VNT>S I59 8 POLICY RESEARCH WORKING PAPER 1598 Logistical Constraints To strengthen strategic alliances with European on International Trade trading and industrial in 1 1 partners, Maghreb firms ln the .tviagnreti Ashould rethink the logistics of their distribution strategy in Franfois Amiot Europe, taking recent Ovadia Salama changes into account and adjusting their trade practices They should try to strengthen interdependency with European partners, develop just-in-time multimodal transport and logistics management, and negotiate maritime and inland freight rates in the context of general transport contracts. The World Bank Middle East and North Africa Country Department I Private Sector Development, Finance, and Infrastructure Division May 1996 | POLICY RESEARCH WORKING PAPER 1598 Summary findings Without a competitive transport industry, the Maghreb both direct and indirect effects, and effective rates are countries will not truly benefit from reform aimed at generally twice as high as nominal rates. increasing the region's share of international trade. A To reconcile macroeconomic and microeconomic study of barriers to the region's trade, especially with approaches to measuring effective rates, Amiot and countries of the European Union, identified more than Salama use a partial equilibrium model (SMART model) 30 barriers, in four categories: barriers to imports, to to estimate the impact on the balance of payments of exports, of infrastructure and equipment, and of intra- eliminating excess costs. Maghreb trade. These include: Most of the corrective policies they recommend Direct barriers concern multimodal transport in the trade between * From traditional distortions (price, discriminatory Europe and the Arab Maghreb Union. The challenges are access to markets). considerable: not only does such a system pave the way * Nontariff barriers (administrative, regulatory, and for cost and time savings ("just-in-time" transport), but tax-related restrictions). it also adopts the logistics management that the most * Traffic agreements (protecting national flags). advanced European enterprises use to orchestrate their * Lack of infrastructure and equipment. raw material purchasing, production, and marketing Indirect barriers, deriving from functions. A multimodel transport system allows them to * Trade harmonization (simplified customs reduce inventories significantly and to respond better to procedures and tariff structures, elimination of quotas, volatile demand. reduction of customs tariffs on transport equipment). Essentials for just-in-time multimodal transport and * Technology lags (telecommunications and logistics management include efficient modern transport handling). techniques, efficient communications systems, efficient Amiot and Salama quantify barriers in terms of "tariff modern merchandise handling, and appropriate equivalents," expressed as a nominal rate of protection regulations. These conditions are still not fully in place in based on the f.o.b. value of the merchandise. But the the Maghreb countries, except partially in some parts of nominal rate of protection measures only the direct costs the clothing and textile industry. of distortions. The effective rate of protection measures This paper - a product of the Private Sector Development, Finance, and Infrastructure Division, Middle East and North Africa, Country Department I - is part of a larger effort in the department to assist Maghrebian countries in achieving a broad-ranging set of integration arrangements with the European Ulnion that will improve their competitive positions. Copies of this paper are available free from the World Bank, 1818 H Street NW, Washington DC 20433-0001. Please contact Laverne Lewis, room H4- 167, telephone 202-473 -7369, fax 202-477-1993, Internet address llewis@worldbank.org. May 1996. (55 pages) The Policy ResearcP Working Paper Series disseminates the findings of work in progress to encourage the exctange of ideas about developmsent issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be used and cited accordlingly. The findings, interpretations, and conclusions are the authors' own and should not be attributed to the World Bank, its Executive 13oard of Directors, or any of its member countries. Produced by the Policy Research Dissemination Center Logistical Constaints to Iternational Trade in the Maghreb ABBREVIATIONS AND ACRONYMS AMU Arab Maghreb Union c.i.f. cost, insurance, freight COMANVAV Compagnie Marocaine de Navigation EU European Union EDI Economic Development Institute, World Bank edi electronic data interchange FAS free alongside the ship f.o.b. free on board GATT General Agreement on Tariffs and Trade NTO National Transport Organization ONT Office National des Transports PHARE Poland and Hungary Assistance for Reconstruction TACIS Technical Assistance for CAS Countries TEU ton equivalent unit UNCTAD United Nations Conference on Trade and Development WTO World Trade Organization Exchange Rate (as of December 1994) US$1.00 = DA 43.70 US$1.00 = DH 8.8 US$1.00 = DT 1.03 Fiscal Year January 1- December 31 This report was finalized after a seminar held in Paris on March 22-25, 1994, under the auspices of ACTIM, and on the initiative of the World Bank and its Economic Development Institute. It was prepared under the direction of Francois Amiot (MNIPI), with the participation of the following experts: Ovadia Salama (principal consultant), Philippe de Bernede (logistics expert), Alan Roe (Professor at the University of Warwick), Olivier Fainsilber (Mercer Management Consulting), Yves Oreille (civil aviation expert) and Olivier Cassin (consultant). John Underwood (MNIDR) was adviser for the study and Hans Peters (TWUTD) was peer reviewer. The seminar was chaired by Amir Al-Khafaji (MNIPI, Division Chief). In addition to the above experts, the seminar resource persons were: M. Martinand (METT-DAEI), C. Reynaud (INRET), J. Bourdillon, D. de Proost, E. Allali (CIDC), L. Karaoui (AMU), S. Miladi (Ministry of Transport, Tunisia), Pedro Geraldes (EDI), Marcelo Minc (EDI) and J. de Melo (University of Lausanne). Brigitte Grant handled the publishing of the report. The study and the seminar were carried out with the financial participation of the European Commission. TABLE OF CONTENTS I. International Trade and Transport Problems in the Maghreb ........ ..... 1 A. Measuring Transport costs 1 B. Equivalence Between Excess Transport costs and Tariffs. 2 C. The C.I.F./F.O.B. Approach and its Limitations. 2 D. The Current Approach and its Limitations. 4 E. Estimating Excess Costs. 6 F. Estimating Benefits from Removing Transport Barriers .... ....... 8 II. Identification and Quantification of Restrictive Practices: Case Studies ... ... 10 A. Voyage Cost Analysis: Export of Glucose from Morocco to Tunisia .. . 10 B. Excess Cost Calculations: Transport Chain Case .11 Morocco: Transport Chain for Clothing and Footwear .12 Tunisia: Transport Chain for Citrus Fruits .13 Algeria: Transport Chain for Power Network Equipment .... 16 ANNEXES Al Calculation of Ad Valorem Excess Costs: ....................... 18 A1.1 Algeria . ....... ...... ... ..................... 19 A1.2 Morocco .............. 20 A1.3 Tunisia .............. 21 A2 Regional Profile of Trade in the Maghreb ....................... 22 A3 Logistical Constraints Affecting Trade in the Maghreb Countries - Diagnosis . . 24 Barrier Ratings ................................ 24 Import-Related Barriers .............................. 32 Export-Related Barriers .............................. 36 Infrastructure and Equipment-Related Barriers ..... ........... 37 Trans-Maghreb Barriers ............................. 39 A4 Matrix of Recommendations for Corrective Measures ................ 43 EXECUTIVE SUMMARY (i) Without a competitive transport industry the Maghreb countries will not benefit fully from reforms aimed at increasing market share of international trade. This rationale prompted a study to identify the transport barriers obstructing the Maghreb countries' trade with the rest of the world, particularly with countries of the European Union (EU), to measure the benefits to be gained from their removal, and to outline possible corrective policies. (ii) Based on specific local surveys, more than thirty import and export barriers were identified. Those barriers that are directly transport related derive from traditional distortions (price barriers, discriminatory market access); administrative, regulatory, tax-related restrictions (nontariff barriers); traffic agreements (protection of national flags); or lack of infrastructure and equipment. Those barriers indirectly connected with transport derive from trade harmonization (simplification of customs procedures and tariff structures, elimination of quotas, and reduction of customs tariffs on transport equipment) or technology lags (such as telecommunications and handling). The topology has been broken down into barriers to imports, exports, infrastructure and equipment, and intra-Maghreb trade. (iii) The economic impact of these barriers can only be measured if a common denominator is used that measures the different distortions in like terms. In this report barriers are quantified in terms of "tariff equivalents," expressed as a nominal rate of protection based on the f.o.b. value of the merchandise. However, the nominal rate of protection only measures the direct costs of distortions whereas the effective rate of protection would measure both the direct and indirect effects. Research in industrial countries indicates that effective rates are generally twice as high as nominal rates. (iv) Two macroeconomic approaches are used to measure the effect of restriction practices. A preliminary nominal and ad valorem measurement of the cost of international transport and insurance can be obtained by comparing the c.i.f. and f.o.b. values of trade. This measurement, which is approximate, points out possible distortions, where the freight and insurance costs are higher for the Maghreb countries than for any other group of countries considered. We find that these costs are five times higher than those in the European Union and twice as high as those in developing countries. (v) A second macroeconomic approach, based on the balance of payments, estimates the total freight and insurance costs for a given country and expresses this cost as a percentage of the total f.o.b. value of an item. This percentage is the equivalent of a "nominal shipment rate" for the item concerned. For the three countries considered, this rate varies (during the reference year 1990) from 3.5% for Algeria and Tunisia to 7% for Morocco. - ii - (vi) A microeconomic approach identifies the restrictive practices in a sample of transport chains and computes the differences with respect to international (standard) levels for an entire range of transactions, including merchandise dockside dwell times, redundant charges (double handling), inefficient tariff structures, billing systems, losses and damage, fraud, and slow-moving customs procedures. In estimating the cost of transactions along the length of the chain, transport costs resulting from different transport modes, user fees, countervailing tariffs, and differential tariffs for cabotage must be taken into account. The aim is to separate the cost of factors intrinsic to the transport function from other costs obstructing trade. These excess costs are expressed in ad valorem terms for the products surveyed and are aggregated to obtain a total estimate of the excess costs arising from transport-related barriers. The annual excess costs estimated by the survey amounted to US$30 million for Morocco, US$94 million for Algeria, and US$71 million for Tunisia. (vii) An attempt to reconcile the two approaches, a partial equilibrium model (SMART model) was used to estimate the economic impact on the balance of payments of eliminating the excess costs, relying on the measurement of ad valorem excess transport costs in terms of tariff barriers. In least cost reduction hypothesis, an estimated variable, transport elasticity (the percentage change in export earnings and freight costs arising from a percentage change in a barrier) is used to compute the increase in international trade that would result from eliminating excess costs. For the reference year chosen, Tunisia would have reduced its current account deficit by 23 %, Morocco would have reduced its deficit by 21 %, and Algeria would have increased its surplus by 8%. (viii) The barriers identified call for corrective policies, either at the national level or at the regional level. Recommendations on Euro-Maghreb trade recur most often are those which obstruct the development of multimodal transport. Multimodal transport is the key component of "logistics management," the new strategic tool used by dynamic firms to orchestrate their raw materials procurement, production, and marketing functions with minimum "dead time" (the "just-in-time" system). This strategy allows fimns to reduce their stocks appreciably and better position themselves to serve an increasingly volatile demand. These firms are thus looking for new foreign markets and are prepared to move to another country or continent, if more advantageous conditions present themselves. The essential characteristics of the new markets sought are: modem and efficient transport techniques; efficient communications systems; modem, reliable, and quick merchandise handling; and appropriate regulatory frameworks. Unfortunately, the trade barriers operating in the Maghreb countries prevent conditions from being met although they have been partially implemented in the textile industry. As a result revision of the Multifibre Arrangement and expansion of EU agreements with Eastern European countries represent a potential threat to Maghreb countries fighting to preserve their market position. (ix) Cooperation with Europe could be strengthened multilaterally (such as PHARE- or TACIS-type cooperation through the European Commission) and bilaterally (training and technology exchanges), but it would especially benefit from strategic alliances with - iii - European trading or industrial partners. To form these alliances Maghreb firms should rethink the logistics of their distribution strategy in Europe, taking recent changes into account and adjusting their trade practices. Such a strategy would aim to strengthen interdependencies with European partners, develop multimodal transport, and negotiate maritime and inland freight rates in the context of overall transport contracts. 1. International Trade and Transport Problems in the Maghreb 1.1 This study seeks to identify the main distortions affecting the transport sector by focusing on intra-Maghreb and Euro-Maghreb trade flows, to assess the potential economic gains that may come from eliminating these barriers, and to make recommendations for facilitating intra- Maghreb and Euro-Maghreb transport. The study benefited from a seminar jointly organized by the Economic Development Institute (EDI) and the World Bank, held in March 1994. 1.2 Excess costs - costs that arise because of trade barriers - are calculated using an approach that quantifies nontariff barriers into their tariff equivalents. The analysis considers three types of distortions: distortions connected with transport, distortions connected with international trade ("trade harmnonization"), and distortions connected with technology. Any action aimed at making trade more competitive must attempt to eliminate these distortions. 1.3 In this study we measure only direct costs. As a result the estimate of the trade and economic benefits of removing distortions is only partial. A full estimate would also take into account the impacts of effective protection and restrictive practices on value added, employment, and the environment. But even with our conservative approach, the estimated impact of eliminating excess costs on the balance of payments is significant: Tunisia would cut its Current Account deficit by 23%, Morocco would reduce its deficit by 21 %, and Algeria would raise its surplus by 8% (for the reference year). A. Measuring Transport Costs in the Maghreb 1.4 Transport costs in general and sea shipping costs in particular form natural trade barriers between the Maghreb countries and their partners. These costs protect domestic producers against competition from imports, as do artificial barriers, and significantly inhibit both the volume and the types of goods exported by Maghreb countries. 1.5 For some Maghreb countries, particularly Morocco, the economic cost of artificial barriers and their effect on trade balances have already been scrutinized and documented. I The barriers that transport costs impose, on the other hand, have not been measured. Transport costs are usually thought to be fixed by the market, and thus immune to policy actions, or thought to be only a minor contributor to total protection. 1.6 International transport costs can be analyzed using the international trade data found in the balance of payments tables and Current Account calculations of each country. Difficulty arises in comparing international data. The main source of comparable data is balance of payments statistics, which are compiled by the International Monetary Fund. Balance of I See: "Morocco: The Impact of Liberalization on Trade and Induslrh1 Adjustnent", EMENA, March 15, 1988. - 2 - payments data are distinguished as either merchandise or nonmerchandise transactions, not as either goods or services. 1.7 Trade documents filed with customs offices and central bank records of foreign exchange transactions, are the two main sources of national data on merchandise trade. Customs data are generally more precise because they capture all cross-border merchandise movements, including those between head offices and subsidiaries of multinational corporations for which there are no other sources of information. Since the international agreements on harmonizing merchandise trade nomenclature were enacted (the Customs Cooperation Council Nomenclature, the Standard International Trade Code, and more recently the Harmonized System Nomenclature), customs data are internationally comparable for several thousand items. 1.8 Countries must estimate the value of nonmerchandise Current Account transactions using either foreign exchange records or surveys of business establishments. Equivalent customs data cannot be gathered because services and other nonmerchandise transactions are not physically observable. As a result, the figures recorded in balance of payments statements are often underestimated. B. Equivalence Between Excess Transport Costs and Tariffs 1.9 The distortions arising from transport costs, tariff barriers, and technology lags must be expressed in like terms so that they can be compared and their combined impact on the balance of payments measured. The ad valorem rate of protection typically expressed in nominal terms, is the most appropriate common denominator. But the effective rate of protection would be a better measure unlike the nominal rate of protection, the effective rate of protection for a final good takes into account (using the input-output tables), the rates of protection of the intermediate goods used in production (see Yeats 1980). Transport services are intermediate inputs, and their excess costs contribute to the nominal rate of protection of intermediate products. In industrial countries effective protection rates are roughly twice as large as nominal rates. C. The C.l.F./F.O.B. Approach and its Limitations 1.10 An ad valorem measurement of the cost of international transport and insurance can be obtained by comparing the c.i.f. and f.o.b. values of trade. The volume of exports and their f.o.b. value are listed in the exporting country's statistics. The same product is entered in the partner's import statistics in volume and in c.i.f. value. The difference between the c.i.f. and f.o.b. values as a fraction of the f.o.b. value, gives an indication of the ad valorem freight and insurance costs (Table 1.1). The bi-directional approach makes it possible to estimate, by country and product, comparable indicators of transport costs, referred to as freight factors. Table 1.1: Incidence of transportation costs, 1988-91 (billion dollars) C.i.L. f.o.b. Trnsportaton coats = (e.i.L - f.o.b.f.o ZZ] Unit: $ m 1988 1989 1990 1991 1988 1989 1990 1991 1988 1989 1990 1991 Average Export 4.70 5.47 6.50 7.68 5.22 5.61 7.09 6.86 -10.00 -0.02 -0.08 0.12 -0.02 Morocco Import 4.14 4.24 5.46 5.79 3.46 3.29 4.16 5.39 0.20 0.29 0.31 0.07 0.20 Total 8.84 9.71 11.96 13.47 8.68 8.90 11.25 12.25 0.02 0.09 0.06 0.10 0.07 Export 8.11 8.90 10.37 9.04 7.25 7.95 9.29 8.06 0.12 0.12 0.12 0.12 0.12 Algeria Import 8.78 9.83 13.42 12.92 8.19 9.28 12.65 12.21 0.07 0.06 0.06 0.06 0.06 Total 16.89 18.73 23.79 21.96 15.44 17.23 21.94 20.27 0.09 0.09 0.08 0.08 0.09 Export 3.69 4.43 5.94 5.44 3.27 3.88 5.10 4.97 0.13 0.14 0.16 0.09 0.13 Tunisia Import 2.37 2.96 3.83 3.91 2.42 3.03 3.95 3.88 -0.02 -0.02 -0.03 0.01 -0.02 Total 6.06 7.39 9.77 9.35 5.69 6.91 9.05 8.85 0.07 0.07 0.08 0.06 0.07 Export 180.34 192.90 235.06 232.30 171.32 188.24 227.05 226.55 0.05 0.02 0.04 0.03 0.03 Fnvuc Impot 166.64 178.19 217.34 223.27 168.62 179.39 216.39 217.08 -0.01 -0.01 0.00 0.03 0.01 TotW 346.98 371.09 452.40 455.57 339.94 367.63 443.44 443.63 0.02 0.01 0.02 0.03 0.02 "' Export 1082.80 1,167.20 1,413.50 1,458.60 1,041.40 1,124.10 1,357.40 1,400.40 0.04 0.04 0.04 0.04 0.04 EC/EU Import 1054.70 1,118.90 1,349.40 1,365.50 1,064.60 1,135.50 1,366.40 1,371.20 -0.01 -0.01 -0.01 0.00 -0.01 Total 2137.50 2,286.10 2,762.90 2,824.10 2,106.00 2,259.60 2,723.80 2,771.60 0.01 0.01 0.0° 0.02 0.02 Industilised Export 2070.30 2,238.60 2,567.80 2,592.40 1,953.50 2,112.80 2,437.80 2,474.00 0.06 0.06 0.05 0.05 0.05 Countries Import 2010.80 2,155.80 2,483.20 2,557.90 1,983.90 2,127.30 2,446.00 2,501.30 0.01 0.01 0.02 0.02 0.02 Total 4081.10 4,394.40 5,051.00 5,150.30 3,937.40 4,240.10 4,883.80 4,975.30 0.04 0.04 0.03 0.04 0.04 DEvelopping Export 701.32 762.73 868.57 978.42 683.98 737.96 840.75 938.80 0.03 0.03 0.03 0.04 0.03 Countries Import 738.08 824.87 933.34 987.47 706.18 781.96 883.75 947.37 0.05 0.05 0.06 0.04 0.05 Tota 1439.40 1,587.60 1,801.91 1,965.89 1,390.16 1,519.92 1,724.50 1,886.17 0.04 0.04 0.04 0.04 0.04 Expor 2771.60 3,001.30 3,436.40 3,570.80 2,690.10 2,909.30 3,329.80 3,448.70 0.03 0.03 0.03 0.04 0.03 World Import 2771.60 3,001.30 3,436.40 3,570.80 2,690.10 2,909.30 3,329.80 3,448.70 0.03 0.03 0.03 0.04 0.03 Total 5543.20 6,002.60 6,872.80 7,141.60 5,380.20 5,81.60 6,659.60 6,897.40 0.03 0.03 0.03 0.04 0.03 Sowre : IMF Dirctin of Trade Stotistic 1993. - 4 - 1.11 Because export and import statistics are available at a very disaggregated level (to the five-digit level in the CCIS code for example), freight factors for a given country can be calculated by product and by destination. These data constitute the "ad valorem transport cost profile" of a country. Comparing profiles for a particular year with those of a several-year average and comparing profiles across countries makes it possible to detect anomalies that suggest the presence of excess costs, and unusually high freight rates and to identify products and transport chains with potential bottlenecks or restrictions. These calculations, however, must be supplemented and verified by comparisons with surveys of shipping companies, forwarding agents, marine insurance brokers, and port authorities (verification of port tariffs and handling costs), and with spot applications of shipping cost models. 1.12 The figures in Table 1.2 must be viewed with caution because of technical problems in gathering information and because the freight rates derived do not necessarily reflect the long-term level of transport costs. However, they point out some differences in transport costs among Maghreb countries and between Maghreb countries and the rest of the world. For instance, freight and insurance costs are five times higher in Maghreb countries than in the European Union and twice as high as in developing countries. Many factors affect the ad valorem incidence of transport charges. This study characterizes and quantifies them, estimates their impact on Maghreb countries, international trades, and proposes corrective measures. D. The Current Account Approach and its Limitations 1.13 The components of the Current Account also throw light on the relative importance of freight and transport costs in a given country (Table 1.2). The sum of "shipment" debits and credits, representing both freight and insurance costs, varies from 3.5 % (Algeria, Tunisia) to 7% (Morocco) of the total f.o.b. value of merchandise imports and exports. This ratio will be referred to as the "nominal shipment rate." These percentages are modest. But compared with the Current Account balance, these transport costs are very significant. In Algeria they equal half of the Current Account surplus posted in 1990. In Morocco, if they were reduced by 25%, the Current Account deficit would be eliminated. 1.14 In addition to calculating the freight factor, the Current Account approach allows to estimate the whole cost of the transport chain and to express this cost as a percentage of the total f.o.b. value of the merchandise. This percentage is equivalent to a "nominal transport rate," obtained by adding the "other transportation" credit and debit lines of the balance of payments and a fraction of "other goods and services" debit and credit lines to the components of the nominal shipment rate. 1.15 More detailed analysis of excess costs (presented in the following chapters) reveals two basic limitations of the Current Account approach. First, Maghreb countries do not report and record merchandise and service transactions in the same way. Second, the figures are highly aggregated, without any breakdown of costs by product, by mode of handling, by port, or by origin and destination. These detailed data can only be obtained from local surveys. Table 1.2: Current Account Components (1990) Algefa Morocco Tunisia Curent Account 1,087 -2r532 1.308 Goods, Services, and Income Total Credit 13,535 6,321 5,300 Total Debit -12,448 -8,853 -6,608 Merchandise Exports (f.o.b.) 12,964 4,210 3,515 Oil and Gas 854 Phosphates 437 Other 3,774 Merchandise Imports (f.o.b.) -8,777 -6,282 -5,193 Trade Balance 4,187 -2,071 -1,678 Shipment: Credit 126 154 110 Shipment: Debit -607 -559 -239 Passenger Services: Credit 38 213 Passenger Services: Debit -31 -112 Other Transportation : Debit 86 21 52 Other Transportation : Credit -124 -69 -85 Port Services -42 Other -43 Travel: Credit 64 1,280 1,018 Travel : Debit -149 -187 -179 Students -36 Other -148 Investment Income: Credit 355 177 184 Investment Income: Debit -2,625 -1,522 -740 Other Goods and Services: Credit 303 392 173 Other Goods and Services: Debit -282 -90 -74 Unrequested Transfers 333 2,332 808 E. Estimating Excess Costs 1.16 Surveys of transport chains originating or ending in the Maghreb countries were conducted to generate data on the incidence of transport-related restrictive practices. These surveys identified representative routes for typical import and export commodities in intra-Maghreb and Europe-Maghreb trade. Product groups that represented different handling modes (bulk, containers, bags, general cargo) were analyzed, major product groups were identified (Table 1.3). Table 1.3: Transport Chains Tunisia Morocco Algeria Imports Imports Imports Steel products Cereals Steel products Marble/glass Steel products Cereals Cement ExQorts Exports Exports Textiles and clothing Almonds Wood Citrus fruits Textiles and clothing Agrifoodstuffs Dates Containers Pharmaceuticals Industrial machinery Machinery Electrical machinery Leather products Canned foods Dairy products Agrifoodstuffs (Olive oil) Sugar Manufactured fertilizers 1.17 Studying these chains in the field made it possible to identify the restrictive practices that apply to each and to determine how each diverges from international standards on dwell times, double charges, inefficient tariff structures, billing systems, coordination between modes, logistics planning, loss and damage, and various forms of fraud. A detailed review of customs procedures considered the complexity of transactions and the cause of this complexity, namely document preparation, currency issues, and variations in procedure among countries. Transaction costs were estimated, taking into account the cost of transport by different modes, user charges, countervailing tariffs, and any differential tariffs for cabotage. The aim was to separate the costs attributable to transportation from other costs that act as barriers to trade. The excess costs were expressed in ad valorem terms for the identified products and aggregated to obtain an estimate of total excess costs. 1.18 Comparing the tonnages reported in Tables Al.1, Al.2, and Al.3 with total foreign trade tonnages reported in Table A1.4 clearly shows that the study has captured most of the foreign trade. The excess costs estimated from these figures amount to US$30 million for Morocco, US$94 million for Algeria, and US$71 million for Tunisia. -7- Figure 1 .1 : Morcco: Ad ValOrem Excess Cost Profile 1.19 For Morocco, excess costs 16*_1 are particularly significant for fruit 1 A and vegetable exports and iron and la it steel imnports (Figure 1.1). Excess A __ . costs are slightly lower for imports 6 of cereals and auto parts. The La 4d weighted average of the excess costs 2 represents 1.4% of Moroccan trade -o . a u - E on an ad valorem basis for all - I ., 8X imports and exports. Since transport it " i costs make up 7.1% of the value of 5 that trade, excess costs represent zi 19% of transport costs. U 1.20 Excess costs are generally higher in Algeria than in Morocco Figure 1.2: Algeria: Ad Valorem Excess (Figure 1.2). Excess costs on iron Cost Profile and steel imports, for example, are 2% higher than those in Morocco. However, excess costs are much 142, lower for fruit and vegetable exports. It 10-1 The weighted average of the excess c. B/ costs represents 2% of Algeria's 4. trade on an ad valorem basis for all 2 imports and exports. Since transport GE c costs amount to 8.7% of the value of trade, excess costs represent 23% of transport costs. 1.21 Finally, in Tunisia the excess costs for textile and fruit and vegetable imports are higher than Figure 1.3 those in Morocco and Algeria, TUNISIA: AD VALOREM EXCESS whereas excess costs for iron and COST PROFILE steel imports are the same as those in Morocco (Figure 1.3). Tunisia's ad valorem excess costs for the 164 remaining traded goods are lower 14 than those in Algeria and Morocco. 10 The weighted average of excess costs 8 represents 1.2% of Tunisian trade on 6 an ad valorem basis. Excess costs 4 represent 17% of transport costs 2 which are 6.8% of the value of 0 _ _ a trade. ij |i I ! X C - 8 - F. Estimating Benefits from Removing Transport Barriers 1.22 In this study the net economic benefit and the improvement in the balance of payments that would result from eliminating trade barriers were computed. The balance of payments impact was estimated with the SMART simulation model, (a partial equilibrium model) using the ad valorem equivalence between transport costs and tariff barriers. This model was based on demand elasticities for products imported into industrial countries substitution and supply elasticities for products exported by the Maghreb countries.2 This design made it possible to estimate the transport elasticity, that is the ratio of the percentage change in export earnings to the percentage change in freight costs following the removal of a barrier. 1.23 Positive economic effects from imports take the form of lower domestic prices following the elimination of excess costs. The net economic gain equals the increase in the value of imports multiplied by the average variation in ad valorem excess costs (before and after the elimination of the distortions). This gain is also equal to consumer surplus. 1.24 The total effect from exports is the sum of trade created and trade diverted. Created trade is the increase in demand from country j for product i exported by country k, resulting from a reduction in the price of this product when distortions are lessened or eliminated and assuming that price variations are automatically passed on. The value of trade created is calculated using the elasticity of demand for an imported product with respect to domestic prices and the elasticity of supply of an exported product with respect to world prices. 1.25 Importers divert trade when they switch from one exporting source to another because relative prices have changed. In the model used, suppliers' substitution elasticity is assumed to be 1.5. The value of this parameter could be made slightly higher if products are more homogeneous or slightly lower if they are more differentiated. The elasticity of supply of exports was assumed equal to infinity, implying a limitless supply of the exported good. Finally, the demand elasticities from the European Union for each tariff line were used for import elasticities. 1.26 The SMART model computes the increase in international trade as the sum of trade created and trade diverted (Tables A1.1, A1.2, and A1.3). 1.27 In 1990, the reference year deficit, removal of excess costs would have reduced Tunisia's Current Account deficit by 23%, reduced Morocco's by 21% and raised Algeria's surplus by 9% (Table 1.4). Although the base estimates are conservative (because they are not exhaustive), they are significant enough to warrant corrective measures. 2 The SMART model was joindy developed by UNCTAD and the World Bank. - 9 - Table 1.4: Impact of Eliminating Tranport-Related Distortions (thousand of dollars) Morocco Algeria Tunisia Variation in Trade Balance Variation in "Shipments" Credit (+) 12,600 27,100 43,600 Variation in "Shipments" Debit (-) (3,033) (1,548) (25,592) Variation in Current Account 1990 Current Account (200,000) 1,420,000 (500,000) Current Account Variation 43,239 122,089 114,748 Expected Current Account (156,761) 1,542,089 (385,252) Current Account Improvement 21.6% 8.6% 23.0% Source: Local surveys, 1993 - 10- II. Identification and Quantification of Restrictive Practices 2.1 Examining specific cases is the best way to show how the different tools used in this study were employed. To describe the procedure one looks first at exports of glucose and glucose syrup from Morocco to Tunisia, selected because of what this product reveals about competitiveness. We then look at one case study by country for a selected product, with calculations presented in increasing order of detail. 2.2 Glucose and glucose syrup are processed foodstuffs manufactured from imported maize. They are not differentiated by quality, origin, and brand so the analysis and comparisons can be based mainly on prices. Although Morocco's unit prices are competitive (on an f.o.b. basis) with those of other suppliers, and supply is largely available, its market share in Tunisia imports is only 5.2% (Table 2.1). Table 2.1: Tunisian Imports of Glucose and Glucose Syrup, 1991 Producers f o. b. value Market share Quantity Cost per unit (thousand of (percent) (dollars) dollars) Germany 383 39.4 1,133 0.34 Spain 193 19.9 539 0.36 Austria 104 10.7 102 1.02 France 92 9.5 160 0.58 Italy 70 7.2 194 0.36 Morocco 51 5.2 158 0.32 Belgium 43 4.4 84 0.51 Netherlands 36 3.7 100 0.36 Source: UNC7AD, Trade Analysis and Information System 1991 Based on shipper's customs declarations 2.3 Maritime shipping and insurance costs could be the cause of Morocco's loss of competitive advantage in the Tunisian market. However, Tunisia requires all imported goods to be insured by Tunisian companies, and thus insurance costs do not affect the equation. Shipping costs remain as the only apparent cause of lost marketshare. This conclusion was verified with a model used to estimate maritime transport costs. The sea routes tested were Casablanca-Tunis (CTN and roll-on/roll-off (ro/ro) vessels), Cadiz-Tunis (CTN vessels), and Rotterdam-Tunis (CTN and Ahlerlines vessels). The findings indicate that: - 11 - If COMANAV (Compagnie Marocaine de Navigation) vessels of 568 ton equivalent unit (TEU) capacity are used, the cost of shipping a 20 foot container between Casablanca and Tunis is US$311. However, if smaller vessels are used, the cost per TEU on the Cadiz-Tunis route is US$480 compared with US$530 on the Casablanca-Tunis route, 1/m a differential of 10.4%. Cost per TEU for Rotterdam-Tunis and Casablanca-Tunis are roughly the same 1/m close to US$530. However, because the distance between Rotterdam and Tunis is greater than that between Casablanca and Tunis, the cost differential per nautical mile is 120%. When small CTN vessels (182 TEU) are used, it costs more to ship a container from Casablanca to Tunis than from Rotterdam to Tunis or Cadiz to Tunis (by Ahlerlines). 2.4 The average cost of maritime transport to Tunis is US$40 per ton, or 9% of the average weighted value (US$450) of merchandise delivered f.o.b. Although this figure is consistent with those calculated in Chapter 1, these estimated costs are merely indicative and may only serve as guides. 2.5 These figures suggest that there are distortions associated with transportation. The cost of maritime transport is high because Maghreb shipping companies are too small to effect economies of scale in their cabotage traffic. In addition, linerconference freight agreements (which protect signatory countries from competition) may also be a source of excess costs: the nonconference rates applied by outsiders are generally 25 % lower than conference rates. The field survey shows that these distortions are not ascribable only to sea freight costs. It reveals that rail transport through Algeria would give Morocco a significant relative advantage, in view of applicable freight charges. However, trans-Maghreb barriers prevent this option from being acted on (see Annex 1). And sea transport handicapped by the weakness of trade between the Maghreb countries and by the protection they afford shippers operating under their flags, the age of their merchant fleets, and the organization of work aboard their vessels. B. Excess Cost Calculation: Transport Chain Case Studies 2.6 Cost calculation details vary from one product to another. In general, however, the excess cost for each product is first calculated by metric ton using survey data. This value is then expressed in ad valorem terms and applied to groups of similar products, taking into account the unit values of the products and the percentage of the potential exports or imports to which this excess cost would apply. Each of the following three cases covers a particular product, and calculations are presented in increasing order of detail. - 12 - Morocco: Transport Chain for Clothing and Footwear 2.7 We describe a company that is unusual because it has increased its efficiency in transportation. This ideal case is highlighted to illustrate the obstacles that are the rule rather than the exception. Logistics 2.8 The company's headquarters are in France and it maintains a branch in Casablanca and one in Tunis. It specializes in transporting raw materials to Morocco and finished goods (mostly clothing and footwear) to the EU by road. The Moroccan and Tunisian branches report roughly the same turnover figures. France is the chief source of the raw materials imported. Weekly departures service its six-region network, which covers all of France. The company delivers its exports directly to consignees in its six regions. Incomplete lots (those not large enough to require an entire trailer unit) are separated out in each region and delivered to their consignees. 2.9 Trucks are sealed when they leave France and are not subject to any customs controls until they arrive in Morocco. In 1991 the company was granted a concession in the port of Mohamm6dia (35 kan north of Casablanca) and was recognized as a customs forwarding agent. It has built several sheds and warehouses there, and is the only company able to: Handle its own freight. Avoid unloading its trucks in the bonded warehouses of the port of Casablanca. * Avoid reloading merchandise. Avoid using customs forwarding agents, who are remunerated on an ad valorem basis. Offer door-to-door service from the factory in France, with delivery to the consignee of goods cleared through customs. Provide quick service -- a truck arriving in Mohammedia on a Tuesday morning can deliver its shipment (in the city) the same afternoon. The same truck entering the bonded warehouses of ODEP in Casablanca could not deliver until Thursday. * Avoid paying informal remuneration in the port of Casablanca. 2.10 Freight rates are those paid for road transport plus crossing of Strait of Gibraltar. Three sea routes, Cadiz-Casablanca, Cadiz-Tangier, or Algesiras-Tangier, can be used with vessels of Moroccan or Spanish registry: COMANAV operates from Cadiz to Casablanca and from Cadiz to Tangier, while three Spanish shipping companies offer service between Algeciras and Tangier. Sea freight on a 13.5 m semi-trailer between Cadiz and Casablanca is 4,000 French francs (f). Road time from Paris, Toulouse, or Marseilles to Mohamm6dia through Algesiras or Cadiz is 84 hours. Shipowners operating out of Cadiz are prepared to transport semi-trailers without their tractor units; this would reduce average turnaround time for a tractor-trailer unit from ten days to seven. It would cost 50 to 60% less to move a TIR trailer by sea than by road: sea freight is F 350/m3 while the TIR cost is between F 550 and 800/m3. Average consignment size per client is 10 to 20 m3. Price differentials among the six regions of France served do not - 13 - exceed 10 to 15%. Freight rates are quoted according to the weight-volume ratio which is to the advantage of the transport operator. 2.11 Ninety percent of transport charges, both on imports to Morocco and exports to France, are paid in Europe. Insurance costs are included in scheduled rates and are subject to the clauses and conditions of the Geneva Convention (CNN). Barriers and Excess Costs 2.12 Several barriers and potential savings were identified in this case study: The charges payable to forwarding agents are computed ad valorem. For example, on a shipment worth 200,000 dirhams (Dh), HAD (honoraires d'agrees en douane) fees were 0.4% and fixed fees were of DH 800 per customs declaration. Potential savings could amount to 50% if transit charges wee paid per ton. Port taxes in Casablanca, unlike those in most other countries, are assessed ad valorem at rates of 0.2% on imports and 0.15% on exports. Potential savings could amount to 50% if taxes were charged on a tonnage basis. Moroccan customs regulations require that all trailers be unloaded after disembarkation for inspection and clearance. This procedure gives rise to double handling charges and thus generates an excess cost, as well as added risk of damage and loss. If customs authorities have allowed goods to be cleared at factories, potential savings would be 100%. Customs clearance, which still includes some manual processes (verification of value of goods and possible adjustment by the customs office, issue of delivery order, audit of manifest), can take anywhere from 24 to 72 hours 1/m an average of 60% of transportation time. IRestrictions on ship registry on these sea routes precludes free competition. Savings from undoing restrictions could amount to 25%. Moroccan insurance is compulsory on all f.o.b. purchases and C&F sales. The premium of 0.88% is much higher than the Lloyds figure. Savings from matching Lloyds' figure could amount to 50%. Tunisia: Transport Chain for Citrus Fruits 2.13 Tunisia's citrus export trade consists almost exclusively of its Maltese-variety oranges, nearly all of which are shipped to France through Marseilles. Even today this traffic follows its traditional route: it is centered on the Marseilles fruit exchange and is based on long- established Franco-Tunisian personal and commercial relations. Adherence to this pattern remains because of proximity, personal and commercial relationships stretching back to the days of the Protectorate, and certain advantages available to Tunisian exporters, including rebates at Marseille (paid in French francs) to offset the strictness of the Tunisian foreign exchange authorities. - 14 - Loitics 2.14 The country's citrus orchards are concentrated around Cap Bon and Bizerta. About 40,000 tons of oranges are produced yearly. Between 20,000 and 30,000 tons are exported to France and roughly 3,000 tons were sold to Yugoslavia (prior to 1989). Export activity is shared among 17 authorized export growers (or growers' cooperatives). The fruit is processed at 17 packing plants (one of which is state-owned) and is transported on pallets. The pallets are transported by truck to the port of Rades, where they are stacked on the docks. OFITEC, an interprofessional authority, inspects samples to control for plant health (sugar-acidity ratios) and for quality (size, ripeness). 2.15 During the fruit exporting season (December to the end of April), exporters may load produce on Monday, Tuesday, Wednesday, and Saturday onto roll on/roll off vessels reserved mainly for orange export traffic. One of these vessels is operated by CTN and two are operated by Sud Cargo. Forklift trucks are used to stow the fruit in ventilated holds. The Tunis- Marseilles crossing takes 48 hours. The average size of the cargo shipped on one of these ro/ro vessels is 500 tons, although they are capable of carrying 1,000 tons. Shipments to Yugoslavia were usually around 500 tons, and were carried under a special agreement with the shipping company. BarTiers and Excess Costs 2.16 Because low tonnages are shipped, other shipowners are kept out even though the freight rates paid are attractive. However, vessels used are in poor condition: ventilation is inadequate, their limited speed cannot offset the effects of bad weather at sea, and instability could lead to damage if cargo has been improperly stowed. 2.17 Because quality controls and plant-health inspections are not carried out at packing plants, rejected lots have to be returned by road, and pallets have to be reconstituted after samples have been taken for inspection and control purposes. 2.18 STAM, the only cargo-handling company in the port of Rades, is the focus of many criticisms: it handles its operations carelessly, its personnel is unmotivated, and it is short of forklifts on the dock. Stevedoring costs in the port of Marseilles are abnormally high. 2.19 Obligatory passage through the Marseilles fruit exchange prevents the diversification into other major import ports like Sete and Port Vendres. But the sales of Maltese-variety oranges are brokered by commission agents who control their distribution in Europe. Tunisia's foreign exchange controls prevent exporters to Marseilles from organizing by maintaining the dominance of commission agents. If exporters formed a group, they could purchase or lease storage space in Marseilles to regulate deliveries and store their fruit in ventilated warehouses. Operating from their own commercial premises would give them a better understanding of their market and enable them to exercise some leverage over commission agents by subjecting them to competition. - 15 - 2.20 Each exporter or exporting cooperative owns and operates its own fruit packdng plant. But exporters could take advantage of scale economies if packing and palletization were carried out at only two or three centers, each having the capacity to handle 10,000 tons of fruit. In addition to making it easier to move customs operations away from the docks, the embarkation process would take less time, low-quality lots would be removed at the packing plant, and the cost of transporting rejected lots from the port back to the plant and the cost of reconstituting pallets would be saved. The possibility of loading the fruit into containers and sealing them at the packing plant also allows for delivery to consumption points without requiring handling or breaking bulk in the port of Marseilles and the possibility of direct distribution over long distances. 2.21 Although export sea freight rates are 30 to 40% lower than conference-based rates, further adjustments may be made. Generally speaking, freight rates and costs (including insurance charges) are as follows: . Sea freight Tunis-Marseilles on ro/ro vessel: 180 French francs per ton . Loading charges (STAM): 12 dinars (Dh) per ton . Unloading charges in Marseilles (90kg pallets): 118 French francs per pallet . Transit charges, dock sorting, pick up: 178 French francs per ton 2.22 Transportation conditions could be upgraded if the following steps were taken by the exporters association and the entire profession: Improving ventilation of ro/ro vessels loading in Tunis. Improving vessel stability (instability causes major delays in poor weather). Conducting plant health and quality inspection procedures at packing plants. Revising STAM and Marseilles rate schedules. Recapitulation of excess costs 2.23 Potential savings can be expressed in terms of the c.i.f. price per kg of oranges (Table 2.2). c.;i.f. price Potential Percentage of Excess costs savings savings FAS price 1/m Tunis 2.50 0.125 5 Loading charges /rm Tunis 0.06 0.006 10 Sea freight 0.18 0.009 5 Unloading 1/m Marseilles 0.13 0.013 10 Transit/pick-up 1/m Marseilles 0.18 0.036 20 Forwarding agent charges 0.46 0.023 5 c.i.f. price 1/m Marseiles 3.51 0.212 6 - 16 - Total excess costs represent 8.3% of the value of orange exports or 117% of the cost of freight, or 22% of the cost of the port-to-port transport chain. Algeria: Transport Chain for Power Network Equipment Logistics 2.24 This Algerian company imports and erects high-voltage power lines and equips a power station. Its major Algerian clients are SONALGAS and SNTF (300 km of lines). Barriers to trade 2.25 Sources of excess costs for this company include: Customs formalities are carried out slowly and regulations are applied arbitrarily. SNTF does not have transport vehicles available on scheduled delivery dates, which increases storage costs by 100 to 150%. Storage charges, paid on a tonnage basis, are added to daily holding charges, paid by shipment. * Virtually all Algerian ports lack stacking yards for in-bond storage. SONALGAS and SNTF are responsible for customs clearance. SONALGAS often delegates a forwarding agent to handle this process, which requires additional to 6 to 7 weeks. During this time storage in the port (less the number of free days allowed) must be paid for, and the risk of pillage and damage is heightened. On the other hand under a turnkey contract, the contractor is responsible for customs clearance. lTransit charges are very high: 1.25% ad valorem, with a minimum payment of Algerian dinars (DA) 1,000 per operation. Merchandise deteriorates during port holding time: of 12 reels of copper wire, six were damaged at time of pick-up. Inflammable, dangerous, or toxic products may not remain in port precincts, but must go through a special customs procedure known as "temporary collection," where they are hoisted directly onto trucks. When customs authorities failed to coordinate with the shipping company, receiving agent, forwarding agent, and transport operator, triple freight charges were paid: the consignment wasn't unloaded and was thus carried on three successive voyages. A standard government contract offers a bonus payment when a foreign subcontractor enters into partnership with an Algerian firm to execute the contract. Calculation of excess costs 2.26 Cargo valued at US$300 per ton for excess costs deriving from stevedoring and handling include: - 17 - Breakbulk cargo at a rate of 150 tons/team/shift, or 150 t ons x 3 shifts = 450 tons/day 450 tons x 3 holds = 1,350 tons/day Compared with the rate at which merchandise is unloaded in the port of Casablanca, there is a negative differential of 225 tons/year, or a 17% lower unloading rate. Unloading cost per ton: DA 302.46. Excess cost arising from the lower loading rate: 17% x DA302.46 per ton = DA 51.41 per ton. Cost of premium (10%) paid for the Algiers loading rate: DA 30.25 per ton. Total excess unloading cost: DA 81.66 per ton (0.6% ad valorem). 2.27 CNAN freight rates carry an excess cost of US$2 to 3 per ton over those quoted by GEMA (outsider or charter rates), falling to US$0.625 (0.2% ad valorem) on imports. 2.28 Delay attributable to lengthy customs formalities are estimated from the survey at US$1 to 2 per ton (0.5% ad valorem). 2.29 Because customs procedures are only partially computerized, clearance formalities are slower, adding an average of six days of storage in Algiers. Excess costs amount to DA 6.9/ton/day x 6 days = DA 41.6 per ton (0.3% ad valorem). 2.30 If transit charges were reduced to the levels in Morocco (adjusted for any distortions) an excess cost of DA 120 per ton (0.8% ad valorem) would be saved. 2.31 Nonavailability of SNTR land transport vehicles delays pick-up operations and can increase normal warehousing and storage by up to 150%. Cost of normal port storage period per ton per day: Transit charges: DA 3.30 x 5 days = DA 16.5 Storage charges: DA 6.90 x 5 days = DA 34.5 Total = DA 51.0 Excess cost (150%) = DA 76.5 (0.5% ad valorem) 2.32 Total excess costs amount to DA 421.56 per ton (2.9% ad valorem). This figure is very high 1/m 3.5 times the cost of sea freight. Percentages in the same range affect exports, the corresponding loss of competitiveness being a major obstacle to market development. It must be noted, however, that three key elements of excess cost are expressed as Algerian dinars equivalent to the US$ value, so that fluctuations in the exchange rate may alter excess cost considerably. For instance, the 1994 devaluation of the Algerian dinar increased the excess cost (expressed in dinars) by 35 %, but lowered the ad valorem percentage (the more important ratio) by 32%. ANNEXES - 18 - Al. CALCULATION OF AD VALOREM EXCESS COSTS . ALGERIA . MOROCCO . TUNISIA Table A.l: Algeria - Calculation of Ad Valorem Excess Costs impwb Iron and Flectrial Pharma. Dairy Tol Steel Cereals Material Wood Producs Products Fertllkers Supr Imports Vohune 1991 (tons) 670,000 4,990,000 461,500 658,000 33,000 216,654 91,800 732,000 7,352,954 value (US$ 1000) 223,780 623,750 2,748,500 215,930 285,433 364,195 20,196 233,508 4,715,293 Uoit Value (US $);FOB for Exp,C EF for Imp 334 12S 6,000 328 8,649 1,681 220 319 Ad Valorem Excs Costs (X 6.00 2.60 I.S.0 3.00 1.50 1.50 1.00 2.50 1.98% Excess CostS (US$lTon) 20 3 90 10 130 25 2 8 288 Total Excess Cats (US$1000) 13,427 16,218 41,535 6,478 4,281 5,463 202 5,838 93,441 Incased Export Benefit (%) (1) Increased Export Benefit (US$1000) (1) Increased Wdfare Benefits (US$1000) (1) 13,427 16,218 41,53S 6,478 4,281 5,463 202 5,838 Transport Mode (2) M M M M M M M M Handling Mode (3) V V G V G/C C V/S V Eports Fruits Total Total Imports Vegetables Wine Exports and Exports Volume 1991 (tons) 148,000 26,400 174,400 8,027,354 Value (USS 1000) 39,220 17,556 56,776 4,772,069 Unit Value (US $) ;FOB for Exp;CEF for Imp 265 665 Ad Valorem Excess Costs (%) 3.50 1.00 2.73% 1.99% Excess Costs (US$/Ton) 9 7 16 282 Tota Excess Costs (US$ 1000) 1,373 176 1,548 94,990 Increased Export Benefits (%) (1) 2 11 Increased Export Benefit (US$1000) (1) 78,440 193,116 Inceased Welfare Benefits (US$1000) (1) Transport Mode (2) M M Handing Mode (3) C V Source S: rvey data, year 1993 (1) Assuming all transport-related distorsions are eliminated. (2) Transport Mode: M: Maritime, R: Road, T: Train, A: Air, I: htermodal (3) Handling Mode : Container/Trailer, G: General Cargo, B: Bulk, Ba : Bags Table A1.2: Morocco: Calculation of Ad Valorem Excess Costs Imports Aatoe Iron and Total Parts Cereas Salhtr Wood Sugar Stee Fertilizer Imaporb Volume 1991 (tons) 8,012 3,500,000 2,660,000 590,000 364,000 569,000 194,000 7,885,012 Value (USS 1000) 38,305 423,395 316,540 200,010 100,100 247,515 21,922 1,347,787 Unit Value (US S);FOB for Exp,C IF for Imp 4,781 121 119 339 275 435 113 Ad Valorem Excess Costs (%/6) 3 2 0.30 3.00 2.00 4.50 0.50 2.05% Excess Costs (USSIon) 124 2 0.36 to 6 20 I 162 Totl Excess Costs (US$1000) 996 6,410 950 6,000 2,002 11,13S 110 27,606 increased Export Benefit (YO) (I) Increased Export Benefit (USS 1000) (1) Increased Welfare Benefits (USS 1000) (1) 996 6,410 950 6,000 2,002 11,138 110 Transport Mode (2) M M M M M M M Handling Mode (3) G V V V VIS V S Exports Dry FruIts and Camed Total Totalpertb Textile Frab Vegetabks Food Expert and Exporb Volume 1991 (tons) 41,630 2,333 10,000 100,000 153,963 8,038,975 Value (US$ 1000) 725,444 2,741 4,450 170,000 902,636 2,250,423 o Unit Value (US $);FOB for Exp,C IF for Imp 17,426 1,175 445 1,700 Ad Valorem Excess Costs (Y) 0.10 2.69 12.00 1.00 0.34% 1.36% Excess Costs (USStTon) 17 32 53 17 119 161 Total Excess Costs (USSl000) 725 74 534 1,700 3,033 30,639 Increased Export Benefit (/) (1) I 3 5 3 Increased Export Benefit (US$1000) (1) 725,444 8,224 22,250 510,000 Increased Welfare Benefits (USS IOOO) (I) Tranort Mode (2) M M M M Handling Mode (3) C G S G . - Source: Swuvy dat year 1993 (I) As qming all ransport-relded distoions ar eliminaod. (2) Trnsport Mode: M: Mntune, R: Rood, T: Trai, A: Air, I: Intennodal (3) Handing Mode: ConainedTnal, G: Genal Cargo, B: Bulk, Ba: Bap Tsble A13: Tunisia: Calculation of Ad Valorem Excess Costs imports lIro am Chemleal Total Tdlhe Stud M abae, Prodmea Cereab SolHtr Wood Iprts Volume 1991 (tons) 183,000 415,000 118.000 550,000 1,120,000 1,127,000 226,000 3,739*00 Value (USS 1000) 237,900 180,525 2,845,633 19,250 151,200 134,113 74,354 34030 Unit Value (US S);FOB for Exp,C IF for Imp 1,300 435 24,116 35 135 119 329 Ad Valorem Excess Costs (%) 7.3 4.41 0.32 0.5 1.5 0.3 3 1.12% Exess Costs (US$/Ton) 101 19 77 0 2 0 10 10 Total ExcM Cos (US$1000) 13,556 7,961 9,106 96 2,26S 402 2,231 406I Inacsed Export Benefit (%) (1) Incsd Export Bencfit (USSIOO0) (1) Increased Welfwe Bnfits (US$1000) (1) 18,556 7,961 9,106 96 2,26S 402 2,231 Transport Mode (2) M M M M M M M Handing Mode (3) C V G V V V V Exports Frta sad Oe Total TOWl 1mpors TaiNtl Vqetaes ON"e on1 Data Export Ma Exports Volume 1991 (tons) 91,000 30,000 155,000 15,000 291,0O0 4,200,0 Value (USS 1000) 2,184,000 19,6s0 148,800 37,500 2,38990 6,079,740 Unit Value (US S);FOB for Exp,C IF for Imp 24,000 656 960 2,500 Ad Valorm Excess Costs (%) 0.4 4S.78 7.29 1.09 1.24% 1.17% Excess Costs (USS/Ton) 96 320 70 27 513 497 Total Exae Cost (US$1000) 3,736 9,600 10,S4S 409 29,592 71,148 Inreaed Export Benefit (%) (1) 2% 2% 1% 2% Incesed Export Benefit (US$1000) (1) 43,680 394 1,488 750 Incased Wdfare Benefits (USS1000) (1) Transport Mode (2) M MM Hamdling Mode (3) C S V G Source: Srvey data year 1993 (I) Asmuing all bwnport-relaed disosion am eliminated. (2) Trarnx Mde: M: Maritime, R: Rood, T: Tramin, A: Air, 1: Intermodal (3) Haling Mode: Containerfrailer, G: GCeai Cargo, B: Bulk, Ba: Bap - 22 - ANNEX 2 International Trade in 1991 Country Exports Total % of Imports Total % of (billion US$) Exports (billion US$) Imports U.E. 24.0 74.7 18.4 65.0 Industrialized Countries of Asia 1.2 3.7 1.4 5.0 A.L.E.N.A. 1.7 5.3 2.5 8.8 P.E.D. 4.2 13.1 4.9 17.3 Maghreb 1.0 3.2 1.1 3.9 Total 32.1 100.0 28.3 100.0 Source: CIDC, 1993 Trade of the Maghreb Countries in 1991 Country Exports (in thousands of US$) Imports (in thousands ofUS$) To Part From Part Maghreb Total (1)/(2) Maghreb Total (3)/(4) (1) (2) % (3) (4) % Algeria 152 12,314 1.2 151 9,104 1.6 Libya 190 10,775 1.7 482 6,001 8.0 Morocco 357 4,528 7.9 244 7,254 3.36 Mauritania 9 515 7.9 22.2 472 4.7 Tunisia 340 3,895 8.7 210 5,459 3.8 Total 1,048 32,027 3.2 1,109 28,289 3.9 Source: CIDC, 1993 - 23 - Regional Profile of Exports in the Maghreb (All Products) 1970 1980 1986 1990 Percentage To Algeria CEE (12) 81.0 43.4 73.4 67.2 Other countries of Western Europe 1.9 1.0 1.8 4.4 Other developing countries 1.1 51.1 18.0 18.6 Total 84.0 95.5 93.3 90.3 Ancient EPCs 9.1 1.9 1.1 1.7 To Morocco CEE (12) 72.8 62.7 58.2 65.0 Other countries of Western Europe 2.7 4.3 6.2 4.5 Other developing countries 3.7 2.3 3.3 4.0 Total 79.1 69.3 67.7 73.5 Ancient EPCs 10.4 12.1 7.9 2.6 To Tunisia CEE (12) 62.1 72.1 73.8 77.8 Other countries of Western Europe 4.5 1.5 2.8 1.6 Other developing countries 0.7 13.4 1.0 0.4 Total 67.2 87.1 75.7 79.7 Ancient EPCs 9.8 2.2 6.6 2.4 Source : Infonnation of the CA1T exchanges accessed by the BIRD, TARS System - 24 - Annex III: Logistical Constraints Affecting Trade in the Maghreb Countries: Diagnosis A3. 1 This annex describes the barriers identified in the survey, and evaluates the relative importance of these distortions for each country and region. This list of barriers is not exhaustive: for instance, infrastructure-related barriers, generally the best known, are mentioned here only in passing. The principal barriers are enumerated (Table A3) and the survey transcripts, in which they were identified for the first time and described in greater detail, are listed. A3.2 For each country a barrier incidence table (Tables A3. 1 -A3.3), was constructed matching trade barriers and products. The group of products examined include most of that country's trade; small-volume activities, some liquid or solid bulk products shipped on tankers, and merchandise shipped through government-owned cargo handling companies (shipboard and dock loading/unloading operations) are excluded. In these cases current practices specifying gang size, labor-office hiring orders dictating the number of gangs to be used, or practices modifying penalty rates or premiums to elicit improved productivity cannot be easily changed. This sector must be privatized to become competitive, as was done in the Tunisian ports of Sousse and Sfax resulting in a 25% reduction in costs. Handling and storage barriers give rise to three types of excess costs: longer vessel unloading times (demurrage), higher cargo handling costs, and supplementary charges for dock-to-warehouse transfer or storage prolonged by lack of pick-up/collection vehicles. (Categories: TDE1, TDE2 and TDA1. Chains: Textiles, TU; Merchant Marine, TU; Transport Federation, TU; Cereals, MO; Transport/Marine, AL; Electrical & Mechanical Equipment, AL; Iron/Steel, AL.) Barrier ratings: scope, severity, importance A3.3 The impact of a trade barrier is a function of its frequency and the excess costs it generates. Three indicators were used to characterize each barrier: Scope: The ratio of total trade affected by a barrier to the total value of all products traded by the country. This indicator simply reflects the percentage of trade affected by a barrier. Severity: The ratio of total excess cost attributable to this barrier to total excess cost arising from all barriers. Importance: The ratio of total excess cost attributable to a barrier to the total value of the trade (examined in the study). This indicator is the most significant of the three. It is akin to an ad valorem excess cost, which links excess costs to the total value of all the country's trade. It also allows barriers rating high in severity but low in scope to be differentiated from barriers rating high in both severity and scope. - 25 - Table A3: Nomenclature of Barriers ABBREVIATION TRANSPORT DISTORSIONS TD A. Traditional Transport Distorsions TDA Pricing Barrier ( road, civil aviation, maritime, railroads) TDA1 Market Distorting Subsidies and Practices TDA2 Access Discrimination (quotas, nationalities, regions) TDA3 B. NTB Restrictions to movements of Goods TDB Administrative and Procedurial Barriers (incl. procurement) TDB1 Service Barriers (Insurance, Banking, ...) TDB2 Money & Fiscal Barriers TDB3 C. Traffic Agreeements TDC Protection of National Fleets TDC1 European Deregulation (Maritime, Aviation) TDC2 D. Regional Consolidations TDD In shipping lines TDD1 In civil aviation TDD2 In railways TDD3 In highways TDD4 E. Infrastructure Equipment and Facilities TDE Efficiency Improvements TDE1 Harbour and Landside transport TDE2 F. Regional Issues TDF TRADE HARMONIZATION TH A. Tariff Structure Simplification THA B. Customs Procedures Simplification THB C. Import Tariffs/duties Reduction THC D. Import Tariffs/Duties Elimination THD E. Quotas Restriction Elimination THE F. Elimination of Other NTB THF TECHNOLOGY GAPS T A. Standardization TA Inter AMU TA1 AMU-Europe TA2 B. Certification TB Inter AMU TB1 AMU-Europe TB2 C. Telecommunications (at borders) TC D. Environment (Transp. safety,...) TD Table A3.1: Algeria - Identification of Transport-Related Distorsions Electrical Pharm. Dairy Fruits and Products Iron and Steel Cereals Material Wood Products Product Fertilizer Sugar Vegetabica Wines Tranport Mode M M M M M M M M M M Handling Mode B B G B G/C C B/Ba B C B bnportExport I I I I I I I I E E 1. -mos Customs Import Duties Freight Confrence Agrments X X X X Handling Coats X X X X X X Dometic Tranqort It. Priority Systems X X X X X Ad-Valorem Trasit Cods X X X X X X X Ad Valorem Port Tax X X X X X X Doubling Hndling (Strijying, Stuffing, Storage) X Com4tuoy Nationdl Inwreace X X X X X X X Currency Availability X X X X X Freigh liceeing X Fright Control Exce Coats X X X X 2. Expor HAdling Coat b X Freight Cofrenos Agreemets X Unloading Cods X ONT-Type Tax Currecy Avaability Credit Lines X K Delay in Currency Provision Dumping Tir Bachl Freight Added Smviess (COPFAS Diffrnal) X _nnaial Mwketing Defiency X Trmdt Cose X X Brokwr Coda x Domatic Trmp. Cost Table A3.1: Algeria - Identification of Transport-Related Distorsions Electrical Phan. Dairy Fnaita and Prodacts Iron and Steel Cereds Material Wood Proacta Product Fertilizer Sugar Vegetables Wines 3. TrU-Mairoeb Border Tax an Road VaMusi Traend. X am on B _a** Algurio Ban an Ax. VaMiaa Cair. Compeati Frroviair. Sbortfalls Rai Engina Swiia Lack of Rail-Road Coordinatio Bm an Bulk Roil Traffic In1era Tr-qort Redalian ONT-Typ. Tax Road Coatla Storag.dLtoLackofEEaipfaht X X X X Cmrrcy Unedability (Devaluation) X X X X X X X X Cmcy Excage Coa.el X X 4. Infatrucoe HaNivr EqtPawai Shap Poor Handlig Perf _Xance X K X X Unloa&, Stora X X X X Silo$ Shorg X haufficiet Dredsius Computmzed oma procedes X Shortae of Ro-Ro facilities X X Note Transport Mede: M: Mandme, R: Road, A: Air, 1: Inemnoda Hndling Mode: C : ContainerTfrailer, G: General Cargo, B : Bulk, Ba: Bag Table A3.2: Morocco - Identification of Transport-Related Distorsions Auto Iron asd Frnita and Products Pact Ceals Sulfur Woo Sugar Steel Fertilizer Textile Dry fuits Vegetables Canned food Tranport Mod M M M M M M M M U 1 M Handling Mode G B B B B/Ba B Ba C G Ba G mp Expot I I I I I I E E E E 1. Imporb CustomsImnport Duties Fregt Conform Agreeient X X X Handing Cosb X X X X X Domestic TrAport IW. X Priority SyasneM Ad-Vlorm Trasit Coat X X X X X Ad Valorem Port Tax X X Dobing Haig (Stripping, Suffing. Storage) C empuayNana llnmwa X X X X X X Cwurrncy Availability X Freight iceninDg x Freight Control ExFe Costa X X X 2. Expors Handlig Ce x x x Freight Cofre Arementb X X X Unloading Coda X X X ONT-Type Tax X Ourreucy Availubility X Credit lines X Dedays in Carrncy Provision x Dumping ric Bacblal Freight Added Serices (ClE;FAS Differential) Intemntioaal Mkeuing Deficiency Transit Cost X X X X Broker Costa Domeadic Trasp. Costs X X Table A3.2: Morocco - Identification of Transport-Related Distorsions Auto Iron NA Fruits mad Prodactu Parts Cereal Sulfur Wood Sugar Sted Fertilizer Textile Dry fruits Vegetables Canned food 3. Trai-Magheab Border Tax an Road VeNWlsa Trabmdo Claims. an fpU. Algeris X Ban an Axb Vbicue X Calm Casyamaiea Fsviaire SbofIalls X Rail Engin Sikm X Lack of Rail-Road Coiinaua Ban a Bulk Reil Traffic X Itermal Traaort Regulation X X o?r-Thp TaM X Rod Cdatas X X Swa ue to Lack of Equipment armacy Uulsity (Deauation) Ctrren Exchmp Cord X 4. Ianbubr Hadiag Equipimt Shotg X X Poor Haing P _rthe X x UWoaiz&. Sra X Silos Shbrte X lmfficiaa Dredging X Coe.pbad cutm - Sborta of Ro-RD facilities Noe: Trussport Mode: M: Mariime, R: Road, A: Air, 1: intemodad Handing Mode: C: CstainrTrailer, G: Genal Cap, B: Bulk, 3 Bags Table A3.3: Tunisia - Identfication of Transport-Related Distorslons I-ronand Chea il Iu and Products Textil Sel MacWiney Products Ceres Sugar Sulfia Wood Textile Vegebls Olive Oil Datt Trpetor Mods M M M M M M M 3d M 3d 3 m HN"oiig Moha() C B G B B G B B C Ba B 0 IaU/EXput I I I I I I I I E B E B 1. babrt Cadom Impact Dudes Phigt Cafeo Agremets x X X x Handling Comb x x x x x x Domestic Tranqort Int. Piriedty Syaa AAValdre Trual Costa X X x X X Ad Valors. Port Tax Dobl Hadlin (Stripping, Stuffing, Storap) Coepsy Na tional Inrsen X X X x X x awroqy Availability x x x Rit Ui Freiht Control Exces Costs x x x x 2. Export. Haing Coas x X x Freiglt Con orne ASrements X X X Unlosdlng Cota X ONT-Type Tax Arrey Availability Credit Un. Delay in uimacy Provision Dumping rir Backhw4 Freit Added Swviee (ClF-FAS Differential) dnnaoe Mareing Deiciency X Tranat Cosa X X Broker Cost X Domestic Trump. Cots X Table A3.3: Tunisia - Identification of Transport-Related Distorsions Iron ad Chemica Fruit aNd Prodhcbt Textile Steel Machinesy Products Cereas Sugar Sulfur Wood Textile Vegetables OliveOil Dattes 3. Trm-Maghreb Bordar Tax On Road Veicules Trabendo Caim on Banque Algerie Ban on Axle Vehicules Caism Compensation Ferroviaire Shortfalls Rail Engine Switches Lack of Rail-Road Cooriaation Ban on Bulk Rail Traffic hital Transport Regulation ONT-Type Tax Road Contros Stoap due to Lack of Equipment x x Ourrency UasUtiliqy (Devaluation) Currency Exchage Control X X X 4. Infrastructure Handing Equipment Shortage x X X Poor Handling Performance x X X Unloading, Storage x x Silo Shortage x Insufficient Dredging Computerized customs procedurea Shortae of Ro-Ro facilities Noe Transport Mode: M: Martime, R Road, A Air, I: Iltermodal Handing Mode: C: Containerffrailer, G: General Cargo, B: Bulk, Ba: Bags - 32 - A3.4 The description given of each barrier is followed by a reference identifying the surveys from which the information came. This reference is followed by the category that it belongs to. Next, barriers are rated by country in terms of their scope, severity, and importance. Import-related barriers A3.5 Customs Import Duty. Unlike their competitor countries, the European Union in particular, the Maghreb countries have enacted customs tariffs that frequently penalize the use of modern means of transport and their maintenance with taxes on spare parts. (Category THC. Transport Chains: Cereals, MO; Professional Associations, MO; Textiles, MO; Iron/Steel and Machinery, TU). A3.6 Freight Conference Agreements. Some of these agreements, which originated for historical reasons or in bilateral traffic arrangements, set North-South and South-North rate schedules for Algeria, Morocco, and Tunisia. These rates ensure consignors that general cargo and ro/ro services will regularly be available, but they eliminate competition based on rebates. Conference agreements, which group and protect signatory shipowners, prescribe the number and types of vessels in service, the freight rates for different categories of merchandise, and the rebates (prorated according to tonnage) to the consignor appearing on the bill of landing. Agreements of the 40-40-20 type (UNCTAD agreements) cover actual goods traffic, granting national registry vessels exclusive rights to 80% of freight volume and leaving the remaining 20% open to competition. A3.7 Handling Costs. All Algerian and Moroccan ports, as well as the main ports of Tunisia, are operated by government-owned cargo handling companies. This results in: Elimination of the beneficial effects of competition on rate schedules. Low productivity as a consequence of poor company management. Poor company self-financing capacity as a consequence of insufficient budget allocations for maintenance and equipment purchases by zone. Rigidities on the part of dock workers. A3.8 The excess cost attributable to these factors may be as high as 30% of the rates that would be quoted by a private independent operator. (Category, TDE1. Chains: Iron/Steel, AL; Electrical and Mechanical Equipment, AL; Port Authorities, AL; Transport/Maritime, AL; Cargo, Almonds and Industrial Machinery, MO.) A3.9 Domestic Transport Regulations: The most striking example is seen in Morocco in the case of the National Transportation Authority (ONT, Office National des Transports), which regulates and coordinates all domestic shipments by vehicles weighing more than 8 tons ( in gross weight). The country is divided into independent administrative zones. No vehicle may travel without an ONT road permit (feuille de route) which costs 5% of the value of the freight, or a receipt for payment of an additional 4.5 to 5.0% coordination tax (which is partially - 33 - redistributed to the road transport cooperatives). Beyond this 10% excess cost, ONT rigidities seldom allow the loading of backhaul shipments, so vehicles return empty most of the time. The system is further hindered by road check points throughout the country, with their inevitable informal payments and considerable delays. This type of barrier increases transport costs by 7 to 15%. (Category: TDB1. Chains: TIR Transport, MO; Pharmaceutical Products, AL; Timber Imports, AL; Electrical and Mechanical Equipment, AL; Textiles, MO.) A3. 10 Quantitative Restrictions. This barrier is particular to Algeria, which in 1993 classified all imports under three headings: strategic product, prohibited products, and controlled products.' By eliminating or reducing small-volume traffic flows in products essential to the population, this regulation generates numerous informal and clandestine traffic flows. The withholding of import licences, needed to purchase foreign exchange, paralyzes or penalizes whole trade sectors, including inter-Maghreb trade. (Category THE. Chain: Transport, AL.) A3. 11 Ad Valorem Transit Charges. In each of the three countries forwarding agents must hold a licence issued by the customs department. Granting of licences is subject to the agent's financial guarantees, reputation, experience, and knowledge of customs procedures. Licences are often granted to international transport companies. When transit charges are geared to the value of the merchandise and not to the cost of the services rendered, they can raise excess costs considerably affecting the entire transport process. (Category: TDA1. Chains: Electrical and Mechanical Equipment, AL; Textiles, MO; TIR Transport, MO.) A3.12 Ad Valorem Port Tax. This tax is specific to the port of Casablanca. Paid by the forwarding agent, it is a tax on merchandise and is added to the loading and unloading charges paid by shipping companies (0.2% of CIF value for imports and 0.15% of FOB value for exports). The resulting excess cost was studied as part of the analysis of a Moroccan transport chain and was viewed in relation to average port taxes throughout the world, which, whenever they exist, are assessed on a tonnage or volume (m3) basis. (Category: TDA1. Chains: Textiles, MO; TIR Transport, MO.) A3.13 Double Handling Costs. This excess cost item is attributable to the limitations of customs procedures, which may be technological (too little computerization) or locational (customs clearance within port precincts). While this applies to Algeria in particular, it also applies to Morocco and Tunisia, although to a lesser degree because TIR customs formalities are often carried out in situ at clothing factories in both import and export operations. Excess costs arise in connection with the stripping of trailers or containers for inspection on bonded premises and their reloading after clearance for delivery. Double handling becomes necessary, and instances of theft and damage increase. In addition, deliveries are delayed (time is becoming an important factor in determining the true cost of products). (Categories: TDEI, THB. Chains: Electrical and Mechanical Equipment, AL; Cargo, Almonds, Electrical and Mechanical Equipment, MO; TIR Transport/ Textiles, MO; Sea Transport, MO.) I This classiffcation was abolished in 1994. - 34 - A3.14 Compulsory National Insurance. To promote domestic insurance-company development, Algeria, Morocco and Tunisia have enacted legislation requiring all FOB import operations and C&F export operations to be insured by domestic companies. This insurance does away with the play of international competition, limits guarantees, delays settlement of disputes, and generates a major ad valorem excess cost in both import and export operations (up to 50% of premiums). (Category, TDB2. Chains: Electrical and Mechanical Equipment, AL; TIR Transport/Textiles, MO; Textiles, MO.) A3.15 Currency Availability. Restrictions of this type affect the three countries, although Tunisia to a lesser degree because foreign exchange controls have recently eased. In Morocco such controls come into play ex post and have made it impossible to relax the constraint created by the nonconvertibility of local currency. In general this barrier is an obstacle to import activity, where the excess cost generated is attributable to: fluctuation (devaluation) of the local currency over the period between application for and release of the foreign exchange needed; the time consuming nature of applying for foreign exchange (during which the price of the product to be imported may fluctuate); inability to take advantage of low freight rates available on the tramping market, where settlement is required immediately after a vessel is chartered; and overvaluation of the currency. In addition to the loss of markets, these controls result in high surcharges. (Category: TDB3. Chains: Fruits and Vegetables, MO; Foodstuffs Industry, MO; Rail, MO; Pharmaceutical Products, AL; Timber, AL; Textiles, TU; Iron/Steel, Industrial Machinery, TU.) A3.16 Licences to Charter: Charter licences are required to protect national shipping companies. The right of any importer or exporter to charter vessels is subject to approval from the national shipping line, thus preempting the right to carry cargo on its own vessel or freely charter a suitable vessel. Permission to charter is granted only if the national shipping line withdraws. Access to the international freight market is virtually shut off and surcharges as high as 20% over the usual international freight rates must be paid. (Category: TDA3. Chains: Maritime Transport, AL and TU; Cereals, MO; Textiles, TU; Iron/Steel, Machinery, TU.) A3.17 Border Customs Clearance Delays. Border formalities are related to foreign exchange controls and import licencing requirements. Since customs formalities are only partly computerized, inspections are made by customs officials in person. The average waiting time at customs stations is 3 to 4 days. This barrier affects all road, sea, and rail traffic in Algeria and Moroccan and Tunisian sea traffic. (Categories: THB, TDA3. Chains: Fruits and Vegetables, MO; Foodstuffs Industry, MO; Textiles, TU.) A3.18 In terms of barrier-importance ratings, the profile for Algeria is relatively uniform, as most barriers fall into a narrow range (12-16). Barrier scope is relatively high and severity is middling (Figure A3.4). The profile for Morocco is less uniform, consisting of high peaks (ad valorem transport costs) and relatively deep valleys (foreign exchange availability). In Tunisia barrier importance is typically has a low profile except for barriers associated with handling costs and freight conference agreements. Table A3.4: Import Related Barriers IMPORT RELATED BARRIERS SCOPE 100 so 60 N~~~~~~~~~~~~~~~~~~~~~~~ MOROCC [2ALGERIA 40 U TUNISIA 20 0- IMPORT RELATED BARRIERS SEVERrTY 140 120 100 60 -3 [ ALGERIA 60- UH x TUHISIA| 40 20 IUU----H- 0 * N X C D 1 0 N IMPORT RELATED BARRIERS IMPORTANCE 30 25 20 15 FM~~~~~~~~~~~~~~~~~~~~~~~ MROCC~ D1ALr-ERIAI 10 3 TUNISIA 0 i t.1CUSTOMS 1.3HANDLING 1.5 1.7ADVAL 1.9 1.IFREIGHT IMPORT COSTS QUANTITATIVE PORT TAX COMPULSORY LICENCING DUTIES RESTRICTIONS NATIONAL INSUR, - 36 - Export-Related Barriers A3. 19 Some export-related barriers are identical to those affecting imports, although their relative impact may be different. They are handling costs, freight conference agreements, domestic transport regulations, and transit charges. Described below are the barriers specifically related to export activity. A3.20 Unloading Costs. Analysis of the citrus transport chain in Tunisia (Maltese oranges) made it possible to identify in detail the costs affecting exported merchandise. Unloading costs are one link in this transport chain. For unloading costs, the exporter can neither choose the handling company nor negotiate the cost of its services, since the cost is usually incorporated in the sea freight charge. The excess cost may be as high as 10% (Categories: TDA1, TDA2. Transport chain: Transport/Maritime, TU.) A3.21 Dumping Backhaul Rates. TIR traffic is growing apace in both Morocco and Tunisia. 80% of this traffic is controlled by European international transport companies. Their powerful position in Europe enables them to channel and regroup not only North-South traffic but also return traffic (refer to the study on textile chains in Morocco and Tunisia). The cost of getting TIR trailers back on the road, if not covered by revenue-producing traffic in both directions, is supported by their North-South fees. Here, their offer of dumping rates for the return journey defeats any potential competition from Maghreb operators, who are unable to find competitive North-South return rates because they lack commercial offices or any logistical organization abroad. (Categories: TDA1, TDA2. Chains: TIR Transport, MO; Textiles/TIR, MO.) A3.22 Lack of International Marketing. Lack of international marketing largely explains why some Maghreb exporters miss the opportunity to expand their sales abroad. They are content to rely on FOB export arrangements. A good case in point is that of Tunisian olive oil, a product of recognized quality and appreciated internationally for its very low acidity. The entire output is sold FOB to importers in Italy, where it is blended and refined. The difference in profit margins between FOB Tunisia and FOB Italy is 1:5. (Category: TDA2. Chain: Transport Federation, TU.) A3.23 Brokerage Costs. Getting certain export products (especially citrus fruits and early crops) to market requires organization at destination that is especially focused on distribution through Europe. Although the broker or commission agent on whom the exporter must rely can be forced to compete with others, it is still very difficult for the exporter, who maintains no permanent supervisory office at the destination point to evaluate the quality of the service he is getting (sale of his goods at the highest price) or the cost at which it is being provided. This common organizational gap causes a significant excess cost charged against the sale proceeds repatriated to them in the country of origin. (Category: TDB2. Chain: Transport/Maritime, TU.) - 37 - A3.24 Although, barrier scope and severity profiles are similar in form and range in the three countries, there are variations in importance (Table A3.5). In Algeria the low export volume in all product categories except petroleum exaggerates the importance of barriers. However, Algeria is clearly distinguished from the other two countries by its obstacles attributable to credit arrangements and transit costs. All three countries are affected by freight conference agreements and handling costs, although Morocco's performance with handling costs is better than Tunisia's. Infrastructure- and Equipment-related Barriers A3.25 The following barriers are related to infrastructure and equipment short-comings that affect both imports and exports. Because the surveys were not exhaustive, the classification of these barriers is merely indicative. A3.26 Shortages of Handling Equipment. Common to all three countries, although to varying degrees, handling equipment shortages generate excess rate costs and excess indirect costs (demurrage). Shortages of mobile equipment (forklifts with more than a 10 tons capacity, gantry cranes, and container hoists) were cited frequently. The resulting excess costs vary from port to port and are partly responsible for high port handling charges affecting all imports and exports (except bulk liquid or solid cargo). (Categories: TDE1, TDE2, TDA1. Transport Chains: Iron/Steel, AL; Timber, AL; Electrical and Mechanical Equipment, AL; Port Administration, AL; Transport/Maritime, AL; Cargo, Almonds, Industrial Machinery, MO; Textiles/TIR, MO; Textiles, TU; Transport/Maritime, TU; Merchant Marine, TU; Citrus, TU; Iron/Steel, Industrial Machinery, TU.) A3.27 Handling, Unloading, and Warehousing Performance. Dock workers' unions in all three countries are an obstacle to performance and rate improvements. Because they wield considerable political power, government-owned handling companies (on-board and dock operations) have little scope for changing current practices concerning gang size, labor-office orders specifying the number of gangs to be used, or practices for modifying penalty rates or premiums to improve productivity. Only privatization will make this sector competitive, as demonstrated by the Tunisian ports of Sousse and Sfax (which reduced costs by 25%). This barrier gives rise to three types of excess costs: longer vessel unloading times (demurrage), higher cargo handling costs, and supplementary charges for dock-to-warehouse transfer or storage prolonged by the lack of pick-up/collection vehicles. (Categories: TDE1, TDE2, TDA1. Chains: Textiles, TU; Merchant Marine, TU; Transport Federation, TU; Cereals, MO; Transport/Sea; AL; Electrical and Mechanical Equipment, AL; Iron/Steel, AL.) A3.28 Shortage of Silos. Ports through which imported cereals transit (especially Casablanca) are handicapped by inadequate silo storage. This shortage results in additional handling or direct unloading that is both slow and inappropriate (into warehouses) and, not surprisingly, in additional handling charges. The same problem is also seen in many underequipped secondary ports in Morocco as well as in Algeria and Tunisia. (Category: TDE2. Chains: Cereals, MO; Transport/Maritime, AL.) C UN C 0 2.1 2.1 2.1 HANDLING COSTS Ii ui u II 2.2 FREIGHT 2.2 2.2 CONE AGREEM. i r._ _ __-' 2.3 2.3 2.3 UNLOADING _ I II _ COSTS - 2.4 LAND 2I 4 2. TPANSP. RESTR 2.5 CURRENCY 2.5 2.5 AVAILABILUTY 2-6CREDIT - -- - - 12.6 2.6 UNES 2.7 DELAYS IN 2.7 CURRENCY 2 A L7 2J DUMPING TNn a4CHUav w 2.8 2.8 FREIGtIT to 2.SERVICE - .2.9 2.9 IWUVET fIE5T -- 2.10oUTERWAT. II21 . Ell TRAMST- - - COSTS-- . I 2.11 2.11 2.12 BROKER i...... -I COSTS Z 212 2.12 2.13 TRANSPCOrSTSI I 2.13 2.13 0 ~~~~~~~~~~~~~~~~0 c: 0 - 39 - A3.29 Insufficient Dredging. This barrier is associated with use of the port of Casablanca, which cannot accommodate laden vessels drawing more than 32 feet (a fully laden vessel 200 m in length draws 30 feet). Pilots must wait for high tide before they can berth this class of vessel. Such vessels are always operated under the charter-party type of contract, so that the resulting loss of time generates corresponding demurrage costs for the recipient party (1 or 2 days, depending on the terms of the charter party). (Category: TDE2. Chain: Cereals, MO). A3.30 Computerization of Customs Procedures. Computerization of customs procedures has brought considerable progress for both users (forwarding agents) and customs authorities by saving time and manpower (registration of declarations, collection of duties, gathering of statistics, and so on). However, information technology is only partially used in the three countries, creating high opportunity costs, lengthy delays, and additional financial charges. The fact that the computer systems in use do not conform to international standards (the case in Tunisia) generates additional excess costs. (Categories: THB, TAI, TA2, TC. Chains: Transport/Maritime, TU; Textiles/TIR, MOI; Cargo, Almonds, Industrial Machinery, MO.) A3.31 Shortage of Ro/Ro Facilities. There is a tendency toward standardizing the technical specifications of vessels to allow for easier rotation of vessels, faster port turnaround times, and use of modern stowing equipment (containers). Ports thus need dedicated roll-on/roll- off berths and container terminals. Although costly, this type of infrastructure is essential for developing multimodal transport services, connecting feeder ports and load centers by cabotage, and distributing goods throughout the country by rail or road. (Categories: TDE1, TDE2. Chains: Rail, MO; Ports Administration, AL.) A3.32 The shortage of ro/ro facilities is more serious in Algeria than in Morocco or Tunisia (Figure A3.6). Cargo handling problems are severe in all three, Algeria being the worst affected, followed by Morocco. Morocco stands out for its dredging and silo problems. However, the survey has demonstrated that the key problem is the shortage of cargo handling equipment. Trans-Maghreb Barriers A3.33 The following barriers affect both export and import flows within the Maghreb region. A3.34 Border Tax on Road Vehicles Border taxes apply only in Algeria. They are collected on any vehicle with a payload larger than 8 tons entering Algeria. The tax is F 5,000. Introduced to generate road maintenance funds, it also generates foreign exchange because it is payable in French francs. It discourages the development of inter-Maghreb trade by road (TIR transport chain, MO). Collection procedures cause delays as long as 3 to 4 days at border posts (Categories: TDA1, TDF. Transport Chain: TIR Transport, MO.) 0 t 4~ Om W . 4.1 HANDUNG 4.1 HANDLING EQUIPMENT EQUIPMENT SHORTAGE SHORTAGE 4.2 POOR 4.2 OOR _ . HANDUNG - ] HANDLING PERFORMANCE - . . . PERFORMANCE 4.3 UNLOADING 43 UNLOADING, STORAGE . . STORA STORAGE 4.4 SILOS 4.4 SILOS SHORTAGE . ...... - ... SHORTAGE UNSUFRCIENT UNSUFFICIENT a DREDGING DREDGING 4.6 --4.6 COMPUTERISED COMPUTERSED CUSTOMS = CUSTOMS PROCEDURES ... ..- . .. . ....... PROCEDURES 4.7 SHORTAGE - OF SHORT 4.7 SHORTAGE OF OFAC1404 . RO-RO FACILMES I FACILTMES ZG w ~~~~~~~~~~~~~~~0 - 41 - A3.35 Contraband. Because of exchange differentials, exchange and trade restrictions, and subsidized prices of certain goods, widespread smuggling takes place between the Maghreb countries. The amounts involved are far from negligible: Libya/Tunisia/Algeria: Products are taken out of Tunisia and sold in Libya at prices subsidized by the Government. This subsidy generates a paper profit, realized when the products are resold in Algeria or Tunisia. They are transported in both heavy and light trucks and by caravan. Morocco/Algeria: The contraband trade is in products of Moroccan origin (dried fruits, almonds, carpets, auto parts) or brought in directly from Ceuta, Melilla, and Tangier. Morocco is also a source of electronic equipment, household appliances, auto parts, tires, pharmaceutical goods, and baby food. There is a market in Oujda where potential buyers can find any of these goods, which are brought across the border by horse, car, caravan, pedestrians, passengers, and so on. Algeria/Morocco: Contraband trade is in hoofed animals, which are smuggled across the border at night in herds. The value of the traffic converging on Oujda alone has been estimated to be at least F 7 billion annually. Contraband activity has inhibited lawful trade in products such as Moroccan electronic goods. (Categories: THB, THC, TDB3, TAI, TA2. Chains: Fruits and Vegetables, MO; Cereals, MO; Textiles, MO.) A3.36 Ban on Non-Bogie Rail Cars. This ban applies only to the Algerian rail system. It grew out of technical constraints affecting circulation on that network and it precludes inter- Maghreb circulation of Moroccan and Tunisian cars. (Categories: TDE2, TDB1, TBl, TB2. Chain: Rail, MO.) A3.37 Lack of Railways Clearinghouse. In 1965, under the sponsorship of CFTM (Chemins de fer trans-Maghreb), the three main Maghreb countries signed cooperation agreements to foster: standardization of rules governing application of rate schedule, regulation of exchanges of rolling stock, application of international rules where royalties were concerned, and establishment of a clearinghouse facility in Algiers. Measures introduced by the Algerian Government in 1992 brought CFTM operations to a halt; traffic, which had doubled by 1989, declined thereafter. (Categories: TDD3, TDE2. Chain: Rail, MO.) A3.38 Interruptions to Rail Traffic. Rail service is interrupted at Oujda so that passengers entering and leaving Algeria can undergo a surveillance. This interruption subjects both goods and passenger trains to lengthy delays. (Categories: TDE2, TAI. Chain: Rail, MO.) - 42 - A3.39 Lack of Rail-Road Coordination. Because rail-road coordination arrangements and mechanisms are absent, the Maghreb does not have multimodal transport systems. As a result container traffic and direct delivery of containers to final destinations throughout the region remain at a minimum. (Categories: TDE2, TAI, TA2. Chains: Rail, MO; Transport/Maritime, AL; Ministry of Transport, AL.) A3.40 Prohibition on Bulk Rail Traffic. The Algerian Government prohibits bulk import rail traffic from entering the country because of difficulties experienced by the Algerian customs authorities in processing such traffic at border junctions. This restriction discourages the use of rail transport. (Categories: TDE3, TDBI. Chain: Rail, MO.) A3.41 Costs Attributable to Lack of Equipment. In Algeria, Morocco, and Tunisia lack of equipment is a cause of excess rate costs and excess indirect costs (demurrage) although to differing degrees. (Categories: TDE2, TAI, TBI. Chaines: TIR Transport, MO; Glucose/Agri-foodstuffs, MO; Fruits and Vegetables, MO.) A3 .42 Foreign Exchange Controls and Currency Instability. These barriers particularly affect medium-scale exporters engaged in trade with Algeria. Because foreign exchange is in short supply in Algeria and delays in obtaining it are lengthy, exporters have to resort to bank bridge loans (private credit). However, banks tend to put ceilings on this type of lending mainly to reduce exchange risk (currency instability) and settlement delays on the part of Algerian importers. The end result, however, has been a slowing down of potential traffic. In addition, passenger traffic out of Algeria is limited by Algeria's restrictions on foreign exchange availability for personal travel. (Categories: TDB3, TA1, TA2. Chains: Rail, MO; Fruits and Vegetable, MO; Glucose/Agri-foodstuffs, MO; Banking, AL; Transport/Maritime, TU.) A3.43 Trans-Maghreb barriers are only moderately relative important compared with the obstacles created by exchange controls, contraband trade and unnecessary delays and storage. To a lesser extent, equipment shortages and the residual effects of foreign exchange regulations in Tunisia also inhibit trade. - 43 - Annex IV: Matrix of Recommendations for Corrective Measures A4. 1 After the obstacles listed in Annex m were discussed at a seminar in March 1994, participants developed a matrix that assembles possible corrective measures. Many substantive recommendations are regional in scope, whether they focus on the Maghreb as a whole or on expanding the relations between Europe and the Maghreb. Recommendations on Euro-Maghreb trade that recur most often concern multimodal transport in the trade between Europe and the Arab Maghreb Union. The challenges are considerable: not only does such a system pave the way for cost and time savings ("just-in-time" transport), but it also adopts the "logistics management" that the most advanced European enterprises use to orchestrate their raw material purchasing, production, and marketing functions. This technique allows them to reduce their inventories significantly and better respond to increasingly volatile demand (see Peters 1991). Such enterprises are all on the look-out for new foreign markets that will enable them to optinize their management performance. In new markets they look for effective, up-to-date transport technology; efficient communications systems, especially those that facilitate administrative and financial procedures; modern, reliable, and rapid goods and cargo handling arrangements; and appropriate regulatory frameworks. Such conditions are still not fully in place in each of the Maghreb countries, although they are partially available in some spheres of the clothing/textile industry. Corrective Measures Matrix IMPORT-RELATED BARRIERS Barriers Possible Corrective Measures Progress with Curment Measures Recommended Actions at Regional Level Inport Duties - Harmonization of customs procedures and - Within the Maghreb, working groups are IM - Step up work of Maghreb task forces. standardization of technical specifications. drawing up a customs nomenclature for the EM - Step up negotiations for creation of - Radical revision (reduction, simplification) of Maghreb based on the Harmonized System; EU/Maghreb free trade area. nomenclature of merchandise. this will be a prelude to drafting a IM, EM - Develop procedure for - Gradual reduction of customs tariffs (on Maghrebian external tariff. computerization and connection of ports, transport vehicles). - Significant reduction in customs duties and airports, and border posts. - Possible exemption of TIR and CKDs consolidation within the GATT framework - Develop Maghrebian interconnected equipment. (Tunisia-Morocco). information network - Complete computerization of customs - Algeria: General reduction in customs - Consultations between Morocco and procedures (airports, ports, border posts). duties through adjustment of the 1992 Tunisia regarding smooth conduct of Tariff. Maximum rate is 60%. present negotiations with EU for creation of free trade area. Freight - Continuing gradual liberalization of restrictions - Conversion of 50-50 agreements into 40- IM - Conduct study on maritime transport Conference on charters for shipment of cargoes not within 40-20 agreements. cost structures with view to optimizing Agreements the geographic or size limits of regular line freight rates while preserving shipping-line services. profitability and quality of service. - Facilitation of cabotage (elimination of NM - Foster creation of an entity to defend economic and financial obstacles to development shippers' interests nationally and of these lines - allocation of foreign exchange, regionally, with view to consultations reduction of port taxes, and so on). between shipowners and shippers. ______________ Implementation of the Maghreb Convention. IM = Intra-Maghreb EM = Europe/Maghreb IMPORT-RELATED BARRIERS Barriers Possible Corrective Measures Progress with Current Measures Recommended Actions at Regional Level Cargo Handling - Elimination of fictitious charges for services - Refer to "Export-related Barriers: Cargo Charges not actually performed (improve productivity Handling Charges.' through incentive bonuses, restructuring of shipboard and dock handling gangs). - Placement of handling operations on lump-sum basis. - Introduction of uniform rate schedules. - Creation of competition among handling companies, both public and private. - Introduction of uniform charges for cargo held on docks. - Modemization of handling equipment. Domestic In both the road and rail sectors: Morocco: Study under way on PA - Reduction in border crossing times on Transport - Revision by the competent authorities of reformulation of ONT's mission and rail system (currently 2448 hours). Regulations licensing requirements throughout the two development strategy. NM - Introduction of common intra- sectors, with view to greater flexibility, Tunisia: Liberalization under way in Maghreb rail tariff (competitive prices, clarification, and more rational investment. conjunction with process to privatize public uniform tariff structure) giving economic - Definition of network responsibilities. enterprises. operators substantial advantages. - Setting of standards re guaranteed short Algeria: Discussion under way on national IM - Elimination of intra-Maghreb road journey times. transport plan. taxes. - Client to have choice of method of payment, - Temporary suspension of measures to IM - Standardization of traction and rail client to be able to deal 'at single window." facilitate intra-Maghreb rail transit. rate schedules throughout the Maghreb. - Liberalization of international and national - Agreement on road taxes ratified but not IM - Reactivation of the intra-Maghreb backhaul freight rates. put into effect. railway clearing house. - Training for TIR truckers. IM - Standardization of rail system - Elimination of abusive internal road traffic maintenance techniques. controls. Quantitative - Gradual elimination of the priorities system - Liberalization of imports well advanced in Restrictions (liberalization of imports, complete or partial Morocco and Tunisia. removal of prohibitions). - Signature of an intra-Maghreb agreement - Contraband control measures. on mutual administrative assistance in campaign against customs fraud. IM = Intra-Maghreb EM = Europe/Maghreb IMPORT-RELATED BARRERS BaTris Possible Corrective Measures Progress with Current Measures Recommended Actions at Regional Levdl Ad Valorem - Rationalization of licensing system (issue of Tunisia: IM - Standardization of intra-Maghreb Transit Charges new licenses, requalification of new - Formulation of regulations to govern tariffs. beneficiaries). forwarding agents. IM - Computerization of customs clearance - Setting of rates for transit operations (HAD, - Intensive computerization of customs formalities. honoraires d'agries en douane) according to clearance formalities. actual cost of services rendered instead of on an ad valorem basis. Ad Valoran - Introduction of competitive tariff structure. Under way in Tunisia. EM - Essential harmonization throughout Port Charge - Modification of the base for these charges, the Maghreb. using the metric ton or m3 instead of the value of the merchandise. TM = Intra-Maghreb EM = Europe/Maghreb iIMPORT-RELATED BARRIERS Barriers Possible Corrective Measures Pogress with Current Measures Recommended Actions at Regional Led Double Cargo - Development of multimodal transport - Legal texts being drafted in Tunisia and Handling companies. Morocco. - Promotion of training for and establishment of - Under way in Tunisia and Morocco. real forwarding agents ("organizers of door-to- - In the planning phase in Morocco. door transport," and not merely commission - Tunisia already has in place a system of agents, of whom there are too many at present, selling to customers on their own premises. especially in Tunisia). - Already exists in Tunisia and Algeria. In - Promotion of competition on the part of Morocco legislation exists but implementing public-sector entities providing port services. regulations are still being drafted. - Gradual liberalization and better organization of port services, whether provided by public- or private sector entities, with a view to keeping operator costs as low as possible and improving service quality (productivity, security, rapidity, and so on). - Transfer of container customs clearance formalities to destination points (importers' storage facilities or factories). - Establishment and development of under-bond areas where shipments can be assembled and broken up. - Introduction and development of an attitude of competition in port management; using methods yet to be formulated but focused especially on standardization of holding, unloading and ______________ warehousing practices. _ Obligation to - Gradual liberalization of insurance contracts. In-depth analysis of excess costs identified. Insure with - Amendment of laws that make it compulsory National to insure imported goods with local insurers (if Companies this generates an excess cost). - Improvement of remedies and indemnification in cases of damage. - Measures to eliminate the need for double insurance. - Facilitation of co-insurance and re-insurance arrangements. OM = Intra-Maghreb EM = Europe/Maghreb IbPORT-RELATED BARRIEIRS Barrers Possible Corrective Measures Progress with Current Measures Recommended Actions at Regonal Level Foreig - Freedom of access to the exchange market. Compensatory mechanisms exist already: IM - Ensure that Banque maghribine Exchange - Better coverage of exchange risk. bilateral agreements between Maghreb dinvestissements et de commerce cxtaieur Controls - Establishment of compensatory mechanisms. central banks. takes an active part in financing Maghreb - Policy directed toward currency convertibility projects and promoting the circulation of and therefore toward stabilization of the capital so as to encourage development of exchange rates between Maghreb currencies. an industrial apparatus whose component parts complement one another instead of being in competition. Grant of - Liberalization of access to charter Partial measures under way in Tunisia. M/EM - Foster establishment of Charter arrangements through legal recognition of the Maghrebian private shipowning companies Licenses right to form private charter companies to with modem fleets by creatig mcentive negotiate better freight rates with international regulatory fmework (fiscal inducements, shipowners thereby eliminating present excess investment assistance, and so on). costs. Customs - Adoption and application of international Tunisia and Morocco are signatories of the EM/IM - Adjustments to reflect European Cleance agreements in the TIR and multimodal arenas. TIR Convention. Algeria proposes to sign and Maghrebian norms affecting the Delays at - Harmonization of customs procedures and it. nomenclature of merchandise. Borders standardization of technical specifications. - Various Maghreb taskforces are currently EM/IM - Standardization of international 00 - Full computerization of customs clearance working on the harmonization of customs transit documents, in accordance with procedures. laws and procedures. European and Maghrebian regulations. - Clarity of documentation and accessibility of - One of these taskforces has a special communications among all partners in the mandate to study transit difficulties and transport chain, through multidimensional recommend solutions. networks and electronic data exchange (edi) - Bilateral customs cooperation committees services. have been formed by the three countries. - Adoption of international norms for technical Their meetings provide forums for resolving specifications governing technical, safety, and numerous problems affecting both (private) environmental features of imported products. passengers and economic operators. Other bilateral committees and commissions that group representatives of the trade sector (economy, transport, customs police, business circles) have also helped to facilitate fornalities at land border posts, ports, and airports. IM Intra-Maghreb EM Europe/Maghreb EXPORT-RELATED BARRIERS Barriers Possible Corlective Measures Progress with Current Measures Recommended Actions at Regional Levd Hnd - Complete elimination of fictitious charges (for Tunisia: Restructuring of cargo handling Charges services not actually rendered). - Fostering of gangs in all ports. Proposal for a tariff competition and competitiveness among public putting all cargo handling charges on a flat- and private sector cargo handling companies. rate basis. - Modernization of cargo handling equipment, Algeria: Stevedoring companies have especially gantry cranes and container hoists. become autonomous in each port, with - Facilitation of embarkation of cargo through dockers no longer directly dependent on decentralization of customs export formalities. government subsidies. The present policy is to set up public and private sector stevedoring companies that will compete with one another. Morocco: The Casablanca Port Authority, an autonomous entity, has signed a performance contract governing incentives for dock personnel and calling for the modernization of port equipment. In addition, each port has its own technical committee. Freight - Gradual liberalization of bilateral agreements Tunisia: There are two daily services on the Conference governing regular freight-line services. Marseilles-Tunis route, with vessel quality Agreements - Improvement of rebate arrangements on and type to suit different service conference freight rates. requirements. Turnaround time is 36 hours - Increased frequency of departures. instead of 48. CTN policy is to stabilize - Improvement of the technical quality of vessels freight rates and possibly to bring pressure to used on regular freight-service routes. bear on other shipping companies to lower their charges. A National Council of Shipowners exists, headquartered in Tunis. Algeria: Since 1990 CNAN no longer has a monopoly on freight. The government department with oversight of the country's ports has made them responsible for their own (decentralized) management. Morocco: Competition is assured through 40-40-20 agreements incorporating "outsider' _____________ shipping companies. ___ IM = Intra-Maghreb EM = Europe/Maghreb EXPORT-RELATED BARRIERS Barriers Possible Corrective Measures Progress with Current Measures Recommended Actions at Regional Level Unlading - Study by the three Maghreb countries of ways Charges to use partnership arrangements to solve the problems affecting different types of traffic. Regulatons In the road and rail sectors: Refer to 'Import-Related Barriers: Domestic IM - Introduction of a joint intra-Maghreb Governing - Revision by the competent authorities of the Transport Regulations." rail tariff (standardized tariff structures) Domestic criteria on which licenses are now granted that will allow economic operators Transport throughout the Maghreb in these sectors 1/m with substantial advantages. a focus on flexibility, clarification, and more IM - Studies to assess joint purchases of rational investments. rolling stock (locomotives, cars) by the - Elimination or rationalization of the road taxes three rail systems. Treat AMU decisions payable on entry into Algeria. as a means of accelerating the process so as - Moderation of road controls. to ensure direct passage without breakbulk operations. IM - Reactivate the inter-Maghreb railway clearing house. Currency - Approval of allocations of foreign exchange in Tunisia: Allowance of D 500 per passenger. Restrictions keeping with the estimated duration of business Use of international credit cards. trips until the currencies are convertible. 0 Morocco: Allowance of DH 5,000 per passenger. Larger allowances for business trips. Algeria: Use of credit cards but counterpart in foreign exchange required. Dtmping Rates - Formation of Maghrebian TIR transport groups Morocco: This change is quite apparent, EM/IM: Bring road fleet into line with on MIR either by utilizing a network of European with the authorities advocating international European Union TIR standards. Backhaul correspondents as agents or by setting up partnership as a way to develop this type of agencies directly. The aim is to institute North- activity. South freight rates that contribute to profitability. IM = Intra-Maghreb EM = Europe/Maghreb EXPORT-RELATED BARRIERS Baniers Possible Conreive Measures Progress with Current Measures Recommended Actions at Regional Levd Lack of - Allocation of foreign exchange to exporters or International export groups to cover costs of establishing out- Marketing of-country logistical and commercial facilities. - Use of all-media advertising campaigns to promote marketing at national and interprofessional levels. - Conversion of FOB selling contracts to a C&F basis. - Establishment of processing plants, locally or abroad, to give greater value added to raw export products (the implication being that all necessary government facilities would be made available for the purpose 1/m foreign exchange, credits, etc.). Transit Charges - Trade missions (making use of the resources of interprofessional organizations) to discuss and negotiate transit charges at destination and to have them treated as transport expenses deductible from the proceeds of export sales. Morooco: Study of the high excess costs generated for TIR traffic by passage of the Strait of Gibraltar. Brokerage - Development of means of monitoring Charges commission agents at destination through the professional association active in each sector. - Availability of government facilities for each case in point. IM Intra-Maghreb EM = Europe/Maghreb TRANS-MAGHREB BARRIERS Barriers Possible Corrective Measures Progress with Current Measures Recommended Actions at Regional Level Boarder Tax on Vehides - Elimination of the entry tax on vehicles crossing the Algerian border and choice of other means of financing the country's road system maintenance fund. Contraband - Strengthening of border controls. IM - Intermational agreements among the - Liberalization of issue of import Maghreb countries on reducing the licenses. subsidies granted on certain product - Allocation of foreign exchange; categories. currency convertibility. IM- AMU studies on where and how to amend existing accords (UNIM, Maghreb Commission, Free Trade Agreement) ratifying trans-Maghreb trade, so as to simplify their application. IM/EM - Promote more contacts through and circulate trade information likely to eliminate triangular traffic patterns (Lylien PVC, exported to Germany for reimport into Tunisia). - In regard to the increased value of this traffic, take into account the effects of the present situation in Algeria. Foreign Exchange - Macroeconomic adjustment measures IM - Develop banking and financial Controls in consultation with international institutions to cover trans-Maghreb trade. partners and the IMF. - Reduce the delays associated with - Policy focus on convertibility of international procurement proceedings so currencies. as to facilitate the bringing into place of the corresponding financing arrangements. - Clarify and select types of financing for Algeria (export credits, or the Islamic- Bank-type of bridge loan). IM Intra-Maghreb EM = Europe/Maghreb TRANS-MAGHREB BARRIERS Barriers Possible Corrective Measures Progress with Cunrent Measures Recommended Actions at Regional Level Prohbition on Non-Bogie - Harmonization of conditions IN - Continue with the government of Rail Cars governing intra-Maghreb circulation of Algeria to ease restrictions on the types railway rolling stock. of rail cars accepted on that country's network, with a view to eventual unrestricted circulation as per UIC standards. The Moroccan and Tunisian networks should also comply with all their obligations. Lack of Railway - Gradual elimination of present loading IM - Reactivation of the cooperation Cle1inghowe; Change of systems. agr signed in 1965 in the name LocMotves - Reactivation of the CFTM (Chemin de of the Cooperation Committee of CFTM. fer trans-Maghreb) clearinghouse. Lack of Rail-Road - Introduction of appropriate lifting IM/EM - Establish a legal framework Coordntio equipment at breakbulk points. for multimodal transport. - Decentralization of road fleet to achieve availability of vehicles at breakbulk points for haulage over final leg of journey. - Coordination of any backhal freight so that emnpty vehicles can be made available at breakbulk points as necessasy._ Proibibtion on Bulk - Gradual easing of the restrictions on Go forward with implementation of the Feight some categories of products. decision already taken to lift this ban. IM= Intra-Maghreb EM = Europe/Maghreb TRANS-MAGHREB BARRIERS Barriers Possible Corrective Measures Progress with Current Measures Recommended Actlowu at Regional Level Storage Made Necessary - Financing and installation of adequate Tunisia: The port of Rhades was by Lack of Cargo cargo handling facilities in ports and at equipped with four container hoists six handling Equipment breakbulk points. months ago. - Adjust handling charges so that there - Containers are stripped in bonded is greater incentive to pick up cargo warehouses outside port precincts. from docks within exemption periods. Morocco: The ports of Casablanca, Agadir, and Tangier were equipped with a total of 18 container hoists between 1980 and 1993. - The new container terminal in the port of Casablanca, due for completion in 1995, will accommodate vessels with up to 20,000 TEU of capacity. Algeria: Three ports are currently being equipped as container terminals: Oran, Algiers, and Annaba. They will be linked to the rail network. IM = Intra-Maghreb EM = Europe/Maghreb INFRASTRUCTURE, EQTIPMENT & TECHNOLOGY BARRIERS Bariers Possible Corrective Measures Progress with Current Measures Recommended Actions at Regional Level Computerization of - Massive investment in computerization so that a IM - Harmonize the procedures employed Customns Procedures fuU range of electronic data interchange (edi) by the Maghreb countries. services can be provided. IM - Avoid hardware and software - Systematic accelerated training for personnel incompatibilities among the Maghreb working as inspectors and customs officers in countries, and ensure that links are possible transit companies. with banking, port, and maritime service - Retraining of personnel not already familiar providers. with computerized procedures. IM - Identify the necessary conditions for a - Extension of terminals linkied to customs offices master plan to link the Maghreb countries in order to accommodate some importes, who with the "just-in-time' system in would thus benefit from being able to clear accordance with international standards. merchandise through customs on their own IM - Extend the system to border controls. premises. - Extension of computerization measures in Algeria, where customs procedures suffer because of the huge number of entry operations and the distances characteristic of the country. ___ Lack of Ro/Ro - Provision of ro/ro installations in all ports - Studies for and installation of ro/ro ramps Facilites where they are needed as a step toward now well under way in primary and development of multimodal transport systems that secondary ports. will allow domestic deliveries by container and TIR trailer and breakbulk operations through .________________ -cabotage vessels (for some types of cargo). _ IM = Intra-Maghreb EM = Europe/Maghreb Policy Research Working Paper Series Contact Title Author Date for paper WPS1570 Protecting the Old and Promoting Estelle James January 1996 S. Khan Growth: A Defense of Averting the 33651 Old Age Cnsis WPS1571 Export Prospects of Middle Eastern Alexander Yeats February 1996 S. Lipscomb Countries: A Post-Uruguay Round 33718 Analysis WPS1572 Averting the Old-Age Crisis. Robert J. Palacios February 1996 M. Pallares Technical Annex 30435 WPS1573 North-South Customs Unions and Eduardo Fernandez-Arias February 1996 S. King-Watson International Capital Mobility Mark M. Spiegel 31047 WPS1574 Bank Regulation: The Case of the Gerard Caprio, Jr. February 1996 D. Evans Missing Model 38526 WPS1575 Inflation, Growth, and Central Banks: Jose de Gregorio February 1996 K. Labrie Theory and Evidence 31001 WPS1576 Rural Poverty in Ecuador-A Jesko Hentschel February 1996 E. Rodriguez Qualitative Assessment William F. Waters 37873 Anna Kathryn Vandever Webb WPS1577 The Peace Dividend: Military Malcolm Knight February 1996 R. Martin Spending Cuts and Economic Norman Loayza 31320 Growth Delano Villanueva WPS1578 Stock Market and Investment: Cherian Samuel March 1996 C. Samuel The Governance Role of the Market 30802 WPS1579 Different Strategies of Transition Marek Dabrowski March 1996 C. Rollison to a Market Economy: How Do 84768 They Work in Practice? WPS1580 Indonesia's Cocoa Boom: Hands- Takamasa Akiyama March 1996 G. llogon Off Policy Encourages Smallholder Akihiko Nishio 33732 Dynamism WPS1581 Where Has All the Education Gone? Lant Pritchett March 1996 S. Fallon 38009 WPS1582 Stock Market Development and Ross Levine March 1996 P. Sintim-Aboagye Long-Run Growth Sara Zervos 38526 WPS1583 Trade Preferential Agreements in Michael Michaely March 1996 D. Papageorgiou Latin America: An Ex-Ante Assessment 31910 WPS1584 Price Support at Any Price? Costs Witold M. Orlowski March 1996 W. Orlowski and Benefits of Alternative Agricultural 37270 Policies for Poland Policy Research Working Paper Series Contact Title Author Date for paper WPS1585 Public Finances and Economic Luca Barbone March 1996 C. Pelegrin Transition Hana Polackova 85087 WPS1586 Did External Barriers Cause the Azita Amjadi March 1996 S. Lipscomb Marginalization of Sub-Saharan Ulrich Reinke 33718 Africa in World Trade? Alexander Yeats WPS1587 Payments and Finance Problems Constantine April 1996 M. de la Puente in the Commonwealth of Michalopoulos 31206 Independent States WPS1588 Social Insurance in the Transition Deborah Mabbett April 1996 L. Biely to a Market Economy: Theoretical 36280 Issues with Application to Moldova WPS1589 The Analysis of Emerging Policy Sudarshan Gooptu April 1996 R. Vo Issues in Development Finance 31047 WPS1590 The Latvian Banking Crisis: Alex Fleming April 1996 S. Coffey Lessons Learned Samuel Talley 32535 WPS1591 Competition in Network Industries Michael Klein April 1996 S. Vivas 82809 WPS1592 The Stockmarkets as a Source of Cherian Samuel April 1996 C. Samuel Finance: A Comparison of U.S. and 30802 Indian Firms WPS1593 Rural Finance for Growth and Poverty Saeed Qureshi April 1996 C. Anbiah Alleviation ljaz Nabi 81275 Rashid Faruqee WPS1594 Why Have Some Indian States Done Gaurav Datt April 1996 P. Sader Better Than Others at Reducing Martin Ravallion 33902 Rural Poverty? WPS1595 In Search of Owners: Lessons of Cheryl W. Gray April 1996 M. Geller Experience with Privatization and 31393 Corporate Governance in Transition Economies WPS1596 Agrarian Structure in Poland: The Johan van Zyl April 1996 M. Williams Myth of Large-Farm Superiority Bill R. Miller 87297 Andrew Parker WPS1597 Egypt and the Uruguay Round Bernard Hoekman May 1996 F. Hatab Arvind Subramanian 35835 WPS1598 Logistical Constraints on Francois Amiot May 1996 L. Lewis International Trade in the Maghreb Ovadia Salama 37369