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

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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

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• 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 OriginSeller’s Factory

AlongsideVessel

Delivery to Dock

Exporting Country

Delivered toBuyer’s

WarehouseFrontier/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

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LPI Methodology

6Source: World Bank, LPI: Connecting to Compete (2012)

Input and Outcome Indicators in the LPI

LPI 2012: Overall Results

Logistics friendly

Logistics unfriendlyPartial performersConsistent performers

LPI Score Customs Infrastructure International shipments

Logistics competence

Tracking & tracing

Timeliness0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

Kazakhstan

Uzbekistan

Kyrgyz Repub-lic

Tajikistan

OECD coun-tries

Upper middle income coun-tries

Europe & Cen-tral Asia Re-gion

Sco

re (

1 to

5)

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)

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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

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Azerbaijan

Belarus

China

Georgia

KazakhstanKyrgyz Republic

Russian Federation

Tajikistan

Uzbekistan

0

2

4

Customs Infrastructure International shipments Logistics competence

Tracking & tracing Timeliness

Key messages:

Institutional issues are at least as bind-ing as infrastruc-ture-related ones.

Institutional reforms (e.g. in customs) remain a high prior-ity despite recent progress.

Affordability of shipments and the tracking indicators tend to be lower in smaller countries.

Intraregional comparisons across LPI dimensions (2012)

Source: www.worldbank.org/LPI

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• 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

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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

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• 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?

Email the LPI team at LPI@worldbank.org

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