43005 Connecting 2007 to Compete Trade Logistics in the Global Economy The Logistics Performance Index and Its Indicators .e scor st highe eht is 5;e 35. ­2 92.2I 5­41.3I scor ste w lo LP LP eht is 1 92.2­1I 41.3­ 53.2I ta da LP LP No Connecting to Compete Trade Logistics in the Global Economy The Logistics Performance Index and Its Indicators Jean-François Arvis The World Bank Monica Alina Mustra The World Bank John Panzer The World Bank Lauri Ojala Turku School of Economics Tapio Naula Turku School of Economics © 2007 e International Bank for Reconstruction and Development / e World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved e ndings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily re ect the views of the Executive Directors of the International Bank for Reconstruc- tion and Development / e World Bank or the governments they represent. e World Bank does not guarantee the accuracy of the data included in this work. e boundar- ies, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of e World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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If you have any questions or comments about this report, please contact: International Trade Department e World Bank 1818 H Street NW, Room MSN MC2-201, Washington, DC 20433 USA Telephone: 202-473-8922 E-mail: tradefacilitation@worldbank.org Web site: www.worldbank.org or www.worldbank.org/lpi All other queries on rights and licenses, including subsidiary rights, should be addressed to the O ce of the Publisher, e World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. Foreword Technologicalprogressandworldwidetradeand reforms and investments in trade and transport investment liberalization are presenting new facilitation. opportunities for countries to harness global The report provides some insights markets for growth and poverty reduction. But on the cost of poor logistics to country with the advent of global supply chains, a new competitiveness--and the sources of those premium is being placed on being able to move higher costs. Beyond cost and time taken to goods from A to B rapidly, reliably, and cheaply. deliver goods, the predictability and reliability Being able to connect to what has been referred of supply chains is increasingly important in a to as the "physical internet" is fast becoming a world of just-in-time production sharing. Costs key determinant of a country's competitiveness. related to hedging against uncertainty are sig- For those able to connect, the physical internet ni cant. Equally, cost and quality of logistics brings access to vast new markets; but for those are determined not just by infrastructure and whose links to the global logistics web are weak, the performance of public agencies, but also by the costs of exclusion are large and growing. the availability of quality and competitive pri- Whether a cause or a consequence, no country vate services. Moreover, in many developing has grown successfully without a large expan- countries, problems of adverse geography are sion of its trade. compounded by a weak modern services sector is report aims to shed light on how dif- due to poor institutions or over-regulation. e ferent countries are doing in the area of trade report closes with some practical insights, advo- logistics, and what they can do to improve cating a comprehensive, integrated approach to their performance. It is based on a worldwide ensure that actions in one area are not rendered survey of the global freight forwarders and ex-x ine ective by bottlenecks in another. press carriers who are the most active in interna- We hope that this initiative will be a valu- tional trade. e Logistics Performance Index able addition to the set of tools the World Bank (LPI) and its underlying indicators constitute providestoenablecountriestoassessandbench- a unique dataset to measure country perfor- mark their performance in this critical area, and mance across several dimensions of logistics that it will, in a modest way, promote growth, and to benchmark that logistics performance poverty reduction, and economic development. against 150 countries. It provides the empirical basis to understand and compare di erences in trade logistics as well as to inform policy with respect to di cult bottlenecks and tradeo s. As a tool for policymakers, professionals, develop- Danny Leipziger ment agencies, and other stakeholders, it will Vice President and Head of Network directly support the fast-growing agenda for Poverty Reduction and Economic management CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY III Acknowledgments e survey would not have been possible is is the rst report presenting the Logis- without the support and participation of the ticsPerformanceIndex(LPI)andindicators. e International Federation of Freight Forward- surveywillbeconductedeachyeartoimprovethe ers Associations (www. ata.com), the Global reliability of the indicators and to build a dataset Express Association (www.global-express. comparable across countries and over time. org), the Global Facilitation Partnership for e authors express their gratitude to the Transportation and Trade (www.gfptt.org), hundreds of employees of freight forwarding and and ten major international logistics com- express carrier companies around the world who panies. e survey was designed and imple- took the time to respond to the survey. eir par- mented with Finland's Turku School of ticipation was central to the quality and credibil- Economics (www.tukkk. /english/), which ity of the project, and their continuing involve- worked with the Bank to develop the concept ment and feedback will be essential as we develop in 2003. and re ne the survey and the LPI in future years. IV CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Authors is report has been prepared under the e accompanying LPI website was pro- leadershipofJean-FrançoisArvis,MonicaAlina duced by the World Bank Institute Multime- Mustra, and John Panzer (sector manager) with dia Team which included Ste en Soulejman a core team of external partners, including Janus, Arseny Malov, and under the guidance Lauri Ojala and Tapio Naula. Additional con- of Monica Alina Mustra. tributions were made by Julia Nielson (includ- Communications Development Incorpo- ing help in dra ing parts of the report) and Jean rated provided overall design, editing, and lay- Pierre Cha our. Liliya Repa contributed to the out, led by Bruce Ross-Larson, Laura Peterson data analysis and the data appendix. Nussbaum, and Amye Kenall. Elaine Wilson Severalreviewerso eredextensiveadviceand created the graphics and typeset the book. Peter comments throughout the conceptualization Grundy, of Peter Grundy Art & Design, pro- stages. ese included Aart Kray, Robin Carru- vided the cover design. Monica Alina Mustra thers, and Najy Benhassine. Extensive and excel- managed the publication process and the dis- lentadvicewasreceivedfromMarcJuhel,Antonio semination activities. Estache, Gerard McLinden, Peter Walkenhorst, e work was conducted under the general Simeon Djankov, and Mariem Malouche. guidance of Uri Dadush. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY V Table of contents Foreword iii Acknowledgments iv Authors v Executive summary 1 Overview: Connecting to compete 3 Measuring logistics performance 7 e Logistics Performance Index and its indicators 8 Assessing the performance gap 8 Overachievers and underachievers: Examples of the logistics gap 9 e LPI gap, trade, and FDI: Good logistics performers bene t more from globalization 11 Key factors in logistics performance 13 Factors determining logistics performance 13 Logistics and competitiveness: Why predictability and reliability matter more than costs 16 Lessons for reform 18 Reforms must be comprehensive 18 Some areas of reform are tackled more than others 19 Implementing reform is not easy 19 While integrated reforms are essential, priorities and strategies may di er 19 VI CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Technical notes Technical note 1: Selection of countries 22 Technical note 2: e Logistics Performance Index and multivariate regressions 23 Boxes Box 1.1 e LPI and other international indicators 7 Box 1.2 Building the Logistics Performance Index 8 Box 1.3 How precise is the LPI estimate? 9 Box 2.1 Modernizing border processes 15 Box 2.2 Delivering on schedule 15 Figures Figure 1.1 High income countries are generally top performers, but there are big di erences between countries at other income levels 9 Figure 1.2 Performance of selected middle income countries 10 Figure 1.3 Performance of selected low income countries 11 Figure 1.4 Logistics performance is associated with the diversi cation of exports, 2005 11 Figure 1.5 Trade expansion of non-oil-exporting developing countries and logistics performance, 1992­2005 12 Figure 2.1 Structure of logistics costs supported by traders 16 Figure 2.2 Direct freight costs versus induced costs assessed by respondent 16 Figure 3.1 High performers are consistent performers: Discrepancies across factors of performance 18 Figure 3.2 Vicious and virtuous logistics 20 Figure 3.3 Logistics typology 21 Tables Table 1 e rst Logistics Performance Index 2 Table 1.1 Top 10 countries, by income group 10 Table 2.1 How logistics professionals assess institutions and processes 13 Table 3.1 Percent of respondents acknowledging positive trends in developments for the following areas, during the last three years 19 Table 3.2 Identify the severity of constraints to overall performance 21 Technical note table 1.1 Six country selection rules 22 Technical note table 1.2 Regional coverage of the Logistics Performance Index 22 Technical note table 2.1 23 Appendix tables Table A1 Country rankings on the Logistics Performance Index and indicators 26 Table A2 Country-speci c environment and institutions data averages, by income group and region 34 Table A3 Country-speci c performance data, by country 36 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY VII Executive summary Connecting to compete--trade logistics in the countries. Country performance is largely in u- global economy--is critical for developing coun- enced by the weakest link in the supply chain: poor tries to harness global trade and reap the bene ts of performance injust oneortwo areas can haveserious globalization. Success in integrating global supply repercussions on overall competitiveness. chains starts with the ability of rms to move goods Although much progress has been made in tele-tel across borders rapidly, reliably, and cheaply. communications and information technology, most e Logistics Performance Index (LPI) and its logistics professionals are not satis ed with the qual- ed th th qua indicators provide the rst in-depth cross-country ity of the physical infrastructure in many developing assessment of the logistics gap among countries. countries. Even where customs has been modern- Drawing on the rst-hand knowledge of logistics ized, the coordination of border procedures between professionalsworldwide,itprovidesacomprehensive customs and other agencies remains an important picture of supply chain performance--from customs concern. Logistics performance is more and more procedures, logistics costs, and infrastructure qual- determined by the availability of quality, competi- ity to the ability to track and trace shipments, timeli- tive private services--such as trucking, customs bro- ness in reaching destination, and the competence of kering, and warehousing. the domestic logistics industry. e LPI suggests that policymakers should look Using a 5-point scale, the LPI aggregates more beyond the traditional "trade facilitation" agenda than 5,000 country evaluations. It is complemented that focuses on road infrastructure and information by a number of qualitative and quantitative indica- technology in customs to also reform logistics ser- tors of the domestic logistics environment, institu- vices markets and reduce coordination failures, espe- tions, and performance of supply chains (such as cially those of public agencies active in border con- costs and delays). trol. isdemandsamoreintegrated,comprehensive e LPI and its indicators point to signi cant approach to reforms all along the supply chain. di erences in logistics performance across countries Indeed,therearestrongsynergiesamongreforms and regions. It re ects not only expected disparities to customs, border management, infrastructure, and between developed and developing countries, espe- transport regulations because reforms usually rein- re cially the least-developed, landlocked countries, but force each other. Countries performing well typi- more important, signi cant di erences among de- cally have a comprehensive approach that improves veloping countries at similar levels of development. key factors in logistics performance in parallel, while Countries that top the LPI ranking are typically countries with a piecemeal approach tend not to key players in the logistics industry, while those at demonstrate lasting improvements. the bottom are o en trapped in a vicious circle of In turn, cross-cutting reforms need to be sup- overregulation, poor quality services, and under- ported by broad constituencies. International com- investment. Among developing countries, logistics panies can bring global knowledge, but the support overachievers are also those experiencing economic of local exporters, operators, and public agencies is growth led by manufactured exports. crucial. A key insight from the survey of logistics profes- e LPI rankings and indicators provide robust sionals is that, while costs and timeliness are of para- benchmarks that may help build the case for reform. mount importance, traders are primarily concerned By shining a light on the costs of poor logistics per- with the overall reliability of the supply chain. Costs formance, the LPI and its indicators can help coun- relatedtohedgingagainstuncertaintyhavebecomea tries break out of the vicious circle of logistics un- signi cant part of logistics costs in many developing friendliness to e ectively access global markets. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 1 Table 1 The first Logistics Performance Index Logistics Performance Index Logistics Performance Index Logistics Performance Index Country Rank Score Country Rank Score Country Rank Score Singapore 1 4.19 Romania 51 2.91 Senegal 101 2.37 Netherlands 2 4.18 Jordan 52 2.89 Côte d'Ivoire 102 2.36 Germany 3 4.10 Vietnam 53 2.89 Kyrgyz Republic 103 2.35 Sweden 4 4.08 Panama 54 2.89 Ethiopia 104 2.33 Austria 5 4.06 Bulgaria 55 2.87 Liberia 105 2.31 Japan 6 4.02 Mexico 56 2.87 Moldova 106 2.31 Switzerland 7 4.02 São Tomé and Principe 57 2.86 Bolivia 107 2.31 Hong Kong, China 8 4.00 Lithuania 58 2.78 Lesotho 108 2.30 United Kingdom 9 3.99 Peru 59 2.77 Mali 109 2.29 Canada 10 3.92 Tunisia 60 2.76 Mozambique 110 2.29 Ireland 11 3.91 Brazil 61 2.75 Azerbaijan 111 2.29 Belgium 12 3.89 Guinea 62 2.71 Yemen, Rep. 112 2.29 Denmark 13 3.86 Croatia 63 2.71 Burundi 113 2.29 United States 14 3.84 Sudan 64 2.71 Zimbabwe 114 2.29 Finland 15 3.82 Philippines 65 2.69 Serbia and Montenegro 115 2.28 Norway 16 3.81 El Salvador 66 2.66 Guinea-Bissau 116 2.28 Australia 17 3.79 Mauritania 67 2.63 Lao PDR 117 2.25 France 18 3.76 Pakistan 68 2.62 Jamaica 118 2.25 New Zealand 19 3.75 Venezuela, RB 69 2.62 Togo 119 2.25 United Arab Emirates 20 3.73 Ecuador 70 2.60 Madagascar 120 2.24 Taiwan, China 21 3.64 Paraguay 71 2.57 Burkina Faso 121 2.24 Italy 22 3.58 Costa Rica 72 2.55 Nicaragua 122 2.21 Luxembourg 23 3.54 Ukraine 73 2.55 Haiti 123 2.21 South Africa 24 3.53 Belarus 74 2.53 Eritrea 124 2.19 Korea, Rep. 25 3.52 Guatemala 75 2.53 Ghana 125 2.16 Spain 26 3.52 Kenya 76 2.52 Namibia 126 2.16 Malaysia 27 3.48 Gambia, The 77 2.52 Somalia 127 2.16 Portugal 28 3.38 Iran, Islamic Rep. 78 2.51 Bhutan 128 2.16 Greece 29 3.36 Uruguay 79 2.51 Uzbekistan 129 2.16 China 30 3.32 Honduras 80 2.50 Nepal 130 2.14 Thailand 31 3.31 Cambodia 81 2.50 Armenia 131 2.14 Chile 32 3.25 Colombia 82 2.50 Mauritius 132 2.13 Israel 33 3.21 Uganda 83 2.49 Kazakhstan 133 2.12 Turkey 34 3.15 Cameroon 84 2.49 Gabon 134 2.10 Hungary 35 3.15 Comoros 85 2.48 Syrian Arab Republic 135 2.09 Bahrain 36 3.15 Angola 86 2.48 Mongolia 136 2.08 Slovenia 37 3.14 Bangladesh 87 2.47 Tanzania 137 2.08 Czech Republic 38 3.13 Bosnia and Herzegovina 88 2.46 Solomon Islands 138 2.08 India 39 3.07 Benin 89 2.45 Albania 139 2.08 Poland 40 3.04 Macedonia, FYR 90 2.43 Algeria 140 2.06 Saudi Arabia 41 3.02 Malawi 91 2.42 Guyana 141 2.05 Latvia 42 3.02 Sri Lanka 92 2.40 Chad 142 1.98 Indonesia 43 3.01 Nigeria 93 2.40 Niger 143 1.97 Kuwait 44 2.99 Morocco 94 2.38 Sierra Leone 144 1.95 Argentina 45 2.98 Papua New Guinea 95 2.38 Djibouti 145 1.94 Qatar 46 2.98 Dominican Republic 96 2.38 Tajikistan 146 1.93 Estonia 47 2.95 Egypt, Arab Rep. 97 2.37 Myanmar 147 1.86 Oman 48 2.92 Lebanon 98 2.37 Rwanda 148 1.77 Cyprus 49 2.92 Russian Federation 99 2.37 Timor-Leste 149 1.71 Slovak Republic 50 2.92 Zambia 100 2.37 Afghanistan 150 1.21 2 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Overview: Connecting to compete High logistics costs e increase in global production sharing, the for the poorest landlocked countries, many of shortening of product life cycles, and the inten- them in Africa. and--more particularly-- si cation of global competition all highlight In this highly competitive world, the qual- low levels of service are a logistics as a strategic source of competitive ity of logistics can have a major bearing on a barrier to trade and foreign advantage. Since the advent of modern trade rm's decisions about which country to locate several centuries ago, the international move- in, which suppliers to buy from, and which direct investment--and ment of goods has been primarily organized by consumer markets to enter. High logistics costs thus to economic growth freight forwarders, typically large networks of and--more particularly--low levels of service companies with worldwide coverage, capable of are a barrier to trade and foreign direct invest- handling and coordinating the diverse actions ment and thus to economic growth. Countries required to move goods across long distances withhigheroveralllogisticscostsaremorelikely and international borders. More recently, the to miss the opportunities of globalization. rise of express carriers and third-party logistics Take landlocked Chad. Importing a providers has expanded the scope of services 20-foot container from Shanghai to its capi- available to traders. Freight forwarders and tal N'djamena takes about ten weeks at a cost express carriers are at the heart of the present of $6,500. Importing the same container to a wave of globalization: they facilitate an ever- landlocked country in western or central Eu- more demanding system that connects rms, rope would take about four weeks and cost less suppliers, and consumers on what e Econo- than$3,000. eshippingcostsanddelaysfrom mist characterizes as "the physical internet."1 Shanghai to Douala, the gateway for Chad, and e physical internet is global, but the ability of toWest European ports are essentially the same. countries to access it depends on the quality of And the same international freight forward- their national infrastructure as well as the e ec- ing company would handle the container from tiveness of their policies and institutions. Douala to N'djamena and within Europe. But Technological advances and economic lib- what accounts for the large di erence in time eralization have created new opportunities for and cost? countries to harness global markets for eco- e answer lies in better processes, higher nomic growth and development. But expanded quality services, and the operating environ- supply chains and global production networks ment. e forwarder in Europe would use a put a new premium on moving goods in a pre- seamless, paperless system to manage the inland dictable, timely, and cost-e ective way. Well shipment from its eight-hectare campus in the connected countries can have access to many gateway port of Le Havre. e transport inside more markets and consumers: a country as dis- Europe would take less than three days. And to tant from most major markets as Chile can be a add value for its client and generate more busi- major player in the high-end world food market, ness, the forwarder would provide additional supplying fresh sh and perishable fruits to con- services, such as improving the client's internal sumers in Asia, Europe, and North America. distribution practices. But for the poorly connected, the costs of exclu- In Chad the process would be di erent. sion are considerable and growing, and the risks While only ve days should be needed to move of missed opportunities loom large, especially the container from Douala to N'djamena, the CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 3 The LPI suggests that actual time would likely be as long as ve weeks. messages about priorities for reform and e ec- In a di cult governance and security environ- tive ways of reforming. there are strong synergies ment, the freight forwarding company would be eLPIanditsindicatorsunderscoresignif- among reforms to customs, trying simply to avoid a breakdown in its client's icant di erences in logistics performance across border management, supply chain. It would maintain company sta countries and regions. ese di erences re ect along the trade corridor to physically track the the disparities between developed and emerg- infrastructure, and goods and trade documents. And it would have ing economies (such as Singapore, which ranks transport regulations to be ready to mediate with the trucking syn- rst) and other developing countries, especially dicate, the security forces, and myriad govern- the least-developed or landlocked countries ment agencies. (Afghanistan ranks last). Countries that top Freight forwarders and express carriers are the LPI rankings are typically hubs and/or key in a privileged position to assess how countries players in the logistics industry. perform on logistics. ey manage operations While performance outcomes such as do- from factory and warehouse to port, from port mestic costs or the time taken to reach a destina- to overland transit, and through one or more tion are important, traders mostly value the per- borders to destination, with each link testing a formance of logistics services available to them: country's logistics infrastructure performance. reliability and predictability of the supply chain e logistics performance survey taps the rst- matter most. For example, traditional measures handknowledgeoftheoperationalsta oflogis- of performance such as direct freight costs and tics companies worldwide. average delays, while important, may not cap- Complementing existing international sets ture the overall logistics performance and thus of competitiveness indicators--such as the the ability of countries to use trade for growth. World Bank's Doing Business measures and the e predictability and reliability of shipments, World Economic Forum's Global Competitive- while more di cult to measure, are more im- ness Index--the Logistics Performance Index portant for rms and may have a more dramatic and its indicators propose a comprehensive impact on their ability to compete. approach to supply chain performance. It pro- Indeed, professionals view the friendliness vides the rst in-depth cross-country assess- of border processes primarily in terms of the ment of the logistics gap and constraints facing transparency and the predictability of clear- countries. It elaborates on several areas of per- ance procedures. Even where countries have formance, such as trade procedures, infrastruc- already implemented a customs moderniza- ture, services, and reliability. Based on a 1 to 5 tion program, the coordination of border pro- scale (lowest to highest performance), it aggre- cedures between customs and other agencies gates more than 5,000 country evaluations by (responsible say, for sanitary and phytosanitary professionals trading with the country on vari- standards) is an important concern. e avail- ous dimensions of performance. ese evalua- ability and competence of trucking, customs tions, by individuals located outside the country brokering, and warehousing services are also being evaluated, are used to compute the Logis- critical performance factors that vary widely tics Performance Index (LPI) and its underlying across countries. While telecommunications indicators (table 1 and appendix table A1). and information technology infrastructure, in- In addition to the LPI, for each country, the creasinglythekeytosuccessfultradeoperations, survey combines qualitative and quantitative have improved rapidly in most countries, most assessments of the domestic logistics environ- professionals remain concerned about the qual- ment, institutions, and performance of domes- ity of physical infrastructure. tic supply chains (costs, delays) by international In terms of the way forward, the LPI sug- professionals located in the country evaluated gests that there are strong synergies among (appendix tables A2 and A3). is additional reforms to customs, border management, information is used to reinforce and interpret infrastructure, and transport regulations. Re-e- the results of the LPI and underlines the major forms in these di erent areas have a mutually 4 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY reinforcing e ect along all links in the logistics case for reform. By showing countries how they Countries performing well supply chain, directly contributing to predict- compare with their competitors, and shining a have a comprehensive ability and performance. Countries perform- Co tri per light on the costs of poor logistics performance, ing well have a comprehensive approach, im- approach, improving it is hoped that the LPI and its indicators may proving all the key logistics in parallel, while help countries break out of the vicious circle of all the key logistics in those with a piecemeal approach, targeting a "logistics unfriendliness". In identifying the key parallel, while those with single link in the logistics chain, may see initial areas of problems and constraints, the LPI and results but no lasting improvements. A com- a piecemeal approach, its indicators also aim to help guide the prepa- prehensive reform of logistics and trade facil- ration of the more in-depth, country-speci c targeting a single link in itation is thus essential. But too few develop- assessments and strategies, such as trade and the logistics chain, may ing countries have created a virtuous circle of transport facilitation audits (Raven 2001), that see initial results but no improvements. Countries at the bottom of the will be needed to generate concrete improve- LPI ranking are typically trapped in a vicious ments in logistics performance. lasting improvements circle of overregulation, poor quality services, Section 1 introduces the overall concept and underinvestment. of the LPI and the methodology underlying e LPI suggests that policymakers should its construction. It also presents examples that lookbeyondthetraditional"facilitationagenda" point to some of the critical factors behind a focused on trade-related infrastructure and in- country's logistics performance. It introduces formation technology in customs. To close the a broad typology of country groups, revealing logistics gap, they should also look to reforms in the large disparities in performance among the markets for logistics services, reduce coordi- countries at similar incomes. It examines this nation failures (especially those of public agen- logistics gap and shows that good logistics per- cies active in border control), and build strong formers experience greater and more diversi ed domestic constituencies to support reform. is trade ows. Section 2 draws upon the qualita- e ort will demand a more integrated, compre- tive information provided by international op- hensive approach to reforms all along the sup- erators based in the countries being evaluated ply chain. For the most severely constrained to provide insights on the key institutions and countries--typically landlocked countries in processes determining logistics performance Africa and Central Asia--innovative solutions and analyzes the importance of reliability in may need to be found, and international donors logistics performance for competitiveness. Sec- will have an important role. tion 3 o ers some ideas on the way forward for e LPI rankings and indicators provide ro- policymakers and development agencies, setting bust benchmarks that may help policymakers-- priorities for comprehensive reforms according and particularly the private sector--build the to the current level of performance. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 5 1 N OIT SEC Measuring logistics performance International logistics Improving logistics performance has become an is sequence cannot be easily summarized in importantdevelopmentpolicyobjective. eper- a single indicator. Nor is it easy to collect on encompasses an formanceofcustoms,trade-relatedinfrastructure, a global basis the information to build a per- array of actions, inland transit, logistics services, information sys- formance measure. Information on time and from transportation, tems,andporte ciencyareallcriticaltowhether costs associated with some important logistics countries can trade goods and services on time processes--such as port time, time to clear cus- consolidation of cargo, and at low cost. And this trade competitiveness is toms, and transport--provides a good starting warehousing, and central to whether countries can harness global- point and in many cases is readily available. But border clearance to ization's new opportunities for development. this information, even when complete, cannot Governments, o en at the urging of the pri- be easily aggregated in a single consistent cross- in-country distribution vate sector, are now ramping up projects to fa- country dataset because of essential di erences and payment systems cilitate trade and transportation, supported by in the supply chain structure among countries. increased assistance from the World Bank and Perhaps more important, many critical ele- other development agencies. But the scarcity of ments for good logistics performance--such as performanceindicatorstobenchmarkandassess thetransparencyofprocessesandthequality,pre- country logistics performance is making it dif- dictability, and reliability of services--cannot be cult for policymakers and private sector stake- captured from the information available on time holders to quantify the constraints they face in and costs. So the World Bank, with its profes- connectingtoglobalmarketsandalsoto inform sional and academic partners, has produced the and reinforce constituencies for reform. ( rst)LogisticsPerformanceIndex(LPI)tostart International logistics encompasses an array closingtheknowledgegapandhelpcountriesde- of actions, from transportation, consolidation velop logistics reform programs to enhance their of cargo, warehousing, and border clearance to competitiveness. e LPI complements existing in-country distribution and payment systems. measures of competitiveness (box 1.1). Box 1.1 The LPI and other international indicators The International Finance Corporation and the World Bank jointly and looting, the transparency of government procedures, macro- maintain the Doing Business database. This major initiative pro- economic conditions, and the underlying strength of institutions. vides objective measures of business regulations and enforcement The Global Competitiveness Index 2006­2007 (GCI), produced (www.doingbusiness.org). Doing Business 2008 presents quan- by World Economic Forum (www.weforum.org), is a composite index titative indicators on business regulations and the protection of based on macro and micro data as well as interviews with key busi- property rights that can be compared across 175 economies and ness and societal stakeholders featuring the 12 pillars of competi- over time. tiveness. It contains detailed pro les of 125 economies and data For trade activities, Doing Business focuses on red tape obsta- tables with global rankings covering more than 100 indicators in nine cles to the movement of goods across borders and the ease of ex- areas: institutions, infrastructure, macroeconomy, health and primary port and import for small and medium sized enterprises. It looks, for education, higher education and training, market ef ciency, techno- example, at the number of documents and signatures for imports logical readiness, business sophistication, and innovation. Several and exports. The LPI uses a broader and comprehensive approach indicators are directly relevant to trade facilitation and logistics. to supply-chain performance to measure some of the critical fac- The added value of the LPI is that it provides a global bench- tors of trade logistics performance, including the quality of infra- mark of logistics ef ciency and service quality not treated speci - structure and logistics services, the security of property from theft cally in the GCI or in Doing Business. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 7 The Logistics Performance The Logistics Performance professionals involved in international freight Index and its indicators logistics.3 e LPI synthesizes this information Index and its indicators in a composite index to allow for comparisons are based on a survey e Logistics Performance Index and its indi- (see appendix table A1). of multinational freight cators have been constructed from informa- e LPI and its indicators are given on a tion gathered in a worldwide survey of the numerical scale, from 1 (worst) to 5 (best). is forwarders and express companies responsible for moving goods and scale can also be used to interpret performance carriers--professionals facilitating trade around the world--the mul- outcomes measures. For example, the analysis whose views matter tinational freight forwarders and the main based on the additional country information express carriers. It relies on the experience and gathered in the survey, indicates that, on aver- knowledge of professionals. eir views mat- age, having an LPI lower by one point (say, 2.5 ter: they have a direct impact on the choice of rather than 3.5) implies six additional days for shipping routes and gateways and can in u- getting imports from the port to a rm's ware- ence the rms' decisions about the location of house and three additional days for exports. It production, choice of suppliers and selection also implies that a shipment is ve times more of target markets. likely to be subject to a physical inspection at e indicators summarize the performance entry. of countries in seven areas that capture the cur- rent logistics environment (box 1.2). ey range Assessing the performance gap from traditional areas such as customs proce- dures, logistics costs (such as freight rates), and Countries that top the LPI rankings are major infrastructure quality to new areas like the abil- global transport and logistics hubs (Singapore) ity to track and trace shipments, timeliness in or the base for a strong logistics service industry reaching a destination, and the competence of (Switzerland). Logistics services in these coun- the domestic logistics industry. None of these tries tend to bene t from economies of scale and areas alone can ensure good logistics perfor- are o en sources of innovation and technologi- mance. e selection of these areas is based on cal change. e scores for the top performers are the latest theoretical and empirical research2 fairly close, yet in many cases the di erences are and on extensive interviews with logistics statistically signi cant (box 1.3). Box 1.2 Building the Logistics Performance Index The Logistics Performance Index (LPI) is built on information from Competence of the local logistics industry. a web-based questionnaire completed by more than 800 logistics Ability to track and trace international shipments. professionals worldwide--the operators or agents of the world's Domestic logistics costs. largest logistics service providers. Each respondent was asked to Timeliness of shipments in reaching destination. rate performance in seven logistics areas for eight countries with More than 5,000 individual country evaluations were used to which they conduct business. For each respondent, the eight coun- prepare the Logistics Performance Index, which covers 150 coun- tries were automatically generated by the survey engine based on tries (see appendix table A1). The LPI was aggregated as a weighted trade ows, income level, geographical position of respondent average of the seven areas of logistics performance.6 The index is countries (coastal or landlocked), and random selection.4 The constructed using the Principal Component Analysis method in country selection matrix is presented in technical note 1. Perfor- order to improve the con dence intervals. mance was evaluated using a 5-point scale (1 for the lowest score, Each respondent was also asked to evaluate the logistics per- 5 for the highest). formance and the environment and institutions in support of logis- The seven areas of performance are:5 tics operations in the country in which they are based (appendix Ef ciency of the clearance process by customs and other table A2) and to provide time and cost data (appendix table A3). border agencies. This wealth of additional information on different aspects of logis- Quality of transport and information technology infra- tics was used to interpret the LPI as well as validate and cross- structure for logistics. check the information underlying the LPI. The questionnaire is avail- Ease and affordability of arranging international shipments. able at www.worldbank.org/lpi. 8 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Many of the oil exporting Box 1.3 How precise is the LPI estimate? Figure 1.1 High income countries are generally top performers, but countries tend to there are big differences between The LPI is a robust combination of the vari- countries at other income levels underperform logistically ous dimensions from the international assess- ments, built by standard econometric tech- Top quintile, highest performance Third quintile, average performance niques to maximize signi cance and improve Second quintile, high performance Fourth quintile, low performance Bottom quintile, lowest performance con dence intervals, which are computed at a 10 percent level. The average con dence in- Distribution of countries by income groups across LPI quintiles (%) terval on the 1­5 scale is 0.16, the equivalent 100 of eight places in the LPI ranking. These calcu- lated intervals are larger for small markets that have few respondents. For instance, Mauritius 75 has a surprisingly low ranking (137), but a wide con dence interval of 0.25. An upper-range reading of its index would give it the same 50 ranking as Sri Lanka (97). 25 At the other extreme are low-income coun- tries, o en landlocked and geographically iso- lated, or countries a icted by con ict or severe 0 governance problems. Landlocked developing High income High income Upper Lower Low OECD non-OECD middle middle income countries, especially in Africa and Central Asia, income income are the most logistically constrained. ey typi- Source: The Logistics Performance Survey. cally su er not only from geographical disad- vantages resulting in high transport costs and Overachievers and underachievers: delays but also from limited access to competi- Examples of the logistics gap tive markets for logistics services and depen- dence upon the performance of other transit Performance is assessed against comparable countries. countries, notably those at similar levels of While all developed countries are top per- development ( gures 1.2 and 1.3). Overachiev- formers, there are signi cant di erences among ers and underachievers can be identi ed by developing countries at similar incomes ( g- whether they exhibit a positive or negative LPI ure 1.1). For example, China--a middle income gap compared with their potential, extrapolated country--ranks 30th of 150, while countries from their level of development (gross national in higher income groups, such as oil produc- income per capita). ers, perform below their potential. Moreover, Many of the oil exporting countries tend to countries doing fairly well in logistics are also underperform logistically. Algeria (140) lags sig- likely to do well in growth and competitiveness, ni cantly behind its neighbors Tunisia (60) and export diversi cation, and trade expansion, as Morocco (94). e same applies to Bahrain (36), discussed further below. Saudi Arabia (41), Kuwait (44), and Qatar (46), For developing countries where trade has which underperform relative to the rest of the beenanimportantfactorinacceleratinggrowth, high income group. One reason for this may be logistics performance is also signi cantly bet- the relative absence in these countries of incen- ter than in other countries at similar incomes. tives and pressure from the private sector to im- Examples include South Africa (24), Malaysia plementinstitutionalreformsfortradeandtrans- (27), Chile (32), and Turkey (34) among the port--re ecting the dominance of oil in their upper middle income countries; China (30) and exports. By contrast, for some emerging econo- ailand (31) among the lower middle income; mies where export-oriented manufacturing has and India (39) and Vietnam (53) among the low been a major factor in growth, the private sector income (table 1.1). has been a prime proponent of logistics reforms. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 9 Table 1.1 Top 10 countries, by income group Top 10 countries Top 10 countries Top 10 countries Upper middle income Lower middle income Low income Logistics Logistics Logistics Performance Index Performance Index Performance Index Country Rank Score Country Rank Score Country Rank Score South Africa 24 3.53 China 30 3.32 India 39 3.07 Malaysia 27 3.48 Thailand 31 3.31 Vietnam 53 2.89 Chile 32 3.25 Indonesia 43 3.01 São Tomé and Principe 57 2.86 Turkey 34 3.15 Jordan 52 2.89 Guinea 62 2.71 Hungary 35 3.15 Bulgaria 55 2.87 Sudan 64 2.71 Czech Republic 38 3.13 Peru 59 2.77 Mauritania 67 2.63 Poland 40 3.04 Tunisia 60 2.76 Pakistan 68 2.62 Latvia 42 3.02 Brazil 61 2.75 Kenya 76 2.52 Argentina 45 2.98 Philippines 65 2.69 Gambia, The 77 2.52 Estonia 47 2.95 El Salvador 66 2.66 Cambodia 81 2.50 Morocco and Tunisia. Close to the EU mar- While implementing exemplary customs and ket, both Morocco and Tunisia have developed port reforms, Morocco has not yet reaped the manufacturing activities as part of production bene ts of recent measures to develop the do- chains with European multinational corpora- mestic logistics industry, notably trucking and tions, in areas such as garments, auto parts, and warehousing (Arvis, Bellier, and Raballand electronics ( gure 1.2). Policymakers in both 2006). At the same time, Tunisia not only im- countries have been very sensitive to logistics plemented some of the core reforms earlier than reform and investments in ports, customs, and Morocco but also developed an electronic data foreign participation in logistics services. interchange system that dramatically simpli- So, why does Morocco (94) score lower on ed the customs clearance process by integrat- the LPI than Tunisia (60) and other competi- ing several procedures. And their Eastern Euro- tors, such as Romania (51) and Bulgaria (55)? pean competitors have directly bene ted from the EU accession process. Figure 1.2 Performance of selected middle income countries Nigeria, Senegal, and Ghana. Among the low income countries ( gure 1.3), Senegal (105) Logistics Performance Index and Ghana (129) rank signi cantly lower than 5 Nigeria (97). Senegal and Ghana have both implemented rather successful customs reform, with the African showcase of IT systems for rev- enue agencies (Gainde in Senegal and CGnet in 4 China Ghana) to improve customs clearing (De Wulf Argentina Bulgaria Romania Tunisia and Sokol 2004). By contrast, Nigeria initiated Philippines Colombia Brazil its customs reforms only recently. Forwarders 3 praise the clearance system in Senegal (76 on Morocco Russian Kazakhstan Federation border processing), but are overwhelmingly Algeria negative for Nigeria (96 on border processing). However, they have the opposite opinion for the 2 1,000 2,000 3,000 4,000 5,000 quality of support services (such as ports and Gross national income per capita (US $) trucking), where Nigeria has bene ted from Note: The fit line shows the expected LPI ranking given its GNI. e cient port operations, thanks to privatiza- Source: Logistics Performance Survey and World Development Indicators 2005. tion of the main container terminals. 10 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Signi cant di erences can be observed from being connected to the South African Uganda, Malawi, and even among countries facing the most severe gateway. By contrast, landlocked countries Zambia are landlocked, logistical challenges--landlocked countries in West and Central Africa ranked lower in in Africa and Central Asia. In East Africa, yet they rank among the index are poorly served by a fragmented Uganda, Malawi, and Zambia are landlocked, and largely overregulated services industry the top 15 performers yet they rank among the top 15 performers of (characterized by practices such as the tour de of the 39 Sub-Saharan the 39 Sub-Saharan African countries. Each role).7 is served by a fairly e cient logistics indus- African countries try operating in a reasonably competitive en- The LPI gap, trade, and FDI: vironment. Malawi and Zambia also bene t Good logistics performers benefit more from globalization Figure 1.3 Performance of selected e LPI gap (the di erence between a country's low income countries actual LPI ranking and its expected ranking Logistics Performance Index based on its level of income) also highlights the 3.5 association between logistics performance and trade and foreign direct investment (FDI) out- India comes. Good logistics performers bene t more Vietnam from globalization. Logistically friendly coun- 3.0 Pakistan tries are more likely to have better global value Kenya Cameroon chain integration and attract export-oriented Nigeria FDI. Since trade and FDI are the key chan- Madagascar Senegal Côte d'Ivoire nels for the international di usion of knowl- 2.5 Ghana edge, poor logistics may impede access to new Tanzania technology and know-how and slow the rate of productivity growth. Conversely, increased 2.0 trade creates demand for good logistics, putting 200 400 600 800 1,000 Gross national income per capita (US $) pressure on facilitating reforms and sustaining a market for modern services. Note: The fit line shows the expected LPI ranking of a low income country given its GNI. isisdemonstratedbycross-countryanaly- Source: Logistics Performance Survey and World Development Indicators 2005. ses of the relationship between growth, export Figure 1.4 Logistics performance is associated with the diversification of exports, 2005 Percent of top 10 exports in total exports 100 80 60 40 20 1 2 3 4 5 Logistics Performance Index Source: UNCOMTRADE and authors' calculations. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 11 deviation of this gap is 0.3, while overachievers Figure 1.5 Trade expansion of have a LPI gap of at least 0.5 ( gure 1.4). non-oil-exporting developing Likewise,countriesundergoingtradeexpan- countries and logistics performance, 1992­2005 sion (increasing trade--imports and exports-- to GDP) tended to also be those outperform- Annual increase in trade openness (%) ing on the LPI relative to their level of income 15 (those with a positive LPI gap). A logistics over- achiever with an LPI gap of 0.5 experiences 2 10 percent more trade expansion, 1 percent more 5 annual growth, or export 40 percent more vari- ety of products ( gure 1.5 and technical note 2) 0 than other countries at the same income level. ese signi cant correlations should be in- ­5 terpreted in terms of their association rather than causality. Improvements in the supply ­10 chain contribute signi cantly to competitive- ­15 ness by reducing transaction costs. At the same ­0.8 ­0.6 ­0.4 ­0.2 0.0 0.2 0.4 0.6 0.8 Logistics Performance Index time, a growing, diversifying economy is likely to have the will and the means to improve its Source: World Development Indicators 2005 and authors' calculations. logistics performance. Countries seeking to bene t more from diversi cation, or trade expansion, and the LPI. globalization need to identify the key aspects Countries ranked highly on the LPI also tended of logistics performance, in particular in terms to have more diversi ed exports. For non-oil- of their impact on competitiveness. is is the exporting developing countries the standard subject of the next section. 12 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 2 N OIT SEC Key factors in logistics performance Reliability is the biggest To provide a more complete picture of the key with the di erence in satisfaction between the factors determining logistics performance, the high and low performing countries much larger concern of logistics Logistics Performance Survey asked logistics than for any other question in the survey. Some professionals professionals about the institutions and pro- of the reasons for this are discussed at the end cesses supporting logistics operations in the of this section. countries they are based in (table 2.1). It asked them to assess critical attributes of the supply Factors determining chain including: timeliness of deliveries, quality logistics performance of transport and IT infrastructure, e ciency of border clearance processes, competence of the Quality of in astructure. Telecommunications local logistics industry, and domestic costs of and IT infrastructure are an essential compo- services (see appendix table A2) as well as pro- nent of modern trade processes. e physical vide time and cost data (appendix table A3). movement of goods now entails the e cient e questions delved into the quality of and timely exchange of information. In coun- infrastructure, the competence of private and tries in the LPI's top two quintiles, logistics public logistics service providers, the roles of operators rarely have any issues with the quality customs and other border agencies, such gover- of the telecommunications and IT infrastruc- nanceissuesascorruptionandtransparency,and ture, but close to half of them express concerns the reliability of the trading system and supply in countries ranging from average to lowest chains.8 Reliability (measured by the predict- performers. In Sub-Saharan Africa 43 percent ability of the clearance process and the timely of respondents see this as an issue (appendix delivery of shipments) emergedas akeyconcern, table A2). Table 2.1 How logistics professionals assess institutions and processes Percent of respondents Top quintile Second quintile Third quintile Fourth quintile Bottom quintile Highest High Average Low Lowest performance performance performance performance performance Concerned about the quality of telecommunications and IT infrastructure 6 7 41 27 46 Concerned about the quality of the physical transport infrastructure (ports, roads, warehouses) 17 28 59 46 57 Satisfied with customs 55 32 19 18 11 Satisfied with other border government agencies 38 13 10 9 18 Satisfied with private logistics servicesa 59 34 18 16 11 Satisfied with professional organizations 46 28 6 21 17 Concerned with frequent solicitation of informal payments 6 23 34 49 56 Satisfied with transparency of border processesb 72 44 38 33 26 Imports cleared and delivered as scheduled 87 69 32 39 13 a. Aggregation of customs brokers, distributors, and road operators. b. Aggregation of the results on the predictability of changes in regulations and transparency of customs clearance process. Source: Logistics Performance Survey, appendix table A2, appendix table A3. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 13 The way the local market e quality of transport infrastructure re- of import time (box 2.1). is underscores the mains a concern in close to or more than half importance of addressing the coordination of for logistics services is of the logistics operators in average, low, and border agencies, especially in countries that regulated directly affects lowest performers. at concerns also exist in already have attained good customs clearance. a country's ability to use even the highest and high performing countries re ects the challenge of maintaining physical Corruption and transparency. Logistics perfor- the physical internet to infrastructure at a level able to satisfy rapidly mance also depends on broader policy dimen- connect to global markets growing demands. sions, including the overall business environ- ment, the quality of regulation for logistics Competence of private and public logistics service services, and most important, on overall gov- providers. e performance of the supply chain ernance. e way the local market for logistics depends on the quality of services delivered by services is regulated directly a ects a country's the private sector through customs brokers and ability to use the physical internet to connect road transport operators--and on the compe- to global markets. e transparency of govern- tence and diligence of public agencies in charge ment procurement, the security of property of border procedures. In these areas, the three from the and looting, the macroeconomic bottom quintiles generally fare much worse conditions,andtheunderlyingstrengthofinsti- than the top quintile, and the di erences in tutions are critical factors in determining logis- quality are as signi cant as those for infrastruc- tics performance. Unsurprisingly, ratings of ture (see table 2.1). For example, the satisfaction the domestic environment in such areas as cor- with customs brokers is fairly high for the upper ruption and the transparency of processes and middle income countries (around 50 percent), regulation re ect these ndings. e rating for but it is only 8 percent for private providers in transparency of border processes consistently Sub-SaharanAfrica(seeappendixtableA2).For declines along with LPI scores for these groups the lower performers, the dissatisfaction with of countries: poor performers in the LPI were the quality of trade logistics services applies also poor performers on transparency of border to both the private and public sector. In those processes (see table 2.1). Solicitation of informal countries where logistics performance is high, payments is rare among the top 30 countries but there is more satisfaction with private providers common among lower performers (close to or than with public providers. e negative view more than 50 percent of responses). of private providers in the lower performers is an important insight. Too o en in developing Reliabilityofthetradingsystemandsupplychains. countries, and notably in Africa, inadequate For traders at the origin or the destination of regulations and the absence of competition the supply chain, what matters most is the qual- lead to corruption or poor services--such as ity and reliability of logistics services, measured those provided by "suitcase businessmen" at by the predictability of the clearance process border posts. O en the mere presence of these and timely delivery of shipments to destination. operators disturbs the clearance process and e di erence in satisfaction between the high hinders the emergence of competent local logis- and low performing countries on this question tics operators who can work with international is much larger than for any other question in operators. the survey. Performance data derived from the survey on the time (days) for delivery of goods Customs and other border agencies. Clearance con rms the same phenomenon (box 2.2). at the border is not only a matter of customs diligence. Law enforcement agencies and min- Taken together, all these factors--quality of istries of agriculture and industry also intervene infrastructure, the competence of private and in the process. Customs performance tends to public logistics service providers, the roles of be better than that of other border agencies; on customs and other border agencies, governance average, customs clearance accounts for a third issues such as corruption and transparency, and 14 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Box 2.1 Modernizing border processes Clearance processes by customs and other agencies are among The Logistics Performance Survey results show a high degree of IT the most important links in the global supply chain. Key facilita- use in Africa, 55 percent, a credit to UNCTAD's Asycuda program and tion principles have been addressed by several international agree- some homegrown projects. Preshipment inspection is a major source ments (Kyoto convention, GATT, and the current negotiations on of delays in Africa (56 percent) and Latin America (43 percent). Physi- trade facilitation at the WTO). In the Logistics Performance Sur- cal inspections and the time needed for clearance are also strongly vey, logistics professionals provide in-depth evaluations in this associated with overall logistics performance. But only one-third of the critical area, across countries (appendix table A2 and appendix time to import is explained by the customs process, the rest by trans- table A3). portation, handling, or delays caused by private operators. Customs and border processing performance, by region Percent Latin OECD high Non-OECD East Asia Europe & America & Middle East & Sub-Saharan income high income & Pacific Central Asia Caribbean North Africa South Asia Africa Estimated percentage of physical inspections 3 22 22 14 25 45 36 48 Respondents agreeing that traders demonstrating high levels of compliance receive expedited customs clearance 54 25 41 51 42 42 57 17 Respondents able to use IT to submit customs declaration 70 42 28 46 58 53 50 55 Time (days) and cost (US$) Time between accepted customs declaration and customs clearance 1.0 1.7 2.1 1.7 2.7 1.9 2.4 4.2 Average time to export 2.4 2.9 3.9 2.8 3.9 3.7 3.6 8.1 Average time to import 3.2 3.6 4.4 3.5 4.8 6.0 6.5 12.3 Cost to import a 40-foot container or a semi-trailer (US$) 663 572 819 936 1,000 609 880 2,124 Source: Logistics Performance Survey, appendix table A2, and appendix table A3. Box 2.2 Delivering on schedule The Logistics Performance Survey captures the time to import stronger in some countries in the bottom quintile--not only in and export and, more important, the dispersion in time as a mea- poor landlocked countries, such as Chad, but also in coastal sure of predictability. Delays tend to increase with lower overall Tanzania and Benin, which have import times of more than a performance, but also with unpredictability. The effect is much week. Customs and border processing performance, by quintile Top quintile Second quintile Third quintile Fourth quintile Bottom quintile Highest performance High performance Average performance Low performance Lowest performance Best time to import (best decile of shipments) 1.9 days 2.1 days 3.7 days 4.6 days 6.1 days Median time to import 3.2 days 3.9 days 5.4 days 7.1 days 13.6 days Source: Logistics Performance Survey and appendix table A3. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 15 Suppliers to the same the reliability of the trading system and supply of its garment production by air to be certain to chains--con rm once again that logistics per- meet the schedules of European buyers. automobile manufacturer formance is about predictability (see table 2.1). e high induced costs of unpredictability will carry 7 days of Predictability is central to the overall costs that in the international supply chain are a major inventory in Italy but companies incur in logistics and thus to their constraint for companies and countries trying competitiveness in global supply chains. to diversify into higher value production. In 35 days in Morocco. Some global production chains countries face a dou- retailers in African countries Logistics and competitiveness: ble challenge of maintaining an e cient chain maintain three months Why predictability and reliability not just for exports but also for imported inputs matter more than costs and components. is can be a particular bur- of inventories or more den for least developed countries, where inputs Just as strong logistics performance is associ- o en cannot be sourced regionally. ated with increased trade in developing coun- Improvements in the quality of the supply tries (section 1), rm-level competitiveness is chaincanthusopennewopportunitiestoentre- extremely sensitive to the quality of the logis- preneurs, even in otherwise constrained coun- tics environment in which it operates. A rm's tries. Southern Mali and Burkina Faso can con- competitiveness is in uenced by cost and per- sider diversifying into exports of fresh mangoes formance of its supply chain and thus depends (three-week shelf life) as well as cotton exports on the overall logistics environment--but the (typically stored at ports for months), thanks to main impact is less through cost than through greatercooperation between local operatorsand the predictability of the deliveries. international logistics providers and better per- Firms have to bear the direct costs associ- formance of the railroad from Abidjan, follow- ated with moving goods, such as freight costs, ing a well executed privatization program. port and handling charges, procedural fees Induced costs in countries with good lo- (such as bonds), agent fees, and side payments. gistics performance are much lower than those But they also have to absorb the induced costs for countries with low logistics performance associated with hedging for the lack of predict- ( gure 2.2), di erences that can determine a ability and reliability of the supply chain (Arvis and others 2007) ( gure 2.1). ey may need to Figure 2.2 Direct freight costs versus carry higher inventories of supplies or nished induced costs assessed by respondent products, or switch to more expensive modes of transportation to be sure to meet delivery Normalized scale schedules (Guasch 2003). 1.0 Induced costs are inversely related to pre- Induced costs dictability and also tend to rise steeply with 0.8 declining logistics performance. For example, suppliers to the same automobile manufacturer 0.6 willcarry7daysofinventoryinItalybut35days in Morocco. Some retailers in African countries Direct freight costs 0.4 maintain three months of inventories or more. Bangladesh has to ship, on average, 10 percent 0.2 Figure 2.1 Structure of logistics costs 0.0 supported by traders 1 2 3 4 5 Logistics Performance Index Induced costs Note: The normalized scale is a nonmonetary measure of the relative level of costs Direct costs Cost of nondelivery or across countries, as assessed by respondents in the survey. The curves are fitted Freight and other costs avoidance of nondelivery, to a logistics model, with a utility quadratic in the LPI. Induced costs = percent of associated to shipment respondents saying that import shipments are not cleared and delivered on time. storage, delivery Direct costs = percent of respondents saying that overall direct logistics costs are high by international standards. 16 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY product's competitiveness in international mar- increased by the low economies of scale for mul- The large differences kets. By contrast, direct logistics costs tend to be timodal infrastructure or structural imbalances observed between much more similar across countries and across of volumes of trade along corridors. In some re- di erent logistics performance levels. ey are countries can be explained gions, especially in Africa and Central Asia, the less of a di erentiating factor in a country's freight costs are augmented by a proliferation by the fact that the ability to compete. Domestic freight services of o cial and uno cial payments. In western overall performance are tradable, at least regionally. e costs of Africa facilitating payments and mandatory capital and some direct inputs, such as fuel, are of a country is largely procedural fees double the direct cost of trans- also fairly comparable, even in countries at very portation (Arvis and others 2007). in uenced by the weakest di erent levels of development. For developing e competitive position of countries at link in its supply chain countries the lower cost of labor may be o set an intermediate development level tends to be by lower productivity, hence the U curve for di- eroded if they have low logistics performance rect costs. and thus much higher induced costs. Firms in Excluding landlocked countries, the average lowest performing countries are even worse o , inland costs (port and hauling) of importing a sincetheyhavetosupportbothhighfreightcosts 40-foot container or semi-trailer, for all coun- and very high induced costs (see gure 2.2). tries in the survey, is about $700: typically 1.5 e above trends show that the higher lo- percent of the value of goods or the equivalent gistics costs borne by traders in poor environ- of two weeks of inventories, much less than the ments are only partially associated with freight actual costs in many developing countries once transport. And because of their endogenous na- large induced costs are factored in.9 is aver- ture, they can thus be lowered by better domes- age masks wide di erences. Large coastal coun- tic systems and policies. e large di erences tries, such as Russia and the United States, have observed between countries can be explained higher costs due to long domestic distances. by the fact that the overall performance of a Other countries are primarily trading overland, country is largely in uenced by the weakest as in Eastern Europe, increasing the costs. link in its supply chain. Poor performance, Higher overall import costs are observed in even in only one or two areas, can have very low logistics performers. In Africa, even in the strong implications for overall country perfor- larger coastal economies of Nigeria and Kenya, mance. is insight is also important for the the cost of importing or exporting a 40-foot design of e ective reforms, the subject of the container is in excess of $2,000. Costs are also next section. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 17 3 N OIT SEC Lessons for reform Traditional measures of By providing a comprehensive assessment of the border processes may neutralize the bene t of gaps and constraints in logistics performance, a customs modernization program (DeWulf performance such as direct the LPI and other information derived from the and Sokol 2005). Facilitation initiatives for freight costs and average Logistics Performance Survey can help policy- trade corridors may not produce visible e ects delays, while important, makers, private stakeholders, and international without modernization of the private services organizations quantify the constraints coun- and supporting the market (Arvis and others may not capture the overall tries face in connecting globally. 2007). logistics performance and The LPI and its indicators also suggest e synergies between the various areas of thus the ability of countries that policymakers may have to expand the reform--such as customs, border management, traditional "facilitation agenda," focused on infrastructure, and transport regulation--are to use trade for growth trade-related infrastructure and customs in- supported by further analysis of the Logistics formation technology, and pursue improve- Performance Survey dataset. For instance, the ments in the markets for logistics services. consistency between the di erent dimensions Reforms to improve logistics should follow in logistics performance is lower for lower an integrated approach, focusing on the in- performing countries: high performers are teraction between infrastructure and public consistently high performers across all indi- and private services, addressing coordination cators, while low performers are inconsistent failures and identifying constituencies for re- ( gure 3.1). form. To be effective, reforms should improve the predictability and reliability of shipments Figure 3.1 High performers are consistent and not just focus on reducing average costs performers: Discrepancies and delays. across factors of performance For instance, traditional measures of perfor- mance such as direct freight costs and average Ranking discrepancies between performance areas 20 delays, while important, may not capture the Fourth quintile Low performance overall logistics performance and thus the abil- Third quintile Average performance ity of countries to use trade for growth. e pre- 15 Bottom quintile dictability and reliability of shipments, while Lowest performance more di cult to measure, are more important Second quintile High performance for rms and may have a much greater impact 10 on their ability to compete. 5 Reforms must be comprehensive Top quintile Highest performance A gradual approach targeting a single fac- 0 5 4 3 2 1 tor of supply chain performance (trade infra- Logistics Performance Index structure or a customs procedure) can bring Note: The indicator used to illustrate the consistency in performance is the some initial results, but ultimately may prove standard deviation of country ranking along the seven component indicators of the LPI. While there is less correlation among the various factors of performance, the limited or unsustainable. For example, poor effect in this chart is amplified by the fact that the LPI values for countries in the bottom quintile have more "noise" due to a smaller number of assessments. integration among the agencies involved in 18 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Table 3.1 Percent of respondents acknowledging positive trends in developments for the following areas, during the last three years High income OECD East Asia Europe & Latin America Middle East & Sub-Saharan & non-OECD & Pacific Central Asia & Caribbean North Africa South Asia Africa Overall business environment 57 44 66 61 68 64 38 Availability of private sector services 58 54 82 70 81 78 51 Quality of telecommunications infrastructure 85 47 89 65 98 71 62 Quality of transport infrastructure 56 41 57 38 67 40 33 Other border crossing-related government agencies clearance procedures 43 26 62 28 38 30 42 Customs clearance procedures 65 38 69 58 70 60 48 Source: Logistics Performance Survey and appendix table A2. Some areas of reform are status quo. Countries become trapped in a vi- tackled more than others cious circle where rent-seeking leads to poor logistics services, o en leading to fraud and Most governments are carrying out policy giving rise to over regulation and unfriendly reforms and furthering public investments in procedures. isinturndiscouragesinvestment critical areas of the supply chain (table 3.1). and the entry of more e cient service providers, But facilitation e orts appear to have had sig- completing a vicious circle of rent-seeking and ni cantly higher impact in customs than in the poor performance ( gure 3.2). other border agencies. As seen from the Logis- Improving logistics requires the capacity tics Performance Survey results, for most coun- to move toward the virtuous circle--connect- tries surveyed, improvements in IT are more ing services, infrastructure investments, and widespread than in the other areas, followed by streamlined administrative processes. is en- the increased availability of private services. compasses the technical capacity to undertake Performance is improving in the majority reforms in each sub-area and the ability to over- of areas surveyed in Europe and Central Asia, come the political constraints to e ective and in the Middle East and North Africa, and in comprehensive reforms. Change needs to be South Asia (table 3.1). But the perception of supported by a wide constituency, so countries trends in Sub-Saharan Africa and East Asia is with a large and diverse export community have not as strong. Logistics operators in Africa may a tremendous advantage over others, such as oil still be looking for basic improvements, while exporters. Unsurprisingly, logistics operators in those in East Asia look for continuing improve- India and Vietnam are twice as positive as those ments to keep up with fast-growing demand. in other low income countries about the role of business groups in trade facilitation (appendix Implementing reform is not easy table A2). Creating an e ective logistics environment While integrated reforms requires consistent improvements and the con- are essential, priorities and tinuing participation of all stakeholders, who strategies may differ can demand concrete and practical improve- ments in performance. Although the problems A comprehensive reform of logistics and trade to be addressed are rather speci c, the ability to facilitation is essential. To close the logistics tackle them depends largely on a country's over- gap, policymakers should pursue improve- all governance and institutional context. ments in the markets for logistics services, Poor logistics environments are o en char- reduce coordination failures (especially those acterized by rent-seeking, which creates power- of public agencies active in border control), and ful vested interests working to maintain the build strong constituencies to support reform. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 19 International companies Figure 3.2 Vicious and virtuous logistics can bring global knowledge Trade and transport and pressure for change. facilitation measures But the support of local Unfriendly Seamless procedures process constituencies of exporters, operators, and public Over-regulation Fraud and Integrity and Liberalized rents need to control compliance market agencies is crucial Vicious Virtuous circle circle Inadequate Low quality High quality Incentive market fragmented services to invest structure services No incentive Scale to invest economies Source: Arvis and others 2007. is e ort will demand more integrated supply Logistics unfriendly--countries with chain-related reforms, according to the perfor- di cult geography (landlocked), least mance of countries, with implications for poli- developed countries, or both (corre- cymakers and development agencies. For the sponding to the h quintile). most severely constrained countries--typically is classi cation of countries is a broad landlocked countries in Africa and Central typology. Given the con dence intervals and Asia--innovative solutions may need to be the methodology employed, it is indicative of found, and international donors will have an a country's logistics performance, but should important role. not be inferred directly from the LPI ranking e Logistics Performance Survey indicates for any speci c country. e association with that the di erences in the logistics performance the quintiles should instead be considered a between the third and fourth quintiles are o en useful guide for setting reform priorities ( g- very small and also much smaller than with the ure 3.3). others. As a result these two quintiles have been is typology of countries implies that the grouped together. Much bigger di erences in agenda for reforms, the priorities, and imple- values are seen for the top two quintiles and the mentation strategies may vary dramatically ac- bottom quintile. cording to the broader logistics environment, e following four groups of countries can even though the basic ingredients of success- be identi ed in terms of the transition from the ful component reforms, such as for customs or vicious circle to the virtuous circle: ports, may be the same (see table 3.3). Logistics friendly (corresponding to Cross-cutting reforms need to be supported the top quintile). by broad constituencies. International compa- Comprehensive reformers--emerg- nies can bring global knowledge and pressure ing economies in East Asia and Latin for change. But the support of local constituen- America, new EU member states, cies of exporters, operators, and public agencies South Africa, India (corresponding to is crucial. However, these constituencies tend to the second quintile). be weak in partial reformers and nonexistent in Partial reformers--oil producers, most the logistics unfriendly countries. countries in Africa, South Asia, and e LPI rankings and indicators pro- the Middle East (corresponding to the vide robust benchmarks that may help third and fourth quintile). policymakers--and particularly the private 20 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Figure 3.3 Logistics typology Logistics friendly Seamless procedures and high-quality infrastructure. Strong, globally integrated service industry. Comprehensive reformer Strong coalitions for change implementing core reforms (customs, infrastructure, services). Working across administrative silos to consistently implement the reforms. Lowering barriers to entry and favoring a competitive service industry. Partial reformer Have implemented some of the core reforms. Difficulties in working across sectors. Resistance to change. Governance problems. Barriers to entry. Logistics unfriendly Trapped in the vicious circle. Basic reforms in customs or key infrastructure difficult to design and implement. No incentive to invest in quality services. Extensive governance problems. Weak coalition for changes. Table 3.2 Identify the severity of constraints to overall performance Comprehensive Areas for reform Logistics friendly reformers Partial reformers Logistics unfriendly Trade-related physical infrastructure × ×× ×× ××× IT trade-related infrastructure × × ×× Customs × ×× ××× Other border processes ×× ××× ××× ××× Reliability of support services × ×× ××× Other governance-related constraints × ×× ××× ××× Constituency for reform × × ×× ××× × = mild constraint ×× = medium constraint ××× = severe constraint sector--to build the case for reform. By show- In identifying the key problem areas and ing countries how they compare with their constraints, the LPI and its indicators also aim competitors and shining a light on the costs to help guide the preparation of more in-depth, of poor logistics performance, it is hoped that country-speci cassessmentsandstrategies,such the LPI and its indicators may help countries as trade and transport facilitation audits (Raven break out of the vicious circle of logistics 2001), that are needed to generate concrete im- unfriendliness. provements in logistics performance. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 21 Technical note 1 Technical note table 1.1 Six country selection rules Selection of countries Respondents from low Respondents from middle Respondents from high income countries income countries income countries Technical note table 1.1 presents the matrix of Three most important how the eight countries are selected based on export partner countries the respondent's country of work. + The most important import e LPI methodology uses the World Bank Five most important partner country Respondents export partner countries + Classi cation of Countries.10 Technical note from coastal + Four countries randomly, one Four countries randomly out of countries Three most important one list of five most important table 1.2 classi es all World Bank member from each country group import partner countries a) Africa export partner countries countries (184) and all other economies with b) East Asia + Central Asia and five most important c) Latin America import partner countries populations of more than 30,000 (208). e d) Europe less Central Asia + OECD + Four countries randomly, one country coverage by the logistics performance Three most important from each country group: index (150 total) is also shown. export partner countries a) Africa + b) East Asia + Central Asia For operational and analytical purposes, Four most important One most important import c) Latin America export partner countries partner country d) Europe less Central economies are divided among income groups Respondents + + from Asia + OECD Two most important Two landlocked countries according to 2005 gross national income (GNI) landlocked import partner countries + countries per capita, calculated using the World Bank + Two countries randomly, one Two landlocked countries from each country group: Atlas method. e groups are: low income, a) Africa + East Asia + Central Asia + Latin America and $875 or less; lower middle income, $876­3,465; b) Europe less Central Asia + OECD upper middle income, $3,466­10,725; and high income, $10,726 or more. Other analyti- Technical note table 1.2 Regional coverage of the Logistics Performance Index cal groups based on geographic regions are also used. Total countries Number of countries LPI's coverage of Income groups/world regions in group/region ranked in LPI group/ region (%) Low income 54 51 94 Middle income 98 65 66 Lower middle income 58 41 71 Upper middle income 40 24 60 Low & middle income 152 116 76 East Asia & Pacific 24 13 54 Europe & Central Asia 27 25 93 Latin America & Caribbean 31 21 68 Middle East & North Africa 14 11 79 South Asia 8 7 88 Sub-Saharan Africa 48 39 81 High income 56 34 61 European Monetary Union 12 12 100 High income (OECD) 24 23 96 High income (non-OECD) 32 10 31 Heavily indebted poor countries (HIPC) 40 37 93 Least developed countries (UN classification) 49 41 84 Landlocked developing countries (UN classification) 31 26 84 Commonwealth of Independent States 12 10 83 Transitional 24 22 92 Organization of Petroleum Exporting Countries 12 10 83 Total countries 208 150 72 22 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Technical note 2 as the natural logarithm of the number The Logistics Performance Index of exported varieties. and multivariate regressions e sample of countries excludes high in- come countries and oil exporters. e results Straightforward econometric analyses point are robust to other choices of period (technical to signi cant association between the LPI and note table 2.1). Regression 1 measures the LPI outcomes such as: against the level of development (Log [GNI/ Medium term growth over 1992­2005. cap] 2005). e residual measures how much Trade expansion, de ned as the overall the countries are performing logistically against annual change in trade openness over their potential (the standard deviation in LPI the same period. It is excess of trade gap is 0.3). Regressions 2 to 6 measure one of growth over GDP growth. the growth, trade expansion, or diversi cation e index of trade diversi cation--the variables against the LPI index and Log (GNI/ eil index, which can be interpreted cap), or against the sole LPI gap. Technical note table 2.1 Dependent variable Regression 4 Regression 5 Regression 1 Regression 2 Regression 3 Trade Trade Regression 6 Independent variable LPI Growth Growth expansion expansion Theil index LPI 2.0% 3.7% 1.05 (2.8)** (3.5)** (3.5)** Log(GNI/cap) 0.422 ­0.8% ­2.1% 0.95 (7.1)** (­1.5) (­2.7)** (4.4)** LPI gap 2.0% 3.7% (2.8)** (3.5)** R² 0.35 0.08 0.08 0.12 0.11 0.44 F 50.9 3.9 7.8 6.4 12.1 38.5 Number of countries 97 97 97 97 97 97 *Significant at the 5 percent level. **Significant at the 1 percent level. CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 23 Notes 1. Makillie (2006). logistics competence, tracking and tracing, domestic logistics 2. The methodology developed by Daley and Murphy in 1993--using costs, and timeliness. a survey format, a 4-point scale, and open-ended questions--set 6. Domestic costs were found to be uncorrelated to the other areas out to measure the perceived importance and influence of different in the LPI. Therefore, being less significant, this component was component attributes that affect the logistical friendliness of dropped from the composition of the index. countries. In a follow up study by Ojala and Qeiroz (2004) only 7. Tour de role refers to a heavily regulated freight allocation system those characteristics identified as best encapsulating logistics where truckers are queuing to get loads in turns. Price is typically performance were included for evaluation. set by collusion between transport unions and the government. 3. These interviews were conducted in the context of the Trade and 8. In appendix table A2, performance is evaluated in 30 subareas Transport Facilitation Audits (TTFA) performed by the World Bank for which LPI quintiles, regional, or income group averages allow and others (Raven 2001) and contributed substantially to refining for meaningful comparisons. For most countries the number of the methodology. respondents in this section of the survey is too small to warrant a 4. While respondents know best the countries with which they trade country statistic. most, relying on trade statistics alone would leave small and low 9. The typical value of a container of consumer goods is $50,000, income economies uncovered. while the inventory value is about 0.1 percent per day (Arvis and 5. In appendix table A1, the short names for these seven areas of others 2007). performance are: customs, infrastructure, international shipments, 10. For detailed information on the World Bank Classification of Countries, visit www.worldbank.org/data/. References Arvis, Jean-François, Michel Bellier, and Gaël Raballand. 2006. Labaste, Patrick. 2003. "Linking farmers to market, exporting Malian "Success factors for improving logistics in a middle-income country." Mangoes to Europe." Working Paper 60. World Bank, Africa Region, Transport Notes Series 35. World Bank, Washington, D.C. Washington, D.C. Arvis, Jean-François, Gaël Raballand, and Jean-François Marteau. Makillie, Paul. 2006. "The physical internet." The Economist. June 15. 2007. "The cost of being landlocked: logistics costs and supply chain reliability." Policy Research Working Paper 4258. World Bank, Ojala L., and C. Qeiroz, eds. 2004, March. "Transport Sector Washington, D.C. Restructuring in the Baltic States towards EU accession." Working Paper 31123. World Bank, Washington, D.C. Daley, James M., Douglas R. Dalenberg, and Paul R. Murphy. 1993. "Doing business in global markets: Perspectives of international Ojala, Lauri, Tapio Naula, and Torsten Hoffmann. 2005. "Trade and freight forwarders." Journal of Global Marketing 6 (4): 53­68. transport facilitation: audit of the Baltic States (TTFBS)." Working Paper 31121. World Bank, Europe and Central Asia Region, Daley, James M., and Paul R. Murphy. Spring 1999. "Revisiting Washington, D.C. logistical friendliness: perspectives of international freight forwarders." Journal of Transportation Management: 65­71. Raven, John. 2001. Trade and transport facilitation: a toolkit for audit, analysis, and remedial action.Washington, D.C.:The World Bank. De Wulf, Luc and José Sokol, eds. 2004. Customs modernization initiatives: case studies.Washington, D.C.:The World Bank. Rodrigues, Bowersox, and Calantone. 2005. "Estimation of global and national logistics expenditures: 2002 Data Update." Journal of ------. 2005. Customs modernization handbook. Washington, D.C.: The business logistics 26 (2):1­16. World Bank. Wilson, John, Tsunehiro Otsuki, and Catherine Mann. 2004. Guasch, J., and Joseph Luis Kogan. 2003. "Just in case inventories: a "Assessing the potential benefit of trade facilitation: a Global cross country analysis." Policy Research Working Paper 3012. World perspective." Policy Research Working Paper 3224. World Bank, Bank, Washington, D.C. Washington, D.C. World Bank. 2005. World Development Indicators 2005. Washington D.C.: World Bank. 24 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Appendix Table A1 Country rankings on the Logistics Performance Index and indicators 26 Table A2 Country-specific environment and institutions data averages, by income group and region 34 Table A3 Country-specific performance data, by country 36 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 25 Table A1 Country rankings on the Logistics Performance Index and indicators Logistics Performance Index Customs Infrastructure International shipments Country LPI rank Score Confidence interval Rank Score Rank Score Rank Score Singapore 1 4.19 0.05 3 3.90 2 4.27 2 4.04 Netherlands 2 4.18 0.04 1 3.99 1 4.29 1 4.05 Germany 3 4.10 0.03 4 3.88 3 4.19 4 3.91 Sweden 4 4.08 0.08 5 3.85 5 4.11 5 3.90 Austria 5 4.06 0.11 8 3.83 9 4.06 3 3.97 Japan 6 4.02 0.03 11 3.79 6 4.11 9 3.77 Switzerland 7 4.02 0.08 6 3.85 4 4.13 14 3.67 Hong Kong, China 8 4.00 0.04 7 3.84 8 4.06 7 3.78 United Kingdom 9 3.99 0.03 13 3.74 10 4.05 6 3.85 Canada 10 3.92 0.05 9 3.82 12 3.95 8 3.78 Ireland 11 3.91 0.11 10 3.82 19 3.72 11 3.76 Belgium 12 3.89 0.05 16 3.61 11 4.00 16 3.65 Denmark 13 3.86 0.10 2 3.97 14 3.82 15 3.67 United States 14 3.84 0.03 19 3.52 7 4.07 20 3.58 Finland 15 3.82 0.13 14 3.68 17 3.81 30 3.30 Norway 16 3.81 0.09 12 3.76 15 3.82 19 3.62 Australia 17 3.79 0.09 17 3.58 20 3.65 12 3.72 France 18 3.76 0.05 21 3.51 16 3.82 18 3.63 New Zealand 19 3.75 0.12 18 3.57 22 3.61 10 3.77 United Arab Emirates 20 3.73 0.08 20 3.52 18 3.80 13 3.68 Taiwan, China 21 3.64 0.09 25 3.25 21 3.62 17 3.65 Italy 22 3.58 0.05 29 3.19 23 3.52 21 3.57 Luxembourg 23 3.54 0.30 15 3.67 13 3.86 45 3.00 South Africa 24 3.53 0.10 27 3.22 26 3.42 22 3.56 Korea, Rep. 25 3.52 0.07 28 3.22 25 3.44 24 3.44 Spain 26 3.52 0.08 30 3.17 24 3.51 23 3.45 Malaysia 27 3.48 0.07 23 3.36 28 3.33 26 3.36 Portugal 28 3.38 0.11 26 3.24 31 3.16 33 3.23 Greece 29 3.36 0.15 31 3.06 35 3.05 37 3.11 China 30 3.32 0.04 35 2.99 30 3.20 28 3.31 Thailand 31 3.31 0.10 32 3.03 32 3.16 32 3.24 Chile 32 3.25 0.08 24 3.32 34 3.06 34 3.21 Israel 33 3.21 0.17 43 2.73 37 3.00 31 3.27 Turkey 34 3.15 0.13 33 3.00 39 2.94 42 3.07 Hungary 35 3.15 0.11 34 3.00 33 3.12 41 3.07 Bahrain 36 3.15 0.18 22 3.40 27 3.40 27 3.33 Slovenia 37 3.14 0.18 40 2.79 29 3.22 36 3.14 Czech Republic 38 3.13 0.15 36 2.95 36 3.00 43 3.06 India 39 3.07 0.08 47 2.69 42 2.90 39 3.08 Poland 40 3.04 0.11 38 2.88 51 2.69 52 2.92 Saudi Arabia 41 3.02 0.06 45 2.72 38 2.95 50 2.93 Latvia 42 3.02 0.16 58 2.53 58 2.56 29 3.31 Indonesia 43 3.01 0.13 44 2.73 45 2.83 44 3.05 Kuwait 44 2.99 0.52 59 2.50 46 2.83 76 2.60 Argentina 45 2.98 0.09 51 2.65 47 2.81 49 2.97 Qatar 46 2.98 0.19 67 2.44 55 2.63 46 3.00 26 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Logistics competence Tracking & tracing Domestic logistics costs Timeliness Rank Score Rank Score Rank Score Rank Score 2 4.21 1 4.25 113 2.70 1 4.53 1 4.25 4 4.14 120 2.65 5 4.38 3 4.21 5 4.12 135 2.34 8 4.33 6 4.06 3 4.15 129 2.44 4 4.43 4 4.13 12 3.97 141 2.24 3 4.44 5 4.12 7 4.08 148 2.02 6 4.34 8 4.00 9 4.04 139 2.26 2 4.48 9 3.99 8 4.06 119 2.66 7 4.33 7 4.02 6 4.10 143 2.21 11 4.25 12 3.85 11 3.98 91 2.84 13 4.19 11 3.93 15 3.96 121 2.65 9 4.32 10 3.95 14 3.96 122 2.62 10 4.25 15 3.83 17 3.76 128 2.52 18 4.11 13 3.85 10 4.01 144 2.20 19 4.11 14 3.85 2 4.17 142 2.22 15 4.18 17 3.78 20 3.67 147 2.08 12 4.24 18 3.76 13 3.97 97 2.80 20 4.10 19 3.76 16 3.87 136 2.34 23 4.02 16 3.82 19 3.68 89 2.86 22 4.05 20 3.67 23 3.61 98 2.80 17 4.12 23 3.58 24 3.60 42 3.10 14 4.18 21 3.63 21 3.66 132 2.39 27 3.93 33 3.22 26 3.56 85 2.88 25 4.00 25 3.54 18 3.71 124 2.61 31 3.78 22 3.63 25 3.56 110 2.73 30 3.86 24 3.55 22 3.63 107 2.75 29 3.86 26 3.40 28 3.51 36 3.13 26 3.95 34 3.19 30 3.44 102 2.78 21 4.06 28 3.33 27 3.53 88 2.87 16 4.13 27 3.40 31 3.37 72 2.97 36 3.68 29 3.31 36 3.25 25 3.21 28 3.91 35 3.19 37 3.17 114 2.68 44 3.55 32 3.23 29 3.46 145 2.17 41 3.58 30 3.29 34 3.27 112 2.71 52 3.38 37 3.07 44 3.00 57 3.00 34 3.69 59 2.75 47 3.00 140 2.25 84 3.00 36 3.09 52 2.91 32 3.18 33 3.73 42 3.00 35 3.27 10 3.40 42 3.56 31 3.27 42 3.03 46 3.08 47 3.47 38 3.04 40 3.12 23 3.23 40 3.59 51 2.88 43 3.02 106 2.76 39 3.65 48 2.94 41 3.06 73 2.94 35 3.69 50 2.90 33 3.30 92 2.84 58 3.28 47 3.00 32 3.33 130 2.40 32 3.75 44 3.00 46 3.00 93 2.84 46 3.50 43 3.00 38 3.17 56 3.00 38 3.67 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 27 Table A1 Country rankings on the Logistics Performance Index and indicators (continued) Logistics Performance Index Customs Infrastructure International shipments Country LPI rank Score Confidence interval Rank Score Rank Score Rank Score Estonia 47 2.95 0.11 42 2.75 41 2.91 56 2.85 Oman 48 2.92 0.22 46 2.71 43 2.86 79 2.57 Cyprus 49 2.92 0.13 41 2.77 40 2.91 51 2.92 Slovak Republic 50 2.92 0.17 55 2.61 52 2.68 38 3.09 Romania 51 2.91 0.18 56 2.60 50 2.73 35 3.20 Jordan 52 2.89 0.13 54 2.62 56 2.62 40 3.08 Vietnam 53 2.89 0.18 37 2.89 60 2.50 47 3.00 Panama 54 2.89 0.15 48 2.68 48 2.79 58 2.80 Bulgaria 55 2.87 0.15 66 2.47 63 2.47 59 2.79 Mexico 56 2.87 0.05 60 2.50 53 2.68 53 2.91 São Tomé and Principe 57 2.86 0.49 61 2.50 95 2.20 25 3.40 Lithuania 58 2.78 0.21 52 2.64 80 2.30 48 3.00 Peru 59 2.77 0.15 49 2.68 57 2.57 54 2.91 Tunisia 60 2.76 0.15 39 2.83 44 2.83 55 2.86 Brazil 61 2.75 0.07 74 2.39 49 2.75 74 2.61 Guinea 62 2.71 0.24 62 2.50 75 2.33 85 2.50 Croatia 63 2.71 0.20 78 2.36 61 2.50 67 2.69 Sudan 64 2.71 0.19 79 2.36 72 2.36 68 2.67 Philippines 65 2.69 0.15 53 2.64 86 2.26 63 2.77 El Salvador 66 2.66 0.13 75 2.38 68 2.42 61 2.78 Mauritania 67 2.63 0.19 70 2.40 96 2.20 77 2.60 Pakistan 68 2.62 0.16 69 2.41 71 2.37 65 2.72 Venezuela, RB 69 2.62 0.08 77 2.37 59 2.51 66 2.69 Ecuador 70 2.60 0.26 88 2.25 73 2.36 72 2.64 Paraguay 71 2.57 0.15 100 2.20 64 2.47 113 2.29 Costa Rica 72 2.55 0.11 64 2.49 67 2.43 82 2.53 Ukraine 73 2.55 0.15 97 2.22 74 2.35 83 2.53 Belarus 74 2.53 0.25 50 2.67 54 2.63 126 2.13 Guatemala 75 2.53 0.18 87 2.27 104 2.13 73 2.62 Kenya 76 2.52 0.17 81 2.33 100 2.15 60 2.79 Gambia, The 77 2.52 0.32 89 2.25 76 2.33 69 2.67 Iran, Islamic Rep. 78 2.51 0.20 63 2.50 66 2.44 78 2.59 Uruguay 79 2.51 0.10 86 2.29 70 2.38 100 2.40 Honduras 80 2.50 0.11 65 2.48 79 2.32 93 2.48 Cambodia 81 2.50 0.12 104 2.19 81 2.30 95 2.47 Colombia 82 2.50 0.10 116 2.10 85 2.28 75 2.61 Uganda 83 2.49 0.16 99 2.21 99 2.17 98 2.42 Cameroon 84 2.49 0.25 57 2.57 114 2.00 110 2.33 Comoros 85 2.48 0.15 85 2.30 65 2.46 108 2.33 Angola 86 2.48 0.22 71 2.40 88 2.25 87 2.50 Bangladesh 87 2.47 0.18 125 2.00 82 2.29 96 2.46 Bosnia and Herzegovina 88 2.46 0.17 84 2.32 87 2.26 86 2.50 Benin 89 2.45 0.21 142 1.80 134 1.89 62 2.78 Macedonia, FYR 90 2.43 0.24 126 2.00 83 2.29 70 2.67 Malawi 91 2.42 0.26 90 2.25 105 2.13 81 2.56 Sri Lanka 92 2.40 0.14 91 2.25 106 2.13 112 2.31 28 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Logistics competence Tracking & tracing Domestic logistics costs Timeliness Rank Score Rank Score Rank Score Rank Score 45 3.00 58 2.84 18 3.29 53 3.35 67 2.67 63 2.80 20 3.25 24 4.00 58 2.77 51 2.92 76 2.92 62 3.25 40 3.00 55 2.87 44 3.09 60 3.26 52 2.86 56 2.86 123 2.62 66 3.18 41 3.00 57 2.85 77 2.92 68 3.17 56 2.80 53 2.90 17 3.30 65 3.22 61 2.73 49 2.93 26 3.21 49 3.43 53 2.86 39 3.14 80 2.91 43 3.56 57 2.80 48 2.96 101 2.79 51 3.40 39 3.00 45 3.00 2 3.67 76 3.00 64 2.70 74 2.60 60 3.00 50 3.40 60 2.73 67 2.70 59 3.00 80 3.00 88 2.43 60 2.83 30 3.20 105 2.80 49 2.94 65 2.77 126 2.58 72 3.10 68 2.67 59 2.83 29 3.20 45 3.50 54 2.83 87 2.46 49 3.08 48 3.45 55 2.83 50 2.92 58 3.00 67 3.17 70 2.65 69 2.65 19 3.27 70 3.14 78 2.53 61 2.82 74 2.94 73 3.06 65 2.70 62 2.80 41 3.11 71 3.10 63 2.71 76 2.57 90 2.86 88 2.93 74 2.59 79 2.54 115 2.68 75 3.03 71 2.64 89 2.45 12 3.36 59 3.27 73 2.63 68 2.67 38 3.13 63 3.23 89 2.43 78 2.57 48 3.08 90 2.89 90 2.41 81 2.53 21 3.25 55 3.31 120 2.13 66 2.71 37 3.13 78 3.00 79 2.50 90 2.43 65 3.00 64 3.23 104 2.31 73 2.62 108 2.75 89 2.92 46 3.00 99 2.33 67 3.00 132 2.50 66 2.69 125 2.00 75 2.93 106 2.80 84 2.45 77 2.57 103 2.78 82 3.00 91 2.41 91 2.41 86 2.88 93 2.88 82 2.47 80 2.53 27 3.21 74 3.05 86 2.44 71 2.63 81 2.91 86 2.94 77 2.55 100 2.33 3 3.63 56 3.29 109 2.25 85 2.50 64 3.00 57 3.29 72 2.64 83 2.50 62 3.00 117 2.67 81 2.50 92 2.38 66 3.00 100 2.83 103 2.33 88 2.46 50 3.08 54 3.33 98 2.37 105 2.29 9 3.41 77 3.00 75 2.56 54 2.89 24 3.22 107 2.78 101 2.33 84 2.50 63 3.00 99 2.83 76 2.56 126 2.00 39 3.13 79 3.00 85 2.45 75 2.58 47 3.08 113 2.69 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 29 Table A1 Country rankings on the Logistics Performance Index and indicators (continued) Logistics Performance Index Customs Infrastructure International shipments Country LPI rank Score Confidence interval Rank Score Rank Score Rank Score Nigeria 93 2.40 0.09 94 2.23 92 2.23 92 2.49 Morocco 94 2.38 0.22 101 2.20 77 2.33 64 2.75 Papua New Guinea 95 2.38 0.24 127 2.00 123 2.00 80 2.57 Dominican Republic 96 2.38 0.10 82 2.33 97 2.18 107 2.34 Egypt, Arab Rep. 97 2.37 0.24 119 2.08 119 2.00 111 2.33 Lebanon 98 2.37 0.31 106 2.17 102 2.14 88 2.50 Russian Federation 99 2.37 0.06 136 1.94 93 2.23 94 2.48 Zambia 100 2.37 0.27 120 2.08 120 2.00 102 2.40 Senegal 101 2.37 0.18 76 2.38 108 2.09 130 2.09 Côte d'Ivoire 102 2.36 0.23 98 2.22 94 2.22 127 2.13 Kyrgyz Republic 103 2.35 0.14 102 2.20 112 2.06 106 2.35 Ethiopia 104 2.33 0.21 109 2.14 135 1.88 97 2.43 Liberia 105 2.31 0.23 72 2.40 101 2.14 57 2.83 Moldova 106 2.31 0.19 110 2.14 128 1.94 105 2.36 Bolivia 107 2.31 0.12 128 2.00 111 2.08 99 2.42 Lesotho 108 2.30 0.35 73 2.40 115 2.00 89 2.50 Mali 109 2.29 0.14 107 2.17 132 1.90 119 2.23 Mozambique 110 2.29 0.18 95 2.23 109 2.08 118 2.25 Azerbaijan 111 2.29 0.22 96 2.23 116 2.00 90 2.50 Yemen, Rep. 112 2.29 0.19 105 2.18 110 2.08 123 2.20 Burundi 113 2.29 0.36 103 2.20 62 2.50 84 2.50 Zimbabwe 114 2.29 0.21 138 1.92 136 1.87 114 2.27 Serbia and Montenegro 115 2.28 0.13 83 2.33 98 2.18 116 2.25 Guinea-Bissau 116 2.28 0.23 111 2.14 89 2.25 120 2.22 Lao PDR 117 2.25 0.21 121 2.08 121 2.00 103 2.40 Jamaica 118 2.25 0.11 80 2.35 113 2.03 128 2.13 Togo 119 2.25 0.20 117 2.10 90 2.25 101 2.40 Madagascar 120 2.24 0.15 93 2.24 107 2.13 117 2.25 Burkina Faso 121 2.24 0.23 115 2.13 133 1.89 71 2.67 Nicaragua 122 2.21 0.14 112 2.14 137 1.86 124 2.18 Haiti 123 2.21 0.13 122 2.08 103 2.14 122 2.20 Eritrea 124 2.19 0.26 113 2.14 117 2.00 135 2.00 Ghana 125 2.16 0.25 129 2.00 91 2.25 115 2.25 Namibia 126 2.16 0.28 114 2.14 118 2.00 125 2.14 Somalia 127 2.16 0.22 68 2.43 147 1.63 141 1.88 Bhutan 128 2.16 0.13 134 1.95 127 1.95 134 2.06 Uzbekistan 129 2.16 0.14 137 1.94 124 2.00 133 2.07 Nepal 130 2.14 0.17 141 1.83 144 1.77 131 2.09 Armenia 131 2.14 0.23 118 2.10 142 1.78 140 2.00 Mauritius 132 2.13 0.25 130 2.00 84 2.29 121 2.20 Kazakhstan 133 2.12 0.13 139 1.91 138 1.86 129 2.10 Gabon 134 2.10 0.36 92 2.25 69 2.40 147 1.67 Syrian Arab Republic 135 2.09 0.20 108 2.17 131 1.91 138 2.00 Mongolia 136 2.08 0.20 131 2.00 129 1.92 91 2.50 Tanzania 137 2.08 0.17 123 2.07 122 2.00 132 2.08 Solomon Islands 138 2.08 0.19 144 1.73 126 2.00 104 2.36 30 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Logistics competence Tracking & tracing Domestic logistics costs Timeliness Rank Score Rank Score Rank Score Rank Score 95 2.38 97 2.36 83 2.90 114 2.69 119 2.13 130 2.00 133 2.38 95 2.86 105 2.29 106 2.29 7 3.43 69 3.14 108 2.25 107 2.28 54 3.05 91 2.89 96 2.38 72 2.62 94 2.83 96 2.85 93 2.40 101 2.33 11 3.40 115 2.67 83 2.46 119 2.17 131 2.40 87 2.94 87 2.44 64 2.80 43 3.10 130 2.50 62 2.73 103 2.30 45 3.09 123 2.63 97 2.38 128 2.00 68 3.00 61 3.25 100 2.35 93 2.38 99 2.80 109 2.76 129 2.00 141 1.83 34 3.17 37 3.67 127 2.00 132 2.00 31 3.20 134 2.43 112 2.21 86 2.50 78 2.92 111 2.73 117 2.17 95 2.38 127 2.53 104 2.81 115 2.20 140 1.83 6 3.50 98 2.83 114 2.21 94 2.38 53 3.05 92 2.88 99 2.36 129 2.00 95 2.83 101 2.83 128 2.00 96 2.38 87 2.88 124 2.63 111 2.22 104 2.30 116 2.67 108 2.78 80 2.50 127 2.00 137 2.33 148 2.00 113 2.21 70 2.64 134 2.36 97 2.85 107 2.29 124 2.07 51 3.07 128 2.54 132 2.00 114 2.22 35 3.14 94 2.86 106 2.29 139 1.89 146 2.13 102 2.83 125 2.07 112 2.24 5 3.50 119 2.65 94 2.40 115 2.20 14 3.33 145 2.11 131 2.00 118 2.19 28 3.21 116 2.67 102 2.33 122 2.13 118 2.67 143 2.25 92 2.41 116 2.19 55 3.04 131 2.50 121 2.11 121 2.16 104 2.78 125 2.60 69 2.67 82 2.50 61 3.00 149 1.83 146 1.75 110 2.25 149 2.00 133 2.50 142 1.83 142 1.83 125 2.60 83 3.00 110 2.25 144 1.75 71 3.00 81 3.00 116 2.18 108 2.27 13 3.36 126 2.57 118 2.15 123 2.08 82 2.91 112 2.73 124 2.08 102 2.33 22 3.25 110 2.75 122 2.11 113 2.22 8 3.43 122 2.63 147 1.75 111 2.25 117 2.67 137 2.33 126 2.05 117 2.19 96 2.81 120 2.65 136 2.00 134 2.00 109 2.75 136 2.33 145 1.80 137 2.00 84 2.89 118 2.67 144 1.80 136 2.00 70 3.00 142 2.25 138 1.92 120 2.17 15 3.33 140 2.27 123 2.10 131 2.00 111 2.73 139 2.30 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 31 Table A1 Country rankings on the Logistics Performance Index and indicators (continued) Logistics Performance Index Customs Infrastructure International shipments Country LPI rank Score Confidence interval Rank Score Rank Score Rank Score Albania 139 2.08 0.17 132 2.00 78 2.33 109 2.33 Algeria 140 2.06 0.22 148 1.60 139 1.83 139 2.00 Guyana 141 2.05 0.15 135 1.95 143 1.78 144 1.80 Chad 142 1.98 0.16 133 2.00 141 1.80 142 1.83 Niger 143 1.97 0.23 145 1.67 149 1.40 145 1.80 Sierra Leone 144 1.95 0.21 149 1.58 140 1.83 143 1.82 Djibouti 145 1.94 0.16 146 1.64 130 1.92 137 2.00 Tajikistan 146 1.93 0.19 140 1.91 125 2.00 136 2.00 Myanmar 147 1.86 0.17 124 2.07 145 1.69 146 1.73 Rwanda 148 1.77 0.13 143 1.80 148 1.53 148 1.67 Timor-Leste 149 1.71 0.23 147 1.63 146 1.67 149 1.50 Afghanistan 150 1.21 0.10 150 1.30 150 1.10 150 1.22 32 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Logistics competence Tracking & tracing Domestic logistics costs Timeliness Rank Score Rank Score Rank Score Rank Score 130 2.00 145 1.67 105 2.78 144 2.13 139 1.92 109 2.27 33 3.17 103 2.82 137 1.95 98 2.35 4 3.50 129 2.50 143 1.82 138 1.91 1 4.00 127 2.56 134 2.00 133 2.00 150 1.67 85 3.00 140 1.91 135 2.00 69 3.00 121 2.64 133 2.00 143 1.82 100 2.80 138 2.30 141 1.90 146 1.67 138 2.33 146 2.11 135 2.00 149 1.57 79 2.92 147 2.08 148 1.67 148 1.60 52 3.07 135 2.38 149 1.60 147 1.67 16 3.33 141 2.25 150 1.25 150 1.00 40 3.13 150 1.38 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 33 Table A2 Country-specific environment and institutions data averages, by income group and region Income group Region Latin High income Lower Upper America Middle East Sub- non-OECD & middle middle East Asia Europe & & the & North Saharan Question Logistics Performance Survey question non OECD Low income income income & Pacific Central Asia Carribean Africa South Asia Africa Based on your experience in international logistics, please select the options that best describe the logistics operational environment in your country of work Percent of respondents answering high/very high 1 Port/Airport charges are 47 54 47 42 47 48 53 39 45 48 Overall, logistics costs (e.g., port charges, 2 domestic transport, agent fees), are 46 60 46 31 40 23 58 47 41 59 3 Warehousing service charges are 38 43 41 27 17 25 55 15 47 45 4 Rail transport rates are 43 28 24 24 25 24 14 36 33 30 5 Less-than-full truck load services rates are 33 61 36 31 38 30 33 38 56 61 6 Full truck load rates are 27 59 39 21 39 21 34 32 34 68 Evaluate the quality of infrastructure in use for logistics operations in your country of work Percent of respondents answering low/very low Telecommunications 27 infrastructure and services 6 44 29 11 35 20 28 15 11 43 Fixed transport infrastructure 28 (e.g., ports, roads, warehouses) 17 52 53 34 46 44 46 51 34 54 Evaluate the effectiveness and efficiency of the following processes in your country of work Percent of respondents answering high/very high Do traders demonstrating high levels of compliance receive 29 expedited customs clearance? 54 25 40 52 41 51 42 42 57 17 Can customs declarations be submitted 32 and processed electronically? 70 42 49 60 28 46 58 53 50 55 Do you receive adequate and timely 33 information when regulations change? 62 27 35 45 41 43 44 30 24 23 34 Is customs clearance a transparent process? 73 26 39 48 25 44 47 47 33 26 Are export shipments cleared 35 and shipped as scheduled? 95 56 63 82 89 76 70 65 62 46 Are import shipments cleared 36 and delivered as scheduled? 80 24 36 73 44 75 40 42 32 22 Evaluate the level of competence of the following professions in your country of work Percent of respondents answering high/very high 37 Trade and transport related associations 46 14 17 18 18 19 15 10 15 16 Other border crossing-related 38 government agencies 33 5 13 16 11 13 13 10 3 12 39 Customs agencies 52 10 22 30 20 30 19 40 17 8 40 Freight forwarders 59 23 30 45 31 51 27 38 42 16 41 Consignees or shippers 40 14 21 24 25 30 13 32 23 10 42 Warehousing and distribution operators 51 13 13 30 16 30 17 13 16 12 43 Air transport service providers 62 26 27 48 38 40 34 38 36 20 44 Rail transport service providers 24 8 13 15 23 24 10 17 5 0 45 Road transport service providers 50 12 16 34 22 39 11 38 16 8 46 Customs brokers 55 14 23 47 29 42 33 27 25 8 Evaluate the evolution of the following factors in your country of work, over the past 3 years Percent of respondents answering better/much better 47 Overall business environment 57 39 63 62 44 66 61 68 64 38 Good governance and 48 eradication of corruption 44 23 36 36 26 39 35 58 18 22 49 Regulatory regime 33 23 37 35 27 39 43 29 28 20 50 Availability of private sector services 58 54 73 75 54 82 70 81 78 51 51 Quality of telecommunications infrastructure 85 62 70 79 47 89 65 98 71 62 34 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Table A2 Country-specific environment and institutions data averages, by income group and region (continued) Income group Region Latin High income Lower Upper America Middle East Sub- non-OECD & middle middle East Asia Europe & & the & North Saharan Question Logistics Performance Survey question non OECD Low income income income & Pacific Central Asia Carribean Africa South Asia Africa 52 Quality of transport infrastructure 56 36 41 55 41 57 38 67 40 33 Other border crossing-related government 53 agencies clearance procedures 43 34 36 51 26 62 28 38 30 42 54 Customs clearance procedures 65 41 60 69 38 69 58 70 60 48 Evaluate the incidence on your activity of the following constraints in your country of work Percent of respondents answering high/very high 55 Solicitation of informal payments 10 54 40 16 30 24 36 21 39 58 56 Criminal activities (e.g., stolen cargo) 6 19 14 9 5 0 24 6 19 22 57 Major delays due to pre-shipment inspection 19 53 33 14 20 12 43 35 17 56 Major delays due to compulsory 58 warehousing 13 18 20 14 10 9 30 25 19 14 Note: For each survey question, responses have been aggregated at the individual country level. A simple average of country aggregates within the group was then calculated. The results are reported in percentages. The scale used for this set of questions had five options ranging from "very high" to "very low." CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 35 Table A3 Country-specific performance data, by country Logistics Performance Survey question Typical Typical chargef for a charge for a Rate of Lead timeb Lead timed Number Number Possibility 40-foot export 40-foot import physical Customs export, Lead timec import, of border of border of a review container or container or inspection clearancea median import, best median agencies agencies proceduree a semi-trailer a semi-trailer Country (percent) (days) case (days) case (days) case (days) exports imports (percent) (US$) (US$) Afghanistan 100 3.8 8.1 14.0 20.7 2.3 3.3 33 1,260 1,817 Angola 36 5.8 7.9 4.6 10.6 3.7 3.7 0 3,873 1,957 Argentina 19 1.6 3.0 2.4 4.1 3.3 2.9 8 487 634 Australia 3 1.7 3.5 2.5 3.4 1.5 2.3 100 562 562 Austria 3 0.7 2.2 1.5 3.3 3.7 3.8 25 1,000 1,000 Bahrain 22 2.2 2.0 2.0 2.0 2.0 2.0 100 500 500 Bangladesh 31 4.1 2.3 3.0 4.5 2.0 2.3 33 211 397 Belgium 3 1.0 1.4 2.0 3.5 2.0 2.0 33 500 500 Benin 100 10.0 3.0 10.0 7.0 6.0 6.0 0 1,000 1,000 Bolivia 6 0.5 4.0 3.0 4.0 1.0 1.0 100 2,000 2,000 Bosnia and Herzegovina 50 1.0 2.0 1.0 1.0 4.0 4.0 0 500 500 Brazil 13 5.8 3.4 3.1 7.0 5.7 6.0 0 909 1,145 Bulgaria 4 1.0 1.0 1.0 1.0 2.0 2.5 100 150 150 Cambodia 12 1.0 2.7 1.4 3.3 3.7 3.7 50 335 422 Cameroon 3 2.4 5.9 3.2 10.0 5.0 6.0 50 1,000 1,225 Canada 2 0.8 2.6 2.2 4.0 2.7 3.8 80 627 757 Central African Republic 100 7.0 7.0 7.0 30.0 4.0 4.0 0 5,000 5,000 Chad 100 3.0 11.0 11.0 35.0 5.0 5.0 0 6,000 6,000 Chile 4 1.0 2.8 1.0 3.2 2.5 2.5 0 274 274 China 7 1.4 2.6 2.4 3.8 4.0 3.9 36 380 388 Colombia 35 7.0 7.0 4.0 7.0 2.0 2.0 0 2,000 2,000 Congo, Dem. Rep. 100 4.0 14.0 8.0 18.0 0.0 8.0 0 2,000 5,000 Costa Rica 11 1.7 4.0 4.0 4.0 3.0 3.0 0 1,000 1,000 Croatia 12 0.9 4.3 1.6 2.9 2.4 2.8 50 309 344 Cyprus 22 1.0 1.0 2.0 2.0 3.0 3.0 50 274 500 Czech Republic 1 0.8 4.8 3.7 5.4 3.0 2.8 100 1,000 794 Denmark 1 0.7 1.3 1.3 1.3 2.0 1.8 100 315 315 Dominican Republic 75 4.6 1.0 1.0 1.0 1.0 5.5 0 250 250 Ecuador 66 2.6 8.9 11.4 8.9 3.0 3.0 0 707 707 Egypt 51 2.5 4.0 3.4 5.8 4.5 4.3 71 237 445 El Salvador 1 1.0 2.0 1.0 2.0 2.0 5.0 0 1,000 1,000 Estonia 2 0.5 1.3 1.3 2.3 2.3 2.3 100 211 422 Finland 2 0.8 2.3 1.5 2.6 2.2 2.1 92 434 480 France 7 1.6 3.2 3.4 4.5 4.8 5.0 100 1,189 1,189 Germany 2 0.7 2.3 1.6 2.4 2.8 3.7 100 806 806 Greece 4 1.0 3.0 1.4 3.5 1.5 2.5 0 500 500 Guinea 22 2.2 3.5 1.4 3.9 3.0 3.0 0 500 500 Haiti 25 3.9 4.2 3.5 5.3 3.0 3.5 100 671 474 Honduras 6 1.4 2.4 1.7 3.2 2.5 3.0 0 707 866 Hong Kong, China 2 0.6 1.9 1.3 2.4 2.5 3.7 67 561 654 Hungary 5 0.8 3.5 3.0 4.7 3.0 3.3 50 1,145 909 India 25 2.4 4.0 4.0 4.7 2.9 2.4 39 601 619 Indonesia 12 1.6 2.5 1.9 3.9 2.7 2.7 38 266 244 36 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY Table A3 Country-specific performance data, by country (continued) Logistics Performance Survey question Typical Typical chargef for a charge for a Rate of Lead timeb Lead timed Number Number Possibility 40-foot export 40-foot import physical Customs export, Lead timec import, of border of border of a review container or container or inspection clearancea median import, best median agencies agencies proceduree a semi-trailer a semi-trailer Country (percent) (days) case (days) case (days) case (days) exports imports (percent) (US$) (US$) Iran 87 1.0 4.0 2.0 3.5 3.5 2.5 0 500 707 Ireland 1 0.8 1.8 1.0 2.3 1.7 1.7 50 266 266 Israel 2 1.4 5.3 2.0 8.7 5.0 6.0 100 1,000 2,000 Italy 5 1.3 2.3 1.6 3.5 6.7 10.0 100 335 531 Jamaica 18 3.0 10.0 6.0 10.0 6.0 5.0 100 Japan 3 1.4 3.0 1.3 2.7 3.0 3.0 100 721 630 Jordan 22 1.8 2.0 2.0 4.6 3.3 3.7 33 707 1,000 Kazakhstan 18 7.1 2.8 2.0 11.5 2.0 7.5 50 194 194 Kenya 28 4.0 5.8 4.7 10.0 3.3 4.4 25 1,176 1,719 Kuwait 45 2.0 4.5 2.3 3.4 2.4 2.6 25 355 490 Latvia 4 0.7 2.3 1.7 2.4 2.8 3.0 67 211 287 Lebanon 42 2.0 2.4 1.4 2.4 1.5 2.0 0 354 500 Liberia 50 3.0 4.0 2.0 5.0 5.0 5.0 0 500 500 Lithuania 14 4.2 4.5 1.0 4.5 3.5 7.5 100 354 354 Malawi 3 1.0 4.2 2.6 3.7 1.5 1.5 100 387 548 Malaysia 6 1.7 3.4 1.7 3.3 2.5 3.3 75 783 658 Maldives 50 0.5 1.0 1.0 1.0 2.0 2.0 0 Mali 75 3.0 12.0 14.0 18.0 3.0 3.0 0 3,000 3,000 Mauritius 18 0.7 3.0 2.0 2.4 2.0 5.0 100 194 250 Mexico 10 1.3 3.9 2.4 4.4 3.3 3.4 0 552 511 Morocco 10 1.0 4.0 4.0 10.0 3.0 3.0 100 300 500 Myanmar 56 4.5 2.6 2.2 3.2 3.7 3.7 0 150 150 Namibia 18 1.0 3.0 3.0 4.0 3.0 6.0 0 1,000 1,000 Nepal 12 1.4 4.9 8.0 8.7 5.3 4.3 33 1,817 2,621 Netherlands 3 0.6 2.6 1.6 2.6 2.9 1.7 80 298 364 New Zealand 5 0.5 1.9 1.4 2.2 2.3 2.8 0 224 224 Nicaragua 18 1.0 2.0 2.0 2.0 1.0 1.0 0 3,000 2,000 Nigeria 72 8.1 9.9 8.4 11.2 7.5 7.5 0 1,732 2,449 Norway 2 0.5 2.2 2.2 3.4 2.3 2.0 60 660 562 Pakistan 10 2.4 3.2 2.7 3.7 3.2 2.9 60 382 444 Panama 18 1.7 3.2 2.8 4.9 2.5 2.5 50 354 274 Paraguay 100 5.0 1.0 4.0 4.0 0.0 10.0 0 1,000 1,000 Peru 7 1.6 1.7 2.7 4.4 3.3 3.2 25 420 707 Philippines 32 1.8 6.3 3.7 5.3 4.0 4.0 50 721 794 Poland 3 3.2 3.0 2.0 3.0 3.0 4.0 0 2,000 1,000 Portugal 3 1.7 2.5 2.5 5.0 2.0 2.3 50 335 500 Qatar 100 3.9 1.0 1.0 1.0 3.0 3.0 50 Romania 24 1.2 2.2 1.4 3.0 4.0 3.5 25 783 794 Russian Federation 20 1.4 2.8 2.0 3.0 4.0 4.5 0 1,565 1,732 Saudi Arabia 32 3.9 4.3 3.6 6.6 2.0 1.8 50 224 335 Senegal 36 4.2 4.0 2.3 5.2 4.0 4.0 33 500 825 Serbia Montenegro 4 0.5 2.0 2.0 3.0 2.0 1.5 0 3,000 5,000 Sierra Leone 75 10.0 10.0 7.0 18.0 3.0 3.0 0 1,000 500 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY 37 Table A3 Country-specific performance data, by country (continued) Logistics Performance Survey question Typical Typical chargef for a charge for a Rate of Lead timeb Lead timed Number Number Possibility 40-foot export 40-foot import physical Customs export, Lead timec import, of border of border of a review container or container or inspection clearancea median import, best median agencies agencies proceduree a semi-trailer a semi-trailer Country (percent) (days) case (days) case (days) case (days) exports imports (percent) (US$) (US$) Singapore 3 1.1 2.4 1.2 2.2 1.5 1.7 67 311 311 Slovak Republic 6 0.8 2.6 2.2 3.0 2.3 2.0 100 707 707 Slovenia 3 1.0 3.7 2.0 3.9 4.0 2.5 100 500 500 Solomon Islands 50 4.0 9.0 5.0 11.0 10.0 10.0 100 South Africa 2 1.9 2.2 1.9 4.0 4.5 3.2 60 619 515 South Korea 1 1.0 2.0 1.8 2.7 2.3 2.7 67 630 630 Spain 3 1.5 2.6 1.7 3.1 5.2 5.2 33 595 595 Sri Lanka 20 1.8 1.9 1.9 2.5 2.4 2.8 20 245 263 Sweden 1 0.7 1.9 1.7 2.6 2.6 3.4 80 758 794 Switzerland 2 0.5 1.6 2.1 3.8 3.3 4.0 33 1,225 1,225 Taiwan, China 11 1.0 2.0 1.4 3.0 3.0 6.0 50 1,000 707 Tanzania 22 7.8 11.2 11.2 21.2 2.3 3.5 0 354 612 Thailand 9 1.9 3.4 1.4 2.3 4.3 4.3 0 422 422 Tunisia 61 3.0 5.9 2.4 10.0 3.5 6.5 50 500 500 Turkey 10 1.9 2.5 1.5 2.4 5.0 4.8 40 917 1,286 Uganda 61 4.5 14.0 10.0 14.0 2.0 2.0 100 3,000 3,000 Ukraine 40 1.0 2.4 2.0 2.4 4.7 5.3 67 250 500 United Arab Emirates 3 0.9 3.5 2.2 4.1 3.6 3.6 71 291 298 United Kingdom 3 0.8 3.3 3.2 3.4 4.2 4.1 75 777 1,147 United States 3 1.1 3.6 2.5 3.9 2.9 3.2 64 861 1,008 Uruguay 11 1.7 5.0 2.2 5.0 2.5 3.5 100 671 671 Venezuela 38 4.4 4.7 4.9 6.4 2.4 3.6 0 715 490 Vietnam 14 1.4 2.8 2.6 4.0 4.5 4.0 57 194 294 Zambia 44 2.0 9.2 5.2 9.9 2.0 2.0 67 4,217 5,000 Zimbabwe 50 2.0 25.0 14.0 18.0 3.0 2.0 100 4,000 4,000 a. Time taken between the submission of an accepted customs declaration and customs clearance. b. From shipper to port of loading, median case = 50 percent of shipments. c. From port of discharge to consignee, best case = 10 percent of shipments. d. From port of discharge to consignee, median case = 50 percent of shipments. e. The percentages reported in this column represent the proportion of respondents answering that a simple and inexpensive review procedure is available. f. Total cost to transport and port services. Note: Country-specific data is not available for all 150 countries in the index. Blank cells indicate no data available. 38 CONNECTING TO COMPETE: TRADE LOGISTICS IN THE GLOBAL ECONOMY What is the Logistics Performance Index? Based on a worldwide survey of global freight forwarders and express carriers, the Logistics Performance Index is a benchmarking tool developed by the World Bank that measures performance along the logistics supply chain within a country. Allowing for comparisons across 150 countries, the index can help countries identify challenges and opportunities and improve their logistics performance. Technological progress and worldwide trade and investment liberalization are presenting new opportunities for countries to harness global markets for growth and poverty reduction. But with the advent of global supply chains, a new premium is being placed on being able to move goods from A to B rapidly, reliably, and cheaply. Countries able to connect to the global logistics web have access to vast new markets; but those whose links are weak face the large and growing costs of exclusion. Trade facilitation has been recognized as key to economic devel- opment, but research on this topic has suffered from a lack of good quantitative measures. By introducing a comprehensive new index of logistics performance, Connecting to Compete: Trade Logistics in the Global Economy makes an important contribution to the literature and offers new insights into the factors limiting the globalization gains accruing to the poorest countries of the world. Thomas W. Hertel Distinguished Professor and Executive Director Center for Global Trade Analysis, Purdue University The establishment of the Logistics Performance Index under- lines the importance of logistics in a globalized world. The index delivers a comprehensive and consistent view on the different national logistics markets and supports the process of continual improvement of service levels related to logistics. Klaus-Michael Kuehne, Executive Chairman Kuehne + Nagel International AG For developing countries such as Pakistan, there is need of such studies that give some indication and guidance on how and what countries should improve to become competitive and reach the level of developed countries. We were glad to be able to contribute to this important initiative of the World Bank. Muhammad Khalid Paracha, Managing Director MAP Enterprises, Karachi, Pakistan