Easing Access to Global Markets : Trade Logistics Advisory Program Washing ton DC ,April 6, 2011

1. Easing Access to Global Markets: TradeLogisticsAdvisoryProgramWashington DC,April 6, 2011 • UmaSubramanian • Global Product Leader, TradeLogistics • InvestmentClimateAdvisoryServices • World Bank Group

2. What is the rationale for the Trade Logistics Advisory Program? Overarching rationale • Globalization and the desire to be part of global networks • Attracting private investment is a key objective for developing countries • Faster, leaner & responsive supply chains that are essential for Improving export/trade performance • Improved export competitiveness • Governments and private sector energized to improve trade logistics services

3. Doing Business 2010 – Trading Across Borders Time to trade: Selected African Countries Very high trade transactions High-medium trade transactions Low trade transactions

4. The Case of Rwanda: 69 days to import (2008 data) Over 50% time accounted for by regulatory procedures 7 days SEA 10 days MOMBASSA PORT 2 days MOMBASSA PORT GATE 15 days MALABA (KENYAN BORDER) 5 days 1 day MALABA (UGANDAN BORDER) GATUNA (UGANDAN BORDER) Documentation and Pre-arrival procedures 25 days 1 day RWANDAN BORDER 2 - 3 days DRY PORT (KIGALI) DRY PORT GATE Source: Trade Logistics project baseline

5. Supply Chain Analysis of Pineapples Imported into St. Lucia 60% of the landed cost is due to transportation and logistics Retail Profits 2 + Other Costs Landed cost 1.8 Land Transport Land + Storage Transport 1.6 & Handling Duties 1.4 Ocean Transport + Port SL 1.2 US$/lb 90% 1 0.8 Other Costs Wholesale 0.6 Ocean Consolidated Transport Port Cost 0.4 + Port CR Miami Land Producer Transport Price 0.2 10% Farm Gate price 0 Farm Gate CR FAS Ocean to Miami Port Miami Miami FOB Ocean to St. St. Lucia Port Wholesale Distribution Retail Price (CR) Miami Warehouse Price Lucia Costa Rica (CR) ------------> --------------> St. Lucia (SL) Source: Logistics, Transport and Food Prices in LAC (2009) and OECS Backward Linkages Study (2008)

6. At least 40%-60% of time to trade is due to ‘software’

7. Domestic logistics costs: Disproportionate burden on small firms Source: Centro Logístico de Latinoamerica, Bogota, Colombia. Benchmarking 2007: Estado de la Logística en America Latina Anexo, María Rey LogisticSummit 2008

8. Reducing Transactions Time Has a Direct Impact on Trade 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 Islands 4.1% Latin America and Caribbean 3.5% OECD 1.7% A 10% reduction export time For Colombia this is equivalent to US $740 millions Direct implications for growth, private investment, jobs and poverty reduction Source: Forthcoming research paper (Subramanian, Anderson and Lee (2011)

9. What is the focus and business model? Objective to assist countries improve access to markets through efficient, easy and accountable import and export procedures • Focused and targeted areas of work: • Simplification and harmonization of procedures including documentation • Risk-based management systems for inspections • Automation/ Single Window Systems for trade • Identifies quick wins to jump-start deeper systemic reforms in response to client demands • Explicit focus on investment climate with strong synergies with World Bank Group departments and potential IFC investments (cold chains, ports, etc.), trade finance and others • Ties results toobjective outcome measurements. Examples: time, cost, number of signatures, number of documents, percentage of containers inspected. • Ex-ante articulation of feasibility vs. relevance matrix with framework to measure Cost- Benefit ratio

10. Rapid Response Regional Solutions Trade Logistics Advisory Program: Delivery Models • Catalyze reform momentum through quick wins and high level championship • (1 year program) Systemic Reform Regional framework combined with country level implementation Greater reach and cost-effective solutions S. Asia, Caribbean, S.E.Europe Full Fledged projects and Solutions to systemic issues (3-4 years) Colombia

11. Results: over 80 improvements since launch July 2007 Highlights Countries Improvements • First 2 pilots in post conflict countries with results • Corp.Performance Award Rwanda, Liberia 10 2008 • Has become a core product of advisory services • Partnering with over 7 agencies/departments Rwanda, Liberia, Colombia, Burkina Faso, Sudan 32 2009 • Identified by IFC for global scale up • Presence in 9-10 countries + 3 Regional. 12-15 countries in FY11. • Corp. Performance Award Over 35 Rwanda, Liberia, Colombia, Burkina Faso, Sudan, Mali, Yemen, Honduras, Peru 2010

12. 22 improvements till Dec 2009: What do results mean in Liberia? Choko Harris – Entrepreneur and Small Business Owner Choko Harris has been involved in a family business since she was a teenager. Encouraged by her mother to start a business in 1982, with $10 in her pocket she began selling palm oil off a table on the street. Today she owns two stores selling plastic goods and regularly visits China and Thailand to procure products while employing 9 members of her family. “Clearing customs used to be hard, it could take almost 3 months to get the goods from the container with lots of people asking for money for various things.” - Choko Harris The growth and profitability of her business relies on the speed at which she can clear her imported goods through Monrovia’s Freeport. But in the past, Choko says, this process has not been easy. “Clearing customs used to be hard, it could take almost 3 months to get the goods from the container with lots of people asking for money for various things.” Liberia is a highly import oriented country, relying on the port of Monrovia, ‘Freeport’, to provide key commodities and staples. Yet the customs and excise system in use was rife with constraints and challenges and it could take months before businesses could take delivery of their containers. Cont…

13. What Have We Learned in Rwanda? • Quick response, quick wins helped generate reform momentum – we achieved 5 reforms in the first 8 months of the program • Strong political support at the highest level. The RICP Program had the President’s support in Rwanda. • Committed counterparts that have vision, credibility and mandate to bring multiple agencies together. The Rwanda Revenue Authority led an extremely reform minded Trade Logistics Working Group • Dynamic private sector pushing for change. Importers/Exporters, freight forwarders etc provided critical inputs into what they wanted to see improved. • Regular stakeholder dialogue ensured right priorities for action. Have had 2 workshops with a third scheduled in mid March. Partnership driven: Mobilize world class expertise from across WBG, international agencies (IMF, WCO) etc and the private sector to deliver solutions.

14. What have we learned in Colombia? • Effective public-private dialogue has allowed for greater momentum in the implementation of reforms. All parties feel part of the decision and implementation process. • Strong support from central and local government has made the implementation of changes easier. Clear communication at all levels of government keeps people informed in a transparent manner. • Government has requested broadening the initial scope of the program given the effectiveness of the program in demonstrating results. Facilitate internal champions to support reforms: through strong communication among stakeholders at all levels

15. Provide Clients with World Class Expertise by… Leveraging partnerships and expertise both within and outside the World Bank group Core Product Development and delivery team -- includes staff from FIAS, IFC Facilities, DBRA team and the World Bank PRODUCT SUPPORT GROUP • For Project Delivery a larger group includes: • Donors (Norway, Netherlands, DFID, Spain, SIDA, CIDA, SECO, Italy, Japan) • WBG (Doing Business, WB and IFC Facilities, WB trade, GICT, WB transport, IFC Investment and Advisory groups) • Development agencies (WCO, IMF, US Dep of Commerce) • Private sector experts drawn locally and globally An Advisory Panel of experts -- WBG internal as well as development / International agencies (donors, IMF,WCO)

16. Emphasis on Impact Evaluation- Metrics: • Increases in exports/trade • Cost savings to firms • Increase in private investment

17. Measuring Results in Colombia What does this reduction in time to trade mean for one Colombian firm? Even conservative partial estimates of direct cost savings to a medium sized firm with $150 million revenue is$3.5 million Inferred value for the industry: $28 million Estimates of direct cost savings to a fertilizer plant with $260 million revenue is $2.7 million • This includes: reduced inventory holdings (raw, intermediate, finished) in storage and reduced capital carrying charge in transit, and cargo loss/damage. • Indirect benefits such as induced growth would add to this benefit well in excess of the estimates above. Source: Ongoing research (Subramanian (2010))

18. Caribbean (regional) Liberia, Mali, Burkina Faso Armenia Kenya, Colombia Rwanda Peru Rapidly Expanding Reach… S.E.Europe (regional) Yemen South Asia (regional) Honduras Mauritius Zambia Malawi

19. Aligning with new corporate priorities: • Trade Logistics with Agribusiness/ Food security: • Regional and national supply chains bridging gap between food production and food security by creating and linking growth nodes and markets. • Streamlining NTBs and thus market access for key agribusiness produce in client countries • Regional projects which aim to harmonize and rationalize trade supply chain activities across countries to maximize impact and reduce duplication. • Benefits in particular will accrue to small poor economies whether landlocked (Rwanda in the EAC) or island nations (Caribbean region) where food imports are a large part of trade volumes.

20. Aligning with new corporate priorities: • Trade Logistics with Climate Change: • McKinsey study on climate change for India showed commercial vehicles were the largest contributor to carbon emissions. • Exploring green supply chains- reduction of carbon footprint along the supply chain • Conflict affected countries: • First 2 pilots, Liberia & Rwanda. Continued engagement with other conflict affected countries.

21. Thankyou!