September 9, 2013 Ms. Marsha McGraw Olive World Bank Country Manager for Tajikistan Central Asia’s Logistics Performance Results from the World Bank’s Logistics Performance Index (LPI)

1.Infrastructure: Ports, road/rail links, dedicated logistics facilities, airports 2.Procedures (customs, payments etc.) –Simplification, automation –Harmonization, standardization –Modernization and governance of border agencies –Enforcement capacities 3.Services: Forwarders, truckers, brokers etc. –Regulation of entry –Market structure and competition –Competence and quality of service + New concerns such as supply chain security 2 Pillars of Logistics Performance Key message: Efficiency of supply chains not only depends on infrastructure but on the institutions and processes of trade (e.g. customs) and the quality of services available for trade

3 The supply chain structure reflects the history and the legacy of the Soviet Union (SU) Decomposition of SU meant that new institutions had to manage borders; unified railway system became fragmented Emergence of two professions: Freight forwarders and customs representatives Numerous interventions in the supply chain, e.g. obligation to go through bonded warehouses or use of customer representatives in Kazakhstan Current supply chain system in Central Asia Key messages: Break-up of SU has created a system that is non-conducive for efficient logistics and trade facilitation Obstacles are especially detrimental to smaller landlocked countries in Central Asia that have to trade in transit across many borders. One of the tools to assess countries’ logistics performance: The World Bank’s Logistics Performance Index (LPI)

Point of Origin Seller’s Factory Alongside Vessel Delivery to Dock Exporting Country Delivered to Buyer’s Warehouse Frontier/ Border What is the Logistics Performance Index (LPI) about? Unloaded on Dock Importing Country Customs Infrastructure Services Quality Timeliness International shipments Tracking and Tracing The Supply Chain Framework

The LPI measures 6 dimensions of country performance: 1. Efficiency of the clearance process 2. Quality of trade and transport infrastructure 3. Ease of arranging competitively priced shipments 4. Logistics competence and quality of logistics services 5. Ability to track and trace consignments 6. Timeliness of shipment delivery  Built on more than 5,000 country assessments by over 1000 logistics professionals worldwide  Primary data gathered for 155 countries  Source of data are suppliers of logistics services (freight forwarders, express carriers)  Respondents rate logistics performance on a scale of 1 to 5 5 LPI Methodology

6 Source: World Bank, LPI: Connecting to Compete (2012) Input and Outcome Indicators in the LPI

LPI 2012: Overall Results Logistics friendly Logistics unfriendly Partial performers Consistent performers

LPI 2012: Results for Central Asia Source: worldbank.org/LPI. No 2012 data for Turkmenistan Key messages: Logistics performance in Central Asia lagging behind upper middle income countries and OECD members Kazakhstan a good performer in the region 2012 ranks: 86 (KZ), 117 (UZ), 130 (KG), 136 (TJ)

9 Logistics Performance Score by GNI per capital Key message: Central Asian countries lag behind the most developed countries but also Eastern Europe, Turkey + East Asia. Facilitation and logistics bottlenecks are significant; countries tend to lag behind in reforms. Countries with a more European orientation tend to do better (Ukraine, Georgia). Source: Rastogi et al., based on World Bank LPI and WDI

10 Intraregional comparisons across LPI dimensions (2012) Source:

11 Substantial fragmentation and vulnerability of existing supply chains Very few companies operate as truly integrated logistics providers (3PL) Logistics operators cannot or are not incentivized to integrate trade and customs processing with transportation and other logistics activities. This introduces additional steps and ruptures to the supply chain. Central Asian Supply Chain Performance

12 Existing transport infrastructure does not appear as the main binding constraint for existing trade flows: Transportation costs or delays on average are in line with other countries. Institutional issues are more of a concern: Low reliability of supply chains acts as a main constraint to businesses due to excessive fragmentation in design and services. Companies face challenging condition of operation with long replenishment cycles, big inventories, and losses. Infrastructure and Institutions

13 Lack of coordination and integration: With legacy systems of bonded warehouses, shippers deal separately with freight forwarders, brokers, truckers; small presence of international freight forwarders Discontinuity in transit supply chains: Limited ability to trace goods in transit; low predictability of railway delivery of wagons and containers Operational constraints: Dispersed terminal and rail yard layout, need to undergo a long series of logistics operations (e.g. cross-docking, successive marshaling to a freight train) Domestic trucking and other services are not up to international standards Remaining trade facilitation constraints for final clearance and transit, largely coming from legacy of the the bonded warehouse clearance system Sources of Fragmentation

Outlook: LPI 2014 The next LPI Report will be published in February 2014 The next LPI Survey will run from late September to November 2013 The LPI team is especially interested in survey participants (freight forwarders) from Central Asia!  If you receive a survey invitation, please help us by filling it out  For representatives from industry associations: Please help us spread the word by forwarding our invite to your member companies Questions on the LPI or how to get involved? the LPI team at 14

LPI Partnerships with the private sector