• Save
Bain Enabling Trade - WEF 2013
Upcoming SlideShare
Loading in...5
×
 

Bain Enabling Trade - WEF 2013

on

  • 765 views

 

Statistics

Views

Total Views
765
Views on SlideShare
765
Embed Views
0

Actions

Likes
0
Downloads
0
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Bain Enabling Trade - WEF 2013 Bain Enabling Trade - WEF 2013 Presentation Transcript

    • In collaboration with Bain & Company and the World BankSee full report for more details:www3.weforum.org/docs/WEF_SCT_EnablingTrade_Report_2013.pdf
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Executive summary (1/2) – Main lessonsReport examines supply chain barriers to trade and combines a macroeconomicanalysis with 18 in-depth company case studies. It summarizes insightful lessons forgovernments and companies.A. Reducing supply chain barriers to trade could increase GDP up to six times morethan removing tariffs. They have been under-managed by both countries andcompanies-Reducing supply chain barriers to trade could increase GDP by nearly 5% and trade by 15%-Reducing barriers benefits households by lowering prices and improving employment prospectsB. Trade increase from supply chain barriers reduction can be achieved only ifspecific tipping points are reached-The effects of reducing barriers are not gradual; changes occur when tipping points are reached-A barrier’s consequences vary by industry-Barriers are harder to overcome for smaller businesses-Clear regulations and better coordination among agencies are neededC. Recommendations to countries and companies — the devil is in the details-Governments need to remove relevant sets of barriers for their industries. They should be aware thatcertain companies have a vested interest in preserving barriers-Companies may not recognize costs where they should
    • Executive summary (2/2) –Policy implication: Think supply chain!• Create a domestic agenda to improve national supply chain performance- Create a national mechanism to set policy priorities for improving supply chain efficiencybased on objective performance data and feedback loops between government andfirms- Create a focal point within government with a mandate to coordinate and oversee allregulation that directly affects supply chain efficiency- Ensure that SME interests are represented in the policy prioritization process and thatsolutions are designed to address specific constraints that disproportionately impactsmall and medium-sized enterprises (SMEs)• Options for international cooperation- Pursue a whole-of-the-supply-chain approach to negotiating barrier removal, whetherthrough multilateral or regional agreements- Launch a global effort to pursue conversion of manual and paper-based documentationto electronic systems, using globally agreed data formats
    • Report is built on 18 case examplesfrom 21 companies# Case exampleNorthAmericaLatinAmericaEurope NorthAfricaSub-SaharanAfricaMiddleEastAsia-Pacific1 Agriculture Co. Brazil2 Apparel Co.3 Chemical Co. Brazil4 Computer Co. Russia5 CPG Co.6 eBay7 Express Delivery Co.8 Global Co.9 Handset Distribution Brazil*10 Healthcare Co. China11 IATA12 Mexican Chemical Co.13 PC Co.14 Pharmaceuticals China**15 Rubber Products16Semiconductor Co. Brazil RussiaChina +India17 Shipping Co. China18 Tech Co. IndiaMarketAccessBorderAdmin.Infra-structureBus.Envi-ronmentBrazil, Russia, India and China (BRIC countries) are only covered in cases where pointed out.* Case covers Brazil and other Latin America; ** Case covers China and other Asia-Pacific.Note: Company names have been disguised to avoid sensitivities.Geographic coverage Barrier coverageCoveredGlobal caseDetailed case examples can be found in the report.
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Enabling Trade Programme• The World Economic Forum’s Enabling TradeProgramme delves into the fundamental attributesthat govern a nations ability to benefit fromtrade.• By bringing together the key actors, the programmehelps policy-makers appreciate private sectorpriorities for action.• The Enabling Trade Programme (2012) aims tofoster a supply chain approach to tradenegotiations by quantifying the impact of supplychain barriers• The work is informed by the Global EnablingTrade Report7
    • A reduction in tariffs has led to increasedtrade, but negotiations have stalledInternational trade volumes have grown withreduced tariffs But negotiations have stalledSource: Tariffs adapted from Coatsworth and Williamson (2002) and Mitchel (1992) referenced in Nenci (2009); World Bank World Trade from World Trade Organization Report 2012;Headlines from Reuters, The Sunday Telegraph, The Australian, and Dow Jones 80246810051015$20T1980198219841986198819901992199419961998200020022004200620082010World Trade($T)Average of World Tariffs(%)World TradeAverage World Tariffs
    • This report takes a holistic view andidentifies four types of supply chain barriersMarket accessBorderadministrationTelecom andtransportinfrastructureBusinessenvironment• Domestic andforeign marketaccess- Quotas- Import fees – not tariffs (e.g.tax schemes)- Local content requirements- Rules of origin- Technical, sanitary &phytosanitary measures orother requirements- Import/export licenses• Efficiency ofcustomsadministration• Efficiency ofimport-exportprocedures (e.g.coordination between borderagencies; admin. burden ofcomplying with standards)• Transparency ofborderadministration(e.g. facilitation payments)• Availability &quality of transportinfrastructure• Availability &quality of transportservices• Availability and useof information andcommunicationstechnologies (ICTs)(e.g. tracking, electronic tolls,communication)• Regulatoryenvironment- Regulatory environment –investment policy- Regulatory environment –hiring foreign workers- Other regulatoryenvironment (incl. tradefinance)• Physical securityDefinition: The lack of infrastructure, institutions, policies, and services facilitating thefree flow of goods over bordersNote: The Global Enabling Trade Report identifies nine pillars; this is an extended list including several sub-pillars as tested in a separate survey for this study 91 23456789
    • The barriers have varying consequences interms of costs, delays, volume and riskConsequence Costs Delay Volume RiskBarrierIncreasedoperationalcostsIncreasedinvestment/working capitalIncreasedaverage delayIncreasedvariable delay(unpredictability)DecreasedvolumeIncreased(political) risk(unpredictability)Domestic and foreignmarket accessEfficiency of customsadministrationEfficiency of import-export proceduresTransparency of borderadministrationAvailability and qualityof transportinfrastructureAvailability and qualityof transport servicesAvailability and use ofICTsRegulatory environmentPhysical security• Customer satisfaction/opportunity costs/lawsuits• Increased FX risk• Increased theft/breakage• Increased buffer stock• Increased stock in transit• High depreciation/scraprate• Either incur risk orinsurance (i.e. hedging orspreading risk)• Require higher return oninvestment (lowers volume)PotentialimplicationsIllustrative
    • Companies combine US$ 800 billion in revenue &represent many industries and geographiesIndustry(# of companies)CountrycoverageNorthAmericaLatinAmericaWestEuropeEastEuropeNorthAfricaSub-SaharanAfricaMiddleEastAsia-PacificBRICAgriculture (1) ~40Healthcare (3) ~40Pharmaceuticals(2)~100Chemicals (2) >20Technology (5) >65Apparel (1) >15Consumer goods(2)~100Internetmarketplace (1)>45Express delivery(2)GlobalShipping (1) GlobalAir transport (1) GlobalNote: Brazil, Russia, India and China are excluded from their respective geographic groups, and grouped within BRIC.Healthcare excludes pharmaceuticals; Asia-Pacific includes Australia.Focus ofcase studyCompanypresence
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Reducing supply chain barriers could increaseGDP up to 6x more than tariff removal• Reducing supply chain barriers to trade could increase GDP by nearly 5% and tradeby 15%- By reducing just border administration and telecom and transport infrastructure barriers halfway to theworld’s best practice (i.e. Singapore), global GDP could increase US$ 2.6 trillion (4.7%) and exportsUS$ 1.6 trillion (14.5%)- In comparison, tariff removal would only increase global GDP by US$ 0.4 trillion (0.7%) and exportsby US$ 1.1 trillion (10.1%); the gains would also be more specific to countries and industries- Reducing barriers is more effective as it eliminates resource waste, whereas abolishing tariffs mainlyreallocates resources; however, removing certain supply chain barriers would require moreinvestments• Reducing barriers benefits households by lowering prices and improvingemployment prospects- Reducing supply chain barriers lowers costs and hence lowers prices for both consumers and firmsimporting production inputs- Consumers would get access to a wider variety of goods- The boost in GDP is likely to stimulate employment growth; in the long run, removing the barriers islikely to lead to increased productivity and wages
    • Reducing supply chain barriers has alarger effect than removing tariffs*Based on export value; includes only the effect of “Border Administration” and “Telecommunication and Transport Infrastructure”.Source: Ferrantino, Geiger and Tsigas, The Benefits of Trade Facilitation - A Modelling Exercise. Based on 2007 baseline.Countries improve trade facilitationhalfway to global best practiceCountries improve trade facilitationhalfway to regional best practiceAll tariffs removed globallyThe GDP effect of reducing supply chain barriers is much higherthan for tariffs
    • The quantification only reflects borderadministration and infrastructure barriers15Note: Survey question – “In the last year, which pillars within the four main issue areas had the highest impact?” Includes retail & manufacturing industries only, N=65Source: World Economic Forum survey.Only ~60% of supply chain barrierscovered by modelSurvey indicates impact could be 60-70% larger
    • Reducing supply chain barriers spreadsGDP gains more widely than removing tariffsTotal 0.7% 2.6% 4.7%Oceania 0.1 1.7 4.3China, Hong Kong SAR, Taiwan 3.9 3.7 7.6Japan 0.2 1.1 2Korea 1 3 4.9South and Central Asia 1.5 4.5 9.3South-East Asia 0.5 1.8 8United States and Canada 0.1 1.5 2.8Mexico 0.2 2.6 4.4Brazil 0.2 1.5 3.6Rest of Americas 0.2 3.5 7.5Europe, except former Soviet Union 0.2 3.3 4.5Russia and other former Soviet Union 7.2 3.5 7.4Non-oil Middle East and North Africa 0.4 3.6 8.5Sub-Saharan Africa 0.6 4.4 12Other oil producers 0.2 3.6 6.8TariffremovalModestscenarioAmbitiousscenarioSource: Ferrantino, Geiger and Tsigas: The Benefits of Trade Facilitation- A Modeling Exercise, based on 2007 base line.
    • Ambitious scenario: The strongest increasewould be seen in Africa and South-East Asia4-5% 6-8% ≥9% Exports2-3% ImportsGDP increase TRADE increaseOceaniaSouth-East AsiaSouth and CentralAsiaMexicoBrazilRest of AmericasEurope, except FSU*Russia and otherFSU*Non-oil Middle Eastand North AfricaSub-Saharan AfricaUnited States andCanadaKoreaChina, Hong KongSAR, TaiwanJapan11% 7%11%26%38% 39%30%74%2% 6%46%34%63%55%26%10%65%49%71%33%12% 18%9% 9%11%3%31% 34%1% 2%Other oil producers*Former Soviet UnionSource: Ferrantino, Geiger and Tsigas: The Benefits of Trade Facilitation- A Modeling Exercise, based on 2007 base line; Ambitious Scenario.
    • Increase in global income could alsostimulate employmentSource: Council of Economic Advisors to US President (2009); Ball et al., 2012; Crivelli et al., 2012.Lower range of 171country studyHigher range of 171country studyCouncil of Economic Advisorsto US PresidentStudy based on USdata beginning in 1948Modestscenario(2.6% GDPincrease)Aggressivescenario(4.7% GDPincrease)
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Trade increases can be achieved only ifspecific tipping points are reached (1/2)• The effects of reducing barriers are not gradual; changes occur whentipping points are reached- Even though the macroeconomic model assumes continual functions, companydecisions are usually binary – they either chose to produce/sell in a specific market ordon’t- Incremental reductions in trade barriers may not have an impact until a certain set ofbarriers is removed- Once a tipping point is reached, the impact on trade and foreign direct investment can besignificant• A barrier’s consequences vary by industry- The effect of supply chain barriers differs by industry depending on its productcharacteristics: time sensitivity, exposure to regulation, value-to-bulk and supply chaincomplexity- Companies commonly respond to delays and unreliability by holding additional inventory,which affects industries differently
    • Trade increases can be achieved only ifspecific tipping points are reached (2/2)• Barriers are harder to overcome for smaller businesses- Overcoming supply chain barriers often requires significant upfront investments, whichrepresent fixed costs and might be prohibitive for SMEs- SMEs are often unable to realize economies of scale associated with internationalshipping- SMEs will have trouble voicing their concerns• Clear regulations and better coordination among agencies are needed- Lack of uniform customs rules makes it more costly for companies to operate in multipleforeign markets and requires significant investment- Coordination can be lacking within countries, especially when an industry falls under thejurisdiction of multiple government agencies
    • What if tariffs are removed?Costs related tobarriersSource: Euromonitor 2011 data for labour costs; Bain analysis; company interview.Effect of barrier reduction occurs at tippingpoints for specific industries and countriesNo tariffs forAfrica & EUExcessive broker’sfee and difficulttransport to port add4% to free on board(FOB) costBut barriers add costs that can tip the balance tothe next low-cost countryMadagascar’s labour costs and lack of tariffgive it a competitive advantage
    • Every industry will have its ownsensitivitiesInsurance rates demonstrate the sensitivity of certainproducts to customs delaysSource: Insurances rates for air transport as provided by IATA.
    • The effect of supply chain barriersdepends on product characteristicsProduct characteristic Examples specific impact of barriersValue to bulkExposure toregulationTime sensitivity• PC Co. imports computer hardware into Saudi Arabia.Because of valuable cargo, delays at the border canlead to theft• Chemical Co.’s imports fall under the jurisdiction ofmultiple US government agencies; lack of coordinationcan lead to seizure of unclaimed cargo• Pharma Co. exports medications that must be kept atcontrolled temperatures; administrative delays atcustoms can cause product to become unusableSupply chaincomplexity• A highly sophisticated supply chain magnifies barriers:primary inputs face barriers and are then used insecondary or tertiary inputs which face barriers again
    • 11%-15%Note: Assumes same average revenue per listing in domestic and international markets; author calculations based on US eBay pilot studies preliminary results.Source: Company data; interviews; based on preliminary, targeted US pilot results; authors’ calculations.InternationalAll DomesticTotalInternational salesDomestic salesAnd company size matters ̶ SMEs faceproportionally higher barrierseBay pilots suggest significant upside from reducing barriers
    • Lack of standardized regulations andcoordination between agencies creates barriersPoor coordination between agencies delaysshipmentsRules of origin and local content requirementsvary across markets020406080100%100 100 100 100DEA BISChem Co. US import delay byproductMainagencycausingdelaysApply tocertificationbody oraccredited labInspectionIssuecertificationProductionShippingSaudi ArabiaProductionApply to localinspection andquarantine centresPre-shipmentinspectionIssue certificationShippingSource: Egypt General Organization for Export and Import Control (GOEIC ); Saudi Arabia Standard Organization.Egypt requires production before thecertification can be startedCertification processEgypt
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Recommendation to countries andcompanies – the devil is in the details• Governments need to remove the sets of barriers relevant to their industries- Governments must understand their existing industries and potential future industries in order toprioritize barriers most costly to such industries- Governments can then develop tailored strategies to reach the tipping points that will unlock trade andinvestment in such industries- Singapore’s strategic initiatives have made it one of the most open economies in the world• Governments should recognize that some companies have a vested interest inpreserving barriers- Examples of these companies:Local firms may seek protection from import competitionSome companies’ added value resides in addressing barriersCompanies that have already made significant investments to address barriersFirms that perceive status quo as inevitable- Governments should realize some relevant stakeholders do not exist yet or have no voice• Companies may not recognize costs where they should- Companies must account for costs beyond traditional factor costs (e.g. greater inventory, increasedrisk of theft)- Costs associated with supply chain barriers may offset more obvious savings, such as lower labourcosts
    • The consequences of barriers differ andcan be more relevant to a specific industryNote: Includes manufacturing, retail and logistics, N=108Source: World Economic Forum survey.
    • Singapore’s targeted approach allowed itto reach #1 on the Enabling Trade Index2008#22010#12012#1Source: World Economic Forum Global Enabling Trade Report 2008, 2010, 2012.World Economic Forum’s Global EnablingTrade Index (ETI): SingaporePhases in Singapore’s growth that shaped itsdevelopmentPre-1965Import substitution policy1965-70sExport oriented strategy1970s-80sCapital intensive,higher tech industries1980s-2000sRegionalization2000s+Hub of knowledge drivenindustries and servicesIndependencein1965fromMalaysia
    • Companies should recognize costs –producing in Mexico has hidden costsInitial view suggestsMexico is 25% cheaperBorder administration,inadequate infrastructure,reduced availability oflocal suppliers, securityand lower productivitylabour increase the cost16%Net benefitof 9%Note: Hypothetical example based on Bain experience.
    • Consequence Costs Delay Volume RiskBarrierIncreasedoperationalcostsIncreasedinvestment/workingcapitalIncreasedaveragedelayIncreasedvariabledelay(unpredict-ability)DecreasedvolumeIncreased(political)risk(unpredict-ability)Domestic andforeign marketaccessEfficiency ofcustomsadministrationEfficiency ofimport-exportproceduresTransparency ofborderadministrationAvailability andquality of transportinfrastructureAvailability andquality of transportservicesAvailability anduse of ICTsRegulatoryenvironmentPhysical securityCompanies should take a comprehensiveapproach to supply chain decisionsFactor costsBarrier costsComparealternativesStrategicimplications
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Policy implication: Think supply chain!• A domestic agenda to improve national supply chain performance- Create a national mechanism to set policy priorities for improving supply chain efficiencybased on objective performance data and feedback loops between government andfirms- Create a focal point within government with a mandate to coordinate and oversee allregulation that directly affects supply chain efficiency- Ensure that SME interests are represented in the policy prioritization process and thatsolutions are designed to address specific constraints that disproportionately impactSMEs• Options for international cooperation- Whether through multilateral or regional agreements, governments should agree topursue a whole-of-the-supply-chain approach to negotiating barrier removal- Launch a global effort to pursue conversion of manual and paper-based documentationto electronic systems, using globally agreed data formats
    • Policy implication: Think supply chain!Policyrecommen-dationsInternationalcooperationCreate a single agency thathas a mandate to coordinateand oversee all regulation thatdirectly impacts supply chainefficiencyLaunch a global effort topursue conversion ofmanual and paper-baseddocumentation toelectronic systems, usingglobally agreed data formatsEnsure that SMEinterests are represented inthe policy prioritization processand solutions are designed toaddress specific constraintsthat disproportionately impactSMEsWhether through multilateral or regionalagreements, governments should agree to pursue a “whole-of-the-supply-chain” approach rather than pursuing negotiationsin different pillars or silos2233445511 Create a national mechanismto set policy priorities forimproving supply chainefficiency based on objectiveperformance data and feedbackloops between government andfirms
    • Agenda• Executive summary- Main lessons and policy implication- Case index• Report- Background- Main lessonsReducing supply chain barriers to trade could increase GDP up to 6xmore than removing tariffsTrade increases from reducing supply chain barriers can be achievedonly if specific tipping points are reachedRecommendation to countries and companies – the devil is in thedetails- Policy implication: Think supply chain!• Case example summaries
    • Cases Summary (1/4)(download report for detailed case studies)# Name Description Summary1AgricultureCo.Agriculturecommodities inBrazil Internal transport and communications infrastructure in Brazil, coupled with customs proceduresbarriers, affect agriculture commodity supply chains that start in remote locations Lack of infrastructure creates delays and demurrage costs of ~US$ 25,000 per vessel per day Lack of information and communication technology reduces operating efficiencies of truck fleet by4% Managing customs paperwork takes some 12 times longer in Brazil than in the European Union (fullday vs a couple of hours)2 Apparel Co.Apparelmanufacturer inMadagascar Supply chain barriers in Madagascar – shipping services and border administration – threaten toerode the country’s labour cost-competitive advantage Supply chain barriers account for about 4% of total revenues through higher freight costs, increasedinventories and customs charges Country faces high opportunity cost – for every 1% gain in fast fashion segment, some US$ 54million is generated for the economy3 Chemical Co.Importingchemicals intoUS and Brazil Chemical industry faces high market access restrictions through licenses, import procedures andlack of government agency coordination Delays in chemical products are sensitive because of storage problems, demurrage charges, andpotential confiscation of products Obtaining licenses and lack of coordination of five agencies in the US leads to delays in up to 30%of shipments – each late shipment costs US$ 60,000 per day Inefficiencies and uncertainty in Brazil force company to choose secondary importing procedures –they pay US$ 40,000 fee per shipment vs US$ 1,500 with the primary procedures4ComputerCo.Computermarket accessin Russia Product testing and licensing lead to large administrative costs and delay time-to-market anywherefrom 10 days to eight weeks depending on specific product type Price uplifts – the arbitrary price-setting of shipment imposed by customs on imports – cause highervalue-added tax (VAT) that increases costs in some instances up to 30% of invoice price5CPG Co.(consumerpackagedgoods)Risk andbusinessenvironment inAfrica Political and social instability, economic mismanagement, corruption and security increase companycosts and financing ability in Africa; they drive company investment decisions Poor quality of infrastructure in roads, ports and services creates inefficiencies that translate intohigher prices; input raw material costs may even increase almost up to 200% in certain countriesNote: Company names have been disguised to avoid sensitivities.
    • Cases Summary (2/4)(download report for detailed case studies)# Name Description Summary6 eBayUnlocking SMEtrade Complex regulations, poor international shipping services, and high fixed costs of internationaltrade discourage SMEs, who often enter markets only with reliable shipping and transparent or fewregulations Using preliminary eBay and outside data, the authors estimate that removing such barriers couldtrigger between 60% and 80% increase in cross-border SME sales7ExpressDeliveryServices Co.Customs barriersin global expressdelivery Delays arising from customs clearance bottlenecks and border administration inefficiencies are themajor barriers express delivery companies encounter Lack of risk analysis methods, limited customs operating hours, and lack of process standardizationand coordination cause delays that may amount to 25% of the shipping cost company pays perpackage8 Global Co.Manufacturingfacility in Mexico Based on Bain & Company’s experience, the impacts of supply chain barriers are addressedthrough a hypothetical study of Global Co., and what considerations it must make when setting up amanufacturing facility in Mexico for the North American region Consideration of a country’s hidden supply chain costs includes transportation, infrastructure andsecurity barriers While Mexico might have a 25% cost advantage, more than half of that advantage could beeliminated by supply chain friction costs9HandsetDistributionCo.Market accessin Brazil,overall Africanenvironment,and baseoperations inDubai Complexity in tax and tariff regimes, and excessive customs requirements create significant costs inBrazil that are transferred to consumers Handsets imported to Brazil will face 83% tax vs 32% for those produced locally, and customsdelays of up to a month will add 5% to cost of product Fees and tariffs, corruption and inadequate infrastructure in Africa lead companies to baseoperations elsewhere, and sometimes even not to enter specific markets Lower barriers and greater connectivity in Dubai make it a better location for operation, even if thatmeans adding ~5% cost to end product10HealthcareCo.Trusted traderprogrammes inCanada andChina Trusted trader programmes are one way in which countries try to overcome customs barriers totrade, but specifics of the programme itself can enable trade in varying degrees The company’s trusted status in Canada is through an account-based system, requiring lowminimal periodic inspections from government, which adds only 0.07% to costs per shipment In China, trusted status decreases volume of inspections, which are still carried out for everytransaction, and adds 0.64% to costs per shipment
    • Cases Summary (3/4)(download report for detailed case studies)# Name Description Summary11 IATAe-Freight: globalair cargo Complexity of handling physical paperwork along the global cargo chain is a major cause of delaysand hidden costs Adopting electronic documentation for the air cargo industry could yield US$ 12 billion in annualsavings and reduce delays by 80%12MexicanChemical Co.Market accessand businessenvironmenteffect in Mexicanindustry A Mexican chemical company is hampered by registration regulations in the European Unionrequiring redundant local lab testing, which delays delivery several weeks Deteriorating business environment increases inspection rates of chemical products into Mexicoeightfold as a response to the rise of illegal drug trafficking, which adds US$ 750 to US$ 1,800 pershipment13 PC Co.Technologymarket access inthe Middle East A wide range of supply chain barriers to trade in the Middle East, in the form of local contentrequirements, rules-of-origin restrictions and pilferage at border crossings, stretch out customerdelivery times and increase costs by 6% to 9%14Pharma-ceuticalsPharmaceuticalindustry inSouth-East Asia Local investment regulations, import quotas, and inconsistent standards in South-East Asia andother developing markets obstruct pharmaceutical companies – they will release fewer newproducts in such markets, delaying people’s access to advanced medicine Local clinical trials imposed by some countries may delay market entrance of new medicines by asmuch as five years15RubberProductsRubbermonopoly inSouth-East Asia Substandard infrastructure, poor quality control and a corrupt business environment in the South-East Asian rubber market make the supply chain for finished goods unreliable Eliminating such barriers could reduce carried inventories by 90 days, representing a 10%reduction in landed costNote: Company names have been disguised to avoid sensitivities.
    • Cases Summary (4/4)(download report for detailed case studies)# Name Description Summary16Semicon-ductor Co.High-techindustry barriersin Brazil, Russia,India and China(BRIC) Vague regulations and complexity in customs processes within China and Russia createbottlenecks in a semiconductor company’s supply chain, making it difficult to manage inventorylevels and the shipment of finished goods Operating in uncertain and unsafe business environments in Brazil, Argentina and India hampersoperations and increases business costs17 Shipping Co.Cabotage inUS and China Cabotage is a politically sensitive restriction to the movement of goods within country borders; whilebased on sound national security concerns, the inefficiencies it creates affect entire supply chains Relaxing cabotage restrictions reduces yearly costs by about US$ 200 million if the US trans-shipsinternational containers instead of transporting via land In China, relaxing relay regulations may reduce costs by some US$ 500 to US$ 700 million, andmay reduce some US$ 1 billion in inventory by trans-shipping instead of rerouting18 Tech Co.Market accessin India Preferential market access, a regulation where a government compensates domesticmanufacturers, could raise a technology company’s costs by 7% to 9% over the cost of imports; thisreduces offer quality and choices for customersNote: Company names have been disguised to avoid sensitivities.