45155 PUBLIC-PRIVATE PARTNERSHIPS IN TRADE AND TRANSPORT FACILITATION June 2005 Public-private partnerships (PPPs) are designed by and exist between public organizations and corporations, companies, or non-governmental organizations working in collaboration to achieve mutually beneficial results. s et In trade and transport facilitation, PPPs they also generate added costs in the sup- bring together stakeholders in trade and ply chain process. These include an in- No transportation to design and implement crease in the final cost of goods sold to the procedures that improve the efficiency of consumer, a decrease in profits, and, if public and private management of the in- improperly designed, a deterrent in further ternational supply chain. investment. For example, the use of con- voy requirements to prevent revenue eva- Introduction sion creates long delays and is hence a costly way to operate when contrasted In the past 10 years, the world of interna- with the guarantee mechanism. Collabora- tional trade and transportation has re- tion among stakeholders, both private and invented itself into a global, service- public, enables the identification of critical oriented function of national economies. trade and transport impediments and the Explanatory The demand for greater efficiency by gov- definition of alternative ways to achieve ernment and the private sector is driving similar objectives at lower costs. both sides to heighten cooperation to achieve their respective goals. This note PPPs provide a forum where stakeholders GFP describes developments in PPPs as they can develop strategies to remove barriers relate to cross-border trade and transporta- to efficient trade. By involving private tion. It does not address PPPs that are parties with competencies in trade and used to provide public services or the de- transport and with vested interests in the velopment of public infrastructure. success of their businesses, public-private Group: partnerships can develop the most efficient The Need for PPPs for Trade and and properly regulated supply chains. Transport Efficiency The UN Center for Trade Facilitation and Supply chains are created by businesses Electronic Business (UN/CEFACT) put Bank for the efficient manufacturing, transfer, forth a recommendation specifically ad- and trade of goods. A critical parameter in dressing the purpose, methods of creation, their design is the need to accommodate and operating structures of PPPs. Titled various government processes created to "Recommendation No. 4, National Trade ensure, inter alia, proper tax collection, Facilitation Bodies," it emphasizes the World fulfillment of health, safety, or security importance of these partnerships in order requirements, conformance with standards, to: and fair business practices. Identify issues affecting the cost and efficiency of a country's international The While these regulations bring a range of trade; benefits to the government infrastructure, Develop measures to reduce the cost and improve the efficiency of interna- cilitation function rather than on the tional trade; structure of the organization. The need Assist in the implementation of for such cooperation has been discussed those measures; above, but the process for developing Monitor the impact of measures us- these partnerships is not widely under- ing detailed indicators; stood. To be successful, potential parties Provide a national focal point for the to any partnership must overcome their collection and dissemination of informa- traditional beliefs about government and tion on best practices in international business intentions. For example, the trade facilitation; and trade community frequently hesitates to Participate in international efforts to meet with government representatives improve trade facilitation and transport and express its thoughts and concerns for efficiency. fear of possible retribution through gov- To view Recommendation No. 4, visit: ernment action. The government often http://www.unece.org/cefact/recommendations/re shares this reluctance for fear that the c04/rec04_ecetrd242e.pdf To view its implementation guidelines, visit: trader might somehow find a technicality http://www.unece.org/cefact/recommendations/re in regulations that enables non- c04/rec04_ecetr256e.pdf compliance with the rules. Parties to PPPs An environment in which trust exists between both parties provides a precur- Private stakeholders may include rep- sor to a good PPP. This approach is sup- resentatives from financial institutions, ported by the United Nations as part of transportation providers and intermediar- its aforementioned Recommendation No. ies, drivers and operators, brokers and 4 of the UN/CEFACT. The establish- forwarders, and freight terminals. Pub- ment of an effective partnership also lic sector representatives may include requires: border security officials, customs and health authorities, revenue collectors, Recognition of the need to facilitate enforcement agencies, and any govern- trade; ment agency with a stake in a product Identification of, and commitment to being transported. Other relevant par- achieving, shared objectives for private ties may include regional bodies, inter- sector and government entities to national government and non- streamline trade and transportation proc- government organizations, and national esses; associations. Development of political will for trade facilitation; The combined resources of the private Availability of champions promoting and public sectors can provide many the agenda either in the public or private benefits, including an adequate transpor- sector (or both); tation infrastructure, an efficient infor- Identification of priority actions that mation and communications technology can be acted upon rapidly and lead to (ICT) infrastructure, export promotion tangible results; programs, systems for certifying norms Definition of a plan of mid-term and standards (including sanitary and measures; phytosanitary standards), efficient and Pooling of resources that can support fair legal and regulatory structures, and the partnership; and viable research and extension programs. Willingness to harmonize trade pro- cedures across borders and in accor- Creating PPPs dance with international standards. PPPs assume various forms, but the im- National trade facilitation bodies can act portant focus should be on the trade fa- as catalysts for such trade facilitation 2 GFP Explanatory Notes - www.gfptt.org measures. They can represent their their stakeholders to agree in writing to Role of PPP in Improving countries in international and regional participate. They can be established Corridor Efficiency initiatives aimed at facilitating trade. through government decrees. Most groups keep written documentation of Promotion and Advocacy Many PPPs created to improve the effi- the responsibilities of each sector and ciency of the supply chain are formed by track implementation progress. Other Planning and Investment the government entity with the greatest less formal arrangements driven by mu- Coordination interest in modernizing the existing tual interest rather than written obliga- process. Smaller, growing economies tions can also develop. Pricing and Cost Recovery can benefit greatly from the use of PPPs in trade and transport facilitation be- Establishing PPP Clusters Traffic Control Improve- cause those partnerships provide inputs ments for aspects of the economy that govern- Most recent research developments in ment alone would address in larger the field of transit transport corridor Documentation Revisions economies. The transportation sector management recognize the value of local has been active in this regard, continu- knowledge and know-how and include Coordination ­ CIQS ally working with customs and border the proposal developed by UNCTAD protection agencies. and regional partners in South Asia (with Performance Monitoring For more information, see the International Road ESCAP), Southern Africa (with Union's paper on Transport Facilitation and the WBCG), and South America (with Information Dissemination need for the WTO Trade Facilitation negotia- tions: ECLAC): http://www.iru.org/Presenting/Facilitation/b2441 http://www.un.org/esa/devaccount/projects/0405 For more information, see -e.pdf M.html "Best Practices in Corridor Management," World Bank, Forthcoming. Experience shows that governments This Cluster Corridor Value Chain ap- form more effective programs when they proach (see chart below) introduces the include stakeholders in the process. concept of a stakeholder's collective Some types of trade facilitation partner- ownership of the transit corridor. In ships include: such a vision, the corridor is seen as a transit service production line and all Ad hoc committees to address a par- business and government participants as ticular issue: providers of added value to the end BASC: product (i.e., the transit service.) http://www.wbasco.org/english/certification.htm; Formal organizations supported by the government: SITPRO: Supply chain perspective ai http://www.sitpro.org.uk/about/index.html; Semi-formal organizations: Transit service production tio PRO Committees: SECIPRO-Southeast Europe PRO Committees; EUROPRO Committees; Broader, more informal organiza- + + + + + + + tions used to encourage constructive dia- Land Locked Country Transit Country logue: Locked Coun Coun The ADB's Customs Cooperation Committee; END PRODUCT: GOODS DELIVERY ODU GOODS DE PPP Corridor Partnerships: 25 Walvis Bay Corridor Group: www.wbcg.com.na; Statutory advisory committees charged by the parliament in an over- Trade and transport facilitation clusters sight capacity: that gather service providers develop Trade Support Network along the corridor in landlocked, border- ing, and seaport regions. These clusters The more formal PPPs often require form a network through shared informa- Public-Private Partnerships in Trade and Transport Facilitation 3 Clusters as Supplements to tion systems that allow constant moni- cies and private sector associations gen- Committees toring of the corridor operation and the erally have five sources of funding: design of improvements. member subscriptions, line items in the Committees: government budget, specific levies, Use a top-down, government- grants or capital contributions from do- Networked Clusters Networked led approach; nors, and sales of the public-private part- Transit Transi nership's services." The ability to se- Place an emphasis on policy cure funding is commensurate with the and regulations; and partnership's capacity to implement ac- tivities with visible and tangible results Require cooperation of higher- Inland Border area Seaport Cluster Cluster for operators without negatively impact- Cluster ranking government and private ing revenues. This may include priori- sector representatives. Network ties, such as abolition of convoy require- ments. Clusters: 12 Developing an understanding of the re- Use a peer-to-peer approach; spective roles of the partners represents Educational materials have been devel- yet another factor in creating public- Place an emphasis on opera- oped to facilitate the implementation of private partnerships. Those responsibili- tional solutions; and the cluster corridor value chain ap- ties that should be specifically addressed proach. These include: include: Require information sharing and joint actions. A guide to cluster development to Purpose of the partnership; help in the formation of three trade and Problems the partnership will ad- transport facilitation clusters gathering dress; public and private partners along the Types of partners involved and the corridor: inland, border area, and transit relative involvement of those parties; seaport. Nature of the partnership; A handbook on transit corridor Extent of the power-sharing; and analysis which looks at the different as- Funding of the partnership. pects of a transit system, including physical and institutional infrastructures, It is best that these roles be assigned in a transport services and equipment, proce- cooperative manner rather than a politi- dures and documentation, and regulatory cal one. For instance, the public sector frameworks. should not retain excessive responsibili- A manual on how to apply the sup- ties and oversight if it lacks the re- ply chain management approach to tran- sources to do so effectively, while the sit corridor operation and how to define private sector should not overextend it- the role of clusters and of each cluster self if it lacks the requisite organiza- participant in the analysis and improve- tional structure. A clear, authoritative ment of the performance of the corridor. document that sets the parameters of a PPP will facilitate a more successful col- NOTE: These manuals will be made laboration. available on the GFP website. For more information, see the paper submitted to USAID by Nathan Associates. Financing PPPs Institutional structures vary from formal Sustained financing is another important legal entities to informal gatherings that factor in creating PPPs. A certain blend build on established organizations like of financial backers is necessary in order chambers of commerce. The private sec- to fund implementation activities so that tor may wish to utilize partially public the collaboration runs smoothly. Ac- institutions such as trade unions and cording to USAID, "public-private agen- NGOs to fulfill certain obligations. Within a PPP, the two sectors must pool 4 GFP Explanatory Notes - www.gfptt.org their strengths and use the advantages of The most critical factors in the creation Case Study: PRO Committees their partner's organization to their own and operation of a successful partnership of Southeast Europe benefit. For instance, the private sector are that both the public and private sec- Supporting the TTFSE Program can be included in the identification tors are proactive in trade facilitation and process by providing innovative solu- that visible improvements are reached In Southeast Europe, public-private tions and financial support, participating rapidly. To that end, the definition of a committees were created with sup- in joint initiatives, and monitoring pro- priority list supported by performance port of the US Government and UN- ject results. measurements, before and after improve- ECE in line with Recommendation 4. Some of these committees ment, is instrumental, particularly when emerged in the wake of the conflicts Other Public-Private Cooperative combined with a focused public dissemi- that occurred in the region in the Trade and Transportation nation effort. 1990s. These committees played an Initiatives instrumental role in supporting the Donor institutions can often play an im- design and implementation of a re- gional program of Trade and Trans- By extension, PPPs take many other portant role in providing advice and sup- port Facilitation in Southeast Europe forms targeted at stimulating the in- port to governments to ensure the suc- (TTFSE), supported by a series of formed compliance of legitimate traders cess of those partnerships. Such partner- World Bank projects and donor and supply chain operators. This entails ships are encouraged to register as na- funding. training both government and private tional focal points under the GFP web- sector employees and defining special site to avoid duplications. Their activities entailed, in addition to the traditional agenda identified simplified procedures for authorized above: (i) defining training needs for traders. Informed compliance can be Some of the impediments to the success private sector operators; (ii) defining supported by joint training in operations of such partnerships include a lack of their information requirements; (iii) and supply-chain logistics and by the interest, a lack of legal and/or adminis- organizing training for over 6000 individuals in 122 cities in partner- sharing of information through a joint trative authority, frequent changes in ship with road transport association information database. The development public sector representatives, and a gen- and freight forwarders associations; of e-government and e-commerce can eral deficiency of capacity due to finan- (iv) establishing a regional portal for also bring useful tools to align public cial, technical, or practical circum- information on border procedures and private sector priorities. stances. (www.ttfse.org); (v) conducting multiple roundtable meetings at For more information, see US Customs and Country-specific examples can be found in CIS 7, local, national, and regional levels Border Protection's C-TPAT website. Kazakhstan and Turkmenistan as reported in the (www.secipro.net); and (vi) interact- World Bank's funded study by Eva Molnar, WB ing with a group of high-level Gov- Government agency websites are needed and Lauri Ojala, WB Consultant, 2003. ernment representatives, the TTFSE to facilitate transparency of requirements Regional Steering Committee. Regu- for private sector operators and inves- Additional Resources and Links lar performance monitoring indica- tors enabled the committees to moni- tors. PPPs can support these efforts by tor improvements. providing feedback or working with the Trade and Transport Facilitation in Southeast Europe Program (TTFSE) public sector to ensure the availability of "Public-Private Sector in Cooperation in The participation of PRO commit- proper information. Trade Facilitation." tees included financial contributions http://www.unece.org/trade/forums/forum02/ from the corresponding Chambers of Conclusion presentations/session_iii/rwee.pdf Commerce matched with donor fi- An analysis of the performance of some nancing (US). This led to cost effec- tive solutions tailored to fit country Coordination between interested stake- national facilitation organizations; requirements. http://www.secipro.net/ holders in the trade and transport sector doc_meetings/20041001172531102.pdf is critical to the successful moderniza- Apostolov, Mario; UNECE Presentation of tion and facilitation of cross-border Public Private Partnerships and Organization transactions. That coordination is best Structure in Support of Trade Facilitation; accomplished in partnerships with all Caucasus Trade Facilitation Conference. key stakeholders, including government "Building up a Sustained Public-Private Partner- ship." Tbilsi, 18-21 June 2001. regulators, traders, financial donor gov- CSIS Euro Atlantic Action Commission, ernments, recipient government agen- 2004; cies, and the private sector trade inter- http://www.csis.org/eaac/recommendations.htm mediaries. The National Council for Public-Private Partnerships. http://ncppp.org/. Public-Private Partnerships in Trade and Transport Facilitation 5 Raven, John; Trade and Transport Facilitation. A Toolkit- for Audit, Analysis, and Remedial Action; 2001; Economic and Social Commission for West- ern Asia Region, Manual for the Establishment of National Trade and Transport Facilitation Com- mittees in the Countries of the Economic and Social Commission for Western Asia Region; December 2002; http://www.escwa.org.lb/information/ publications/division/docs/trans-02-3.pdf; The North American International Trade Corridor Partnership; http://www.naitcp.org/lowing.htm Trade Corridors Partnership; http://www.tradecorridors.com/ National Council for Public-Private Partner- ships: http://ncppp.org/howpart/ppptypes.html http://www.unece.org/cefact/nat_bodies.pdf Jamaica Trade Point, http://www.jamaicatradepoint.com/aboutUs.html U.S. Customs and Border Protection's Cus- toms-Trade Partnership Against Terrorism (C- TPAT); http://www.customs.ustreas.gov/xp/cgov/import/ commercial_enforcement/ctpat/fact_sheet.xml Operation Safe Commerce, http://www.tsa.gov/public/display? theme=44&content=090005198003f277 WCO's Trade Symposium on Supply Chain Security, http://www.wcoomd.org/ie/en/en.html TTFSE Implementing mechanism http://www.seerecon.org/ttfse/ TTFSERoleParties.pdf This GFP Note has been produced with the financial assistance of a grant from TRISP, a partnership between the UK Department for International Development and the World Bank for learning and sharing of knowledge in the fields of transport and rural infrastructure services. This Note was prepared by JBC International and reviewed by the World Bank Trade Logistics Group and GFP Steering Committee. The preparation of the GFP Notes was coordinated by Gerald Ollivier, World Bank. The views published are those of the authors and should not be attributed to the World Bank or any other GFP affiliated organization. Additionally, the conclusions do not represent official policy of the World Bank, its Executive Directors, or the countries they represent. For more information, contact Mr. Ollivier at golliver@worldbank.org. 6 GFP Explanatory Notes - www.gfptt.org