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    Beyond Investment: Engaging the Private Sector in Trade Facilitation

     

     
     
    International Trade Forum - Issue 4/2009 

    The private sector has an important role to play in the effective development and implementation of trade facilitation strategies beyond investment alone. Public-private partnerships (PPPs) in trade facilitation are valuable in identifying the needs of government and traders, improving transparency and information flows, and promoting viable and sustainable trade facilitation solutions. Current success stories prove that the focus needs to be on an integrated strategy that does not assume a "one-size-fits-all" approach.

    Trade facilitation has the potential to bring considerable economic gains to developing and least developed countries through improving their trade competitiveness and diversifying their export bases. The benefits of removing impediments to trade are substantial, with evidence suggesting that the gains from these reforms can be higher than reducing tariffs. According to the Asia-Pacific Trade and Investment Report 2009(1), most developing countries take 50 per cent more time to fulfil the requirements for export and import procedures than developed countries. Research(2) indicates that reducing export time by one day could add a percentage point to trade. Furthermore, UNESCAP(3) estimates that by reducing behind-the-border and at-the-border export costs by 10 per cent, trade in the Asia-Pacific region could increase by up to US$ 286 billion.

    Pre-clearance documentation delays affect Asia's trade competitiveness

    World Bank(4) and UNESCAP data(5) demonstrate that the Asia-Pacific region has made tremendous progress in reducing at- and behind-the-border time and costs, but the performance varies significantly across countries and subregions. On average, the time to complete export procedures in the region's best performing economies takes six days or less and costs less than US$ 650, compared to ten days and US$ 1,124 for G-7 countries. Despite these gains, however, Asia-Pacific is also home to some of the worst performers, where completing export procedures takes on average more than 75 days and costs in excess of US$ 3,000.

    The characteristics of top trade facilitation economies

    The World Bank observes that the top ten trade facilitation economies, which include Singapore, Hong Kong, China and the Republic of Korea, share four characteristics:

    • They have introduced paper-free electronic data interchange systems and pre-arrival submission of customs declarations
    • They make use of a risk management inspection system where less than 10 per cent of containers are physically inspected
    • They have systems allowing authorized persons who meet prescribed criteria to benefit from simplified procedures
    • They have excellent port infrastructure.

    PPPs for trade facilitation

    UNESCAP recommends an integrated approach to trade facilitation which not only looks at border issues but also addresses domestic regulations and behind-the-border challenges. These issues include trade procedures and processes, barriers to the development of an efficient logistics services sector and a thorough assessment of the existing trade-related infrastructure. A number of UNESCAP members, including Armenia, Azerbaijan, Kyrgyzstan, Mongolia, Pakistan and Sri Lanka, have established, or are in the process of setting up, national trade (and transport) facilitation committees or similar coordinating structures.

    Some of the best-known examples of PPPs for trade facilitation in the area have been in the implementation of Single Electronic Windows (SEW). The most successful SEW systems - such as TradeNet in Singapore, Tradelink in Hong Kong, China and U-tradeHub in the Republic of Korea - have set benchmarks and established business models that offer important lessons for other countries wishing to emulate their success. The benefits are obvious. In Singapore, the time to process trade documents was reduced from four days to 15 minutes after the introduction of TradeNet. In Hong Kong, China, the annual savings from automated information transaction systems are estimated at HK$ 1.3 billion (US$ 1.7 million) according to UNESCAP. And in the Republic of Korea, the total savings for the trading community from implementing U-tradeHub are estimated at US$ 1.82 billion.

    It is important to note that there is no one-size-fits-all investment model for SEW projects. They need to be structured on sound business principles which take into account the country's long-term development goals, context and experiences. In the best practices highlighted above, each country had a clear vision for how trade facilitation reforms like SEW could boost competitiveness and solidify their leadership as export hubs. The Republic of Korea wanted to become the economic and logistics hub of north-east Asia, while Singapore, situated in the middle of the world's busiest shipping lanes, saw the value of becoming a leading trans-shipment and logistics hub.

    PPP trade facilitation projects like SEW facilities rely on a number of critical success factors. They include building trust between regulatory agencies and the private sector, and having sustained commitment from policy-makers and the business community, a realistic assessment by both private and public sectors of each party's role and capability in the venture, and a sound legal framework that supports the needs of the project and the general trade facilitation environment. 


    Trade facilitation defined 

    Trade facilitation, broadly defined, refers to both at-the-border and behind-the-border measures, which make trade easier, less costly and more efficient. While there is still no standard definition in public policy circles, there is consensus on what constitutes general trade facilitation principles. These include the logistics of getting goods from ports, documentation associated with moving goods across borders, transparency in customs and regulatory agency operations, harmonization of standards, conformity with international regulations, non-tariff barriers and the business environment in which trade transactions take place. (1) 

    The United Nations Network of Experts for Paperless Trade in Asia and the Pacific (UNNeXT), operated jointly by UNESCAP and the UN Economic Commission for Europe, provides a platform for practitioners to share their experience and exchange best practices in trade facilitation with each other and with member countries. For more information, visitwww.unescap.org/unnext/ 

    (i) Disclaimer: the views expressed in this article are those of the author and do not necessarily represent the views of the United Nations.
    (1) UNESCAP: Asia-Pacific Trade and Investment Report 2009: Trade-led Recovery and Beyond. Bangkok: UNESCAP, 2009. Available at 
    www.unescap.org/tid/publication/aptir2549.asp

    (2) Djankov, S., Freund, C. and Pham, C.S. Trading on Time. Washington DC: World Bank, 2006. Available atwww.doingbusiness.org/documents/trading_on_time_full_report.pdf

    (3) Duval, Y. and Utoktham, C. Behind-the-border trade facilitation in Asia-Pacific: cost of trade, credit information, contract enforcement and regulatory coherence. ESCAP TID Staff Working Paper No. 02/09. Available atwww.unescap.org/tid/publication/swp209.pdf

    (4) World Bank. Doing Business 2010: Reforming through Difficult Times. Washington DC: World Bank, 2010. Seehttp://publications.worldbank.org/ecommerce/catalog/product?item_id=9305853

    (5) UNESCAP and Asian Development Bank (ADB). Designing and Implementing Trade Facilitation in Asia and the Pacific. Bangkok: UNESCAP and ADB, 2009. Available at
    www.unescap.org/tid/projects/tfforum_adbescapbook.asp