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Trade and Logistics: Evolution
of a Product Line
Robin CarruthersTUDTR
May 2003
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Why logistics?
Increases demand by lowering prices faced by consumers
Raises profits of producers, encourages production,increases demand for labor demand and wages
Encourages price stability by reducing arbitrage of price
differentials caused by regional shortages Increases product variety available to consumers by
reducing the number of goods where transport isprohibitively expensive relative to the value shipped
Allows a move up the development chain toward moresophisticated differentiated goods, and higher valuecommodities.
Facilitates diversification of product mix and expands theset of markets producers can access
Increases competition in world markets
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Structure of Trade and Logistics review
A Regional and national trade patterns
B Scope for impact of logistics as tradestimulator
C Country diagnoses
D Agenda for logistics actions
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A East Asia trade patterns
For lower income countries, GDP per capitaincreases with more trade (but who really
benefits?) Little intra regional trade
Countries are moving up the value chain
Some countrys exports are still heavily
concentrated on a few high value products Export oriented trade is concentrated in port cities,
perhaps not best way to reduce poverty
Most exports are to USJapan and EU are distantsecond and third
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In East Asia, GDP increases with trade
in low-income countries
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Intra-regional trade is low but growing
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Countries are moving up the value
chain
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Commodity concentration
Country
Top 3
exports
Top 5
exports Products
China 13.8% 21.8% Telecoms equip. Computer Apparel
Thailand 20.9% 26.2% Office equip. Transistors Fish
Indonesia 23.6% 29.7% Gas Petroleum Veneer
Korea 27.3% 38.5% Transistors Cars Telecom
Malaysia 39.9% 50.0% Transistors Office equip. Computers
Vietnam 44.3% 60.3% Petroleum Textiles Seafood
Singapore 48.4% 60.8% Transistors Computers Petroleum
Philippines 59.9% 66.6% Transistors Computers Office equipment
Cambodia 78.3% 80.2% Garments Timber Rice
Mongolia 84.5% 93.4% Copper Wool Hides
PNG 64.6% 74.5% Gold Petroleum Copper
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B Scope for logistics impact
Not much to gain where logistics are
already advanced
Not much to gain if economy is still
relatively closed
Inaccessible inland areas stand to gain most
Improved information technology will
benefit all at relatively low cost
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Openness and Logistics
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Cost ratios as an indicator of maritime
efficiency CIF/FOB ratio more than 2.0
Vietnam
Laos
Cambodia CIF/FOB ratio between 1.4
and 2.0
PNG
China
Philippines
Low Wage Countries
CIF/FOB ratio less than 1.4
Malaysia
Singapore
Hong Kong
Thailand
Indonesia
Taiwan
High/Medium Wage Countries
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Smaller ports are growing much faster than
larger portsPort 1995 1996 1997 1998 1999 2000 2001 Grow th rate
Hong Kong 12,550 13,460 14,567 14,582 16,211 17,800 17,900 6.1%
Singapore 11,846 12,944 14,135 15,136 15,945 17,040 15,520 4.6%
Shanghai 1,196 1,305 2,527 3,066 4,206 5,613 6,310 31.9%
Port Klang 1,134 1,410 1,685 1,820 2,550 3,206 3,759 22.1%
Laem Chabang n.a. 729 1,036 1,425 1,756 2,195 2,424 27.1%
Qingdao 603 810 1,031 1,213 1,540 2,100 2,639 27.9%
Tianjin 702 822 935 1,018 1,302 1,708 2,010 19.2%Gunagzhou 515 558 687 848 1,179 1,430 1,628 21.1%
Taichung, Taiw an 447 695 842 880 1,107 1,130 1,069 15.6%
Total (East Asia) 54,433 57,836 65,119 68,155 75,155 83,422 94,267 9.6%
HK and Singapore % 45% 46% 44% 44% 43% 42% 35%
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Uneven use of information technology in
trade facilitation
Country Port
OperatorsMIS
Traders in
Port EDI
System
Customs
Agency
MIS
Traders in
Customs
EDIsystem
All parties
electronically
linked
Electronic
trade in
transportservices
Japan X X X X
Singapore X X X X X X
Korea X X X X X X
Thailand X X X X X X
Philippines X X X XIndonesia X X X X
Vietnam
Laos
Cambodia
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Land access costs remain high
Transport to the US West Coast of a container
from an inland province of China
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C Country Groups and Studies in East Asia
Group 1: Outward Oriented, highly Accessible(Singapore, HK, Korea, Taiwan)
Group 2A: Outward Oriented, more Accessible(Thailand, Philippines, Malaysia)
Group 2B: Outward Oriented, less Accessible
(Inland China, North-East Thailand)
Group 3: Less Open and Accessible (Vietnam,Cambodia)
Group 4: Land Locked and Pacific Island(Laos, Mongolia, Samoa, PNG..)
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Main conclusions of Country Studies
Non-transport logistics cost impose much highertrade penalty than transport costs
Regional trade is suppressed by poor logistics
more than by tariffs Domestic marketing arrangements impede
international trade
Cross border arrangements impose on all small
countries, not only land-locked Most trade-related industry is in port cities. Trade
related growth has not reached inland regions
Port related activities contribute significantly to
congestion and pollution
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Poor logistics influence prices and
marketing patterns In Laos price of rice varies +/- 25% due to poor
transport affecting market integration
In Mindanao, Philippines, farm gate prices varysignificantly, northern farmers receive better prices
due to good road access
Most Mongolian export cashmere is sold to Chinese
merchants as accessibility to China is better thanwithin Mongolia
In Vietnam, coffee production in otherwise productive
highlands is constrained by poor accessibility
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Logistics limit diversification of exports
Limited number of markets and shipment
scale
Reduced trans-pacific shipping costs have
stimulated East Asias trade to US, while poor
local logistics have inhibited growth of intra-
regional trade
Small export base increases vulnerability For three countries, more than 2/3 of export
value derives from three products
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Ports, regional growth and the urban
context
In larger Eat Asian countries, most FDI isconcentrated in port cities, so the benefits ofincreased trade are not spread throughout the
country Many East Asian ports are in downtown areas, and
they and their associated activities contributesignificantly to congestion and pollution. These
locations are often unsuitable for new generationsof container ships that need deeper draughts thatcan only be achieved with expensiveandenvironmentally risky dredging
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D Logistics strategy depends on stage
of economic development For already open and accessible economies,
increasing international trade competitivenessis logistics priority
For less open economies, improved logistics willfirst help make domestic trade morecompetitive and efficient
For these countries, opening of economy is ahigher priority for international trade growththan improving logistics
Open but inaccessible countries will benefit
most from improved logistics
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Logistics Development Agenda
Domestic Integration: A high priority in Groups 3 and 4
Improved infrastructurepriority for Groups 3 and 4 but
not sufficientbetter services are also important Logistics evolution - Advanced in Group 1 and someGroup 2, needs stimulating environment in other Groups
Regulatory EnvironmentTransport, Urban
Management, Standardization, Cross-border facilities Regional Cooperation between governments and
logistics suppliers will do more to stimulate trade thanreductions in trade tariffs
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Priority logistics actions Group 2A Outward Oriented Accessible
Improve urban access to ports and upgrade transport servicesRelocation non-maritime activities away from port, and consider relocation ofmaritime activities out of downtown areas
Restructure MoT to facilitate multimodal transport
Group 2B Outward Oriented, less Accessible
Promote inland ICDsImprove road, rail and waterway access to ports and upgrade logistics services
Group 3 Less Open and AccessibleImprove road, rail and waterway access to ports and upgrade transportservices
Legalize and deregulate freight forwarders
Group 4 Land Locked and Pacific IslandSimplify land border crossings, negotiate land access rights in neighboringcountries,
Upgrade express logistics services for high unit value goods (eg flowers, exoticplants, seafood, fashion textiles)
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Second Stage Studies
Use standard indicators to measure tradecompetitiveness and openness of economy
Assess trade potentialproducts and countries Use standard indicators and interviews withexporters and logistics operators to establish
potential sources of logistics improvement
Undertake country surveys for Facilitation Audit Discuss and develop logistics development agenda
with exporters and government
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