Table 3.1
Average transaction times for cross border trade, by region (Logistics Performance Index data, 2010) Customs clearance time (days)
Region or income classification
Without physical inspection
With physical inspection
Physical inspection (percentage of shipments)
Time to export (days)
Time to import (days)
Region East Asia and Pacific
1.55
3.36
25
3.58
4.93
Europe and Central Asia
1.48
1.89
26
2.77
3.00
Latin America and Caribbean
1.62
3.41
23
3.84
5.50
Middle East and North Africa
1.78
2.91
45
2.75
7.22
South Asia
2.17
3.20
35
1.88
3.30
Sub-Saharan Africa
2.83
4.94
36
7.79
7.05
0.83
1.83
2.53
3.86
Income classification High income
2.49
Note: Time to export (days) is the median export lead time for the port and airport supply chains. Time to import (days) is the median import lead time for the port and airport supply chains. The Logistics Performance Index methodology uses the World Bank classification of countries (for detailed information, visit http://worldbank.org/data). Source: Logistics Performance Index 2010 (http://www.worldbank.org/lpi).
Logistics and trade competitiveness
Effective connections with international markets depend on supply chain reliability. A key message of the LPI is that, while costs and timeliness are important, traders are primarily concerned with overall reliability and predictability, which can heavily affect their cost competitiveness and are thus the most important aspects of logistics performance. Supply chain unreliability takes many forms. Long delays and unpredictable goods clearance times result from poor infrastructure, inadequate services, and excessively bureaucratic border processing systems and procedures. Excessive physical inspection and overreliance on inspector discretion cause large variations in clearance times, with multiple inspections frequent. Also, increasingly strict safety and security measures impair service in all but the top ranked countries. High degrees of unpredictability prompt operators to adopt costly hedging strategies, such as maintaining large inventories or switching to more reliable—and expensive—transportation modes (Guasch and Kogan 2003). Recent research suggests that these induced costs on the supply chain can be even higher than direct freight costs (Arvis, Raballand, and Marteau 2007). So unreliability makes firms less competitive. At the same time, it makes it difficult for developing countries to diversify into more time sensitive commodities. Exporters in Malawi and Mozambique, for example, face tradeoffs between direct transportation costs B O R D E R M A N A G E M E N T M O D E R N I Z AT I O N
3 Border management modernization and the trade supply chain
ratings, especially when neighboring and competitor countries scored higher on key indices. The evidence highlights the wide gap in performance between low and high income countries, but it also indicates significant differences between countries at similar development levels. A useful outcome measure of logistics performance is the time taken to complete trade transactions (table 3.1). Clearance times for imported goods, as measured by the LPI, differ greatly by region: in the East Asia and Pacific region they are approximately 1.5 days, but in Sub-Saharan Africa they can be twice as long. Clearance times as a percentage of total lead times also differ considerably across regions. For example, in the Middle East and North Africa region clearance without physical inspection represents 25 percent of the total lead time, compared with 50–60 percent in the Europe and Central Asia and South Asia regions. These data suggest that logistics performance is not simply an issue of national income or development but depends heavily on national governments’ policy and investment choices. The growing awareness of the need for trade facilitation also appears in the many provisions of bilateral and regional trade agreements that concern it. The Doha Round of multilateral trade negotiations includes efforts to overhaul and modernize the World Trade Organization trade facilitation rules, now more than 50 years old (Eglin 2008). The negotiations have expanded beyond their initial mandate to include issues outside the fairly narrow domain of customs procedures.
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