Connecting 2012 to 70417 Compete Trade Logistics in the Global Economy The Logistics Performance Index and Its Indicators LPI score 1.00–2.41 2.42–2.89 2.89–3.39 3.42–5.00 No data 1 is the lowest score; 5 is the highest score. Connecting to Compete 2012 Trade Logistics in the Global Economy The Logistics Performance Index and Its Indicators Jean-François Arvis The World Bank Monica Alina Mustra The World Bank Lauri Ojala Turku School of Economics Ben Shepherd The World Bank Daniel Saslavsky The World Bank © 2012 The International Bank for Reconstruction and Development/The World Bank 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the Executive Directors of the International Bank for Reconstruc- tion and Development/The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundar- ies, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorse- ment or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: pubrights@worldbank.org. If you have any questions or comments about this report, please contact: International Trade Department The World Bank 1818 H Street NW, Room MSN G4-176, Washington, DC 20433 USA Telephone: 202-473-8922 E-mail: tradefacilitation@worldbank.org Web site: www.worldbank.org, www.worldbank.org/trade, or www.worldbank.org/lpi The report was designed, edited, and typeset by Communications Development Incorporated, Washington, DC. Foreword This is the third edition of Connecting to Com- The tremendous importance of logistics per- pete: Trade Logistics in the Global Economy. At formance for economic growth, diversification, its heart is the Logistics Performance Index and poverty reduction has long been widely rec- (LPI), which the World Bank has produced ognized. Policies matter: national governments every two years since 2007. The LPI measures can facilitate trade through investments in both on-the-ground trade logistics performance— “hard� and “soft� infrastructure. Countries have this year, in 155 countries—helping national improved their logistics performance by imple- leaders, key policymakers, and private sector menting strategic and sustained interventions, traders understand the challenges they and their mobilizing actors across traditional sector silos, trading partners face in reducing logistical bar- and involving the private sector. Logistics is riers to international commerce. also increasingly important for sustainability. Logistics, organizing the movement of For the first time, the LPI this year includes a goods over time and space, has evolved from focus on the environmental impacts of logistics its 19th century military roots to today’s in- practices. ternational supply chains. As the backbone The LPI provides a simple, global bench- of international trade, logistics encompasses mark to measure logistics performance, fill- freight transportation, warehousing, border ing gaps in datasets by providing systematic, clearance, payment systems, and many other cross-country comparisons. A joint venture functions. These functions are performed of the World Bank, logistics service providers, mostly by private service providers for private and academics, the LPI is built around a sur- traders and owners of goods, but logistics is vey of logistics professionals. By asking freight also important for the public policies of na- forwarders to rate countries on key logistics tional governments and regional and interna- issues—such as customs clearance efficiency, tional organizations. infrastructure quality, and the ability to track Because global supply chains are so var- cargo—it captures a broad set of elements that ied and complex, the efficiency of logistics de- affect perceptions of the efficiency of trade logis- pends on government services, investments, tics in practice. It is a “coarse-grained� indica- and policies. Building infrastructure, develop- tor that shows where a country stands and that ing a regulatory regime for transport services, could motivate researchers to take on a deeper, and designing and implementing efficient cus- finer, country-specific assessment of the deter- toms clearance procedures are all areas where minants of logistics performance. LPI scores governments play an important role. The im- should not be overvalued—a country’s LPI provements in global logistics over the past two score is less relevant than its quintile (whether it decades have been driven by innovation and is among the best or worst performing countries a great increase in global trade. While poli- or is somewhere in the middle). The authors use cies and investments that enable good logistics confidence intervals to examine the sensitivity practices help modernize the best-performing of each country’s LPI score. countries, logistics still lags in many developing The LPI reflects the perspective of the global countries. Indeed, the “logistics gap� evident in private sector on how countries are globally con- the first two editions of this report remains. nected through their main trade gateways, so it C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y iii might not fully capture changes at the country government, business, and civil society to bet- level. The LPI complements, rather than substi- ter assess the competitive advantage created by tutes for, the in-depth country assessments that good logistics and to understand the varying many countries have undertaken in recent years, importance of different intervention areas. We many of them with World Bank support. hope that this third edition of Connecting to Trade analysts, policymakers, and practi- Compete will continue to help this broad com- tioners interested in measuring logistics per- munity of policymakers and stakeholders. formance all use the LPI. The World Bank and other international organizations are using it more and more in their advisory and imple- Otaviano Canuto mentation activities for trade facilitation in Vice-President and Head of Network developing countries. The LPI allows leaders in Poverty Reduction and Economic Management iv C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Authors and acknowledgments This report was prepared by the World Bank’s Pacific), Jari Kauppila (International Transport International Trade Department (PRMTR), Forum), and Louis-Paul Tardif (Transport Can- under the guidance of Bernard Hoekman ada). Daniel Cramer of BlueTundra.com de- (director) and Mona Haddad (sector manager). signed, developed, and maintained the LPI sur- The project leaders and main authors were Jean- vey and results websites (the web-based survey François Arvis (Jarvis1@worldbank.org) and questionnaire was offered in English, French, Monica Alina Mustra (Mmustra@worldbank. Spanish, Chinese, and Russian), under the org). Authors included Professor Lauri Ojala guidance of the core team. Scott Johnson from (Turku School of Economics, University of the World Bank Information Solutions Group Turku; Lauri.ojala@utu.fi), Ben Shepherd helped the team monitor survey responses. (Principal, Developing Trade Consultants; The LPI survey would not have been possi- ben@developing-trade.com), and Daniel ble without the support and participation of the Saslavsky (dsaslavsky@worldbank.org). International Federation of Freight Forwarders Many colleagues at the World Bank pro- Associations (www.fiata.com), the Global Ex- vided major inputs to the survey concept and press Association (www.global-express.org), the review of the results or provided materials, the Global Facilitation Partnership for Trans- including Robin Carruthers, Natalia Cubillos, portation and Trade (www.gfptt.org), 10 inter- Marc Juhel, Charles Kunaka, Somik Lall, An- national logistics companies, and a large group dreas Dietrich Kopp, Gerard McLinden, Julia of small and medium logistics companies world- Burr Oliver, Gaël Raballand, Julian Lampi- wide. The survey was designed and implemented etti, Henry Sandee, Jordan Schwartz, Virginia with Finland’s Turku School of Economics, Tanase, and Jos Verbeek. Selina Elisabeth University of Turku (www.tse.fi/en), which has Jackson, Mombert Hoppe, Jean Noel Guillos- worked with the World Bank to develop the sou, Ekaterina Vashakmadze, Giovanna Pren- concept since 2000. nushi, Ivan Rossignol, Vijay Srinivas Tata, The authors thank the hundreds of employ- Saroj Kumar Jha, Yvonne Tsikata, and Ardo ees of freight forwarding and express carrier Hansson also contributed to the review of the companies around the world who responded to results. the survey. Their participation was central to the The authors are also grateful to external quality and credibility of the project, and their colleagues for their support and contributions, continuing feedback will be essential as we de- including Yann Duval (United Nations Eco- velop and refine the survey and the LPI in years nomic and Social Commission for Asia and the to come. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y v Table of contents Foreword iii Authors and acknowledgments v LPI ranking and scores, 2012 viii Summary and key findings 1 1. The 2012 Logistics Performance Index 5 New features of the 2012 survey 6 Key findings from the 2012 LPI 6 2. Unbundling logistics performance 15 Infrastructure 15 Services 15 Border procedures and time 17 Delays, reliability, and service delivery 22 3. The way forward: New challenges in trade facilitation and logistics 27 Infrastructure 28 Improving logistics services in developing countries 28 Coordinating border management 29 Regional facilitation and integration 30 National data for reforms 30 Supply chain sustainability and development 30 A trade logistics reform matrix 32 Notes 35 Appendix 1. International LPI results 36 Appendix 2. Domestic LPI results, by region and income group 40 Appendix 3. Domestic LPI results, time and cost data 43 Appendix 4. The LPI methodology 51 References 55 Boxes 1.1 Better logistics—a piece of the global food security puzzle 6 1.2 Using the Logistics Performance Index 7 1.3 Indonesia’s logistics progress 10 1.4 How precise are LPI scores and ranks? 14 1.5 Policy applications of the 2007 and 2010 LPI—regionally and globally 14 vi C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 2.1 Innovative approaches to border agency cooperation: the Philippines and Indonesia 20 2.2 Customs reform in Sub-Saharan Africa: Cameroon Customs’ key performance indicators 20 2.3 Who is to blame for delays? 24 3.1 Beyond the LPI: Canada’s effort to develop in-depth, customized data collection 31 3.2 A shipper’s demand for green supply chain solutions 32 Figures 1 LPI score as percentage of highest LPI score by LPI quintile, 2007, 2010, and 2012 2 2 Percentage change in LPI component as measured against the highest performer, 2007–2012 2 1.1 Cumulative distribution of 2012 LPI scores 10 1.2 LPI component scores, by LPI quintile 11 1.3 Percentage change in LPI scores over 2007–2012, by LPI component and income group 11 1.4 2012 LPI score, average and minimum/maximum range by income group 12 1.5 Distribution of LPI quintiles across income groups 12 1.6 LPI overperformers and underperformers 13 1.7 LPI score as percentage of highest LPI score by LPI quintile, 2007, 2010, and 2012 13 2.1 Relationship between country scores on the World Bank Air Connectivity Index and the percent of respondents rating the quality and competence of air transport service providers as “high� or “very high� 17 2.2 Median import lead time and average clearance time, by LPI quintile 18 2.3 Median export lead time, by LPI quintile 19 2.4 Median export lead time, by income group 19 2.5 Red tape affecting import and export transactions, by LPI quintile 21 2.6 Respondents reporting that shipments are “often� or “nearly always� cleared and delivered as scheduled, by LPI quintile 23 2.7 Respondents reporting that shipments are “often� or “nearly always� cleared and delivered as scheduled, by World Bank developing country region 23 2.8 Shipments not meeting company quality criteria, by LPI quintile 24 Tables 1.1 The top 10 performers on the 2012 LPI 8 1.2 The bottom 10 performers on the 2012 LPI 8 1.3 The top 10 upper middle-income performers on the 2012 LPI 8 1.4 The top 10 lower middle-income performers on the 2012 LPI 9 1.5 The top 10 low-income performers on the 2012 LPI 9 1.6 Respondents indicating an improved or much improved logistics environment since 2009, by LPI quintile 12 2.1 Respondents rating the quality of each infrastructure type “high� or “very high,� by LPI quintile 16 2.2 Respondents rating the quality of each infrastructure type “high� or “very high,� by World Bank developing country region 16 2.3 Respondents rating the quality and competence of each service provider type “high� or “very high,� by LPI quintile 16 2.4 Difference between respondents rating services “high� or “very high� and those rating infrastructure “high� or “very high,� by World Bank developing country region 17 2.5 Respondents indicating that listed customs procedures are available and being used, by LPI quintile 18 2.6 Respondents rating the quality and competence of three border agencies as “high� or “very high,� by LPI quintile 21 2.7 Respondents reporting that shipments are “often� or “nearly always� delayed, by delay category and LPI quintile 22 3.1 Trade logistics reform matrix 32 A4.1 Methodology for selecting country groups for survey respondents 52 A4.2 Results of principal component analysis for the international LPI 53 A4.3 Component loadings for the international LPI 53 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y vii LPI ranking and scores, 2012 2012 LPI 2012 LPI 2012 LPI % of % of % of highest highest highest Economy Rank Score performer Economy Rank Score performer Economy Rank Score performer Singapore 1 4.13 100.0 Vietnam 53 3.00 64.1 Honduras 105 2.53 49.1 Hong Kong SAR, China 2 4.12 99.9 Romania 54 3.00 63.8 Cameroon 106 2.53 48.9 Finland 3 4.05 97.6 Bosnia and Herzegovina 55 2.99 63.5 Bhutan 107 2.52 48.6 Germany 4 4.03 97.0 Uruguay 56 2.98 63.5 Ghana 108 2.51 48.2 Netherlands 5 4.02 96.7 Egypt, Arab Rep. 57 2.98 63.3 Lao PDR 109 2.50 48.0 Denmark 6 4.02 96.6 Lithuania 58 2.95 62.3 Senegal 110 2.49 47.7 Belgium 7 3.98 95.3 Indonesia 59 2.94 62.2 Venezuela, RB 111 2.49 47.7 Japan 8 3.93 93.8 Peru 60 2.94 61.9 Iran, Islamic Rep. 112 2.49 47.6 United States 9 3.93 93.7 Panama 61 2.93 61.6 Paraguay 113 2.48 47.4 United Kingdom 10 3.90 92.7 Oman 62 2.89 60.4 São Tomé and Príncipe 114 2.48 47.4 Austria 11 3.89 92.5 Yemen, Rep. 63 2.89 60.3 Guinea 115 2.48 47.4 France 12 3.85 91.2 Colombia 64 2.87 59.8 Azerbaijan 116 2.48 47.4 Sweden 13 3.85 91.2 Estonia 65 2.86 59.5 Uzbekistan 117 2.46 46.9 Canada 14 3.85 91.1 Ukraine 66 2.85 59.3 Gambia, The 118 2.46 46.8 Luxembourg 15 3.82 90.3 Benin 67 2.85 59.3 Liberia 119 2.45 46.3 Switzerland 16 3.80 89.7 Botswana 68 2.84 58.9 Montenegro 120 2.45 46.3 United Arab Emirates 17 3.78 88.9 Greece 69 2.83 58.6 Nigeria 121 2.45 46.3 Australia 18 3.73 87.2 Kuwait 70 2.83 58.5 Kenya 122 2.43 45.9 Taiwan, China 19 3.71 86.6 Pakistan 71 2.83 58.4 Fiji 123 2.42 45.4 Spain 20 3.70 86.4 Mauritius 72 2.82 58.2 Jamaica 124 2.42 45.3 Korea, Rep. 21 3.70 86.2 Malawi 73 2.81 57.8 Algeria 125 2.41 45.3 Norway 22 3.68 85.9 Guatemala 74 2.80 57.7 Solomon Islands 126 2.41 45.2 South Africa 23 3.67 85.5 Serbia 75 2.80 57.6 Mauritania 127 2.40 44.7 Italy 24 3.67 85.4 Latvia 76 2.78 56.9 Papua New Guinea 128 2.38 44.0 Ireland 25 3.52 80.6 Georgia 77 2.77 56.8 Myanmar 129 2.37 43.8 China 26 3.52 80.5 Albania 78 2.77 56.7 Kyrgyz Republic 130 2.35 43.3 Turkey 27 3.51 80.3 Ecuador 79 2.76 56.2 Gabon 131 2.34 43.0 Portugal 28 3.50 80.1 Bahamas, The 80 2.75 56.1 Moldova 132 2.33 42.6 Malaysia 29 3.49 79.8 Sri Lanka 81 2.75 56.0 Guyana 133 2.33 42.5 Poland 30 3.43 77.8 Costa Rica 82 2.75 55.9 Burkina Faso 134 2.32 42.3 New Zealand 31 3.42 77.4 Côte d’Ivoire 83 2.73 55.4 Afghanistan 135 2.30 41.5 Iceland 32 3.39 76.6 Madagascar 84 2.72 55.1 Tajikistan 136 2.28 41.1 Qatar 33 3.32 74.3 Dominican Republic 85 2.70 54.4 Libya 137 2.28 41.0 Slovenia 34 3.29 73.1 Kazakhstan 86 2.69 54.2 Angola 138 2.28 40.8 Cyprus 35 3.24 71.8 Niger 87 2.69 54.1 Rwanda 139 2.27 40.5 Bulgaria 36 3.21 70.7 Tanzania 88 2.65 52.9 Mongolia 140 2.25 40.0 Saudi Arabia 37 3.18 69.7 Namibia 89 2.65 52.9 Ethiopia 141 2.24 39.6 Thailand 38 3.18 69.6 Bolivia 90 2.61 51.6 Lesotho 142 2.24 39.5 Chile 39 3.17 69.5 Belarus 91 2.61 51.6 Congo, Dem. Rep. 143 2.21 38.6 Hungary 40 3.17 69.5 Syrian Arab Republic 92 2.60 51.3 Cuba 144 2.20 38.3 Tunisia 41 3.17 69.4 El Salvador 93 2.60 51.2 Iraq 145 2.16 37.1 Croatia 42 3.16 69.2 Guinea-Bissau 94 2.60 51.1 Comoros 146 2.14 36.5 Malta 43 3.16 69.0 Russian Federation 95 2.58 50.7 Eritrea 147 2.11 35.5 Czech Republic 44 3.14 68.5 Lebanon 96 2.58 50.6 Sudan 148 2.10 35.3 Brazil 45 3.13 68.2 Togo 97 2.58 50.5 Congo, Rep. 149 2.08 34.7 India 46 3.08 66.4 Central African Republic 98 2.57 50.3 Sierra Leone 150 2.08 34.5 Mexico 47 3.06 66.0 Macedonia, FYR 99 2.56 50.1 Nepal 151 2.04 33.1 Bahrain 48 3.05 65.7 Armenia 100 2.56 50.0 Chad 152 2.03 32.9 Argentina 49 3.05 65.5 Cambodia 101 2.56 50.0 Haiti 153 2.03 32.8 Morocco 50 3.03 65.0 Jordan 102 2.56 49.8 Djibouti 154 1.80 25.5 Slovak Republic 51 3.03 64.9 Zimbabwe 103 2.55 49.6 Burundi 155 1.61 19.5 Philippines 52 3.02 64.8 Maldives 104 2.55 49.4 viii C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Summary and key findings This third edition of Connecting to Compete: • The frequency with which shipments Trade Logistics in the Global Economy reports reach the consignee within the sched- on the Logistics Performance Index (LPI) and uled or expected delivery time. its six component indicators. The LPI mea- Connecting to Compete 2012 also includes a sures logistics efficiency, now widely recog- set of domestic performance indicators for 143 nized as vital for trade and growth. A coun- countries. For these data, survey respondents as- try’s ability to trade globally depends on its sess the logistics environments in the countries traders’ access to global freight and logistics where they work, providing information on the networks. And the efficiency of a country’s quality of infrastructure, the performance of supply chain (in cost, time, and reliability) core services, the friendliness of trade clearance depends on specific features of its domestic procedures, and the time, cost, and reliability of economy (logistics performance). Better over- import and export supply chains. These domes- all logistics performance and trade facilita- tic indicators help define logistics constraints tion are strongly associated with trade expan- within countries, not just at the gateways, such sion, export diversification, attractiveness as ports or borders. They analyze the major de- to foreign direct investment, and economic terminants of overall logistics performance, fo- growth. cusing on country performance in four major A multidimensional assessment of logistics determinants of overall logistics performance: performance, the LPI compares the trade logis- infrastructure, services, border procedures and tics profiles of 155 countries and rates them on time, and supply chain reliability. a scale of 1 (worst) to 5 (best). The ratings are The gap between the highest and lowest based on 6,000 individual country assessments scores in the 2012 LPI, and the score distribu- by nearly 1,000 international freight forward- tion across countries, are about the same as in ers, who rated the eight foreign countries their 2010 (figure 1). Singapore ranked highest at company serves most frequently. The LPI’s six 4.13, Burundi the lowest at 1.61 (19 percent of components include:1 Singapore’s top score). • The efficiency of the clearance process The 2012 LPI does not suggest that the con- (speed, simplicity, and predictability of verging trend from the 2007 LPI to the 2010 formalities) by border control agencies, LPI is continuing. From 2007 to 2010, lower including customs. performing countries improved their overall • The quality of trade- and transport-re- LPI scores more than did higher performing lated infrastructure (ports, railroads, countries. But from 2010 to 2012, they were not roads, information technology). able to further narrow the gap. • The ease of arranging competitively This stalled improvement likely reflects priced shipments. conditions that shifted governments’ priori- • The competence and quality of logistics ties away from logistics reform—such as the services (transport operators, customs global recession and the European sovereign- brokers). debt crisis. In some regions, declining trade • The ability to track and trace consign- further disrupted supply chains. In the con- ments. text of the recession, a slowing progression in C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 1 infrastructure stands out Figure 1 LPI score as percentage of from 89 in 2007 to 67 in 2012, however, per- as the chief driver of LPi highest LPI score by LPI quintile, haps reflecting traders’ satisfaction with the 2007, 2010, and 2012 country’s new national single window system progress, with the modest in the Port of Coutonou. Percent 2007 2010 2012 convergence since 2007 90 Morocco’s LPI rank jumped from 113 in explained by a perceived 2007 to 50 in 2012, having implemented a com- 80 prehensive strategy to improve logistics and con- improvement in the nectivity and take advantage of the country’s infrastructure of low- and 70 proximity to Europe. Combining border man- middle-income countries agement reform with large physical investments 60 in the Tangier-Med Port, the strategy fostered 50 the emergence of Morocco’s just-in-time exports to Europe (especially textiles, electronics, and 40 automotive components). Morocco’s fast rise in the LPI highlights the payoffs of such a compre- 30 hensive approach. Bottom Fourth Third Second Top quintile quintile quintile quintile quintile Reformers are seeing more and more that Source: Logistics Performance Index 2007, 2010, and 2012. many modern logistics problems are entrenched —that there are no quick fixes. Reaping low- hanging fruit will not sustainably improve customs indicators could reflect an unusual logistics in the ways that count most for trad- focus on revenue collection at the expense of ers. The stagnancy of some performance in- trade facilitation. dicators suggests that the source of problems The “logistics gap� between high- and low- is deeper than an errant regulation or a lack income countries remains wide. The countries of equipment. In the 2012 LPI, infrastruc- with the worst performance in 2012 were least ture stands out as the chief driver of progress developed countries that were also landlocked (figure 2), with the modest convergence since countries, small-island states, or postconflict 2007 explained by a perceived improvement in countries. Making up three-fourths of the the infrastructure of low- and middle-income bottom LPI quintile, these countries typically have small trade volumes, are far from trade Figure 2 Percentage change in LPI hubs, and are hampered by severe capacity con- component as measured against straints. Adding to their difficulties—on top of the highest performer, 2007–2012 their reform challenges and their lack of scale- Percentage change Customs Infrastructure economies for infrastructure and services—is Quality of logistics and services their dependence on the logistics of similarly 12 constrained neighboring countries. 10 Despite the broad association between low performance and difficult circumstances, the 8 policies a country adopts are important. True, most high-income countries from the Organ- 6 isation for Economic Co-operation and Devel- opment (OECD) are high logistics performers, 4 but in other income groups some countries have 2 had more efficient logistics than others over the three LPI surveys, including China, India, 0 South Africa, and Vietnam. Among least devel- Low Lower Upper income middle income middle income oped countries, it is harder to find countries out- Source: Logistics Performance Index 2007 and 2012. performing their income group. Benin jumped 2 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y countries—and to a lesser extent in their logis- generally have higher LPI ratings in 2012 than The quality of logistics tics services and their customs and border man- in 2010. Yet the gap between high-income coun- services is central to agement. This perceived improvement attests to tries and developing countries remains wide. trade efficiency and the success of donor efforts to close the infra- Low-income countries score poorly on truck- structure gap between high- and low-income ing, despite trucking systems having recently is strongly associated countries. attracted more policy attention. with the reliability of The quality and availability of trade-related Environmental sustainability concerns are supply chains and the infrastructure, especially roads, still constrains emerging as a market driver. The 2012 LPI in- logistics performance in developing countries, cludes a new survey question on the demand predictability of service especially for countries with the lowest incomes. for green logistics. A third of respondents ship- delivery available to Yet countries nearer the middle of the LPI ping to OECD countries recognized a strong producers and exporters rankings are also hindered by the quality and demand for green solutions (meaning modes availability of roads and ports. And railroads or routes), compared with just a tenth of those have low ratings almost everywhere. In develop- shipping to low-income economies. Developing ing countries, rail services dissatisfy more than countries will need to consider the environmen- 90 percent of survey respondents. tal footprint of logistics, especially in trading Efficient border management and the co- with developed countries. ordination of the agencies involved in border Logistics performance is strongly associ- clearance are more critical now than ever. Across ated with the reliability of supply chains and income groups, customs agencies have higher the predictability of service delivery available to LPI ratings than all other agencies involved in producers and exporters. Supply chains—only border management. But in many countries, as strong as their weakest links—are becoming the agencies responsible for enforcing sanitary more and more complex, often spanning many and phytosanitary regulations—and to less ex- countries while remaining critical to national tent other product standards—lag well behind competitiveness. Comprehensive reforms and customs in their perceived performance. A com- long-term commitments from policymakers prehensive approach is needed to reform border and private stakeholders will be essential. management, with attention to all the relevant Events such as the recession and economic sectors and agencies. troubles in Europe in 2011 may have derailed The quality of logistics services—trucking, planned logistics reforms, so it is now all the forwarding, and customs brokerage—is also more urgent that countries and donors renew central to trade efficiency. Logistics services their efforts to improve logistics. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 3 1 SECTion The 2012 Logistics performance index Freight transport and the accompanying logis- highly concentrated,4 especially since the eco- tics industry represent one of the most dynamic nomic downturn of 2008.5 Yet the industry is far and important sectors of the European economy, less concentrated in local, traditional subsectors accounting for at least 10 percent of GDP. with low entry costs: trucking, traditional —Siim Kallas, Vice-President of the Eu- freight forwarding, and customs brokerage. ropean Commission and European Commis- Global logistics requires that this ideally seam- sioner responsible for Transport, speaking at the less chain of service providers support the physi- Launch of the Green Freight Europe initiative cal movement of goods. But the ease with which a in Brussels (March 2012).2 country’s exporters can access the global logistics network depends on domestic factors subject to If CBP [the U.S. Customs and Border Protection government intervention. Governments can im- agency] does not support a strong economy, we’re prove the regulation of logistics services, finance not doing our job. trade-related infrastructure (either directly or in —Brenda Brockman Smith, U.S. Executive public-private partnerships), and smooth trade Director, Trade Policy and Programs, Office of procedures. Although efficient logistics and trade International Trade, U.S. Customs and Border facilitation are central to national competitiveness, Protection, speaking at the 12th annual Trans- the simultaneous involvement of many sectors can Pacific Maritime Conference (March 2012).3 create difficulties for sound policymaking. Supply chain performance is measured in Countries— and groups of countries—have time, cost, reliability, and flexibility. But these adopted forward-looking logistics policies. In outcomes depend on local inputs that affect 2011, Morocco adopted a public-private char- the supply chain within a country. There are ter on logistics development. South Africa pub- trade-related procedures. There is the supply for lishes a yearly state-of-logistics report. Indonesia trade-related support services. And there is in- and Malaysia have national logistics strategies. frastructure, which includes ports, roads, rail- China is among the few countries with a bureau roads, airports, and information and commu- for logistics development. And the United nications technology (ICT). States launched a Supply Chain Competitive- A trade supply chain is only as strong as its ness Council, in cooperation with its Chamber weakest link. Progress in one area cannot always of Commerce, in fall 2011. offset a lack of progress elsewhere. So policy- Such public support affirms the impor- makers must strengthen the weakest links with tance of logistics services providers. The global targeted development interventions. Interven- network of logistics operators for international tions that target areas not among those in most trade includes ocean shipping, air freight, land need of reform waste scarce resources. transport, warehousing, and third-party logis- Reforms need not have the sole objective of tics. To keep global supply chains working un- boosting supply chain performance. In border interrupted, logistics services providers have had management reform, governments try to recon- to both integrate and diversify. Key segments of cile security and fiscal objectives with trade fa- the industry—air freight, container shipping, cilitation. Sustainability, too, is becoming more port operations, and contract logistics (or third/ important in food security (box 1.1) and in re- fourth-party service providers)—have become ducing emissions. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 5 By showing countries Sound policymaking requires informed dia- participation in the LPI: in 2012, there were how they stack up against logue with stakeholders, especially those in the about 6,000 assessments, some 20 percent more private sector. Global benchmarks such as the than in 2010. Country coverage for the interna- their competitors and Logistics Performance Index (LPI) play an im- tional LPI remained the same as in 2010, cov- highlighting the costs of portant informative role. By showing countries ering 155 countries.6 Country coverage for the poor logistics, the LPi how they stack up against their competitors and domestic LPI has increased to 143 countries. highlighting the costs of poor logistics, the LPI To continue streamlining the LPI survey, helps policymakers and catalyzes progress—helping policymakers and feedback from users, policymakers, practitio- the private sector build a the private sector build a strong case for reform. ners, and logistics professionals was considered. strong case for reform Minor changes were made to the international New features of the 2012 survey part, in which respondents assess the same six key components in eight of their most impor- The 2012 LPI survey is similar to the two tant overseas markets. A new question on green before: a standardized questionnaire with two logistics was introduced to capture how envi- parts (international and domestic). For the ronmental concerns are changing how logistics international part, respondents assess six key operators work.7 The survey instrument for the areas of logistics performance in eight of the 2012 LPI collects new information in the do- respondents’ main overseas markets. For the mestic part, too, providing more detail on such domestic part, respondents provide qualitative issues as border management (valuation). Fur- and quantitative data on the logistics environ- ther, new Incoterms® 8 were used to collect time ment in the countries where they work—for and cost information for a typical supply chain. example, information on time and costs in a typical supply chain (box 1.2). The survey also Key findings from the 2012 LPI collects data on domestic logistics and on the time and cost burdens of import and export As in the first two editions of the LPI, high- transactions. The private sector increased its income countries dominate the top 10 Box 1.1 Better logistics—a piece of the global food security puzzle There is no global food shortage. in 2010, the world produced allow markets to respond quickly in a crisis, and increase access 2.2 billion tons of cereals, more than 2.5 times its production five to food. A recent assessment of the wheat supply chain for coun- decades earlier. Food production outpaced population growth of tries in the Middle East and North Africa—which are among the 4 billion people, yet more than a billion people remain hungry or countries most dependent on grain imports—reveals many causes vulnerable to sharp changes in food prices. Why? of high logistics costs and vulnerability. 2 Product losses are high, One answer is that transport and logistics do much to deter- typically greater than 5 percent. Wheat’s average transit time from mine food prices. in developing countries—especially landlocked its main source markets to its target markets in Arab countries is least developed countries—transport and logistics costs are dispro- 78 days, and the trip costs about $40 per metric ton. By contrast, portionately high, accounting for 20–60 percent of delivered food the average transit time to target markets in the Netherlands is just prices. For example, transport and logistics make up 48 percent 18 days, and the trip costs $11 per metric ton. (in the Republic of of the cost of U.S. corn imported by Nicaragua and 40 percent of Korea, the average transit time is 47 days, and the trip costs $17 the cost of U.S. wheat imported by Honduras.1 And an unreliable per metric ton.) supply chain can cause domestic price shocks when supply chain individual countries cannot do much to reduce certain costs disruptions cause local supply shortages. —such as ocean freight costs, which can make up a large part in February 2011, world food prices reached a record high. They of the final price for grains and edible oils. Even so, policies can remained volatile in the following months—months reminiscent of lower the costs of regional and domestic distribution by boost- the devastating price swings of the 1970s. When such fluctuations ing overall logistics performance and by improving the trade affect the price of cereals, which make up staple diets, the world’s environment. poorest people suffer most. in 2010, for example, cereals consti- tuted 40 percent of the food imported by least developed countries. Notes in many cases, improved food supply chains can mitigate this 1. Fernández and others 2011. vulnerability. More efficient logistics can reduce consumer prices, 2. World Bank and FAO 2012. 6 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Box 1.2 Using the Logistics Performance Index The World Bank’s Logistics Performance index (LPi) analyzes coun- tries in six components: Input and outcome LPI indicators 1. The efficiency of customs and border management clearance. Customs Timeliness 2. The quality of trade and transport infrastructure. 3. The ease of arranging competitively priced shipments. 4. The competence and quality of logistics services. Supply chain Inter- Infra- 5. The ability to track and trace consignments. national structure service shipments 6. The frequency with which shipments reach consignees delivery within scheduled or expected delivery times. The components were chosen based on recent theoretical and Services Tracking empirical research and on the practical experience of logistics pro- quality and tracing fessionals involved in international freight forwarding. Areas Service Earlier methodologies developed in 19931 used a survey for- delivery for mat, a 2-point scale, and open-ended questions—to measure the policy performance regulations outcomes perceived importance and influence of different component attri- Time, cost, (inputs) butes affecting the logistical friendliness of countries. in a follow- reliability up study,2 only the characteristics identified as best encapsulating Source: Authors’ analysis. logistics performance were included for evaluation. The method- ology was refined with contributions from interviews conducted for the Trade and Transport Facilitation Audits performed by the World express carriers are those best able to assess how countries per- Bank and others over more than a decade.3 form. And their views matter, directly affecting the choice of shipping The figure maps the six LPi indicators in two main categories: routes and gateways and influencing firms’ decisions on production • Areas for policy regulation, indicating main inputs to the sup- location, choice of suppliers, and selection of target markets. Their ply chain (customs, infrastructure, and services). participation is central to the quality and credibility of the LPi, and • Supply chain performance outcomes (corresponding to LPi their involvement and feedback have been essential in developing indicators of time, cost, and reliability—timeliness, interna- and refining the survey in this third edition of the LPi. Nearly 1,000 lo- tional shipments, and tracking and tracing). gistics professionals in 143 countries participated in the 2011 survey The LPi uses standard statistical techniques to aggregate the for the 2012 LPi, and 12 additional countries were covered. data into a single indicator.4 (See appendix 4 for a detailed descrip- See the 2012 LPi questionnaire at www.worldbank.org/lpi. tion of how the LPi is calculated.) This single indicator can be used to compare countries, regions, and income groups. it can also be Notes used for country-level work. 1. Murphy, Daley, and Dalenberg 1993; Murphy and Daley 1999. Because operators on the ground can best assess these vital 2. Ojala and Queiroz 2000, 2004. aspects of logistics performance, the LPi relies on a structured 3. Raven 2001. online survey of logistics professionals from the companies re- 4. in all three editions of the LPi (2007, 2010, and 2012), statistical aggrega- sponsible for moving goods around the world: multinational freight tion has produced an overall index that is close to the simple average of forwarders and the main express carriers. Freight forwarders and country scores across the six LPi components. (table 1.1). Indeed, the top 10 for 2012 are nearly The broad middle-income group, comprising the same as for 2010.9 Most are well-established upper and lower middle-income countries, is led key logistics players with an important role in —as expected—by some of the rapidly growing global or regional supply chains. emerging economies that dominate the upper half By contrast, the bottom 10 are all low- of the LPI rankings (tables 1.3 and 1.4). Benin is income countries, and 8 are in Africa (table 1.2). the top low-income performer (table 1.5). Geographic barriers—along with a history of Figure 1.1 shows the cumulative distribu- unrest, armed conflict, and natural disasters— tion of LPI scores. The vertical lines indicate restrict these countries’ access to markets, thus the boundaries of quintiles—five groups con- constraining their ability to participate in global taining equal numbers of countries rated in the supply chains. LPI. The bottom quintile comprises countries C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 7 Table 1.1 The top 10 performers on the 2012 LPI 2012 2010 2007 % of % of % of LPI LPI highest LPI LPI highest LPI LPI highest Economy rank score performer rank score performer rank score performer Singapore 1 4.13 100.0 2 4.09 99.2 1 4.19 100.0 Hong Kong SAR, China 2 4.12 99.9 13 3.88 92.4 8 4.00 94.1 Finland 3 4.05 97.6 12 3.89 92.6 15 3.82 88.3 Germany 4 4.03 97.0 1 4.11 100.0 3 4.10 97.1 Netherlands 5 4.02 96.7 4 4.07 98.5 2 4.18 99.6 Denmark 6 4.02 96.6 16 3.85 91.4 13 3.86 89.6 Belgium 7 3.98 95.3 9 3.94 94.5 12 3.89 90.7 Japan 8 3.93 93.8 7 3.97 95.2 6 4.02 94.8 United States 9 3.93 93.7 15 3.86 91.7 14 3.84 89.1 United Kingdom 10 3.90 92.7 8 3.95 94.9 9 3.99 93.8 Source: Logistics Performance Index 2007, 2010, and 2012. Table 1.2 The bottom 10 performers on the 2012 LPI 2012 2010 2007 % of % of % of LPI LPI highest LPI LPI highest LPI LPI highest Economy rank score performer rank score performer rank score performer Comoros 146 2.14 36.5 120 2.45 46.5 85 2.48 46.3 Eritrea 147 2.11 35.5 154 1.70 22.4 124 2.19 37.2 Sudan 148 2.10 35.3 146 2.21 38.7 64 2.71 53.6 Congo, Rep. 149 2.08 34.7 116 2.48 47.4 na na na Sierra Leone 150 2.08 34.5 153 1.97 31.2 144 1.95 29.9 Nepal 151 2.04 33.1 147 2.20 38.6 130 2.14 35.7 Chad 152 2.03 32.9 115 2.49 47.9 142 1.98 30.8 Haiti 153 2.03 32.8 98 2.59 51.1 123 2.21 38.0 Djibouti 154 1.80 25.5 126 2.39 44.8 145 1.94 29.5 Burundi 155 1.61 19.5 na na na 113 2.29 40.4 na is not applicable. Source: Logistics Performance Index 2007, 2010, and 2012. Table 1.3 The top 10 upper middle-income performers on the 2012 LPI 2012 2010 2007 % of % of % of LPI LPI highest LPI LPI highest LPI LPI highest Economy rank score performer rank score performer rank score performer South Africa 23 3.67 85.5 28 3.46 78.9 24 3.53 79.4 China 26 3.52 80.5 27 3.49 79.9 30 3.32 72.8 Turkey 27 3.51 80.3 39 3.22 71.4 34 3.15 67.5 Malaysia 29 3.49 79.8 29 3.44 78.4 27 3.48 77.7 Bulgaria 36 3.21 70.7 63 2.83 58.8 55 2.87 58.6 Thailand 38 3.18 69.6 35 3.29 73.6 31 3.31 72.5 Chile 39 3.17 69.5 49 3.09 67.3 32 3.25 70.5 Tunisia 41 3.17 69.4 61 2.84 58.9 60 2.76 55.3 Brazil 45 3.13 68.2 41 3.20 70.6 61 2.75 54.9 Mexico 47 3.06 66.0 50 3.05 65.7 56 2.87 58.6 Source: Logistics Performance Index 2007, 2010, and 2012. 8 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Table 1.4 The top 10 lower middle-income performers on the 2012 LPI 2012 LPI 2010 LPI 2007 LPI % of % of % of LPI LPI highest LPI LPI highest LPI LPI highest Economy rank score performer rank score performer rank score performer India 46 3.08 66.4 47 3.12 67.9 39 3.07 64.9 Morocco 50 3.03 65.0 na na na 94 2.38 43.4 Philippines 52 3.02 64.8 44 3.14 68.8 65 2.69 52.9 Vietnam 53 3.00 64.1 53 2.96 63.1 53 2.89 59.2 Egypt, Arab Rep. 57 2.98 63.3 92 2.61 51.8 97 2.37 43.0 Indonesia 59 2.94 62.2 75 2.76 56.5 43 3.01 63.0 Yemen, Rep. 63 2.89 60.3 101 2.58 50.8 112 2.29 40.4 Ukraine 66 2.85 59.3 102 2.57 50.6 73 2.55 48.7 Pakistan 71 2.83 58.4 110 2.53 49.1 68 2.62 50.7 na is not applicable. Source: Logistics Performance Index 2007, 2010, and 2012. Table 1.5 The top 10 low-income performers on the 2012 LPI 2012 2010 2007 % of % of % of LPI LPI highest LPI LPI highest LPI LPI highest Economy rank score performer rank score performer rank score performer Benin 67 2.85 59.3 69 2.79 57.4 89 2.45 45.3 Malawi 73 2.81 57.8 na na na 91 2.42 44.5 Madagascar 84 2.72 55.1 88 2.66 53.2 120 2.24 39.0 Niger 87 2.69 54.1 106 2.54 49.4 143 1.97 30.5 Tanzania 88 2.65 52.9 95 2.60 51.4 137 2.08 34.0 Guinea-Bissau 94 2.60 51.1 149 2.10 35.4 116 2.28 40.0 Togo 97 2.58 50.5 96 2.60 51.4 119 2.25 39.0 Central African Rep. 98 2.57 50.3 na na na na na na Cambodia 101 2.56 50.0 129 2.37 44.0 81 2.50 47.0 Zimbabwe 103 2.55 49.6 na na na 114 2.29 40.3 na is not applicable. Source: Logistics Performance Index 2007, 2010, and 2012. with the lowest LPI scores and the top quintile • Consistent performers—includes coun- those with the highest LPI scores. tries rated for logistics performance The distribution of LPI scores is broken more highly than most others in their down into four categories, used in all editions income group (second LPI quintile). of Connecting to Compete: • Logistics friendly—includes high per- • Logistics unfriendly—includes countries formers, mostly high-income countries with severe logistics constraints, such as (top LPI quintile). the least developed countries (bottom LPI quintile). Logistics performance does not improve • Partial performers— includes coun- overnight tries with a level of logistics constraints Trade facilitation is crucial to economic devel- most often seen in low- and middle- opment. Countries with better logistics can income countries (fourth and third LPI grow faster, become more competitive, and quintiles). increase their investment. Boosting logistics C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 9 Figure 1.1 Cumulative distribution of 2012 LPI scores Cumulative density 1.0 Bottom quintile Fourth Third Second quintile Top quintile quintile quintile Partial performers 0.8 Logistics unfriendly Logistics friendly 0.6 0.4 Consistent performers 0.2 0.0 1.5 2.0 2.5 3.0 3.5 4.0 LPI score Source: Logistics Performance Index 2012. performance in low-income countries to the To move products to market efficiently, reliably, middle-income average could expand trade and economically, countries must reduce trad- some 15  percent.10 That would benefit both ing costs, make their exports more competitive, firms and consumers, who would receive lower and adopt policies to support trade. Reform- prices and better services. ing trade facilitation can especially help bolster For such sustained improvement, policy- trade competitiveness.11 makers and private stakeholders must commit In the international LPI, there are marked dif- long term to comprehensive reforms (box 1.3). ferences by component and quintile—especially Box 1.3 Indonesia’s logistics progress Leaders in indonesia have used LPi data to monitor government leaving containers for long periods) and introduced a new informa- performance and improve logistics—raising national awareness tion technology system (to better monitor and direct port traffic). A and jumpstarting projects to make the country’s main port more scheduled expansion of the port is expected to double its container efficient. Shortly after Connecting to Compete 2007 was pub- capacity by 2017. lished,1 indonesia launched an ambitious public and private dia- But neither storage fees nor traffic monitoring will substantially logue on trade facilitation and logistics. The country prepared an reduce delays at Tanjung Priok.2 On arriving there, an import con- action plan examining the costs of international trade through its tainer spends most of its wait time—about three and a half days ports and the unique logistics costs of a large archipelago. it used —in preclearance (the time between unloading a container from the the domestic logistics costs component of the LPi to measure ship and submitting import declarations to customs). Cumbersome Ministry of Trade performance, and after 2010 it used the overall pre-customs clearance procedures cause much of the delay, and LPi score. late submission of the shipping manifest by shippers and import- in 2008, the World Bank suggested ways to improve operations ers contributes, too. at Tanjung Priok, which handles two-thirds of indonesia’s interna- The World Bank is working with indonesia to establish a port tional trade and has seen a rapid rise in container traffic. A main community (with public and private sector participants) where lead- goal of the port initiative is to reduce dwell time—the average time it ers can discuss, monitor, and follow up on reform efforts. takes containers to clear the port. in 2011, Tanjung Priok’s dwell time was six days, longer than indonesia’s regional peers (Singapore one Notes day, Malaysia four days, Thailand five days). To reduce dwell time, 1. Arvis and others 2007. the port operator raised storage fees (to discourage shippers from 2. Sandee, Oliver, and Cubillos Salcedo 2012. 10 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y in the two lowest quintiles (figure 1.2). In these As overall logistics performance improves, As overall logistics two quintiles, the two components that lag be- customs and other border agencies improve performance improves, hind the rest are the efficiency of customs and faster than do other aspects of logistics perfor- customs and other border border management clearance (component 1) and mance. Infrastructure lags in the two lowest the competence and quality of logistics services quintiles, reflecting the continuing need for agencies improve faster (component 4). In the same two quintiles, the hard infrastructure investments in developing than do other aspects of two components that outperform the rest are the nations—especially the poorest. logistics performance ease of arranging competitively priced shipments Over 2007–2012, the two lowest quintiles (component 3) and the frequency with which have progressed the fastest in two components: shipments reach consignees within scheduled or the efficiency of customs and border manage- expected delivery times (component 6). ment clearance (component 1) and the quality Figure 1.2 LPI component scores, by LPI quintile LPI score Customs Infrastructure Ease of Quality of logistics Tracking and Timeliness arranging shipments and services tracing 4.5 4.0 3.5 3.0 2.5 2.0 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Source: Logistics Performance Index 2012. Figure 1.3 Percentage change in LPI scores over 2007–2012, by LPI component and income group Percentage change Customs Infrastructure Quality of logistics and services 12 10 8 6 4 2 0 Low Lower middle Upper middle High income High income income income income non-OECD OECD Source: Logistics Performance Index 2007 and 2012. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 11 Table 1.6 Respondents indicating an improved or much improved group and LPI quintile. From the percentage of logistics environment since 2009, by LPI quintile LPI survey respondents in each quintile who say Percent of respondents that particular elements of the logistics environ- Bottom quintile Fourth quintile Third quintile Second quintile Top quintile ment are improved or much improved in 2012 Customs 27 43 63 57 65 over 2010 (table 1.6), perceived progress is much Other border procedures 22 31 41 48 52 greater in the upper two LPI quintiles. Also, de- Transport infrastructure 41 40 54 47 56 spite continued progress, the pace of improve- ICT infrastructure 67 65 71 79 68 ment has slowed substantially in the two lowest Private logistics services 53 70 71 74 67 quintiles—especially in the bottom quintile. Logistics regulation 26 31 39 36 41 Incidence of corruption 12 35 36 35 37 The “logistics gap� persists On average, LPI scores remain much higher ICT is information and communications technology. Source: Logistics Performance Index 2012. for high-income countries than for poorer ones (figure 1.4). High-income countries outper- of trade and transport infrastructure (compo- form low-income countries by 43 percent, lower nent 2; figure 1.3). For low-income countries, middle-income countries by 34 percent, and streamlining border clearance procedures and upper middle-income countries by 24 percent. ensuring physical access to markets are neces- Among high-income OECD countries, almost sary for closing basic capacity deficits. By con- 80 percent are ranked in the top quintile in terms trast, upper middle-income countries and, to of logistics performance worldwide (figure 1.5). less extent, lower middle-income countries, have progressed the fastest in the competence Income alone does not explain logistics and quality of logistics services (component 4). performance Indeed, middle-income countries have shifted Despite the persistent logistics gap, income their emphasis from basic hard infrastructure alone cannot explain why performance var- investments to soft infrastructure improve- ies widely among countries in certain income ments based on regulatory reform. groups—particularly in the low- and middle- Changes in the logistics environment are not income groups. High-income countries are one-dimensional. Rather, they vary by income Figure 1.5 Distribution of LPI quintiles across income groups Figure 1.4 2012 LPI score, average and minimum/maximum range by income group Top quintile Third quintile Bottom quintile Second quintile Fourth quintile LPI score Percent 5 100 4 75 3 50 2 25 1 0 Low Lower Upper High Low Lower Upper High income High income income middle income middle income income income middle middle non-OECD OECD income income Note: Vertical rules show minimum/maximum range. Source: Logistics Performance Index 2012. Source: Logistics Performance Index 2012. 12 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Figure 1.6 LPI overperformers and underperformers income alone cannot explain why performance LPI score 4.5 varies widely among countries in certain 4.0 South Africa income groups— China Turkey 3.5 Malaysia particularly in the low- and India 3.0 Vietnam middle-income groups Malawi Madagascar Benin Niger Russian Federation 2.5 Gabon Venezuela, RB Angola Libya Iraq Cuba Montenegro 2.0 Congo, Rep. Linear regression Djibouti 1.5 5 6 7 8 9 10 11 12 Log of GDP per capita (US$) Note: Fitted values are based on an ordinary least squares regression using data for all countries. Underperformers (black diamonds) are the non-high-income countries with the 10 smallest residuals. Overperformers (black circles) are the non–high-income countries with the 10 largest residuals. Source: Logistics Performance Index 2012. heavily concentrated in the top LPI quintile, but LPI = 100 × [ LPI – 1] / [LPI highest – 1]. Thus, other income groups are more dispersed. Upper the best performer has the maximum relative middle-income and lower middle-income coun- LPI score of 100 percent (Singapore). For 2012, tries range from the bottom LPI quintile to the the worst relative performer is Burundi, with a top. Even low-income countries range across all relative LPI score of 19 percent. The distance but the top quintile (see figure 1.5). between the best and worst relative performers Against others in their income group, the in 2012 is about the same as in 2010 (though most overperforming non-high-income countries far smaller than in 2007; figure 1.7). High per- are Vietnam, India, China, and South Africa formers remain strong, while developing coun- (figure 1.6).12 The most underperforming non- tries are slowly catching up. Yet the gap between high-income countries are Djibouti, Republic of Congo, Iraq, Angola, Cuba, Montenegro, Libya, Figure 1.7 LPI score as percentage of Gabon, República Bolivariana de Venezuela, and highest LPI score by LPI quintile, the Russian Federation. The dispersion within 2007, 2010, and 2012 income groups suggests that policy, as well as in- Percent 2007 2010 2012 come, affects logistics performance. 90 Despite the marked variation within income groups, caution should be taken when interpret- 80 ing LPI scores to identify overperforming and 70 underperforming countries. For example, in a large, diverse country, a high score might not in- 60 dicate uniformly strong performance. 50 The gap between the best and worst relative LPI scores is about the same as 40 in 2010 Another measure to compute underlying 30 Bottom Fourth Third Second Top changes in performance, introduced in 2010, is quintile quintile quintile quintile quintile the relative LPI score. The relative LPI score is Source: Logistics Performance Index 2007, 2010, and 2012. obtained by normalizing the LPI score: Relative C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 13 Box 1.4 How precise are LPI scores and ranks? Although the LPi and its components now offer the most compre- 80 percent confidence intervals (see appendix 4). These intervals hensive and comparable data on country logistics and trade facilita- yield upper and lower bounds for a country’s LPi score and rank.1 tion environments, they have a limited domain of validity. First, the Confidence intervals must be examined carefully to determine experience of international freight forwarders might not represent whether a change in score or a difference between two scores the broader logistics environment in poor countries, which often is statistically significant. A statistically significant improvement rely on traditional operators. international and traditional operators in a country’s performance should be concluded only if the lower might differ in their interactions with government agencies—and bound of its 2012 LPi score exceeds the upper bound of its 2010 in their service levels. Most agents and affiliates of international score. networks in developing countries serve large companies, which Because of the LPi’s limited domain of validity and the need for perform at different levels—including for time and costs—than do confidence intervals to account for sampling error, a country’s exact traditional trading networks. ranking might be less relevant to policymakers than its proximity to Second, for landlocked countries and small-island states, the others in a wider performance group or its statistically significant LPi might reflect access problems outside the country assessed, improvements. such as transit difficulties. The low rating of a landlocked country, such as Rwanda, might not adequately reflect its trade facilitation Note reform efforts. Rwanda’s trade must continue to depend on long 1. Upper bounds for LPi ranks are calculated by increasing a country’s international transit routes through Tanzania, Kenya, and Uganda. LPi score to its upper bound while maintaining all other country scores To account for the sampling error created by the LPi’s sur- constant and then recalculating LPi ranks. An analogous procedure is vey-based dataset, LPi scores are presented with approximate adopted for the lower bounds. the highest performing countries and the low- Box 1.5 Policy applications of the 2007 and 2010 LPI—regionally and globally est performing countries is still wide, and nar- rowing it will require substantial time and The 2007 and 2010 LPi data have been widely referenced internationally. The World resources. Economic Forum’s Global Enabling Trade Report, published yearly since 2009, uses The correlation between countries’ 2010 LPi data in its composite Enabling Trade index to capture important aspects of sup- and 2012 LPI scores is about 90 percent, and ply chain performance affecting international economic integration.1 the corresponding rank correlation about 85 The Asia-Pacific Economic Cooperation also uses data from the LPi, to measure percent. Although some changes in countries’ performance under its Supply Chain Connectivity initiative. The initiative’s goal is to ranks and scores appear large at first glance, the reduce by 10 percent the time, cost, and uncertainty of supply chain transactions LPI is as subject to sampling error as any other in five years. The World Bank uses the LPi in its World Development Indicators and as a stan- survey-based dataset. Only when confidence in- dard performance indicator in such country reports as Country Economic Memo- tervals for 2010 and 2012 do not overlap should randums or Country Assistance Strategies. 2 a statistically significant change—positive or Advanced economies use the LPi, too. The Øresund EcoMobility project, a negative—be concluded (box 1.4). Swedish–Danish cross-border initiative to increase competence within climate- Recognizing the importance of trade facili- friendly transport of both goods and people, draws on 2007 and 2010 LPi data in tation and logistics, policymakers are aiming to the Logistics and Sustainability Performance index that it is developing.3 put in place the structures that boost perfor- mance. Since the World Bank launched the LPI Notes 1. World Economic Forum 2010. and its component indicators in 2007, they have 2. See, for example, World Bank (2011). rapidly gained acceptance among policymakers 3. www.cbs.dk/Forskning/institutter-centre/Projekter/EcoMobility. and professionals—nationally, regionally, and globally (box 1.5). 14 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 2 SECTion Unbundling logistics performance The LPI score and country rankings for the “high� or “very high� is at most half as large as six main component indicators come from the for any other type. Road infrastructure satisfies international part of the survey, a collection more respondents than most other types, ex- of information provided by foreign logistics cept in the two lowest quintiles. In the bottom professionals. quintile, infrastructure generally fails to satisfy In the domestic LPI, by contrast, surveyed —an exception to the pattern of variation. logistics professionals assess the logistics envi- Similar patterns emerge when the do- ronments in the countries where they work. The mestic LPI data on infrastructure are domestic part thus contains more detailed in- disaggregated by World Bank region, omitting formation on countries’ logistics environments, high-income countries (table 2.2). The high- core logistics processes and institutions, and est ratings in all regions are for ICT—with performance time and cost. This approach looks ratings in Sub-Saharan Africa lagging behind at the logistics constraints within countries, not those in other regions. Ratings for other in- just at the gateways, such as ports or borders. It frastructure types vary more widely by region, analyzes country performance in four major but two features stand out. First, satisfaction determinants of overall logistics performance: with road infrastructure is especially low in infrastructure, services, border procedures and South Asia and the Middle East and North time, and supply chain reliability. Africa. Second, satisfaction with rail infra- structure is higher in the Middle East and Infrastructure North Africa and Europe and Central Asia than elsewhere, though it is still lower than Survey respondents in countries in the top for other infrastructure types. quintile rated their infrastructure far more highly than did those in countries in the other Services four quintiles (table 2.1). Differences across the other four quintiles are less striking, especially The quality and competence of core logistics for road and rail links. Infrastructure, though service providers is another important part of still a logistics constraint in developing coun- overall country performance. For countries in tries, seems to be improving. the three lowest LPI quintiles, freight forward- Since 2010, satisfaction with many infra- ers are rated much higher than other types of structure types has risen—though to vary- service providers (table 2.3).13 Ratings for the ing degrees across quintiles (see table 2.1 in other provider types vary more widely across Connecting to Compete 2010). Respondents in all quintiles—though rail transport service all LPI quintiles are most satisfied with ICT provision, like rail infrastructure, consistently infrastructure: in the four lowest quintiles, the receives low ratings. And as with infrastructure, number of respondents rating its quality “high� countries in the top quintile receive by far the or “very high� is at least twice as large as for any highest ratings for service provider quality and other infrastructure type. By contrast, rail in- competence. frastructure inspires general dissatisfaction: the Respondents in all but the top quintile number of respondents rating rail infrastructure are far more satisfied with service providers C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 15 Table 2.1 Respondents rating the quality of each infrastructure infrastructure and rail services. Yet both rail type “high� or “very high,� by LPI quintile infrastructure and services receive low ratings, even in the top LPI quintile, consistent with Percent of respondents Warehousing and Europe’s long-term shift from rail freight to Ports Airports Roads Rail transloading ICT trucking. Bottom quintile 12 9 9 12 10 18 It is also useful to compare the LPI indica- Fourth quintile 12 10 6 1 12 26 tors on service provider performance with ex- Third quintile 24 33 19 10 31 44 ternal measures, such as the World Bank’s Air Second quintile 27 31 23 3 32 67 Connectivity Index, which measures countries’ Top quintile 72 76 69 32 70 77 centrality to the global air transport network ICT is information and communications technology. on a scale from 0 to 1.14 Higher satisfaction Source: Logistics Performance Index 2012. with air transport service providers is strongly associated with a higher Air Connectivity Table 2.2 Respondents rating the quality of each infrastructure type Index score (figure 2.1). Also positively corre- “high� or “very high,� by World Bank developing country region lated with the Air Connectivity Index score is Percent of respondents the quality of air transport infrastructure. So Warehousing and improving country connectivity requires im- Ports Airports Roads Rail transloading ICT proving infrastructure, such as airports. But it East Asia and Pacific 18 22 14 3 15 41 also requires improving the domestic regula- Europe and Central Asia 14 33 15 12 27 43 tory environment, with attention to competi- Latin America and Caribbean 21 24 15 4 19 39 tion, to entry barriers, and to policies that in- Middle East and North Africa 25 29 5 10 19 39 crease the costs of trade. South Asia 16 23 7 8 11 35 Understanding economic connectivity is Sub-Saharan Africa 18 10 12 1 15 28 becoming more and more important for un- ICT is information and communications technology. derstanding global supply chains. Logistics Source: Logistics Performance Index 2012. performance measures how well countries than with infrastructure quality (compare connect to global networks, while connectiv- tables 2.1 and 2.3). The same gap appears gen- ity assesses how well countries are positioned erally across World Bank regions (table 2.4). toward their markets, considering their posi- These data suggest a need to develop trans- tion on services networks (air, shipping). The port-related infrastructure. The difference United Nations Conference on Trade and De- in satisfaction with services and infrastruc- velopment has been developing since 2004 the ture is especially strong in air and maritime Liner Shipping Connectivity Index for ship- transport and, in some regions, road and rail ping networks. Connecting to Compete 2010 transport. Unlike the 2010 LPI, the 2012 LPI showed a link between shipping connectivity shows a striking difference in satisfaction— and supply chain reliability, as in air trans- throughout all LPI quintiles —between rail port. While connectivity influences domestic Table 2.3 Respondents rating the quality and competence of each service provider type “high� or “very high,� by LPI quintile Percent of respondents Maritime Warehousing, Trade and Road Rail Air transport transloading, Freight Customs transport Cosignees or transport transport transport and ports and distribution forwarders brokers associations shippers Bottom quintile 14 10 18 15 7 27 20 11 21 Fourth quintile 21 6 27 25 15 36 17 14 24 Third quintile 23 17 43 46 44 62 45 32 39 Second quintile 24 15 45 34 36 47 32 17 31 Top quintile 66 37 78 74 68 77 70 59 56 Source: Logistics Performance Index 2012. 16 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y logistics outcomes captured in the LPI, it is not Table 2.4 Difference between respondents rating services “high� or fully exogenous. Indeed, national policies and “very high� and those rating infrastructure “high� or “very high,� by World Bank developing country region cross-border arrangements also influence con- nectivity, whether for air, maritime, or land Percentage points transport (which depends largely on transit Maritime Warehousing, Road Rail Air transport transloading, agreements). transport transport transport and ports and distribution East Asia and Pacific 6 17 2 2 5 Border procedures and time Europe and Central Asia 16 10 18 8 12 Latin America and Caribbean 21 11 0 –2 13 The LPI includes several indicators of border Middle East and North Africa –4 2 10 –3 –9 procedures and time. South Asia 14 6 12 0 4 Sub-Saharan Africa 8 10 2 10 –2 Import and export time Source: Logistics Performance Index 2012. A useful outcome measure of logistics per- formance is the time taken to complete trade this process, but especially in the clearance of transactions. The median import lead time for goods on arrival (see figure 2.2). Countries with port and airport supply chains, as measured for low logistics performance need to reform their the LPI, is more than 3.5 times longer in low- border management so that they can reduce red performing countries than in high-performing tape, excessive and opaque procedural require- countries (figure 2.2). The difference is around ments, and physical inspections. Although the three times for land supply chains. These times time to clear goods through customs is a fairly are associated with distance, with a correla- small fraction of total import time for all LPI tion coefficient of 0.6. The association suggests quintiles, it rises sharply if goods are physically that geographical hurdles, and perhaps internal inspected. Core customs procedures are simi- transport markets, still pose substantial difficul- lar across quintiles. But low-performing coun- ties in many countries. tries have a far higher prevalence of physical Besides geography and speed en route, an- inspection, even subjecting the same shipment other factor in import lead times is the border to repeated inspections by multiple agencies process. Time can be reduced at all stages of (table 2.5). Figure 2.1 Relationship between country scores on the World Bank Air Connectivity Index and the percent of respondents rating the quality and competence of air transport service providers as “high� or “very high� Air Connectivity Index score 0.25 0.20 0.15 0.10 0.05 Linear regression 0.00 0 25 50 75 100 Percent of respondents Source: Arvis and Shepherd 2011; Logistics Performance Index 2012. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 17 The median import Figure 2.2 Median import lead time and average clearance time, by LPI quintile lead time for port and Days Lead time, import (port/airport) Lead time, import (land) airport supply chains 14 is more than 3.5 times 12 longer in low-performing 10 countries than in high- 8 Average clearance time without physical inspection performing countries Average clearance time with physical inspection 6 4 2 0 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Source: Logistics Performance Index 2012. Table 2.5 Respondents indicating that listed customs procedures are available and being used, by LPI quintile Percent of respondents unless otherwise indicated Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Online processing of customs declaration 38 68 86 83 98 Online publication of procedures and requirements for export/import 27 62 77 75 97 Availability of review/appeal 47 48 73 69 87 Pre-arrival processing 22 58 54 52 86 Formal dialogue process 42 66 68 57 85 Online processing of supporting documentation 13 27 53 36 78 Choice of location of final clearance 51 68 63 66 76 Release with guarantee pending final clearance 47 66 61 49 69 Requirement that a licensed customs broker be used for clearance 79 89 73 82 59 Valuation using reference price or other arbitrary uplift 68 82 65 66 34 Physical inspection (percent of shipments) 38 39 19 17 7 Multiple physical inspections 14 19 8 8 4 Source: Logistics Performance Index 2012. Export supply chains typically have a much export competitiveness and ability to partici- lighter procedural burden than do import sup- pate in international trade. ply chains, so lead times are shorter for exports Unlike lead times, which vary considerably than for imports (figure 2.3). But export lead around the world, customs procedures are be- times display the familiar logistics gap—they coming more similar (see table 2.5). The larg- are three or even four times longer for low- est performance gap for customs procedures is income countries than for high-income coun- between the bottom LPI quintile and all other tries (figure 2.4). Moreover, they differ much quintiles. Even that gap is much smaller for more between low-income countries and the some procedures (such as the choice of a final rest than between middle-income and high- clearance location) than for others (such as on- income countries. Many low-income countries line processing). The valuation of goods still have long export lead times, reducing their varies, with reference prices or other arbitrary 18 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Figure 2.3 Median export lead time, by LPI quintile Export lead times are three or even four times Lead time, export (days) Port/airport Land 10 longer for low-income countries than for 8 high-income countries 6 4 2 0 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Source: Logistics Performance Index 2012. Figure 2.4 Median export lead time, by income group Lead time, export (days) Port/airport Land 10 8 6 4 2 0 Low Lower Upper High income middle income middle income income Source: Logistics Performance Index 2012. uplifts often applied in countries outside the top the gap is smaller for countries in the top LPI quintile. quintile—countries where border clearance has Even as customs procedures become more received broad-based policy attention. Here, similar, many countries still find their supply again, the top quintile stands out. chain performance constrained by other bor- The gap in satisfaction between customs and der agencies. Customs is not the only agency other border agencies is especially striking for involved in border management. Coopera- health and SPS agencies, which in many coun- tion among all border management agencies tries may be impeding more efficient import —standards, transport, health, and sanitary procedures. By contrast, quality and standards and phytosanitary (SPS)—is critical to reform inspection agencies receive higher satisfaction (box 2.1). So is the introduction of modern ap- ratings. One reason is that fewer inspection pro- proaches to regulatory compliance (box 2.2). cedures are required for products that are not per- Satisfaction with customs is generally higher ishable or time-sensitive. Another is that health than with other border agencies (table 2.6). Yet and SPS agencies have been slow to automate. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 19 Box 2.1 Innovative approaches to border agency cooperation: the Philippines and Indonesia in 2010 and 2011, the Philippines government developed—and and harmonize trade-related regulations. The system also estab- began to implement—a national single window system for trade. lished a mechanism for regular private sector consultation. initially The system has already automated 33 government agencies’ created to fix deficiencies in system implementation, the consulta- import and export permit and licensing requirements. Many of tion mechanism quickly evolved into a more general forum, where those agencies did not have automated back-office functions traders discuss trade regulations with government officials. These until 2011, but all are now connected to the system, and more discussions have led to some regulations being simplified—and than 80 paper-based processes are being fully automated. Trad- some being repealed. ers can access the system online—first to submit and pay for in both countries, customs hosts the national single window permit applications, and then to track approval and clearance. system’s information and communications technology infrastruc- Key performance indicators show that the system has reduced ture. Also in both countries, the system’s design and development the time it takes traders to apply for various permits and licenses involved both public and private stakeholders. The Philippines’s and be granted them. system was led by customs, indonesia’s by the Coordinating Min- The indonesian government has also launched a national single istry for Economic Affairs (directly led by the Deputy Minister for window system, one that now links the national customs system industry and Trade Affairs). Although the two countries used differ- with more than 25 government agencies. The new system’s imple- ent coordination mechanisms, each improved its border manage- mentation brought to light conflicting trade regulations issued by ment substantially—without resorting to expensive, likely disruptive, various ministries over time, revealing a need to regularly review organizational restructuring. Box 2.2 Customs reform in Sub- Saharan Africa: Cameroon Customs’ key performance indicators Cameroon Customs has been collecting more revenue, facilitat- The revenue added during the experiment was estimated at more ing more trade, and fighting more corruption since 2010. How? By than 23 million euros.2 introducing individual performance contracts and relying on verifi- The experiment has had a major impact on Cameroon Customs able indicators. officers and trade stakeholders, demonstrating that change is pos- Cameroon began reforming its customs in 2007 with the instal- sible and lucrative. Customs reform should take a comprehensive lation of a new customs clearance system, not just to track process- approach based on three principles: ing for each consignment but also to measure the performance of • Strengthen accountability. Have an external audit or stron- customs officers.1 Performance indicators measured how frontline ger scrutiny from parliament and systematically publish officers applied reforms initiated by upper management. revenue collection data and other customs performance The initial quantification phase bore fruit, but the next phase data in the media. stalled. in 2010, Cameroon Customs conducted an experiment to • Make information more symmetrical between the principal give the reform new impact, introducing individual performance (head of customs) and the agent (frontline customs officer). contracts to measure the actions and behaviors of customs of- Generate accurate information on economic activities and ficers at two of the seven Douala port bureaus. The performance behaviors. indicators—extracted from the computer system—focused on trade • Design a new human resources policy. Change the incen- facilitation (especially file processing speed) and on combating tive structure for frontline customs officials and regularly fraud and other malpractice. monitor staff performance using objective data. After several months, the Cameroon Customs offices with in- dividual performance contracts performed better than the offices Notes without (the control group) on indicators for reducing corruption, 1. Cantens and others 2011. collecting revenue, and facilitating trade. Duties and taxes assessed 2. The estimated revenue added during the pilot (all else equal) is the rev- in Douala Port i were up 6.2 percent from the same period in 2009, enue collected during the experiment minus the number of declarations though the number of imported containers was down 3 percent. during the experiment, multiplied by the average taxes and duties of 2009. Comparing table 2.6 with its equivalent 2010, more respondents in the top LPI quintile for the 2010 LPI (Connecting to Compete 2010, have become satisfied with the performance of table 2.4) shows that the logistics gap between customs agencies (up from 62 percent to 68 per- the leading and lagging performers is not merely cent) and of health and SPS agencies (up from persistent but has widened over time. Since 57 percent to 59 percent), while their rate of 20 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Table 2.6 Respondents rating the quality and competence of three The gap in satisfaction border agencies as “high� or “very high,� by LPI quintile between customs and Percent of respondents other border agencies Customs Quality/standards Health/sanitary and agencies inspection agencies phytosanitary agencies is especially striking for Bottom quintile 19 17 11 health and sanitary and Fourth quintile 21 16 14 Third quintile 41 31 29 phytosanitary agencies Second quintile 32 22 17 Top quintile 68 62 59 Source: Logistics Performance Index 2012. satisfaction with quality and standards inspec- Yet a comparison of red tape indicators in tion agencies has not changed. In the bottom the 2010 LPI with those in the 2012 LPI is en- quintile, however, the rate of satisfaction with couraging. Importers and exporters saw a reduc- all three border agencies has declined (customs tion in the number of agencies they must con- down from 26 percent to 19 percent, quality tact, except in countries in the top LPI quintile, and standards inspection agencies down from where the number remains low. And all LPI 24 percent to 17 percent, health and SPS agen- quintiles reduced the number of documents re- cies down from 15 percent to 11 percent). quired for importing and exporting. Simplifying documentation for imports Red tape and exports has long been high on the trade Indicators for red tape show the same lack of facilitation agenda, prompting initiatives to coordination at the border, with a resulting bur- bring border agencies together and to create a den on private logistics operators. In countries single window for trade. The International Fi- in the top LPI quintile, operators typically deal nance Corporation’s Doing Business indicators with around half as many government agen- place high weight on such simplification. Still, cies as do those in countries in the bottom LPI simplification and single window initiatives quintile (figure 2.5). Similarly, countries in the themselves are not enough. Also essential is im- top quintile typically require two or three docu- proving other aspects of border management ments for export and import transactions; those and, more generally, soft and hard trade-related in the bottom quintile require four or five. infrastructure. Figure 2.5 Red tape affecting import and export transactions, by LPI quintile Number Import agencies Export agencies Import documents Export documents 5 4 3 2 1 0 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Source: Logistics Performance Index 2012. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 21 in the bottom LPi Delays, reliability, and highly variable lead times can disrupt produc- quintile, 60 percent of service delivery tion and exporting. Firms would have to adopt costly strategies, such as the use of express ship- respondents report that Some causes of underperformance are endog- ments or of sharp increases of inventories to shipments are often or enous to a country’s supply chain: the quality of hedge against the lack of inventory. Recent re- nearly always delayed by service and the costs and speed of clearance pro- search introduced the concept of total logistics cesses. But other causes, such as dependence on costs15 encompassing three areas: compulsory warehousing indirect maritime routes, lie outside the domes- • Freight transport. or preshipment inspection tic supply chain and are not under a country’s • Indirect costs and overheads, supported control. internally or paid externally to organize The LPI details possible causes of delay that the supply chain (agency fees, official or are not directly related to how domestic services non-official payments). and agencies perform (table 2.7). Between the • Costs induced by the lack of the reliabil- top and bottom LPI quintiles there is, again, ity, such as in inventories. All else equal, a striking contrast. This contrast, appearing in these costs are often much higher for all five LPI delay categories, is especially large time-sensitive goods. in three: informal (corrupt) payments, compul- Delays rise steeply with lower logistics sory warehousing, and maritime transshipment. performance—a fact highlighted in the two Delays and unexpected costs are common in previous editions of Connecting to Compete.16 low LPI quintiles, where they limit overall sup- Thus, a stark difference in on-schedule arrival ply chain performance. Worse, the incidence rates separates countries at the bottom and top of delays is increasing across LPI quintiles— of the LPI ranking (figure 2.6). In the top LPI especially in the lower ones. In the bottom quintile, most respondents report that import quintile, 60 percent of 2012 LPI respondents and export shipments “nearly always� arrive on report that shipments are often or nearly al- schedule. In the bottom quintile, fewer than ways delayed by compulsory warehousing or a third of respondents report “nearly always� preshipment inspection—a stark increase from for imports—and fewer than two-thirds for 2010, when 39 percent reported delays from exports. compulsory warehousing and 34 percent from The lack of reliability and unpredictable preshipment inspection. Sampling error may delays, which do more damage than the aver- account for some of these differences, but it is age costs and time that can be factored into the unlikely to tell the full story. Declining sup- supply chains, create high induced-logistics ply chain predictability, an urgent commercial costs in low logistics-performance environ- problem, has prompted some firms to launch ments and add dramatically to the challenge premium on-time delivery guarantee services. of economic diversification in low-income Predictable, reliable supply chains are cen- and many middle-income economies. By con- tral to good logistics performance. Indeed, trast, Morocco, which invested in improving Table 2.7 Respondents reporting that shipments are “often� or “nearly always� delayed, by delay category and LPI quintile Percent of respondents Compulsory Preshipment Maritime Criminal Informal warehousing inspection transshipment activity payments Bottom quintile 60 60 56 21 40 Fourth quintile 37 46 40 12 31 Third quintile 11 18 34 4 13 Second quintile 20 24 27 14 21 Top quintile 8 11 9 5 5 Source: Logistics Performance Index 2012. 22 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Figure 2.6 Respondents reporting that shipments are “often� or “nearly always� cleared The lack of reliability and and delivered as scheduled, by LPI quintile unpredictable delays do Percent of respondents Imports Exports more damage than the 100 average costs and time 75 50 25 0 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Source: Logistics Performance Index 2012. logistics during the 2000s, could develop a imports suggests that supply chain unreliability logistics industry that can support far more discriminates in practice (if not in law) against complex supply chains than in the recent past. foreign goods. As traditional trade barriers col- In 2012, Renault-Nissan began operating at its lapse around the world, policies contributing Tangier factory with a production capacity of to such de facto discrimination become ever 400,000 cars for export, the first such venture larger determinants of performance and trade in Africa. outcomes. Addressing the causes of unexpected The bottom LPI quintile has the largest dif- delays—including unpredictability in clearance, ference between on-schedule arrival rates for inland transit delays, and low service reliability exports and those for imports (see figure 2.6). —should thus be an important part of logistics The much lower percentage of high ratings for reform in low-performing countries. Figure 2.7 Respondents reporting that shipments are “often� or “nearly always� cleared and delivered as scheduled, by World Bank developing country region Percent of respondents Imports Exports 100 75 50 25 0 East Asia Europe and Latin America Middle East and South Sub-Saharan and Paci�c Central Asia and Caribbean North Africa Asia Africa Source: Logistics Performance Index 2012. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 23 Box 2.3 Who is to blame for delays? A key indicator in international logistics is the dwell time of import reduce dwell time by two days at the port of Casablanca by chang- containers in ports (the average delay between unloading and exit). ing how shipping lines transmit their ship manifests to customs. The question of responsibility for dwell time often starts a blame Another study pointed to a very different explanation for dwell game between control agencies and port authorities (faulted for time in the least developed countries of Sub-Saharan Africa, where slow clearance) and private operators (suspected of using the port much dwell time results from collusion among control agencies, for storage). port authorities, private terminal operators, logistics operators, and in ports with efficient logistics, dwell time can be just two or large shippers. At Douala, for example, the port—not an external three days. in the main port gateways for the developing countries facility—is an importer’s cheapest storage option for up to 22 days. in Asia, North Africa, the Middle East, and Latin America, it is no Firm surveys show that in most cases, reducing cargo dwell time longer than seven days or so. But in Sub-Saharan ports, it is a stag- would increase importers’ input costs. And terminal operators earn gering 14 days on average. large revenues from storage, giving them little incentive to reduce Data from customs and from container operators, now gener- dwell time.1 The same type of analysis found no evidence of such ally available through computer systems, can shed light on what perverse incentives in Morocco and indonesia—middle- income determines dwell time. One analysis found that in middle-income countries with a diversified producer base concerned with supply and emerging economies, most parties—including port authori- chain performance. ties and private sector operators—want to reduce dwell time, but that inefficiencies in information management cause delays and Note unpredictability. For example, Morocco recently found that it could 1. Raballand and others 2012; World Bank 2012. The patterns highlighted above are more cleared and delivered as scheduled, but in Eu- striking in some World Bank regions than rope and Central Asia (the highest performing in others (figure 2.7). Export shipments are region) the figure is 60 percent. “often� or “nearly always� cleared and delivered These data show a geographic predictability as scheduled according to 59 percent of respon- gap, with implications for competitiveness and dents in South Asia (the lowest performing re- the spread of regional supply chains and produc- gion) and 75 percent of respondents in East Asia tion networks. And this gap might be widening. and Pacific (the highest performing region). Since the 2010 LPI, the percentage of respon- Import performance varies more widely. In the dents stating that shipments “often� or “nearly Middle East and North Africa (the lowest per- always� arrived as scheduled has risen strik- forming region), 34 percent of respondents re- ingly in East Asia and Pacific—from 41 percent port that imports are “often� or “nearly always� to 56 percent for imports and from 26 percent Figure 2.8 Shipments not meeting company quality criteria, by LPI quintile Percent 40 30 20 10 0 Bottom quintile Fourth quintile Third quintile Second quintile Top quintile Source: Logistics Performance Index 2012. 24 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y to 75 percent for exports. In Sub-Saharan Af- the top LPI quintile, just 15 percent of ship- Since 2010, the rica, this figure has fallen for imports (from ments do not meet company quality criteria. percentage of shipments 56 percent to 43 percent) but risen for exports But in the bottom quintile, the proportion more not meeting quality criteria (from 47 percent to 69 percent). Sampling error than doubles—to around 35 percent. might explain part of these changes. Still, it is The most important quality criterion has remained largely the important to renew attention to supply chain in freight forwarding is delivery within the same in all but the second predictability in lower income regions. In high- promised time window. Almost as important LPi quintile, where it rose performing countries, the acceptable qual- is the absence of errors in cargo composition ity window is much narrower and tolerance or documentation. The acceptable quality win- 8 percentage points for quality defects is much lower than in low- dow is much narrower (and errors much less performing countries, magnifying the actual tolerated) in high-performing countries than gap in quality. in low-performing countries. The shipment Supply chain predictability is not just a quality gap only partly reflects these differing matter of time and cost (box 2.3). A further expectations. consideration—for private sector operators and Since 2010, the percentage of shipments not their clients—is quality. And between low- and meeting quality criteria has remained largely the high-performing countries, the 2012 LPI reveals same in all but the second quintile, where it rose a wide gap in shipment quality (figure 2.8). In 8 percentage points. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 25 3 The way forward: new challenges SECTion in trade facilitation and logistics Since the release of Connecting to Compete 2007, Despite this rise in global awareness, lo- logistics priorities have changed at the global and gistics and trade facilitation priorities are ulti- country levels, with special significance for poorer mately set by countries—or regionally, in small countries. Logistics efficiency and trade facilita- and consistent country groups. Countries have tion are now high on the agenda of policymakers, varying reform and improvement needs. Also, private firms, and international organizations. since a supply chain is no stronger than its weak- And many developing countries have pushed for est link, mitigating one performance bottleneck reforms to increase supply chain efficiency and might not yield all the projected benefits until facilitate trade and transportation services. progress is made in other areas. The international community has sup- Constraints on logistics performance share ported these efforts. Projects dealing with lo- similar patterns in countries with similarly gistics and trade facilitation constitute about 10 advanced—or similarly lagging—reform pro- percent of the World Bank’s overall portfolio. grams. According to the typology used in Con- In 2010, the World Bank started the Trade Fa- necting to Compete 2007 and 2010, countries cilitation Facility, a donor-funded technical as- fall into four groups: logistics unfriendly, partial sistance initiative to target trade facilitation and performers, consistent performers, and logistics logistics projects in low-income countries. Re- friendly (see section 1 of this report for details). gional development banks in Asia, Africa, and Three trends are in play across these groups. the Americas have also stepped up their projects One is the international community giving more and capacity-building activities.17 attention to logistically constrained countries. Participants in the Doha Round negotiated These countries often face governance challenges new trade facilitation measures to be part of an (postconflict countries and fragile states), and eventual World Trade Organization agreement. some have their access to global markets limited The negotiations were productive, not only in by geography or the size of their economy (land- their convergence toward common measures but locked developing countries, small-island states, also in the participation of low-income countries small economies distant from main trade routes). —with associated capacity building to ready Even with fairly successful border management countries for implementation. Regional forums reforms and general improvements in the busi- have also made trade facilitation and supply ness climate, logistically constrained countries— chain performance a priority, integrating mem- such as Malawi, Rwanda, and other least devel- bers through such initiatives as the Asia-Pacific oped countries in Sub-Saharan Africa—may be Economic Cooperation (for supply chain con- unable to boost their connectivity and logistics nectivity) and the Association of Southeast Asian performance on their own. They must depend Nations (for a single window system). Special- instead on international cooperation to achieve ized public and private organizations promoting economies of scale or to loosen bottlenecks. The awareness, good practices, and capacity building UN-supported Almaty Program of Actions for include the World Customs Organization, the Landlocked and Transit Developing Countries International Road Transport Union, the Inter- demonstrates the international community’s re- national Federation of Freight Forwarders Asso- newed attention to helping these countries ad- ciations, and the Global Express Association. dress their logistics predicaments.18 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 27 Respondents in the 2012 A second trend is the increasing complexity performance and quality. For instance, highly LPi voiced widespread of reforms—a clear trend in projects supported efficient container movements that compete by the World Bank. New projects typically with road transport are very few and are con- dissatisfaction with involve several sectors, complementary stake- centrated in a few OECD countries. port infrastructure in all holder groups, and, increasingly, several coun- More surprising, concerns with port lo- developing regions tries. Since hard and soft components often can- gistics are high. Respondents in the 2012 LPI not be treated independently, investments in voiced widespread dissatisfaction with port trade-related infrastructure should go hand in infrastructure in all developing regions—and in hand with efforts to reform border management all LPI quintiles except the top. What does this agencies or to improve regulation and stimulate mean about the drive for developing country the market for competitive services. port reforms in recent decades? It is now nor- A third trend is that logistics challenges and mal in developing countries for commercial and priorities are continually evolving. Policymakers services activities to be separated from the port and international organizations must shift their authority, and there are many examples of suc- attention and adapt. cessful private sector participation in container terminal operations. Anecdotal evidence sug- Infrastructure gests that investment has yet to catch up with the rapidly growing volume of container trade, Investment in trade-related infrastructure is the with many older ports reaching their physical most established form of public intervention, limits—notwithstanding the facilitation mea- either through direct investment and mainte- sures that speed up the throughput and that nance or through public-private partnerships. delay the need for investment. The LPI surveys show a wide gap in perceived Dissatisfaction with port infrastructure infrastructure performance between OECD in developing countries likely stems from two countries and developing countries—but with principal sources: important variations. • A sheer lack of capacity, and thus a lack First, although ICT is essential for trade op- of investment, resulting from the re- erations and is increasingly automated, it is not duced fiscal space and from the reduced a major cause for concern. Its quality and avail- appetite for private sector involvement ability are high and generally consistent across in the least developed countries that fol- all income groups. lowed the global financial crisis (despite Second, concerns with road quality are high the resumption of trade flows). in the two lowest LPI quintiles, in South Asia, • Inefficient operations at existing and—surprisingly—in the Middle East and facilities—the result of lacking or in- North Africa. complete sector reforms, in turn causing Third, poor rail infrastructure is persistent. poor performance and artificial conges- Respondents who rate rail quality as “high� or tion (congestion not absolutely related “very high� number half as many as for other to the lack of capacity, though quite real infrastructure areas at most (as in the 2010 for users). LPI). Satisfaction with rail infrastructure is The natural course of action would be to highest in the Middle East and North Africa start with attention to sector reforms, making and Europe and Central Asia. Yet even in these port operations more efficient before consider- regions, rail infrastructure is rated lower than ing new capacity investments. are other infrastructure types. Although rail use reduces carbon emissions, price signals alone are Improving logistics services unlikely to shift traders toward freight modes in developing countries that are more environmentally friendly than trucking. Only with major qualitative changes Because service to traders is ultimately deliv- can countries bridge the gap in rail logistics ered by private companies, another key part 28 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y of the new agenda is improving logistics and Coordinating border management Key to the new agenda is trade-supporting services. Their quality is cen- a more holistic approach tral to facilitating trade and transport—both The 2010 and 2012 LPI data suggest that cus- to the clearance of directly and indirectly, through related regula- toms procedures are already converging, with tory reforms. pre-arrival clearance, online submission, and goods, which requires Some emerging countries are trying to posi- post-clearance auditing now widely available more collaboration tion themselves as logistics hubs, seeing an op- (see table 2.5). One reason is the dissemination among all border portunity to diversify in the development of lo- of World Customs Organization and World gistics services. In 2011, for example, Morocco Trade Organization principles, supported by management agencies established an agency for logistics development. technical assistance and capacity building. Banking on its location and on the success of its Yet customs is not the whole of border man- investment in the transshipment port at Tanger agement. Delays and unexpected problems in Med, the country is pursuing a policy to develop quality and standards inspection agencies, and freight and logistics facilities and services that in health and sanitary and phytosanitary agen- reach beyond its own economy—to North Af- cies, are just as able as poor customs procedures rica, Southern Europe, and West Africa. Similar to create supply chain problems and thus poor strategies are in place in Malaysia, Panama, and overall logistics performance (see table 2.6). elsewhere. Key to the new agenda is a more holistic ap- Two main causes of inefficiency in develop- proach to the clearance of goods. Such an ap- ing countries are the fragmentation of services proach requires more collaboration among all and the small size of local markets. Fragmen- border management agencies—standards, sani- tation, which cuts against the integration of tary, phytosanitary, transport, and health—and global supply chains,19 has many causes. One the adoption of modern approaches to regula- is the policy of separating functions. For in- tory compliance. Even if customs is highly auto- stance, certain regulations still require cus- mated and practices risk management through toms brokers to be independent from transport the selective use of physical inspection, these providers. improvements will matter little as long as other Since the 2010 LPI, the trucking market government agencies are not automated and has become a major focus of service reforms. persist in routine physical inspections of all im- Trucking surveys indicate that freight cost dif- ported goods.21 ferentials across countries often result from inef- Reducing the number of formalities and ficiencies in the market structure for transport procedures is a main tool of trade facilitation. providers and from regulatory barriers prevent- Countries are now seeking to reduce the inci- ing open competition.20 dence of intervention—in number of agencies National and regional regulators must cre- or at least in number of physical interfaces with ate substantial incentives to promote reliable, these agencies. The holistic approach has elic- high-quality services—especially through elim- ited innovative border management approaches. inating barriers to entry. This agenda presents One is the electronic national single window, many new challenges, but the political econ- which allows traders to submit all the import, omy might not favor changing current business export, and transit formalities required by mul- practices or limiting conventional rent-seeking. tiple regulatory agencies through a single online Also, change could require tradeoffs that are gateway (rather than through various govern- difficult socially and for the poor. Traditional ment entities, some automated and others still organizations tend to be labor-intensive: West relying on paper). Such initiatives benefit the Africa’s small truckers’ organization needs twice trading community by cutting the cost and time as many trucks per quantity transported than for formalities and provide governments with does commercial trucking in Southern Africa— opportunities to streamline the processes. The and employs one and a half times as many work- same is true for cross-border initiatives, such as ers per truck (2.2 to 1.5). one-stop border posts, which aim to integrate C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 29 Developing regions need agency processes by harmonizing two countries’ National data for reforms extensive changes in their procedures and sharing their information and resources. Logistics-related reforms and projects need transit regimes and corridor Yet implementing these innovative ap- reliable indicators—to inform the dialogue arrangements, most of proaches is complex. The many participating among policymakers, the private sector, and which were designed more agencies, often with diverging mandates and in- other stakeholders and to monitor impact. terests, create a challenge to sustainable institu- The LPI and its indicators allow comparisons than 30 years ago and few tional reform and determining which agency or across countries, but as benchmarks they are of which are fully in place entity is responsible for the operation. coarse-grained. For greater detail and specificity, countries Regional facilitation and integration can tailor new logistics-related indicators (such as port and corridor indicators) to their proj- Regional integration initiatives sought, early ects. And for some activities, countries can also on, to facilitate trade and transport. Much measure logistics costs. Some high-income and trade among neighbors takes place on overland emerging economies have government initia- transport corridors. And logistics-unfriendly tives and partnership projects to systematically countries—many of them landlocked and post- measure national supply chain performance. conflict, with small economies—depend heavily Canada has focused on collecting, aggregating, on trade and transit systems set up with larger and analyzing supply chain data (cost, time, and neighbors, themselves not always high logistics reliability) at the micro level (box 3.1). Other performers. As the UN Almaty Program of countries have focused on the demand side, Action underlined, countries with these chal- looking at the share of logistics in production lenges require the international community’s costs for the country’s main activities—through help to reduce logistics costs and develop sus- surveys (Finland, France, Germany, Thailand)25 tainable exports. The World Bank supports or through a reinterpretation of available statis- facilitation and integration projects in 14 of its tics (Brazil, Germany, South Africa, the United subregions. States). But the challenge is not just to improve The turn toward national observatories to border crossing. Regional facilitation and in- measure logistics costs should be encouraged, tegration involve provisions and agreements to and it should be part of the emerging interna- organize the movement of goods, vehicles, and tional effort to solve methodological problems trade-related information.22 Making transit sys- cooperatively. Still, it should be clear that gains tems effective for trade across corridors has been in national detail often diminish the compara- least problematic in Western Europe and North bility of data across borders. A country’s supply America. The United States and Canada have chain depends on its geography and production recently reengineered their border procedures structure, and primary data differ considerably to facilitate trade while reinforcing security. across countries. Canada and Australia have re- And a new Beyond the Border Action Plan, an- cently proposed a common core—based on the nounced on December 7, 2011, includes cutting- LPI—to make data more comparable and to edge trade and traveler facilitation measures and help develop new data capacities and observato- greater information sharing.23 ries in developing countries. Developing regions need extensive changes in their transit regimes and corridor arrange- Supply chain sustainability ments, most of which were designed more and development than 30 years ago and few of which are fully in place. But these regions also need other lo- Logistics is increasingly seen as important, for gistics changes, especially in services and bor- both competitiveness and sustainability. Logis- der management. All these efforts face similar tics directly affects food security—price and obstacles.24 local availability—through the performance 30 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Box 3.1 Beyond the LPI: Canada’s effort to develop in-depth, customized data collection Adapting to an age of increasing competiveness in global trade supply the primary data). What has been learned so far? One ex- networks, Canada has looked beyond the LPi to monitor domestic ample: Western Canadian gateways connecting Asia to Central Ca- logistics performance. Are Canada’s gateways and supply chains nadian markets performed well in 2010 and 2011. Substantial gains reliable, given its geography and trade composition? To answer that were made in the port interface (reduced dwell time) and in rail transit question, its federal ministry of transportation (Transport Canada) performance—two ports in British Columbia improved 21 percent. began using performance indicators to measure efficiency in ports But because ocean transit times increased over the same period, and supply chain transport. Canada hopes to use these indicators overall cargo transit times in 2011 were much the same as in 2010. to help set performance targets, guide national policy, and measure The monitoring project shows how countries can build on the returns on infrastructure investments. LPi to shed light on more specific factors in trade-related perfor- The monitoring project began in 2008. Canada’s largest port mance, increasing accountability and oversight for key assets and authorities worked with academics to develop indicators that could trade-related infrastructure. insightful performance measurement capture the complexities of port operations in container and bulk can help governments, such as Canada’s, amend policies and in- cargo transport, as well as in transport along attached land corri- vestments with greater precision. it can also involve international dors. To discover how efficiently freight moved through the country, collaboration. Through an initiative of the Asia-Pacific Economic Transport Canada used fluidity indicators to capture the average Co-operation (APEC), Canada and Australia (which has been de- travel time of cargo from overseas through Canadian gateways to veloping its own indicator strategy) are working toward a common, North American inland destinations. in-depth set of detailed indicators. The two countries hope that de- The fluidity indicators look at the operational interaction of gate- veloping economies in the APEC group will use the new indicators ways and strategic trade corridors, using data exchange partnerships and so benefit from the experience and expertise of more advanced with private carriers, such as trucking companies (who voluntarily countries and international institutions. and resilience of food supply chains. That is Environmentally friendly initiatives have especially true for African and Middle Eastern combined regulation with the voluntary countries that depend heavily on food imports changes of industry actors. In Europe, 20 years (see box 1.1). of consistent policies and large investments in Logistics affects the environment and cli- new technologies helped reduce emissions of mate change even more directly. How can carbon monoxide, hydrocarbons, nitrogen ox- the world achieve a more sustainable balance ides, and particulates by 98 percent. The global among economic, environmental, and social road transport industry, on its own initiative, objectives? Green logistics is quickly gaining has committed to reducing its carbon dioxide prominence in high-income and emerging emissions 30 percent by 2030.28 Another driver economies26 and is likely to become more im- of change, likely to become a major one, is ship- portant elsewhere. per demand (box 3.2). Logistics and freight-related activities may Large logistics service providers, notably account for up to 15 percent of human carbon the four main express carriers (DHL, FedEx, dioxide emissions, in part because of fossil fuels. UPS, TNT), have anticipated this trend in More fuel-efficient vehicles and cleaner practices shipper demand and developed global products mean better logistics. It may be possible for lo- and programs to meet it. First, they have global gistics to diminish its carbon footprint with initiatives to reduce the footprint of their op- higher load factors or fewer trips. But emissions erations and those of contractors—shifting to can be reduced the most through a shift away more efficient vehicles (as in DHL’s conversion from higher emission transport modes—that is, of its New York fleet to hybrid and electric), 29 if lower emission modes (which in many cases making facilities more efficient, training staff are also slower) can be made more attractive members, and so on. Second, they have ways to through better service delivery and predict- help shippers reduce their supply chain foot- ability.27 To meet shippers’ expectations, lower print. For example, under DHL’s GoGreen emission modes in most regions will require vast program, clients are offered offsets for car- qualitative improvements. bon-neutral logistics, consultation on greener C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 31 These changes will likely help expand the Box 3.2 A shipper’s demand for green supply chain solutions green logistics movement from rich, already The survey for the 2012 LPi included a question on shippers’ environmental prefer- environmentally sensitive economies to devel- ences: “How often do shippers ask for environmentally friendly options (e.g., in view oping countries. Logistics performance and of emission levels, choice of routes, vehicles, schedules) when shipping to . . .?� sustainability are being seen, more and more, as The responses show that one-third of shippers, on average, are concerned complementary objectives. with the environmental footprint of their international supply chain when shipping to OECD countries. For shippers to low-income countries, the share is only one-tenth. A trade logistics reform matrix Respondents reporting that shippers have “often� or “almost always� asked Reforms must be implemented as coherent for environmentally friendly options packages, and they require sustained, long- when shipping to particular regions, by term attention. There is not one unique institu- income group tional arrangement for countries to implement Percent logistics-related reforms. Indeed, policymaking 40 is a responsibility shared among government agencies in charge of transportation policies and investment, commerce, industry, and cus- 30 toms and border management. No country has a ministry for logistics. Instead, a collective 20 framework that includes the private sector is important for consistent implementation. Can- ada, China, Finland, Germany, Malaysia, and 10 Morocco have all introduced councils or simi- lar coordination mechanisms. The focus and leadership of logistics reforms 0 Low Middle High income High income depend on local circumstances. In advanced and income income non-OECD OECD emerging economies, transportation agencies Source: Logistics Performance Index 2012. have more often led the coordination, with an increasingly environmental focus. In develop- ing countries, the agencies in charge of com- solutions (including modal and distributional merce and economic development have also changes), and logistics footprint dashboards for played a major role in promoting the facilita- decisionmaking. The program handled 1.8 bil- tion and logistics agenda. Experience shows the lion shipments in 2011 and offset 135,000 tons complementarities between hard and soft inter- of carbon emissions. ventions, especially in low-income regions. For Table 3.1 Trade logistics reform matrix Bottom Third and fourth Second Top LPI component quintile quintiles quintile quintile Physical infrastructure ✔✔ ✔✔ ✔✔ Information and communications technology ✔ ✔ Customs ✔✔✔ ✔✔ ✔ Integration of border management ✔ ✔✔✔ ✔✔✔ ✔ Services ✔✔ ✔✔✔ ✔✔✔ Regional facilitation and corridors ✔✔✔ ✔✔ ✔✔ National data tools ✔ ✔ ✔✔✔ ✔✔✔ Green logistics ✔✔ ✔✔✔ ✔✔✔ is very important; ✔✔ is important; ✔ is fairly important. Source: Authors. 32 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y example, improvements in trade facilitation are services, infrastructure, and efficient logis- improvements in implemented more easily with physical invest- tics; and consistent policies in transport and trade facilitation are ment to develop or rehabilitate international logistics. implemented more transport infrastructures, such as road or rail Focus areas and priorities also depend on corridors. countries and their level of performance. The easily with physical The 2012 LPI shows preconditions for ef- association between needs and level of perfor- investment to develop or ficient logistics. All top performers have devel- mance is not entirely scientific. However, based rehabilitate international oped and maintained a long tradition of strong on the results in section 2 and on project ex- public-private partnership and dialogue; good perience from the many contributors to this transport infrastructures cooperation between policymakers, practitio- report, a matrix can suggest reforms appropri- ners, administrators, and academics; a com- ate to a country’s level of logistics efficiency prehensive approach in the development of (table 3.1). C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 33 notes 1 This report references the six LPI indicators by their short 12 Other countries in the overperformers group, mostly low names: customs, infrastructure, international shipments, income and lower middle income, are not counted here, logistics quality and competence, tracking and tracing, as there is little ground-based evidence indicating their and timeliness. engagement in any reforms that could be linked to their 2 Kallas 2012. better performance, other than the statistical relationship between income and LPI score. 3 Mongelluzzo 2012. 13 Although the respondents in the LPI survey are freight 4 Klaus and Kille 2007. forwarders and express carriers, the quality and 5 Klaus, Kille, and Schwemmer 2011. competence of service providers are assessed by their 6 The following countries had to be excluded from the competitors. international LPI sample due to an insufficient number of 14 Arvis and Shepherd 2011. responses or other data reliability concerns: Bangladesh, 15 Arvis and others 2010. Israel, Mali, Mozambique, Nicaragua, Somalia, Turkmenistan, Uganda, and Zambia. 16 Arvis and others 2010. 7 The responses from this question were used not to 17 IDB 2012. compute the LPI but as a floating question to capture 18 Arvis and others 2011. trends that might be relevant. 19 Kunaka, Mustra, and Saez forthcoming. 8 The Incoterms® (International Commercial Terms) rules 20 Raballand and Teravaninthorn 2008. are an internationally recognized standard and are used worldwide in international and domestic contracts for 21 McLinden and others 2011. the sale of goods. First published in 1936, Incoterms® 22 Arvis, Raballand, and Marteau 2010; Arvis and others rules provide internationally accepted definitions and 2011. rules of interpretation for most common commercial 23 www.borderactionplan.gc.ca. terms. Developed and maintained by experts and 24 Arvis, Raballand, and Marteau 2010; World Bank 2008. practitioners brought together by the International Chamber of Commerce, the rules help traders avoid costly 25 Rantasila and Ojala 2012. misunderstandings by clarifying the tasks, costs, and 26 McKinnon and others 2010. risks involved in delivering goods from sellers to buyers. 27 World Bank 2012. The United Nations recognizes Incoterms® rules as the global standard for interpreting the most common terms in 28 Resolution of the General Assembly of the International foreign trade (International Chamber of Commerce 2010). Road Transport Union, representing truck, bus, coach, and taxi operators through its 180 members in 74 9 Only Belgium, Norway, and Luxembourg were outside the countries on five continents (see www.iru.org/cms top 10 in 2007, but Belgium and Norway were in the top -filesystem-action?file=en_Resolutions_General%20 20 in 2007 and Luxembourg in the top 25. transport%20policy/09_30-30.E.pdf). 10 Hoekman and Nicita 2011. 29 Deutsche Post DHL 2012. 11 Reis and Farole 2012. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 35 AppEndix 1 international Lpi results Logistics International quality and Tracking and LPI rank LPI score Customs Infrastructure shipments competence tracing Timeliness % of Lower Upper Lower Upper highest Rank bound bound Score bound bound performer Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Singapore 1 1 2 4.13 4.06 4.19 100.0 1 4.10 2 4.15 2 3.99 6 4.07 6 4.07 1 4.39 Hong Kong SAR, China 2 1 2 4.12 4.05 4.19 99.9 3 3.97 7 4.12 1 4.18 5 4.08 5 4.09 4 4.28 Finland 3 1 15 4.05 3.81 4.29 97.6 2 3.98 6 4.12 4 3.85 1 4.14 1 4.14 15 4.10 Germany 4 3 7 4.03 3.97 4.09 97.0 6 3.87 1 4.26 11 3.67 4 4.09 7 4.05 2 4.32 Netherlands 5 3 7 4.02 3.94 4.11 96.7 8 3.85 3 4.15 3 3.86 7 4.05 2 4.12 12 4.15 Denmark 6 1 15 4.02 3.82 4.22 96.6 4 3.93 10 4.07 8 3.70 2 4.14 4 4.10 7 4.21 Belgium 7 3 13 3.98 3.85 4.11 95.3 7 3.85 8 4.12 6 3.73 8 3.98 8 4.05 9 4.20 Japan 8 7 11 3.93 3.88 3.99 93.8 11 3.72 9 4.11 14 3.61 9 3.97 9 4.03 6 4.21 United States 9 8 11 3.93 3.88 3.98 93.7 13 3.67 4 4.14 17 3.56 10 3.96 3 4.11 8 4.21 United Kingdom 10 8 14 3.90 3.84 3.96 92.7 10 3.73 15 3.95 13 3.63 11 3.93 10 4.00 10 4.19 Austria 11 3 19 3.89 3.70 4.08 92.5 9 3.77 11 4.05 7 3.71 3 4.10 11 3.97 31 3.79 France 12 10 17 3.85 3.77 3.93 91.2 14 3.64 14 3.96 5 3.73 14 3.82 12 3.97 23 4.02 Sweden 13 5 22 3.85 3.68 4.02 91.2 12 3.68 5 4.13 29 3.39 12 3.90 17 3.82 5 4.26 Canada 14 8 17 3.85 3.76 3.94 91.1 17 3.58 12 3.99 18 3.55 13 3.85 14 3.86 3 4.31 Luxembourg 15 1 29 3.82 3.49 4.16 90.3 18 3.54 20 3.79 9 3.70 15 3.82 13 3.91 11 4.19 Switzerland 16 8 24 3.80 3.66 3.95 89.7 5 3.88 13 3.98 24 3.46 18 3.71 15 3.83 24 4.01 United Arab Emirates 17 12 19 3.78 3.70 3.85 88.9 15 3.61 17 3.84 15 3.59 17 3.74 18 3.81 13 4.10 Australia 18 16 24 3.73 3.63 3.82 87.2 16 3.60 18 3.83 28 3.40 16 3.75 19 3.79 17 4.05 Taiwan, China 19 16 24 3.71 3.60 3.82 86.6 22 3.42 21 3.77 16 3.58 20 3.68 21 3.72 14 4.10 Spain 20 17 24 3.70 3.60 3.80 86.4 25 3.40 24 3.74 10 3.68 19 3.69 23 3.67 22 4.02 Korea, Rep. 21 18 24 3.70 3.64 3.76 86.2 23 3.42 22 3.74 12 3.67 22 3.65 22 3.68 21 4.02 Norway 22 7 32 3.68 3.36 4.01 85.9 21 3.46 16 3.86 21 3.49 23 3.57 24 3.67 16 4.09 South Africa 23 16 24 3.67 3.52 3.82 85.5 26 3.35 19 3.79 20 3.50 24 3.56 16 3.83 20 4.03 Italy 24 18 24 3.67 3.61 3.73 85.4 27 3.34 23 3.74 19 3.53 21 3.65 20 3.73 18 4.05 Ireland 25 23 32 3.52 3.36 3.68 80.6 24 3.40 31 3.35 27 3.40 25 3.54 25 3.65 33 3.77 China 26 25 29 3.52 3.46 3.58 80.5 30 3.25 26 3.61 23 3.46 28 3.47 31 3.52 30 3.80 Turkey 27 25 32 3.51 3.38 3.64 80.3 32 3.16 25 3.62 30 3.38 26 3.52 29 3.54 27 3.87 Portugal 28 25 32 3.50 3.34 3.66 80.1 31 3.19 28 3.42 25 3.43 27 3.48 26 3.60 26 3.88 Malaysia 29 25 31 3.49 3.40 3.59 79.8 29 3.28 27 3.43 26 3.40 30 3.45 28 3.54 28 3.86 Poland 30 25 34 3.43 3.27 3.59 77.8 28 3.30 42 3.10 22 3.47 32 3.30 37 3.32 19 4.04 New Zealand 31 25 39 3.42 3.17 3.67 77.4 20 3.47 29 3.42 33 3.27 34 3.25 27 3.58 48 3.55 Iceland 32 25 36 3.39 3.20 3.59 76.6 19 3.53 30 3.39 47 3.01 29 3.47 35 3.39 40 3.62 Qatar 33 25 48 3.32 3.05 3.59 74.3 34 3.12 34 3.23 64 2.88 35 3.25 32 3.50 25 4.00 Slovenia 34 25 48 3.29 3.05 3.52 73.1 38 3.05 33 3.24 31 3.34 33 3.25 44 3.20 43 3.60 Cyprus 35 25 62 3.24 2.89 3.60 71.8 39 3.02 38 3.17 36 3.21 37 3.17 36 3.36 51 3.54 Bulgaria 36 33 51 3.21 3.03 3.39 70.7 41 2.97 36 3.20 34 3.25 42 3.10 48 3.16 47 3.56 Saudi Arabia 37 35 45 3.18 3.10 3.25 69.7 51 2.79 35 3.22 42 3.10 47 2.99 42 3.21 34 3.76 Thailand 38 35 46 3.18 3.07 3.28 69.6 42 2.96 44 3.08 35 3.21 49 2.98 45 3.18 39 3.63 Chile 39 33 55 3.17 2.99 3.36 69.5 35 3.11 37 3.18 44 3.06 46 3.00 41 3.22 54 3.47 Hungary 40 33 52 3.17 3.01 3.33 69.5 47 2.82 40 3.14 52 2.99 36 3.18 30 3.52 61 3.41 Tunisia 41 30 61 3.17 2.90 3.44 69.4 33 3.13 54 2.88 65 2.88 40 3.13 40 3.25 35 3.75 Croatia 42 33 56 3.16 2.98 3.34 69.2 37 3.06 32 3.35 58 2.95 55 2.92 43 3.20 50 3.54 36 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Logistics International quality and Tracking and LPI rank LPI score Customs Infrastructure shipments competence tracing Timeliness % of Lower Upper Lower Upper highest Rank bound bound Score bound bound performer Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Malta 43 33 54 3.16 2.99 3.33 69.0 49 2.81 41 3.10 37 3.17 45 3.01 56 3.05 32 3.79 Czech Republic 44 33 61 3.14 2.90 3.38 68.5 43 2.95 50 2.96 45 3.01 31 3.34 46 3.17 63 3.40 Brazil 45 35 52 3.13 3.02 3.24 68.2 78 2.51 46 3.07 41 3.12 41 3.12 33 3.42 49 3.55 India 46 44 53 3.08 3.00 3.15 66.4 52 2.77 56 2.87 54 2.98 38 3.14 54 3.09 44 3.58 Mexico 47 37 59 3.06 2.94 3.18 66.0 66 2.63 47 3.03 43 3.07 44 3.02 49 3.15 55 3.47 Bahrain 48 33 82 3.05 2.74 3.37 65.7 60 2.67 43 3.08 72 2.83 53 2.94 34 3.42 60 3.42 Argentina 49 37 61 3.05 2.90 3.19 65.5 83 2.45 52 2.94 32 3.33 51 2.95 38 3.30 72 3.27 Morocco 50 37 65 3.03 2.86 3.21 65.0 65 2.64 39 3.14 46 3.01 59 2.89 58 3.01 53 3.51 Slovak Republic 51 33 84 3.03 2.70 3.36 64.9 45 2.88 48 2.99 71 2.84 43 3.07 68 2.84 46 3.57 Philippines 52 37 67 3.02 2.85 3.20 64.8 67 2.63 62 2.80 56 2.97 39 3.14 39 3.30 69 3.30 Vietnam 53 37 72 3.00 2.81 3.20 64.1 63 2.65 72 2.68 39 3.14 82 2.68 47 3.16 38 3.64 Romania 54 45 66 3.00 2.85 3.14 63.8 61 2.65 87 2.51 53 2.99 64 2.83 53 3.10 29 3.82 Bosnia and Herzegovina 55 44 71 2.99 2.82 3.15 63.5 62 2.65 57 2.86 49 3.00 54 2.93 71 2.81 41 3.61 Uruguay 56 44 72 2.98 2.81 3.16 63.5 40 2.99 55 2.87 60 2.91 48 2.98 61 2.98 81 3.16 Egypt, Arab Rep. 57 40 75 2.98 2.79 3.17 63.3 69 2.60 45 3.07 51 3.00 50 2.95 66 2.86 64 3.39 Lithuania 58 36 87 2.95 2.68 3.22 62.3 55 2.73 82 2.58 55 2.97 57 2.91 83 2.73 37 3.70 Indonesia 59 46 76 2.94 2.78 3.11 62.2 75 2.53 85 2.54 57 2.97 62 2.85 52 3.12 42 3.61 Peru 60 46 76 2.94 2.78 3.09 61.9 58 2.68 67 2.73 66 2.87 56 2.91 60 2.99 62 3.40 Panama 61 46 81 2.93 2.75 3.11 61.6 74 2.56 51 2.94 79 2.76 63 2.84 57 3.01 56 3.47 Oman 62 44 89 2.89 2.63 3.14 60.4 36 3.10 49 2.96 77 2.78 77 2.73 94 2.59 80 3.17 Yemen, Rep. 63 45 89 2.89 2.64 3.14 60.3 110 2.29 74 2.62 38 3.14 69 2.79 51 3.12 70 3.29 Colombia 64 46 87 2.87 2.66 3.08 59.8 64 2.65 68 2.72 78 2.76 52 2.95 85 2.66 57 3.45 Estonia 65 41 102 2.86 2.55 3.17 59.5 79 2.51 63 2.79 74 2.82 65 2.82 59 3.00 75 3.23 Ukraine 66 55 84 2.85 2.72 2.99 59.3 88 2.41 70 2.69 83 2.72 61 2.85 50 3.15 68 3.31 Benin 67 41 104 2.85 2.53 3.17 59.3 70 2.59 83 2.57 119 2.44 58 2.90 65 2.87 36 3.74 Botswana 68 36 118 2.84 2.46 3.22 58.9 48 2.82 60 2.82 111 2.53 75 2.74 81 2.73 58 3.43 Greece 69 43 108 2.83 2.50 3.16 58.6 94 2.38 53 2.88 87 2.69 73 2.76 63 2.98 67 3.32 Kuwait 70 48 93 2.83 2.60 3.06 58.5 53 2.73 61 2.82 90 2.68 84 2.68 62 2.98 87 3.11 Pakistan 71 46 98 2.83 2.57 3.08 58.4 46 2.85 71 2.69 68 2.86 72 2.77 90 2.61 83 3.14 Mauritius 72 47 98 2.82 2.57 3.07 58.2 72 2.58 59 2.83 113 2.50 85 2.67 69 2.83 52 3.52 Malawi 73 48 101 2.81 2.56 3.06 57.8 77 2.51 64 2.78 48 3.01 60 2.85 102 2.56 88 3.09 Guatemala 74 58 89 2.80 2.64 2.97 57.7 68 2.62 81 2.59 75 2.82 71 2.78 73 2.80 77 3.19 Serbia 75 46 106 2.80 2.52 3.08 57.6 92 2.39 75 2.62 80 2.76 66 2.80 55 3.07 82 3.14 Latvia 76 48 109 2.78 2.50 3.06 56.9 56 2.71 86 2.52 84 2.72 93 2.64 64 2.97 90 3.08 Georgia 77 53 104 2.77 2.54 3.01 56.8 44 2.90 58 2.85 91 2.68 70 2.78 93 2.59 115 2.86 Albania 78 47 112 2.77 2.48 3.06 56.7 86 2.43 99 2.43 70 2.84 91 2.65 88 2.65 45 3.58 Ecuador 79 62 91 2.76 2.61 2.91 56.2 98 2.36 76 2.62 67 2.86 90 2.65 96 2.58 59 3.42 Bahamas, The 80 55 107 2.75 2.51 2.99 56.1 57 2.69 66 2.77 81 2.72 80 2.69 87 2.65 98 2.99 Sri Lanka 81 50 116 2.75 2.47 3.03 56.0 71 2.58 89 2.50 50 3.00 68 2.80 86 2.65 110 2.90 Costa Rica 82 62 97 2.75 2.58 2.91 55.9 80 2.47 80 2.60 69 2.85 101 2.53 72 2.81 78 3.19 Côte d’Ivoire 83 58 108 2.73 2.51 2.96 55.4 107 2.31 114 2.31 62 2.90 78 2.73 84 2.69 65 3.36 Madagascar 84 53 122 2.72 2.43 3.02 55.1 50 2.80 108 2.40 124 2.40 67 2.80 74 2.80 84 3.13 Dominican Republic 85 68 102 2.70 2.55 2.85 54.4 76 2.53 77 2.61 73 2.83 76 2.74 110 2.49 100 2.97 Kazakhstan 86 61 118 2.69 2.46 2.93 54.2 73 2.58 79 2.60 92 2.67 74 2.75 70 2.83 132 2.73 Niger 87 50 130 2.69 2.35 3.04 54.1 59 2.67 96 2.45 61 2.91 105 2.49 109 2.49 91 3.07 Tanzania 88 76 107 2.65 2.52 2.79 52.9 130 2.17 105 2.41 59 2.91 94 2.64 77 2.77 99 2.97 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 37 Logistics International quality and Tracking and LPI rank LPI score Customs Infrastructure shipments competence tracing Timeliness % of Lower Upper Lower Upper highest Rank bound bound Score bound bound performer Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Namibia 89 66 120 2.65 2.45 2.86 52.9 54 2.73 69 2.72 114 2.49 88 2.65 67 2.85 144 2.52 Bolivia 90 62 134 2.61 2.32 2.90 51.6 89 2.40 109 2.39 104 2.60 97 2.58 82 2.73 103 2.95 Belarus 91 68 127 2.61 2.38 2.84 51.6 121 2.24 65 2.78 107 2.58 89 2.65 98 2.58 114 2.87 Syrian Arab Republic 92 73 127 2.60 2.39 2.82 51.3 104 2.33 84 2.54 100 2.62 107 2.48 125 2.35 73 3.26 El Salvador 93 79 121 2.60 2.44 2.76 51.2 114 2.28 95 2.46 108 2.57 95 2.60 92 2.60 89 3.08 Guinea-Bissau 94 61 139 2.60 2.26 2.93 51.1 90 2.39 73 2.68 103 2.61 98 2.58 97 2.58 128 2.74 Russian Federation 95 88 109 2.58 2.49 2.68 50.7 138 2.04 97 2.45 106 2.59 92 2.65 79 2.76 94 3.02 Lebanon 96 62 139 2.58 2.26 2.90 50.6 124 2.21 102 2.41 85 2.71 119 2.38 91 2.61 86 3.11 Togo 97 68 134 2.58 2.32 2.84 50.5 112 2.29 94 2.46 40 3.13 124 2.29 115 2.46 123 2.77 Central African Republic 98 62 140 2.57 2.25 2.90 50.3 82 2.45 134 2.09 132 2.33 79 2.70 113 2.48 66 3.33 Macedonia, FYR 99 64 139 2.56 2.26 2.87 50.1 120 2.24 78 2.60 95 2.66 86 2.66 120 2.41 120 2.79 Armenia 100 76 130 2.56 2.35 2.78 50.0 116 2.27 110 2.38 96 2.65 115 2.40 99 2.57 92 3.07 Cambodia 101 62 142 2.56 2.23 2.89 50.0 108 2.30 128 2.20 101 2.61 103 2.50 78 2.77 104 2.95 Jordan 102 65 140 2.56 2.25 2.87 49.8 115 2.27 91 2.48 63 2.88 137 2.17 104 2.55 106 2.92 Zimbabwe 103 80 131 2.55 2.34 2.75 49.6 105 2.31 127 2.20 93 2.67 127 2.27 107 2.50 71 3.27 Maldives 104 85 128 2.55 2.37 2.72 49.4 119 2.24 93 2.47 117 2.47 81 2.68 118 2.43 102 2.96 Honduras 105 88 127 2.53 2.38 2.69 49.1 91 2.39 111 2.35 86 2.70 109 2.44 126 2.35 108 2.90 Cameroon 106 85 129 2.53 2.35 2.70 48.9 96 2.37 121 2.24 128 2.37 114 2.41 103 2.55 76 3.19 Bhutan 107 88 127 2.52 2.38 2.66 48.6 109 2.29 117 2.29 102 2.61 111 2.42 101 2.56 111 2.90 Ghana 108 64 146 2.51 2.13 2.89 48.2 103 2.33 136 2.05 76 2.81 83 2.68 133 2.31 125 2.76 Lao PDR 109 69 145 2.50 2.16 2.84 48.0 93 2.38 106 2.40 123 2.40 104 2.49 111 2.49 118 2.82 Senegal 110 84 139 2.49 2.25 2.73 47.7 81 2.46 115 2.31 82 2.72 99 2.55 145 2.10 130 2.74 Venezuela, RB 111 88 134 2.49 2.31 2.67 47.7 134 2.10 129 2.17 109 2.54 123 2.33 100 2.57 79 3.18 Iran, Islamic Rep. 112 84 139 2.49 2.25 2.73 47.6 126 2.19 100 2.42 115 2.49 87 2.66 108 2.49 138 2.66 Paraguay 113 88 134 2.48 2.30 2.67 47.4 97 2.36 103 2.41 137 2.31 106 2.49 95 2.59 127 2.74 São Tomé and Príncipe 114 80 142 2.48 2.21 2.75 47.4 100 2.33 122 2.24 136 2.33 113 2.42 76 2.78 121 2.78 Guinea 115 79 144 2.48 2.19 2.77 47.4 87 2.42 112 2.34 94 2.67 96 2.59 131 2.33 147 2.50 Azerbaijan 116 59 153 2.48 2.02 2.95 47.4 147 1.92 101 2.42 120 2.43 143 2.14 80 2.75 74 3.23 Uzbekistan 117 61 153 2.46 2.00 2.93 46.9 118 2.25 120 2.25 127 2.38 117 2.39 105 2.53 101 2.96 Gambia, The 118 86 142 2.46 2.23 2.70 46.8 111 2.29 147 1.90 98 2.63 100 2.55 75 2.80 142 2.55 Liberia 119 88 142 2.45 2.22 2.68 46.3 140 2.00 104 2.41 110 2.54 108 2.46 119 2.42 117 2.84 Montenegro 120 88 142 2.45 2.21 2.69 46.3 106 2.31 116 2.30 141 2.22 120 2.35 89 2.62 112 2.89 Nigeria 121 90 140 2.45 2.24 2.65 46.3 146 1.97 118 2.27 105 2.60 102 2.52 128 2.35 105 2.92 Kenya 122 85 145 2.43 2.15 2.71 45.9 136 2.08 130 2.16 88 2.69 118 2.38 130 2.34 113 2.88 Fiji 123 88 144 2.42 2.17 2.67 45.4 137 2.07 123 2.22 122 2.41 136 2.18 112 2.48 85 3.12 Jamaica 124 94 140 2.42 2.24 2.60 45.3 123 2.22 119 2.27 121 2.43 132 2.21 117 2.43 107 2.91 Algeria 125 88 145 2.41 2.15 2.68 45.3 117 2.26 139 2.02 89 2.68 145 2.13 114 2.46 116 2.85 Solomon Islands 126 90 142 2.41 2.21 2.61 45.2 95 2.37 137 2.03 118 2.44 144 2.14 122 2.39 93 3.04 Mauritania 127 88 146 2.40 2.12 2.68 44.7 102 2.33 113 2.34 112 2.52 125 2.28 135 2.28 139 2.60 Papua New Guinea 128 90 146 2.38 2.13 2.62 44.0 145 1.98 126 2.20 131 2.34 135 2.18 106 2.51 95 3.01 Myanmar 129 90 148 2.37 2.10 2.64 43.8 122 2.24 133 2.10 116 2.47 110 2.42 129 2.34 140 2.59 Kyrgyz Republic 130 107 144 2.35 2.18 2.52 43.3 84 2.45 90 2.49 147 2.00 129 2.25 132 2.31 135 2.69 Gabon 131 82 153 2.34 1.94 2.75 43.0 142 2.00 143 2.00 125 2.40 116 2.40 137 2.20 96 3.00 Moldova 132 107 146 2.33 2.14 2.52 42.6 129 2.17 98 2.44 145 2.08 142 2.15 116 2.44 126 2.74 38 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Logistics International quality and Tracking and LPI rank LPI score Customs Infrastructure shipments competence tracing Timeliness % of Lower Upper Lower Upper highest Rank bound bound Score bound bound performer Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Guyana 133 107 146 2.33 2.13 2.52 42.5 113 2.29 131 2.15 129 2.35 122 2.33 140 2.14 136 2.67 Burkina Faso 134 95 150 2.32 2.05 2.60 42.3 132 2.12 107 2.40 133 2.33 126 2.28 142 2.13 137 2.67 Afghanistan 135 117 146 2.30 2.13 2.47 41.5 99 2.33 141 2.00 134 2.33 139 2.16 146 2.10 119 2.80 Tajikistan 136 105 151 2.28 2.03 2.53 41.1 85 2.43 138 2.03 135 2.33 130 2.22 143 2.13 146 2.51 Libya 137 113 150 2.28 2.08 2.49 41.0 135 2.08 152 1.75 99 2.63 128 2.25 123 2.38 145 2.51 Angola 138 108 151 2.28 2.03 2.52 40.8 101 2.33 92 2.48 139 2.26 149 2.00 147 2.00 141 2.59 Rwanda 139 113 150 2.27 2.05 2.49 40.5 127 2.19 148 1.88 138 2.27 147 2.06 121 2.39 124 2.76 Mongolia 140 123 150 2.25 2.07 2.43 40.0 144 1.98 125 2.22 142 2.13 152 1.88 134 2.29 97 2.99 Ethiopia 141 127 150 2.24 2.07 2.40 39.6 139 2.03 124 2.22 130 2.35 140 2.16 144 2.10 143 2.54 Lesotho 142 92 153 2.24 1.87 2.61 39.5 143 2.00 132 2.13 143 2.13 112 2.42 148 1.99 131 2.73 Congo, Dem. Rep. 143 127 153 2.21 2.01 2.40 38.6 133 2.10 144 1.96 140 2.23 138 2.17 124 2.35 149 2.38 Cuba 144 129 153 2.20 2.02 2.37 38.3 128 2.18 135 2.08 144 2.12 131 2.21 136 2.26 152 2.31 Iraq 145 132 153 2.16 1.98 2.34 37.1 152 1.75 146 1.92 126 2.38 134 2.19 151 1.86 122 2.77 Comoros 146 130 153 2.14 1.92 2.36 36.5 141 2.00 145 1.94 153 1.81 133 2.20 138 2.20 134 2.70 Eritrea 147 106 154 2.11 1.69 2.53 35.5 151 1.78 150 1.83 97 2.63 148 2.03 152 1.83 148 2.43 Sudan 148 128 153 2.10 1.83 2.38 35.3 131 2.14 140 2.01 150 1.93 121 2.33 150 1.89 151 2.31 Congo, Rep. 149 135 153 2.08 1.85 2.31 34.7 149 1.80 155 1.27 149 1.94 141 2.15 127 2.35 109 2.90 Sierra Leone 150 130 154 2.08 1.80 2.36 34.5 153 1.73 88 2.50 152 1.85 151 1.98 141 2.14 150 2.35 Nepal 151 134 154 2.04 1.74 2.33 33.1 125 2.20 149 1.87 151 1.86 146 2.12 149 1.95 153 2.21 Chad 152 129 154 2.03 1.68 2.37 32.9 148 1.86 142 2.00 146 2.00 150 2.00 155 1.57 133 2.71 Haiti 153 145 153 2.03 1.87 2.19 32.8 150 1.78 151 1.78 148 1.94 154 1.74 139 2.15 129 2.74 Djibouti 154 154 155 1.80 1.58 2.02 25.5 154 1.72 154 1.51 154 1.77 153 1.84 153 1.73 154 2.19 Burundi 155 154 155 1.61 1.29 1.93 19.5 155 1.67 153 1.68 155 1.57 155 1.43 154 1.67 155 1.67 Note: The LPI index is a multidimensional assessment of logistics performance, rated on a scale from 1 (worst) to 5 (best). The six core components captured by the LPI survey are rated by respondents on a scale of 1–5, where 1 is very low or very difficult and 5 is very high or very easy, except for question 15, where 1 is hardly ever and 5 is nearly always. Source: Logistics Performance Index 2012. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 39 AppEndix 2 domestic Lpi results, by region and income group Percent of respondents Region Income group Europe Latin Middle East and America East and Sub- Lower Upper Response Asia and Central and North South Saharan Low middle middle High Question categories Pacific Asia Caribbean Africa Asia Africa income income income income Question 17: Level of fees and charges Low or very low 38 45 52 55 37 68 60 57 47 43 Port charges High or very high 11 9 15 19 6 17 11 7 22 11 Low or very low 31 44 52 47 19 63 53 55 41 38 Airport charges High or very high 7 5 11 29 14 16 13 11 16 9 Low or very low 6 32 59 20 47 69 73 51 39 32 Road transport rate High or very high 15 25 8 39 10 7 7 12 23 22 Low or very low 30 38 25 19 29 30 37 29 24 30 Rail transport rates High or very high 21 18 48 38 31 30 35 22 37 14 Low or very low 41 33 51 39 24 46 38 45 40 34 Warehousing/transloading charges High or very high 10 24 13 27 37 11 13 19 19 15 Low or very low 18 23 27 42 15 25 21 32 23 21 Agent fees High or very high 24 28 20 14 34 32 32 19 28 18 Question 18: Quality of infrastructure Low or very low 41 43 45 40 61 39 57 34 42 12 Ports High or very high 18 14 21 25 16 18 17 21 17 60 Low or very low 41 24 36 40 32 27 39 29 29 8 Airports High or very high 22 33 24 29 23 10 11 17 32 62 Low or very low 56 51 50 29 72 55 66 50 44 13 Roads High or very high 14 15 15 5 7 12 6 10 18 60 Low or very low 58 57 91 55 53 78 78 67 67 34 Warehousing/transloading facilities High or very high 3 12 4 10 8 1 6 2 8 28 Low or very low 48 36 30 53 50 48 60 43 30 4 Rail High or very high 15 27 19 19 11 15 9 17 26 64 Low or very low 26 9 20 44 27 30 44 18 18 4 Telecommunications and IT High or very high 41 43 39 39 35 28 18 40 45 79 Question 19: Quality and competence of service Low or very low 37 16 37 31 33 33 50 18 29 6 Road High or very high 16 33 15 15 19 13 9 18 24 59 Low or very low 57 43 87 69 65 68 80 55 66 26 Rail High or very high 5 19 3 7 7 10 9 10 8 38 Low or very low 21 18 16 16 10 20 25 21 10 4 Air transport High or very high 39 43 34 31 28 19 20 26 42 73 Low or very low 20 23 10 12 13 24 31 17 11 3 Maritime transport High or very high 24 30 41 21 30 26 24 26 36 67 Warehousing/transloading Low or very low 35 19 16 64 28 29 36 31 21 6 and distribution High or very high 20 39 33 10 16 13 7 22 35 65 Low or very low 5 8 4 38 1 14 21 4 11 0 Freight forwarders High or very high 25 54 53 24 45 33 27 38 51 76 Low or very low 50 29 26 38 19 39 47 35 24 12 Customs agencies High or very high 12 53 29 31 23 16 16 25 37 60 Quality/standards Low or very low 49 22 27 38 39 45 52 38 24 8 inspection agencies High or very high 13 30 14 12 17 19 16 15 22 57 40 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Region Income group Europe Latin Middle East and America East and Sub- Lower Upper Response Asia and Central and North South Saharan Low middle middle High Question categories Pacific Asia Caribbean Africa Asia Africa income income income income Health/sanitary and Low or very low 47 35 42 34 65 55 60 48 35 13 phytosanitary agencies High or very high 7 30 13 21 8 11 7 12 24 54 Low or very low 24 10 22 43 6 22 31 12 22 8 Customs brokers High or very high 16 39 19 31 25 23 20 23 31 69 Low or very low 42 23 37 51 30 41 50 35 30 13 Trade and transport associations High or very high 16 30 16 20 14 12 12 12 26 50 Low or very low 17 11 14 18 10 25 29 12 14 4 Consignees or shippers High or very high 15 31 33 30 19 24 18 26 32 56 Question 20: Efficiency of processes Hardly ever or rarely 9 20 21 37 24 27 39 17 17 5 Clearance and delivery of imports Often or nearly always 56 61 52 35 39 43 41 41 59 88 Hardly ever or rarely 6 10 11 19 32 8 14 9 13 4 Clearance and delivery of exports Often or nearly always 75 73 62 65 59 69 69 62 71 85 Hardly ever or rarely 32 22 27 39 41 22 38 28 19 8 Transparency of customs clearance Often or nearly always 26 54 50 34 24 43 34 35 54 80 Transparency of other Hardly ever or rarely 42 22 25 28 42 29 48 28 17 9 border agencies Often or nearly always 14 52 49 41 25 31 33 35 43 72 Provision of adequate and timely Hardly ever or rarely 45 21 39 64 55 42 55 41 31 20 information on regulatory changes Often or nearly always 23 62 40 19 26 31 19 39 45 64 Expedited customs clearance for Hardly ever or rarely 27 13 27 34 37 47 56 29 18 14 traders with high compliance levels Often or nearly always 25 50 42 42 35 22 20 34 46 65 Question 21: Sources of major delays Compulsory warehousing/ Often or nearly always 24 31 34 37 36 33 46 35 21 7 transloading Hardly ever or rarely 31 36 28 29 29 30 27 22 40 73 Often or nearly always 33 32 30 54 33 38 50 44 20 13 Preshipment inspection Hardly ever or rarely 22 34 22 12 26 41 33 22 34 70 Often or nearly always 14 46 30 42 28 56 64 36 29 12 Maritime transshipment Hardly ever or rarely 21 22 29 12 24 6 7 18 24 56 Criminal activities Often or nearly always 10 7 19 14 5 14 19 13 9 4 (such as stolen cargo) Hardly ever or rarely 63 75 45 52 53 55 59 54 59 80 Often or nearly always 19 25 34 24 35 26 42 28 16 5 Solicitation of informal payments Hardly ever or rarely 35 47 38 32 23 30 23 27 51 77 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 41 Region Income group Europe Latin Middle East and America East and Sub- Lower Upper Response Asia and Central and North South Saharan Low middle middle High Question categories Pacific Asia Caribbean Africa Asia Africa income income income income Question 22: Changes in the logistics environment since 2009 Much worsened Customs clearance procedures 8 24 23 19 5 17 17 21 16 10 or worsened Improved or much 41 51 49 49 53 49 42 49 54 63 improved Much worsened Other official clearance procedures 4 22 16 16 9 11 13 14 15 10 or worsened Improved or much 34 45 37 45 49 29 31 32 46 46 improved Much worsened Trade and transport infrastructure 3 11 22 18 26 10 12 12 17 5 or worsened Improved or much 45 47 37 56 31 57 45 44 53 51 improved Telecommunications and Much worsened 2 0 7 15 4 3 6 4 4 1 IT infrastructure or worsened Improved or much 63 74 71 54 62 76 67 71 72 71 improved Much worsened Private logistics services 3 0 1 15 4 0 1 3 3 1 or worsened Improved or much 70 81 74 63 58 65 59 75 73 64 improved Much worsened Regulation related to logistics 5 0 18 29 9 9 10 12 11 12 or worsened Improved or much 48 29 31 35 48 37 33 42 32 35 improved Much worsened Solicitation of informal payments 6 10 20 18 15 29 28 21 11 5 or worsened Improved or much 38 34 37 21 16 20 19 23 37 43 improved Note: Responses are calculated at the country level and then averaged by region and income group. Source: Logistics Performance Index 2012. 42 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 3 AppEndix domestic Lpi results, time and cost data Question 23: Export time and cost Question 25: Import time and cost Port or airport supply chaina Land supply chainb Port or airport supply chainc Land supply chainb Distanced Lead time Coste Distance Lead time Cost f Distance Lead time Coste Distance Lead time Cost f (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) Afghanistan 25 5 250 — — — — — — — — — Albania 75 11 750 — — — — — — 75 7 1,000 Algeria 75 8 1,000 — — — 750 39 2,000 — — — Argentina 55 5 943 130 16 1,145 84 11 822 25 — 750 Armenia — — — — — — — — — — — — Australia 30 4 1,020 43 2 433 43 3 785 75 7 1,500 Austria — — — — — — — — — — — — Azerbaijan — — — — — — — — — — — — Bahamas, The 25 3 3,000 — — — 25 3 2,000 — — — Bahrain 25 2 250 25 2 250 25 2 250 25 2 250 Bangladesh 181 3 1,257 — — — 301 6 1,089 — — — Belarus 300 2 1,000 775 3 1,061 750 3 1,500 387 3 2,121 Belgium 144 2 707 750 3 750 149 3 585 237 3 433 Benin — — — — — — — — — — — — Bolivia 2,000 3 1,500 2,000 3 1,500 2,000 3 3,000 2,000 3 3,000 Bosnia and Herzegovina 300 2 354 750 3 474 300 2 354 750 3 612 Botswana — — — 1,250 9 4,000 — — — 750 7 4,000 Brazil 150 2 612 83 3 439 150 2 274 150 5 750 Bulgaria 257 2 944 667 3 1,277 189 2 1,030 550 3 1,287 Burkina Faso — — — — — — — — — — — — Burundi 2,000 6 4,000 300 1 1,500 2,000 18 5,000 300 2 4,000 Cambodia 111 2 565 444 3 1,060 118 2 865 240 3 1,159 Cameroon — 18 2,000 — — — — 45 3,162 — — — Canada 233 2 646 325 2 734 152 2 736 389 2 748 Central African Rep. — — — — — 5,000 2,000 12 5,000 2,000 12 5,000 Chad 3,500 25 — 3,500 74 5,000 2,000 32 5,000 3,500 74 5,000 Chile 114 2 1,861 300 2 750 83 2 909 — — — China 162 3 454 215 3 645 133 4 453 171 3 637 Colombia 160 4 1,275 — — — 430 8 1,783 — — — Congo, Dem. Rep. 300 88 5,000 — — — — — — — — — Congo, Rep. 87 11 1,000 — — — — — — 75 — — Costa Rica 125 2 849 300 6 500 79 1 438 — — — Côte d’Ivoire 25 2 1,000 — — — 680 5 1,145 137 1 474 Croatia 150 1 866 255 2 641 25 8 2,000 — — — Cyprus 75 1 750 — — — 75 2 750 — — — Czech Republic — — — — — — — — — — — — Denmark 75 2 612 300 2 500 300 2 500 87 3 612 Dominican Republic 43 2 500 — — — 43 2 500 — — — Ecuador 25 2 612 750 5 1,000 36 4 979 750 9 1,000 Egypt, Arab Rep. 280 2 773 578 4 1,097 346 3 1,123 1,024 6 1,392 El Salvador 344 2 595 — — — 630 5 806 474 5 433 Estonia 75 1 500 75 1 250 75 1 500 75 1 250 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 43 Question 23: Export time and cost Question 25: Import time and cost Port or airport supply chaina Land supply chainb Port or airport supply chainc Land supply chainb Distanced Lead time Coste Distance Lead time Cost f Distance Lead time Coste Distance Lead time Cost f (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) Ethiopia 750 4 1,000 750 4 1,000 1,250 3 1,000 1,250 5 1,500 Finland 509 4 1,055 453 4 977 252 3 592 296 2 804 France 300 2 500 300 2 500 750 9 1,500 300 4 1,500 Gambia, The 25 2 500 — — — 25 3 500 — — — Georgia 429 6 572 297 8 630 1,025 12 612 1,025 15 707 Germany 150 1 1,500 868 5 1,784 150 1 1,500 483 4 1,145 Ghana 300 2 775 300 3 775 300 19 866 150 6 1,000 Greece 300 1 1,000 75 1 3,000 300 2 3,000 300 7 4,000 Guatemala 189 4 1,957 300 4 612 162 4 1,310 — — — Guinea — — — — — — — — — — — — Haiti 130 6 909 300 7 500 78 12 1,587 300 9 750 Honduras 52 3 500 25 3 750 75 2 354 — 3 750 Hong Kong SAR, China 36 1 270 87 1 354 41 1 309 25 1 274 Hungary 474 2 — 474 2 866 474 2 750 300 3 1,000 Iceland — — — — — — — — — — — — India 626 3 918 197 3 1,043 375 3 1,097 241 4 921 Indonesia 81 2 415 104 3 309 78 3 501 104 5 426 Iran, Islamic Rep. 43 3 387 750 10 500 75 4 150 — — — Iraq 75 3 1,500 — — — 300 5 2,000 300 4 2,000 Ireland 25 1 194 1,620 7 2,121 25 2 250 137 7 1,732 Israel 115 2 487 489 8 1,061 81 2 595 775 5 1,000 Italy 300 3 909 300 2 750 300 4 794 300 3 1,000 Jamaica 25 14 750 — — — 75 14 750 — — — Japan 392 1 931 75 1 707 171 1 931 75 1 866 Jordan 300 3 572 483 5 909 300 5 1,000 — — — Kazakhstan 25 2 500 — — — — — — — — — Kenya 132 2 1,455 478 8 1,651 253 4 3,203 889 7 2,289 Korea, Rep. 300 2 572 300 3 500 300 3 707 300 3 500 Kuwait 75 2 500 — — — 75 3 500 — — — Kyrgyz Republic 25 1 500 — — — — — — — — — Lao PDR — — — — 2 1,500 — — — — 3 1,500 Lebanon 60 2 672 79 3 1,145 82 3 975 94 3 1,285 Liberia — — — — — — — — — — — — Libya 43 2 548 750 1 150 25 4 671 — — — Luxembourg — — — — — — — — — — — — Macedonia, FYR — — — 1,250 2 1,500 — — — 237 1 474 Madagascar 300 2 2,000 — — — 300 5 3,000 — — — Malawi 25 — 5,000 — 6 3,000 — — — — — — Malaysia 73 3 285 172 2 298 84 2 285 105 2 298 Maldives 300 4 500 — — — — — — — — — Mali — 5 5,000 1,250 6 5,000 1,250 7 5,000 1,250 6 5,000 Malta 25 2 250 25 2 1,000 25 2 250 25 2 1,000 Mauritania 25 8 3,000 300 2 2,000 25 7 2,000 300 5 3,000 Mauritius 43 1 750 25 1 1,000 25 1 750 25 1 1,000 Mexico 398 3 884 1,617 3 707 352 6 1,413 2,092 5 1,000 Moldova — — — 300 4 1,500 — — — 300 7 1,500 Mongolia 230 5 487 237 18 2,081 224 4 794 638 10 1,974 44 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Question 23: Export time and cost Question 25: Import time and cost Port or airport supply chaina Land supply chainb Port or airport supply chainc Land supply chainb Distanced Lead time Coste Distance Lead time Cost f Distance Lead time Coste Distance Lead time Cost f (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) Montenegro — — — — — — — — — — — — Morocco 247 3 500 1,025 3 1,118 247 3 500 1,025 3 1,118 Mozambique — — — 750 4 3,000 — — — 25 4 250 Myanmar 25 1 150 25 1 150 25 1 150 25 1 150 Namibia 131 2 794 150 2 707 300 3 1,145 300 2 866 Nepal — — — 777 7 1,651 286 5 1,957 712 8 2,322 Netherlands 43 2 354 — — — 43 2 500 — — — New Zealand 43 2 262 81 2 420 57 3 572 75 3 612 Nicaragua 403 8 3,464 553 3 1,040 512 — 4,472 553 3 1,040 Nigeria 297 4 1,261 75 2 500 183 4 1,587 750 3 3,000 Norway — — — — — — — — — — — — Oman — — — — — — — — — — — — Pakistan 274 3 731 369 3 1,051 363 5 926 570 5 1,540 Panama 36 2 383 150 2 2,121 162 3 1,310 43 3 866 Paraguay — — — 300 3 2,000 300 2 2,000 300 2 2,000 Peru 43 1 866 — — — 25 2 866 — — — Philippines 155 3 500 87 1 866 296 4 1,732 25 2 1,500 Poland 750 4 — 968 3 — 750 2 1,500 474 2 1,500 Portugal 113 2 539 43 1 194 25 2 440 25 1 194 Qatar 75 2 750 — — — 75 2 1,000 — — — Romania 474 2 707 474 5 1,225 474 2 750 474 6 1,061 Russian Federation 750 2 2,000 3,500 5 5,000 1,620 3 3,162 — — — Saudi Arabia 132 5 506 186 3 932 145 6 1,225 43 4 410 Senegal — 7 — — — — 582 9 1,310 — — — Serbia — — — 474 3 1,061 — — — 1,250 4 1,500 Sierra Leone 300 2 4,000 300 2 4,000 300 2 4,000 300 2 4,000 Singapore 130 2 178 25 2 250 130 2 266 25 2 250 Slovak Republic 474 2 707 474 2 1,030 750 2 866 377 2 1,140 South Africa 364 2 1,861 553 3 1,442 320 3 2,000 474 4 1,732 Spain 114 1 515 256 2 721 150 2 658 300 1 1,000 Sri Lanka 43 2 616 43 1 658 50 2 575 43 2 1,732 Sudan 414 3 866 1,250 3 1,040 1,054 8 1,442 968 9 1,225 Sweden 87 1 500 300 1 500 300 2 612 — — — Switzerland 697 6 1,107 852 4 1,456 256 6 1,145 407 2 1,145 Syrian Arab Rep. 300 3 866 300 3 3,000 300 4 1,225 300 5 3,000 Taiwan, China 43 1 324 49 1 306 38 2 258 25 1 178 Tajikistan 3,500 2 — — — — 3,500 2 — — — — Tanzania — — — — — — — — — — — — Thailand 300 2 707 300 2 250 189 1 1,000 300 2 — Togo — — — 2,000 13 5,000 2,000 15 5,000 — — — Tunisia 300 2 250 — — — 300 1 250 — — — Turkey 101 2 806 458 3 1,670 122 2 831 562 4 1,362 Uganda — — — 3,500 7 5,000 3,500 81 5,000 — — — Ukraine 87 2 866 137 2 1,061 75 2 5,000 150 6 1,732 United Arab Emirates 166 1 495 427 3 626 103 2 618 455 3 743 United Kingdom 377 3 1,000 565 2 1,414 150 5 1,225 565 4 2,466 United States 206 2 680 346 3 745 126 2 603 273 3 729 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 45 Question 23: Export time and cost Question 25: Import time and cost Port or airport supply chaina Land supply chainb Port or airport supply chainc Land supply chainb Distanced Lead time Coste Distance Lead time Cost f Distance Lead time Coste Distance Lead time Cost f (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) (kilometers) (days) (US$) Uruguay 300 14 750 — — — — — — — — — Uzbekistan — — — — — — 474 25 1,118 474 23 1,000 Venezuela, RB 300 7 2,121 612 5 1,732 300 7 2,739 1,025 5 2,000 Vietnam 52 2 310 59 2 293 63 2 361 55 2 289 Yemen, Rep. — — — — — — — — — — — — Zambia 2,000 5 5,000 2,000 5 5,000 2,000 7 5,000 2,000 7 5,000 Zimbabwe — 4 1,936 — 3 3,500 — 4 2,943 — 4 2,866 — is not available. a. From the point of origin (the seller’s factory, typically located either in the capital city or in the largest commercial center) to the port of loading or equivalent (port/airport), and excluding international shipping (EXW to FOB). b. From the point of origin (the seller’s factory, typically located either in the capital city or in the largest commercial center) to the buyer’s warehouse (EXW to DDP). c. From the port of discharge or equivalent to the buyer’s warehouse (DES to DDP). d. Aggregates of the distance indicator for port and airport. e. Typical charge for a 40-foot dry container or a semi-trailer (total freight including agent fees, port, airport, and other charges). f. Typical charge for a 40-foot dry container or a semi-trailer (total freight including agent fees and other charges). Source: Logistics Performance Index 2012. 46 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Question 31: Question 32: Question 26: Question 29: Physical Multiple % of shipments Clearance time (days)a inspection inspection meeting quality Question 27: Question 28: criteria Number of agencies Number of forms Without With % of % of shipments physical physical import physically % of shipments Imports Exports Imports Exports inspection inspection shipments inspected Afghanistan 40 3 3 3 3 2 2 3 3 Albania 40 1 1 3 2 1 1 50 50 Algeria 83 4 2 4 2 8 3 75 35 Argentina 73 3 3 3 3 2 3 26 20 Armenia — 2 2 Australia 73 2 2 3 2 1 3 6 2 Austria — — — — — — — — — Azerbaijan — — — — — — — — — Bahamas, The 93 1 1 2 1 1 3 18 1 Bahrain 88 5 5 2 2 1 1 18 1 Bangladesh 79 4 4 5 4 3 4 10 5 Belarus 72 2 2 3 3 1 1 7 2 Belgium 93 2 2 2 2 0 1 2 1 Benin 40 4 4 2 2 5 6 11 7 Bolivia 93 4 2 1 1 7 15 50 35 Bosnia and Herzegovina 89 2 2 3 3 1 1 50 6 Botswana 83 1 1 1 2 4 18 3 Brazil 70 3 3 2 3 2 5 6 2 Bulgaria 87 2 2 2 2 1 1 7 2 Burkina Faso — — — — — — — — — Burundi 40 3 2 4 3 4 5 50 3 Cambodia 93 3 3 5 5 1 1 11 3 Cameroon 84 7 5 6 6 2 4 9 6 Canada 83 2 1 2 2 1 3 3 2 Central African Republic 40 3 4 3 5 3 4 75 3 Chad 40 3 2 4 3 6 7 30 7 Chile 89 2 2 3 3 1 1 10 5 China 69 3 3 6 5 2 4 17 5 Colombia 74 3 3 3 2 1 2 13 1 Congo, Dem. Rep. — — — — — — — — — Congo, Rep. 83 2 — 2 2 — — 1 3 Costa Rica 64 3 3 2 2 1 2 3 1 Croatia 74 2 2 2 2 1 1 14 1 Côte d’Ivoire 88 3 3 11 8 1 2 3 1 Cyprus 88 2 2 1 1 0 1 3 1 Czech Republic — — — — — — — — — Denmark 89 2 1 2 1 1 1 1 1 Dominican Republic 96 3 3 2 2 1 3 15 1 Ecuador 89 3 3 3 3 2 4 14 7 Egypt, Arab Rep. 70 4 2 5 3 2 4 25 7 El Salvador 85 3 3 3 3 0 2 5 4 Estonia 88 1 1 1 1 0 0 3 3 Ethiopia 83 — — — — — — — — Finland 79 1 1 1 2 0 1 1 1 France 97 3 3 4 4 3 2 1 1 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 47 Question 31: Question 32: Question 26: Question 29: Physical Multiple % of shipments Clearance time (days)a inspection inspection meeting quality Question 27: Question 28: criteria Number of agencies Number of forms Without With % of % of shipments physical physical import physically % of shipments Imports Exports Imports Exports inspection inspection shipments inspected Gambia, The 83 3 3 3 3 1 1 75 1 Georgia 87 2 2 3 3 1 1 5 2 Germany 80 1 1 2 2 0 1 3 2 Ghana 57 4 4 3 2 1 1 42 4 Greece 93 — — — — — — — — Guatemala 89 2 3 1 1 1 2 20 2 Guinea — — — — — — — — — Haiti 51 4 2 3 2 1 2 25 2 Honduras 86 1 2 3 3 2 6 41 7 Hong Kong SAR, China 79 2 1 1 1 0 0 1 1 Hungary 95 3 2 2 2 1 1 3 3 Iceland — — — — — — — — — India 59 3 3 6 5 2 4 35 16 Indonesia 51 5 5 5 3 1 4 31 18 Iran, Islamic Rep. 40 — — 6 2 3 3 75 75 Iraq 40 3 2 5 5 2 4 18 1 Ireland 96 2 2 4 4 0 1 2 1 Israel 92 2 2 4 3 1 2 3 1 Italy 93 4 4 4 3 1 1 3 1 Jamaica 88 5 5 3 4 1 5 50 35 Japan 93 3 3 4 4 0 1 3 2 Jordan 83 5 1 1 1 1 2 35 1 Kazakhstan 88 1 1 1 1 1 1 6 3 Kenya 88 3 3 4 3 2 5 25 2 Korea, Rep. 97 1 1 2 1 1 1 3 1 Kuwait 93 4 1 4 5 2 4 50 50 Kyrgyz Republic 83 1 3 5 5 1 1 75 3 Lao PDR 97 11 11 11 11 3 2 75 75 Lebanon 60 4 4 4 4 1 3 33 7 Liberia — — — — — — — — — Libya 93 3 3 3 3 2 4 75 3 Luxembourg — — — — — — — — — Macedonia, FYR 90 2 1 6 5 1 1 42 42 Madagascar 40 11 11 2 2 2 4 35 1 Malawi 83 1 1 3 3 1 2 1 3 Malaysia 71 2 3 2 2 1 1 6 3 Maldives — — — — — — — — — Mali 40 3 3 2 2 3 7 75 50 Malta 59 1 1 1 1 0 1 15 1 Mauritania 40 2 4 5 6 1 4 18 3 Mauritius 87 2 2 2 2 1 1 6 2 Mexico 69 4 2 2 2 1 2 7 1 Moldova 93 11 11 8 8 2 7 35 35 Mongolia 56 4 5 3 4 1 1 71 6 Montenegro — 5 5 2 2 1 1 18 — Morocco 65 3 3 3 2 1 3 17 3 48 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y Question 31: Question 32: Question 26: Question 29: Physical Multiple % of shipments Clearance time (days)a inspection inspection meeting quality Question 27: Question 28: criteria Number of agencies Number of forms Without With % of % of shipments physical physical import physically % of shipments Imports Exports Imports Exports inspection inspection shipments inspected Mozambique 40 2 2 4 5 2 5 75 75 Myanmar 40 3 4 3 4 2 3 75 75 Namibia 91 2 3 2 2 3 3 22 2 Nepal 69 5 5 6 5 1 1 30 10 Netherlands 95 1 1 2 2 0 1 3 1 New Zealand 87 2 2 3 2 0 2 1 1 Nicaragua 86 4 3 3 2 1 3 13 4 Nigeria 57 8 6 6 6 5 8 43 8 Norway — — — — — — — — — Oman — — — — — — — — — Pakistan 55 4 4 4 4 2 4 27 5 Panama 93 5 3 4 3 1 2 6 2 Paraguay 88 3 3 3 3 2 3 50 50 Peru 89 2 2 3 2 1 2 6 3 Philippines 97 7 3 6 3 2 4 6 2 Poland 57 3 3 4 4 1 2 75 61 Portugal 72 2 2 2 2 1 1 18 2 Qatar 97 2 3 1 1 3 3 50 75 Romania 65 4 3 4 4 1 1 11 3 Russian Federation 88 2 2 8 8 1 2 61 61 Saudi Arabia 79 2 2 3 2 3 4 36 3 Senegal 66 3 3 4 4 3 5 18 11 Serbia 57 2 2 5 3 1 1 6 6 Sierra Leone 40 1 1 4 4 4 4 50 50 Singapore 95 2 1 1 1 0 1 1 1 Slovak Republic 78 1 1 2 2 0 1 4 3 South Africa 89 2 2 2 2 1 2 5 2 Spain 74 2 1 2 1 1 1 5 1 Sri Lanka 80 4 3 5 5 1 2 33 7 Sudan 86 5 4 3 3 2 4 18 1 Sweden 97 2 2 2 2 1 2 1 1 Switzerland 76 4 4 2 2 1 1 1 1 Syrian Arab Republic 61 3 2 5 3 3 3 51 18 Taiwan, China 82 2 1 2 2 0 1 2 1 Tajikistan 88 5 3 5 3 1 1 3 1 Tanzania — — — — — — — — — Thailand 97 5 4 5 4 1 1 5 2 Togo 59 3 3 3 3 3 5 11 1 Tunisia 88 — — — — — — — — Turkey 77 3 2 4 3 1 2 8 3 Uganda 88 10 5 1 1 4 10 75 35 Ukraine 72 7 7 8 7 1 2 21 3 United Arab Emirates 86 2 2 2 2 1 1 4 2 United Kingdom 90 3 4 3 3 1 2 3 2 United States 93 3 2 4 2 1 3 7 3 Uruguay — — — — — — — — — C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 49 Question 31: Question 32: Question 26: Question 29: Physical Multiple % of shipments Clearance time (days)a inspection inspection meeting quality Question 27: Question 28: criteria Number of agencies Number of forms Without With % of % of shipments physical physical import physically % of shipments Imports Exports Imports Exports inspection inspection shipments inspected Uzbekistan 57 3 2 3 3 3 5 14 9 Venezuela, RB 59 6 6 8 7 3 6 30 4 Vietnam 78 4 4 5 4 1 2 8 8 Yemen, Rep. — — — — — — — — — Zambia 40 4 3 1 1 2 4 6 1 Zimbabwe 59 4 4 4 5 1 3 33 4 — is not available. a. Time taken between the submission of an accepted customs declaration and notification of clearance. Source: Logistics Performance Index 2012. 50 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 4 AppEndix The Lpi methodology Because logistics has many dimensions, measur- for roughly 18 percent of responses. Most of ing and summarizing performance across coun- the responses are thus from small and medium tries is challenging. Examining the time and enterprises. costs associated with logistics processes—port Knowledgeable senior company members processing, customs clearance, transport, and are important to the survey. The 2012 respon- the like—is a good start, and in many cases this dents include senior executives (50 percent), information is readily available. But even when area or country managers (16 percent), and de- complete, this information cannot be easily partment managers (17 percent). These groups aggregated into a single, consistent, cross-coun- of professionals are directly involved in day-to- try dataset, because of structural differences in day operations, not only from company head- countries’ supply chains. Even more important, quarters but also from country offices. Almost many critical elements of good logistics—such two-thirds of respondents are at corporate or re- as process transparency, service quality, pre- gional headquarters (39 percent) or at country dictability, and reliability—cannot be assessed branch offices (23 percent). The rest are at local using only time and cost information. branch offices (7 percent) or independent firms (31 percent). Respondent demographics The majority of respondents (54 percent) are involved in providing most logistics services The vital aspects of logistics performance are as their main line of work. Such services in- best assessed by operators on the ground. So the clude warehousing and distribution, customer- LPI uses a structured online survey of logistics tailored logistics solutions, courier services, bulk professionals at multinational freight forward- or break bulk cargo transport, and less-than-full ers and at the main express carriers. container, full-container, or full-trailer load The 2012 LPI data are based on the 2011 transport. By contrast, just 32 percent of re- survey, which was administered to nearly 1,000 spondents are at companies with business mod- respondents at international logistics companies els based on full-container or full-trailer load in 143 countries (domestic performance indica- transport (22 percent) or on customer-tailored tors). The international LPI covers 155 coun- logistics solutions (10 percent). tries. The number of respondents is about the Among all respondents, 45 percent deal same as for the 2010 LPI. with multimodal transport, 23 percent with In addition, the location of respondents for maritime transport, and 13 percent with air the 2012 LPI reflects the growing importance transport. Whereas 42 percent usually oversee of trade facilitation for the developing world. both domestic and international operations, Among the respondents, 69 percent are in either another 30 percent deal exclusively with inter- low-income countries (13 percent) or middle- national shipping (both exports and imports). income countries (56 percent). And whereas 30 percent work with most of the The LPI assesses both large companies and world’s regions, others concentrate their work small and medium enterprises. Large companies in Asia (24 percent), Europe (23 percent), or the (those with 250 employees or more) account Americas (9 percent). C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 51 Constructing the international LPI Because the survey engine relies heavily on a specialized country selection methodology for The first part of the LPI survey (questions survey respondents based on high trade volume 10–15) informs the international LPI. Each between countries, the USR approach can help survey respondent rates eight overseas mar- countries with lower trade volumes rise to the kets on six core components of logistics perfor- top during country selection. mance. The eight countries are chosen based on The 2012 survey engine builds a set of coun- the most important export and import mar- tries for the survey respondents that are subject kets of the country where the respondent is to the rule set (see table A4.1). After 200 sur- located, on random selection, and—for land- veys, the USR approach is introduced into the locked countries— on neighboring countries engine’s process for country selection. For each that form part of the land bridge connecting new survey respondent, the USR approach solic- them with international markets. The method its a response from a country chosen at random used to select the group of countries rated by but with non-uniform sampling—with weights each respondent varies by the characteristics chosen to evolve the sampling toward uniform of the country where the respondent is located probability. Specifically, a country i is chosen (table A4.1). with a probability (N – ni) / 2N, where ni is the Respondents take the survey online. A new sample size of country i so far, and N is the total web engine was designed for the 2012 LPI to sample size. solve problems in the previous engines (Iarossi The international LPI is a summary indica- 2006). The 2012 engine also incorporates a tor of logistics sector performance, combining newly developed Uniform Sampling Random- data on six core performance components into a ized (USR) approach, to gain the most possible single aggregate measure. Some respondents did responses from underrepresented countries. not provide information for all six components, Table A4.1 Methodology for selecting country groups for survey respondents Respondents from low- Respondents from middle- Respondents from high- income countries income countries income countries Three most important export partner countries + The most important import partner country Five most important export + partner countries Respondents from Four countries randomly, one Two countries randomly from a + coastal countries from each country group: list of five most important export Three most important a. Africa partner countries and five most partner countries b. East Asia and important import partner countries Central Asia + c. Latin America Four countries randomly, one d. OECD and Europe from each country group: less Central Asia a. Africa Three most important b. East Asia and export partner countries Central Asia + c. Latin America One most important d. OECD and Europe Four most important export import partner country less Central Asia partner countries + + + Two land-bridge countries Two countries randomly Respondents from from the combined country Two most important import + landlocked countries groups a, b, c, and d partner countries Two countries randomly, one + from each country group: Two land-bridge countries a. Africa, East Asia and Central Asia, and Latin America b. OECD and Europe less Central Asia Source: Logistics Performance Index 2012. 52 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y so interpolation is used to fill in missing values. Table A4.2 Results of principal component analysis for the international LPI The missing values are replaced with the coun- try mean response for each question, adjusted Variance proportion by the respondent’s average deviation from the Component Eigenvalue Difference Individual Cumulative country mean in the answered questions. 1 5.55 5.39 0.92 0.92 The six core components are: 2 0.16 0.04 0.03 0.95 • The efficiency of customs and border man- 3 0.12 0.05 0.02 0.97 agement clearance, rated from “very low� 4 0.07 0.02 0.01 0.98 (1) to “very high� (5) in survey question 5 0.06 0.02 0.01 0.99 10. 6 0.04 0.01 1.00 • The quality of trade and transport infra- Source: Authors’ analysis. structure, rated from “very low� (1) to “very high� (5) in survey question 11. Table A4.3 Component loadings for • The ease of arranging competitively priced the international LPI shipments, rated from “very difficult� (1) Dimension Weight to “very easy� (5) in survey question 12. Customs 0.41 • The competence and quality of logistics Infrastructure 0.41 services, rated from “very low� (1) to International shipments 0.40 “very high� (5) in survey question 13. Logistics quality and competence 0.42 • The ability to track and trace consign- Tracking and tracing 0.41 ments, rated from “very low� (1) to “very Timeliness 0.40 high� (5) in survey question 14. • The frequency with which shipments Source: Authors’ analysis. reach consignees within scheduled or ex- pected delivery times, rated from “hardly plot, suggest that a single principal component ever� (1) to “nearly always� (5) in survey be retained to summarize the underlying data. question 15. This principal component is the international The LPI is constructed from these six indica- LPI. Table A4.2 shows that the international tors using principal component analysis (PCA), LPI accounts for 92 percent of the variation in a standard statistical technique used to reduce the six components. the dimensionality of a dataset. In the LPI, the To construct the international LPI, normal- inputs for PCA are country scores on questions ized scores for each of the six original indica- 10–15, averaged across all respondents provid- tors are multiplied by their component loadings ing data on a given overseas market. Scores are (table A4.3) and then summed. The component normalized by subtracting the sample mean and loadings represent the weight given to each orig- dividing by the standard deviation before con- inal indicator in constructing the international ducting PCA. The output from PCA is a single LPI. Since the loadings are similar for all six, the indicator—the LPI—that is a weighted average international LPI is close to a simple average of of those scores. The weights are chosen to maxi- the indicators. mize the percentage of variation in the LPI’s To account for the sampling error created original six indicators. by the LPI’s survey-based dataset, LPI scores are Full details of the PCA procedure are in ta- presented with approximate 80 percent confi- bles A4.2 and A4.3. The first line of table A4.2 dence intervals. These intervals make it possible shows that the first (principal) eigenvalue of the to provide upper and lower bounds for a coun- correlation matrix of the six core indicators is try’s LPI score and rank. To determine whether greater than one—and much larger than any a change in score or a difference between two other eigenvalue. Standard statistical tests, such scores is statistically significant, confidence as the Kaiser Criterion and the eigenvalue scree intervals must be examined carefully. For C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 53 example, a statistically significant improvement countries and small-island states, the LPI might in a country’s performance should not be con- reflect access problems outside the country as- cluded unless the lower bound of the country’s sessed, such as transit difficulties. The low rating 2012 LPI score exceeds the upper bound of its of a landlocked country might not adequately re- 2010 score. flect its trade facilitation efforts, which depend To calculate the confidence interval, the on the workings of complex international transit standard error of LPI scores across all respon- systems. Landlocked countries cannot eliminate dents is estimated for a country. The upper and transit inefficiencies with domestic reforms. lower bounds of the confidence interval are then Constructing the domestic t(0.1, N–1)S LPI database LPI ± , N The second part of the LPI survey instrument is where LPI is a country’s LPI score, N is the the domestic LPI, in which respondents provide number of survey respondents for that country, qualitative and quantitative information on the s is the estimated standard error of each coun- logistics environment in the country where they try’s LPI score, and t is Student’s t-distribution. work. As a result of this approach, confidence inter- Questions 17–22 ask respondents to choose vals and low-high ranges for scores and ranks are one of five performance categories. In question larger for small markets with few respondents, 17, for example, they can describe port charges since these estimates are less certain. in their country as “very high,� “high,� “aver- The high and low scores are used to calculate age,� “low,� or “very low.� As in the international upper and lower bounds on country ranks. The LPI, these options are coded from 1 (worst) to 5 upper bound is the LPI rank a country would (best). Appendix 2 displays country averages of receive if its LPI score were at the upper bound the percentage of respondents rating each aspect of the confidence interval rather than at the cen- of the logistics environment as 1–2 or 4–5. ter. The lower bound is the LPI rank a country With a few exceptions, questions 23–34 would receive if its LPI score were at the lower ask respondents for quantitative information bound of the confidence interval rather than at on their countries’ international supply chains, the center. In both cases, the scores of all other offering choices in a dropdown menu. When a countries are kept constant. response indicates a single value, the answer is The average confidence interval on the 1–5 coded as the logarithm of that value. When a scale is 0.21, or about 7.4 percent of the average response indicates a range, the answer is coded country’s LPI score. On average, this is equiva- as the logarithm of the midpoint of that range. lent to 13 places in the LPI ranking. Caution For example, export distance can be indicated must be taken when interpreting small differ- as fewer than 50 kilometers, 50–100 kilome- ences in LPI scores and rankings. ters, 100–500 kilometers, and so forth—so a re- Despite being the most comprehensive data sponse of 50–100 kilometers is coded as log(75). source for country logistics and trade facilita- Full details of the coding matrix are available tion, the LPI has two important limitations. on request. First, the experience of international freight for- Country scores are produced by exponen- warders might not represent the broader logistics tiating the average of responses in logarithms environment in poor countries, which often rely across all respondents for a given country. This on traditional operators. And the international method is equivalent to taking a geometric aver- and traditional operators might differ in their age in levels. Scores for regions, income groups, interactions with government agencies—and and LPI quintiles are simple averages of the rel- in their service levels. Second, for landlocked evant country scores. 54 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y References APEC (Asia-Pacific Economic Cooperation) Secretariat. 2009. Freight Europe initiative, Brussels, March 27. http://europa.eu/rapid/ “Logistics: Connectivity for Goods and Services.� Document 2009/ pressReleasesAction.do?reference=SPEECH/12/230&format=HTML. SOM1/CTI-EC/TPD/002. Trade Policy Dialogue on Trade Logistics, Accessed March 2012. Singapore. Klaus, Peter, and Christian Kille. 2007. Top 100 in European Transport Arvis, Jean-François, and Ben Shepherd. 2011. “The Air Connectivity and Logistics Services. Hamburg, Germany: DVV Media Group / Index: Measuring Integration in the Global Air Transport Network.� Deutscher Verkehrs Verlag. Policy Research Working Paper 5722. World Bank, Washington, DC. Klaus, Peter, Christian Kille, and Martin Schwemmer. 2011. “Top 100 Arvis, Jean-François, Gaël Raballand, and Jean-François Marteau. in European Transport and Logistics Services; Market Sizes, Market 2010. “The Cost of Being Landlocked: Logistics Costs and Supply Segments and Market Leaders in the European Logistics Industry.� Chain Reliability.� World Bank, Washington, DC. DVV Media Group / Deutscher Verkehrs-Verlag. www.dvz.de/ Arvis, Jean-François, Graham Smith, and Robin Carruthers. 2011. fileadmin/user_upload/Buch-PDFs/TOP-100-Europ-2011-Leseprobe. Connecting Landlocked Developing Countries to Markets: Trade pdf. Accessed January 2012. Corridors in the 21st Century. Washington, DC: World Bank. Kunaka, Charles, Monica Alina Mustra, and Sebastian Saez. Arvis, Jean-François, Monica Alina Mustra, John Panzer, Lauri Forthcoming. “Trade Dimension of Logistics Services.� World Bank, Ojala, and Tapio Naula. 2007. Connecting to Compete 2007: Trade Washington, DC. Logistics in the Global Economy. Washington, DC: World Bank. Makillie, Paul. 2006. “The Physical Internet.� The Economist, June 15. Arvis, Jean-François, Monica Alina Mustra, Lauri Ojala, Ben Shepherd, McKinnon, Alan C., Sharon Cullinane, Michael Browne, and Anthony and Daniel Saslavsky. 2010. Connecting to Compete 2010: Trade Whiteing, eds. 2010. Green Logistics: Improving the Environmental Logistics in the Global Economy. Washington, DC: World Bank. Sustainability of Logistics. London: Kogan Page. Cantens, Thomas, Gaël Raballand, Samson Bilangna, and Marcellin McLinden, Gerard, Enrique Fanta, David Widdowson, and Tom Doyle, eds. Djeuwo. 2011. “Reforming Customs by Measuring Performance: 2011. Border Management Modernization. Washington, DC: World Bank. A Cameroon Case Study.� In Where to Spend the Next Million? Mongelluzzo, Bill. 2012. “Single Border Portal Tops Importers’ Wish List.� Applying Impact Evaluation to Trade Assistance, ed. Olivier Cadot, The Journal of Commerce, March 3. Ana M. Fernandes, Julien Gourdon, and Aaditya Mattoo, 183–206. Murphy, Paul R., and James M. Daley. 1999. “Revisiting Logistical Washington, DC: World Bank. Friendliness: Perspective of International Freight Forwarders.� Journal Deutsche Post DHL. 2012. “Go Green: Our Approach towards of Transportation Management (Spring) 65–71. Environmental Protection. Presentation at World Bank Transport Murphy, Paul R., James. M. Daley, and Douglas. R. Dalenberg. 1993. Day, February. www.dp-dhl.com/en/responsibility/environment.html. “Doing Business in Global Markets: Perspectives of International Accessed April 2012. Freight Forwarders.� Journal of Global Marketing 6 (4): 53–68. Fernández, Raquel, Santiago Flórez Gómez, Francisco Estrázulas de Mustra, Monica Alina, Jean François Arvis, John Arnold, Robin Souza, and Henry Vega. 2011. “Supply Chain Analyses of Exports Carruthers, and Daniel Saslavsky. 2010. Trade and Transport and Imports of Agricultural Products: Case Studies of Costa Rica, Facilitation Assessment. Washington, DC: World Bank. Honduras and Nicaragua.� In Getting the Most out of Free Trade Ojala, Lauri, and Cezar Queiroz, eds. 2000. “Transport Sector Agreements in Central America, ed. J. Humberto Lopez and Rashmi Restructuring in the Baltic States: Proceedings of a Ministerial Shankar, 151–79. Washington, DC: World Bank. Seminar held in Riga.� Turku School of Economics and Business Helble, Matthias, Ben Shepherd, and John S. Wilson. 2009. Administration, Finland, November 16–17. “Transparency and Regional Integration in the Asia Pacific.� The World ———. 2004. “Transport Sector Restructuring in the Baltic States Economy 32 (3): 479–508. towards EU Accession.� Working Paper 31123. World Bank, Hoekman, Bernard, and Alessandro Nicita. 2011. “Trade Policy, Trade Washington, DC. Costs, and Developing Country Trade.� World Development 39 (12): Raballand, Gaël, and Supee Teravaninthorn. 2008. Transport Prices and 2069–79. Costs in Africa: A Review of the International Corridors. Washington, Iarossi, Giuseppe. 2006. The Power of Survey Design: A User’s Guide for DC: World Bank. Managing Surveys, Interpreting Results, and Influencing Respondents. Raballand, Gaël, Salim Refas, Monica Beuran, and Gözde Isik. 2012. Washington, DC: World Bank. Why Does Cargo Spend Weeks in Sub-Saharan African Ports? IDB (Inter-American Development Bank). 2012. “IDB Supports Efforts to Lessons from Six Countries. Washington, DC: World Bank. Strengthen Asia-LAC Ties through the Trans-Pacific Partnership.� News Rantasila, Karri, and Lauri Ojala. 2012. “Measurement of National-level Release, January 31. www.iadb.org/en/news/news-releases/ Logistics Costs and Performance.� ITF Discussion paper 2012-04, 2012-01-31/asia-lac-ties-through-the-trans-pacific-partnership,9827. International Transport Forum, Paris. http://internationaltransportforum. html. Accessed January 2012. org/jtrc/DiscussionPapers/jtrcpapers.html. Accessed May 2012. International Chamber of Commerce. 2010. ICC Guide to Incoterms ® Raven, John. 2001. Trade and Transport Facilitation: A Toolkit for Audit, 2010. ICC 720. New York: ICC Publications. Analysis, and Remedial Action. Washington, DC: World Bank. Kallas, Siim. 2012. “Using Freight to Help European transport Move to Reis, Jose Guilherme, and Tom Farole. 2012. Trade Competitiveness a sustainable future.� Speech presented at the launch of the Green Diagnostic Toolkit. Washington, DC: World Bank. C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y 55 Sandee, Henry, Julia Oliver, and Natalia Cubillos Salcedo. 2012. “Why ———. 2011. “International Bank for Reconstruction and Development Dwell Time Matters.� World Bank Institute Growth and Crisis Blog. and International Finance Corporation Country Partnership Strategy for http://blogs.worldbank.org/growth/why-dwell-time-matters. Accessed the Republic of Serbia for the period FY12–FY15.� Report 65379-YF. April 2012. www-wds.worldbank.org/external/default/WDSContentServer/WDSP/ UNCTAD (United Nations Conference on Trade and Development). IB/2012/02/07/000350881_20120207170941/Rendered/PDF/ 2010. “A Comparison of the LPI and the LSCI.� Transport Newsletter 653790CAS0revised0Box365777B00PUBLIC0.pdf. Accessed 46: 7–8. http://archive.unctad.org/en/docs/webdtltlb20103_en.pdf. January 2012. Accessed January 2012. ———. 2012. “Turning the Right Corner: Ensuring Development through ———. 2011. Review of Maritime Transport 2011. Geneva. a Low-Carbon Transport Sector.� Washington, DC. UNIDO (United Nations Industrial Development Organization). 2009. World Bank and FAO (Food and Agriculture Organization of the United Industrial Development Report 2009—Breaking In and Moving Up: Nations). 2012. “The Grain Chain: Food Security and Managing New Industrial Challenges for the Bottom Billion and the Middle- Wheat Imports in Arab Countries.� World Bank, Washington, DC. Income Countries. Vienna. World Economic Forum. 2010. The Global Enabling Trade Report 2010. World Bank. 2009. “Madagascar Country Economic Memorandum.� Geneva. Washington, DC. 56 C o n n E C T i n G T o C o m p E T E 2 0 12 T r A D E L O g I S T I c S I n T h E g L O B A L E c O n O M y What is the Logistics Performance Index? Based on a worldwide survey of global freight forwarders and express carriers, the Logistics Performance Index is a benchmarking tool developed by the World Bank that measures performance along the logistics supply chain within a country. Allowing for comparisons across 155 countries, the index can help countries identif y challenges and opportunities and improve their logistics performance. The World Bank conducts the survey every two years. Technological progress and worldwide trade and investment liberalization are presenting new opportunities for countries to harness global markets for growth and poverty reduction. But with the advent of global supply chains, a new premium is being placed on being able to move goods rapidly, reliably, and cheaply. The ability to connect to the global logistics web depends on a country’s infrastructure, service markets, and trade processes. Government and the private sector in many developing countries should improve these areas—or face the large and growing costs of exclusion. This is the third edition of Connecting to Compete, a report summarizing the �ndings from the new dataset for the 2012 Logistics Performance Index (LPI) and its component indicators. The 2012 LPI also provides expanded data on import and export supply chains in 143 countries, including information on time, cost, and reliability and ratings on domestic infrastructure quality, the performance of core services, and the friendliness of trade clearance procedures. The 2012 LPI and its indicators encapsulate the �rsthand knowledge of movers of international trade. This information is relevant for policymakers and the private sector seeking to identify priorities for reform of their “soft� and “hard� trade and logistics infrastructure. Findings include: • Despite a positive trend in performance since 2007, infrastructure, clearance procedures, and quality of services remain serious constraints, except in high-income countries. • Countries with substantial performance improvement are the ones that have implemented long-term and comprehensive reforms and investments. • Ef�cient border clearance goes beyond customs and implies coordination of the various agencies involved. • Greening the logistics is a growing concern, especially when shipping with Organisation for Economic Co-operation and Development countries.