Graham Smith The World Bank, Beijing Office.

1. Inter-Regional Trade and Transport Facilitation between Europe, Central Asia, South Asia and East Asia Graham Smith The World Bank, Beijing Office.

2. Outline • Previous studies in Central Asia (TTFCA) and South-east Europe (TTFSE) • Focus on land-locked Central Asia Region • Trade corridors linking Central Asia, Europe, East Asia, and South Asia • Trade related logistics costs • Transport infrastructure issues • Recommendations • Future studies

3. Main Findings of TTFCA (2003) • Foreign trade: 48 % of regional GDP • Movement of imports and exports characterized by two features • Significant transit traffic (i.e. due to being land-locked countries) • Freight carried predominantly by rail • Russia continues to be the major trading partner for both imports and exports, but China, Europe and Middle East is increasing

4. Main Findings of TTFCA (2003) .. • Existing transport networks and services are insufficient to serve the needs of a region that needs to integrate with the global economy • Road and rail networks run north-south with significant maintenance backlogs • Transport fleet is generally in poor condition • Significant trade barriers of neighboring countries with long and costly customs procedures and other border inspections

5. Main Findings of TTFSE (2003) • Program countries: • Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Macedonia, Moldova, Romania, Serbia & Montenegro • Objectives: • Reduce non-tariff costs to trade and transport • Reduce illicit trade and unofficial payments at border crossings • Project Focus: • Reform Customs procedures • Improve inter-agency cooperation at borders • Implement performance monitoring for Customs and trade flows

6. Main TTFSE Results • Significant reduction of waiting time at borders and inland pilot points (>50%) • Improved dialogue among Customs Agencies within the region • Implementation of transparent Customs performance monitoring system • A collaborative culture of partnership between the public and private sectors • Revenue collected by Customs doubled through risk management and selectivity approach • Significant increase in trade volumes

7. TTFSE Performance Monitoring (1999 – 2003): Customs Clearance time

8. Objectives of the Inter-Regional TTF Study • Review current trade and transport volumes between the three regions • Identify the key impediments to trade and transport facilitation • Outline a broad range of actions required to improve trade and transport links between the three regions • Recommend the "inter-regional" cooperation framework that would enhance trade and transport between the three regions

9. Trade Characteristics of Land-locked Central Asia Region • Exports and services contribute between 37% - 60% of GDP • Export trade is concentrated on a few primary products, e.g. Oil & gas, cotton, grain, coal, etc. • Imports are mainly consumer goods • There are several multilateral and bilateral trade agreements, but key international conventions are not respected (e.g. TIR consignments, etc.) • Most promising regional trade dialogue is through CAREC umbrella • Customs barriers to be removed by 2007

10. Regional Agreements involving Central Asian Countries

11. Trade by Volume and Mode to Main Trading Partners

12. Main Trade Corridors 1b. E Russia, East Asia 7. Western Europe 2a. NW China 1a) Russia, CIS 6b. SE & W Europe 2b. NW China 6a. SE & W Europe 3. fghanistan, Pakistan 5. Turkey, MENA 4. Iran, Bandar Abbas,

13. Transport Corridor Performance

14. Key Trends in Trade • Exports from Central Asia to Western Europe and to “the rest of the World” is rapidly increasing • Russia remains the largest single trade partner • Trade with China rapidly increasing especially consumer goods & oil • Rail dominates with 89% of export volume and 81% of import volume (excluding pipeline & air) • Road transport mainly comprises micro firms and SMEs who encounter protective policies from neighboring countries and unofficial rents.

15. Trade Logistics Costs • Exports from CAR in 2003 was valued at US$ 20.6 bn, with imports at US$14.9 bn • Direct transport related costs estimated at 11.5% of export value, 8.0% for imports; equivalent to direct costs of US$2.4bn for exports, and US$1.3 bn for imports • Estimated costs of other trade barriers for land-locked counties would add 7-10%, thus CAR spends US$5.8-6.7 bn on transport costs • High logistics costs and poor services limit SME participation, suppressing additional 10% of trade

16. Drivers of Logistics Costs • Time sensitive trade (e.g. perishable goods) are mostly transported by road • Freight by wagon-loads have fewer border crossing problems with lower costs from rail, but mainly used for bulk cargo • Imbalance in trade results in significant empty legs • Transport services for SMEs very expensive • Few inter-modal services (e.g. trailers on rail) • Air freight services not fully developed • Poor services from international freight forwarders

17. Transport Infrastructure Issues • Major ongoing projects involve rehabilitation of existing infrastructure • A few new links to avoid transit through neighboring countries • Need for improved institutional capacity and sustainable financing for infrastructure maintenance • Need to restructure railways to improve operational efficiency and focus on core business • Air transport needs to be restructured to separate airlines from air traffic control and airport services

18. Key Recommendations - Technical • Improve private sector provision of logistics services particularly for SMEs • Create logistics centers offering efficient groupage, clearing, forwarding, and multi-modal services • Improve border crossing facilities • Integrate domestic transport networks with international trade corridors • Monitor corridor performance through transparent measures • Modernize road haulage fleet & services

19. Key Recommendations – Policy Issues • Close cooperation within CAR and with the neighboring countries; Russia, China, Afghanistan, Iran, Ukraine • Observance of international agreements and regulations on TTF (e.g. WTO, TIR) • Non-discrimination of transit traffic from other countries • Improve customs clearance and border agency inspections • Reduce illicit trade and eliminate unofficial payments (especially for road transport)

20. Thank You“Xie-Xie” (in Chinese)CПECИБO