Developing Countries Can Use Reform to Boost Exports
According to the IFC/ World Bank Trading on Time study: Each day of delay reduces a country’s export volumes by 1 percent
Washington D.C, 26 January 2006 —Delaying exports hurts the economies of developing countries, according to a new study from the World Bank and the International Finance Corporation (IFC) entitled Trading on Time. An export container requires 116 days to move from the factory or farm in Bangui (Central African Republic) to the nearest port and to fulfill all the customs, administrative, and port requirements to load the cargo onto a ship. Similar delays affect many other countries: it takes 71 days to do so from Ouagadougou (Burkina Faso), 87 days from N’djamena (Chad), and 93 from Almaty (Kazakhstan). In contrast, it takes only 20 days in China or Malaysia or Chile. Long delays also make it impossible to export perishable agricultural products such as meat, fruits, and vegetables, the study finds. Released today, the study determines how time delays affect international trade, comparing newly-collected data on the days it takes to move standard cargo from the factory gate to the ship in 126 countries.
The study introduces new trade research based on the data provided from the Doing Business in 2006: Creating Jobs report – an annual report cosponsored by the IFC and the World Bank. The new study concludes that each day of delays reduces a country’s export volumes by about 1 percent. For example, if Burkina Faso reduced its factory-to-ship time from 71 days to 27 days (the median for the sample), exports may increase by nearly 45 percent. Similarly, if the Central African Republic reduced its median factory-to-ship time from 116 days to 27 days, exports would nearly double.
Delays have a great impact on a developing country’s exports, especially perishable agricultural products. A day’s delay reduces exports of highly perishable agricultural goods, such as corn, apricots, and cucumbers, by 7 percent, as compared to agricultural goods with a longer storage life, such as potatoes or apples. This makes it unlikely that many countries, particularly in Africa, will be able to benefit significantly from existing duty-free access provisions or from future trade liberalization in OECD agricultural markets under a WTO agreement -- unless export procedures are simplified.
Most delays are due to administrative hurdles, ranging from numerous customs and tax procedures to clearances and cargo inspections. Such hurdles often occur well before the containers reach the port. The study concludes that infrastructure problems are especially large for landlocked African countries, where poor transport infrastructure can lead to excessive delays and where exporters need to comply with different requirements at each border. Harmonizing transport and customs procedures is the main way to increase efficiency. Such reforms are successfully taking place in southern Africa, and momentum is building in West Africa.
Trading on Time highlights the need to focus aid for trade in developing countries on improving trade facilitation; removing obstacles to exporting will broaden market opportunities for the private sector. The study also illustrates the potential gains from addressing the trade facilitation agenda in trade agreements, including through the WTO.
- Contact Information
- Nadine Ghannam
- International Finance Corporation (IFC)
- Contact via E-mail
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