EXPERT GROUP MEETING ON IMPROVING TRANSIT COOPERATION,
TRADE AND TRADE FACILITATION FOR THE BENFIT OF LLDCS:
CURRENT STATUS AND POLICY IMPLICATIONS
NEW YORK, 10-11 DECEMBER 2015
SYED NURUZZAMAN
STRUCTURE OF THE REPORT
• Recent economic and social trends
• International conventions and agreements
• Harmonization of customs and border crossing procedures
• Transit infrastructure
• Trade and trade facilitation
• Financing infrastructure development
• Way forward: Policy options
I. RECENT ECONOMIC AND SOCIAL TRENDS
• Robust growth replaced by growing uncertainty
• Falling commodity prices: Azerbaijan, Kazakhstan, Mongolia and Turkmenistan
• Rapid depreciation of currencies
• Lay-offs in construction activities
• Remittances faltering
II.
INTERNATIONAL CONVENTIONS AND AGREEMENTS
•
•
VPoA notes that numerous physical and non-physical barriers holding back the LLDCs
•
•
Simplifying and regulating transport and transit operations
•
UNECE and ESCAP providing technical assistance within the ambit of the International Convention
on the Harmonization of Frontier Control of Goods (1982)
LLDCs have acceded to international conventions and agreements: inter-country trade and transit
cooperation
International conventions and agreements important platforms for regional cooperation and
integration
STATUS OF ACCESSION
• Resolution 48/11 recommended 7 conventions
• More have been added to the recommended ones
• All 12 LLDCs have acceded to at least 1 convention (Lao PDR)
• None have acceded to all the 21 conventions listed in Table 5
• Many conventions are yet to be acceded to by the Asian LLDCs
STATUS OF ACCESSION (CONTINUED)
•
Among the 12 Asian LLDCs, most popular (9 LLDCs) is the Customs Convention on the
International Transport of Goods under Cover of TIR Carnets – 1975: 40 years of
fruitful experience with TIR
•
Next is 8 LLDCs each acceding to the Convention on the Contract for the International
Carriage of Goods by Road (CMR 1956), Convention on Road Traffic 1956, and the
International Convention on the Harmonization of Frontier Control of Goods 1982
(Revised Kyoto Convention 1999).
FREE TRADE AGREEMENTS
• Very popular with LLDCs
• Armenia 9, Azerbaijan 10, Kazakhstan 14, Kyrgyzstan 9, Lao PDR 10,
Mongolia 1, Nepal 3, Tajikistan 9, Turkmenistan 5 and Uzbekistan 10
• Trade impact with FTA partners:
Bhutan, Lao PDR and Nepal trade mostly with FTA partners;
most other LLDCs export 20 percent or less to FTA partners
III.
CUSTOMS, HARMONIZATION OF POLICIES AND BORDER
CROSSING PROCEDURES
Key transit barriers: WB
• Hard physical infrastructure barriers
lack of infrastructure
Missing links, poor maintenance, incompatible systems, obsolete technologies
Soft infrastructure barriers: different legal systems, weak coordination, lack of skilled
personnel, non-compliance with conventions, lack or slow implementation of regional/subregional agreements
CUSTOMS, HARMONIZATION OF POLICIES AND BORDER CROSSING
PROCEDURES (CONTINUED)
Procedural barriers in serving corridors
Cumbersome and large number of documents
Frequent inspections
Different technical standards
Exorbitant charges
CUSTOMS, HARMONIZATION OF POLICIES AND BORDER
CROSSING PROCEDURES (CONTINUED)
Different traffic regulations
Restricted visa requirements
Different locations of various control stations
Stringent requirements for vehicle movements
REGIONAL AND SUB-REGIONAL INITIATIVES IN ADDRESSING
TRANSIT BARRIERS
Asian Highway Network
Trans-Asian Railway Network
Singapore-Kunming Rail Network
CAREC Joint Customs programme
UNECE/ESCAP Electronic TIR Customs Transit System (eTIR)
REGIONAL AND SUB-REGIONAL INITIATIVES IN ADDRESSING
TRANSIT BARRIERS
UNECE/ESCAP Single Window programme
Regional Single Window for ASEAN Connectivity
GMS Sub-regional Agreement for Facilitation of Cross-border Transport of
Goods and People
Integrated Check Post initiative (ICP: India)
BBIN
MODELS AND METHODOLOGIES FOR CONTROL AUTHORITIES
• Secure Cross-border Transport Model: a vehicle tracking system
• Efficient Cross-border Transport Model: a model for identifying non-physical
barriers, evaluate alternatives and provide optimal solutions
• Time-cost Distance Methodology: designed to identify bottlenecks along the
transport corridors
COUNTRY RESULTS IN REDUCING BARRIERS THROUGH
FACILITATION MEASURES
• Armenia, Azerbaijan, Bhutan, Kazakhstan, Lao PDR, Nepal, Mongolia and
Tajikistan have reduced time needed to complete international trade
transactions
• Azerbaijan: from 69 days in 2006 to 38 days in 2012
• Lao PDR: from 66 days in 2006 to 26 days in 2012
• Azerbaijan and Kyrgyzstan: cut down number of documents from 18 to 8
during the same period
V.
TRANSIT INFRASTRUCTURE DEVELOPMENT
• Key to promoting transit trade
• LLDCs and their development partners accord high priority
• One of the 6 priority areas in VPoA
• Development of roads, rail links, dray ports and transport/development
corridors receiving priority attention
• Challenges remain: poor quality trade-transport infrastructure and various
inefficiencies associated with “doing business”
QUALITY OF TRADE-TRANSPORT INFRASTRUCTURE
World Bank’s Logistics Performance Index
Efficiency of clearance process
Quality of trade and transport related infrastructure
Ease of arranging competitively priced shipments
Competence and quality of logistics
Ability to track and trace consignments
Timeliness of shipments
OVERALL LPI RANKINGS
• Among the 12 LLDCs, “best” performers are Kazakhstan and Armenia with 88 and 92 rankings, way below
international standard
• Rest of the LLDCs have double digit rankings, indicating urgent need for policies and measures in
reducing/eliminating the listed barriers
• Survey of logistics professionals shows similar results
• World Bank’s Doing Business Report 2016: trading across borders, a new variable
 Particularly difficult for LLDCs
 Rankings ranging from 21 for Bhutan to 132 for Tajikistan, 159 for Uzbekistan and 172 for Afghanistan
TRANSPORT/ECONOMIC CORRIDOR APPROACH TO
INFRASTRUCTURE DEVELOPMENT
CAREC initiative (6 road corridors)
19200 km corridor roads brought to good condition by 2013
1312 km roads and highways upgraded by 2013
Extending original CAREC corridors to 29,350 km by 2020
Number of projects increased from 6 in 2001 to 166 in 2015
All these have led to significant increase in transit trade
Necessary but not sufficient: must be accompanied by harmonization of customs and
border crossing procedures
TRANSPORT/ECONOMIC CORRIDOR APPROACH TO
INFRASTRUCTURE DEVELOPMENT (CONTINUED)
Euro-Asian Transport Link (EATL)
jointly launched by UNECE and UNESCAP:
Phase I (2002-2007): focused on identification of Euro-Asian road and rail projects; EG vetted the results
Phase II (2008-2013): coordinated by UNECE, identified 9 rail and road corridors to link participating
countries with Europe and Asia.
Identified 311 projects with an outlay of US$215 billion
Phase III: coordinated by UNECE, aims to make the EATL links operational with a focus on mobilizing financing
the projects and removing administrative and physical barriers to transit trade
NETWORK APPROACH TO ROAD AND RAIL INFRASTRUCTURE
DEVELOPMENT
Asian Highway Network:
29 countries have become signatory to the agreement
11 are LLDCs
Covers 142,000 km of roads, connecting 32 countries
Kazakhstan with 12,828 km of highways tops the list
Bhutan has the lowest with 170 km of roads
Quality remains a big concern
Missing links another concern
Human costs of low quality roads: high incidence of road accidents
NETWORK APPROACH TO ROAD AND RAIL INFRASTRUCTURE
DEVELOPMENT (CONTINUED)
Trans-Asian Railway Network
The Intergovernmental Agreement on the Trans-Asian Railway Network came into existence on 11 June 2009
18 countries become party to the agreement including Lao PDR, Mongolia, Nepal, Tajikistan and Uzbekistan
Armenia, Azerbaijan and Kazakhstan have signed but not yet parties to the agreement
Railways cover vast distances from hinterland/LLDCs to nearest ports: potential for huge investment
Again, often very poor quality, missing links and different standards prevent full realization of transit trade
VI. TRADE AND TRADE FACILITATION
Recent trends in world trade
WTO revised world merchandize trade growing from 3.3 percent to 2.8 percent in
2015
Asia’s growth in merchandize trade revised from 5 percent to 3.1 percent
China has slowed down
Consequently, LLDCs are being badly hit as they depend on international and transit
trade for their economic growth
TRADE AND TRADE FACILITATION (CONTINUED)
Reducing trade barriers and trade costs
Various trade/transit barriers and long distances lead to high time and trade costs in exporting/importing
Transit neighbors often have poor quality or missing infrastructure, poor logistics and high customs barriers, adding to
LLDCs’ already high trade costs
One study reveals that, in trading with USA and Germany, LLDCs face trade costs that are on average significantly
higher than those faced by the non-LLDCs
Additional trade costs with USA range from 3 % for Kazakhstan to 174 for Bhutan, 67 per cent being the average
for the group
One of the main sources of the high trade cost is the high and increasing cost of containers to export/import their
goods
VII. FINANCING INFRASTRUCTURE DEVELOPMENT
Infrastructure requirements in Asia-Pacific region
 Both physical infrastructure as well as removing non-physical barriers to transit trade
 AP region’s total infrastructure financing requirements @ US$8.3 trillion over ten years from 2010 to 2020
 US$750 billion per year
 US$710 billion per year for physical infrastructure
 One ESCAP estimate puts regional infrastructure requirement at US$800 billion to US$900 billion per year with US$11
trillion over next 15 years
 Transport projects to cost US$350 billion per year
 New sources: e.g., Asian Infrastructure Investment Bank
FINANCING INFRASTRUCTURE DEVELOPMENT (CONTINUED)
Infrastructure requirements in Asian LLDCs
National transport infrastructure investment requirement @ US$1.3 trillion over 10
years for 11 Asian LLDCs
Afghanistan occupies the top spot with US$14 billion, followed by Kazakhstan
US$11 billion, Mongolia US$9 billion, and Lao PDR US$9 billion
Yearly requirements vary from US$287 million for Azerbaijan to US$2 billion for
Mongolia
FINANCING INFRASTRUCTURE DEVELOPMENT (CONTINUED)
Sources for mobilizing investment resources
Domestic resources
Resource rents earned from natural resources range from 37 percent to 47 percent of their GDP in
Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan
Tax revenue is a traditional source: 4 LLDCs have tax/GDP in excess of 20 percent but most faltering
Need for more efforts in raising resources through this traditional route
Most LLDCs are energy rich: good potential to mobilize resource by setting aside resource rents and then
invest in transit infrastructure
Tax/GDP ratio: 4 LLDCs have in excess of 20 per cent. Most faltering
FINANCING INFRASTRUCTURE DEVELOPMENT (CONTINUED)
Foreign Direct Investment
Constitutes an important source of development finance for LLDCs but highly
skewed in favor of resource rich LLDCs
FDI stocks since 2000 totaled US$129 billion for Kazakhstan, US$26 billion
for Turkmenistan, US$18 billion for Azerbaijan, US$17 billion for Mongolia
and US$9 billion for Uzbekistan.
Others have been less successful
FINANCING INFRASTRUCTURE DEVELOPMENT (CONTINUED)
Official development assistance
Critical for LLDCs in building their infrastructure
Strong and net positive externalities
Sub-optimal investment in infrastructure
Government investment supplemented/complemented by ODA
Total ODA commitments to all LLDCs increased from US$11.4 billion in 2000 to US$26.1 billion in
2014.
Asian LLDCs saw a decline from US$10 billion in 2010 to US$8.7 billion in 2014
FINANCING INFRASTRUCTURE DEVELOPMENT (CONTINUED)
ODA destination and sectoral composition
Afghanistan received the most ODA among Asian LLDCs: average of US$6 billion over 4
years; exceeded 10 per cent of its GDP
 Less than 1 % of GDP in other LLDCs
Although low as a share of GDP, highly significant in infrastructure development particularly
for non-resource rich LLDCs
Most of the ODA went to social and economic sectors
In the latter, transport and energy, trade and industry, and tourism development featured
prominently
FINANCING INFRASTRUCTURE DEVELOPMENT (CONTINUED)
Other sources
Remittances
Public-private partnerships
Regional capital markets
South-south and triangular cooperation
POLICY OPTIONS
Need for improving productive capacity with support from development partners
Need to mainstream VPoA in national development strategies with a special focus on
transit cooperation, trade and trade facilitation and infrastructure development
LLDCs that have not done yet should be supported in acceding to international
conventions and ratifying agreements such as WTFA
POLICY OPTIONS
LLDCs and their transit partners should strengthen cooperation in promoting regional
integration through enhanced intraregional trade and greater participation in
regional and sub regional agreements
Technical assistance should be provided to LLDCs in undertaking country specific
studies in enhancing their transit trade
LLDCs should take measures to identify transit/trade barriers and take concrete
actions to overcome those
POLICY OPTIONS
LLDCs should be supported in building the capacities of their trade and transport
related institutions
LLDCs should be supported by their development partners in fully utilizing various
trade facilitation measures including those based on ICT
LLDCs should have full access to all types of resources in their infrastructure
development efforts
LLDCs should be supported to fully benefit from their participation in
economic/transport corridors
POLICY OPTIONS
LLDCs should take concrete measures to better target the scarce resources including external
resources for building their infrastructure and productive capacities
LLDCs with support from their development partners need to devise strategies to use ODA,
FDI and other resources in creating deeper linkages within their economies so that they can
better leverage their trade potential.
LLDCs should be supported to adopt measures to raise domestic as well as external resources
for their infrastructure development with a focus on domestic as well as transit infrastructure
THANK YOU