Transcript Why Trade Logistics Matter in the Arab Region?

Expert Group Meeting on Transport and
Trade facilitation
Why Trade Logistics Matter in the Arab
Region?
Mohamed A. Chemingui, ESCWA
Movenpick hotel, Dubai, 10-11 April 2013
Regional Characteristics
Economically diverse region …..
In terms of:
- Size of economy;
- Size of population;
- Economic structures and level of economic
diversification;
- Geographical location and area;
- Type of governance and institutions
- Human capital and labor productivity
- Level of integration to the world economy
2
Growth pattern has special characteristics……
-
Heavy reliance on oil exports;
Weak macroeconomic policies coordination
Weak regional trade and financial integration;
High population growth rates;
High unemployment rates, particularly youth and
women;
High weight of public sectors and inefficient
markets
High poverty rates outside GCC countries;
Very heterogeneous fiscal space levels;
Underdeveloped institutions;
Country Name
 Clear discrepancy in
the region;
GCC (Oil-Rich
labor importing)
 In 2009, Oil rich labor
importing countries
recorded less that 14%
of total Arab Pop; and
more than 57% of Arab
GDP
 In 2009, Non- oil middle
income labor exporting
countries population
registered more than 3
times that of oil rich
countless with only 25%
share to total Arab GDP.

3rd
The
group
contributed 18% to total
GDP and more than 40%
of total Arab population.
Non-Oil middle
income Labor
exporting
Others
(Diversified
Economies)
Bahrain
Kuwait
Libya
Oman
Qatar
Saudi Arabia
UAE
Total
Egypt
Morocco
Jordan
Lebanon
Syrian
Tunisia
Total
Algeria
Djibouti
Mauritania
Iraq
Sudan
Yemen
Population GDP
1.1
2.5
6.2
2.6
1.4
26.2
6.2
46.2
78.3
34.8
5.8
4.2
19.6
10.3
153.0
34.8
1.9
3.0
30.2
41.4
22.6
GDP per
capita
19.3
105.9
62.4
46.9
97.6
376.7
297.6
1006.4
189.0
90.9
23.8
34.9
53.9
43.5
436.1
138.1
1.0
3.0
81.1
67.0
31.0
No data available for Palestine, Comoros and Somalia.
% of Total
population
to overall
ESCWA
population
18.3
41.6
10.1
17.8
69.9
14.4
48.0
220
2.4
2.6
4.1
8.4
2.7
4.2
24.5
4.0
0.5
1.0
2.7
1.6
1.4
0.32
0.76
1.86
0.79
0.42
7.86
1.86
13.87
23.51
10.45
1.74
1.25
5.90
3.09
45.93
10.45
0.57
0.90
9.06
12.43
6.79
Source WB
% of GDP
constant to
Total
ESCWA GDP
1.1
6.0
3.5
2.7
5.5
21.4
16.9
57.1
10.7
5.2
1.4
2.0
3.1
2.5
24.7
7.8
0.1
0.2
4.6
3.8
1.8
Starting from Arab League in 1945…
 1950 Treaty for Joint Defense and Economic
Cooperation;
 1953 Agreement on Trade Facilitation and Regulating
Transit Trade;
 1957 Arab Economic Unity Agreement;
 1964 Arab Common Market Agreement;
 1981 Agreement on Facilitation and Development of
Trade;
 1981 Gulf Cooperation Council;
 1989 Arab Maghreb Union;
 1997 Greater Arab Free Trade Area;
 2003 Initiation of the Framework Agreement for
Liberalizing Trade in Services;
 2005 Full entry into force of Greater Arab Free Trade
Area.
Future actions
• Main declarations of the third Arab Economic Summit 2013
• 1. Removal of remaining barriers (tariffs and non tariffs) on intraArab trade by end of 2013
• 2. Creation of Arab Custom Union by 2015
• 3. Accelerate the implementation of the “Aid for Trade” activities for
the 22 Arab countries under the coordination of the Islamic
Development Bank
• Challenges:
• Is there a room for an Arab Common Position for the Next WTO
ministerial conference in December 2013 and potential agreement?
• What about the FTAs signed by some Arab countries with the EU
and USA if an Arab Custom Union will be implemented?
Intraregional exports as %
of total exports (2010)
70.0
64.5
60.0
48.7
50.0
Arab region is less
integrated, even compared
to African countries.
40.0
30.0
24.8
20.0
12.4
10.0
5.2
2.6
2.5
GCC
Maghreb
0.0
Arab
league
UE 27
NAFTA
Asean
Africa
Source: ITC
7
What determines divergent trade performance?
Export concentration index by region
index (1995,2011)
0.6
Export concentration index by county
and export performance (2000-2011)
14.0
1.40
2000-2011 Volume of exports Growth
12.0
DCs Western
Asia
0.5
1.20
2011 concentration index
10.0
1.00
8.0
0.80
6.0
0.60
4.0
0.40
2.0
0.20
0.0
0.00
DCs Africa
0.4
0.3
0.2
DCs
•
•
2011
-4.0
Iraq
Kuwait
Yemen
Oman
Qatar
UAE
Bahrain
Arab countries has high export concentration
Does high export concentration hindering export growth?
– Empirical Studies .. Yes
– Western Asia .. Yes (oil sector), but there are windows for diversification
and improvements !
Saudi Arabia
1995
Syrian Arab R.
-2.0
0.0
O. Palestinian
T.
Developed
economies
Jordan
World
Lebanon
DCs Asia
Turkey
DCs America
0.1
-0.20
-0.40
Understanding why intra-Arab trade
is low in Arab countries?
A. High Concentration of Exports (or low diversification
level)
Most Arab countries are highly dependant on few products
for exports with high concentration of markets.
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
1995
2010
B. Low complementarity among Arab Countries
•
•
Low complementarity of
trade in the region.
Could regional
integration be
beneficial?
Country
Saudi Arabia
United Arab
Emirates
Bahrain
Qatar
Kuwait
Oman
Tunisian
Algeria
Libya
Morocco
Mauritania
Egypt
Syria
Iraq
Jordan
Lebanon
Sudan
Djibouti
Somalia
Yemen
Palestine
2000
10.2
2010
13.3
23.8
10.3
8.6
8.3
17.5
21.5
6.2
5.8
15.2
1.9
21.3
11.5
3.5
28.4
25.0
7.6
13.3
4.9
6.9
4.3
32.9
15.5
9.7
9.8
15.7
26.0
10.3
9.0
17.2
4.0
30.1
22.7
2.4
26.0
27.9
4.8
5.0
1.4
12.7
14.3
Trade Complementarity Indices
35.0
30.0
25.0
20.0
2000
2010
15.0
10.0
5.0
0.0
SAU ARE BHR QAT KWT OMN TUN DZA LBY MAR MRT EGY SYR IRQ JOR LBN SDN DJI SOM YEM PAL
Structure of Arab Countries’ Exports
100%
90%
80%
70%
60%
Commodities and transactions not classified
elsewhere in the SITC
Miscellaneous manufactured articles
Machinery and transport equipment
Manufactured goods classified chiefly by
material
50%
Chemicals and related products, n.e.s
40%
Animal and vegetable oils, fats and waxes
30%
Mineral fuels, lubricants and related materials
20%
Crude materials, inedible, except fuels
10%
Beverages and tobacco
0%
Food and live animals
C. High Non-Tariff Measures (NTM) among Arab countries
Share of burdensome NTMs and exports
in LAS
•
45
40
35
Percent
30
25
NTM
20
Export
•
15
10
5
•
0
Agriculture
•
Manufacturing
NTMs in Manufacture: Rules of
origin is the main callenge
followed by SPS and TBT
measures.
Trade agreements
granting prefrencial
market access DOES
NOT eliminate problems
created by NTMs.
NTMs are particulary
challanging in
manufacturing sector.
NTMs in Agriculture:
Sanitary and
Photosanitay measures
(SPS), technical barriers
to trade (TBT), and rules
of origin.
D. . High Cost of Logistics
The Logistics Performance
Indicator provides a simple,
global benchmark
to measure logistics
performance
•
•
•
•
•
•
The most performing Arab
countries is the UAE
The second Arab country appears
only at the 33 rank
Most of the remaining countries
still poor in terms of facility of
trade.
Poor logistics performance index
means high cost of trade.
In many Arab countries, the
expected impacts from tariff
removal have been offset by the
high logistic costs
To ensure gains from trade, Arab
countries must make significant
efforts in reducing technical
barreirs to trade through the
modernization of its infrastructure
and logistics related to trade.
LPI is built around a survey of logistics
professionals. By asking freight forwarders to rate
countries on key logistics issues— such as customs
clearance efficiency, infrastructure quality, and the
ability to track cargo— It captures a broad set of
elements that affect perceptions of the efficiency of
trade logistics in practice
Economy
Singapore
Hong Kong SAR, China
United Arab Emirates
Qatar
Saudi Arabia
Tunisia
Morocco
Egypt, Arab Rep.
Oman
Yemen, Rep.
Kuwait
Syrian Arab Republic
Lebanon
Jordan
Algeria
Mauritania
Libya
Iraq
Sudan
Djibouti
Burundi
rank
1
2
17
33
37
41
50
57
62
63
70
92
96
102
125
127
137
145
148
154
155
score
% of highest performer
4.13
100.00
4.12
99.90
3.78
88.90
3.32
74.30
3.18
69.70
3.17
69.40
3.03
65.00
2.98
63.30
2.89
60.40
2.89
60.30
2.83
58.50
2.60
51.30
2.58
50.60
2.56
49.80
2.41
45.30
2.40
44.70
2.28
41.00
2.16
37.10
2.10
35.30
1.80
25.50
1.61
19.50
High disparities in terms of macroeconomic and sectoral
policies
E. . High disparities in terms of macroeconomic and
sectoral policies
Convergence in macroeconomic and
sectoral policies is found to be a key
factor for the success of regional
integration shemes
The three pillars for a successful regional integration
are:
- Convergence in terms of monetary policies
-Convergence in terms of fiscal policies
- Convergence in sectoral policies.
•
Macroeconomic policies are too heterogeneous in the Arab word: Monetary
policies are an example, where Arab countries did not achieved the minimum level
of convergence. Some of them pegged their currencies to the US Dollar while
others are more flexible.
•
The objective of monetary policies itself is not homogeneous among countries:
targeting inflation, increasing domestic investment, or mobilizing savings...
•
Sectoral policies in terms of subsidies and public support harm competition and
accordingly many countries excluded a significant lists of products from their
inter-Arab agreements, mainly in Agriculture and related industries
Impact of reduction of the cost of
transport s in the Region within the
context of DAFAT?
sim4:sim3+ An
Arab
preference for
migration
quotas in OPC
Sim 1 (FTA): A full implementation of intraArab FTA
Sim2 (TR) =Sim1+ a 50% reduction of intraArab transport costs
Sim3 (CU) : Sim2+ a customs union
between all Arab countries.
Sim4 (Migration): Sim3+the replacement
of 20% of non Arab migrant stock by Arab
migrants.
sim3: sim3+a
common
external tariffs
(for non
agriculture
products
sim2: sim1+ 50%
reduction in
transport cost
sim1: A complete
Free trade Area
18
14.0
Share of the intra-Arab trade in total
trade
12.0
11.5
10.0
10.6
10.7
sim3
sim4
9.3
8.5
8.0
 A full implementation of the FTA
supports the increase of
intra-Arab
trade by around 10 per cent. If 50 per
cent transport cost is reduced intraArab trade could increase by 38.5%.
 The application of common external
tariff increases trade with non-Arab
partners as the market access will
increase in both directions.
6.0
4.0
2.0
0.0
ref
sim1
sim2
Intra Arab trade variation
45.0
38.5
40.0
35.0
32.6
33.0
sim3
sim4
30.0
25.0
20.0
15.0
10.0
10.1
5.0
0.0
sim1
sim2
19
Variation of GDP

Impact on GDP ranges from
0.17 % in scenario 1 to more
than 3.56% in scenario 4.

This increase is shown for
both oil and non-oil producing
Arab economies with more
increase in non oil economies.

Scenario 4 shows, in oil
producing countries the GDP
increases around 3% compared
to 4.45% increase in non oil
producing countries.
20
Rest of Mashreq
0.42
Tunisia
Substantially impact on
Egypt
GDP is shown in all Arab
countries.
Rest of North Africa
-0.14
 Egypt will in particular
Qatar
benefit and will enjoy a 5.49%
increase in GDP.
Oman
 A number of GCC countries
will also benefit such as SA, UAE
Kuwait
Bahrain, Kuwait.

The impact on GDP is low
Bahrain
in Oman and Qatar.
0.55
3.08
2.1
1.04
0.03

5.49
3.23
1.58
1.95
1.94
0.15
0.98
1.27
0.45
0.01
0.34
1.24
0.82
0.05
3.36
3.11
0.52
0.04
0
Migration
1
CU
4
2.88
1.22
0.12
4.07
2.88
0.62
0.12
Saudi Arabia
4.01
4.14
2.13
0.15
UAE
-1
2.39
0.55
0.42
0.12
Morocco
4.43
3.37
2.24
2
3
4
Transport cost reduction
5
6
FTA
21
How to reduce Trade Costs? ESCWA’s
activities
• Current activities
• 1. Identification and costing of
technical barriers to trade: A
survey on trade costs in
selected Arab countries and on
selected commodities
• 2. Costing of strategies and
impacts analysis: Impacts of
reduction in trade costs on
economic performance in the
Arab region (by country)
through alternative options of
public-private investments and
financing
• 3. Aid for Trade:
• Identification of projects to
reduce trade costs (by country)
• Costing the identified projects
(by country)
• Comparative financing options
for trade costs related projects
(by country)
• Economic implications (by
country)
Conclusions
• Removing trade barriers
is good but not enough
• Other barriers and
obstacles require specific
and additional attention:
• Making countries able to
take advantage from
trade openness is more
challenging than
removing tariffs
• - inefficient trade logistics
• - costly transport and financial
services
• - low productive capacities and
poor diversification
• - poor policy coordination and
convergence
Thanks for your attention