The capacity of countries to efficiently move goods and connect manufacturers and consumers with international markets is improving around the world, but much more progress is needed to spur faster economic growth and help firms benefit from trade recovery, according to a recent World Bank Group survey on trade logistics.
Germany is the top performer among the 155 economies ranked in the Logistics Performance Indicators (LPI), which are included in the report “Connecting to Compete 2010: Trade Logistics in the Global Economy.” The study is based on a global survey of international freight forwarders and express carriers. The United States ranks at number 15 on the list.
“Economic competitiveness is relentlessly driving countries to strengthen performance, and improving trade logistics is a smart way to deliver more efficiencies, lower costs and added economic growth,” says Robert Zoellick, president of World Bank Group. “Streamlining the connections among markets, manufacturers, farmers and consumers offers tremendous growth and investment opportunities and should be a top focus for developing country growth strategies.”
According to the LPI, high income economies dominate the top logistics rankings, with most of them occupying important places in global and regional supply chains. By contrast, the 10 lowest performing countries are almost all from the low and lower income groups.
Although the study shows a substantial “logistics gap” between rich countries and most developing countries, it finds positive trends in some areas essential to logistics performance and trade. Some of them include the modernization of customs, use of information technology, and development of private logistics services.
“Following our first survey in 2007, many developing countries have improved their capacity to connect to international markets, which is a key ingredient for competitiveness and economic growth,” says Otaviano Canuto, World Bank’s vice president for poverty reduction and economic management. “But if developing countries want to come out of the crisis in a stronger and more competitive position, they need to invest in better trade logistics.”
“Countries with better logistics performance can grow faster, become more competitive and increase their level of investment,” adds Bernard Hoekman, World Bank’s trade department director. “Our research shows that increasing logistics performance in low-income countries to the middle-income average could boost trade by around 15% and benefit all firms and consumers through lower prices and better quality services.”
The report, headed by World Bank Group economists Jean Francois Arvis and Monica Alina Mustra, notes that among developing economies logistics performance transcends the level of per capita income: Many countries perform better than what their income level would suggest. The most significant over-performers include China (27), India (47), Uganda (66), Vietnam (53), Thailand (35), the Philippines (44), and South Africa (28).
Likewise, the countries with significant improvement in performance between the two surveys (the 2007 and 2010 LPI) are often those which implemented comprehensive logistics and trade facilitation reforms earlier, such as Colombia, Brazil and Tunisia.
In terms of how developing countries are doing per region, South Africa (28) is the top performer from Africa; China (27) from East Asia; Poland (30) from Central and Eastern Europe; Brazil (41) from Latin America; Lebanon (33) from the Middle East; and India (47) from South Asia.
According to the study, logistics performance is heavily influenced by the quality of public sector institutions and the effective coordination of border clearance processes among all border management agencies. In this area, customs performs better than many other agencies, pointing to the need for border management reforms. In low performing countries, on average, half of the containers are physically inspected and one container out of seven at least twice.
Other areas for improvement include better transport policies, increasing competition in trade-related services such as trucking, freight forwarding and railways; and better trade-related infrastructure. For many low-income countries the most binding constraints are often in logistics services and international transit systems. Given they perform better on many other indicators, improving trade infrastructure is often reported to be a priority for middle-income countries.