How governance influences on
Logistics performance in ASEAN
Date:
2021 Nov. 29
Student ID: 2021263026
Full Name: Le Thi Minh Hong
Content
1. Motivation
2. Research Question/Idea
3. Literature Review
4. Sample Data
5. Research Design
6. Contribution
Motivation
- ASEAN countries are considered as a special market which has not only a diversity
of economies but also political situations.
- Explore the effect of governance quality on Logistics performance in ASEAN
countries.
- The relationship between governance quality and Logistics Performance, especially
in ASEAN based on the governance definition of World Bank has been barely
explored.
Research Question/Idea
• This research is conducted to answer the question “How does governance effect on
Logistics performance in ASEAN countries?” based on the data aggregated by World
Bank about Logistics Performance Index and Worldwide Governance Indicators in
2007, 2010, 2012, 2014, 2016, 2018.
• The research is conducted by Exploratory Factor Analysis, Common Factor Analysis
to aggregate indicators into factors and investigate the relationship between
governance - logistics performance by using Multiple Regression Model using SPSS
software no. 25.
• Keywords: LPI, WGI, Logistics, Governance, ASEAN
Literature Review
1. Logistics Performance and Logistics Performance Index (LPI)
• Logistics performance is considered as a scale to measure “the degree of effectiveness,
efficiency and differentiation” of a country about the logistics activities (“Logistics Performance:
Efficiency, Effectiveness, and Differentiation” by Brian S. Fugate, John T. Mentzer, Theodore P.
Stank)
• According to the report “Connecting to Compete 2018 - Trade Logistics in the Global Economy:
The Logistics Performance Index and Its Indicators”, the World Bank also remarked that
logistics performance show the efficiency of supply chain that connects firms to domestics and
international markets.
• Logistics performance was proved to be a significantly positive relationship with economic
growth of a country, especially in international trade. In “The Logistics Performance Effect on
International trade”, Azmat GANI
Literature Review
• Logistics performance Index was developed by the World Bank every 2 years from 2007
based on 6 indicators which are about Customs, Infrastructure, Ease Of Arranging
Shipment, Quality Of Logistics Services, Tracking And Tracing And Timeliness.
• Logistics Performance Index can show a general picture about quality about the customs,
Infrastructure, logistics service of a country. (“Proposals for improving the Logistics
Performance Index” by Ruslan Beysenbaev, Yuri Dus)
• Logistics performance Index was prove to be “the most accurate and broad logistics
efficiency assessment tool” – according to “Proposals for improving the Logistics
Performance Index” by Ruslan Beysenbaev, Yuri Dus.
Literature Review
2. Logistics Performance in ASEAN
• Logistics Performance was proved to have a significant role in improving trade value in
ASEAN. (An Analysis of the Impact of ASEAN’s Logistics Performance on Trade Flows
Using Linear and Non-linear methods in an Augmented Gravity Model – by Barton Sy,
Stephen Jun Villejo, Rutcher Lacaza
• ASEAN market was considered as a potential emerging market with the second high
international LPI scores after East Asia in Asia. "Overcoming trade logistics challenges:
Asia-Pacific experiences“ by Shepherd, B. and Hamanaka, S. (2015)
• Customs Procedure in ASEAN country is still not good due to the lack of automated
practices, redundant procedures and becomes a biggest barrier in Logistic services.
Literature Review
3. Worldwide Governance Index (WGI) and Governance in ASEAN
• Governance could be defined by many ways. According to the “Governance Matter” by
Daniel Kaufmann et al. in 1999, Governance is defined “the traditions and institutions by
which authority in a country is exercised”. In this definition, Governance is divided into 3
main areas which is the process by which governments are selected, monitored and replaced;
the capacity of the government to effectively formulate and implement sound policies and the
respect of citizens and the state for the institutions that govern economic and social
interactions among them.
Literature Review
3. Worldwide Governance Index (WGI) and Governance in ASEAN
• In “the role of governance in economic development: Evidence from some selected
countries in Asian and the Pacific”, Muhammad Azam et al. concluded that weak
governance of a country could be showed through weaknesses in systems and institutions.
• Corruption was a result of weak governance. High corruption shows that a country suffers
from a governance problem as the result of weakness in its institutions such as lack of
accountability, transparency, competent bureaucracy and particularly lack of rule of law.
“The role of governance in economic development: Evidence from some selected countries
in Asia and the Pacific” by Muhammad Azam, Chandra Emirullah, 2014
Literature Review
3. Worldwide Governance Index (WGI) and Governance in ASEAN
According to “Corruption and Growth in ASEAN Countries: A Non-Linear Investigation” by
Haw, T. J., Kueh, J., & Ling, S. W. S. (2020):
• ASEAN has a closed link to widespread corruption due to social and historical impact such
as historical impact of brutal ruling regime in the past, weak governance and nation
integrity system, the weak regulatory framework and civil society, and exist of statedrestricted news media system.
• There is a significant U-shaped relationship between control of corruption and economic
growth of ASEAN countries. In other words, corruption may indirectly facilitate the growth
until certain threshold level, ultimately, corruption is substantially reducing growth as
corruption level under control.
Literature Review
4. Governance and Logistics Performance
• Logistics Performance Index are divided into 2 main categories which are area for policy
regulation including Customs, Infrastructure and Services which indicate as main inputs to
supply chain and supply chain performance outcomes which include Timeliness,
International shipments and Tracking and tracing. (according to the report “Connecting to
Compete 2018 - Trade Logistics in the Global Economy: The Logistics Performance Index
and Its Indicators” by Jean-Francois Arvis et al.
• An environment with high opportunity for corruption to raise which can be due to
complicated trade administrative procedure can lead to further inefficiencies in logistics
performance _ “The Logistics Performance Effect in International Trade” by Azmat Gani
Literature Review
4. Governance and Logistics Performance
• The negative relationship between Corruption and logistics performance has been conducted
by many researches before. In "Corruption, gender inequality and logistics performance“
Larson, P.D. concluded that corruption has a detrimental influence on logistics performance
after testing based on LPI and CPI (corruption Perception Index).
• There is a positive in the relationship among corruption, weak governance and LPI which is
the more corruption and weaker governance yield higher logistics performance, according to
"The double-edge resource-based view of logistics performance and governance in Asian
countries“ by Koh, B.H., Wong, W.P., Tang, C.F. and Lim, M.K. (2018)
Hypothesis
• This research is conducted based on the available data of LPI and WGI from the data of
World Bank to investigate the relationship between Governance and Logistics
Performance by examining the hypothesis:
 H1: : the more effective governance is, the better logistics performance becomes.
Research Methodology – Sample Data
- The obtained data was based on the logistics performance records of ASEAN countries in
2007, 2010, 2012, 2014, 2016, 2018 which were conducted by World Bank.
- The source of data is Logistics performance Index by World Bank; Worldwide Governance
Indicators by World Bank in 2007, 2010, 2012, 2014, 2016, 2018.
- International Monetary Fund, World Economic Outlook Database, October 2021
- After removing missing data of Brunei Darussalam in 2007, 2010, 2012, 2014, the sample
size is 56 records in total.
Research Design: Main Research Model (regression)
LPI_O = 𝜷𝟎 +𝜷𝟏 𝑾𝑮𝑰_𝑷𝑶𝑳 + 𝜷𝟐 𝑾𝑮𝑰_𝑽𝑨𝑨 + 𝜷𝟑 𝑫𝒖𝒎_𝒄𝒐𝒂𝒔𝒕 + ∈
In there:
•
LPI_O: Dependent Variable which is Overall Logistics Performance Index is
aggregated from 6 partial Logistics performance Indicators
•
WGI_POL: Independent Variable which is Overall Worldwide Governance Index
related to policy and regulation of each country and is aggregated from 5 partial
Worldwide Governance Indicators.
•
WGI_VAA: Independent Variable which is Voice and Accountability – a Worldwide
Governance Indicator.
•
Dum_Coast: is Control Variable coded that 0 if the country is landlocked and 1 if
not.
•
∈: error term
Research Design: Dependent Variable
- LPI_O is biannual overall Logistics Performance index which is calculated by the normalized
scores for each of the six original indicators by using Exploratory Factor Analysis (EFA) and
Common Factor Analysis (CFA).
- Six indicators are:
o LPI_CUS: Efficiency of the clearance process, score (1=low to 5=high)
o LPI_INFRAS: Quality of trade- and transport-related infrastructure, score (1=low to
5=high)
o LPI_EOS: Ease of arranging competitively priced international shipments, score (1=low
to 5=high)
o LPI_LOGSER: Competence and quality of logistics services, score (1=low to 5=high)
o LPI_EOT: Ability to track and trace consignments (1 = low to 5 = high)
o LPI_TIME: Frequency with which shipments reach consignee within scheduled or
expected time, score (1=low to 5=high)
Research Design: Dependent Variable
Observed
variable
LPI_LOGSER
LPI_INFRAS
LPI_EOT
LPI_EOS
LPI_CUS
LPI_TIME
factor
Mean
LPI_O
0.98
2.90
0.97
2.78
0.97
3.00
0.97
3.00
0.96
2.80
0.96
3.42
KMO(kaiser-Meyer_olkin)
Bartlett's Test of Sphericity
SD
Cronbach
Alpha
0.57
0.66
0.60
0.52
0.56
0.52
0.99
0.90
Approx. ChiSquare
df
Sig.
648.30
15.00
0.000
Eigenvalues: 5.618; Cumulative %: 93.634
 The new factor (LPI_O) can explain 93.63% all the variance of all 6 observed
variables.
Research Design: Test Variables
Test variables are consist of 6 worldwide governance indicators which are:
Indicators
Meaning
WGI_VAA
Voice and Accountability: Reflects perceptions of the extent to which a country's citizens are able to
participate in selecting their government, as well as freedom of expression, freedom of association, and a
free media. (ranges from approximately -2.5 (weak) to 2.5 (strong) governance performance)
Political Stability and Absence of Violence/Terrorism: measures perceptions of the likelihood of political
WGI_PSNV instability and/or politically-motivated violence, including terrorism. (ranges from approximately -2.5 (weak)
to 2.5 (strong) governance performance)
WGI_GE
Government Effectiveness: Reflects perceptions of the quality of public services, the quality of the civil
service and the degree of its independence from political pressures, the quality of policy formulation and
implementation, and the credibility of the government's commitment to such policies. (ranges from
approximately -2.5 (weak) to 2.5 (strong) governance performance)
WGI_RQ
Regulation Quality: Reflects perceptions of the ability of the government to formulate and implement sound
policies and regulations that permit and promote private sector development.(ranges from approximately 2.5 (weak) to 2.5 (strong) governance performance)
WGI_ROL
Rule of Law: Reflects perceptions of the extent to which agents have confidence in and abide by the rules
of society, and in particular the quality of contract enforcement, property rights, the police, and the courts,
as well as the likelihood of crime and violence. (ranges from approximately -2.5 (weak) to 2.5 (strong)
governance performance)
WGI_COC
Control of Corruption: Reflects perceptions of the extent to which public power is exercised for private gain,
including both petty and grand forms of corruption, as well as "capture" of the state by elites and private
interests. (ranges from approximately -2.5 (weak) to 2.5 (strong) governance performance)
Research Design: Test Variables
• 6 test variables are proved that highly correlated each others.
• To remove the multicollinearity in test variables without removing any of 6 variables,
Exploratory Factor Analysis (EFA) and Common Factor Analysis (CFA) are used to
summarized into 2 new factors which are WGI_VAA which is kept originally and
WGI_POL which is aggregated form 5 remained variables.
• In there:
o WGI_VAA: is Voice and Accountability
o WGI_POL: includes Political Stability and Absence of Violence/Terrorism,
Government Effectiveness, Regulation Quality, Rule of Law and Control of
Corruption.
Research Design: Test Variables
Indicators
WGI_VAA
WGI_ROL
WGI_COC
WGI_GE
WGI_RQ
WGI_PSNV
Factor
WGI_VAA WGI_POL
0.92
0.97
0.94
0.93
0.86
0.80
Mean
SD
-0.76
-0.22
-0.29
0.11
-0.07
-0.21
0.68
0.88
0.99
1.02
0.98
0.86
KMO(kaiser-Meyer_olkin)
Bartlett's Test of Sphericity
Cronbach
Alpha
0.96
0.79
Approx. ChiSquare
df
Sig.
567.87
15
0.000
By summarizing 6 indicators into 2 new factor, the Eigenvalues= 1.06 and Cumulative
% =95.22%  this 2 factors can explain 95.22% for variance of all 6 Indicators
LPI_O
LPI_O
Research Design: Variables Test
WGI_VAA
WGI_POL
By scatter plot, WGI_VAA and WGI_POL have upward linear relationship with dependent variable
LPI_O
Research Design: Control Variables
• Dum_Coast is a Dummy variable which is coded that countries which have coastline
will take value 1 and countries which are landlocked will take value 0.
• In LPI, the World Bank noted that landlocked country will be connected to the
international markets by land bridge formed by the neighbor countries.
• Being landlocked or having owned coastline can also lead to difference in the
governance and structure of law and regulation among countries in Logistics field
Research Design: Control Variables
Group Statistics
Dum_coast
LPI_O
landlock
coastline
N
Mean
6
50
2.3406
3.0596
Std.
Std. Error
Deviation Mean
0.17652
0.07206
0.53149
0.07516
t
P-value
-3.269
0.002
• By independent sample t-test, with P-value=0.002 is smaller than the significant level (0.05)
 There is difference in the effect of being a landlocked country or not on Logistics Performance
Index of a country.
• Mean of landlocked countries is 2.34, meanwhile countries having coastline have mean
equaled to 3.0596
 The countries with coastline have logistics performance better than landlocked countries.
Research Design: Descriptive statistics
Factors
LPI_O
WGI_VAA
WGI_POL
Indicators
N
Minimum
Maximum
Mean
LPI_CUS
LPI_INFR
LPI_EAOSH
LPI_LOGSER
LPI_EOTR
LPI_TIM
WGI_VAA
WGI_PSNV
WGI_GE
WGI_RQ
WGI_ROL
WGI_COC
56
56
56
56
56
56
56
56
56
56
56
56
1.85
1.69
1.73
2.00
1.57
2.08
-2.21
-1.65
-1.62
-2.27
-1.55
-1.67
4.18
4.27
4.04
4.21
4.25
4.53
0.17
1.50
2.38
2.23
1.84
2.24
2.7968
2.7773
3.0048
2.8954
3.0041
3.4172
-0.7624
-0.2132
0.1119
-0.0743
-0.2235
-0.2944
Valid N (listwise)
56
Std.
Deviation
0.55954
0.65890
0.52414
0.56688
0.59533
0.51761
0.68386
0.85576
1.02022
0.98332
0.88382
0.99208
Research Design: Descriptive statistics
As the result from descriptive statistics:
•
In LPI overall, mean values of indicators run from 2.7773 to 3.4172 in which timeliness has the highest
value and Infrastructure has the lowest value.)
 Meeting schedule has the best performance in Logistics and Infrastructure has the worst quality in
ASEAN.
•
In the scale from -2.5 to 2.5, the mean value of Voice and Accountability equaled to -0.7624, with the
min value is -2.21 and max value is 0.17
•
 the freedom of citizens in ASEAN countries which is about participating in selecting their
government, as well as freedom of expression, freedom of association, and a free media was not high.
•
In relation to politic, regulation and corruption, control of corruption has the lowest mean (-0.2944)
which means that the corruption in ASEAN countries is still high.
•
Government effectiveness has the highest mean value (0.1119) but also has the highest standard
deviation (1.02022) which means that there is difference in effectiveness of government in ASEAN
countries.
Research Design: Correlation test
Variables
WGI_POL
WGI_VAA
LPI_O
Mean
-0.139
-0.762
2.983
Std.
Deviation
0.883
0.684
0.552
Correlations
WGI_POL
WGI_VAA
LPI_O
1
.494
**
(0.000)
.892
**
(0.000)
1
.621
**
(0.000)
1
**. Correlation is significant at the 0.01 level (2-tailed).
From the result of correlation test, both WGI_POL and WGI_VAA has positive
correlation with the dependent variable which is LPI_O with all P-value are smaller than
the significant level.
Research Design: Regression test
Regression Model Coefficient
Model
LPI_O
For model
Coefficients
t
Sig.
(Constant)
2.875
23.842
0.000
WGI_VAA
0.123
2.286
0.026
WGI_POL
0.489
13.102
0.000
Dum_Coast
0.301
2.871
0.006
F
Adjusted
R Square
106.923
0.852
Research Design: Regression test
• As the result in the table above, All P-value of independent variables are smaller than
the significant level 0.05.
• WGI_VAA and WGI_POL has positive correlation coefficients with LPI_O.
• Adjusted R-Square equaled to 0.852 which means these explanatory variables can
explain 85.2% the effect on the Logistics Performance Index in ASEAN countries.
• In other words, the hypothesis which is “the more effective the governance is, the
better Logistics Performance is” is supported.
 We have our final model:
LPI_O = 2.875+ 0.489*𝑾𝑮𝑰_𝑷𝑶𝑳+0.123*𝑾𝑮𝑰_𝑽𝑨𝑨+0.301*𝑫𝒖𝒎_𝒄𝒐𝒂𝒔𝒕+∈
Research Design: Regression Model – Assumption test
1. Test of Normality
Tests of Normality
Kolmogorov-Smirnova
LPI_O
Statistic
0.096
df
56
Shapiro-Wilk
Sig.
Statistic
*
.200
0.954
df
56
Sig.
0.033
Significant values of both 2
tests are smaller than
significant level 0.05  the
data differs significantly
from a normal distribution
Research Design: Regression Model – Assumption test
1. Test of Auto-correlation
Model
1
R
.928
a
Model Summaryb
Adjusted R Std. Error of
R Square
Square
the Estimate
0.861
0.852
0.21209
DurbinWatson
1.571
a. Predictors: (Constant), Dummy, WGI_POL, WGI_VAA
b. Dependent Variable: LPI_O
With Durbin-Watson value equaled to 1.571< 4 so this model are not affected by
auto-correlation
Research Design: Regression Model – Assumption test
2. Test of Multi-collinearity
Model
Unstandardized
Coefficients
B
(Constant)
2.875
WGI_VAA 0.123
LPI_O
WGI_POL
0.489
Dummy
0.301
a. Dependent Variable: LPI_O
Std.
Error
0.121
0.054
0.037
0.105
Coefficientsa
Standard
ized
Coefficie
t
nts
Sig.
Beta
0.153
0.781
0.170
23.842
2.286
13.102
2.871
0.000
0.026
0.000
0.006
95.0% Confidence
Interval for B
Lower
Bound
2.633
0.015
0.414
0.091
Collinearity
Statistics
Upper Toleran
VIF
Bound
ce
3.117
0.231
0.602 1.661
0.563
0.755 1.325
0.512
0.762 1.312
All VIF values are smaller than 3 so there is no Multi-Collinearity in the model
Research Design: Regression Model – Assumption test
3. Test of Homoscedasticity
•
•
By Histogram, Regression Standardized Residual has mean value equaled 2.35E-15 ~ 0
and Standard deviation equaled to 0.972 ~1. Therefore, Regression Standardized Residual
can be concluded to follow standard normal distribution.
By Normal P-P plot of Regression Standardized Residual, Regression Standardized
Residual can be concluded to follow standard normal distribution
Contribution
1. Conclusion
•
Governance quality is significantly associated with Logistics performance and is a significant driver
of Logistic performance.
•
Being a landlocked country or a coasted country also has a significant effect on Logistics
Performance.
•
In general, Governance quality in ASEAN countries is not high, in there, Voice and Accountability
index has the lowest quality which means the control of Government in almost ASEAN countries is
still high. Simultaneously, due to that, it can be easy to understand that Government Effectiveness
Index in ASEAN has the highest value.
•
Control of corruption quality also low which means corruption in ASEAN countries is quite strong.
•
Logistics Performance index in ASEAN stays at the middle level of {1;5} with timeliness index has
the highest level. Meanwhile, quality of infrastructure in Logistics has lowest value. This can be
explained due to that almost ASEAN countries are lower middle income.
•
Because of governance quality is not high and corruption situation is still high, Efficiency of the
clearance process or Custom quality is not high in ASEAN countries (mean of Custom is 2.8).
Contribution
1. Implications
•
This research result can provide policymakers, logistics sector operators and companies in ASEAN
countries and potential business parters from foreign markets who want to do business in ASEAN
countries.
•
To enhance Logistics performance, Governments should enhance governance quality such as:
improving control of corruption in custom clearance process; improving Infrastructure quality
related to Logistics.
35