Agricultural Trade Facilitation : An Overview and Business Process Analysis (BPA) Findings in Myanmar

Khan Salehin Trade and Investment Division, ESCAP

Trade Training Institute, 2 July 2014

OUTLINE

Agriculture and Agro-food Trade in the Asia-Pacific Region

What is Trade Facilitation for Agro-products? – Facilitating trade in agro-food products: key issues

Findings from Business Process Analysis (BPA) studies in Myanmar

Agriculture in the Asia-Pacific Region

Agriculture accounts for a quarter of the gross domestic product (GDP) of Asia‐Pacific’s developing countries and employs about 60% of the region’s working population (ESCAP 2008).

Improving agricultural productivity could pull 218 million people out of poverty in this region (ESCAP 2008).

It can bring investment opportunities for the private sector, and be a driver for boosting agriculture related industries.

The World Bank estimates that GDP growth originating in agriculture is at least twice as effective in reducing poverty as GDP growth originating outside agriculture.

Agriculture in the Asia-Pacific Region

Source: FAO 2009

Source: FAO 2009

0

50

100

Nep

alLa

o PD

RM

yanm

arCa

mbo

dia

Bhut

anVi

et N

amAf

ghan

istan

Chin

aIn

dia

Bang

lade

shPa

kist

anSr

i Lan

kaTh

aila

ndIn

done

siaPh

ilipp

ines Ira

nM

ongo

liaKa

zakh

stan

Mal

aysia

New

Zea

land

Rep.

of K

orea

Aust

ralia

Japa

n

Perc

enta

ge 2

006

Agricultural Population as Share of Total Population in Selected Asia-Pacific Countries

0102030405060

Aust

ralia

Bang

lade

shCa

mbo

dia

Chin

aIn

dia

Indo

nesia

Japa

nKa

zakh

stan

Kore

a, R

epLa

o PD

RM

alay

siaM

ongo

liaM

yanm

arN

epal

New

Zea

land

Paki

stan

Phili

ppin

esSr

i Lan

kaTh

aila

ndVi

etna

mPerc

enta

ge 2

007

Contribution of Agriculture to GDP in Selected Asia-Pacific Countries

34%

4

Key Drivers of Agricultural Trade

Agricultural Trade

Growth

Change in Dietary

Practices

Population Growth

Increased Disposable

IncomeChange in

Commodity Prices

Other Factors (export policy,

capacity etc.)

Trade Facilitation

What is Trade Facilitation?– Any measure that reduce barriers to the movement of

goods between buyers and sellers throughout the international supply chains (ESCAP 2010)

– Simply any measure that facilitate and simplify movement of goods and information along the supply chains

- i.e. TF reduces time, cost and complexity of trade transactions

What is agricultural trade facilitation?- Trade facilitation of agricultural or food products - For example, facilitating development of product

standards; improving SPS certification procedures, improving storage facilities, reducing paperwork for agro trade or implementation of e-traceability

Comprehensive Trade Costs (excluding tariff) for Agricultural Goods with Japan (2000-2005, 2006-2011)

0

100

200

300

400

500

600

700

800

Rep.

of K

orea

Uni

ted S

tates

Thail

and

Viet

nam

Chin

a

New

Zea

land

Aus

tralia

Phili

ppin

es

Indo

nesia

Uni

ted K

ingd

om

Ger

man

y

Mala

ysia

Sri L

anka

Indi

a

Russ

ian F

eder

ation

Fran

ce

Turk

ey Fiji

Mald

ives

Iran

(Islam

ic Re

p. o

f)

Paki

stan

Nep

al

Bang

lades

h

Lao

PDR

Cam

bodi

a

Tarif

f-equ

ivale

nt tr

ade c

osts

(per

cent

) Agriculture (2000-2005)

Agriculture (2006-2011)

Manufacturing (2006-2011)

Source: ESCAP-World Bank Trade Cost Database, updated August 2013

Benefits of Trade Facilitation

GDP gains from 25% reduction in time to export/Import, GMS and China

Source: Strutt, Stone, and Minor (2008) simulations

9

Why Facilitating Agricultural Trade is Crucial?Long Term Impact of Agricultural Trade Facilitation :

- Poverty Reduction and Food Security- Improves overall environment for agro-trade (domestic too)

- Opportunity for integration of smallholders into agri supply chains - Upgrading of small farmers in terms of production practices or capacities

Trade Facilitation Measures Applied in Agricultural Supply

Chains/Sectors

Improved Trade Policies, Efficient Trade Processes

Reduced Transaction Cost, Improved Trading

Environment

Improved Trade Competitiveness

Greater integration of MSMEs including

ProducersGreater Income for Poor

Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No. 74

What is so unique about it?

Perishability – time and temperature sensitive

Food Product and Process Standards, Technical Regulation (SPS, private standards)

Logistics (warehousing) and infrastructure – special requirements

Financing is difficult

Cost of trading is higher than manufactured goods

Trade Facilitation for Agro food Products

There are significant constraints to Trade Facilitation in agriculture which eventually impact trade competitiveness.

These constraints can be divided into four main categories:

Trade Procedures

Product Standards

Trade Logistics

Trade Finance

Trade Facilitation for Agro-food Goods: Challenges

11

Trade Procedures: A Generic Agricultural Product Supply Chain Structure

Consumer

ExporterWholesalersProducer

Import Agent

Tran

spor

t

Regulatory Agencies

ImporterRetailers

Bank

Export Customs

Import Customs

Source: Sirimanne 2011

Building 2

Information,documents, procedures

Information, documents, procedures

Information, documents, procedures

Information, documents, procedures

12

Product Standards

Ensuring product standards for international trade ofagricultural products is a complex topic and Itencompasses:Institutions.Infrastructure.Logistics.Administrative Issues.

Standard

“A document established by consensus and approved by a

recognized body that provides for common and repeated use, rules, guidelines, or characteristics for

activities or their results, aimed at the achievements of the optimum

degree of order in a given context.” ISO (2004)

• Accreditation body• Mutual Recognition of conformity

assessment standards• National capacity development

13

Trade Logistics

Poor Trade Related Infrastructure and Transportation SystemInfrastructure

and Transportation

Border ProceduresServices

Agro-products Export From Export ToTransport & Handling Cost

(% of transaction cost)

Frozen Shrimp Bangladesh Japan 29

Cotton Yarn India Bangladesh 31

Hydrogenated Veg. Oil Nepal India 80

Tea Sri Lanka Japan 22

Transport and Handling Cost as percentage of transaction cost in South Asia

Source: Business Process Analysis Studies ESCAP 2010-11

Share of Transport Costs as percentage of transaction cost in Central Asia

Export Import

Kazakhstan 10% 8%

Kyrgyzstan 13% 10%

Tajikistan 14% 10%

Uzbekistan 12% 8%

Source: ADB 2006

14

Spoilage during Post-harvest Handling: Absence of warehousing facility,inappropriate goods vehicles or trucks, long distance from nearby railways orinland waterways stations and so on.

FAO (1994): Total loss of agro‐products during storage and transport could be as high as 16%.

World Bank in India shows that the lack of adequate storage and marketing infrastructure can be as high as 20‐40 % of the total production (ESCAP 2009).

IFC estimated the wastage caused by poor transportation and logistics system at $13 billion per year there (2010).

Thai fresh produce exports of fruits and vegetables, producers and exporters lose 2.92 billion baht (about $96.4 million) a year due to spoilage and poor storage.

Trade Logistics (contd.)

15

Reasons for not increasing lending in this sector

Trade Finance

’financing of imports and

exports’’

Risk of spoilage

Poor storage facilities Price volatility Weather

conditionsSeasonality of

productionVaried quality

of products

Inability of producers to meet the big

collateral guarantees

Stringent terms of trade

Lenders’ Lack of Understanding

Knowledge Gap of SMEs/producers

is

It is the most difficult bottleneck to overcome for agricultural trade

Trade Finance

16

Business Process Analysis (BPA) of Agro products in South and

Southeast Asia

Why conduct a Business Process Analysis?

18

Business Process Analysis is a practical study to understand attributes of business processes,

and their relationships

Who involved

Proceduresand Documents

required

Related Rulesand Regulations

Some quantitative

indicators

Business Process Analysis (BPA) Studies for Five Countries in South and Southeast Asia

Bangladesh Business (Trade) Process Analysis (BPA) for Export of Jute Bags to India and Import of Wheat from India

Cambodia BPA for Export of Maize and Cassava to China

Lao PDR BPA for Export of Maize to Thailand and Import of Animal Feed from Thailand

Myanmar BPA for Export of Mango and Rice to China, Import of Palm Oil from Malaysia

Nepal BPA for Export of Cardamom to India and Import of Rice from India

Available at: http://unnext.unescap.org/pub/bpa-cam.pdf

Use Case Diagram – Export of Rice from Myanmar

Time Procedure Chart – Export of Rice from Myanmar

25

Total Time23 days

20Total Time19 days

15

1.1 Conclude Sales Contract 2 days (1‐3 days)2.1 Make Advance Payment 3‐7 days3.1 Obtain Export License 1 day

10 3.2 Arrange Shipping (Maritime) 1 day3.3 Arrange pre-Inspection and Fumigation 1 day3.4 Declare CusDec 2 3‐5 hours3.5 Terminal Procedure and Customs Exam at Port 5 hours3.6 Arrange Berthing 7 days

5 3.7 Arrange Port Clearance for Vessel Departure 1 day3.8 Prepare Shipping Documents 2 days (2‐3 days)

Assumptions:

‐ Cash is paid immediately after the sales contract is concluded (buyer has the enough working capital to make the payment)‐ Exporter starts obtaining Export License immediately after the payment is made (not payment received)

2 days

1 day

1 day1 day 1 day

7 days

7 days

Tim

e in

day

s

2 days

Process

3.7 3.81.1 2.1 3.1 3.2 3.3 3.4 3.5

1 day 1 day

Time Chart for the Export of Rice to West Africa

3.6

1 day 1 day

1 day

1 day

3 days

1 day

1 day

2 days7 days

Use Case Diagram - Import of Palm Oil in Myanmar

Time Procedure Chart – Import of Palm Oil in Myanmar

Total Time

26 days25 With the Original Bill of Lading

Without the Original Bill of Lading 23 days

20

15

1.1 Conclude Sales Contract 1 day2.1 Prepare for Import Recommendation Application 2 days2.2 Obtain Import Recommendation 4 days

10 2.3 Obtain Import License 3 days2.4 Make Storage Contract 5 hours2.5 Opening Letter of Credit 10 days2.6 Declare CusDec 1 2 hours2.7 Obtain Delivery Order (with/without Original Bill of Lading) 2 hours / 4 days

5 2.8 Arrange Berthing 2 days2.9 Examine, Inspect, Test, Take Sample and Discharge Cargo 4 days2.10 Finalize CusDec 1 2 hours3.1 Payment concluded in step 2.5 through Letter of Credit (in step 2.5)

Assumptions: ‐ Storage Tank is available‐ No unexpected delays in document processing or shipment‐ The necessary documents for process 2.7 are obtained in process 2.6 after 6 days

3.1

Tim

e in

day

s

Time Chart for the Import of Palm Oil from Malaysia

4 days

Process

1.11 day

2 days

2.7 2.8 2.9 2.102.62.1 2.2 2.3 2.4 2.5

1 day

7 days1 day

2 days 4 days

1 day3 days

10 days

4 days 2 days

1 day 1 day

Activity Diagram – Obtaining Import Recommendation

Activity Diagram: Examine, Inspect……….(Import of Palm Oil)

Export country and product

Destination No. of days

No. of actors involved

No. of processes

Type of documents required

Cost ($)

Cambodia –Maize

China 20 15 13 22 1250-1360

Lao PDR -Maize

Thailand 16 11 8 21 735

Myanmar –Rice

West Africa 19-23 20 10 >25 425

Bangladesh-Jute bag

India 10 15 12 24 -

Nepal -Cardamom

India 15 11 9 14 1213

Source: ESCAP BPA Study Reports 2013-14, available at:http://unnext.unescap.org/tools/business_process.asp

Key Findings: Business Process Analysis Studies (South and Southeast Asia)

Obtaining Sanitary and Phyto-sanitary Certificate for export of agro-food products

Bangladesh Cambodia Lao PDR Myanmar Nepal Trading Partner and Export Products

India, Jute Bags

China, Maize

Thailand, Maize

West Africa, Rice

India, Cardamom

Number of Days Required

4 2-5 2 2 1

Documents Required

(i) Proforma invoice

(ii) packing list, iii) oil content

certificate, iv) Certificate of

Origin (COO)

(i) Phyto sanitary certificate application

(ii) Commercial invoice

(iii) Packing lists (iv) Release

container, (v) Fumigation

certificate

(i) Phytosanitary application form

(ii) Packing list, (iii) Export license (iv) Customs

certification (v) Business license

from Vientiane Capital Agriculture Department

(vi) Commercial contract among importer and exporter

(vii) Pro-forma invoice

(i) Shipping instructions

(ii) National Registration Card

(iii) Sealed case file from Customs head office -

? Export Declaration

? Export License

? Invoice ? Packing list

(i) Letter from Customs to Food Quarantine Office

(ii) Commercial Invoice

(iii) Packing List (iv) Customs

Declaration Form

(v) Sample

Stakeholders Involved

• Exporter (or representative)

• Department of Agricultural Extension (DAE)

• Clearing and Forwarding (C&F) Agent

• Exporter • Ministry of

Agriculture Forestry and Fisheries (General Directorate of Agriculture)

• Exporter or representative

• Vientiane Capital Agriculture Division -Agriculture Quarantine Section

• Exporter • Ministry of

agriculture

• Exporter • Clearing agent • Food Quarantine

Office • Customs Office

Direct Costs

USD 10 $730 or $58 (Fumigation 28 Fumigation/ CCIC 700 Inspection 30)

More than USD 300 USD 5

Recommendations – Simplifying Processes for Export of Rice

Process Recommendation Benefits /Reduction of

Docs(No)

Time (Days)

Costs (USD)

2.1) Make advance payment

‐ Introduce e‐banking to facilitate payment‐ Reduce administrative requirements in payment procedures e.g.•Eliminate unnecessary forms (application letter, export letter with bank seal)•Reduce process steps•Eliminate hard copies

2

3.1) Obtain Export License

‐ Eliminate export license altogether‐ Use private banks for collection of fee in addition to MCB(If eliminating the Export License is not a policy option, simplifying the procedure for amending the Export License needs to be considered. At present, amending the License as well as other documents is difficult and takes almost as long as applying for a new Export License despite all necessary documents have already been submitted when obtaining it)

<5 1 75

Recommendations – Simplifying Processes for Export of Rice (contd.)

Process Recommendation Benefits /Reduction of

Docs(No)

Time (Days)

Costs (USD)

3.4) Declare CusDec 2

‐ Introduce e‐banking to facilitate payment‐ Reduce internal process steps within the Customs department (this may require an internal restructuring)‐ Introduce IT in internal processing of exports to enable the simultaneous review/approval of an export document

3.5) Terminal procedure and Customs exam at port

‐ Introduce a port EDI system to provide seamless and instant communication between all actors involved in this process‐ Reduce administrative requirements in terminal and Customs procedure e.g.•Eliminate unnecessary forms by making them available in the EDI system (sealed case files, shipping instructions). For Export License see 3.1.•Reduce internal process steps within Customs department •Combine terminal Customs and port Customs into one unit (reduce organizational and administrative redundancy)•Apply risk management and reduce physical inspections of cargo. Where necessary, carry out joint inspections

Recommendations – Simplifying Processes for Import of Palm Oil

Process Recommendation Benefits /Reduction of

Docs(No)

Time (Days)

Costs (USD)

2.1) Prepare Import

Recommendation application

‐ Eliminate this process (see process 2.2) 4 2

2.2) Obtain Import Recommendation

‐ Eliminate this process as it is a pre‐test. Instead, the Government should publish quality, health, and other requirements for palm oil imports. These requirements should be tested once the actual palm oil shipment arrives in Yangon (see process 2.9). Ensuring that the oil meets all specifications set by the Government should be left to the private sector. However, this requires high levels of transparency on how the public sector tests the requirements, e.g. what tests, what methodology, etc. will be employed

If eliminating this process is not a policy option, the certification process should be decentralized. To date, it is still necessary to bring the documents to Nay Pyi Taw whereas most importers are in Yangon. Making the same services available in Yangon as in Nay Pyi Taw will save time and costs for travel and arranging logistics.

7 4 47

2.3) Obtain Import License

‐ Eliminate this processIf eliminating this process is not a policy option, the alteration of

the Import License process must be simplified (see process 2.5)

6 3 >135

Recommendations – Export (South and Southeast Asia)

Country Processes RecommendationsN

epal

–Ex

port

of

Card

amom

High transport cost due to road condition and syndicate system

•Enforce Competition Promotion and Market Protection Act effectively

Burden of levy of export fee by DDC (local authorities)

•Remove export fee in conformity with the policy of making export tax free

Customs related offices are scattered •Locate all Customs related offices within Customs premises

Customs do not accept electronic copies of documents except Customs Declaration Form

• Accept electronic copies of all documents by the Customs•Develop system of electronic submission of documents

Mya

nmar

–Ex

port

of

Rice

Make advance payment ‐ Introduce e‐banking to facilitate payment‐ Reduce administrative requirements in payment procedures e.g.• Eliminate unnecessary forms (application letter,

export letter with bank seal)• Reduce process steps• Eliminate hard copies

Arrange pre‐inspection •Eliminate this process step unless buyer requests a tested sample

Recommendations – Export (2) South and Southeast Asia

Country Processes RecommendationsCa

mbo

dia-

Expo

rtof

Mai

ze/C

assa

va

Apply for Phytosanitary Certificate Reduce activity 2.2 apply for PhytosanitaryCertificate from 5‐day to 3‐day.

Apply for Certificate of Origin (COO) Reduce activity 2.7 apply for Certificate of Origin from 2‐day to 1‐day.

All container goes through rigorous security check and scanning at the Port of entry.

Customs should use risks based assessment coupled with exporter and freight forwarder profile for selective scanning. Waive mandatory scanning for export.

Lao

PDR

–Ex

port

of

Mai

ze

Issuance of Certificate of origin (COO) can be processed after or simultaneously with the phytosanitaryand fumigation certification process.

The process of application and issuance of COO should be initiated simultaneously with the application for Phytosanitary and/or fumigation certification.

Submission of documents in processes. Automation of overall export system is very essential. It will reduce the time taken to travel from one place to another for submission of documents.

Bang

lade

sh-

Expo

rt o

f Ju

te B

ags Obtaining SAPTA certificate Submission of Export Registration Certificate

(ERC) should be removed.Obtaining Phytosanitary certificate Submission of Certificate of Origin (COO) should

be droppedObtaining both COO and SAPTA certificates

One of them should be dropped as both serves the same purpose (showing country of origin)

Recommendations – Import (1) South and Southeast Asia

Country Processes RecommendationsN

epal

–Im

port

of

Anim

al F

eed

Electronic copies of documents except Customs Declaration Form are not accepted by the Customs

Accept electronic copies of all documents by the CustomsDevelop electronic submission system of documents

Customs related offices are scattered In selected surveyed Customs points, related offices particularly Plant Quarantine Office and Food Quarantine Offices were found to be located outside of the Customs area. If these offices are located within Customs premises it can save time and document.

Lao

PDR

–Im

port

of A

nim

al F

eed

Inspection of the importer's site by VCFD, VCTD and other concerns

The accompanying by the Vientiane Capital Trade Division during the site visit should be dropped and the brief of importer/farm's site visit by VCLFD should be shared instead for acknowledgement; in this way, the site visit will be shorter and efficient

Inspection of all the consignments by Customs and Quarantine officers at the border checkpoint are conducted separately.

It can be organized at one time. The report of inspection can be simplified into one single set of reports that will consist of the following main finding: customs declaration, goods inspection, certification of products in terms of quarantine rule and technical procedures

Recommendations – Import (2) South and Southeast Asia

Country Processes RecommendationsBa

ngla

desh

-Im

port

of

Whe

atIssuance of QuarantineCertificate

Currently a copy of the IRC is required is obtaining a quarantine certificate. This is redundant information in issuing quarantine certificate and hence needs to be removed.

Opening Letter of Credit (L/C)

Currently hard copy of the L/C details and IRC are required in opening L/C. The process can be simplified if scanned copies of the details are accepted by the banks.

BPA Study Reports 2013-14, available at:http://unnext.unescap.org/tools/business_process.asp

Rice Export Policy: Enhancing trade facilitation, reducing informal fees and eliminating check points

Measure 1: “MEF/General Department of Customs and Excise (GDCE), MAFF and MoC/General Department of CAMCONTROL and relevant agencies shall: develop

a specific strategy to identify and streamline export processing procedures including inspection, documentation requirements, fees and time required to process export applications; define clear and publicly transparent division of

responsibilities among export regulating ministries/agencies; consider milled rice export as a top priority in order to reduce to a minimum informal payments and time required to export by extending “special treatment” similar to the garment

sector.”

TF Measures by Cambodia

Measure 2: Implement a single-stop service for export processing:

MEF/GDCE, MAFF and MoC/ CAMCONTROL and relevant agencies

shall set up a Single Stop Service for export processing and issuing

certificates for SPS, fumigation, grading and quality, quantity and weight,

and customs declaration.

Measures by Cambodia (Contd.)

Publication

“Facilitating Agricultural Trade in Asia and the

Pacific”-

Overview, TF issues, Good practices

Available at:

http://www.unescap.org/publications/detail.asp?id=1480

THANK YOU!

salehin@un.org

unnext.unescap.org www.satnetasia.org