Logistics- Trade & Transport Facilitation Kunming May 19th 2011 Paul Apthorp

The views expressed in this paper/presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

NSEC BKK- KMG

A Transport Corridor on Paper

Dalou ( CN) Mong La Crossing not operating as a through route No Operational route through Myanmar No permanent Mekong crossing yet Does not include the main route Boteng to Vientiane

Border Crossings

Lack of facilities Manual cargo transshipment No cranes for moving containers over Long waiting times

Customs Clearance
Lack of Lao Customs Brokers. And Banking service for payments

NSEC
Uncertain Transit Times
Long customs queues Long lunch breaks Mekong Ferry finishes at 5 pm wait until tomorrow !

Transshipment
Lack of cranes for Transshipment of containers Manual Transshipment means lack of security Low security means high tech customers wont use the route. Trade Flow Most Traffic to Vientiane

Impressive Border Gate Mohan China

Waiting at Boteng Border = Costing Money

Customs Having Lunch Everyone Waits

Transshipment at Boteng

EWEC - Thailand- Laos - Vietnam

An Effective Transport Corridor
Certain Transit Times Process run like clockwork < One hour at each border

TNT sent 600 + Trucks along the EWEC in past year

Spending over US $ 500,000 in the local Lao economy Spending $ 2 Million in the Vietnam economy Spending $ 2 Million in the Thai Economy Money spent employing Trucks Drivers Customs Clerks o Crane Drivers o Customs offices o Cafes
o o

Logistics

Asset Utilisation drives Logistics cost Idle equipment costs money Facilities must be paid for Freight Costs Offset savings in Labour Goes to the Cost of Goods Sold Long transit Times Reduces Comparative advantage of lower labour cost Limits ability to respond to market needs

The Cost of Transport

Time is more expensive than distance ( asset utilisation)
The easiest and quickest route is generally cheaper than a slower shorter route. Transport takes the route of least resistance

Vehicles ( Trucks, Planes , Ships)

Cost money standing still

Freight rates are driven by market forces not distance

Development of Infrastructure last 5 years

Border Challenges today

Borders Open 12 hours x 7 Days Multi Million Dollar Border Facilities developed, but ..

Customs Opening Hours are restricted: 5 Hours a day 5 days a week (i.e. no 24/7) With a 3 hours lunch break

Outcome of above is therefore restricting the flow of trade!

Pingxiang Logistics Park $$$$$ Investment Customs open 5 hours a day 3 hours for lunch !

The Hidden Cost of Transportation

Time is more expensive than distance (asset utilisation) The easiest and quickest route is generally cheaper than a slower

shorter route.
Transport takes the route of least resistance Assets - Vehicles (Trucks, Planes , Ships) Cost money standing still Freight rates are driven by market forces not distance (ease of trade)

examples Did You Bring Any Help ?

Costs risk damage theft- safety !

The Certainties in Transportation

Border handling Costs Money (swap bodies etc) Every time you stop, offload or Transship it costs money Increases risks of damage / loss / pilferage etc increases costs Handling Facilities have to be paid for ! Cranes, Warehouses and Labour cost money The costs are passed on to the Customers ! They go to the Cost Of Goods Sold !! Affecting the competitiveness of goods, imports or inputs Impacts country export competiveness and business opportunity

examples Costly Border Transshipment

Vast improvements BUT costly crane hire and still time delays etc..

Trade Facilitation

The simplification and harmonisation of International Trade procedures

(WTO)
.. Streamlining and simplifying International Trade Procedures in order to

allow for easier flow of goods (OECD)

Simplification and harmonisation of International Trade procedures to

assist the movement of goods (DFAT Aus)

Ease of use - Countries & Customs

Some Countries Customs seen as Pro Export Customs are User friendlysimplified export processes Customs are trade facilitators First . Revenue collectors Second Customs allow for easy movement of bonded cargo (between facilities) Some Countries Customs regulations differ by border and method of export Strict adherence to Company Articles of Association (no common sense

leeway)
Lack consistency in interpretation of regulations (person to person;

region to region)
Shippers forced to obtain export permits on the gray market

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Decision 197 / TB-BCT Importing Alcohol , Cosmetic & Mobile Phones

In order to protect the interests of consumers and health, against the

importation of fake goods, inferior quality and increase anti-commercial fraud. The Ministry of Industry and Commerce launching notice to allow the import of alcohol, cosmetics, mobile phones through the 3 international ports: Hai Phong, Da Nang, Ho Chi Minh City as below: 1. Imported document In addition to the documents presented for customs clearance, importers must provide more documents issued by authorized distributors, importers of genuine production, venture or agency contract manufacturing of genuine trading goods. These documents are diplomatic representative agencies of Vietnam in foreign consular legalized under the provisions of law. 2. At import border Importer only allowed doing customer clearance at 3 international SEA ports: HPH, DAD, SGN 3, 4, 5: Ministry of Industry and Trade requesting all ministries, departments relating to support for launching this decision and improve checking, inspecting and dealing with misconduct. The decision will be effected on Jun 1, 2011

What is Still Missing ?

A Competitive Cross Border Transport Sector Poor vehicle Standards

Overloading Breakdowns Poor driving standards

Smooth and efficient Border Processes

Easy Market Access for SME exports Less than container loads Regional ICDs and Consolidation Points More numbers and also public options Need to encourage investment in quality and simplification (protects

compliance) and Discourage poor standards

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What is Still Missing ?

To encourage investment in better

equipment Improve asset utilization to justify investment

Higher capacity with less

environmental damage More axles less damage to roads and bridges

Better vehicles burn less fuel Less emissions for carbon

neutral ambition for corridors

Benefits of Improved Transport Standards

Better equipment / processes

means: Higher capacity per vehicle Lower cost per kilo of freight

Lower cost per kilo means: Lower costs for export Lower costs for importers and

local populations
Greater production options

Building a lower cost logistics

system To encourage regional investment

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Updating Transport Regulations and Moderisation

London to Paris

1981

$ 900

One way

No channel tunnel .. Ferry costs $ 300 one way. No open market Permits required Customs clearance .. With costs 12 meter Trailers ( 40 ft) 18 ton maximum pay load $ 0.05 per kilo ( $2300 with Inflation)

London Paris 2011 $ 900 One way Channel tunnel No permits Reduced customs procedures 13.6 Meter Trailers 24 ton maximum pay load $ 0.0375 per kilo

($0.1275 with Inflation)

Thesis

The reality of Multi Modal Transport in the GMS is that it serves the

Import of Consumer Products from non GMS countries. Multi Modal transport is not serving the needs of SMEs in the GMS
New Roads and Bridges have done little to improve market access or

participation in the Global Supply Chain for SMEs in the GMS hinterland.
The Non-Physical Barriers are still the dominant Transport is move expensive than it needs to be.

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ARN Opening Up the Inland

The EWEC The Road to Follow !

Thank You !!!

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