IRTI's interventions in enhancing intra-oic trade

1. 26 May 2015
IRTI’s Interventions in
Enhancing Intra-OIC Trade
Dr Abdelkader Chachi
Senior Training Specialist & Economist Researcher
Islamic Research and Training Institute, Islamic Development Bank, Jeddah, KSA
Presented in the IDB Group Preparatory Seminar
For the 5th Global Review of Aid for Trade
21-23 April 2015, Amman Jordan

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1. About IRTI
2. Relationship between IRTI, GTRC & Intra-OIC Trade
3. Background on Intra-OIC Trade
4. IRTI Interventions on enhancing Intra-OIC Trade
5. BPA Studies carried out under GTRC initiatives
6. Way forward for this study
Outline of the Presentation

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◊IRTI established in 1401H (1981) to be the knowledge hub of the IDB Group.
◊It conducts research, training, advisory and knowledge dissemination activities
aimed at bringing the financial services in member countries in line with Islamic
injunctions.
◊It is made of Four (4) Divisions:
Research
Advisory
Training
Information
About IRTI

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About IRTI

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◊Apart from publishing books, journals, research papers and other publications,
IRTI also undertakes a variety of programs designed to promote knowledge in
Islamic finance. These include the IDB Prize for Islamic Economics, Banking and
Finance; IRTI Scholarships and Research Grants Programs; as well as collection
and publication of data on Islamic financial institutions.
◊IRTI also partners with like-minded institutions globally, including universities
and regulatory authorities, towards advancing knowledge in Islamic Finance
through policy dialogues, workshops, seminars, lectures, etc.
About IRTI

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About IRTI

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◊ IRTI joined Group Trade Related Committee (GTRC) since its inception (2009). It, actively,
participates in its meetings, events and initiatives
◊ GTRC Objectives include leveraging synergy among all IDB Group entities in enhancing Intra-
OIC Trade under the leadership of ITFC
◊ ITFC is the entity that is mostly linked to the finance and facilitation of Intra-OIC Trade
especially through its TCPP Division
◊ ICIEC is the other IDB Entity that facilitate Intra-OIC Trade by insuring imports and exports to
and from OIC member countries
◊ ICD is also very much involved in enhancing Intra-OIC trade by taking care of the Private
Sector and SMEs
◊ IRTI does not contribute directly towards the increase and enhancement of Intra-OIC Trade,
however, it contributes positively indirectly
Relationship between IRTI, GTRC & Intra-OIC Trade

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◊The intra-trade among OIC countries has been for a long time less than
10% of their total trade.
◊It is only recently that it has reached around 17% due to the many
attempts and efforts exerted at the country and international level.
◊The OIC Ten Year Program of Action adopted by the 3rd OIC Extraordinary
Summit, held in Makkah Al-Mukkaramah in December 2005: call for
accelerating OIC intra-trade to reach a share of 20% in total trade by 2015.
Background on Intra-OIC Trade

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Source: WTO, SESRIC
Intra-OIC Trade

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Source: ICDT & SESRIC

11. Difficulties facing Intra-OIC Trade
26 May 2015 11
Mahmoud Sami Nabi, Constraints on the OIC intra-trade: Insights from experts‘ opinions

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Degree of difficulty on a scale of 1 to 5 for the private sector of the region
to trade with OIC countries belonging to the mentioned regions
Mahmoud Sami Nabi, Constraints on the OIC intra-trade: Insights from experts‘ opinions

13. The most strategic commodities (except petroleum and gas)
for intra-OIC trade- (Higher score reflects higher importance)
26 May 2015 13
Mahmoud Sami Nabi, Constraints on the OIC intra-trade: Insights from experts‘ opinions

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◊ IRTI does not contribute directly towards the increase and enhancement of Intra-
OIC Trade, however, it contributes positively indirectly through
Research & Publication of Books, Journal Papers, Working Papers, Articles, etc..
Seminars and Conferences
Forums and Workshops (COMCEC, IBF, ICDT, etc..)
Training Courses (Islamic Modes of trade Finance, Financing SMEs)
GTRC meetings, events and initiatives
IRTI Interventions on enhancing Intra-OIC Trade

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◊ IRTI has published a number of books and articles on intra-OIC trade, the latest of which are:
◊ A joint research paper on “Enhancing Intra-Trade in OIC Member Countries Through T-SDRs”
By Mahmoud Sami Nabi, Sami Suweilem, Rami Abdelkafi and Imed Drine.
◊ Hired a consultant from Kazakhstan to undertake a study on “Business Process Analysis on
the Barriers of the Trade Process of Kazakhstan for the Strategic Agricultural Products”.
◊ A joint study on “The Constraints to Intra-OIC Trade” by Abdelkader Chachi, Mahmoud Sami
Nabi, Tengfei Wan, Ayhan Karaca, Yelena Vassilevskaya & Urmat takirov.
Research & Publications

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◊Completed a working paper on “The Challenges of Islamic Trade Finance in
Promoting SMEs in IDB Member Countries” by Abd elrahman Elzahi
◊Completed the first draft on the study on “Business Process Analysis on the
Barriers of the Trade Process of Kazakhstan for the Strategic Agricultural
Products”
◊Conducted a Workshop on Business Process Analysis in Bishkek in April 2014
◊Next Workshop on BPA in Almaty, Kazakhstan on 4-6 May 2015
Research & Publications

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◊ Within the framework of its program of technical assistance for the benefit of the OIC
Member States, the Islamic Research and Training Institute (IRTI) organised more than 30
training programs on different aspects related to the enhancement of trade or that have an
impact on trade generally and Intra-OIC trade especially.
◊ These courses have benefitted more than 1,000 trainees in different OIC Member Countries.
◊ Conducted a Workshop on Business Process Analysis in Bishkek in April 2014
◊ Next Workshop on BPA in Almaty, Kazakhstan on 4-6 May 2015
Advisory and Capacity Building

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◊ IRTI, in collaboration with GTRC, ITFC and UNESCAP hired two
consultants from Kazakhstan and Kyrgyzstan to do BPA
studies on the constraints facing intra-trade among
Azerbaijan, Kazakhstan and Kyrgyzstan.
◊ BPA studies were conducted by using the approach presented
in the UNNExT Business Process Analysis Guide. Procedural,
regulatory, documental requirements were analyzed and
discussed with main stakeholders along supply chains.
Business Process Analysis (BPA)

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◊Diagnose and identify the barriers, constraints and difficulties facing intra-trade
and come up with the right recommendations to streamline trade processes
based on the Business Process Analysis (BPA) Methodology.
◊BPA help identifying, recording and analysing existing “as-is” international
trade business processes, as well as generating recommendations for their
prospective optimization.
BPA Objectives

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◊ The Consultant from Kazakhstan, Yelena Vissilevska and Urmat from Kyrgystan found:
◊ Crossing borders of commodities requires a lot of commercial, transport, customs and other
documents based on government legislation.
◊ Strict product safety requirements often create the potentially inefficient operations and
unnecessary delays and costs.
◊ Redundancies, bottlenecks and legal gaps were discovered.
Results of BPA Studies

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◊Despite of presence of the Free Trade Agreement in CIS Zone there are a lot of
legal mismatches in regulation of export from Kyrgyz Republic to the CU,
especially lack of mechanism of acceptance of Kyrgyz quality compliance
documents in Kazakhstan.
◊The current situation leads to duplication of trade related procedures. It was
proposed that accession of Kyrgyz Republic to the CU will reduce barriers to
trade with countries-members of the CU.
Results of Kyrgyzstan BPA Study

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◊List of activities of Action plans include following dimensions of reforms:
◊Elimination of redundant processes and activities which are not value-adding.
◊Reorganization of processes and activities by combining joint cooperation at
the border-crossing control, harmonization of data exchange, modernization of
infrastructure to conduct relevant processes etc.
◊Improvement, development and adoption of national legal framework to
international recommendations, standards, legislation of the Customs Union.
◊Promotion of awareness and capacity building of business society regarding
doing business (especially export and import conditions at the traditional
markets and main supplying countries).
Recommendations from BPA Studies

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◊ Government officials should develop appropriated regulations and standards for certification
bodies, laboratories and inspections, as well as inter-governmental agreements. The
implementation of these actions will reduce the delivery time of goods for 17-19 days.
◊ conduct the monitor of border checkpoints of the two countries, after monitoring it is
necessary to develop and implement action plan to reduce the barriers on the border
through using new technologies and equipment. The implementation of these actions will
reduce the time on the border to 2 hours.
◊ It is also necessary to conduct the monitoring of compliance with the requirements of the
international agreements on recognition of weight certificate and to facilitate the discussion
at governmental bilateral meetings of Kazakhstan and Kyrgyzstan.
Recommendations from BPA Studies

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◊In order to facilitate Intra-OIC Trade further, enhance its growth and
development and benefit from this in improving the balances of trade, the
employment of human and financial resources and the OIC economies at large,
there is a need to diagnose the difficulties, constraints and obstacles facing
intra-OIC trade.
◊To do that, I think it is very important to start at the beginning by taking the
first step of the process which is to conduct BPA studies between countries
similar to the one IRTI, GTRC, ITFC and UNESCAP sponsored.
The Way Forward

25. BPA: the first step to be taken before
introducing other trade facilitation measures
26 May 2015 25
e-Single Window
and paperless
trading
National Data Harmonization
Document Simplification & Standardization
Cross Border Data
Exchange
Business Process Analysis for Trade Facilitation
1
6
5
3
2
4
Process Simplification and Harmonization
Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

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Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP
Information captured by BPA
Who
involved
Procedures
and Documents
required
Related Rules
and Regulations
Some
quantitative
indicators

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Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP
BPA+: An Integrated Methodology
Trade-related
procedures
before cargo
movement
Cargo
origin
Border
crossing
point
Border
crossing
point
Cargo
destination
Trade-
related
procedures
after cargo
arrival
TRS TRS
TCD
BPA of Trade Procedures
Business Process Analysis (BPA) for diagnosis of TF bottlenecks along entire supply chain
Time-Cost Distance Method (TCD) & Time Release Study (TRS) to Improve/verify BPA time and
cost estimates

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28
Shipping company
Shipping agent
Port Authority, etc.
Customs, Bank,
Customs broker
Port Authority
Container Yard
Warehouse,
Forwarder, etc.
Importer,
Customs broker
Container Yard
OGAs, etc.
Time Release Study (TRS): Measuring ‘time’ for border crossing procedures
Arrival of cargo Unloading/Storage
Submission of Declaration
Customs release permission Removal of cargo
28
Tengfei Wan, National Trade and Transport Facilitation Monitoring Mechanism (TTFMM), UNESCAP

29. Time-Cost-Distance Method: record ‘time’ and ‘cost’ of
physical movement of cargoes
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Transport to border
Wait at border
crossing/change transport
mode
Transport to sea
port
Wait at sea
port
Sea transport
500 km 1000 km 2000 km1500 km
Day 4
Day 3
Day 2
Day 1
$400
$300
$200
$100
Point of Origin
Destination
Tengfei Wan, National Trade and Transport Facilitation
Monitoring Mechanism (TTFMM), UNESCAP

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◊ The main obstacles facing IRTI in expanding its trade related training courses and other
projects are:
◊ The budget constraints
◊ The shortage of professional staff
◊ However, IRTI, in its endeavour to face the challenges and become self-sufficient through its
income-generating programs, wishes to do more programs in the future, not only to enhance
trade among OIC member countries but also to contribute more effectively to the growth
and development of its member countries.
OBSTACLES AND CHALLENGES FACING IRTI

31. 3126 May 2015
‫جزيال‬ ‫شكرا‬
Thank You very much
Merci Beaucoup
Muchas Gracias
Email: achachi@isdb.org
Tel. +966-12-646 6229
Fax. +966-12-637 8927
Website: irti.org