Regional integration easing EAC logistics, World Bank report says

The East African Community regional integration process has seen the region register improvement in logistics performance which had stagnated in previous years, a World Bank report has said.

The East African Community regional integration process has seen the region register improvement in logistics performance which had stagnated in previous years, a World Bank report has said.

The bi-annual report, ‘Connecting to Compete 2016: Trade Logistics in the Global Economy’, ranked 160 countries on their trade logistics performance as well as the region, identifying the challenges and opportunities.

 

The report noted that the move by the East African Community nations to integrate into one bloc had elevated the region’s logistics performance, consequently making it more attractive for investments and reducing the cost of doing business.

 

Among the most notable changes observed by the survey was the elimination of multiple barriers to trade and transport, such as cumbersome procedures.

 

“The Northern Corridor was once known for multiple barriers to trade and transport, including lengthy dwell times at Mombasa port and cumbersome clearance procedures along the corridor. In 2012–13, the corridor countries started a series of reforms that significantly improved the logistics environment and drove down logistics costs,” the report’s authors observed.

Integration, the report says, saw the establishment of a single customs territory, thereby tackling unbearable clearance procedures.

“One of the reforms was to introduce Single Customs Territory clearance procedures within the East African Community, including Burundi and Tanzania. This means final customs clearances for free circulation can be made already at the port of entry in Mombasa. The system has significantly reduced administrative burden and shortened the time required for customs formalities,” the authors said.

With the single customs territory, cargo can be released at Mombasa port by customs officials of a respective hinterland country such as Rwanda and shipments do not have to be transported under customs control because official payments have already been made, it adds.

The report also noted other logistics facilitation improvements, which include regional customs transit system, cargo tracking systems, interagency coordination, one-stop border posts, and corridor monitoring on a weekly basis.

Impacts of the improvements

Analysing the benefits stemming from the improved logistics performance, the report observes that the average dwell and transit times had been cut down significantly and consequently the cost of trade.

“The average dwell time in Mombasa port was reduced from 13 days in 2006 to 2–3 days in 2016. And the Malaba border crossing point between Kenya and Uganda registered a dramatic fall in border clearance times from 24 hours to 6 hours in December 2012 to January 2013.”

“Kenyan Customs Services estimate that the time taken to move cargo from Mombasa to Kampala dropped from 18 days to 3 days and from Mombasa to Kigali from 21 days to 6 days,” the report notes.

The report estimates that, as a result of the logistics performance improvement, the cost of doing business has decreased by about 50 per cent and is likely to reduce further with ongoing improvements and adjustments.

This, it says, was proof that improving logistics performance was less about costly infrastructure and more about reforms and political will.

The case of the Northern Corridor shows that the logistics environment can be quickly improved if there is strong political will for administrative reforms, according to the report.

In some cases, the reforms even preceded the infrastructure development, it says.

The report shows that, in Africa, EAC countries competed strongly, with Rwanda emerging eleventh across the continent. Kenya was ranked second, Uganda fifth, and Tanzania the tenth. Burundi occupied the 13th place.

Experts say that logistics performance is key in national and regional economic growth, and competitiveness as it connected people and firms to markets.

Anabel Gonzalez, the Senior Director for the World Bank Group’s Trade & Competitiveness Global Practice, said continued improvement in the area achieves higher productivity and welfare.

“Logistics performance, both in international trade and domestically, is central to countries’ economic growth and competitiveness. Efficient logistics connects people and firms to markets and opportunities, and helps achieve higher levels of productivity and welfare,” Gonzalez said.

Jean-Francois Arvis, a co-author of the report and a logistics expert, noted that efficient logistics involves achieving reliable supply chains linking economies to markets and requires strong cooperation between the public and private sectors.

“Logistics performance is about achieving reliability of supply chains linking economies to markets. In the most constrained countries the needs focus on infrastructure, or critical improvements in customs and border management.

More logistically performing countries have to address complex sets of issues centered on the development and quality of services. And all top performers show strong cooperation between the public and private sectors in developing a comprehensive approach to efficient logistics,” he said.

editorial@newtimes.co.rw

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