CONNECTING TO COMPETE The 2014 Logistics Performance Index Transport Business Summit 2014 Brussels Dr. Jean-François Arvis Senior Economist, The World Bank Prof. Lauri Ojala University of Turku, Finland March 27, 2014
Outline 1. Why care about logistics? 2. What is the Logistics Performance Index? 3. LPI 2014 Results 4. Key messages 5. The LPI’s role in the policy dialogue 6. How the World Bank supports countries in logistics pollicy-making 2 World Bank LPI, Transport Business Summit 2014, Brussels
Why care about logistics? 3 World Bank LPI, Transport Business Summit 2014, Brussels
Why Logistics Matters Country trade costs of goods value vs. LPI score Average trade costs of goods value 250% 230% 210% 190% 170% 150% 130% 110% 90% 70% 50% 2 2,5 3 3,5 4 4,5 LPI score (2010) Supply chain bottlenecks are the primary cause of friction in trade (trade costs). Reducing them by half would raise trade by 15% and production by 5% globally. 4 World Bank LPI, Transport Business Summit 2014, Brussels
Logistics Performance and Connectivity Exchange Rate Cost of Starting Business Domestic Logistics Performance Geography and Costs Air Connectivity (most of) shipping Shipping Connectivity connectivity are out of a country’s Tariffs control, but policy Same RTA Bilateral decisions are not. Common Language Costs Common Border Distance 0 0,1 0,2 0,3 0,4 0,5 0,6 Elasticity of trade costs Besides distance, connectivity and logistics performance matter more than other trade barriers in boosting trade. Source: World Bank, Trade Costs in the Developing World 2013. (RTA = Regional Trade Agreement) 5 World Bank LPI, Transport Business Summit 2014, Brussels
Logistics costs impact productivity Firm-level logistics expenditures as % of sales in 2011-2012 Transport cost Germany 5% 4% Other logistics costs Finland 5% 7% Estonia 7% 9% Kazakhstan 7% 13% 0% 5% 10% 15% 20% Reliability is often more important than freight costs Logistics costs increase with decreasing logistics performance. Most of this increase comes from lower reliability and the need to increase inventory (“other costs”). Sources: Authors, for Germany: TU Berlin, for Brazil: ILOS, for Finland: Turku School of Economics 6 World Bank LPI, Transport Business Summit 2014, Brussels
What is the Logistics Performance Index (LPI)? 7 World Bank LPI, Transport Business Summit 2014, Brussels
Supply Chain Framework & the six LPI dimensions Timeliness International shipments Customs Tracking and Tracing Infrastructure Unloaded Alongside Delivery on Dock Vessel to Dock Point of Origin Seller’s Factory Delivered to Buyer’s Frontier/ Warehouse Border Services Quality Exporting Country Importing Country 8 World Bank LPI, Transport Business Summit 2014, Brussels
LPI outline Partnerships Built on > 5,000 country assessments by over 1,000 freight forwarders & logistics professionals worldwide Survey in cooperation with partners Respondents rate logistics performance of own country and 8 other countries on a scale of 1 to 5 Coverage: 160 countries in LPI 2014 Published every 2 years LPI editions: 2007, 2010, 2012 & 2014 9 World Bank LPI, Transport Business Summit 2014, Brussels
What do we measure? Here’s a s ample question of the Domestic LPI: Source: LPI 2013/2014 Survey The LPI survey is based on expert assessments of logistics professionals (perception-based) 10 World Bank LPI, Transport Business Summit 2014, Brussels
LPI 2014 Results 11 World Bank LPI, Transport Business Summit 2014, Brussels
LPI data and report at: lpi.worldbank.org 12 World Bank LPI, Transport Business Summit 2014, Brussels
Good News: All countries performing better 2014 2012 2010 2007 90 Percentage of highest LPI score With the right 80 investment and policies , lower income 70 countries can also be Countries in 60 high performers. bottom quintile 50 saw the largest improvements 40 (2007-2014). 30 Bottom Fourth Third quintile Second Top quintile quintile quintile quintile LPI score as percentage of highest LPI score by LPI quintile; 2007, 2010, 2012 and 2014 13 World Bank LPI, Transport Business Summit 2014, Brussels
Income level helps little without aligned policies Countries by LPI 2014 overall score and GDP/capita 14 World Bank LPI, Transport Business Summit 2014, Brussels
LPI 2014: Top 10 European performers 0 5 10 15 20 1 Germany 4,1 2 Netherlands LPI rank LPI score 4,0 3 Belgium 4,0 4 United Kingdom 4,0 6 Sweden 4,0 8 Luxembourg 3,9 11 Ireland 3,9 13 France 3,8 17 Denmark 3,8 18 Spain 3,7 LPI 2014 rank out of 160 economies 15 World Bank LPI, Transport Business Summit 2014, Brussels
LPI is a survey scores are Confidence Intervals 4,5 EU 28 sorted by LPI 2014 score 4,3 4,1 3,9 3,7 3,5 3,3 3,1 Score 2014 2,9 2,7 2,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP LPI score range: 1 = lowest; 5 = highest 16 World Bank LPI, Transport Business Summit 2014, Brussels
LPI is a survey scores are Confidence Intervals 4,5 EU 28 sorted by LPI 2014 score 4,3 4,1 3,9 3,7 3,5 3,3 Score 2014 3,1 2,9 Score 2012 2,7 2,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP LPI score range: 1 = lowest; 5 = highest 17 World Bank LPI, Transport Business Summit 2014, Brussels
LPI is a survey scores are Confidence Intervals 4,5 EU 28 sorted by LPI 2014 score 4,3 4,1 3,9 3,7 3,5 3,3 Score 2014 3,1 Lower bound 2014 2,9 2,7 Upper bound 2014 2,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP LPI score range: 1 = lowest; 5 = highest 18 World Bank LPI, Transport Business Summit 2014, Brussels
LPI is a survey scores are Confidence Intervals 4,5 EU 28 sorted by LPI 2014 score 4,3 4,1 3,9 3,7 3,5 Score 2014 3,3 Score 2012 3,1 2,9 Lower bound 2014 2,7 Upper bound 2014 2,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP LPI score range: 1 = lowest; 5 = highest 19 World Bank LPI, Transport Business Summit 2014, Brussels
LPI is a survey scores are Confidence Intervals 4,5 EU 28 sorted by LPI 2014 score 4,3 4,1 3,9 3,7 3,5 Score 2014 3,3 Score 2012 3,1 Score 2007-2014 2,9 Lower bound 2014 2,7 Upper bound 2014 2,5 DEU NLD BEL GBR SWE LUX IRL FRA DNK ESP ITA AUT FIN PRT POL CZE HUN LVA SVN EST ROM SVK GRC LTU BGR MLT HRV CYP LPI score range: 1 = lowest; 5 = highest 20 World Bank LPI, Transport Business Summit 2014, Brussels
Aggregated data for 2007-2014 less volatile ROM SWE GBR DNK HUN BGR GRC DEU HRV NLD FRA AUT POL SVN SVK CYP MLT BEL LUX ESP PRT CZE LVA EST LTU FIN IRL ITA 0 EU 28 sorted by weighted* 10 LPI 2007-2014 rank 20 30 40 50 Rank 2014 out of 160 60 Rank 2012 out of 155 70 Weighted rank 2007-2014 out of 166 80 *) Weights: 2014 = 53.3%; 2012 = 26.7%; 2010 = 13.3%; 2007 = 6.7 % 21 World Bank LPI, Transport Business Summit 2014, Brussels
LPI 2014: Top 10 performers by income group Top 10 upper middle-income Top 10 overall By overall LPI score 2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2 2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2 Malaysia Germany China Netherlands Turkey Belgium Hungary United Kingdom Singapore South Africa Sweden Thailand Norway Romania Luxembourg Panama United States Bulgaria Japan Mexico Top 10 lower middle-income Top 10 low-income 2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2 2,4 2,6 2,8 3,0 3,2 3,4 3,6 3,8 4,0 4,2 Malawi Vietnam Kenya Indonesia Rwanda India Cambodia Philippines Burkina Faso Ukraine Liberia Egypt, Arab Rep. Ethiopia El Salvador Pakistan Nepal Burundi Nigeria Guatemala Bangladesh 22 World Bank LPI, Transport Business Summit 2014, Brussels
Key messages 23 World Bank LPI, Transport Business Summit 2014, Brussels
Key messages from the LPI 2014 • The gap between the best and worst logistics performers is slowly narrowing , confirming trends from LPI 2007-2012 reports. • Although a country's level of development plays an important role in its logistics performance, policies do matter . Over-performing countries such as Indonesia have carried out targeted reforms to improve the efficiency of their logistics. • In terms of trade facilitation, customs show a steady improvement across the board but other border control agencies lag behind . • Weakest link paradigm : The challenge is to get right a number of reforms in parallel and in several areas. This explains a lot of churning in scores and rank in the middle of the sample. 24 World Bank LPI, Transport Business Summit 2014, Brussels
The “Services Gap” Customs Infrastructure Quality of logistics and services 12 Supply chain efficiency depends on the quality of private services 10 moving the goods. If logistics service delivery is %-change 8 poor, even good physical in LPI connectivity is not enough. component as measured 6 against the highest performer, 4 2007-2014 2 0 Low income Lower middle Upper middle income income 25 World Bank LPI, Transport Business Summit 2014, Brussels
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