Germany tops 2010 Logistics Performance Index as best-performing country; Brazil, China, Bangladesh and Uganda move up.
Survey of 1,000 international freight-forwarders conducted during global financial crisis.
Country Logistics Councils enlist representatives from transport, customs, government agencies and the private sector to fix trade bottlenecks.
January 15, 2010—A few years ago,it took three or four days for a shipment of goods to clear the Uganda-Kenya border.
Today, the border crossing has been reduced to a few hours, and land-locked Uganda is seen by shippers as a more efficient place for trade.
That’s one of the findings of the 2010 Logistics Performance Index and its underlying indicators, a joint effort of the World Bank, logistics providers from around the world, and academic partners—released today in Berlin.
The ranking of 155 economies on the ease of importing and exporting goods is the result of a comprehensive survey—much of it conducted during the economic crisis—of nearly 1,000 international freight-forwarders and express carriers on the frontlines of world trade.
Germany topped the list as the best-performing country, while Somalia was last.
Uganda, along with Brazil, China and Bangladesh, moved up from their rankings in the first 2007 survey as part of an overall trend toward better trade logistics.
“Following our first survey in 2007, many developing countries have improved their capacity to connect to international markets, which is a key ingredient for competitiveness and economic growth,” says Otaviano Canuto, World Bank Vice President for Poverty Reduction and Economic Management.
“But if developing countries want to come out of the crisis in a stronger and more competitive position, they need to invest in better trade logistics.”
Survey Helps Identify Weakest Links
One of the survey’s goals is to identify the weakest links in the logistics chain, so countries can fix them, says World Bank trade economist Monica Alina Mustra, a main author of an accompanying report, “Connecting to Compete 2010: Trade Logistics and the Global Economy.”
World trade between countries is conducted via a network of increasingly connected logistics operators. But the ease with which traders can use this network to link up with international markets depends in large part on country-specific factors such as trade procedures, transport and telecommunications, infrastructure, and the domestic market for support services, says the report.
Indicators derived from the survey rate quality of infrastructure, efficiency of clearance processes, logistics competence, timeliness, cost and other factors.
“A country can have a quick look and see which one of these indicators is not performing as well as you’d expect. It’s a first signal as to which areas might need more attention,” says Mustra.
After the first Logistics Performance Index was released in 2007, “a number of countries responded and said, OK, we don’t like where we are, what can we do to fix it?” says World Bank Trade Director Bernard Hoekman.
Trade Lending Doubles
The World Bank has doubled its trade-related lending to $3.45 billion in FY 2009, up from an average of $1.54 billion per year in FY2006-08. About 35 percent of trade projects are in Africa. A majority of this lending is going to projects designed to facilitate trade and transportation.
In its country-level activities, the Bank conducts in-depth trade and transport facilitation audits to dig deeper into particular segments of the logistics chain, including customs and roads. Increasingly, projects, such as those on trade corridors, are regional in focus, in order to address the situation of landlocked developing countries such as Chad, Central African Republic, Uganda, Rwanda, and Burundi, or Afghanistan and Central Asia.
The Bank has also helped countries including Indonesia, Vietnam, Colombia, and Tunisia develop comprehensive strategies. These typically involve creation of Logistics Councils comprising representatives from transport, customs, government agencies and the private sector. The councils identify what needs to be done to fix trade bottlenecks and work to ensure that such changes happen.
“The private sector is a key player in terms of identifying where things aren’t working; also, a lot of the improvements have to involve the private sector,” says Hoekman.
A Comprehensive Approach Brings the Greatest Efficiency Gains
The biggest logistics improvements come with policy changes and investments that address performance of infrastructure sectors like ports or road corridors, markets for logistics services such as trucking or customs brokerage, and efficiency of border clearance processes, adds Hoekman.
“Increasingly, the message from shippers is that customs is still a problem, but increasingly not the problem. It’s also the other agencies at the border. It’s partly related to security, food safety, health standards. It’s increasingly those types of agencies that are blocking rapid clearance of goods.”
A “single window” or a one-stop-shop for clearances, including tariff payments, food safety, health and security-related inspections, “is a big help to solve this latter problem,” says Hoekman.
Colombia’s improved ranking, from 82 to 72, on the Logistics Index is largely due to proactive policies including adoption of a comprehensive logistics strategy, which implemented a “single window” but also addressed reform in services and improvement in port management, says Mustra.
Such measures are catching on. The report finds positive trends in modernization of customs, increased use of information technology, and development of private logistics services.
“There was a bigger gap last time  between the highest- and lowest-performing countries,” says report co-author and World Bank senior trade economist Jean-Francois Arvis.
“This time, people are relatively positive about the trends. Even in countries where things are not really going very well right now, things are improving. When you look at the scores and the numbers we are crunching, those are relatively better. It’s small, but there are encouraging signs. For policymakers, investing in this area can generate big pay-offs and be something visible.”