llDCS CURRENT STATUS AND POLICY IMPLICATIONS new York 1011 December 2015 SYED NURUZZAMAN Structure of the report ID: 461920
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EXPERT GROUP MEETING ON IMPROVING TRANSIT COOPERATION, TRADE AND TRADE FACILITATION FOR THE BENFIT OF llDCS: CURRENT STATUS AND POLICY IMPLICATIONS
new York, 10-11 December 2015
SYED NURUZZAMAN
Slide2
Structure of the reportRecent economic and social trends
International conventions and agreements
Harmonization of customs and border crossing procedures
Transit infrastructure
Trade and trade facilitation
Financing infrastructure development
Way forward: Policy optionsSlide3
i. Recent economic and social trends
Robust growth replaced by growing uncertainty
Falling commodity prices: Azerbaijan, Kazakhstan, Mongolia and Turkmenistan
Rapid depreciation of currencies
Lay-offs in construction activities
Remittances falteringSlide4
II. International conventions and agreements
VPoA
notes that numerous physical and non-physical barriers holding back the LLDCs
LLDCs have acceded to international conventions and agreements: inter-country trade and transit cooperation
Simplifying and regulating transport and transit operations
International conventions and agreements important platforms for regional cooperation and integration
UNECE and ESCAP providing technical assistance within the ambit of the International Convention on the Harmonization of Frontier Control of Goods (1982)Slide5
Status of Accession Resolution 48/11 recommended 7 conventions
More have been added to the recommended ones
All 12 LLDCs have acceded to at least 1 convention (Lao PDR)
None have acceded to all the 21 conventions listed in Table 5
Many conventions are yet to be acceded to by the Asian LLDCsSlide6
Status of Accession (continued)
Among the 12 Asian LLDCs, most popular (9 LLDCs) is the Customs Convention on the International Transport of Goods under Cover of TIR Carnets – 1975: 40 years of fruitful experience with TIR
Next is 8 LLDCs each acceding to the Convention on the Contract for the International
C
arriage of Goods by Road (CMR 1956), Convention on Road Traffic 1956, and the International Convention on the Harmonization of Frontier Control of Goods 1982 (Revised Kyoto Convention 1999).Slide7
free Trade agreements
Very popular with LLDCs
Armenia 9, Azerbaijan 10, Kazakhstan 14, Kyrgyzstan 9, Lao PDR 10, Mongolia 1, Nepal 3, Tajikistan 9, Turkmenistan 5 and Uzbekistan 10
Trade impact with FTA partners:
Bhutan, Lao PDR and Nepal trade mostly with FTA partners;
most other LLDCs export 20 percent or less to FTA partners Slide8
III. Customs, Harmonization of policies and border crossing procedures
Key transit barriers: WB
Hard physical infrastructure barriers
lack of infrastructure
Missing links, poor maintenance, incompatible systems, obsolete technologies
Soft infrastructure barriers: different legal systems, weak coordination, lack of skilled personnel, non-compliance with conventions, lack or slow implementation of regional/sub-regional agreementsSlide9
Customs, Harmonization of policies and border crossing procedures (continued)
Procedural
barriers in serving corridors
Cumbersome and large number of documents
Frequent inspections
Different technical standards
Exorbitant chargesSlide10
Customs, Harmonization of policies and border crossing procedures (continued)Different traffic
regulations
Restricted
visa requirements
Different locations of various control stations
Stringent requirements for vehicle movementsSlide11
Regional and sub-regional initiatives in addressing transit barriers
Asian Highway Network
Trans-Asian Railway Network
Singapore-Kunming Rail Network
CAREC Joint Customs
programme
UNECE/ESCAP Electronic TIR Customs Transit System (
eTIR
)Slide12
Regional and sub-regional initiatives in addressing transit barriersUNECE/ESCAP Single Window
programme
Regional Single Window for ASEAN Connectivity
GMS Sub-regional Agreement for Facilitation of Cross-border Transport of Goods and People
Integrated Check Post initiative (ICP: India)
BBINSlide13
Models and methodologies for control authoritiesSecure Cross-border Transport Model: a vehicle tracking system
Efficient Cross-border Transport Model: a model for identifying non-physical barriers, evaluate alternatives and provide optimal solutions
Time-cost Distance Methodology: designed to identify bottlenecks along the transport corridorsSlide14
Country results in reducing barriers through facilitation measuresArmenia, Azerbaijan, Bhutan, Kazakhstan,
L
ao PDR, Nepal, Mongolia and Tajikistan have reduced time needed to complete international trade transactions
Azerbaijan: from 69 days in 2006 to 38 days in 2012
Lao PDR: from 66 days in 2006 to 26 days in 2012
Azerbaijan and Kyrgyzstan: cut down number of documents from 18 to 8 during the same periodSlide15
V. Transit infrastructure development
Key to promoting transit trade
LLDCs and their development partners accord high priority
One of the 6 priority areas in
VPoA
Development of roads, rail links, dray ports and transport/development corridors receiving priority attention
Challenges remain: poor quality trade-transport infrastructure and various inefficiencies associated with “doing business
”Slide16
Quality of trade-transport infrastructure
World Bank’s Logistics Performance Index
Efficiency of clearance process
Quality of trade and transport related infrastructure
Ease of arranging competitively priced shipments
Competence and quality of logistics
Ability to track and trace consignments
Timeliness of shipments Slide17
Overall LPI rankings
Among the 12 LLDCs, “best” performers are Kazakhstan and Armenia with 88 and 92 rankings, way below international standard
Rest of the LLDCs have double digit rankings, indicating urgent need for policies and measures in reducing/eliminating the listed barriers
Survey of logistics professionals shows similar results
World Bank’s
Doing Business Report 2016:
trading across borders, a new variable
Particularly difficult for LLDCs
Rankings ranging from 21 for Bhutan to 132 for Tajikistan, 159 for Uzbekistan and 172 for AfghanistanSlide18
Transport/economic corridor approach to infrastructure development
CAREC initiative (6 road corridors)
19200 km corridor roads brought to good condition by 2013
1312 km roads and highways upgraded by 2013
Extending original CAREC corridors to 29,350 km by 2020
Number of projects increased from 6 in 2001 to 166 in 2015
All these have led to significant increase in transit trade
Necessary but not sufficient: must be accompanied by harmonization of customs and border crossing procedures Slide19
Transport/economic corridor approach to infrastructure development (continued)
Euro-Asian Transport Link (EATL)
jointly launched by UNECE and UNESCAP:
Phase I (2002-2007): focused on identification of Euro-Asian road and rail projects; EG vetted the results
Phase II (2008-2013): coordinated by UNECE, identified 9 rail and road corridors to link participating countries with Europe and Asia.
Identified 311 projects with an outlay of US$215 billion
Phase III: coordinated by UNECE, aims to make the EATL links operational with a focus on mobilizing financing the projects and removing administrative and physical barriers to transit tradeSlide20
Network approach to road and rail infrastructure development
Asian Highway Network
:
29 countries have become signatory to the agreement
11 are LLDCs
Covers 142,000 km of roads, connecting 32 countries
Kazakhstan with 12,828 km of highways tops the list
Bhutan has the lowest with 170 km of roads
Quality remains a big concern
Missing links another concern
Human costs of low quality roads: high incidence of road accidents Slide21
Network approach to road and rail infrastructure development (continued)
Trans-Asian Railway Network
The Intergovernmental Agreement on the Trans-Asian Railway Network came into existence on 11 June 2009
18 countries become party to the agreement including Lao PDR, Mongolia, Nepal, Tajikistan and Uzbekistan
Armenia, Azerbaijan and Kazakhstan have signed but not yet parties to the agreement
Railways cover vast distances from hinterland/LLDCs to nearest ports: potential for huge investment
Again, often very poor quality, missing links and different standards prevent full realization of transit tradeSlide22
VI. Trade and trade facilitation
Recent trends in world trade
WTO revised world merchandize trade growing from 3.3 percent to 2.8 percent in 2015
Asia’s growth in merchandize trade revised from 5 percent to 3.1 percent
China has slowed down
Consequently, LLDCs are being badly hit as they depend on international and transit trade for their economic growthSlide23
Trade and trade facilitation (continued)Reducing trade barriers and trade costs
Various trade/transit barriers and long distances lead to high time and trade costs in exporting/importing
Transit neighbors often have poor quality or missing infrastructure, poor logistics and high customs barriers, adding to LLDCs’ already high trade costs
One study reveals that, in trading with USA and Germany, LLDCs face trade costs that are on average significantly higher than those faced by the non-LLDCs
Additional trade costs with USA range from 3 % for Kazakhstan to 174 for Bhutan, 67 per cent being the average for the group
One of the main sources of the high trade cost is the high and increasing cost of containers to export/import their goodsSlide24
VII. Financing infrastructure development
Infrastructure requirements in Asia-Pacific region
Both physical infrastructure as well as removing non-physical barriers to transit trade
AP region’s total infrastructure financing requirements @ US$8.3 trillion over ten years from 2010 to 2020
US$750 billion per year
US$710 billion per year for physical infrastructure
One ESCAP estimate puts regional infrastructure requirement at US$800 billion to US$900 billion per year with US$11 trillion over next 15 years
Transport projects to cost US$350 billion per year
New sources: e.g., Asian Infrastructure Investment Bank Slide25
Financing infrastructure development (continued)
Infrastructure requirements in
Asian LLDCs
National transport infrastructure investment requirement @ US$1.3 trillion over 10 years for 11 Asian LLDCs
Afghanistan occupies the top spot with US$14 billion, followed by Kazakhstan US$11 billion, Mongolia US$9 billion, and Lao PDR US$9 billion
Yearly requirements vary from US$287 million for Azerbaijan to US$2 billion for MongoliaSlide26
Financing infrastructure development (continued)Sources for mobilizing investment resources
Domestic resources
Resource rents earned from natural resources range from 37 percent to 47 percent of their GDP in Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan
Tax revenue is a traditional source: 4 LLDCs have tax/GDP in excess of 20 percent but most faltering
Need for more efforts in raising resources through this traditional route
Most LLDCs are energy rich: good potential to mobilize resource by setting aside resource rents and then invest in transit infrastructure
Tax/GDP ratio: 4 LLDCs have in excess of 20 per cent. Most falteringSlide27
Financing infrastructure development (continued)Foreign Direct Investment
Constitutes an important source of development finance for LLDCs but highly skewed in favor of resource rich LLDCs
FDI stocks since 2000 totaled US$129 billion for Kazakhstan, US$26 billion for Turkmenistan, US$18 billion for Azerbaijan, US$17 billion for Mongolia and US$9 billion for Uzbekistan.
Others have been less successfulSlide28
Financing infrastructure development (continued)Official development assistance
Critical for LLDCs in building their infrastructure
Strong and net positive externalities
Sub-optimal investment in infrastructure
Government investment supplemented/complemented by ODA
Total ODA commitments to all LLDCs increased from US$11.4 billion in 2000 to US$26.1 billion in 2014.
Asian LLDCs saw a decline from US$10 billion in 2010 to US$8.7 billion in 2014Slide29
Financing infrastructure development (continued)ODA destination and sectoral composition
Afghanistan received the most ODA among Asian LLDCs: average of US$6 billion over 4 years; exceeded 10 per cent of its GDP
Less than 1 % of GDP in other LLDCs
Although low as a share of GDP, highly significant in infrastructure development particularly for non-resource rich LLDCs
Most of the ODA went to social and economic sectors
In the latter, transport and energy, trade and industry, and tourism development featured prominentlySlide30
Financing infrastructure development (continued)Other sources
Remittances
Public-private partnerships
Regional capital markets
South-south and triangular cooperationSlide31
Policy Options
Need for improving productive capacity with support from development partners
Need to mainstream
VPoA
in national development strategies with a special focus on transit cooperation, trade and trade facilitation and infrastructure development
LLDCs that have not done yet should be supported in acceding to international conventions and ratifying agreements such as WTFA Slide32
Policy Options
LLDCs and their transit partners should strengthen cooperation in promoting regional integration through enhanced intraregional trade and greater participation in regional and sub regional agreements
Technical assistance should be provided to LLDCs in undertaking country specific studies in enhancing their transit trade
LLDCs should take measures to identify transit/trade barriers and take concrete actions to overcome thoseSlide33
Policy Options
LLDCs should be supported in building the capacities of their trade and transport related institutions
LLDCs should be supported by their development partners in fully utilizing various trade facilitation measures including those based on ICT
LLDCs should have full access to all types of resources in their infrastructure development efforts
LLDCs should be supported to fully benefit from their participation in economic/transport corridorsSlide34
Policy Options
LLDCs should take concrete measures to better target the scarce resources including external resources for building their infrastructure and productive capacities
LLDCs with support from their development partners need to devise strategies to use ODA, FDI and other resources in creating deeper linkages within their economies so that they can better leverage their trade potential.
LLDCs should be supported to adopt measures to raise domestic as well as external resources for their infrastructure development with a focus on domestic as well as transit infrastructureSlide35
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