connectivity and supply chain performance

Presented by

Akhmad Bayhaqi

APEC Secretariat (Policy Support Unit)

Copyright 2013 APEC Secretariat

Connectivity and Supply Chain Performance

Introduction APEC connectivity blueprint APEC supply chain connectivity framework Infrastructure investment to support Supply

Chains Global connectivity Outlook and Key issues

Outline

APEC Member Economies

APEC Official Observers Association of South East Asian Nations (ASEAN) Secretariat Pacific Economic Cooperation Council (PECC) Pacific Islands Forum (PIF) Copyright 2013 APEC Secretariat

Source: APEC in Charts, 2014 (PSU).

Integrating the region and ensuring that goods, services and people move easily across

borders is at the core of APECs work. Members facilitate this trade through faster

customs procedures at borders; more favorable

business climates behind the border; and

aligning regulations and standards across the

region.

For example, APECs initiatives to synchronize regulatory systems is a key step to integrating

the Asia-Pacific economy. A product can be

more easily exported with just one set of

common standards across all economies.

Source: http://www.apec.org/About-Us/About-APEC/Fact-Sheets/Regional-Economic-Integration-Agenda.aspx

Regional Integration

APEC Connectivity Blueprint

Physical connectivity that improves supply chain performance, connects

and integrates logistics, transport,

energy, and telecommunication

infrastructure in the APEC region.

Institutional connectivity that advances regulatory and procedural

cooperation and coherence among

our economies.

People-to-people connectivity that enhances interaction, mobility and

joint endeavors.

Key Initiatives for Enhanced

Physical Connectivity

Copyright 2013 APEC Secretariat

Public-Private Partnerships Multi-Year Plan on Infrastructure Development and Investment (MYPIDI)

Designed to alleviate private sector concerns such as an unclear regulatory environment and reduce long-term risks

Long-term aim is to create a regional infrastructure financing market by stitching together these enhanced local institutions and joining them together into a regional network

PPP Expert Advisory Panel Group of PPP experts have begun providing assistance to Indonesia as they

implement the APEC PPP Pilot Center PPP Guidebook

Project under the Investment Experts Group Aims to compile information on the variety of PPP frameworks already in place

in each APEC economy Will provide a general overview of the process and requirements to establish a

PPP project

Workstream 1: Fostering a business friendly environment

for infrastructure development and

investment, through a solid regulatory framework, that

minimizes uncertainty and

maximizes transparency and

predictability.

Workstream 2: Development

and Refinement of an Integrated planning system

mechanisms

Workstream 3: Development of

government capacity to identify and generate a pipeline of bankable

infrastructure projects

Workstream 4: Development or

further improvement of

financing and funding

environment to encourage long term investors

Multi-Year Plan on Infrastructure Development and Investment (MYPIDI)



Source: Railway Handbook 2013



Land Transportation Global passenger and freight travel is expected to double from 2010-2050 requiring a

land transport network 60% larger than 2010 levels 25 Road Infrastructure Projects and 3 Rail Projects submitted by Member Economies Examples of APEC work include the Energy Working Groups Maximizing Energy

Efficiencies of Supply Chain Connectivity by Improving Rail-Waterway Intermodal Transport in APEC Economies project

Air Transportation Enhanced airport capacity is a key initiative to enhance both trade and tourism 22 ongoing or recently completed Air Infrastructure Projects submitted Examples of potential future APEC work streams include enhanced tracking and

monitoring of goods traded by air and air transport market liberalization



Maritime Transportation Cargo ships carried over nine billion tons of traded goods in 2012 representing 80% of

global merchandise trade, demonstrating the importance of quality port infrastructure 25 Maritime Infrastructure Project submitted by Member Economies Examples of potential future APEC work streams include building on a pilot project that

examined Real-Time Tracking and Monitoring of Cargo Containers

Telecommunications and ICT Development and Energy Infrastructure A 10% increase in broadband internet access is associated with a growth in per capita

GDP of roughly 0.2%, demonstrating real results for personal economic development, according to the United Nations

US$ 1.7 trillion of energy infrastructure investment is needed globally by 2035 with 60% of the total coming in the electricity sector

14 ICT Infrastructure Projects and 10 Energy Infrastructure Projects submitted by Member Economies


Institutional Connectivity

Customs and border agency (trade facilitation) The goal of encouraging each member economy to develop its own Single Window system

by 2020 APEC Customs 3M Strategic Framework that encourages member economies to cooperate

through mutual assistance, mutual recognition, and mutual sharing (abbreviated as 3M) The 2014 APEC MRT: the formulation of the Guidelines for APEC Customs Transit and

continuing work on the Time Release Study

Supply-chain connectivity APEC Pathfinder to Enhance Supply Chain Connectivity by Establishing a Baseline De

Minimis Value APEC's Strategies and Actions Toward a Cross-Border Paperless Trading Environment: to

enable the electronic transmission of trade-related information across the region by 2020 The 8th APEC Transportation Ministerial Meeting instructed the TPTWG to develop a

transportation Connectivity Map that will visualize APECs ideal of physical and institutional integration to be reached by the year 2020


Institutional Connectivity

Finance: The Asia Region Funds Passport provided the following common

objectives (among others):a) A more diverse range of investment opportunitiesb) Deepen the regions capital market to attract finance for growthc) Grow the pool of funds available for investment in the region

Structural Reforms Economic Committee also outlined the importance of establishing a

competitive market, by supporting and facilitating more open, well-functioning, transparent, and competitive markets.

Key Initiatives for Enhanced People-to-People Connectivity

Business Mobility APEC Business Travel Card: helps accredited business travelers move

across the region; 152,543 holders as of 2013 BMG is working on extending ABTC validity from 3 to 5 years and

improving end-to-end administration Need to reduce time to obtain ABTC and harmonize requirements

Cross-Border Education Cooperation Scholarship grants, bilateral student exchange programs, and education

cooperation, APEC Study Centers HRDWG: Education Cooperation Project (2013-2016); Higher Education

Diploma Supplement Need to promote developing economies as destinations for student

exchange. Also need a more coordinated approach to cultural exchange: partnerships with private sector could help

Key Initiatives for Enhanced People-to-People Connectivity

Tourism Facilitation Tourism outreach and promotion Visa facilitation and immigration/customs streamlining TWG: harmonization of visa/immigration policies, tourist-friendly airports,

Smart Traveller Program, air connectivity and open skies Need to do more on easing visa restrictions, exchange of security

information (e.g., trusted travellers), passengers bill of rights

Professional and Labor Mobility Bilateral MRAs, working visa facilitation, MOUs on protection for workers HRDWG: standards harmonization for TVET; qualifications benchmarking

for transport and logistics industry workers; Skills Mapping Project; TWG: MRAs for workers in tourism industry

Need to coordinate on APEC-wide MRAs, establish monitoring mechanism for labor imbalances, and expand ABTC to cover professional and technical workers

Clusters Action Plan Chokepoints

Building infrastructure& capacity

Infrastructure 2Inefficient or inadequate transport infrastructure; lack of cross border physical linkages (e.g. roads, bridges).

Logistics capacity

3 Lack of capacity of local / regional logistics sub-providers

Connectivity 6Underdeveloped multi-modal transport capabilities; inefficient air, land, and multimodal connectivity

Streamliningprocedures

Clearance 4Inefficient clearance of goods at the border; lack of coordination among border agencies, especially relating to clearance of regulated goods at the border

Documentation 5Burdensome procedures for customs documentation and other procedures (including for preferential trade).

Strengthening rules & institutions

Transparency 1Lack of transparency/ awareness of full scope of regulatory issues of affecting logistics; lack of awareness and coordination among government agencies on policies affecting logistics sector; absence of single contact point or champion agency on logistics matters.

Regulations & standards

7Variations in cross-border standards and regulations for movements of goods, services and business travelers.

Transit 8 Lack of regional cross-boarder customs-transit arrangements

Overall objective: 10% reduction of trading time, cost & uncertainty by 2015

Supply chain Connectivity

Framework Action Plan

Global demand for the funding of infrastructure investments: $57 trillion by 2030.

Long-term investors: hold around $85 trillion in assets under management

[Brookings Institute]

Financing Gap

Source: The Economist

Importance of Infrastructure

Copyright 2013 APEC Scretariat

Three aspects of (physical) infrastructure that are important for business and

trade:

1. Costs: efficiency of the existing infrastructures and services

2. Infrastructure quality services: speed and reliability of delivery.

3. Accessibility or extensiveness: wider coverage means wider access

Base case Downside Upside

Total need through

2030

$57 trillion $57 trillion $57 trillion

Government

spending

3% of GDP 2% of GDP 3.5% of GDP

Total gap $8.4 trillion $24.6 trillion Zero

Annual gap $500 billion $1.5 trillion Zero

Source: OECD; McKinsey & Co.; Global Insight in Standard and Poors.

Scenarios For Global Infrastructure Investment Needs Versus Public Sector Funding SourcesTo 2030

Importance of Infrastructure

Copyright 2013 APEC Scretariat

Indicator APEC OECD GapQuality of overall infrastructure 4.96 5.48 0.52

Quality of roads 4.86 5.17 0.31

Quality of railroad

infrastructure

4.2 4.48 0.28

Quality of port infrastructure 4.91 5.18 0.27

Quality of airport

infrastructure 5.20 5.41

0.52

Availability and quality oftransport infrastructure 4.62 4.69 (0.07)Availability and quality oftransport services 4.89 5.16 0.27

Assessing the Gap in the Infrastructure between the APEC

Region and the OECD

Indicator APEC OECD GapTechnological adoption, 1-7(best) 5.18 5.41

0.23

Availability of latest

technologies 5.44 5.910.47

Firm-level technology

absorption 5.23 5.460.23

FDI and technology transfer 4.88 4.86 -0.02

ICT use , 1-7 (best) 4.62 4.69 0.07

The Gap in the ICT between the APEC Region

and the OECD.

Source: WEF (World Economic Forum): Global Competitiveness Report 20132014 data

APEC Transport Infrastructure Quality

Source: World Bank 2014.

Infrastructure Expenditure Needs (%GDP)

Source: Yepes (2008) (quoted in Fay et al. 2011) in Inderst and Stewart 2014.

Infrastructure needs

Estimated Infrastructure Investments in Developing Countries

Source: Bhattacharya et al. (2012) in Inderst and Stewart 2014.

Impact to growth capacity

Source: Estache and Garsous (April 2012)

Intra-APEC trade accounts for around two-thirds (67%) of

APECs total merchandise trade (exports and imports)

Value added in APEC Exports

Source: World Bank 2014.

World Trade Network in Gross Value

Terms, 2009

Graphical Representation of the

World Trade Network in Value

Added Terms, 2009

VALUE CHAIN CONNECTEDNESS

Figure 8 Simple Average Connectedness Score for Total Value Added Trade, by Economy Group, 2009

Source: APEC PSU (2014c)

Global Connectedness: Pole of Growth

Source: DHL Global Connectedness Index 2014

Source: DHL Global Connectedness Index 2014

Important issues for global

connectivity

1. Trade costs2. Global value chains3. New normal for global trade?

Source: ESCAP-WB Trade Costs Database (from ESCAP website: http://www.unescap.org/tid/artnet/trade-costs.asp) and PSU calculation.

Trade Costs for Manufacturing Goods, APEC Economies,excluding tariff costs, percent ad valorem equivalent

Trade Costs

Trade Costs for Manufacturing Goods, selected Regional Groupings, excluding tariff costs, percent ad valorem equivalent, 2009

Note: APEC LA: consist of Chile, Mexico and Peru; APEC NLA: consist of the remaining APEC economies where data is available; ASEAN-4: consist of Indonesia, Malaysia, the Philippines and Thailand; EA-3: consist of China, Japan and Korea.Source: ESCAP-WB Trade Costs Database (from ESCAP website: http://www.unescap.org/tid/artnet/trade-costs.asp) and PSU calculation.

Trade Costs

Nominal Costs to Trade

0

200

400

600

800

1000

1200

APEC Import(LPI)

APEC Import(DB)

OECD Import(LPI)

OECD Import(DB)

APEC Export(LPI)

APEC Export(DB)

OECD Export(LPI)

OECD Export(DB)

Costs to Trade, APEC and OECD

2009 2013

Global Value Chains play a dominant role in global trade and business. The increase in global trade has been attributed to the increased activity of GVCs,

with multinational corporations (MNCs) contributing around 80% of global

exports (WEF 2013). Growth in GVCs also encourages FDI.

Global Value Chains

Table 1 Selected key performance indicators, foreign affiliates of TNCs, 2013

2013 Level Change over 2012

71 million of employees +5%

$35 trillion of sales +9%

$7 trillion of value added (~10% of global GDP) +6%

$97 trillion of managed assets +8%

$8 trillion of exports +3%

Source: World Investment Report 2014.

Twenty years ago, 60% of world trade was between developed countries (NorthNorth), 30% was between developed and developing countries (NorthSouth) and 10% was SouthSouth. By 2020, we are expecting it to be split equally three ways, so the relative weight of NorthNorth trade will have been halved in just 30 years or so.

Interestingly, almost 60% of trade in goods is now in intermediates, i.e. goods used as inputs in the production process.

[Pascal Lamy, Future of Trade, 18 December 2013]

Global Value Chains

Source: Oxford Economics, 2014 PwC APEC CEO Survey

Entering Value Chains

New normal for global trade?

Source: WTO World Trade

Report 2014.

Figure 1. Trade in global value chains has decelarated more rapidly than total trade

Source: Datastream, International Trade Commission (ITC), World Bank in Ferrantino and Taglioni 2014.


Figure 2. Motor vehicles and parts trade has led the decline in the current and previous slowdowns

Source: International Trade Commission (ITC), World Bank in Ferrantino and Taglioni 2014.


Source: OECD; Johansson and Olaberra (2014).


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connectivity and supply chain performance

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