Trade and Transport Facilitation Central Africa Trade and Transport Facilitation

B)

(III) World Bank Efforts in Trade and Transport Facilitation

(cont’d) Projects (a sample) Country level Pakistan’s Trade and Transport Facilitation Project Mekong Transport Infrastructure Development Project In Vietnam Trade Facilitation and Competitiveness in Cambodia Customs Modernization in Vietnam Brazil’s Competitiveness Reform Loan

(IV) The Trade and Transport Facilitation Project in South East Europe (TTFSE

)

A) Overview of The TTFSE Program

 Regional Investment Program: US$120 million, WB $78 million  Implementation started in 2001 in six countries then reached 8 countries; one project in each  Project components: TA for border agency modernization (Customs), X-ray equipment, IT equipment (computers/network), TA for Single Electronic Window, border crossing improvements, training, website providing rules/procedures of border agencies  Main Program Goals are to facilitate legitimate trade by  a) reducing: (i) processing time for traders/transporters , (ii) ‘facilitation’ payments, (iii) corruption; & (iv) smuggling  b) increasing effectiveness of controls at the border

A) Overview of The TTFSE Program

Now in the second phase (TTFSE II) Consolidating achievements of first phase, replicating them and scaling up.

Potential areas under consideration: – Admission of electronic documents , Air Transport and Airport Operations , Aligned Trade Documents , Border performance monitoring systems , Control on animal and animal products , Electronic standards/EDI , E-signature and certification authorities , Harmonized System , Integrated border management , Landlocked countries access : corridor arrangements , Maritime Transport and Port Operations, Multimodal transport , Phytosanitary control , Public-private partnerships , Rail Transport , Regional Partnerships , Single window environment , Standards and Conformity Assessment , Streamlining and harmonization , Trade Facilitation and competitiveness , Trade Facilitation and SME development , Trade logistics and developing countries , Trade Logistics practical measures , Transit facilitation and logistics , TTF promotion , Use of ICT for Facilitation

B) The TTFSE Program What Made it All Possible

 Commitment of Governments  Commitment and keenness of the private sector  European integration prospects  Strong donor support (SECI, US, Netherlands, Austria, France)  Peer pressure  High cost of inaction (transport cost/credibility as trading partners )  Commitment by World Bank Management to support regional efforts

C) Potential Benefits of the TTFSE Program

Increased revenue collection Reduced smuggling opportunities Reduced corruption Cheaper imported consumption goods Cheaper imported capital goods More reliable business environment Savings in time and stockholding costs Reduced errors and lower transaction cost when interacting with border agencies Adoption of international standards and procedures Speeding up regional and global integration

D) TTFSE 2001-2003 Sharing Some Results



Significant reduction in waiting time at border and inland pilot points: from 23% to 89%



Contribution to the large increase in Customs revenue collection: from 6.3$ to $10.8 billion



Contribution to large increase in trade values: from $63 billion to $92 billion.



Reduced smuggling, increased detection of fraud with X-Ray equipment



Modernization of border crossing points

Increase in Customs Revenues Collected

5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Al ba ni a Bi H _F ed Bi H _R S Bu lg ari a C ro at ia Ma ce do ni a R oma ni a 2001 2003

Large increase in Trade Volume

50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 A lb an ia B iH _F ed B iH _R S B ul ga ria C ro at ia M ac ed on ia R o m a ni a 2001 2003

Pilot Sites : a Valid Concept … Drastic Reduction in Clearance Times

350 300 250 200 150 100 50 0 Jankomir term.

Project start Plovdiv Term.

Nov-03 Banja Luka Term.

Site Name

Grude term.

…with results Large Reduction in Border Crossing Times

250 200 150 100 50 0 Rousse Izacic Raca

BCP Name

Macelj Gradiska Project start Nov-03

D) Sharing Some Results (cont’d)

Degree of success varied across indicators and pilot sites Significant improvements, marginal improvements, no improvements Why?

E) Stakeholders/Required Expertise STAKEHOLDERS : a wide array

Government side : Customs, Border Police, Veterinary and Phyto sanitary agencies, Ministry of Transport… Users: road transport associations, freight forwarder associations, Chambers of commerce, large companies, relevant NGOs ..

International partners : IRU, FIATA, Development partners, UNECE, WCO

REQUIRED EXPERTISE :

Integrator, Institutional Specialist, Process Analyst, Customs Specialist, IT Specialist Ability to create links across various ministries/development partners

E) Stakeholders (cont’d) Putting the Project Team Together

Country Level National Coordinator TTFSE Project Manager Trade Facilitation Coordinator Website Coordinator Regional Level TFC Project Manager Conventional Training Consultant Distance Learning Consultant Website Consultant Int’l Level US State Department World Bank Regional Coordinator World Bank Regional Customs Specialist Working Group Consultants Working Group Leaders Local Representatives of Professional Associations Regional Steering Committee Lead Professional Associations UNECE

F) Main TTF Issues/Challenges

Raising awareness about the TTF Conflicting Objectives? - Revenue collection vs. facilitation Interagency Cooperation /Coordination Cross Border Cooperation Dialogue with the private sector Transparency regarding procedures/requirements Involvement of different government levels Agreement on/definition of performance indicators & targets Keeping Automation simple Cultural changes—Selective examination

G) Response to the Challenges

Memorandum of Understanding and Regional Steering Committee Raising awareness : user survey, partnership with professional associations and Chambers. Performance measurement using clearly defined indicators Top-down (strategy) and bottom up approach (pilot sites) Regional website (www.ttfse.org) to provide procedures/requirements online Stimulate exchange of experiences to induce cultural change (advance declarations, selective processing, opening hours, reducing opportunities for bribes…

H) Measuring Performance and Setting Targets

www.seerecon.org/ttfse//RegionalInitiatives/TTFSE/TTFSE_Manual.pdf

  

Customs/clearance efficiency indicators (MOF focus)

6 measures of Customs performance/clearance Allow for comparison (over time, regional) Close attention needed in collection

Pilot site indicators (Trade Facilitation focus)

National Customs collecting data regionally and measuring the overall processing (from entry to exit) Three indicators linked to covenants : Percentage of vehicles cleared in less than 15 minutes; percentage of declarations inspected; trucks opened at border. Constant attention required to collect meaningful and comparable data while staff rotates

Target set based on initial data measurement

I) Select Features of TTFSE Projects

Highly client- and context-dependent Project cost from US$ 11 m to US$27 million From 12 months to 24 months to prepare (identification-board) From US$160 k to US$400 k to prepare, US$70 to 90k to supervise per year (quite intense supervision) Regional economies of scale (surveys, training...) One Program Team Leader, two TTL, one Sr. Customs Specialist, one Institutional Specialist

J) Tools Available

Global Facilitation Partnership-Facilitation Audit Toolkit at http://wbln0018.worldbank.org/twu/gfp.nsf and related questionnaire Example of facilitation audit carried out in the Caucasus at http://lnweb18.worldbank.org/eca/eca.nsf/d1e666886eb626e2852567d100165168/5dde058b18a92ca58 52568fc005bfaec?OpenDocument User survey : http://www.seerecon.org/RegionalInitiatives/TTFSE/ttfse-interim report.htm

Performance Measurement Manual PRO-Committee definition and relation among participants (www.seerecon.org/ttfse site) Sample tender documents at Transweblibraryeca Number of Distance learning programs to be available shortly under the GFP-DLI (road transport, forwarding, supply chain management…) www.gfp-dli.org

K) Building Partnership with Private Sector

Essential for sustainability Raise awareness Contribution (1 st year $150k grant, $150k local contribution) Draw on existing structure and initiative (local and international) and support their strengthening (institutionalized but flexible) Support public-private dialogue with direct private sector contribution through professional associations/ Chamber NGO to organize debate/training/and structure available information (see www.ttfse.org) Organize professional certification (IRU/FIATA)

L) Regional or National?

Regional ties with individual country projects highly preferable – Economies of scale – Generate increased cooperation/competition – Stronger potential support from donors – Joint training programs to give access to opportunities – Replication of successful experiences But Regional is complex (frequent staff change, political instability) and requires strong commitment across all countries.

Opportunities to cooperate across regions as well Caucasus/Iran/Central Asia/Afghanistan.

Lessons Learned

Commitment by high levels of government and the need for a champion are vital Start small with pilot projects setting reasonable targets (different targets for different countries) and scale up/replicate Success requires an active and proactive role from the private sector (pro committees) Performance targets are necessary for monitoring progress Regional nature of the project creates peer pressure among countries as well as opportunities learn from one another.

Implementation will be complex; expect it and plan for it!

Customs will be more effective and efficient using selective examination.

Physical investment at border crossings may be necessary but not sufficient for reaching the desired levels of efficiency.

Trade facilitation reforms need a change in culture which takes time

The World Bank

Thank you!

M. Baher El-Hifnawi Sr. Transport Economist The World Bank [email protected]