Regional Integration: The importance of Trade and Transport Facilitation

Tarik H. AlamiDirector, a.i.

Economic Development and Globalization DivisionUnited Nations Economic and Social Commission for Western Asia

(UN-ESCWA)

The 7th Arab MeetingWTO – Important Issues in the Arab Region

Beirut-Lebanon 26-28 April 2011

OUTLINE• Economic Situation and Prospects and challenges

in the Arab Region اإلقتصادية والتوقعات الحالة

• Investment and Business Environment in the Arab Region اإلستثمارية البيئة

• Time as a tax and trade barrier الوقت عامل تأثيرضرائب بمثابة وهو التجارة على

• The Importance of Trade and Transport Facilitation for Doing Business تسهيل أهمية

والنقل التجارة

• Some Doing Business Indicators

األعمال أنشطة لممارسة المهمة المؤشرات بعض

Economic Situation and Prospects in the Arab RegionREAL GDP GROWTH RATE AND CONSUMER INFLATION RATE, 2007-2011 (Annual % change)

Real GDP Growth rate Consumer inflation rateCountry/Area 2007 2008 2009a/ 2010b/ 2011c/ 2007 2008 2009 2010b/ 2011c/

Bahrain 8.4 6.3 3.1 4.0 2.5 3.3 3.5 2.8 2.0 205Kuwait 4.5 5.5 -4.6 4.4 3.6 5.5 10.6 4.0 4.0 5.5Oman 6.8 12.8 3.6 4.3 3.5 5.9 12.6 3.5 3.4 4.2Qatar 26.8 25.4 8.6 13.4 16.0 13.8 15.2 -4.7 -2.4 2.0Saudi Arabia 2.0 4.2 0.6 3.4 4.5 4.1 9.9 5.1 5.3 5.5United Arab Emirates 6.2 7.4 -1.9 2.7 3.2 11.1 12.3 1.6 0.9 2.0

GCC countries d/ 4.9 6.6 0.4 4.0 5.2 6.3 10.8 2.9 3.1 4.2Egypt e/ 7.2 4.7 5.1 3.0 5.0 9.5 17.1 11.8 11.3 11.5Iraq 1.5 9.5 4.2 4.0 5.5 30.8 2.7 -2.8 2.4 4.0Jordan 8.5 7.6 2.3 3.1 3.5 4.7 13.9 -0.7 5.0 5.4Lebanon 7.5 9.3 8.5 7.0 5.6 6.7 10.0 1.2 4.0 4.5OPT 5.4 5.9 6.8 4.2 4.5 1.9 9.9 2.8 2.8 3.5The Sudan 10.2 6.0 4.5 5.5 5.0 8.1 14.9 11.2 13.2 115The Syrian Arab Republic 5.7 4.3 5.9 5.5 4.5 4.5 15.2 2.8 4.4 4.7

Yemen 4.7 4.5 4.7 3.5 2.5 7.9 19.0 5.4 8.4 11.0More Diversified Economiesd/ 6.3 6.0 5.1 4.1 4.8 11.5 13.8 6.2 8.1 8.4

Total ESCWA region 5.4 6.4 2.0 4.5 5.1 8.2 11.9 3.9 4.5 5.4

Economic Situation and Prospects in the Arab RegionWORLD UNEMPLOYMENT RATES 2005-2009(Per cent)

2005 2006 2007 2008 2009a/

World 6.3 6.0 5.6 5.7 6.3

Developed economies and European Union 6.9 6.3 5.8 6.1 8.4

Central and Eastern Europe (non-EU) and Commonwealth of Independent States

9.4 9.0 8.6 8.6 10.4

East Asia 4.2 4.0 3.8 4.3 4.4

South-East Asia and the Pacific 6.5 6.1 5.4 5.3 5.2

South Asia 5.3 5.1 5.0 4.3 4.4

Latin America and the Caribbean 8.0 7.4 7.0 6.6 7.7

Middle East 11.2 10.7 10.5 10.2 10.3

North Africa 11.6 10.5 10.2 9.6 9.9

Sub-Saharan Africa 8.6 8.0 7.9 7.9 7.9

Sources: International Labour Office, Global Employment Trends January 2011, Table A2 Unemployment rate, world and regions. a/ Preliminary estimate by ILO

Acknowledged challengesالتحديات

1. Volatile Growth rates متقلبة نمو معدالت

2. Unemployment, poverty and increasing disparities

بالتفاوت الالمساواة معدالت في وتزايد فقر بطالة،المدخول في الكبير

3. Little economic diversification and weak industrial base القاعدة وضعف االقتصادي التنويع إلى اإلفتقار الصناعية

4. Limited regional integration

البينية والتجارة اإلقتصادي التكامل ومحدودية ضعف5. Weak Environment for attracting and doing

business لإلستثمار الجاذبة اإلقتصادية البيئة ضعف

2. Weak link between growth and unemployment

Source: national sources.

3. Little Diversification

Source: Compiled by ESCWA from different sources

Export Concentration (Herfindahl-Hirschmann) Index (1995 (blue) and 2007 (red))*

* Scale 0-1 with 1 representing total concentration. By comparison East Asia has been around 0.10-0.15 in both 1995 and 2007

GCC Oil and Gas Revenues as % of Total Revenues

3. Poverty large and heavily concentrated in rural areas.

1. Poverty is still large and heavily concentrated in rural areas.

2. Poverty rates in LDC are still double the average for the region

3. Insufficient progress to meet the hunger target,

4. Limited regional integrationIntra-regional Trade of Selected Trade Integrated Regions, In percentage

Source: ESCWA Annual Review of Developments in Globalization and Regional Integration in the Arab Countries, 2008 and 2009

5. Investment and Business Environment in the Arab RegionWorld Bank: Doing Business 2011, Trading across borders, Exports and Imports (PP. 30-31)

Economy ▲Documents

to export (number)

Time to export (days)

Cost to export (US$

per container)

Documents to import (number)

Time to import (days)

Cost to import (US$

per container)

East Asia & Pacific 6.4 22.7 889.8 6.9 24.1 934.7Eastern Europe & Central Asia 6.4 26.7 1,651.70 7.6 28.1 1,845.40Latin America & Caribbean 6.6 18 1,228.30 7.1 20.1 1,487.90Middle East & North Africa 6.4 20.4 1,048.90 7.5 24.2 1,229.30

OECD 4.4 10.9 1,058.70 4.9 11.4 1,106.30

South Asia 8.5 32.3 1,511.60 9 32.5 1,744.50Sub-Saharan Africa 7.7 32.3 1,961.50 8.7 38.2 2,491.80

5. Investment and Business Environment in the Arab Region World Bank: Doing Business 2010

Source: World Bank, Doing Business, 2010

Looking at the Index in more detailsPerformance of Arab Countries in Trading Across Borders (2010)

Ease of exporting in high income countries

Documents (number)

Time (days) Cost to export (US$ per

container)

Germany 4 7 872

Greece 5 20 1,153

Italy 4 20 1,231

Singapore 4 5 456

United Kingdom 4 9 1,030

United States 4 6 1,050

Who makes exporting easy - and who does not? Documents (number) المطلوبة الوقائق

Fewest Most United Arab Emirates 4 Egypt, Arab Rep. 6

Bahrain 5 West Bank and Gaza 6 Djibouti 5 Yemen, Rep. 6 Lebanon 5 Jordan 7 Qatar 5 Morocco 7 Saudi Arabia 5 Kuwait 8

Tunisia 4 Syrian Arab Republic 8 Algeria 8 Oman 9 Iraq 10

Time (days) المطلوب الوقتFastest Slowest

United Arab Emirates 8 Algeria 17 Tunisia 13 Jordan 17 Bahrain 14 Kuwait 17 Egypt, Arab Rep. 14 Oman 18

Morocco 14 Djibouti 19 Saudi Arabia 15 Qatar 21 Syrian Arab Republic 15 West Bank and Gaza 25

Lebanon 26 Yemen, Rep. 27 Iraq 102

Cost to export (US$ per container) التصدير كلفة Least Most Saudi Arabia 532 Oman 821 United Arab Emirates 593 West Bank and Gaza 835

Morocco 700 Djibouti 836 Jordan 730 Bahrain 955 Qatar 735 Lebanon 1,002

Egypt, Arab Rep. 737 Kuwait 1,060 Tunisia 773 Yemen, Rep. 1,129

Syrian Arab Republic 1,190 Algeria 1,248 Iraq 3,900

Much Facilitation work is yet to be done!Performance of Arab Countries in Trading Across Borders

(2010)

Ease of importing in high income countries Documents

(number) Time (days) Cost to export

(US$ per container)

Germany 5 7 937 Greece 6 25 1,265 Italy 4 18 1,231 Singapore 4 4 439 United Kingdom 4 8 1,160 United States 5 5 1,315

Source: World Bank, Doing Business, 2010

Who makes importing easy- and who does not? Documents (number) Fewest Most Djibouti 5 Algeria 9 Saudi Arabia 5 Oman 9 United Arab Emirates 5 Syrian Arab Republic 9 Bahrain 6 Yemen, Rep. 9 Egypt, Arab Rep. 6 Iraq 10 West Bank and Gaza 6 Kuwait 10 Jordan 7 Morocco 10 Lebanon 7 Qatar 7 Tunisia 7 Time (days) Fastest Slowest United Arab Emirates 9 Syrian Arab Republic 21 Bahrain 15 Tunisia 21 Egypt, Arab Rep. 15 Algeria 23 Morocco 17 Oman 23 Djibouti 18 Yemen, Rep. 25 Saudi Arabia 18 Lebanon 35 Jordan 19 West Bank and Gaza 40 Kuwait 19 Iraq 101 Qatar 20 Cost to export (US$ per container) Least Most United Arab Emirates 579 Morocco 1,000 Qatar 657 Lebanon 1,203 Saudi Arabia 678 Kuwait 1,217 Egypt, Arab Rep. 823 West Bank and Gaza 1,225 Tunisia 858 Jordan 1,290 Oman 860 Algeria 1,428 Djibouti 911 Yemen, Rep. 1,475 Bahrain 995 Syrian Arab Republic 1,625 Iraq 3,900

Time as a tax and trade barrier• Inefficient Procedural delays (e.g. time for customs

clearance and cargo handling) are equivalent to a trade tax.• Time delays narrow the profit margin and destroys capital –

on the exporting process and storage/transport • Reducing export times by 10 days is likely to have a bigger

impact on exports (expanding by about 10 %) than any feasible liberalization in Europe or North America (Trading on Time,

World Bank 2006, WPS3909) Simeon Djankov, Caroline Freund, Cong S. Pham. Trading on Time, http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/ Methodology/Supporting-Papers/DB-Methodology-Trading-On-Time.pdf.)

• Doubling of a country’s transport costs leads to a drop in its trade of 80% or even higher (Why Trade Costs matter, Asia-Pacific Research and Training Network on Trade , Working Paper Series, No 7. , April 2006).

Time as a tax and trade barrierGetting products from factory to ship

• According to World Bank Study 2006, WPS3909) and based on the number of days to move cargo from the factory gate to the ship in 126 countries, A day’s delay reduces relative exports competitiveness:– of time-insensitive goods by1% &– time-sensitive goods by 7 %.– or lengthen distance by 85 km

• Simeon Djankov, Caroline Freund, Cong S. Pham. Trading on Time : http://doingbusiness.org/~/media/FPDKM/Doing%20Business/Documents/ Methodology/Supporting-Papers/DB-Methodology-Trading-On-Time.pdf.)

Time as a tax and trade barrierGetting products from factory to ship

• The averages as areas– Developed countries 12½days– East Asia and the Pacific 24 days– Sub Saharan Africa 47½days– Central African Republics 18 to 116 days.– Middle East and North Africa 28.40

Same source, table 2

The Importance of Trade and Transport Facilitation for Doing Business

Impact of Transaction Costs and Time on Trade• Direct and indirect trade transaction: costs 1 -15 % of value of traded

goods (OECD) TAD/TC/WP(2008)13/FINAL , PP. 18

• The entire trade transaction: costs 7 to 10 % of the total value of world trade, where trade facilitation measures could reduce the costs by one-quarter (UNCTAD) Trade facilitation (Nitya Nanda) http://www.centad.org/relatedinfo15.asp, PP.13

• 10 % increase in the time delays in exports reduces their volume by about 8 %, 10 % saving of time in exporting increases exports by about 4 percent (Djankovet al., World Bank, 2006)

• Higher transport cost is bad. As pointed out by Limao and Venables (2001), doubling of transport costs can lead to a drop in country’s trade

by about 80 percent. ( Regional Integration and Trade Costs in South Asia1, Nilanjan Banik and John

Gilbert, 2006, PP 13).

Starting a Business Doing Business Indicators

الحصول أو العمل ممارسة بدء األعمال ممارسة مؤشرات بعضعمل ممارسة رخصة على

Procedures (number)المعامالت عدد

Time (days)المطلوب الوقت

Cost(% of income per capita)

نصيب من كنسبة الكلفةالقومي الدخل من الفرد

Algeria 14 24 12.1Bahrain 7 9 0.5Djibouti 11 37 195.1Egypt, Arab Rep. 6 7 16.1Iraq 11 77 75.9Jordan 8 13 49.5Kuwait 13 35 1Lebanon 5 9 78.2Morocco 6 12 16.1Oman 5 12 2.2Qatar 6 6 7.1Saudi Arabia 4 5 7.7Syrian Arab Republic 7 15 27.8Tunisia 10 11 5.7United Arab Emirates 8 15 6.2West Bank and Gaza 11 49 55Yemen, Rep. 6 12 83Germany 9 18 4.7Greece 15 19 20.2Singapore 3 3 0.7United Kingdom 6 13 0.7USA 6 6 0.7Source: World Bank, Doing Business 2010

Doing Business Indicatorsاألعمال ممارسة مؤشرات Dealing with Construction Permitsبعض

رخصة على الحصولإنشاءات

Procedures (number)معامالت عدد

Time (days)المطلوب الوقت

Cost(% of income per capita)

نصيب من كنسبة الكلفةالقومي الناتج في الفرد

Algeria 22 240 39.6Bahrain 13 43 54.6Djibouti 16 179 2,145.60Egypt, Arab Rep. 25 218 331.6Iraq 14 215 397.9Jordan 19 87 697.1Kuwait 25 104 124.1Lebanon 21 211 351.6Morocco 19 163 263.7Oman 15 186 100.8Qatar 19 76 0.6Saudi Arabia 17 94 32.8Syrian Arab Republic 26 128 540.3Tunisia 20 84 998.3United Arab Emirates 17 64 30.7West Bank and Gaza 21 199 1,110.6Yemen, Rep. 15 107 144.1Germany 12 100 60.2Greece 15 169 50.7Singapore 11 25 19.9United Kingdom 11 95 69.1USA 19 40 12.7Source: World Bank, Doing Business 2010

Doing Business IndicatorsRegistering Propertyعقارات تسجيل Procedures (number)

المعامالت عددTime (days)

المطلوب الوقتCost

(% of property value)نصيب من كنسبة الكلفة

القومي الدخل من الفردAlgeria 11 47 7.1Bahrain 2 31 0.9Djibouti 7 40 13.2Egypt, Arab Rep. 7 72 0.9Iraq 5 51 7.7Jordan 7 21 7.5Kuwait 8 55 0.5Lebanon 8 25 5.8Morocco 8 47 4.9Oman 2 16 3Qatar 10 16 0.3Saudi Arabia 2 2 0Syrian Arab Republic 4 19 28Tunisia 4 39 6.1United Arab Emirates 1 2 2West Bank and Gaza 7 47 0.7Yemen, Rep. 6 19 3.8Germany 5 40 5.2Greece 11 22 4Italy 8 27 4.6Singapore 3 5 2.8United Kingdom 2 8 4.1USA 4 12 0.5Source: World Bank, Doing Business 2010

Doing Business IndicatorsProtecting Investors

المستثمر حمايةEnforcing Contracts

باأليام الوقانون إنقاذStrength of investor protection index (0-

10)

من المستثمر حماية متانة مؤشر1-0

(األقل 10)

Time (days)

المطلوب الوقت

Algeria 5.3 630Bahrain 5.7 635Djibouti 2.3 1,225Egypt, Arab Rep. 5.3 1,010Iraq 4.3 520Jordan 4.3 689Kuwait 6.3 566Lebanon 5 721Morocco 3 615Oman 5 598Qatar 5 570Saudi Arabia 7 635Syrian Arab Republic 4.3 872Tunisia 5.3 565United Arab Emirates 4.3 537West Bank and Gaza 6 600Yemen, Rep. 4 520Germany 5 394Greece 3.3 819Singapore 9.3 150United Kingdom 8 399USA 8.3 300Source: World Bank, Doing Business 2010

Doing Business IndicatorsClosing a Business

Time (years) Cost (% of estate)Algeria 2.5 7Bahrain 2.5 10Djibouti 5 18Egypt, Arab Rep. 4.2 22Iraq no practice no practiceJordan 4.3 9Kuwait 4.2 1Lebanon 4 22Morocco 1.8 18Oman 4 4Qatar 2.8 22Saudi Arabia 1.5 22Syrian Arab Republic 4.1 9Tunisia 1.3 7United Arab Emirates 5.1 30West Bank and Gaza no practice no practiceYemen, Rep. 3 8Germany 1.2 8Greece 2 9Italy 1.8 22Singapore 0.8 1United Kingdom 1 6USA 1.5 7Source: World Bank, Doing Business 2010