Trade and Trade Facilitation in the Greater Mekong Subregion

1
Trade and Trade Facilitation in the Greater
Mekong Sub-region

• Jean Pierre Verbiest
• Country Director
• Thailand Resident Mission, Asian Development
  Bank
  
• March 2008

2
Outline

• Overview of Trade in GMS
• Trade Facilitation Defined
• Current Initiatives
• Some Thoughts on Way Forward

3
Trade Key Trends and Patterns

• Fast growth in merchandize trade since early
  1990s in the GMS economies slowed down during
  Asian financial crisis and picked up further late
  on.
• Exports from the seven GMS economies rose from
  26.2 billion in 1990 to 153 billion in 2005 -
  at a compound annual rate of 12.3, twice as fast
  as the rise in world exports.
• Trade openness increased
• Share of intra-regional to total GMS trade grew
  from just over 5 in 1992 to over 12 in 2002,
  and continues to be on the rise
  
• Marked change in commodity structure of exports
• Source ADB Key Indicators of Developing Asian
  and Pacific Countries

4
Figure 1 Exports, Imports and Trade Openness
5
Figure 2 Composition of Merchandise Exports(
of total exports)
Source UN COMTRADE database compiled from
partner country data.
6
Potential

• Intra-regional trade in East Asia has grown from
  less than 35 of total trade in 1980 to 54 in
  2003. This is a lower proportion than in the
  European Union, but higher than NAFTAs, which is
  around 46.
• Intra-GMS trade is way below intra-regional trade
  in East Asia and there is much room for catching
  up (while caution needs to be rendered on trade
  diversion).
• Further scope to expand international trade.

7
Opportunities

• There is ample scope for further growth of
  trade
  
• The GMS proximity with the rapidly growing
  markets in PRC and India.
  
• Market access improved in recent years both in
  ASEAN and in developed countries outside the
  region, e.g. Lao PDR (NTR status in the US since
  2005), Cambodia and Viet Nam (WTO membership in
  2005 and 2007).
• The GMS economies combined share in world trade
  remains small (1.5 of world trade)

8
Main Impediments to Trade

• GMS situation economic growth multilateral
  trade liberalization recent moves towards
  bilateral and regional free trade agreements GMS
  programs and development of economic corridors
• Tariffs have come down road infrastructure have
  been developed potential for trade in GMS is yet
  to be fully realized, why?
  
• Trade still difficult - primarily due to
  remaining hurdles in transport and trade
  facilitation

9

TRADE FACILITATION COMPONENTS
Legal and institutional framework
Trade and customs documentation
Cargo clearance by customs and other related
agencies such as sanitary and phyto-sanitary and
health authorities
Trade logistics and supply chain
Trade finance
10
Trade Facilitation in GMS

• Defined trade, customs and transport
  facilitation, to support accession and
  implementation of the international/regional
  agreements and commitments
• Focus of work physical connectivity legal
  agreement (CBTA) framework for action on trade
  facilitation
  
• Institutional mechanisms trade facilitation
  working group meetings committees under CBTA
  GMS Customs directors-generals meetings

11
The CBTA

• Cross Border Transport Agreement

12
The CBTA Initiative

• Inconsistent and difficult border crossing
  formalities and procedures
  
• Restrictive visa requirements for truck drivers
• Restrictions on entry of motor vehicles
• Different standards on vehicles and drivers
  across countries
  
• Transit traffic difficult/not allowed

13
CBTA Focus

• Facilitation of border crossing formalities
  (single window and single stop customs
  inspection, coordinating of hours of operation)
  
• Facilitate cross-border movement of people
  (multi-entry visa, recognition of driver
  license)
  
• Facilitate cross-border movement of goods
  (regional transit regime)
  
• Exchange of traffic rights
• Set requirements for admittance of road vehicles
• Pilots implementation focus on selected GMS
  border crossings (see map)

14
Geographic Coverage of CBTA
15
SFA-TFI Initiative

• Strategic Framework for Action on Trade
  Facilitation and Investment

16
SFA-TFI Initiative

• SFA-TFI re-enforces FTAs, WTO agreements, Revised
  Kyoto Convention, ASEAN Transit Agreement and
  CBTA
  
• SFA-TFI deals behind the border constraints in
  information sharing and exchange regarding cargo
  clearance, customs procedures harmonization,
  sanitary and phyto-sanitary cooperation, trade
  logistics development and business visa for
  business people all of these are national
  issues and require GMS level cooperation

17
SFA-TFI Customs Gaps

• Reforms customs reforms are ongoing but at
  different stages of implementation (the Revised
  Kyoto Convention)
  
• Differences in inspection regime (slow to adopt
  modern risk management techniques), transparency,
  automation and uneven use of electronic data
  interchange, clearance time
• Customs-centered reforms, lack of support for
  other government agencies involved in cargo
  clearance
  
• Land border systems underdeveloped, focus has
  been on ports and airports

18
SPS Inspection and Quarantine Gaps

• Uneven regulatory and legal framework
• Slow and inadequate collection and distribution
  of information on threats and responses
  
• Lack of certified testing and quarantine
  facilities
  
• Use of standards as non tariff barriers (NTBs)
• Lack of risk management in SPS agencies

19
Logistics Gaps Analysis

• Lack of connectivity and capacity of
  infrastructure
  
• Continue inefficient public sector operations
• Simple, un-integrated logistics services
• Limited demand for more sophisticated services

20
Priority Projects Identified

• Customs compliance program programs to promote
  customs and other Government agencies relationship

21
Priority Projects Identified

• SPS risk management, mutual recognition and
  certification of labs, and assistance to SMEs for
  compliance

22
Priority Projects Identified

• Information platform

23
Priority Projects Identified

• Logistics national logistics plan
  institutional building

24
Way Forward

• Continue implementation of reforms at selected
  GMS border crossings
  
• Initiate institutional re-engineering of agencies
  involved in cargo clearance, and provide them
  with the information systems needed to expedite
  transactions at the border
• Support to GMS Business Forum to promote and
  mainstream private sector participation in public
  sector transport and trade facilitation
  activities

25
Logistics Development Study of the NSEC

• Ruth Banomyong
• ADB Consultant

26
Perception of reliability index

• This perception of reliability index is based on
  a five point likert-type scale
  
• Perceived to be not reliable
• Perceived to be not very reliable
• Perceived to be fairly reliable
• Perceived to be reliable and
• Perceived to be very reliable.

27
NSEC logistics corridor analysis

• Bangkok-Kunming corridor
• Route no. 3 West (R3W) Bangkok-Chiang Rai-Mai
  Sai-Keng Tung-Mong La-Da Luo-Yunjinghong-Kunming.
  
• Bangkok- Chiang Rai-Chiang Saen-Mekong
  River-Yunjinghong/Kuanlei port-Kunming
  
• Route no. 3 East (R3E) Bangkok- Chiang
  Rai-Chiang Khong-Hoeuy Xay-Luang
  Namtha-Boten-Bohan-Kunming

28
NSEC Bangkok-Kunming corridor
R3W via Myanmar R3E via Lao PDR Via Mekong River
29
Route no. 3W via Myanmar (2006)
30
BKK-Kunming via Mekong River (2006)
31
Route no. 3E via Lao PDR (2006)
32
Logistics corridor modelling cost (2006)
33
R3 Cost Summary (2006)
34
R3 border cost summary (2006)
35
Logistics corridor modelling cost (2000)
36
Logistics corridor modelling projected cost
(2015)
37
Logistics corridor modelling time (2006)
38
R3 Time Summary (2006)
39
R3 border time summary (2006)
40
Logistics corridor modelling time (2000)
41
Logistics corridor modelling projected time
(2015)
42
Haiphong-Kunming (2006)
43
Haiphong-Kunming cost (2000-2006-2015)
44
Haiphong-Kunming time (2000-2006-2015)
45
Nanning-Hanoi (2006)
FTL Steel (30 tons)
(or 27 USD/Ton)
46
Nanning-Hanoi cost (2000-2006-2015)
47
Nanning-Hanoi time (2000-2006-2015)
48
Summary (2006)
49
NSEC logistics development

• Impact of higher logistics cost on NSEC
• A 10 percent increase in transport costs can
  lead to a 20 percent reduction in international
  trade (Limao Venables, 2001).
  
• Each day that a product is delayed before being
  shipped reduces trade by more than 1 percent
  (Djankov et al., 2006).
  

50
NSEC/GMS key indicators
Source Adapted from Doing Business in 2007 and
Djankov et al (2006), World Bank.
51
NSEC/GMS macro logistics scorecard
52
Corridor Level Assessment R3
53
Corridor Level Assessment
54
Summary

• Infrastructure (hardware) still lacking but
  improving.
  
• Rules regulations (software) in place but not
  totally implemented.
  
• Border crossings are still the weakest link in
  the corridors.
  
• Transit trade minimal compared to border trade.
• No economic corridor (level 4) yet only transport
  corridors are in place