An Investigation into the Measures Affecting the ...

An Investigation into the Measures Affecting the Integration of ASEAN’s Priority Sectors (Phase 2): The Case of Logistics REPSF Project No. 06/001d

Authors: Robert de Souza Mark Goh Sumeet Gupta Luo Lei

Final Report April 2007

The views expressed in this report are those of the authors, and not necessarily those of the ASEAN Secretariat and/or the Australian Government.

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An Investigation into the Measures Affecting the Integration of ASEAN’s Priority Sectors (Phase 2): The Case of Logistics

ABSTRACT

ASEAN’s objective is to establish a single market in the twelve identified priority sectors. Logistics is one of these sectors. Lloyd and Smith (2004), in their report on economic integration (REPSF, 03/006a), define a single market in terms of the law of one price holding in all markets. They note that achieving this goal would require the elimination of both border and beyond-the-border measures that discriminate against foreigners. They also note that cross-border measures (regulatory processes that apply to both domestic and foreign providers and which may inhibit the integration of markets) should be eliminated. Following the work of Lloyd and Smith, CIES (2006) (Phase 1 of this project, REPSF 04/011 2006), surveyed existing international inventories of policy and other measures that impede the formation of a single market. It also reviewed the work on the use of survey and other methods to gain insight into the significance of these measures. Based on an extensive survey of the literature, CIES recommended a procedure for collecting information and assessing the significance of the barriers to market integration in the logistics services sector. Phase 2 (this study) consists of implementing the specific activities proposed by CIES (2006) for the systematic investigation of the measures that affect integration in the logistics service sector. The goal is to systematically investigate how these measures influence effective door-to-door delivery of goods within ASEAN. Phase 2 began with semi-structured interviews with the various stakeholders in the logistics supply chain, so as to identify the trade barriers in ASEAN. Inefficient customs procedures and inspections are considered to be the greatest barriers to logistics services in ASEAN, followed by barriers in land transportation.

REPSF Project 06/001d: Final report

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CONTENTS

ABSTRACT.............................................................................................................................. I CONTENTS............................................................................................................................. II LIST OF TABLES ...................................................................................................................V LIST OF FIGURES................................................................................................................VII ABBREVIATIONS..................................................................................................................IX GLOSSARY ...........................................................................................................................XI ACKNOWLEDGEMENTS .................................................................................................. XVII EXECUTIVE SUMMARY..................................................................................................... XIX I.

INTRODUCTION ......................................................................................................... 1 A. OBJECTIVE................................................................................................................. 1 B. DEFINITION AND SCOPE OF LOGISTICS SERVICES............................................. 1 C. THE LOGISTICS SUPPLY CHAIN .............................................................................. 4 D. ORGANIZATION OF THIS REPORT .......................................................................... 5

II.

OVERVIEW OF ASEAN LOGISTICS INDUSTRY ...................................................... 7 A. INTRODUCTION ......................................................................................................... 7 B. KEY LOGISTICS PLAYERS IN ASEAN ...................................................................... 8 C. TRADE PERFORMANCE IN TOTAL SERVICES AND TRANSPORT ..................... 11

III.

LITERATURE REVIEW............................................................................................. 15 A. TRADE FACILITATION MEASURES ........................................................................ 15 B. LOGISTICS SECTOR DEVELOPMENT IN ASEAN.................................................. 16 C. IMPACT OF TRADE FACILITATION ON FREE TRADE .......................................... 17

IV.

RESEARCH METHODOLOGY ................................................................................. 19 A. RESEARCH APPROACH AND DATA COLLECTION .............................................. 19 B. SURVEY QUESTIONNAIRE ..................................................................................... 19 C. TRADE PERFORMANCE MEASURES .................................................................... 19 D. FIELD WORK ............................................................................................................ 19 E. CHALLENGES........................................................................................................... 20 F. LOGISTICS BARRIERS TO TRADE FACILITATION IN ASEAN.............................. 21

V.

TRADE BARRIERS: CUSTOMS PROCEDURES AND INSPECTIONS.................. 23 A. CUSTOMS DOCUMENTATION ................................................................................ 23 B. CUSTOMS INSPECTION.......................................................................................... 26 C. BORDER COORDINATION AND CLEARANCE....................................................... 29 D. OTHER CUSTOMS-RELATED BARRIERS .............................................................. 32


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VI.

TRADE BARRIERS: FOREIGN INVESTMENT........................................................ 33 A. BARRIERS DUE TO CROSS-SECTORAL INVESTMENT POLICIES...................... 33 B. BARRIERS DUE TO LICENSING REQUIREMENTS AND TRANSPARENCY ........ 34 C. BARRIERS DUE TO LABOUR LIMITATIONS .......................................................... 35

VII.

TRADE BARRIERS: MARITIME SPECIFIC ............................................................. 37 A. REGULATORY BARRIERS....................................................................................... 37 B. INFRASTRUCTURE BARRIERS .............................................................................. 39

VIII.

TRADE BARRIERS: AVIATION SPECIFIC.............................................................. 43

A. REGULATORY BARRIERS....................................................................................... 43 B. INFRASTRUCTURE BARRIERS .............................................................................. 45 IX.

TRADE BARRIERS: LAND TRANSPORTATION SPECIFIC .................................. 47 A. REGULATORY BARRIERS....................................................................................... 47 B. INFRASTRUCTURE BARRIERS .............................................................................. 48

X.

TRADE BARRIERS: OTHER BARRIERS ................................................................ 49

XI.

TRADE PERFORMANCE AND RECOMMENDATIONS.......................................... 51 A. TOP BARRIERS ........................................................................................................ 51 B. INFLUENCE OF BARRIERS ON TRADE PERFORMANCE .................................... 51 C. LOGISTICS FRIENDLINESS INDICATORS ............................................................. 53

XII.

MAJOR BARRIERS AND RECOMMENDATIONS................................................... 55 A. CRITICALLY SIGNIFICANT BARRIERS................................................................... 55 B. VERY SIGNIFICANT BARRIERS.............................................................................. 55 C. MODERATELY SIGNIFICANT BARRIERS............................................................... 56 D. CONCLUSIONS AND LIMITATIONS ........................................................................ 56

REFERENCES ...................................................................................................................... 57 APPENDIXES ....................................................................................................................... 61 A. APPENDIX 1: INTERVIEW QUESTIONNAIRE......................................................... 61 B. APPENDIX 2: SUMMARY TABLE OF BARRIERS ................................................... 77 C. APPENDIX 3: ABOUT THE AUTHORS .................................................................... 92

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LIST OF TABLES

Table 1: Major Findings and Recommendations .................................................................... xx Table 2: Logistics Friendliness Indicators in ASEAN..............................................................xxi Table 1-1: Logistics Services Checklist .................................................................................... 2 Table 2-1: Indicators of Logistics Quality.................................................................................. 8 Table 2-2: Some Information on Major LSPs in ASEAN .......................................................... 9 Table 2-3: ASEAN’s Export and Import in Total Services and Transport Sector in US$ mil (1980-2004)............................................................................................................................ 12 Table 4-1: Respondents Interviewed by Country ................................................................... 20 Table 4-2: Respondents Interviewed by “Position” in Logistics Supply Chain........................ 20 Table 5-1: Singapore’s Commitment to Quality Service......................................................... 25 Table 5-2: Cargo Release Times in Selected ASEAN Economies......................................... 28 Table 5-3: Tariff and Clearance System in Selected ASEAN Economies .............................. 30 Table 7-1: Customs Clearance Times (Standard Dry Cargo) for Selected ASEAN Economies ............................................................................................................................................... 40 Table 8-1: Customs Clearance Times for Selected ASEAN Economies................................ 45 Table 11-1: Influence on Trade Performance (Time) ............................................................. 52 Table 11-2: Influence on Trade Performance (Cost) .............................................................. 52 Table 11-3: Influence on Trade Performance (Quality) .......................................................... 53 Table 11-4: Influence on Trade Performance (Volume) ......................................................... 53 Table 11-5: Influence on Trade Performance (Reliability) ...................................................... 53 Table 11-6: Logistics Friendliness Indicators in ASEAN ........................................................ 54 Table 12-1: Critically Significant Barriers................................................................................ 55 Table 12-2: Very Significant Barriers...................................................................................... 55 Table 12-3: Moderately Significant Barriers ........................................................................... 56


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LIST OF FIGURES

Figure 1-1: Logistics Services Activities ............................................................................. 3 Figure 1-2: Logistics Supply Chain ..................................................................................... 4 Figure 2-1: ASEAN’s Total Service Export (1980-2004) .................................................. 13 Figure 2-2: ASEAN’s Total Service Import (1980-2004)................................................... 13 Figure 2-3: ASEAN’s Transportation Export (1980-2004) ................................................ 14 Figure 2-4: ASEAN’s Transportation Import (1980-2004) ................................................ 14


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ABBREVIATIONS

3PL

Third-Party Logistics

AEC

ASEAN Economic Community

AEM

ASEAN Economic ministers

AFTA

ASEAN Free Trade Area

APEC

Asia Pacific Economic Cooperation

ASEAN

Association of South East Asian Nations

CFS

Container Freight Station

CGE

Computable General Equilibrium

CIES

Centre for International Economic Studies

CIF

Cost, Insurance and Freight

CLMV

Cambodia, Lao PDR, Myanmar and Vietnam

CPC

Provisional Central Product Classification

CSI

Coalition of Service Industries

EDI

Electronic Data Interchange

ETA

Estimated Time of Arrival

EU

European Union

FDI

Foreign Direct Investment

FOB

Free On Board

GATT

General Agreement on Trade and Tariffs

GATS

General Agreement on Trade in Services

GPS

Global Positioning System

HS

Harmonized System

ICT

Information and Communication Technology

IDA

Infocomm Development Authority of Singapore

ISEAS

Institute of Southeast Asian Studies

JV

Joint Venture


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LSP

Logistics Service Provider

MNC

Multinational Corporation

NTM

Non-Tariff Measures

PPA

Philippines Ports Authority

PSA

Port Authority of Singapore

PTP

Port of Tanjung Pelepas

SCM

Supply Chain Management

SME

Small and Medium-sized Enterprise

TDB

Trade Development Board

TESS

Trade Enhancement for the Services Sector

TEU

Twenty-Foot Equivalent Unit

ULD

Unit Load Devices

USITC

United States International Trade Commission

VAT

Value Added Tax

WTO

World Trade Organization



GLOSSARY Balance of Trade: The surplus or deficit which results from comparing a country's exports and imports of merchandise only. Bonded Warehouse: A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed. Brokerage: Freight forwarder/broker compensation as specified by ocean tariff or contract Bulk Cargo: Not in packages or containers; shipped loose in the hold of a ship without mark and count." Grain, coal and sulphur are usually bulk freight. C&F Terms of Sale, or INCOTERMS: Obsolete, albeit heavily used, term of sale meaning "cargo and freight" whereby Seller pays for cost of goods and freight charges up to destination port. In July, 1990 the International Chamber of Commerce replaced C&F with CFR. Cabotage: Water transportation term applicable to shipments between ports of a nation; commonly refers to coast-wise or inter-coastal navigation or trade. Many nations, including the United States, have cabotage laws which require national flag vessels to provide domestic inter-port service. Cargo: Freight loaded onto a ship. Carrier: Any person or entity who, in a contract of carriage, undertakes to perform or to procure the performance of carriage by rail, road, sea, air, inland waterway or by a combination of such modes. Certificate: The document issued by the U.S. Coast Guard certifying an American flag vessel's compliance with applicable laws and regulations. Certificate of Origin: A certified document showing the origin of goods; used in international commerce. CFS: Abbreviation for "Container Freight Station." A shipping dock where cargo is loaded ("stuffed") into or unloaded ("stripped") from containers. Generally, this involves less than container load shipments, although small shipments destined to same consignee are often consolidated. Container reloading from/to rail or motor carrier equipment is a typical activity. CIF: Abbreviation for "Cost, Insurance, Freight." (Named Port) Same as C&F or CFR except seller also provides insurance to named destination. Classification: A publication, such as Uniform Freight Classification (railroad) or the National Motor Freight Classification (motor carrier), that assigns ratings to various articles and provides bill of lading descriptions and rules. Classification Rating: The designation provided in a classification by which a class rate is determined. Commercial Invoice: Represents a complete record of the transaction between exporter and importer with regard to the goods sold. Also reports the content of the shipment and serves as the basis for all other documents about the shipment Common Carrier: A transportation company which provides service to the general public at published rates Connecting Carrier: A carrier which has a direct physical connection with, or forms a link between two or more carriers. Consignee: A person or company to whom commodities are shipped Consolidation: Cargo containing shipments of two or more shippers or suppliers. Container load shipments may be consolidated for one or more consignees. REPSF Project 06/001d: Final report

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Consolidator: A person or firm performing a consolidation service for others. The consolidator takes advantage of lower full carload (FCL) rates, and savings are passed on to shippers. Container: A truck trailer body that can be detached from the chassis for loading into a vessel, a rail car or stacked in a container depot. Containers may be ventilated, insulated, refrigerated, flat rack, vehicle rack, open top, bulk liquid or equipped with interior devices. A container may be 20 feet, 40 feet, 45 feet, 48 feet or 53 feet in length, 8'0" or 8'6" in width, and 8'6" or 9'6" in height. Container Load: A load sufficient in size to fill a container either by cubic measurement or by weight. Container Terminal: An area designated for the stowage of cargoes in container; usually accessible by truck, railroad and marine transportation. Here containers are picked up, dropped off, maintained and housed. Customhouse: A government office where duties are paid, import documents filed, etc., on foreign shipments. Customhouse Broker: A person or firm, licensed by the treasury department of their country when required, engaged in entering and clearing goods through Customs for a client (importer). Customs: Government agency charged with enforcing the rules passed to protect the country's import and export revenues. Customs Bonded Warehouse: A warehouse authorized by Customs to receive duty-free merchandise. Customs Entry: All countries require that the importer make a declaration on incoming foreign goods. The importer then normally pays a duty on the imported merchandise. The importer's statement is compared against the carrier's vessel manifest to ensure that all foreign goods are properly declared. Customs Invoice: A form requiring all data in a commercial invoice along with a certificate of value and/or a certificate of origin. Required in a few countries (usually former British territories) and usually serves as a seller's commercial invoice. Customs of the Port: A phrase often included in charter parties and freight contracts referring to local rules and practices which may impact upon the costs borne by the various parties. Delivery Instructions: Order to pick up goods at a named place and deliver them to a pier. Usually issued by exporter to trucker but may apply to a railroad, which completes delivery by land. Use is limited to a few major U.S. ports. Also known as shipping delivery order. Destination: the place where carrier actually turns over cargo to a consignee or his agent. Despatch: An incentive payment paid to a carrier to loading and unloading the cargo faster than agreed. Usually negotiated only in charter parties. EDI: Abbreviation for "Electronic Data Interface." Generic term for transmission of transactional data between computer systems. EDI is typically via a batched transmission, usually conforming to consistent standards. Entry: Customs documents required to clear an import shipment for entry into the general commerce of a country Export: Shipment of goods to a foreign country. Export Declaration: A government document declaring designated goods to be shipped out of the country. To be completed by the exporter and filed with the U.S. Government.

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Export License: A government document which permits the "Licensee" to engage in the export of designated goods to certain destinations. Export Rate: A rate published on traffic moving from an interior point to a port for transhipment to a foreign country. Factor: A factor is an agent who will, at a discount (usually five to 8% of the gross), buy receivables. Feeder Service: Cargo to/from regional ports is transferred to/from a central hub port for a long-haul ocean voyage. Feeder Vessel: A short-sea vessel which transfers cargo between a central "hub" port and smaller "spoke" ports. Foreign Trade Zone: A free port in a country divorced from Customs authority but under government control. Merchandise, except that which is prohibited, may be stored in the zone without being subject to import duty regulations. Free Trade Zone: A port designated by the government of a country for duty-free entry of any non-prohibited goods. Merchandise may be stored, displayed, used for manufacturing, etc., within the zone and re-exported without duties. Freight: Refers to either the cargo carried or the charges assessed for carriage of the cargo. Freight Bill: A document issued by the carrier based on the bill of lading and other information; used to account for a shipment operationally, statistically, and financially. An Invoice. Freight Forwarder: A person whose business is to act as an agent on behalf of the shipper. A freight forwarder frequently makes the booking reservation. Gateway: Industry-related: A point at which freight moving from one territory to another is interchanged between transportation lines. Gross Weight: Entire weight of goods, packaging and freight car or container, ready for shipment. Generally, 80,000 pounds maximum container, cargo and tractor for highway transport. Harmonized System (HS) Codes: An international goods classification system for describing cargo in international trade under a single commodity-coding scheme. Developed under the auspices of the Customs Co-operation Council (CCC), an international Customs organization in Brussels, this code is a hierarchically structured product nomenclature containing approximately 5,000 headings and subheadings. It is organized into 99 chapters arranged in 22 sections. Sections encompass an industry (e.g., Section XI, Textiles and Textile Articles); chapters encompass the various materials and products of the industry (e.g., Chapter 50, Silk; Chapter 55, Manmade Staple Fibers; Chapter 57, Carpets). The basic code contains four-digit headings and six-digit subheadings. Many countries add digits for Customs tariff and statistical purposes. In the United States, duty rates will be the eight-digit level; statistical suffixes will be at the ten-digit level. The HS is the current U.S. tariff schedule (TSUSA) for imports and is the basis for the ten-digit Schedule B export code. Import: To receive goods from a foreign country. Import License: A document required and issued by some national governments authorizing the importation of goods. Inland Carrier: A transportation line that hauls export or import traffic between ports and inland points. Interchange Point: A location where one carrier delivers freight to another carrier.


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Intermodal: Used to denote movements of cargo containers interchangeably between transport modes, i.e., motor, water, and air carriers, and where the equipment is compatible within the multiple systems. Invoice: An itemized list of goods shipped to a buyer, stating quantities, prices, shipping charges, etc. Issuing Bank: Bank that opens a straight or negotiable letter of credit and assumes the obligation to pay the bank or beneficiary if the documents presented are in accordance with the terms of the letter of credit. Issuing Carrier: The carrier issuing transportation documents or publishing a tariff. Licences: Some governments require certain commodities to be licensed prior to exportation or importation. Clauses attesting to compliance are often required on the B/L. Various types issued for export (general, validated) and import as mandated by government(s). Liner: A vessel sailing between specified ports on a regular basis. Logistics: Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers' requirements. Malpractice: A carrier giving a customer illegal preference to attract cargo. This can take the form of a money refund (rebate); using lower figures than actual for the assessment of freight charges (under-cubing); mis-declaration of the commodity shipped to allow the assessment of a lower tariff rate; waiving published tariff charges for demurrage, CFS handling or equalization; providing specialized equipment to a shipper to the detriment of other shippers, etc. Maritime: Business pertaining to commerce or navigation transacted upon the sea or in seaports in such matters as the court of admiralty has jurisdiction. Multimodal: Synonymous for all practical purposes with Intermodal Packing List: Itemized list of commodities with marks/numbers but no cost values indicated Pickup: The act of calling for freight by truck at the consignor's shipping platform Quota: The quantity of goods that may be imported without restriction during a set period of time. Shipment: The tender of one lot of cargo at one time from one shipper to one consignee on one bill of lading. Shipper: The person or company who is usually the supplier or owner of commodities shipped. Also called consignor. Shipper's Export Declaration (SED,"Ex Dec"): A joint Bureau of the Census' International Trade Administration form used for compiling U.S. exports. It is completed by a shipper and shows the value, weight, destination, etc., of export shipments as well as Schedule B commodity code. Shipper's Instructions: Shipper's communication(s) to its agent and/or directly to the international water-carrier. Instructions may be varied, e.g., specific details/clauses to be printed on the B/L, directions for cargo pickup and delivery. Standard Industrial Classification (SIC): A standard numerical code used by the U.S. Government to classify products and services. Stevedore: Individual or firm that employs longshoremen and who contracts to load or unload the ship.

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Stowage: A marine term referring to loading freight into ships' holds Supply Chain: A logistical management system which integrates the sequence of activities from delivery of raw materials to the manufacturer through to delivery of the finished product to the customer into measurable components. "Just in Time" is a typical value-added example of supply chain management. Tariff (Trf.): A publication setting forth the charges, rates and rules of transportation companies. Terminal: An assigned area in which containers are prepared for loading into a vessel, train, truck, or airplane or are stacked immediately after discharge from the vessel, train, truck, or airplane. Terminal Charge: A charge made for a service performed in a carrier's terminal area. Terms of Sale: The point at which sellers have fulfilled their obligations so the goods in a legal sense could be said to have been delivered to the buyer. They are shorthand expressions that set out the rights and obligations of each party when it comes to transporting the goods. Following, are the thirteen terms of sale in international trade as Terms of Sale reflected in the recent amendment to the International chamber of Commerce Terms of Trade (INCOTERMS), effective July 1990: EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAF, DES, DEQ, DDU, and DDP. Transport: To move cargo from one place to another. Tranship: To transfer goods from one from one ship to another. Transhipment Port: Place where cargo is transferred to another carrier. Turnaround: In water transport, the time it takes between the arrival of a vessel and its departure. Tonnage: 100 cubic feet. Towage: The charge made for towing a vessel. Tractor: Unit of highway motive power used to pull one or more trailers/containers. Trade Acceptance: A time or a date draft that has been accepted by the buyer (the drawee) for payment at maturity. Traffic: Persons and property carried by transport lines. Trailer: The truck unit into which freight is loaded as in tractor trailer combination. See Container. Unitization: Loading one or more large items of Cargo onto A single piece of equipment, such as a pallet. Unloading: Removal of a shipment from a vessel. Unit Load: Packages loaded on a pallet, in a crate or any other way that enables them to be handled at one time as a unit. Warehouse: A place for the reception, delivery, consolidation, distribution, and storage of goods/cargo. Warehouse Entry: Document that identifies goods imported when placed in a bonded warehouse. The duty is not imposed on the products while in the warehouse but will be collected when they are withdrawn for delivery or consumption. Warehousing: The storing of goods/cargo Yard: A classification, storage or switching area.


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ACKNOWLEDGEMENTS

The Logistics Institute - Asia Pacific would like to thank the ASEAN Secretariat, AusAID, and the Regional Economic Policy Support Facility (REPSF) under the ASEAN-Australia Development Cooperation Program (AADCP) for funding this study. Thanks are also due to the various industry representatives from the logistics industry associations, logistics service providers, and shippers from the various ASEAN for their valuable contributions to the study. Last but not least, we are grateful to the seminar participants in the two workshops held in Singapore (9-10 Sep. and 4-5 Nov. 2006) for their valuable suggestions on this study.


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EXECUTIVE SUMMARY

This study marks the inception of Phase 2 of the ASEAN initiative for the integration of the twelve priority sectors. This study is conducted for the logistics service sector, which was added at the 37th ASEAN economic ministers meeting in Vientiane, LAO PDR in Sept. 2005. Based on USITC (2005), logistics services can be categorized as: (i) core freight, (ii) related freight, and (iii) non-core freight. Core freight logistics services include cargo handling, storage and warehousing, transport agency, and supporting and auxiliary transport services. Some logistics service providers focus on supply chain consulting such as global network design and distribution strategies, inventory forecasting and planning, product design strategies, information technology needs assessment, and vendor identification and management. Both transport management and supply chain consulting services are key services for the logistics sector and are defined as Tier 1 logistics services. Related freight logistics services include sub-sectors (maritime, inland waterways, air, rail, and road transport services) related to freight transport services as well as technical testing and analysis, postal and courier, commission agents, wholesale trade, and retail trade services. Multimodal freight transport is categorized as Tier 2 logistics service. This study focuses on Tier 1 and Tier 2 services. At the request of the ASEAN Secretariat, The Logistics Institute – Asia Pacific conducted this study to identify the barriers to free trade in logistics services in ASEAN. Beginning with a desk review of such barriers, semi-structured interviews were conducted with 35 respondents that represent the various players in the logistics supply chain operating in ASEAN. The questionnaire, using a 6-point Likert scale, was framed to identify the existence of the barriers, and the significance of that barrier (6=critically significant) to free trade in logistics services. Logistics services face a broad range of impediments in foreign markets. The barriers include customs, foreign investment, and mode-specific constraints. The feedback from the interviews suggests that the customs-related barriers represent the greatest impediment to free trade in the logistics services sector. Table 1, containing the major findings and pertinent recommendations, shows that customs procedures and inspections are the greatest impediments to free trade followed by land transportation regulations. Table 2 highlights the logistics quality indicators in ASEAN on a 10-point scale. The lower the value, the better is the logistics quality of that country, relative to the other countries in ASEAN. Using this rating, the outcome is as follows:

Very good in logistics friendliness: Singapore

Good in logistics friendliness : Brunei and Thailand

Average in logistics friendliness: the Philippines, Cambodia, Vietnam, Myanmar, Lao PDR and Malaysia

Weak in logistics friendliness: Indonesia

Labelling this as ‘A’, B’, ‘C’, and ‘D’ respectively, our study suggests that Singapore has an ‘A’ rating for logistics friendliness and therefore presents the least barriers to free trade in logistics services. Conversely, Indonesia with her ‘D’ level rating has the most barriers to free trade in logistics services within the ASEAN community. The caveat here is that the ratings are relative and depending on the cut-offs imposed, some of the countries with ‘B’ ratings can be relegated to a ‘C’. This is a key limitation of our study.


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Table 1: Major Findings and Recommendations BARRIER

TYPE

RECOMMENDATION

CRITICALLY SIGNIFICANT (RATING= 6) Time consuming documentation requirements

Customs procedures and inspections

Adopt common EDI for ASEAN and all gateways (including payment) to enhance flow efficiency

Burdensome inspection requirements


Adopt common inspection policy to reduce need for repeated inspection

Different classification of goods in different countries


Install clear and transparent customs rules. Educate customs officers on proper classification

Limitation on equipment usage

Land transportation (Regulatory)

Allow common ASEAN certified trucks for cross-border transportation

Limitation on fleet size and hours of operation


Allow common ASEAN certified trucks for in-country operations

VERY SIGNIFICANT (RATING = 5)

Lack of coordination Inefficient process

border

crossing


Have single documentation

ASEAN

window

for

inbound

clearance


Have transparent customs regulations to enhance efficiency for both customs and shippers

MODERATELY SIGNIFICANT (RATING = 4) Foreign ownership regulations

Foreign Investment

Allow majority foreign ownership to help to improve infrastructure

Discriminatory licensing

Foreign Investment

Have same treatment for all firms

Cabotage regulations Arbitrary independent rulings

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Aviation specific (Regulatory) Customs procedures and inspections

Remove cabotage Make rules and regulations transparent

Volatility in border traffic


Have 24 hours operation at borders

Multiple uncoordinated offices


Have greater transparency in rules and regulations and integration of customs offices

Improper penalties


Have greater transparency in customs procedures, rules and regulations



INDONESIA

LAO PDR

MALAYSIA

MYANMAR

PHILIPPINES

SINGAPORE

THAILAND

VIETNAM

CUSTOMS PROCEDURES AND INSPECTIONS MODE-SPECIFIC (REGULATORY) SCORE MARITIME (REGULATORY) SCORE AVIATION (REGULATORY)SCORE LAND TRANSPORTATION (REGULATORY) SCORE REGULATORY SCORE

CAMBODIA

LOGISTICS FRIENDLINESS INDICATORS

BRUNEI

Table 2: Logistics Friendliness Indicators in ASEAN

1.69 1.11 1.14 1.00

1.92 1.23 1.23 1.00

2.53 1.36 1.50 1.00

1.83 1.20 NA 1.00

1.91 1.34 1.32 1.00

2.00 1.27 1.24 1.00

1.88 1.30 1.46 1.00

1.29 1.23 1.35 1.00

1.97 1.21 1.23 1.02

1.80 1.30 1.43 1.00

1.20 1.54 1.46 1.46 1.86 1.71 1.29 1.20 1.40 1.37 1.41 1.59 1.96 1.64 1.64 1.65 1.60 1.26 1.60 1.56

LABOUR SCORE CROSS-SECTORAL INVESTMENT SCORE LICENSING AND TRANSPARENCY SCORE FOREIGN INVESTMENT SCORE

1.11 1.26 1.63 1.36

MARITIME (INFRASTRUCTURE) SCORE AVIATION (INFRASTRUCTURE) SCORE LAND TRANSPORTATION (INFRASTRUCTURE) SCORE INFRASTRUCTURE SCORE

2.29 2.00 2.51 NA 1.71 1.83 2.51 1.46 1.83 2.69 1.63 2.01 1.82 1.94 1.79 2.08 1.65 1.50 1.45 1.91 2.63 3.06 3.06 3.06 3.49 3.06 3.06 1.34 3.06 3.06 1.96 2.12 2.19 2.13 1.95 2.10 2.10 1.47 1.75 2.30

OVERALL SCORE Logistics Friendliness classification

1.50 1.72 2.03 1.75 1.75 1.74 1.69 1.29 1.66 1.72 B C D C C C C A B C


1.46 2.29 1.63 1.65

1.51 2.63 2.06 1.91

1.46 2.29 1.69 1.67

1.51 2.63 2.17 1.96

1.46 2.29 1.54 1.61

1.40 1.26 1.46 1.40

1.11 1.26 1.20 1.17

1.54 2.63 1.86 1.83

1.46 2.29 1.71 1.69

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I. INTRODUCTION A. OBJECTIVE At the 10th ASEAN summit, the leaders signed the framework agreement for the integration of priority sectors, which outlines the scope, modalities, and timeliness to accelerate the integration of the first 11 sectors. The 12th sector, logistics, was added at the 37th ASEAN economic ministers meeting in Vientiane, Lao PDR in September 2005. This agreement follows the ASEAN Concord II (also known as Bali Concord II) establishing the ASEAN economic community as the realization of the end-goal of economic integration as outlined in the ASEAN vision 2020 whereby there is a free flow of goods, services, investment and a freer flow of capital, equitable economic development and reduced poverty and socio-economic disparities. The Concord further declares that the ASEAN economic community shall also establish the region as a single market and a production base. This market is one in which there is no price discrimination for commodities and against foreign goods, services, capital and labour (see Lloyd and Smith 2004). Lloyd and Smith (2004) provide a broad classification of groups of measures to be considered in the assessment of strategies for move to single markets in the priority areas. Based on this, Phase I of this project (CIES 2006, REPSF 04/011) designed a procedure for collecting information on assessing the significance of barriers to market integration. This work is to be undertaken in this second phase of this project. The objective of Phase II (this study) is to compile a list of all in-country policies, measures and regulations, which directly and indirectly influence the efficient door-to-door delivery of goods within ASEAN and to investigate the effectiveness of these policies, measures and regulations. Based on these measures, we design a questionnaire for a region-wide survey In Phase II.

B. DEFINITION AND SCOPE OF LOGISTICS SERVICES According to the Coalition of Service Industries (CSI) (2004), logistics is defined as the process of planning, implementing, managing and controlling the flow and storage of goods, services and related information from the point of origin to the point of consumption. Although many WTO members made General Agreement on Trade in Services (GATS) commitments in separate segments of logistics services such as freight agency, cargo handling, warehousing, courier and transportation services, a specific checklist for logistics services sector is presently not available. The guide generally used by WTO members is the Services Sectoral Classification List (W/120). W/120 itself is based on the U.N. Provisional Central Product Classification (CPC) system. As noted, CPC does not contain a distinct listing for logistics services. CSI drew the list of logistics services from a number of headings in the CPC and clustered them under a single heading, namely, the logistics services checklist, to facilitate the effort of securing liberalization through GATS negotiations. The United States International Trade Commission (USITC) employs a similar checklist for logistics. Based on the CSI and USITC checklists, we construct a logistics services checklist (see Table 1-1).


1


Table 1-1: Logistics Services Checklist PLACE IN CHECKLIST CORE FREIGHT LOGISTICS SERVICES “TIER 1”

RELATED FREIGHT LOGISTICS SERVICES “TIER 2”

INDUSTRY DESCRIPTION Cargo handling services Storage and warehousing services Freight transport agency services Other supporting and auxiliary transport service Maritime transport services Passenger transportation Freight transportation Towing and pushing services Supporting services for water transport Inland waterways transport services Passenger transportation Freight transportation Air transport services Freight transportation by air Rental services of aircraft with operator Rail transport services Freight transportation Road transport services Freight transportation Rental services of commercial freight vehicles with operator

RELATED FREIGHT LOGISTICS SERVICES “TIER 3”

NON-CORE FREIGHT LOGISTICS SERVICES “TIER 3”

Postal and courier services Postal services Courier services Technical testing and analysis services Technical testing and analysis services Commission agents' services Commission agents' services Wholesale trade services Wholesale trade services Retailing services Food retailing services Non-food retailing services Sale of motor vehicles Sale of parts and accessories of motor vehicles Sale of motorcycles and snowmobiles and related parts & accessories Packaging services Packaging services Leasing and rental services of logistics related equipments Leasing or rental services concerning private cars without operator

7211 7212 7214 745 7221 7222 732 734 7112 7123 7124 7511 7512 8676 621 622 631 632 6111 6113 6121 876 83101

Leasing or rental services concerning goods transport vehicles without operator Leasing or rental services concerning vessels without operator

83103

Leasing or rental services concerning aircraft without operator

83104

Computer and related services Data processing services Database services Management consulting and related services General management consulting services Marketing management consulting services Production management consulting services Real estate services

2

CPC CODE 741 742 748 749

83102

843 844 86501 86503 86505



Real estate services involving own or leased property

821

Data and message transmission services Data and message transmission services

7523

Based on the USITC (2005) we categorize logistics services as: (i) core freight, (ii) related freight, and (iii) non-core freight logistics services. Core freight logistics services include cargo handling, storage and warehousing, transport agency, and supporting and auxiliary transport services. Firms providing such transport management services use their own equipment and transportation fleets to provide truckload, less-than-truckload, air, or sea freight along with value-added logistics services and therefore are very asset intensive. Some LSPs also focus on supply chain consulting such as global network design and distribution strategies, inventory forecasting and planning, product design strategies, information technology (IT) needs assessment, and vendor identification and management. Such LSPs are more IT-intensive and less asset-intensive. Both transport management and supply chain consulting services are key services for the logistics sector and are categorized as Tier 1 logistics service activities (Figure 1-1). Figure 1-1: Logistics Services Activities TIER 3 Computer and related services

TIER 2

Package services

Freight transport services Supply-chain consulting

Road Mgmt. Consulting

Real Estate

Air

TIER 1

Leasing and Rental services

Transport Management Rail

Maritime

Data & Message Transmission

Related freight logistics services include sub-sectors (maritime, inland waterways, air, rail, and road transport services) related to freight transport services as well as technical testing and analysis, postal and courier, commission agents, wholesale trade, and retail trade services. In particular, multimodal freight transportation is classified as Tier 2 logistics services. The rest of the related freight logistics services together with the non-core freight logistics services belong to Tier 3 logistics services. Non-core freight logistics services include packaging, management consulting, real estate, data and message transmission, leasing and rental of logistics related equipments services, and computer and related services. These services are the support sectors for logistics markets and do not belong to the core freight logistics business. All the services identified in Table 1-1 are logistics services. In order to focus on the most relevant aspects of logistics services, this project discusses primarily Tiers 1 and 2 logistics services. Figure 1-1 depicts the scope of logistics industry. In this phase, we examine Tier 1 and Tier 2 services as they have the greatest influence on the logistics service sector.


3


C. THE LOGISTICS SUPPLY CHAIN Figure 1-2 shows the logistics supply chain diagram depicting the typical players involved in the transportation of goods from shipper to importer. The role of LSPs is crucial in logistics services as they integrate the various parts of the logistics supply chain. The LSPs can be asset based or non-asset based. The asset-based LSPs usually own one or more of the assets such as warehouses, trucks, ships, and aircraft. They provide services such as cargo handling, storage and warehousing, customs brokerage, and supporting and auxiliary transport services. These LSPs may also provide services such as customs brokerage, reverse logistics, warehouse and transportation management. The non-asset based LSPs are providers of contract logistics services and operate as an intermediary between the shipper and various LSPs. These contract LSPs may also provide services such as supply chain planning, transportation management, supply chain management, warehouse management and various other IT related services. Figure 1-2: Logistics Supply Chain

Included in the logistics supply chain are also the port operators and operators of distriparks, inland container depots, container freight stations, provider of ground handling services and stevedoring services. These players provide various port related services mainly related to cargo handling, consolidation and distribution of cargo and cargo shipping. There are also other players, mainly regulators and industry associations who influence the logistics supply chain through various regulations and negotiations for making the logistics practices safe and efficient. Figure 1-2, shows that the various players and nodes across the

4



supply chain can introduce inefficiencies due to infrastructure, trans-border barriers, and country-specific regulations.

D. ORGANIZATION OF THIS REPORT This report is organized as follows. Chapter 2 provides an overview of the logistics industry, identifying major industry participants, factors driving demand for logistics services, and the current logistics market. Chapter 3 reviews the literature on trade facilitation measures, ASEAN logistics development and the impact of trade facilitation on free trade in logistics services. Chapter 4 details the research methodology. Chapters 5 to 10 examine the trade barriers due to customs procedures and inspections, foreign investment, maritime, aviation, and land transportation respectively. Chapter 11 discusses the influence of the trade barriers on trade performance. Chapter 12 concludes the study by summarizing the key findings and discusses the limitations of this study.


5



6



II. OVERVIEW OF ASEAN LOGISTICS INDUSTRY A. INTRODUCTION In Singapore, the outsourced logistics market is expected to grow 8 percent from US$2.2 billion in 2005 to US$2.4 billion in 2006. According to the Infocomm Development Authority of Singapore (IDA), the logistics sector employs 93,000 workers and generates revenues of $12.7 billion, which contributes to about 8 percent of Singapore’s GDP. There are over 8,000 logistics establishments in Singapore, including 17 of the world's top 25 Third Party Logistics (3PL) companies. Two home-grown firms, APL Logistics and SembCorp Logistics, were also named among the world’s top 25 3PL companies in a survey by the trade journal, Global Logistics & Supply Chain Strategies, in May 2005. In order to develop the country into a premium integrated transport and logistics hub, the Singapore government has set up a multi-government agency committee led by the then Trade Development Board (TDB) in 1995. In Malaysia, the third most attractive outsourcing site, outsourced logistics market is expected to grow from US$3 billion in 2005 to US$3.25 billion in 2006, and US$3.54 billion in 2007 respectively. Classic outsourcing services, consisting mainly of freight management, warehouse management and distribution, contribute to more than half of the logistics market. The manufacturing sector is one of the main driving forces of the 3PL services in Malaysia. The majority of 3PL services employed by the manufacturing sector, which contributed 84 percent of the total exports in 2005, are for the inbound and outbound logistics. The major users of 3PL services in Malaysia are only the Multinational Corporations (MNCs). The top 10 3PL companies in Malaysia are foreign-owned. In the recent years, local logistics players (e.g., Integrated Logistics Bhd, Century Logistics Holdings Bhd, Konsortium Logistics Bhd, and Tiong Nam Logistics Holdings Bhd) have expanded their service capabilities and have emerged as regional 3PLs. The Malaysia government plays a less active role in developing the logistics industry. However, other than the ad hoc approaches taken by the Ministry of Transport in matters related to the development of the transport sector, no major development has taken place in the logistics services sector. Frost & Sullivan ranks the Philippines second to China as a preferred logistics outsourcing site. In the Philippines, the outsourced logistics market grew rapidly from only US$349 million in 2001 to over US$2 billion in 2004, and US$3.8 billion in 2005 respectively. This revenue is expected to reach US$12.4 billion, accounting for 6.5 percent of the country’s projected GDP in 2010. The number of jobs is expected to grow 30 percent or 303,000 annually or a total of 1.1 million by 2010. Like Malaysia, the Filipino logistics outsourcing industry is dominated by the subsidiaries of global and regional logistics players such as FedEx, Corp., UPS, and GAC Logistics. In Thailand, the outsourced logistics market is worth US$2.5 billion in 2005. This revenue is expected to grow at a compound annual growth rate of 17.2 percent to reach US$7.58 billion in 2012. The Thai government has put in place a 10-year logistics plan to nudge logistics outsourcing and process streamlining. Recently, the government has stepped up effort to push the Thai Small and Medium-sized Enterprises (SMEs) to farm out their logistics management, to combat rising fuel prices and to deal with a challenging business climate. Compared to Singapore, Malaysia, the Philippines and Thailand, the Supply Chain Management (SCM) concept in Indonesia and several other countries such as Lao PDR, Cambodia, Vietnam and India, is still relatively new. As such, data for Brunei, Cambodia, Lao PDR and Myanmar are not available A comparison of the logistics service environment in each of the ASEAN is presented in Table 2-1. It is drawn from the USITC survey results. Logistics quality is measured along six dimensions: regulatory, airport, seaport, availability of complementary resources, burden of security procedures, and customs. The scores vary from zero to ten, with zero indicating a REPSF Project 06/001d: Final report

7


best-quality logistics service environment and ten indicating a lowest-quality logistics service environment. As expected, Singapore has the best logistics service environment, followed by Malaysia and Thailand, while Indonesia and Vietnam lag. Table 2-1: Indicators of Logistics Quality Regulatory score

Airport score

Seaport score

Availability of complementary resources

Burden of security procedures

Customs score

Indonesia

4.82

4.51

5.91

8.00

6.00

7.71

Malaysia

2.65

3.82

4.98

5.10

5.19

5.39

The Philippines

4.06

4.59

4.85

6.10

6.33

6.33

Singapore

0.87

3.98

4.36

4.09

3.67

5.21

Thailand

3.43

4.88

5.50

6.07

5.83

6.43

Vietnam

5.15

5.13

5.09

7.13

4.50

7.07

Country

Source: USITC (2005)

B. KEY LOGISTICS PLAYERS IN ASEAN The key logistics players in ASEAN include four different types of firms: a. LSPs (e.g., YCH, Toll Asia, Bax, DHL, and TNT); b. Members of the respective country associations in logistics (e.g., SLA, TIFFA, INFA, CILT, and VIFFAS); c. Members of the shipping community (e.g., NOL, PIL, and RCL); and d. Members of the air cargo community (e.g., Thai Airways, Malaysian Airlines). Most LSPs plying in ASEAN operate on a regional and global arena. Many of these are home-grown LSPs, who started as basic LSPs to being providers of value-added services and now as providers of logistics and supply chain solutions. In addition, there are a few global players. Thus, the regional and global LSPs provide a good cross-section of the logistics sector. Table 2-2 shows the major LSPs operating in ASEAN, their 2005 revenues, manpower and services.

8



Table 2-2: Some Information on Major LSPs in ASEAN REVENUE (US$ mil) 2005

MANPOWER 2005

LOGISTICS SERVICES PROVIDED

Airocean

329.2

1,115

International freight forwarding, general sales agency (GSA) for major international airlines, air terminal ground cargo handling services

APL Logistics / NOL

1300

5,000

Shipment consolidation and deconsolidation, global freight forwarding and customs management, regional warehousing and distribution networks and IT solutions

31544.6

12,000

Supply chain management and transportation solutions, multi-modal logistics management for businessto-business shippers, specialty services for the aerospace, automotive, hi-tech, retail, health care industries

CWT Logistics

32.9

1,464

Logistics, international freight forwarding and engineering

DHL

60.7

285,000

3090

8,000

Transportation (international and domestic freight forwarding via air, ocean and ground), import and export services

Expeditors International

3900

10,000

Vendor consolidation, air and ocean freight forwarding, customs brokerage, insurance, ocean consolidation, distribution and value-added services

Keppel Logistics

N.A.

N.A.

Offshore and marine, infrastructure and property

Sembawang Kimtrans

56.4

402

Warehousing and storage, freight forwarding and marine transportation, heavy lift and haulage, cargo consolidation and distribution, procurement and project logistics

Kuehne + Nagel

11.4

42,000

Global seafreight, airfreight, rail, road transportation and contract logistics businesses with a focus on providing IT-based supply chain management services

Lao Freight Forwarder

N.A.

N.A.

Transport, forwarding and packing of all kinds of outgoing and incoming goods by overland, river, air and sea

LTH Group

N.A.

N.A.

Dangerous Goods (DG) and non-DG storage, chemical transportation in bulk tankers and ISO-tanks containers, container haulage, packaged goods transportation, freight services and documentation services

FIRM

BAX Global / Schenker1

EGL Eagle Logistics

1

Global

Full range of customized solutions - from express document shipping to supply chain management

Total revenue is for DB Group


9


REVENUE (US$ mil) 2005

MANPOWER 2005

LOGISTICS SERVICES PROVIDED

15091.2

38,300

Across nearly the entire range of logistics, including motor freight transport, railway forwarding, marine transport, air freight forwarding, warehousing

NYK Logistics

3300

17,000

Warehousing and distribution, freight forwarding, International network solutions, supply chain consulting, IT solutions

Pacorini-Semblog

N.A.

N.A.

Chartering and brokerage, transports and freight forwarding, handling and warehousing

PIL Logistics

N.A.

N.A.

Consulting services span from strategy consulting and supply chain design to technology services, systems integration and overall business process rationalization

RichLand

20.5

400

Transportation management, airport cargo terminal handling, supply chain services

SembLog /Toll Asia

639.5

N.A.

Supply chain management solutions focusing on six sectors - consumer, retail, healthcare, automotive, high tech and industrial

Societe Mixte de Transport

N.A.

N.A.

Customs clearance, transhipment co-operation, project cargo handling, sea-air services, inland transportation, inland transportation, open air storage services

4398.6

35,000

Complete range of logistics services covering the entire supply chain- design and operate integrated supply chain management solutions.

1490.4

18,000

Integrated logistics and supply chain management, exhibition and event logistics

YCH

N.A.

N.A.

Integrated logistics services, global end-to-end supply chain management services such as raw materials management, consumer goods distribution and service and returns management

CG Logistics

N.A.

N.A.

Supply chain execution, delivery services, warehousing

Panalpina

6.7

13,583

Yes Logistics- Evergreen

N.A.

N.A.

FIRM

Nippon Express

TNT Logistics Trans-Link Logistics2

/

PWC

Intercontinental air freight and ocean freight shipments and associated supply chain management solutions Freight forwarding, customs brokerage, warehousing and distribution, integrated logistics

Source: Information extracted from company websites 2

Total revenue and number of employees are for PWC Logistics

10



C. TRADE PERFORMANCE IN TOTAL SERVICES AND TRANSPORT In this section, we analyze the trade performance of transport services and compare it with that of total services. As logistics data is unavailable, we use transportation data as a proxy of logistics services. The trade flows of transport and total services for each ASEAN country are obtained from UNCTAD, which has trade flows available for all ASEAN except Brunei.3 In this database, the trade flows are not decomposed into intra- and extra- ASEAN trade flows. Therefore, our analyses are based on the total export and import of each ASEAN country, from year 1980 to 2004. For some country-years, when the data is not available, it is denoted as ‘NA’. Table 2-3 presents the export and import in total services and transport sector for each ASEAN country (except Brunei) from 1980 to 2004. Only the Philippines and Thailand have trade flows available for 2004. Generally, for ASEAN, about 20% of the total services export is from the transport sector. Indonesia and the Philippines have the lowest share (7.2% and 10.6%, respectively) in the transport sector. Malaysia has the highest share of 29.8%. Transport import accounts for about 40% to 50% of total services import. The proportion of Indonesia’s transport service is 36.0%, the lowest among ASEAN. The highest proportion is from Thailand (51.1%). On total services, many countries have balanced trade flows i.e., the ratios of total service imports to total service exports are generally in the range of 0.7 to 1.5. Indonesia is an exception as its total imports are 11 times of total exports in 1981. By 2003, Indonesia’s import has reduced to 3.3 times of export, although it is still the highest among the ASEAN nations. In 2003, except Cambodia and Singapore, all the other countries’ import outweighs their export, albeit the gap is not huge. Singapore has equal export and import amounts for total services. Cambodia’s import is about 70% of its export. The latest import and export data for Lao PDR is for 2001, where the import is only 20% of export, the lowest among all the country-years. The transportation sector is quite different from total services in terms of trade balance. Transportation imports are usually 2-3 times of exports for many ASEAN except Singapore and Indonesia. From 1980 to 1984, Singapore’s transportation imports are almost equal to its exports. From 1985 to 1994, Singapore’s transport import is in the range of 1.2 to 1.6 times of its export. After1995, Singapore’s transport import is almost 1.1 times of its export. Singapore has the least trade deficit in the transportation sector. Conversely, Indonesia suffers the most trade deficit. In 1991 and 1992, Indonesia’s transportation import is about 40 times of its export. In 1993, this ratio increased to 83. Transportation export data are unavailable for Indonesia from 1994 to 2001. In 2002 and 2003, Indonesia’s transportation import to export ratio reduced to 5, due to a huge increase in export. Figures 2-1 and 2-2 depict the total services export for each ASEAN country (except Brunei) from 1980 to 2004. The patterns are similar for export and import. Generally, there are clearly upward trends till 1997 on both export and import for ASEAN. In 1986, Singapore’s total services export was at a record low. From 1986 to 1997, the growth rates are increasing for both export and import and for many countries. Due to the Asian financial crisis, trade flows dropped significantly for many ASEAN in 1998. Figure 2-2 shows that the total services exports are dramatically affected for all ASEAN except Cambodia, Lao PDR and Vietnam. Myanmar seems to be affected with a lag, and the effects are prolonged till recent years. The Philippines’ total services export also experienced prolonged depression, recouping some losses in recent two years but still far behind that prior to the Asian financial crisis. Singapore is the most robust country in withstanding the crisis. Its export rebounded in 1999. In 2000, all losses were recovered. Moreover, the total services export has increased over time. Countries such as Indonesia, Malaysia and Thailand have also recovered from the crisis since 1999. However, their recovery rate is not as fast as Singapore’s. 3

http://stats.unctad.org/Handbook/TableViewer/tableView.aspx?ReportId=171.


11


Table 2-3: ASEAN’s Export and Import in Total Services and Transport Sector in US$ mil (1980-2004) C o unt r y

Sect o r Tot al services

Cambodia Transport

Tot al services Indonesia Transport

Tot al services Lao PDR Transport

Tot al services M alaysia Transport

Tot al services M yanmar Transport

Tot al services Philippines Transport

Tot al services Singapore Transport

Tot al services Thailand Transport

Tot al services Viet nam Transport

F lo w

19 8 0

19 8 1

19 8 2

19 8 3

19 8 4

19 8 5

19 8 6

19 8 7

19 8 8

19 8 9

19 9 0

19 9 1

19 9 2

19 9 3

19 9 4

19 9 5

19 9 6

19 9 7

19 9 8

19 9 9

2000

2001

2002

2003

2004

Exports

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

50

64

55

114

163

160

177

294

428

525

604

526

NA

Import s

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

64

121

140

188

215

188

221

292

328

347

374

394

NA

Exports

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

10

11

32

50

50

37

48

71

87

89

83

NA

Import s

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

16

53

72

84

100

92

107

137

170

187

214

234

NA

Exports

NA

449

504

546

570

844

844

1065

1369

1875

2488

2822

3391

3959

4797

5469

6599

6941

4479

4599

5214

5500

6663

5293

NA

Import s

NA

4998

4862

4311

4239

5135

4256

4440

4606

5439

6056

6564

8100

9846

11416

13540

15139

16607

12088

12376

15637

15880

17045

17400

NA

Exports

NA

68

69

50

49

42

39

41

44

54

70

81

89

44

NA

NA

NA

NA

NA

NA

NA

NA

1058

856

NA

Import s

NA

2004

2171

2125

1845

1577

1441

1475

1666

2081

2795

3187

3574

3667

3913

4861

5244

5400

3730

3274

4016

3877

5150

4824

NA

Exports

NA

NA

NA

NA

15

21

24

26

18

23

24

38

61

85

87

97

104

106

145

130

176

166

NA

NA

NA

Import s

NA

NA

NA

NA

58

43

34

38

27

26

26

48

71

76

152

122

126

111

96

52

43

32

NA

NA

NA

Exports

NA

NA

NA

NA

4

5

6

7

6

9

8

11

14

18

11

15

16

19

19

18

20

23

NA

NA

NA

Import s

NA

NA

NA

NA

36

17

16

19

14

19

18

22

31

34

43

51

48

45

38

5

5

5

NA

NA

NA NA

Exports

1135

1315

1579

1851

1932

1934

1981

2273

2379

2870

3859

4374

4989

6412

9320

11602

15136

15727

11517

11919

13941

14455

14878

13578

Import s

2957

2856

3269

3964

4254

3927

3575

3595

4205

4792

5485

6564

7336

9516

12052

14981

17573

18297

13127

14735

16747

16657

16448

17532

NA

Exports

472

528

536

655

731

690

840

1043

1104

1127

1198

1389

1593

1613

1871

2466

2822

2861

2271

2492

2802

2748

2855

2767

NA

Import s

1310

1388

1414

1558

1629

1408

1259

1445

1795

2144

2531

3023

3181

3433

4356

5609

5433

5549

4088

4720

5890

5736

5892

6260

NA

Exports

53

74

83

65

62

67

67

70

47

57

94

57

113

249

272

365

432

527

633

512

478

408

379

300

NA

Import s

74

92

107

76

71

83

57

47

35

45

73

55

43

132

130

246

305

448

369

291

328

363

322

355

NA

Exports

18

24

25

6

10

7

6

6

5

5

10

4

3

6

3

23

41

37

34

82

76

71

72

80

NA

Import s

42

63

76

30

30

16

22

7

8

15

26

1

11

14

17

26

37

111

163

225

254

277

221

221

NA

Exports

1447

1791

1804

1808

1642

2235

2860

2345

2413

3225

3244

3654

4742

4673

6768

9348

12947

15137

7477

4803

3972

3148

3055

3299

4101

Import s

1439

1632

1823

1733

1194

867

844

1155

1308

1564

1761

1804

2308

3090

4654

6926

9429

14122

10107

7515

6402

5198

4072

5024

5383

Exports

206

244

174

133

150

200

159

169

220

235

246

242

273

218

233

274

358

357

324

575

891

659

630

935

1121

Import s

749

766

804

651

445

372

397

552

726

887

980

1062

1199

1425

1457

2051

2287

2673

1983

1944

2988

2417

2000

2316

2444

Exports

4856

7184

8128

7834

6153

4688

4806

5795

7563

9658

12811

13823

16200

18597

23044

27832

29195

28080

23570

26372

29404

29106

29993

30715

NA

Import s

2912

3254

3613

3782

4024

3554

3808

4612

5797

6849

8642

9124

9537

11321

13898

20819

22305

22298

19681

24282

27432

28382

29750

29580

NA

Exports

1308

1462

1521

1397

1435

966

970

1195

1591

1838

2225

2517

2766

3173

4042

8306

8935

8780

9070

10692

11890

11463

11998

11799

NA

Import s

1114

1237

1377

1311

1351

1394

1379

1922

2491

2831

3513

3794

3582

4015

4797

9243

10107

10377

9574

11094

12814

12383

12780

13440

NA

Exports

1490

1612

1717

1846

1964

2041

2302

3070

4648

5457

6419

7272

9288

11059

11640

14845

17007

15763

13156

14635

13868

13024

15391

15798

19040

Import s

1644

1819

1658

1909

1910

1815

1852

2406

3569

4505

6309

8040

10368

12469

15396

18804

19585

17355

11998

13583

15460

14610

16720

18169

23211

Exports

299

305

354

407

459

463

450

713

989

1071

1327

1484

1526

1964

1842

2455

2618

2417

2671

3017

3250

3057

3265

3503

4350

Import s

1059

1131

1002

1169

1191

1126

1133

1492

2235

2864

3576

4185

4539

5005

5862

7780

7845

6890

4604

5305

6760

6830

7121

8484

10937

Exports

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

2243

2530

2616

2493

2702

2810

2948

NA

NA

Import s

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

2304

3153

3146

3040

3252

3382

3698

NA

NA

Exports

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

Import s

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

NA

Data source: UNCTAD, http://stats.unctad.org/Handbook/TableViewer/tableView.aspx?ReportId=171

12



Figure 2-1: ASEAN’s Total Service Export (1980-2004) Cambodia

35

Indonesia Lao PDR

30

Malaysia Myanmar

US $000' Million

25

Philippines 20

Singapore Thailand

15

Viet Nam

10 5

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

0

Moreover, the total services export is increasing over time for Singapore. Other countries such as Indonesia, Malaysia and Thailand have also recovered from the crisis since 1999. However, their recovery rate is not as much as that of Singapore. Figure 2-2: ASEAN’s Total Service Import (1980-2004) 35 Cambodia Indonesia

30

Lao PDR US $000' Million

25

Malaysia Myanmar

20

Philippines Singapore

15

Thailand Viet Nam

10 5

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

0

The year 1998 also saw a big drop in total services import in many ASEAN. Cambodia and Vietnam are the two countries which did not suffer any loss. Similar to its import, the Philippines’ total services export is also affected by the crisis for a long time. Although Lao PDR’ export is not affected by the crisis, its import has reduced greatly since 1998. However, Singapore’s total services import has witnessed a positive growth rate after the crisis. Figures 2-3 and 2-4 present the trends of the ASEAN’ transportation export and import respectively. Different from the total services export, transportation export is less affected by the Asian financial crisis. Only Malaysia, Myanmar, and the Philippines were affected by the crisis to some extent. But these countries recovered quickly. No transportation export data is available for Indonesia from 1994 to 2001. Indonesia’s transportation export in 2002 is 24 times of that in 1993. Singapore’s growth in this sector is the highest while many countries REPSF Project 06/001d: Final report

13


have a slow but steady increase in transportation export. This gap between Singapore and the other ASEAN nations has widened over time. Transportation imports had suffered more from the Asian financial crisis than transportation exports. Even though many countries have recovered their transportation imports level, the recovery took a long time and their growth rates were lower than those of exports. The growth rates are highest for Singapore and Thailand. Singapore and Thailand are also leading in transportation import by value. Figure 2-3: ASEAN’s Transportation Export (1980-2004) 14 Cambodia Indonesia

12

Lao PDR Malaysia

US $000' Million

10

Myanmar Philippines

8

Singapore Thailand

6

4

2

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

0

Figure 2-4: ASEAN’s Transportation Import (1980-2004) 16 Cambodia 14

Indonesia Lao PDR

12

Malaysia

US $000' Million

Myanmar 10

Philippines Singapore

8

Thailand

6 4 2

14

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

1980

0



III. LITERATURE REVIEW A deepening of economic integration in ASEAN has been concomitant with an expansion of trade facilitation activities such as the harmonization of standards and facilitation of goods in transit. At the 9th ASEAN Summit in 2003, the ASEAN Leaders adopted a framework for achieving an ASEAN Economic Community (AEC) by 2020 with a view to creating a single market and production base with the free flow of goods, services, investment skilled labour, and a greater mobility of capital. This would naturally entail a huge effort towards trade facilitation in the entire region. Lloyd and Smith (2004) (REPSF 03/006a) note in their report on ASEAN integration that the creation of a single market implies that the law of one price holds in all markets. To obtain the goal of economic integration (i.e., a single market), they identified three sets of measures.

Border measures applying to imports into one member country Beyond-the-border measures applying to imports into one member country Harmonization of measures across member countries

ISEAS (1985) reports two types of trade barriers to services, namely, border restrictions and investment restrictions. Border restrictions limit the flow of services into the country, while investment restrictions affect a foreign firm’s competitive position relative to that of the local firms. Recently, Dee (2005) estimates the barriers to trade in services by converting the qualitative information on regulatory conditions in the services sector into a quantitative index. Sidorenko and Findlay (2003) examine the links between services trade barriers and beyondthe-border domestic regulations. Border measures refer to the traditional tariff and non-tariff measures (NTM) such as quotas, prohibitions or licensing. Beyond-the-border barriers are the measures that apply after the goods have crossed the border, such as technical barriers due to industrial, environmental and other standards, other regulations which discriminate against foreign goods and differences in tax treatment. In the case of services (e.g., logistics), tariff measures are not applicable. Most of the variation in time and cost across countries in the logistics services sector stem from differences in the quality and cost of infrastructure services as well as differences in policies, procedures, and institutions. They have a significant effect on trade competitiveness and hence economic integration. Therefore, these measures need to be identified and addressed for achieving economic integration.

A. TRADE FACILITATION MEASURES According to Wilson et al. (2003), trade facilitation implies improved efficiency in the administration, procedures, and logistics at ports and customs. In a broader sense, it encompasses 'the transparency and professionalism of customs and regulatory environments, as well as the harmonization of standards and conformance to international or regional regulations. The Asia Pacific Foundation of Canada (1999) measures the relative importance of the three kinds of trade facilitation measures (customs, standards and regulatory conformance, and business mobility) for doing business in APEC. CIES (2006) (Phase I of the REPSF 04/011 project) note that the most important barriers to services are the regulations that operate behind the border. Most of these do not explicitly discriminate against foreign suppliers but still affect the local service firms. REPSF 04/011 identifies a few studies that report barriers to services trade and more specifically to the logistics services sector. The OECD (2001) has surveyed the literature on trade facilitation by looking at trade transaction costs for business that would be reduced with trade facilitation measures. Trade transaction costs are defined to include costs directly related to formalities; charges for tradeREPSF Project 06/001d: Final report

15


related services; costs related to procedural delays; lost business opportunity costs; and costs related to the lack of predictability. Later, the OECD (2003) developed two indicators, border process quality and border waiting time, to measure customs efficiency for 102 and 80 countries respectively. Time is also an important barrier to trade (Hummels, 2001; Nordas et al., 2006; Cudmore and Whalley, 2004; Djankov et al., 2006). The OECD (1999) presents an inventory of measures affecting trade in air cargo services. Gonenc and Nicoletti (2000), and Doove et al. (2001) have examined the degree of restrictiveness of provisions in air service agreements. They classify the regulatory restrictions into (1) designation requirements; (2) capacity regulation; (3) price regulation; and (4) regulation of non-scheduled services. Clark et al. (2004) have identified three determinants of port efficiency: (1) restrictions against foreign participation in cargo handling; (2) whether the following port services are mandatory: pilotage, towing, tug assistance, navigation aids, berthing, waste disposal, anchorage and other mandatory services; and (3) the absence of organized crime. Fink et al. (2002) have constructed a cargo handling restrictions index to captures the restrictions and special requirements imposed on foreign suppliers of cargo handling services. Carana (2005) identifies several cost factors in maritime, road and air transports. More recently, PDP Australia Pty Ltd (2005, REPSF 04/001) assessed the performance of the ASEAN maritime sector and further identified a number of concerns that inhibit the ability of shipping to serve as a catalyst and facilitator for ASEAN economic integration. Hausman et al. (2005) have employed the global logistics indicators developed by the World Bank to estimate the impact of logistics performance on the level of bilateral trade. These indicators are based on time, cost, variability, complexity, and risk. USITC (2005) further identifies other measures that may influence efficient trade across countries. It categorizes the measures that inhibit trade facilitation in global logistics services as regulatory, border and customs, security, and mode-specific. Wilson et al. (2003) have analyzed the impact of trade facilitation on trade flows in the Asia-Pacific, using four indicators: (1) port efficiency; (2) customs environment; (3) regulatory environment; and (4) e-business usage. Later, Wilson et al. (2005) and Wilson et al. (2006) employ the same trade facilitation measures to investigate their relationship to trade for 75 countries and for the main industrial sectors in Mexico respectively.

B. LOGISTICS SECTOR DEVELOPMENT IN ASEAN Multimodal transportation is an important topic in logistics research. The literature on this topic outlines the need for the development of intermodal transport networks, benchmarking of intermodal freight transport (OECD, 2002) as well as the cost and time benefits of using intermodal transport (Banomyong, 2004). Several methods have been adopted to study the issues related to multimodal transport. Case study research focusing on cost and time has been conducted to show the cost and efficiency advantages of using the different combinations of routes and modes for the transportation of freight in ASEAN (Banomyong, 2000, 2004). Studies on regional issues related to multimodal transport have been conducted in the EU (Lewis et al., 2001), APEC (Goetz et al., 2002), etc. The focus of these studies ranges from the benchmarking of costs and analysis of issues related to intermodal transport to theoretical studies of these transport networks (Stank and Roath, 1998). Dee (2004) uses existing measures of trade barriers to examine their impact on cost in seven different service sectors in Thailand, including the international air and sea transport sectors. The Computable General Equilibrium (CGE) model is used to ascertain the welfare effects of the restrictive regulations. Some organizations including the REPSF, World Bank, ALMEC and USITC have conducted numerous country studies in the logistics sector which mainly focus on infrastructure and geographic issues that influence efficient trade across the countries in 16



ASEAN. A study by the Nomura Research Institute (2002) has examined logistics related demands and issues that might hinder the growth of the most traded products from Vietnam. Arnold and Villareal (2002) have examined the logistics of selected commodities produced in the Philippines for export. They assess the effects of logistics impediments on the total supply chain, market price and household budgets. Arnold (2003) has also studied logistics development and trade facilitation in the Lao PDR. He identifies a number of problems in the existing transport network connected to the Lao PDR as well as trade facilitations (financial institutions, customs procedures and duties, as well as trade and transit agreements) and suggests some improvements to facilitate trade. Related to this, Goh and Ang (2000) have looked at the logistics development of the Greater Mekong Sub-region. Carana (2004) examines the impact of transport and logistics on Indonesia’s trade competitiveness. It investigates constraints covering various modes of transport, intermodal networks, infrastructure, customs practices and procedures, trade related banking and financial practices, transport intermediaries as well as the overall development of Indonesia’s transport and logistics system. ALMEC (2002) analyses the development of maritime transport system in ASEAN, including the liberalization of shipping, port system and logistics development. It also employs a case study to investigate the access to maritime transport in the Lao PDR. REPSF (2005) identifies the measures of the efficiency and competitiveness of shipping services between ASEAN ports. It analyses the current status of intra-ASEAN shipping and proposes the changes needed to improve system performance. Other logistics and trade studies cover countries in ASEAN and other regions. For example, Carana (2005) examines the impact of transport and logistics systems on trade competitiveness in Bulgaria, Indonesia, Mali and Nicaragua. Carruthers et al. (2003) discuss the assessment of present logistics services and the impediments, and opportunities they offer for free trade in East Asia. Wilson and Otsuki (2004) have evaluated the gains to trade in South Asia from improvement in port efficiency, customs environment, regulatory environment, and service-sector infrastructure.

C. IMPACT OF TRADE FACILITATION ON FREE TRADE Dollar et al. (2004) report that firms in countries with a better investment climate, including better logistics have a higher probability of exporting to international markets and attracting foreign direct investment. Subramanian et al. (2005) find that long customs clearance times affect a firm’s productivity adversely. Several recent studies use the CGE model to assess the impact of reduced transaction costs on trade flows. For instance, UNCTAD (2001) uses a CGE analysis to consider trade facilitation in the broader context of creating an environment conducive to developing e-commerce usage and applications. It finds that a one percent reduction in the cost of maritime and air transport services could increase Asian GDP by about US$3.3 billion. APEC (1999) estimates that APEC merchandise exports would increase by 3.3 percent from the trade facilitation effort to reduce costs. Hertel et al. (2001) find that greater standards harmonization for e-business and automating customs procedures in Japan and Singapore will increase trade flows between these countries as well as their trade flows with the rest of the world. Likewise, Cudmore and Whalley (2004) report that border delays can cause a welfare loss of 0.13 percent. Other researches employ the gravity model to investigate the impact of trade facilitation on international trade. Fink et al. (2002) find that liberalizing the provision of port services and regulating the exercise of market power in shipping leads to a decline of a third of the shipping costs on average. Clark et al. (2004) show that a doubling in distance roughly increases maritime transportation costs by 18-percent. Further, transportation costs are found to be negatively associated with bilateral trade. Freund and Weinhold (2000) find that a REPSF Project 06/001d: Final report

17


10-percent increase in the relative number of web hosts in one country increased trade flows in 1998 and 1999 by one percent. Moenius (2000) finds that bilaterally shared standards can promote trade. Otsuki et al. (2001a, 2001b) show that African export of cereals, nuts and dried fruits will decline by 4.3 (cereals) and 11 (nuts and dried fruits) percent with a 10percent tighter EU standard on aflatoxin contamination levels of these products. Hausman et al. (2005) find that logistics index is positively associated with bilateral trade. Hummels (2001) reports that each day saved in shipping time reduces the probability of trade by one percent (for all goods) and 1.5 percent (for manufactured goods). Djankov et al. (2006) find that each day of delay to a product prior to being shipped reduces trade by at least one percent. De Groot et al. (2004) find that increasing the overall quality of institutions would significantly increase bilateral trade. Limao and Venables (2001) show that a deterioration of infrastructure from the median to the 75th percentile increases transport cost by 12 percent and reduces trade volume by 28 percent. Finally, enhanced port efficiency has a large and positive effect on trade but regulatory barriers deter trade in the Asia-Pacific (Wilson et al., 2003). Wilson et al. (2005) report that improvement in all four trade facilitation measures results in increases in both exports and imports. Wilson et al. (2006) suggest that unilateral trade facilitation reforms in Mexico could increase export by more than 20 percent and increase import by 11 percent respectively.

18



IV. RESEARCH METHODOLOGY A. RESEARCH APPROACH AND DATA COLLECTION In this study, we adopted both primary and secondary research for collecting data. As a part of the secondary research, we conducted a thorough desk review of a number of studies for compiling the list of policies and performance measures that influence free trade in logistics services worldwide. We elicited data from various website, industry news, World Bank surveys, and previous REPSF reports. For the fieldwork, we conducted semi-structured interviews with various players in the logistics supply chain. We interviewed shippers, regulatory bodies, logistics trade associations as well as logistics service providers (both shipping agencies and freight forwarders) to gain a comprehensive understanding of the barriers to logistics services in ASEAN.

B. SURVEY QUESTIONNAIRE To conduct the semi-structured interviews, we designed a questionnaire to guide the interview protocol. Appendix 1 contains a copy of the interview request letter, ASEAN Secretariat endorsement letter and the questionnaire used for the semi-structured interviews. For each question and country, we designed two sub-columns indicating E and S where ‘E’ = Yes/No question asking if the barrier indicated by the question exists in the country or not, and ‘S’ = significance of that barrier to that country if it exists. Respondents were also asked to indicate the significance of the barrier to free trade. For assigning the significance of the barrier to free trade and the influence of the barrier in a particular country, we used the same Likert-6 point scale (1 = insignificant, 6 = critically significant).

C. TRADE PERFORMANCE MEASURES As each barrier would influence trade performance to a certain extent, we asked the respondents to identify the specific trade performance measure that would be influenced by the barrier. We identified five measures of trade performance as shown below:

Total time of shipping Total cost of shipping Quality of shipment (related to efficiency of logistics services provided by the LSP) Trade volume (related to the total volume that could be shipped) Reliability of the shipment (related to damage and pilferage of goods in transit)

D. FIELDWORK We interviewed 36 respondents who represent various players in the logistics supply chain. As one respondent could not be classified as any of the measured groups, our sample size is reduced to 35. We conducted face-to-face interviews with most of the respondents and teleconferences with some of the respondents. We also visited some of the countries to identify the trade barriers. The teleconferences were the most efficient and adequate source of information, and afforded flexibility for both the interviewer and the interviewee. The average duration of an interview was an hour. The major sources of information about barriers were the LSPs and the shipping agencies. The shippers deal with the LSPs and hence do not face the logistics barriers directly. The industry associations were also a source of useful and unbiased information.


19


Regulatory bodies and port operators were a useful source of information for the infrastructure related barriers that influence free trade. Our main focus was on interviewing non-asset and asset based LSPs who face such barriers directly as they deal with customs and face the regulatory authorities in respective countries. Table 4-1 reflects respondents interviewed with respect to a particular country; and Table 4-2 reflects respondents interviewed by their “position” in the logistics supply chain respectively. Table 4-1: Respondents Interviewed by Country Countries Represented No. of Respondents Brunei

12

Cambodia

13

Indonesia

26

Lao PDR

8

Malaysia

27

Myanmar

9

Philippines

20

Singapore

26

Thailand

27

Vietnam

21

Table 4-2: Respondents Interviewed by “Position” in Logistics Supply Chain Position No. of Respondents Trucking

4

Asset based LSP

13

Non-asset based LSP

12

Contract LSP

3

Regulatory bodies

1

Industry associations

6

E. CHALLENGES We report some of the problems encountered when conducting the fieldwork. There are different types of companies along the supply chain with different foci on logistics. Therefore, not all the sections of the interview questionnaire could be applied to any one respondent. Some respondents were more forthcoming in answering certain portions of the interviews.

20

We found it difficult to assign the significance numbers to any country for any specific barrier. This results in difficulty in analysing the logistics friendliness indicators. The results we obtained from most respondents were specific to the respondents. This could result in response bias. Most firms would prefer to operate in tax free region and so on. But this may not be in the best interest of the country from a security and economic perspective.



Many barriers are due to the practices of the LSPs. Also, the lack of infrastructure was raised by the respondents as a significant barrier to logistics services. We could not obtain specific data on clearance times and cost along the supply chain from the interviews. There was a large variation among different respondents regarding such data.

F. LOGISTICS BARRIERS TO TRADE FACILITATION IN ASEAN We created a database containing an inventory of the findings, based on the transcripts of the interview. Next, we divided the logistics barriers into six major segments as listed below:

Customs related barriers

Foreign investment related barriers (Foreign Equity, Licensing, Transparency and Labour related barriers)

Maritime specific barriers (Regulatory and Infrastructure)

Aviation specific barriers (Regulatory and Infrastructure)

Land transportation specific barriers (Regulatory and Infrastructure)

Other barriers

These barriers are presented in the following six chapters.


21



22



V. TRADE BARRIERS: CUSTOMS PROCEDURES AND INSPECTIONS According to the report by the USITC (2005), customs procedures and inspections pose the most significant obstacle to the provision of Tier 1 and Tier 2 logistics services, the principal objective of which is to move freight expeditiously, reliably, and at low cost. Most of the interviewees reported customs regulations to be the most significant barrier in influencing free trade. Among the 10 ASEAN, the influence of customs related barriers is least significant in Singapore. All other countries have complicated customs regulations and high import duties for a number of products. Moreover, only Singapore is a free port. For example, for moving cargo between Thailand to Singapore via Malaysia, road transport is a cheap and efficient mode. However, due to complicated customs barrier, most of the cargo is moved via ocean. Customs give rise to a number of trade barriers.

A. CUSTOMS DOCUMENTATION 1. Time Consuming Documentation Requirements (Critically Significant – 6) Typically, LSPs are required to submit the import/export documentation at the customs border of the respective country. The inefficiency in documentation arises due to the lack of a fully automated and integrated system such as EDI. As a result, a large number of documents are required to be completed, the lack of a standard documentation format across countries, and the lack of transparent regulations. As such, documentation consumes a large chunk of the processing time. Some of the documents required to be submitted at the customs office include the pack list, trade document, shipping document, regulation form and sometimes the country of origin. The import shipments to Singapore, Malaysia and Thailand are typically divided into four categories, namely, documents (no value), low value-shipments, non-dutiable shipments above a certain country-specific value, and dutiable shipments. For the last two categories, customs usually require more information. For example, in Singapore, documents (such as mail) can be processed quickly, but dutiable cigarettes are inspected very carefully. The customs authorities of some countries require a number of documents which inadvertently delays the documentation process. For example, the customs authorities of Indonesia and Thailand require a number of different documents, albeit often repeated, to be filled which increases inefficiency in the documentation process. In Indonesia, customs require import licences for any goods as well as the shipping list. If a company has licences, it can import at any time. Apart from an import licence, the other documentation needed is the shipping list (item list). In Thailand, customs specifically require many details on their documents. Typically, it takes 5-7 days to clear after the goods arrive at the port. Similarly, for cross border flow between Malaysia and Singapore, several layers of documentation are required. From Singapore to Malaysia, one needs to fill export documentation from Singapore and nearly a similar set of import documentation to enter Malaysia. In Myanmar, it requires at least 3 weeks to obtain an export/import licence and other documentations for each shipment. The procedure is time consuming and this poses the greatest impediment to trade in Myanmar. If a licence cannot be obtained on time, a penalty is imposed. Likewise, in Vietnam and Lao PDR, customs clearance takes about the same time. When documents are in good order, customs clearance (import) can be less than three days. For transit goods, it takes 3-5 days. In Lao PDR, one needs to obtain a number of licences. For example, five forms are required to be filled for goods shipped between Thailand and Vietnam, transiting via Lao PDR. In Brunei, apart from the electronic documentation, additional manual entry and printed documentation are required, although the number of documents is few.


23


EDI is used for customs documentation in most of ASEAN. However, it is not fully functional except in Singapore. In Malaysia, for example, documents can be submitted using EDI, but the payment process is manual. Similarly, in Indonesia, the Philippines, and Thailand, even though EDI is in place, the documentation review process is very long and uncertain. For example, in Thailand, after the completion of the approval process, one needs to bring the documents to the customs office for stamping. In the case of Brunei, the documents can be prepared in the computer and then saved onto a disk which is then transferred for further processing. In Myanmar, EDI is not fully functional and the documents need to be prepared 5 days in advance of the arrival of the goods. Lao PDR and Cambodia are, however, poor in EDI. In Lao PDR, while there is a single-stop-window at the border, the inspection is done twice, one at the single-stop-window and the other with the local customs at the Lao border. Another comment on documentation is the lack of a standard format across ASEAN. To cross the border, two different sets of documentation (import and export) are required for customs clearance. Different countries have different documentation templates and working languages (English, Thai etc.). This makes the process tedious and difficult, and leads to inefficiency in cross-border trade. 2. Different Classification of Goods in Different Countries (Critically Significant–6) In ASEAN, the harmonized system (HS) is in place. However, it is misperceived in many countries. Classification is only applicable when there is a tax regime. As the taxes are different, shippers tend to arbitrarily classify their goods so as to pay minimum tax. For example, some customs classify toys as plastic goods while others classify them as decoration items. This misclassification is either due to the lack of education among customs authorities or due to the logistics unfriendly practices. Also, transit delay occurs when LSPs challenge the customs officials on the classification codes. Logistics costs also increase because of detention, as the containers are detained at the port, thereby increasing port charges. The classification of goods depends on interpretation even at a country level. For example, at the two ports of Malaysia where different customs checkpoints charge different duties for the same goods (15% at Port Klang and 25% at Johor port). In Brunei, customs officials are not well educated on the classification system. Therefore, the shippers have to rely on whatever they say. In Brunei and Thailand, customs officials can change the classification codes arbitrarily and intentionally. In Indonesia and Cambodia, there is a language problem, as codes are in English and customs officials do not fully understand English. Also, there is a lack of knowledge among customs officials in Vietnam, Cambodia and Lao PDR, especially on goods such as electronics. In addition, Indonesia and Thailand do not allow the import of any used parts, which increases the potential of goods misclassification. 3. Regulations that Limit Foreign Firms’ Ability to Provide Brokerage Services (Slightly Significant – 2) Most countries do not allow brokerage licences to foreign companies as it risks the safety of the country. However, these regulations influence free trade (although not significant) by restricting the business for foreign firms in a country which affects the quality and reliability of the shipment. In most countries, except Singapore, foreign firms are not allowed to freely provide brokerage services. In Vietnam, such services can be provided only in designated industrial parks. In the Philippines, customs brokerage licences are limited to individual citizens, although the matter is under discussion. In Cambodia, only very few companies possess brokerage licences. Indonesia, Thailand, Malaysia and Myanmar clearly do not allow foreign companies to own brokerage licences. 24



4. Arbitrary Independent Rulings (Very Significant – 5) Where customs has several offices in a single jurisdiction, which do not coordinate with each other, there is a possibility of passing arbitrary independent rulings. The lack of clear rules in many customs increases the chance of such arbitrary independent rulings. The passing of arbitrary independent rulings forms a serious impediment to free trade. These rulings are related to malpractices adopted by the customs authority. As an example, the port of Tanjung Priok in Indonesia has three offices, each of which seems to be independently run and apply arbitrary rulings. When shippers do not agree with a ruling, local customs officials often apply their arbitrary rulings without involving others in the customs hierarchy. Transparency in the rules is also important. If there is a delay in shipment, the reasons for the delay and the expected time ought to be made known to the concerned parties. In Thailand, the rules are not clear and transparent, and the customs officials are not fast enough. The rules and regulations in Myanmar often change. Table 5-1 shows the transparency adopted by the Singapore customs. Table 5-1: Singapore’s Commitment to Quality Service Service

Performance Target

Processing of TradeNet declarations

90% within 10 minutes

Processing of amendment of TradeNet permits submitted by fax or by electronic filing

100% within 4 hours

Processing of applications for refund of duty/GST submitted by fax

100% within 12 working days

Processing of applications for refund of duty/GST submitted by electronic filing


Processing of licensed warehouse licences


Processing of zero-GST warehouse type I licences


Deployment of officers for supervision of stuffing and unstuffing of containers at licensed warehouses

95% within 30 mins of requested time

Supervision of stuffing and unstuffing of containers

95% within 2.5 hour

Replying to enquiry letters (including e-mails)


Processing of Certificates of Origin

100% within 2 hours of application

Issuance of Import Certificate and delivery verification

100% within 2 hours of application

Assessment and collection of duty/GST from passengers and crew


Endorsement of GST tourist refund claim forms


Source: http://www.customs.gov.sg/

5. Improper Penalties (Moderately Significant – 4) Penalties are often imposed by customs officials without adequate cause to extract fines which one must pay to be repealed. It impedes free trade by increasing the total time for shipment, and hence a higher cost of shipment. Moreover, such penalties may lead the shipment to lie at the yard, thus influencing the quality of the shipment. In most of the ASEAN, such penalties are rare. In Malaysia, Cambodia and Myanmar, however, penalties


25


are imposed on late submissions, amendments, and inspections, so as to charge arbitrary money. In Indonesia, such penalties are quite common. 6. Customs Department Raises Fees Unilaterally (Significant – 3) Fees are raised to cover administrative costs, without adequately finding other avenues to reduce expense or without conducting public dialogue. This practice is not very common in the ASEAN, except in Indonesia. For example, in 2004, Indonesian customs announced incorporation of new fees in the state budget as non-tax revenue, of which it would receive 80 percent. The new fees would range from US $3.50 to $52.50 per service performed by customs.

B. CUSTOMS INSPECTION 1. Restriction on Weight and Value of the Shipment (Not Very Significant – 1) There are restrictions in some ASEAN on certain goods, thus influencing free trade. Indonesia, Myanmar, and Thailand impose restrictions on the import of certain goods. The restrictions influence trade and the total volume of goods traded. Indonesia and Thailand also restricts the import of high value items and commodities such as rice and sugar. Indonesia also restricts the import of used parts. One respondent expressed concern about the restrictions on the import of used and refurbished parts. In several cases, customs clearance requires a lot more information and several interviews are conducted before permission is granted for the import of used parts. For example, the parts for old PC models, which are no longer being produced, are replaced by refurbished parts and then supplied to the customers. Technically, these parts are classified as used. In countries such as Indonesia and Thailand, this classification leads to problems in import as these countries do not permit the import of used parts. Delays occur due to such appeals. It is a challenging task for shippers to obtain permission from the authorities, as they are required to send such parts to the clients urgently. Myanmar has restrictions on the weight and value of exports and imports due to the government’s policy to balance trade and to encourage certain sectors. Myanmar requires that the import and export be balanced. Since Myanmar exports seafood and vegetable produce, one would often find importing companies engaged in exporting seafood to balance import and export. Companies in the infrastructure sector who need to import equipment and raw materials are required to balance it with exports on an annual basis. They export seafood, because the country does not have other things to export. One respondent narrated, “Our customers ask us to find an exporter from Myanmar, so they can balance the account. If we do not introduce exporters to them, we cannot do our business”. In Thailand, shippers have to declare the value of the cargo before assessing the duty. 2. Burdensome Inspection Requirements (Critically Significant – 6) WTO standards require that approximately 1 percent of goods be inspected during shipment. Inspection is, however, done at the discretion of the customs officials depending on the type of goods shipped. Many customs officials adopt an inconsistent method of goods inspection. As a result, shippers do not really know when the goods will be inspected. When there is a probability of smuggling or the goods being shipped are of high value, customs officials conduct a thorough inspection of goods. Moreover, since duties and taxes serve as a form of government revenue, the government is protective of imports. The free movement of goods thus contradicts with the government’s goal of extracting revenue from imports.

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The inspection procedure varies from country to country. For instance, in Singapore, inspection is very quick and in line with its goal of quick turnaround to achieve maximum tonnage handled and hence trade. In Lao PDR, there are three types of goods (goods with tax exemption, taxable goods, and tax-paid goods). For taxable goods, 1 percent of goods are inspected per consignment and tax-paid goods are required to be warehoused. In Myanmar, all imports/exports have to be inspected. In most cases, manual inspection for exports takes about 1 working day. For imports, it takes 2-3 days for inspection. In Brunei, WTO standards are followed on inspection. In Vietnam, when documents are in good order, it takes less than 3 days for customs clearance of normal goods and 3-5 days for transit goods. In Thailand, careful inspection is carried out for high value goods. In the Philippines, the landing charges for documentation and clearance are almost twice that of the other ASEAN. In Cambodia, Indonesia and Malaysia, shippers need to provide their own labour and equipment for truck inspection resulting in lost time and potential damage. One respondent reported that, in Indonesia, about 35% of the shipments that cross borders are not recorded. Inspection intensity is high for dutiable and potentially contraband products, such as cigarettes and liquor, where there are greater chances of logistics unfriendly practices such as under the table payments. It may be possible in Cambodia and Lao PDR, where infrastructure is poor and in Indonesia, where logistics unfriendly practices prevail. 3. Discriminatory inspection practices (Significant – 3) Discriminatory inspection practices refer to the preferred treatment towards domestic carriers. Discriminatory inspection significantly influences free trade and the quality of goods being shipped. Discriminatory inspection is not prevalent in ASEAN. In Vietnam, documentation is easier for domestic companies (1 day) as compared to foreign companies (2-3 days). Moreover, Indonesia and Vietnam have protective regulations. Indonesia has an import tax (VAT), which is against the WTO requirement of zero tax. 4. Security Related Delays (Slightly Significant – 2) There is a trade-off between security of the country and free-trade. Security related delays make it more difficult for LSPs to make timely deliveries. A few ASEAN emphasize on greater security in customs clearance. For example, in Thailand, the security requirements are strict requiring extensive documentation especially for the import and export of new products. The review process is long with a great deal of uncertainty. In Indonesia also, the customs regulations are strict, but not unreasonable, as there are different levels of appeal. In Malaysia and Singapore, since the process is less complex, customers face fewer problems in customs clearance. Border customs clearance is strict at the Malaysian-Thailand border since there have been incidents of crime and pilferage there. Table 5-2 presents the cargo release times in selected ASEAN countries.


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Table 5-2: Cargo Release Times in Selected ASEAN Economies Country

Port

Sihanoukville Seaport Cambodia Pochentong International Airport

Indonesia

Lao PDR

Imports – red lane

4.0

Exports – green lane

3.0

Exports – red land

3.0

Imports – green lane

2.0

Exports – green lane

2.5

Exports – red lane

2.5

Imports Exports

6.0

Imports – small firms Imports – medium firms

5.56 5.42

Imports – large firms

5.98

4.0

5.78

Imports Exports

1.65

Wattay International Airport

Imports

1.0

Exports

0.65

Ninoy Aquino International Airport

Year taken

3.5

Imports – average

Hai Phong Seaport

Vietnam

Time (Days)

Thanaleng and Savannakhet checkpoints

Port of Manila and Manila International Container Port

Philippines

Type of trade Imports – green lane

1.0

Imports – average

5.05

Imports – green lane Imports – yellow lane

4.56

2004

2003

2003

2004

5.59


4.87

Imports – average

4.68


4.32

Imports – yellow lane

4.75


5.32

Imports – small firms Imports – medium firms

2.83

Imports – large firms

1.94

Imports – average

3.30

Imports – green lane Imports – red lane

2.5

2003

6.98 2003

3.5

Exports

2.0

Tan Son Nhat International Airport


1.5

Exports

1.5

Saigon New Port Hai Phong Seaport

Imports

9.6

Imports

5.5

Imports

5.9

Phuoc Long ICD

2004

2004

Source: REPSF Project No. 04/002, "Harmonization and Integration of Customs Cargo Processing Policies and Practices in the ASEAN Region", p. 65

5. Inefficiency of Inbound Clearance Process (Very Significant – 5) At times, customs clearance can be quite lengthy. Automobiles, for example, need an average of 10 days to clear customs. The inventory cost from this delay is ultimately passed on to the consumers. The inbound clearance process is very fast and easy in Singapore and Brunei. However, most of the other ASEAN including Cambodia, Indonesia, Lao PDR, Malaysia, the Philippines, Thailand and Vietnam suffer from a lack of transparency on 28



clearance time. In Indonesia and Thailand, the inbound clearance process can be very time consuming. In Myanmar, it takes 3 weeks to approve an import licence, after which the clearance process can begin. Table 5-2 contains more details.

C. BORDER COORDINATION AND CLEARANCE Table 5-3 shows the tariff and clearance system in selected ASEAN economies. 1. Limited Hours of Operations at Customs Facilities (Significant – 3) The limited hours of operations at custom facilities influence the efficiency of free flow of goods at the border, thus increasing the total shipment time and reliability of goods (exposure to theft and misplacement) at the border. Singapore is an exception where customs facilities are available around the clock. For the rest of ASEAN, different countries have different operating hours. Usually, in almost all ASEAN, customs facilities agree to work overtime, the fees of which are borne by the freight forwarders. For example, in Brunei, customs facilities are closed on Fridays instead of Sundays. Forwarders pay overtime fees in order to avail customs facilities overtime. The customs of East Malaysia also do not work on Saturday and Sundays. Goods arriving on Friday therefore have to wait till the next Monday, thus causing delays in shipment. Similarly, in Thailand and the Philippines the operating hours are restricted and there are no operations on weekends and public holidays. This imposes difficulties for shippers especially when the end of business coincides with the weekends/public holidays resulting in a delay in customs clearance. Further, restricted operating hours creates problems in importing large machinery. However, in Indonesia operating hours are more flexible with some operating on weekends. In Myanmar, the situation is again different. If the import quantity is low, it is possible to complete clearance during normal working hours. Customs officials in Myanmar may or may not accept overtime, depending upon the amount of cargo. 2. Lack of Border Crossing Coordination with Regional Neighbors (Very Significant – 5) Border crossing coordination is a problem at both the national and regional levels. Although trade facilitation is routinely mentioned as a primary objective by regional border agencies, border-crossing coordination between regional neighbours remains a secondary priority. Long-standing rivalry between the headquarters and border crossing points, as well as a tradition of police control over borders, have led some border agencies to closely protect their individual mandate, versus the overall objective of optimizing the efficiency of border crossing points. Except for the Philippines, which has no adjoining border with the other ASEAN, the border coordination problem is present in almost all ASEAN. For example, land transportation between Brunei and East Malaysia requires 7 stamps. The customs of each country do not coordinate with each other, thus sometimes requiring duplication of documents at the border. In Lao PDR, most of the goods route through Thailand. To truck to the Lao PDR border, LSPs need to meet multi-country requirements. In such a situation, two sets of documents for Thai and Lao PDR customs are required. At the Singapore-Malaysia, dual border inspection and duplicate forms (different customs forms) are required too, thus increasing lead time and creating physical bottlenecks of trade volumes.


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Table 5-3: Tariff and Clearance System in Selected ASEAN Economies Thailand

Malaysia

Indonesia

The Philippines

Vietnam

Prepayment of tariffs before declaration. Declarations are categorized into red line (document /cargo check), yellow line (document only) and green line (no document /cargo check). Most are red items.

A moratorium of tariffs for 9 months (275 days) after importing materials for export processing. A moratorium of 30 days also applies to items for domestic consumption.

Clearance procedure

Two categories of green line (no document examination) and red line (document examination). Cargo inspection after tariff payment.

Mainly document examination. Only 2~ 3percent of cargos are inspected.

Categorization into priority status (excellent), green lane (document examination only) and red lane (physical check).

Computerization (EDI)

Widely used EDI declarations by customs brokers for green/red line categorization. Examination is documentbased.

Customs brokers widely use EDI declarations. Examination is document-based. Can pay online tariffs from broker’s account.

Widely used EDI declarations by customs brokers for green/red line categorization. Examination is documentbased.

EDI declaration is possible but "not utilized often (the Bureau of Customs).

Just got started a pilot EDI declaration.

Customs valuation

Implementation in accordance with WTO customs valuation system (Article 7, GATT).




Implemented according to WTO customs valuation system (Article 7, GATT) before joining WTO.

Tariff classification

Classification based on HS rules. AHTN applies in ASEAN. Different tariff codes between ASEAN and non-ASEAN (lower 2~3 digits).

Classification based on HS rules. AHTN applies in ASEAN. Different tariff codes between ASEAN and non-ASEAN (lower 2~3 digits).

Classification based on HS rules. Higher 8 digits are AHTN for ASEAN and non-ASEAN. Lower 2 digits are the original classification by Indonesia. Total 10 digits.

Classification based on HS rules. AHTN for ASEAN and non-ASEAN.

Classification based on HS rules. AHTN for ASEAN and non-ASEAN.

Advanced classification ruling

None. Preparing for introduction.

Implemented.

Implemented.

Implemented.

Implemented. But not fully effective.

Conciliation

Valuation appeals committee is established. Application within 30 days.

Implemented.

Objection system is established under Articles 93~95 of the customs law. Judgment by arbitration tribunal.

Implemented by Valuation/ Classification Review Committee.

Implemented.

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Thailand

Post-audit

Major issues

Implemented. Papers must be kept for 5 years. Insufficient tariffs are collected for past 10 years.

Arbitrariness of officers in valuation and classification. Large amounts of taxation by post-audit.

Other remarks

Malaysia

Indonesia

The Philippines

Vietnam

Implemented for past 3 years.

Implemented. Two years from the date of declaration are subject to the audit. No express provision of document filing period.

Just started in January 2004 for past 3 years.

Implemented. Inapplicable if there is no sign of violation under the current law. Investigate past 5 years.

Slow clearance. Licences must be obtained for import of automobiles and steel.

Port handling capacity, infrastructure such as expressways and EDI system, "block" system, arbitrary evaluation and classification by officers (low product knowledge), insufficient information sharing, short notice of systems, etc.

Slow clearance. Frequent failure of customs computers.

Many pre-clearance procedures such as import plans and permissions. Frequent changes by notices.

Monthly meeting between the customs commissioner and representatives of Japanese firms.

Committed to 10 items of improvement in tariff and clearance systems as part of the Japan-Vietnam Joint Initiative.

A pilot project of Customs Golden Client system has been started to connect online the consignees and customs since September 2004.

Source: JETRO (2005), "Facts and Issues in the Tariff and Clearance Systems in the ASEAN", p.35


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3. Volatility in Border Traffic (Significant – 4) Customs officials typically note that a reason for delay at the border crossing is the high variability of daily traffic during the week. Even with the effort to improve the efficiency of border processes, such fluctuations are likely to turn the border into a bottleneck and create long queues. Congestion is a problem at border crossing. Even in process efficient Singapore, there are 1 to 2 hours of traffic jam at the checkpoints. For Lao PDR, although the shipment volume is low, there is much bureaucracy. An LSP has to provide ample advance notice. Shippers do not want their cargo to get stuck at any of the terminals. Culture plays a part too. For example, on Fridays, since Malaysian customs do not operate 24 hours for religious reasons, a number of trucks have to queue overnight at the Singapore-Malaysian border. Problems in domestic land transportation are also faced in Thailand due to traffic congestion and the restricted hours for entry of trucks into Bangkok. 4. Multiple Uncoordinated Offices (Moderately Significant – 4) Some customs jurisdictions have several offices, which often run independently. It is a problem in countries with more than one port. This problem is prevalent in Indonesia and the Philippines as these countries are archipelagic in nature, thus being widespread and difficult to control. In Indonesia, while the major ports are coordinated, the small ports lack coordination. The East and West Malaysian ports also lack coordination in terms of customs rules. Thailand also has large number of private ports which tend to interpret existing regulations differently.

D. OTHER CUSTOMS-RELATED BARRIERS Low processing speed of customs officials as well as language also pose barriers to free logistics services. Particularly, in Brunei, Myanmar, Vietnam and Thailand customs processing speed is very slow. And in Cambodia, Lao PDR and Vietnam local language is used on customs documents. In Vietnam, people are not fully conversant with English which poses problems in exporting hazardous goods such as gas, in case such goods are misinterpreted by customs authorities. In Myanmar there exists a unique problem. In Myanmar there are only government owned local banks. This precludes foreign firms from opening bank account thus increasing difficulty in remitting money to another country from Myanmar.

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VI. TRADE BARRIERS: FOREIGN INVESTMENT The trade barriers in foreign investment arise due to cross-sectoral investment regulations, licensing requirements, transparency in licensing, and labour regulations. Crosssectoral investment regulations refer to those which regulate the commercial presence of logistics firms across the borders. Third-party logistics service providers typically establish a commercial presence in foreign markets to provide integrated, point-to-point logistics services. However, governmental measures regulate such commercial presence and thus inhibit efficient logistics service integration. Licensing for the provision of transportation services is required in virtually every country. While in most countries licensing regimes are broadly fair and equitable (USITC 2005), in some countries the differentiation is made between foreign firms and the domestic firms in relation to licensing such that the foreign firms do not receive national treatment. Labour limitations refer to those policies or measures that limit the movement or hiring of key personnel. According to the USITC (2005), labour limitations are not a major inhibitor of trade. In most countries, regulations require the hiring of local residents by foreign firms. In the following sub-sections, we discuss these barriers.

A. BARRIERS DUE TO CROSS-SECTORAL INVESTMENT POLICIES 1. Foreign Ownership Regulations (Moderately Significant - 4) Foreign ownership regulations pertain to those regulations that either limit the equity ownership in the firm or regulate the form of establishment, such as through a separatelycapitalized subsidiary, representative office, or joint venture. Every country wants to protect her national interest. While some counties are quite liberal and allow foreign firms to have majority equity, others require local majority ownership. Such regulations are inhibitors as foreign firms sometimes struggle to find the right partner for joint ventures. The lack of management control also results in lower quality and the reliability of service provided to customers, thus leading to inefficiency in trade. Except for Singapore and Brunei, in all other ASEAN, regulations require some form of local participation in the management of the firm. For instance, in Cambodia and Myanmar foreign firms can own up to 100% equity, but it depends on the size of the company. For example, Schenker, a foreign LSP, owns 100% equity in Myanmar because it provides employment for locals as well as foreign direct investment. Usually, the bigger LSPs are easily granted licences to operate in a country with 100% equity. In Vietnam, foreign equity is restricted to less than 50% and it is usually very difficult to find the right partners. In Lao PDR, foreign ownership is restricted to less than 50%. So far, there are hardly any foreign firms in Lao PDR. Lao PDR and Vietnam are now opening up the transportation sector to foreign LSPs. In Thailand, regulations allow foreign firms to invest (< 50%) and require these firms to have a minimum amount of paid-up capital and at least 7 local board members. Investment is difficult in Indonesia. While warehousing and distribution are permitted, transportation is not allowed. Foreign equity is restricted to less than 50%. Malaysian regulations have local majority requiring Bumiputras to own more than 50%. Recently Malaysian regulations have reduced Bumiputra ownership to around 30%. For larger investments, Malaysian regulations may grant up to 100% equity ownership to foreign firms. However, such policies are uncertain and the equity ownership ratio may change. Local partners in Indonesia and Malaysia are typically sleeping partners and are there just to sign the paper work. The Malaysian government benefits from such policies as it can protect the locals when they retire. For example, trucking licences in Malaysia are normally given to former government, military or civil service officials. When these officials retire, they can obtain 50-100 licences to operate. The government can then refrain from providing pensions to such high-ranking officials. These officials can earn RM$500-1000/month on one licence alone. REPSF Project 06/001d: Final report

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B. BARRIERS DUE TO LICENSING REQUIREMENTS AND TRANSPARENCY Licensing for the provision of transportation services is required in virtually every country (USITC 2005). While in most countries, licensing regimes are broadly fair and equitable (USITC 2005), in other countries the differentiation is made between foreign and domestic firms in relation to licensing and that the foreign firms do not receive national treatment in certain countries. 1. Licensing Requirements (Significant -3) Licensing requirements are present in every country except Singapore, and are different from country to country. Indonesia allows for foreign investment in warehousing and distribution but not in transportation. The process of obtaining licences is quite time consuming and difficult as there are different kinds of licences, such as office licence, brand licence, export and import licences and so on. The Philippines does not grant licences to foreigners generally, and a firm has to go through a long debate to obtain a licence. There are also lobby groups such as the Philippines freight forwarders association which has been pushing local aviation regulators not to grant licences to international players. Moreover, local transportation delivery is given only to local firms. In Thailand, licensing requirements are mainly for transportation. Domestic transportation services can only be offered by local firms or those with majority Thai ownership. Next, foreign companies can purchase a truck for their own purposes, but they cannot lease it to other companies. For example, in Malaysia, foreign firms can apply for licences through joint ventures. In Lao PDR, once a company obtains a licence, it does not face any problem. It is difficult to get licence to set up a business in Vietnam. There are several licences such as a branch licence, which does not permit a firm to do import and export. In Cambodia, Myanmar, Lao PDR, Vietnam and Brunei, a firm can obtain a licence, but local transport delivery is given only to local companies. In Malaysia, it is easier to obtain a licence through joint ventures. In Malaysia, there are restrictions on government projects which are granted only to local LSPs. Malaysia does not allow trucking and brokerage licences to be given to foreign firms. In Singapore, one needs to have local shareholding to undertake local trucking. In Indonesia, representative offices cannot issue invoices as their role is only to do research and coordination. In Thailand, bonded warehouses tend to favour Thai firms more. In Vietnam, the document processing time is 2-3 days for foreign firms and around one day for local firms. In addition, while import taxes are zero under the WTO agreement, value added taxes are imposed on goods. 2. Discriminatory Licensing (Moderately Significant – 4) In some countries, discriminatory licensing policies are in place. Some examples of such policies include varying licensing requirements across provinces or districts, duplicative licensing requirements depending on services, uneven enforcement of licensing requirements and preferential access to domestic competitors on information affecting regulations. Such policies raise the barriers to free trade as foreign firms find it difficult to operate in such an environment, and thus the quality and reliability of shipments are affected. In Malaysia, customs brokerage is much sought after. This licence, granted by the customs authorities, requires passing a 10-day course offered by the local customs and freight forwarders association. An applicant needs two referees. Once the certificate is granted, a firm can operate as a customs brokerage house. Container trucking is still controlled by the government. A firm needs to have a licence for operations. East and West

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Malaysia have different state controls, so licensing is different. This results in higher cost and duplication of operations for both local and foreign firms. 3. Duplicative Licensing Requirements Depending on Services (Significant - 3) In Myanmar, the Philippines, and Singapore, the respondents did not report any problems. Lao PDR and Vietnam have also opened up. However, in Brunei, Cambodia and Thailand, domestic transportation can only be offered by local firms. Also, in Indonesia, foreigners are not allowed to run customs brokerage services. For warehousing and transportation, more than 3 different licences are required for all firms. However, the duplicate licensing requirements in these ASEAN are rarely meant to oppose transparency. They apply mostly to both local and foreign firms.

C. BARRIERS DUE TO LABOUR LIMITATIONS Labour limitations refer to those policies or measures that limit the movement or hiring of key personnel. Labour limitations are not a major inhibitor of trade. In most countries, regulations require the hiring of local residents by foreign firms. Usually foreign firms experience difficulty in obtaining entry visas and permits. Moreover, the cultural differences imposed due to hiring of local personnel inhibit a firm’s performance. For example, the English speaking population for managerial positions in some of the ASEAN is very low. Also, the local labour laws in many countries make it difficult for the firms to lay off workers, without having to offer costly severance packages. 1. Labour Policies (Slightly Significant – 2) The labour policies in most of the ASEAN are formed in such a way favouring local labour. Such policies influence the quality of the shipment as non or poor performance on the part of labour affects shipment quality. This aside, the influence of labour policies on free trade is very low. In Singapore, laws are skewed toward firms rather than labour. In Malaysia, locals are favoured. All the ASEAN require firms to hire local labour for their operations. However, in Singapore and Malaysia, there is shortage of local labour which makes it imperative for them to import labour. Charges are levied on foreigners applying visa and work permits. 2. Cultural Differences (Slightly Significant – 2) Cultural differences influence the quality of shipment. Language poses a major cultural barrier to free trade. In Brunei, Singapore, Malaysia and the Philippines, English is spoken readily whereas in Indonesia, Myanmar, Vietnam, Thailand, Lao PDR and Cambodia, language poses a problem, especially when transporting dangerous goods. People handing the goods need to fully understand the briefings. Low productivity leads to a high cost of operations. In some countries (e.g., Indonesia, Cambodia, Lao PDR, and Myanmar) labour productivity is low, but this does pose as a barrier to free trade. For example, in Indonesia, people work more slowly. In Muslim countries, during Ramadan, things slow down. The Thai’s work attitude is most affected by its culture, followed by Malaysia and then Indonesia. In terms of service attitude and approach, Thailand is considered the best. 3. Difficulty in Hiring/Firing (Significant – 3) The difficulty in firing poses some challenges for foreign firms as the severance packages for local staff can be costly. This indirectly affects trade. If a firm hires wrong locals


35


(unproductive workers) then they become burden for the firm. These policies influence the cost and quality of free trade. In Singapore and Brunei, there is no serious issue with retrenchment. In Singapore, a month’s notice is required to layoff. In Vietnam, Indonesia, Malaysia, Lao PDR, Cambodia, the Philippines and Thailand, labour laws favour locals. It is easy to hire, but difficult to fire. If fired, local labour laws can impose penalties on the firm. In Malaysia, the laws favour employees. If employees are fired, it is costly for the firm even though one month’s notice is required for laying off. It is not easy to dismiss a person and the firm needs to discuss with the person concerned. In Indonesia also, regulations do not allow companies to fire employees, and enforces a costly severance package. In Thailand, the same situation exists but to a lesser extent, as the compensation amount is less.

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VII. TRADE BARRIERS: MARITIME SPECIFIC Shipping policies in ASEAN have historically been very fragmented, though there has been some streamlining recently (PDP Australia Pty Ltd, REPSF 04/001). Maritime transport, an integral part of logistics services (shipping) in ASEAN, faces regulatory and infrastructurerelated impediments that may affect the operational efficiency and the quality of services provided by LSPs. An overview of the maritime transport related barriers is provided below.

A. REGULATORY BARRIERS 1. Cabotage Regulations (Significant – 3) Cabotage restrictions refer to a country’s right to control maritime traffic within its borders. Cabotage restrictions are in place throughout ASEAN, that are either archipelagic in nature (e.g., Indonesia and the Philippines) or have an extensive coastline. By removing such regulations, foreign feeder ships can operate on multiple ports thus increasing overall efficiency and reducing handling. Moreover, with liberalization, transportation can become more efficient as more country flag vessels can operate within the port and thus transport freight from one area to another in the same country could be more efficient and less costly. The result is better transportation linkages within the country. Cabotage restrictions do not exist in Brunei, Cambodia, Lao PDR, Myanmar, Thailand and Singapore. Vietnam shipping does not allow direct sailing of foreign flags. Foreign flags can only go to the gateway ports. In the Philippines, cabotage regulations prevent foreign firms from accessing from the feeder ports. In Malaysia, cabotage is a requirement. Cargo movement from one local port to another must be done with Malaysian flags. For example, sailings from Port Klang to East Malaysia and other similar routes are kept for local carriers. However, due to capacity constraints and line connectivity, the government is now looking into removing cabotage. For example, while Penang, Port Klang, and Pasir Gudang are limited to national carriers, they allow foreign flags albeit on a case by case basis. The government is now opening the Penang to Port Klang leg, which has less cabotage for transhipment. Indonesia has many ports and cabotage regulations are practised for domestic port-toport transfer. However, foreign firms may not be interested in this service. They would rather perform regional feedering as this maximises the size of the ships needed to extract better economies of scale. 2. Cargo Reservation Laws (Slightly Significant – 2) Cargo reservation laws refer to policies that restrict the type of cargoes that may be carried by the carriers. Cargo reservation increases the total time for shipping. Cargo reservation is not well practised in ASEAN. Only Indonesia, Malaysia, the Philippines, and Vietnam practise it. In the Philippines, cargo owned by the government or purchased with public funds or under a government guarantee requires a waiver to move on non-Philippine vessels. In Indonesia, cargo reservation is confined to import cargoes of government and state owned enterprises, which must be carried by Indonesian-flag vessels. 3. Ability of Foreign Maritime Firms to Access Government Owned Port Facilities (Slightly Significant – 2) Government may control access to certain government owned port facilities. However, based on the interviews, we did not find this to be a concern in ASEAN. In Singapore, priority


37


is given to big vessels for clearing and therefore, feeder vessels may have to wait for about 1-2 days to berth. An open port means that ships of any nationality can call into Singapore, carry the cargo, and receive the same services offered as any other flag vessels. 4. Restrictions on Foreign Maritime Firms to Provide Own or Third Party Portrelated Services (Not Significant – 1) Governments typically regulate and may stipulate who provides maritime auxiliary services. The ability of foreign maritime firms to gain adequate access to government-owned port facilities, provide their own or third party port-related services (e.g., maritime auxiliary services such as cargo handling, storage and warehousing, and container station, and depot services), is subject to domestic regulations. In ASEAN, foreign vessels are not allowed to provide their own port-related services. As cargo handling is a sensitive issue, it cannot be completely relegated to foreign firms. In Vietnam, port services are provided exclusively by Vietnamese enterprises. 5. Regulations that Allow Foreign Maritime Firms to Provide Port-related Services but Subject Them to Foreign Equity, Nationality or Licensing Requirements (Slightly Significant – 2) In some countries, foreign maritime firms are allowed to provide port-related services but are subject to regulatory requirements that impose foreign equity, nationality, or licensing restrictions. However, providing of such services by foreign firms may not sway free trade. For example, Thailand requires foreign entities engaged in port operations to comply with foreign equity and nationality requirements included in the Foreign Business Act, and the Thai Civil and Commercial Code respectively. Brunei has no restrictions while limited foreign equity participation exists in Cambodia, Indonesia, Myanmar, the Philippines, Thailand, Malaysia, and Vietnam. The Port of Tanjong Pelepas (PTP) is operated by Maersk which has 30% equity participation. Also, PTP provides both port pilotage and towage. In Singapore, only PSA and Jurong port can operate cargo terminals; no third party is allowed to operate. Pilotage is provided only by one port operator but towage is provided by 5 foreign firms. 6. Absence of General Competition Legislation in Liner Shipping (Significant – 3) Few ASEAN have a clear legislative framework to regulate the behaviour of shipping conferences or dominant shipping lines. In many cases, this reflects the absence of a general competition legislation, which usually forms the background against which specific provisions relating to international liner shipping are framed. The Singapore government has subscribed to the philosophy that competition, international and domestic, is good for economic health. Singapore passed legislation to ban certain anti-competitive practices in 2004 but the legislation will only be effected in 2006. The lack of free competition increases both cost and time, and deteriorates the quality of shipment handling. In Brunei, Cambodia and Myanmar, the market is too small for competition as there is not much cargo through their ports. Indonesia, Malaysia, the Philippines, Thailand, and Vietnam do not allow free competition. In the case of Singapore which has 2 port operators, free market competition is not possible as there is not enough physical space for a third operator to operate a port. 7. Monopolized Handling of Cargo (Slightly Significant - 2) The major difficulty with the logistics of inter-island movements is the regulated nature of the port and shipping industry. The network of public ports In the Philippines is controlled by the Philippines Ports Authority (PPA), which acts as both landlord and regulator. It leases

38



selected berths and storage facilities to private operators and grants cargo-handling licences to stevedoring companies that operate on common-user facilities. It has a policy of limiting the number of cargo handlers to at most two in any port, with the exception of Manila. The monopolization of cargo handling was formalized by the previous administration under the Executive Order 59, which would have granted an exclusive contract for the handling of cargo in all ports. In Brunei, Cambodia, Myanmar, Indonesia, the Philippines, and Vietnam, this problem does not exist. PSA operates Muara port in Brunei. Thailand is also quite open in maritime cargo handling. However, in Singapore, Vietnam, and Thailand, there is significant port congestion. Malaysia is also liberalizing its port sector in an attempt to create a competitive environment. For example, Port Klang is operated by two port operators. There are many private but small ports in the Philippines. They are allowed to handle their own cargo, and in some cases third party cargo, but they are prevented from competing with the public ports. The PPA collects a tax (wharfage charge) on the cargo handled at these facilities and prevents them from providing common-user services. Under the previous management of the PPA, there was a proposal to transfer all private ports within 100 km of a public port to the control of the PPA.

B. INFRASTRUCTURE BARRIERS Carrying more than 90 percent of world’s cargo and at the core of intermodal shipments, maritime transport costs have a significant impact on the final cost of exported goods. Factors affecting the cost of ocean freight and hence free trade include: 1. Reliance on Transshipment and Feeder Services (Slightly Significant – 2) Reliance on transhipment and feeder services raises the cost of transport, as each transhipment increases shipment distance, transit time and handling costs. In case of transhipment, shippers may face problems arising from volume constraints on the shipment and special documentation requirements. In terms of additional document requirements, banker’s guarantee etc. may be required for transhipment. These documents require additional planning and time. ASEAN has some of the world’s largest ports as well as smallest ports. Big mother vessels cannot call into small ports due to lack of connectivity and poor efficiency at these ports. The small ports do not provide enough trade volume. So mother vessels come to the transhipment hubs, conduct drop and pick up with the feeder vessels which call on other small ports. The Singaporean ports (PSA and Jurong Port) and some of the Malaysian ports (e.g., PTPs and Port Klang) are transhipment hubs. PTP does not have feeder services. As PTP is 30% owned by Maersk, some lines do not like to move their cargoes through this port. Brunei has container transhipment. The Port of Laem Chabang in Thailand is a major port but it is less dependent on transhipment and feeder services. Most of the trade through this port is from Lao PDR, Cambodia, Myanmar, and Thailand. Ports in the Philippines and Indonesia are feeders. Ports in Cambodia and Myanmar are very small due to the low trade volumes. 2. Directional Imbalance (Very Significant – 5) Directional imbalance is the discrepancy between inbound and outbound traffic, resulting in empty backhauls and divergent freight rates and represents an effective subsidy for export shipments but increases the cost of production to value chains using import inputs. This affects the total shipment time.


39


All ASEAN ports have some container flow imbalance. Imbalance also depends on season. Myanmar is an exception as it tries to balance import with seafood and agricultural exports. Singapore has very little imbalance as it is a transhipment hub. Imbalance is higher for feeder ships going out from Singapore. Similarly, Indonesia is also manageable. However, imbalance is a bigger problem in the Philippines. The cost of shipment is very high and there is no short term availability of equipment. It is also a problem in East Malaysia as the cost of shipment on average is high (US$1000/container). Vietnam also has more serious imbalance as it has more imports compared to exports. Thailand, however, is opposite to Vietnam. In Malaysia, imbalance is high for the small ports only. Similarly, Brunei lacks exports (except oil and gas) and therefore, has huge directional imbalance. 3. Inadequate Warehousing and Specialized Storage Facilities (Very Significant – 5) Given the inadequate warehousing and specialized storage facilities, the LSPs need to better time their deliveries and pick-ups to vessel arrivals, so as to reduce port congestion, decrease waiting time and berthing cost. The quality of the goods lying on the port may also be affected as a result. This is the biggest problem in the Philippines where vessels struggle to find facilities. Singapore, Brunei, Malaysia and Thailand have adequate warehousing and storage facilities. Myanmar has adequate facilities, but the standard is poor. In Indonesia, only the major ports provide adequate storage and warehousing facilities. In Cambodia, limited warehousing is available, however, it is not much of a problem as the trade volume is low. In Vietnam, the facilities are inadequate. 4. Inefficient Ports such as Inability to Handle Large Cargo Volumes (Moderately Significant – 4) Uncompetitive ports cannot support significantly high cargo flows. Ports experience capacity shortage and container handling problems due to increased container volumes. Moreover, it increases the total shipment time and influences the quality of shipments. Table 7-1 shows the cargo clearance times in work-days for selected ASEAN economies. Table 7-1: Customs Clearance Times (Standard Dry Cargo) for Selected ASEAN Economies Brunei

Indonesia

Malaysia

Philippines

Singapore

Thailand

Vietnam

LCL

5

3-5 after devanning

3 days

5

3

14 days

7

FCL

5

2-4 after vessel discharge

3 days

3

2-3

14 days

7

Source: International Exhibition Logistics Associates, http://www.iela.org, 2002

Ports efficiency is an important issue. Different ports are at different stages of technology and efficiency. The top ports in ASEAN include Singapore’s PSA and Malaysia’s PTP. The PSA port can accommodate the 8,000 – 11,000 TEU vessels as it has longer-reach quay and yard cranes. There are daily container movements, either by road or by feeder. Because the ships come here (mother vessels) they can connect to other mother vessels to Europe and other places. However, as PTP is about 30% lower in cost, some of the mother vessels go there. But they have to route through Singapore, because Singaporean importers do not want to go to PTP to collect their containers. Thus, feeders need to come to PTP to connect to the mother vessel. Some reasons for feedering are: 40

Carriers do not want to be delayed by visiting every small port (time issue). One hub REPSF Project 06/001d: Final report


(Singapore) is enough, and As Singapore is an international hub, every line wants to come to pick up boxes. Other countries do not have enough volume to warrant the investment in infrastructure.

The port in Brunei is also quite efficient and is run as a joint venture between PSA and Brunei. The main ports in Indonesia are quite efficient too. However, the ports in Cambodia, Myanmar, and Vietnam are inefficient. Finally, the ports in the Philippines, Thailand, Vietnam, and Indonesia are manually operated. 5. Berthing of Vessels (Slightly Significant – 2) The lack of maritime infrastructure also leads to berthing challenges. If a port is too congested, berthing of vessels is difficult. Sometimes, ports (Singapore) give priority to mother vessels in which case feeder vessels have to wait. Also, if the mother vessel does not leave, feeder vessels have to wait. This waiting time is 1-3 days. Ports in Thailand and Malaysia suffer from this as they are busy ports. The time delay depends on the vessels and ports. In Thailand, feeder vessels do not have enough time to berth. They have to load and discharge quickly.


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VIII.TRADE BARRIERS: AVIATION SPECIFIC Air transportation forms a small portion of logistics in ASEAN. Airlines are subject to domestic-level laws and regulations that may impede their ability to operate in foreign airports. An overview of these regulations in ASEAN is presented below. A. REGULATORY BARRIERS 1. Allocation of Take-Off and Landing Slots (Not Significant – 1) In ASEAN, this problem is minor, and it does not really affect free trade. It is more an issue of demand and supply. Malaysia is encouraging more flights to its airports. Singapore and Thailand are vying for the same. With more flights, there are more choices for exporters and importers. In Thailand, the airlines cannot get the time slots they want. But airlines expect this problem to be mitigated with the new (Survanabhumi) airport which has better capacity. In other countries, it is not a big issue. 2. Ability of Airlines to Provide Their Own or Third-Party Ground-Handling Services (Not Significant – 1) Airlines usually do not want to provide ground handling services in a foreign country as third parties have economies of scale in ground handling services. From a national perspective, ground handling services being restricted to a few firms is important for security reasons. In most of ASEAN, there are 2-3 ground handling service providers, with the national airline of that country as one of the providers. From the interviews, we did not find any discrimination made by these firms toward the airlines. Moreover, airlines do not wish to provide such services outside of their country as it requires considerable investment. In Brunei, Royal Brunei provides ground-handling services along with a private company. As the market is small, allowing too many players is not beneficial. Singapore has 3 companies which provide ground handling services (SATS, Swissport and CAAS). Similarly, in Malaysia, MAS and KLAS provide ground handing services. In Malaysia, there is some problem with congestion as the ground handling services providers are already at their maximum capacity. Cambodia, Lao PDR, Myanmar, Vietnam, Indonesia, and the Philippines do not allow airlines from other countries to provide ground handling services. The problems in Cambodia, Lao PDR, Vietnam, Myanmar and the Philippines are that airlines need to comply with regulations and IT structure is not good enough. So, they pay less attention to cargo and security is also less. Thailand has also 2 ground handlers. 3. Access to Cargo-Handling and Warehousing Facilities (Moderately Significant – 4) The lack of storage and warehousing facilities restricts the airlines from carrying cargo into the country. This affects the total shipment time. In Brunei, as the market is small, there is no problem with cargo handling and warehousing facilities. Some countries have only one cargo handling services provider such as Myanmar and Lao PDR. In Singapore, Malaysia, Thailand, the Philippines, and Indonesia, there are choices. However, in Cambodia, Myanmar, Lao PDR and Vietnam, there is no restriction on foreigners accessing cargo handling facilities. In Myanmar, air freight is difficult due to security reasons and one week is required for security clearance. Only after the approval, can planes land in Myanmar. In Indonesia, Malaysia, the Philippines, and Vietnam, warehousing facilities are small and limited.


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Most airports lack facilities for hazardous goods. Such goods must be declared and packaged properly. But shippers, especially those from Indonesia, Malaysia, Thailand, and Vietnam do not declare their goods as dangerous to avoid a surcharge. Indonesia allows such goods to enter provided they are packaged properly. 4. Use of third-party provider for ground handling services (Not Significant – 1) As the ground handling service providers need to provide services such as aircraft parking, re-fuelling, cargo handling, and passenger handling, airlines do not supply these services themselves as it requires huge investments in infrastructure. Problems arise when there is only one monopoly operator. With two operators, airlines do not find any problem. The only difficulty is with the quality of handling which is not up to international standards. For example, most countries do not have proper controls for ULD (Unit Load Devices), which requires qualified people to operate. Except Thailand, Singapore, and Malaysia, all other countries have problems in providing ground handling services. Thailand has only TAGS to do the ground handling. In Singapore, there are three companies and there is good competition. Thailand, Indonesia, Malaysia, Myanmar, and Cambodia have only one ground handling services provider each. The Philippines has a few operators. 5. Foreign ownership regulations that restrict the right of foreign entities to invest in domestic airlines (Not Significant – 1) Usually in ASEAN, foreign airlines are not interested in investing in domestic airlines due to the lack of infrastructure, of the small number of passengers and the cargo being moved. Most of the ASEAN countries are small. Brunei and Singapore are too small to justify investment in domestic airlines. Domestic cargo is mostly moved in these countries by road. In Malaysia, Indonesia, and Thailand, domestic cargo is moved by road or sea. Also, in Malaysia and the Philippines, foreign airlines are not allowed to invest in domestic airlines. 6. Cabotage regulations (Very Significant – 4) Cabotage regulations in air transport are regulations that restrict the domestic movement of cargo by a foreign airline from one airport to another airport within a country. It impacts the total cost of shipment. As most of the economic activities of a country are centred on major ports, unless the consignment size is large, foreign firms may not wish to operate domestic cargo transport services. Some ASEAN countries have only one capital airport (Brunei, Lao PDR, and Cambodia). Hence there is no question of cabotage. Myanmar has low volumes of domestic trade through air which makes investment by foreign firms non-viable. Malaysia, Indonesia and the Philippines have cabotage issues. First, the practice of cabotage does not allow domestic operations by foreign airlines. For instance, Malaysia requires transhipment within the country to be done by MAS cargo. However, Singapore does not allow commercial (cargo) coach to transfer from Changi airport to Senai airport nor to airports in East Malaysia. So, transhipment is a challenge. Ideally, ASEAN would want to have an open sky. However, fifth freedom rights are limited to some countries or service providers. Under fifth freedom rights, foreign carriers can pick up commercial loads in a foreign country and carry them to other countries. There are several restrictions on fifth freedom rights in ASEAN. For example, restrictions on fifth freedom rights prevent foreign airlines from collecting cargo meant for the U.S. directly from electronics factories located in Penang (Malaysia). Instead the cargo is flown to Singapore first from

44



where it is air-flown to the U.S. Restrictions on these airlines result in inefficient air cargo movement in ASEAN. A few countries allow fifth freedom rights to foreign carriers with restrictions on capacity, services, or through joint ventures. For example, in the Philippines and Vietnam, traffic right restrictions restrict the number of flights by foreign companies to around 10 flights a week.

B. INFRASTRUCTURE BARRIERS Air transport is at the core of the time-definite logistics system - especially for high-value and perishable goods. For landlocked countries, air transport is a fast alternative to reach distant markets. Insufficient infrastructure influences the cost of shipment. Some of the barriers and their influence on free trade in ASEAN are mentioned below. 1. Lack of sufficient airport infrastructure (Significant – 3) Airport infrastructure is required to accommodate freighters outside the major airports. The requirement for airport infrastructure depends on the market size which is quite small in most ASEAN countries. Therefore, many countries lack sufficient airport infrastructure. The lack of sufficient airport infrastructure increases the total time and cost of shipment. Table 8-1 shows the cargo clearance times in selected ASEAN economies. Table 8-1: Customs Clearance Times for Selected ASEAN Economies Brunei

Indonesia

Malaysia

Philippines

Singapore

2-4 working 2-3 days after flight 4 working working 1-2 days days arrival (direct days ship) Source: International Exhibition Logistics Associates, http://www.iela.org, 2002 Air freight

3 working days

Thailand

Vietnam

7 days

5 working days

Singapore, Malaysia, Thailand, and Brunei have good airport infrastructure. The other ASEAN airports are as efficient to turnaround (offload/load cargo) aircraft quickly. Aircraft can land but cargo handling takes a long time. Equipment, people and place are restricted by infrastructure. The aircraft turnaround time in these countries, which is normally 1.5 hours, is about 3-5 hours. Aircraft are forced to alter their landing times due to the lack of apron crew. 2. Limited lift capacity and directional imbalance (Moderately Significant – 4) Directional imbalance and limited lift capacity result from low shipping volumes and the lack of dedicated freight services. As freight is often shipped on passenger airlines, competition with passengers also limits the total lift capacity. It increases total shipment cost. Most ASEAN countries experience directional imbalance. Vietnam is an importing country and hence has considerable directional imbalance. Brunei has only imports. Indonesia and Thailand are quite equal. Myanmar tries to balance imports and exports. However, directional imbalance exists as seafood and agricultural produce cannot be shipped by air. 3. Changes in demand for air cargo services (Significant – 3) Changes in demand for air cargo services, due to the export of seasonal goods, exacerbate problems related to limited lift capacity, directional balances, and volatile transit costs by season.


45


Shifts in world trade lead to a change in demand for air cargo. In the past, Singapore was a manufacturing base. Now the base has shifted to China. Problems also arise due to a lack of air cargo space especially in the peak season of June to November to meet the holiday demand. In the peak period, driven by demand for space, shipping rates increase. During winter holidays (December to February), due to the weather and annual vacations, cargo movement is slower. During Christmas and other festivities, the factories close (particularly in the Philippines) and hence there is nothing to transport.

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IX. TRADE BARRIERS: LAND TRANSPORTATION SPECIFIC Land transportation in ASEAN is extensive in almost all countries except the Philippines and Indonesia which are archipelagic by nature. Rail only carries a very small percentage of cargo transportation in ASEAN. Therefore, we focus on road transportation which is beset with various regulatory measures (both within and across border).

A. REGULATORY BARRIERS 1. Limitation on equipment usage (Very Significant – 5) The limitation on equipment usage reduces the connectivity and raises the cost of the shipment within any country. In Brunei, commercial trucks have a maximum road life of 12 years. In Myanmar, although there is no barrier to domestic trucking, rice export using trucks is prohibited so as to prevent any illegal exporting of rice. 2. Limitation on fleet size and hours of operation (Very Significant – 5) Various transport regulations inhibit the free movement of trucks within and across the country and increase the total cost and time for shipments. In Indonesia, foreigners are not allowed to own a transport company. In Thailand and Malaysia, a foreign firm must enter into a joint venture with a local company to operate there. In Thailand, the foreign equity has to be less than 50%. Malaysia allows more than 50% equity but there must be a local partner. Countries try to protect local firms. For instance, foreigners can own trucks to do their own distribution, but they cannot do business with other companies. Other regulatory barriers to road transport by foreign companies exist. For example, East Malaysian trucks can enter Brunei and Bruneian trucks can enter East Malaysia. However, East Malaysia restricts Indonesian trucks into Brunei. Malaysian trucks are not allowed to enter Lao PDR and Cambodia. It needs to handover at some point in Bangkok. All countries face the problem of the free movement of trucks between two countries. Some countries allow bonded trucks to move. For example, Singapore, Malaysia and Thailand have had discussions to allow certain kinds of bonded trucks to move freely through these countries, with appropriate customs supervision. Cargo is not allowed to move freely from Thailand to Singapore via Malaysia. A number of restrictions exist. Because of the complicated customs barrier, cargo usually moves by sea, bypassing a third country. Moving by road from Thailand to Singapore via Malaysia involves two border crossings. The customs process is tedious and one needs to change chassis at the borders. Malaysian trucks are not allowed into Lao PDR and Cambodia. It needs to handover at some point in Bangkok. Lao PDR and Vietnam do not permit trucks from other countries entry, to protect her local industry. Some respondents shared their concerns about road cabotage between Singapore and Malaysia. Malaysian trucks are only allowed into Singapore to drop and pick up goods. Although Singapore allows Malaysian trucks to enter, this is not reciprocated. From the Singapore government’s perspective, allowing Malaysian trucks to drop and pick goods in Singapore has cost benefits for Singaporean firms. If Malaysia allows Singaporean trucks to enter its territories, Singaporean companies will be worse off as their cost of transportation is much higher than Malaysian trucks. The ASEAN framework for intermodal transport agreement in 2005 discussed about border crossing from Singapore using multimodal transport, traversing Malaysia and Thailand, joining the China network via Kunming, and then joining the West-Asia network. They allow the transposing of vehicles across the different borders (Malaysia, Thailand and


47


Singapore vehicle). The restriction is on the number of vehicles allowed in this case (60 vehicles only) that can do so. Between Lao PDR and Thailand, and between Lao PDR and Vietnam, there are agreements on the number of trucks with free access. They allow trucks to go to a Thai port. Also, trucks from Thailand and Vietnam can enter Lao PDR, restriction free. 3. Prohibiting operation on certain days of a week or on certain highways (Slightly Significant – 2) Thailand has had restrictions on large trucks into Bangkok from 9 a.m. to 9 pm, to prevent congestion. This restriction has been extended to the greater city area. While it does not affect free trade, goods distribution is more difficult and less efficient. In Kuala Lumpur, also, large trucks are not allowed into the city during peak hours so as to reduce congestion. Restrictions on truck operations apply during the peak hours 6-8 a.m. and after working hours. The truck drivers also hate to go in during that time, unless it is urgent cargo. They usually deliver from 5 to 7 a.m.

B. INFRASTRUCTURAL BARRIERS A critical link for intermodal transport, regional trade, and landlocked countries, road transportation accounts for more than half of the door-to-door transit time and cost. Poor road condition is the main infrastructural barrier that influences the time and cost of shipments. 1. Poor road conditions (Significant – 3) Narrow roads do not allow the use of 40-foot container trucks, resulting in multiple handling at different points, over capacity and frequent breakdowns in the supply chain. About 50 percent of the roads in ASEAN are in poor condition and the road quality degrades substantially in bad weather. Moreover, in some countries, the enforcement of driving and vehicle regulations is weak and in some countries, traffic safety is a lower priority. Indonesia and Vietnam do not have many roads. The road condition in Vietnam is very poor and the number of highways is also few. In Indonesia, fuel cost is low but transportation cost is high. Thailand has the lowest cost of transportation and Singapore has the highest cost of transportation. The cost of transportation in Vietnam is also quite low but there are problems such as overloading, poor truck condition and box sizes limitation. The road condition in Brunei and Singapore is excellent but fair in Malaysia and Thailand. Thailand is quite good in terms of infrastructure but traffic jams are quite frequent in Bangkok. The connection between Vietnam and Lao PDR is narrow and windy. The roads connecting Lao PDR to Thailand and Lao PDR to Vietnam are good. The land transportation infrastructure in Myanmar is not good. For example, from Yangon to the Thai border, it takes three days because of poor road conditions and customs inspection at the check points. In the Philippines, however, road conditions are fairly good.

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X. TRADE BARRIERS: OTHER BARRIERS 1. Criminal Practices (Significant – 3) Criminal practices are very common in Cambodia, Malaysia and Indonesia. In Cambodia, there are reports of truck cargo being hijacked. In Malaysia, there have been cases of hijack of high value cargo, even with security escorts present. Logistics firms are also trying to put in a GPS tracking system. Similarly, in Indonesia, there have been cases of truck hijacking. In the Philippines, Thailand, and Malaysia, the situation is the same. Logistics firms conduct regular security screening of employees, check the vehicles and send security escorts to reduce the risk of hijacks. The GPS tracking system or an armed security escort raises the cost of transportation considerably. For example, the costs of transportation from Penang to Singapore via Kuala Lumpur are as follows: GPS: S$2000 per vehicle Armed escort: S$1,000 - 1,200 per trip Unarmed: S$600 per trip It is a significant cost of cross border transportation from Penang to Singapore. 2. Malpractices / Facilitation Money (Moderately Significant – 4) One issue influencing free trade is the flow of facilitation money. In Indonesia, one has to comply with the regulations or pretty much hand over arbitrary sums to customs authorities. Malpractices are also prevalent in the Philippines as well as Thailand. One respondent mentioned that when exporting goods from Singapore to Indonesia, the goods listed in the importing document are less than the goods listed in the exporting document. They are officially missing. The facilitation money is about 25% of the customs duty in Indonesia, 30-35% in Vietnam, 70% in Lao PDR, 30% in Thailand respectively. Freight forwarders call this phenomenon as moving goods by ‘submarine’. Such shipments are moved through the normal channel but the red lane goods are also transported through the green lane. To some extent, Singapore faces a similar situation. Some importers bring liquor into Singapore in the name of transhipment but conduct sales in Singapore. The Philippines has two customs - one in North harbour and the other in South harbour. They have different sets of customs regulations. The distance between these two customs is only 1km. If a ship calls on North harbour (shipping lines sometimes call different ports and shippers do not know) and cannot clear out due to lack of connectivity, the container cannot be moved across the road to the South port. They have to ship the container back to Hong Kong and put in another ship which calls the South harbour.


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50



XI. TRADE PERFORMANCE AND RECOMMENDATIONS Chapters III to IX provided the details of the various trade barriers in ASEAN. Appendix 2 summarizes these barriers indicating the significant rating of each barrier in the country as well as the number of respondents who responded to the interview about that barrier. In this chapter, we will analyze these barriers.

A. TOP BARRIERS We asked each respondent to indicate the top barriers that influence free trade. The list below summarizes the top barriers. 1. Customs

Lack of clear and firm rules in customs Customs clearance including documentation and inspection takes long time Use of EDI does not include payments. ASEAN’s “one stop service” or “single window service” needs to be improved. Inconsistent classification of codes across ASEAN Single point of entry for customs Customs working hours does not resolves urgency situations

2. Foreign Investment

Foreign ownership in ASEAN, particularly transportation sector Language problems

3. Mode-specific transportation

Open skies policy Border coordination between different countries Under-developed ports in different countries

4. Other barriers

Prevalence of facilitation money practices and bureaucracy

B. INFLUENCE OF BARRIERS ON TRADE PERFORMANCE As discussed earlier, trade performance can be measured in terms of the total time for shipping, total cost of shipping, quality of the shipment, trade volume, and reliability of the shipment. During the interviews, we specifically identified the trade performance measures that are specifically influenced by a trade barrier. The following sub-sections identify these barriers and the scale at which they influence free trade within ASEAN. 1. Total Time for Shipping Table 11-1 shows the barriers that influence the total time for shipping and trade.


51


Table 11-1: Influence on Trade Performance (Time) Barrier to logistics services

Scale

Type of barrier

Time consuming documentation requirements Burdensome inspection requirements Different classification of goods in different countries Arbitrary independent rulings Lack of border crossing coordination with regional neighbors Inefficiency of inbound clearance process

6 6 6 5 5 5


5


5

Access to cargo-handling and storage and warehousing facilities Volatility in border traffic Improper penalties Limited hours of operations at customs facilities

4 4 4 3

Licensing requirements

3

Cabotage regulations Absence of general competition legislation in liner shipping Security related delays Monopolized handling of cargo Cargo reservation laws

3 3 2 2 2

Customs related Customs related Customs related Customs related Customs related Customs related Land transport specific Land transport specific Aviation specific Customs related Customs related Customs related Licensing & Transparency Maritime specific Maritime specific Customs related Maritime specific Maritime specific

2. Total Cost of Shipping Table 11-2 shows the barriers that influence the total cost of shipping. Table 11-2: Influence on Trade Performance (Cost) Barrier to logistics services

Scale

Type of barrier

Time consuming documentation requirements Different classification of goods in different countries Arbitrary independent rulings

6 6 5


5


5

Absence of adequate warehousing and specialized storage facilities Cabotage regulations Improper penalties Difficulty in hiring / firing Cabotage regulations Absence of general competition legislation in liner shipping Security related delays Monopolized handling of cargo

5 4 4 3 3 3 2 2

Customs related Customs related Customs related Land transport specific Land transport specific Maritime specific Aviation specific Customs related Labour related Maritime specific Maritime specific Customs related Maritime specific

3. Quality of the Shipment (related to efficiency of logistics services provided) Table 11-3 shows the barriers that influence the quality of the shipment.

52



Table 11-3: Influence on Trade Performance (Quality) Barrier to logistics services

Scale

Type of barrier

Burdensome inspection requirements Foreign ownership regulations Improper penalties Multiple uncoordinated offices

6 4 4 4

Customs related Cross-sectoral investment Customs related Customs related


4

Licensing & Transparency

Discriminatory inspection practices Difficulty in hiring / firing

3 3

Customs related Labor related


3


Duplicative licensing requirements depending upon services

3


Cabotage regulations Absence of general competition legislation in liner shipping Limit on foreign firms to provide brokerage services Labor Policies Monopolized handling of cargo

3 3 2 2 2

Maritime specific Maritime specific Customs related Labor related Maritime specific

4. Trade Volume (related to the total volume that could be shipped) Table 11-4 shows the barriers that influence the trade volume. Table 11-4: Influence on Trade Performance (Volume) Barrier to logistics services

Scale

Type of barrier

1

Customs related

Restriction on weight and value of the shipment

5. Reliability of the Shipment (related to damage and pilferage of goods in transit) Table 11-5 shows the barriers that influence the reliability of the shipment. Table 11-5: Influence on Trade Performance (Reliability) Barrier to logistics services

Scale

Type of barrier

6 4 4 3 3 2

Customs related Cross-sectoral investment Licensing & Transparency Customs related Licensing & Transparency Customs related

Burdensome inspection requirements Foreign ownership regulations Discriminatory licensing Limited hours of operations at customs facilities Duplicative licensing requirements depending upon services Limit on foreign firms to provide brokerage services

C. LOGISTICS FRIENDLINESS INDICATORS Based on the results of the interviews, we developed an index to measure the extent of logistics friendliness in ASEAN. The measurement index shows a category-wise weighted average of barriers to free trade on a 4-point scale (1- Best friendliness, 4 – Worst friendliness). The lower the score, the better is the logistics friendliness in that country. We used the following formula to compute the weighted average:

S=


BS CS 1 n (A + B i × i ) ∑ n i =1 R R 53


where S = Logistics quality score n = No. of indicators for the relevant category BS = Significance of the barrier to free trade (on 6-point Likert scale) CS = Significance of existence of the barrier in a specific country (on 6-point Likert scale) R = Range of the rating (6) L = Scale factor (10) to scale the score on a 10 point scale. Table 11-6 shows the logistics friendliness indicators in ASEAN. Based on the scale distribution which is within the range of 1 to 4, we categorize the ASEAN into four logistics friendliness groups. As there are very few countries with a score higher than 2, the interval 2.00 and above are defined as poor logistics friendliness. As for the scores between 1:00 and 1.99, they are divided into three equal intervals: 1-1.33 (Very Good); and 1.34-1.66 (Good); 1.67-1.99 (Average). Thus, Singapore is very logistics friendly while Indonesia has relatively poor logistics friendliness.

INDONESIA

LAO PDR

MALAYSIA

MYANMAR

PHILIPPINES

SINGAPORE

THAILAND

VIETNAM

CUSTOMS PROCEDURES AND INSPECTIONS

CAMBODIA

LOGISTICS FRIENDLINESS INDICATORS

BRUNEI

Table 11-6: Logistics Friendliness Indicators in ASEAN

1.69

1.92

2.53

1.83

1.91

2.00

1.88

1.29

1.97

1.80

MODE-SPECIFIC (REGULATORY) SCORE

1.11

MARITIME (REGULATORY) SCORE AVIATION (REGULATORY)SCORE

1.14 1.00

LAND TRANSPORTATION (REGULATORY) SCORE

1.20

REGULATORY SCORE

1.23

1.36

1.20

1.34

1.27

1.30

1.23

1.21

1.30

1.23

1.50

NA

1.32

1.24

1.46

1.35

1.23

1.43

1.00

1.00

1.00

1.00

1.00

1.00

1.00

1.02

1.00

1.54

1.46

1.46

1.86

1.71

1.29

1.20

1.40

1.37

1.41

1.59

1.96

1.64

1.64

1.65

1.60

1.26

1.60

1.56

LABOUR SCORE

1.11

1.46

1.51

1.46

1.51

1.46

1.40

1.11

1.54

1.46

CROSS-SECTORAL INVESTMENT SCORE

1.26

2.29

2.63

2.29

2.63

2.29

1.26

1.26

2.63

2.29

LICENSING AND TRANSPARENCY SCORE

1.63

1.63

2.06

1.69

2.17

1.54

1.46

1.20

1.86

1.71

FOREIGN INVESTMENT SCORE

1.36

1.65

1.91

1.67

1.96

1.61

1.40

1.17

1.83

1.69

MARITIME (INFRASTRUCTURE) SCORE

2.29

2.00

2.51

NA

1.71

1.83

2.51

1.46

1.83

2.69

AVIATION (INFRASTRUCTURE) SCORE

1.63

2.01

1.82

1.94

1.79

2.08

1.65

1.50

1.45

1.91

LAND TRANSPORTATION (INFRASTRUCTURE) SCORE

2.63

3.06

3.06

3.06

3.49

3.06

3.06

1.34

3.06

3.06

INFRASTRUCTURE SCORE

1.96

2.12

2.19

2.13

1.95

2.10

2.10

1.47

1.75

2.30

OVERALL SCORE

1.50

1.72

2.03

1.75

1.75

1.74

1.69

1.29

1.66

1.72

54



XII. MAJOR BARRIERS AND RECOMMENDATIONS In this study, we have identified a number of barriers that influence free trade across ASEAN. Some are critical to free trade. Here we list the barriers with significance rating greater than four and provide recommendations based on the interview responses. We have excluded the barriers that cannot be acted upon, such as those due to poor infrastructure. A. CRITICALLY SIGNIFICANT BARRIERS Table 12-1 shows recommendations.

the

barriers

that

critically

influence

free

trade

and

our

VIETNAM

THAILAND

SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

TYPE OF BARRIER

CAMBODIA

SPECIFIC BARRIER

BRUNEI

Table 12-1: Critically Significant Barriers

RECOMMENDATION

Time consuming documentation requirements


3

5

6

6

2

6

4

1

4

3

Adopt common EDI for all ASEAN and all gateways (including payment) to enhance efficiency considerably



2

3

6

3

2

3

4

1

4

3

Adopt common inspection policy to reduce corruption related problems

Different classifications of goods in different countries


2

Institute clear and transparent customs rules; Educate the customs officers on proper goods classification

4

4

6

3

3

3

6

1

4

B. VERY SIGNIFICANT BARRIERS Table 12-2 shows the barriers that highly influence free trade and our recommendations.

VIETNAM

THAILAND

SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

TYPE OF BARRIER

CAMBODIA

SPECIFIC BARRIER

BRUNEI

Table 12-2: Very Significant Barriers



1

1

1

1

5

2

1

1

1

1



4

5

5

5

5

5

5

5

5

5


RECOMMENDATION

Use common ASEAN certified trucks for cross-border transportation Use common ASEAN certified trucks for cross-border transportation

55


Lack of border crossing coordination with regional neighbours


Inefficiency of inbound clearance process


5

2

5

4

5

6

4

4

6

4

4

6

1

2

4

4

1

5

4

Use common ASEAN certified trucks for cross-border transportation

4

Have transparent regulations in customs to enhance efficiency for both customs and LSPs

C. MODERATELY SIGNIFICANT BARRIERS Table 12-3 shows the barriers that moderately influence free trade and our recommendations.

TYPE OF BARRIER

BRUNEI

CAMBODIA

INDONESIA

LAO PDR

MALAYSIA

MYANMAR

PHILIPPINES

SINGAPORE

THAILAND

VIETNAM

Table 12-3: Moderately Significant Barriers

Foreign ownership regulations

Foreign Investment

1

4

5

4

5

4

1

1

5

4

Allow majority foreign ownership to help countries improve their infrastructure


Foreign Investment

1

1

4

3

5

1

1

1

3

1

Enforce same treatment to all firms

Cabotage regulations

Aviation specific (Regulatory)

1

3

3

3

4

3

2

5

1

2

Remove cabotage for increased efficiency

Arbitrary independent ruli1ngs


1

1

5

1

1

4

1

1

1

1

Enforce for transparency in rules and regulations (related to corruption)

Volatility in border traffic


3

3

3

4

5

3

1

2

4

4

Have 24-hour operation at borders

Multiple uncoordinated offices


1

1

4

1

4

1

5

1

4

1

Be transparent in rules and regulations and integration of customs offices

Improper penalties

Foreign Investment

1

1

6

1

1

1

1

1

1

1

Be transparent in customs procedures, rules and regulations

SPECIFIC BARRIER

RECOMMENDATION

D. CONCLUSIONS AND LIMITATIONS In this study, we have identified barriers to free trade in logistics services. Customs procedures and inspections are the most significant barriers to logistics services in ASEAN. The inefficiency arises mainly due to the lack of automated practices and redundant procedures requiring much documentation. The generalizability of the results of this study is subject to its limitations. The time frame for this study was short and hence the results are at best an overview of the barriers. The study, being exploratory, warrants conducting a more rigorous survey for measuring the extent and influence of each specific barrier in ASEAN.

56



REFERENCES ALMEC Corporation, 2002. ASEAN maritime transport development study, 1-38. APEC (Asia Pacific Economic Co-operation), 1999. Assessing APEC trade liberalization and facilitation: 1999 update. Economic Committee, September 1999. APEC: Singapore. Arnold, J. and Villareal, T., 2002. Philippines logistics study. The World Bank Studies. Arnold, J., 2003. Logistics development and trade facilitation in Lao PDR. The World Bank Studies. ASEAN, 2006. Defining the ASEAN logistics service industry. The 2nd consultative meeting for the priority integration sector (COPS II). USAID 2006, Toward a Roadmap for Integration of the ASEAN Logistics Sector, Nathan Associates Inc. ASEAN framework agreement for the integration of priority sectors, 2005. Asia Pacific Foundation of Canada, 1999. Survey on customs, standards and business mobility in the APEC region. APF Canada: Vancouver. Banomyong, R., 2000. Multimodal corridors in the ASEAN. Unpublished Ph.D. Thesis, University of Wales. Banomyong, R., 2004. Assessing import channels for a land-locked country. Asia Pacific Journal of Marketing and Logistics, Vol. 16, No. 2, 62-81. Beresford, A.K.C. and Dubey, R.C., 1990. Handbook on the management and operations of dry ports, UNCTAD, RDP/LDC.7, Geneva, Switzerland. Beresford, A.K.C., 1999. Modeling freight transport costs: A case study of the UK-Greece corridors. International Journal of Logistics: Research and Applications, Vol. 2, No. 3, 229-246. Carana Corporation, 2004. Impact of transport and logistics on Indonesia’s trade competitiveness. Carana Corporation, 2005. Improving transport and logistics for trade: Final report for the special study on the impact of transport and logistics on trade competitiveness. Carruthers, R., Jitendra, N.B., and Hummels, D., 2003. Trade and logistics in East Asia: A development agenda. EASTR working paper, No. 3. Clark, X., D. Dollar, and A. Micco, 2004. Port efficiency, maritime transport costs, and bilateral trade. Journal of Development Economics, Vol. 75, 417-450. CSI (Coalition of Service Industries), 2004. Statement of the coalition of service industries to the U.S. international trade commission. Press releases, November 19, 2004. Cudmore, E. and J. Whalley, 2004. Border delays and trade liberalization. University of Western Ontario and NBEER Peking University CESinfo. De Dios, L.C., 2004. Issues and options for the work program to eliminate non-tariff barriers in AFTA, ASEAN-EU Programme for Regional Integration Support Project 04/07. De Groot, H.L.F, G.J. Linders, P. Rietveld and U. Subramanian, 2004. The institutional determinants of bilateral trade patterns. Kyklos, Vol. 57, No. 1, 103-123. Dee, P., 2004. A systematic evaluation of services trade barriers: The case of Thailand. Presented in the Seventh Annual Conference on Global Economic Analysis, June 1719, 2004, Washington DC. Dee, P., 2005. Measuring and modelling the barriers to services trade: Australia’s Experience. In P. Dee and M. Ferrantino (eds.), Quantitative Measures for Assessing REPSF Project 06/001d: Final report

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the Effect of Non-Tariff Measures and Trade Facilitation, Singapore: World Scientific Ltd. for APEC, 71-106. Djankov, S., C. Freund and C.S. Pham, 2006. Trading on Time. World Bank Working Paper. Dollar, D., M. Hallward-Driemeier and T. Mengistae, 2004. Investment climate and international integration. Policy Research Working Paper 3323. World Bank, Washington, D.C. Doove, S., Gabbitas, O., Nguyen-Hong, D. and Owen, J., 2001. Price effects of regulation: International air passenger transport. Telecommunications and Electricity Supply, Productivity Commission Staff Research Paper, Ausinfo, Canberra. Fink, C., A. Mattoo, and C. Neagu, 2002. Trade in international maritime services: How much does policy matter? The World Bank Economic Review, Vol. 16, No. 1, 81-108. Freund, C. and D. Weihold, 2000. On the effect of the internet on international trade. International Finance Discussion Papers, No. 693, Board of Governors of the Federal Reserve System. Goetz, Perl, Sherry and Szyliowicz, 2002. A case study of the intermodal issues facing the Puget Sound region and the port of Seattle. For APEC Transportation Working Group, Intermodal Task Force. Goh, M. and A. Ang, Some Logistics Realities in Indochina, International Journal of Physical Distribution and Logistics Management, Vol. 30(9-10), 887-911. Gonenc, R. and G. Nicoletti, 2000. Regulation, market structure and performance in air passenger transportation. OECD Economics Department Working Paper, August 2000. Hausman, W.H., H.L. Lee and U. Subramanian, 2005. Global logistics indicators, supply chain metrics and bilateral patterns. World Bank Policy Research Working Paper 3773. Hertel, T.W., T. Walmsley and K. Itakura, 2001. Dynamic effect of the “new age” free trade agreement between Japan and Singapore. Journal of Economic Integration, Vol. 16, No. 4, 446-484. Hummels, D., 2001. Time as a trade barrier. Global Trade Analysis Project Working Paper No.17, Purdue University. ISEAS (Institute of Southeast Asian Studies), 1985. ASEAN-EEC trade in services: An overview, Singapore. Lewis, I., Semeijn, J., and Vellenga, D.B., 2001. Issues and initiatives surrounding rail freight transportation in Europe. Transportation Journal, Vol. 41, 23-31. Limao, N. and A.J. Venables, 2001. Infrastructure, geographical disadvantage, transport costs and trade. World Bank Economic Review, Vol. 15, 451-479. Moenius, J., 2000. Three essays on trade barriers and trade volumes. Ph.D. Dissertation, University of California, San Diego. Nomura Research Institute, 2002. Vietnam logistics development, trade facilitation and the impact on poverty reduction. Prepared for Ministry of Transport, Vietnam and The World Bank. Nordas, H.K. E., Pinali and M.G., Grosso, 2006. Logistics and time as a trade barrier. OECD Trade Policy Working Papers 35, OECD Trade Directorate. OECD (Organization for Economic Co-operation and Development), 1999. Assessing barriers to trade in services air cargo services. TD/TC/WP(99)57/Final.

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OECD (Organization for Economic Co-operation and Development), 2001. Business benefits of trade facilitation. TD/TC/WP(2001)21/Final. OECD, 2002. Benchmarking intermodal freight transport. ISBN 9264197427, 1-148. OECD,

2003. Quantitative assessment TD/TC/WP(2003)31/Final.

of

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facilitation.

Otsuki, T., J.S. Wilson and M. Sewadeh, 2001a. What price precaution? European Harmonization of Aflatoxin regulations and African groundnut exports. European Review of Agriculture Economics, Vol. 28, No. 3, 263-284. Otsuki, T., J.S. Wilson and M. Sewadeh, 2001b. Saving two in a billion: Quantifying the trade effect of European food safety standards on African exports. Food Policy, Vol. 26. REPSF project 03/006a, 2004. Global economic challenges to ASEAN integration and competitiveness: A prospective look. REPSF project 04/001, 2005. Promoting efficient and competitive intra-ASEAN shipping services. REPSF Project 04/008, 2005. Strategic directions for ASEAN airlines in a globalizing world ownership rules and investment issues. REPSF project 04/011, 2006. Investigation of measures affecting the integration of ASEAN’s priority sectors: Phase one. Sidorenko, A. and Findlay, C., 2003. Regulation and market access. Asia Pacific Press, Canberra. Stank, T.K., and Roath, A.S., 1998. Some Propositions on intermodal transportation and logistics facility development: Shippers’ perspectives. Transportation Journal, Spring 1998, 13-24. Subramanian, U., W. Anderson and K. Lee, 2005. Measuring the impact of the investment climate on total factor productivity: Cases of China and Brazil. Working Paper. World Bank, Washington, D.C. UNCTAD (United Nations Conference on Trade and Development), 2001. E-commerce and development report. Geneva. USITC (United States International Trade Commission), 2005. Logistics services: An overview of the global market and potential effects of removing trade impediments. Wilson, J.S. and T. Otsuki, 2004. Trade facilitation and regional integration in South Asia: Accelerating the gains to trade with capacity building. Paper prepared for the South Asia Region, World Bank (mimeo). Wilson, J.S., Mann., C.L. and Otsuki, T., 2003. Trade facilitation and economic development: A new approach to measuring the impact. World Bank Economic Review, Vol. 17, No. 3, 367-389. Wilson, J.S., Mann., C.L. and Otsuki, T., 2005. Assessing the benefits of trade facilitation: A global perspective. The World Economy, Vol. 28, No. 6, 841-871. Wilson, J.S., Soloaga, I. and Mejia, A., 2006. Moving forward faster: Trade facilitation reform and Mexican competitiveness. World Bank Policy Research Working Paper No. 3953.


59



60



APPENDIXES A. APPENDIX 1: INTERVIEW QUESTIONNAIRE

INTERVIEW QUESTIONNAIRE

PROJECT: An Investigation into the Measures Affecting the Integration of ASEAN’s Priority Sectors (PHASE 2): The Case of Logistics

A collaboration between the National University of Singapore & the Georgia Institute of Technology


61


62



SURVEY INTRODUCTION AND GUIDELINES

Dear ___________________________, At the 10th ASEAN summit, the leaders signed the framework agreement for the integration of priority sectors with an objective to establish a single market in twelve priority sectors, the logistics services sector being one of them. On behalf of the ASEAN secretariat, The logistics Institute-Asia Pacific (TLI-AP) is conducting a study on trade barriers in the logistics services sector within the ASEAN region. The objective of this study is to compile a list of logistics related trade barriers (e.g., cabotage and cargo reservation laws; licensing requirements on foreign-flag supplies) which inhibit free logistics services within ASEAN. From this study, we seek to develop an understanding of the existence and significance of the policies and measures which prevent the free movement across national borders or the full national treatment or different standards, regulations and laws that inhibit logistics integration within ASEAN. For this purpose, we would be conducting semi-structured interviews with key personnel of the various logistics related firms in Singapore and other ASEAN. The questions are open-ended as well as closed-ended. We would be grateful to you for letting us know any other issues that are not covered by the questionnaire. In case you need advice of have questions regarding the questionnaire, please contact at the address mentioned below. We are grateful for your time and interest in participating in this project. Thank you very much,

The Interview Team, The Logistics Institute – Asia Pacific, National University of Singapore, AS6, 5th Floor, 11 Law Link, Singapore – 119260 Ph., 6516 4325, 6516 4854 Email: [email protected], [email protected]


63


GUIDELINES The survey questions seek to understand the existence and significance of barriers to logistics trade in the ASEAN region. As there are 10 countries in ASEAN, each question seeks your understanding of the barriers (both import and export) your company faces in trading with other ASEAN. Example: XYZ is a logistics services provider (LSP) based in Singapore. It conducts logistics operations with Indonesia and Malaysia. The question shown below relates to geographical and demographical barriers faced by XYZ in conducting logistics operations with Indonesia and Malaysia. The barriers that XYZ would face would be in importing goods from Indonesia and Malaysia to Singapore and exporting goods from Singapore to Indonesia and Malaysia. For each question and country there are two sub-columns indicating E and S. ‘E’ stands for a Yes/No question asking whether the barrier indicated by the question exists in the country or not. ‘S’ stands for significance question on a 6-point scale, in case the barrier exists. In case the barrier exists, please indicate the effect (on cost, quality, time or trade volume) of removing the barrier on effective trade within the ASEAN region on a scale between 1 (No effect) and 6 (High effect). Each question may impact the cost, time, quality of volume of shipment. Please tick as appropriate. The questions would be guided with supporting ideas during the interview.

1 1a.

BARRRIERS DUE TO INFRASTRUCTURE To what extent is maritime transport to and from this country influenced by the following factors?

Notes: - E: Does the barrier exist? - (Yes/No) - S: How significant is the barrier to logistics services [On a scale of 1 (No effect) and 6 (High impact)] - Logistics performance measures: Cost of Shipment Quality of Shipment Total time taken for shipping Effective trade volume shipped Reliability of the Shipment

64


RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM

INFLUENCE ON THAILAND

SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA

LOGISTICS SERVICES BARRIERS IN ASEAN

BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


GENERAL QUESTIONS A. Name

: _________________________________

B. Countries of operation in the ASEAN region (Please tick) Brunei

Malaysia

Thailand

Cambodia

Myanmar

Vietnam

Indonesia

The Philippines

Lao PDR

Singapore

C. Employer (Name of the company)

: _________________________________

D. Address

: _________________________________ : _________________________________ : _________________________________ : _________________________________

E. Phones

: ____________(O) _______________(M)

F. Fax

: _________________________________

G. e-mail address

: _________________________________

H. Internet website

: _________________________________

I.

Would you like any of the above information not to be published? Yes / No. If Yes, please indicate which one: _________________________________

J. Company’s Size (Manpower)

: _________________________________

K. Company’s Revenue (2005)

: _________________________________


65


BARRIERS DUE TO INFRASTRUCTURE The following questions seek to understand the logistics related barriers posed by country’s infrastructure. For example, some ASEAN may not have EDI facilities, or labor management may be poor.

1 1a.

To what extent is maritime transport to and from this country influenced by the following factors? Reliance on trans-shipment and feeder services Directional Imbalance Weak auxiliary services Absence of adequate warehousing and specialized storage facilities Repeated handling Inefficient ports, such as, inability to handle large cargo volume Labor management practices, such as strikes No. of small decentralized ports Existing fleet of small size Inefficient and under-equipped cargo handling services Small consignment sizes

1b.

To what extent is air transport to and from this country influenced by these factors? Lack of sufficient airport infrastructure Limited lift capacity and directional imbalances Competition with tourist/passenger baggage Changing schedules and cancellations Changes in demand for air cargo services

1c.

To what extent is road transport within this country influenced by the following factors? Poor road conditions Weak domestic road transport and market conditions Challenges for landlocked economies

Continued on next page 66


RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


Does Inter-modal transport in this country influence 1d. logistics services performance in terms of cost, quality, reliability or time? 1e. Crimes in this country influence logistics services. 1f.

Corrupt practices in this country inhibit efficient logistics services and trade across ASEAN.

1g.

Banking and finance practices in this country support efficient logistics services and trade.

1h.

The following issues may also potentially influence efficient logistics trade across the logistics sector Limited formal education Lack of use of advanced logistics strategies Poor demand visibility of sellers Low process transparency and automation Manpower Issues Availability of services infrastructure including transport, electricity, and telecommunications

Note: E: Does the barrier exist? - (Yes/No) S: How significant is the barrier to logistics services [On a scale of 1 (No effect) and 6 (High impact)] 1: No effect; 6: Very Significant effect Logistics performance measures: Cost, Quality, Time, Reliability or Trade Volume


67

RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


BARRIERS DUE TO CUSTOMS PROCEDURES AND INSPECTIONS

The customs procedures of various countries inhibit efficient logistics across the countries. The following questions seek to understand the logistics related barriers due to various customs procedures and inspections in the ASEAN. For example, some countries require manual copies of the shipping documents which increase the total shipping time.

2 To what extent do the following procedures and 2a. inspections influence efficient logistics services across ASEAN? Restriction on weight and value of the shipments Time consuming documentation requirements Burdensome inspection requirements Limit on foreign firms to provide brokerage services Limited hours of operations at customs facilities Discriminatory inspections practices, such as preferred treatment to domestic carriers Security-related delays Different classification of goods in different countries Arbitrary, independent rulings Lack of border crossing coordination with regional neighbors Volatility in border traffic Multiple uncoordinated offices Improper penalties Customs department raises fees unilaterally Inefficiency of inbound clearance process

Note: E: Does the barrier exist? - (Yes/No) S: How significant is the barrier to logistics services [On a scale of 1 (No effect) and 6 (High impact)] 1: No effect; 6: Very Significant effect Logistics performance measures: Cost, Quality, Time, Reliability or Trade Volume.

68


RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


BARRIERS DUE TO CROSS SECTORAL INVESTMENT REGULATIONS

Cross-sectoral investment regulations, such as limiting foreign investment in a country, may inhibit efficient trade across countries. The following questions seek to understand the logistics related barriers due to various cross-sectoral investment regulations in the ASEAN.

3 To what extent do the following cross-sectoral 3a. investment regulations inhibit efficient logistics in ASEAN? Regulations that limit foreign investment, such as on the basis of economic needs or capacity test Regulations that regulate the form of establishment, such as through a separately-capitalized subsidiary, representative office, or joint venture



69

RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


BARRIERS DUE TO LICENSING REQUIREMENTS AND TRANSPARENCY

The following questions seek to various licensing requirements and lack of transparency. For example, discriminatory policies and varying licensing requirements may pose barriers to effective logistics trade.

4 Does this country have discriminatory licensing 4a. requirements for foreign firms, and if so, to what extent does it significantly influence logistics services? Are the following licensing requirements (which pose 4b. lack of transparency) present in this country, and if so, to what extent do they inhibit logistics services? Varying licensing requirements across provinces or districts Duplicative licensing requirements depending upon services Uneven enforcement of licensing requirements Preferential access to domestic competitors regarding information affecting regulations than foreign competitors


70


RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


BARRIERS DUE TO LABOR LIMITATIONS

The following questions seek to understand the logistics related barriers due to labor limitations, such as local manpower requirements, in the ASEAN.

5 Do the regulations in this country require hiring of 5a. local nationals by foreign firms? If so, to what extent does it inhibit efficient logistics in ASEAN? Do you experience difficulty in obtaining entry visas 5b. and permits, and if so, to what extent does it influence efficient logistics across ASEAN? Do you experience cultural differences in the hiring of local residents in this country, and if so, to what 5c. extent does it influence efficient logistics across ASEAN? Do the local laws inhibit firms to lay off workers by requiring the firm to offer costly severance packages, 5d. and if so, to what extent does it influence efficient logistics across ASEAN?



71

RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


BARRIERS DUE TO MODE SPECIFIC RESTRICTIVE LAWS AND REGULATIONS

The following questions seek to understand the logistics related barriers due to mode-specific (maritime, air, road or rail) restrictive laws and regulations such as cabotage rules and cargo restrictions.

6 6a.

To what extent do the following maritime transport regulations inhibit efficient trade across ASEAN? Cabotage regulations that restrict the supply of internal point-to-point transport services to domestic vessels Cabotage regulations that restrict the supply of internal point-to-point transport services to domestic vessels Cargo regulations that allow point-to-point services but impose various restrictions, including licensing requirements, on foreign-flag supplies Cargo reservation laws which require that a portion of country's international cargo is transported on national-flag vessels Regulations restricting the ability of foreign maritime firms to gain adequate access to government-owned port facilities Regulations that allow foreign maritime firms to provide port-related services but subject them to foreign equity, nationality, or licensing restrictions Absence of general competition legislation in liner shipping Lack of provision of subsidies, grants or tax incentives for development of shipping industry Monopolized handling of cargo Large number of private ports

Continued on next page Note: E: Does the barrier exist? - (Yes/No) S: How significant is the barrier to logistics services [On a scale of 1 (No effect) and 6 (High impact)] 1: No effect; 6: Very Significant effect Logistics performance measures: Cost, Quality, Time, Reliability or Trade Volume.

72


RELIABILITY

RADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


6 To what extent do the following air transport 6b. regulations inhibit efficient logistics and trade across ASEAN? Allocation of take-off and landing slots Ability of airlines to provide their own or third-party ground-handling services Access to cargo-handling and storage and warehousing facilities Environmental restrictions that limit airlines hours of operation Usage of third-party providers for ground handling services Preventing airlines from offering such services to other airlines Prohibiting airlines from providing their own groundhandling services Granting cargo carriers adequate access to storage and warehousing facilities Foreign ownership regulations that restrict the right of foreign entities to invest in domestic airlines Cabotage regulations that restrict the right of foreign carriers to provide cabotage, or domestic point-to-point service Cabotage regulations that restrict the supply of internal point-to-point transport services to domestic carriers

Continued on next page Note: E: Does the barrier exist? - (Yes/No) S: How significant is the barrier to logistics services [On a scale of 1 (No effect) and 6 (High impact)] 1: No effect; 6: Very Significant effect Logistics performance measures: Cost, Quality, Time, Reliability or Trade Volume


73

RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


6 6c.

To what extent do the following road transport regulations inhibit efficient trade within the country? Limitations on equipment usage Limitation on fleet size and hours of operation Prohibiting foreign firms from operating particular type of vehicles, such as tractor-trailer Prohibiting operation during certain days of a week or on certain highways

6d.

To what extent do the following rail transport regulations inhibit efficient trade within the country? Priority passenger transport over cargo transport in some countries Non-harmonized rail track gauges across borders Lack of capacity High prices of rail transport Prohibiting foreign firms from operating particular types of vehicles, such as tractor-trailer

Note: E: Does the barrier exist? - (Yes/No) S: How significant is the barrier to logistics services [On a scale of 1 (No effect) and 6 (High impact)] 1: No effect; 6: Very Significant effect Logistics performance measures: Cost, Quality, Time, Reliability or Trade Volume

74


RELIABILITY

TRADE VOL.

QUALITY

TIME

COST

VIETNAM


SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.

IMPORT/EXPORT ASEAN


BARRIERS DUE TO INEFFICIENT CONTAINER MOVEMENT

We would like to understand the influence of logistics due to inefficient container movement across ASEAN. For example, countries may prefer trans-shipment through a third country rather than direct shipment for savings on time and cost.

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________


75


ANY OTHER BARRIERS

Please indicate any other barriers to logistics services and trade not covered by this questionnaire.

-

_____________________________________________________________________

-

_____________________________________________________________________

-

_____________________________________________________________________

Please list the top three barriers to logistics services and trade in ASEAN.

[1]. _____________________________________________________________________

[2]. _____________________________________________________________________

[3]. _____________________________________________________________________

76



E. APPENDIX 2: SUMMARY TABLE OF BARRIERS PERFORMANCE

PERFORMANCE MEASURE

1

SIGNIFICANCE OF THE BARRIER TO FREE TRADE

3

Except for balancing requirements as in Myanmar, it does not very much impede free trade

Trade Volume

There is no standard format across ASEAN and EDI is not fully functional (especially payment) in most countries

Time and Cost

VIETNAM

1

Not Significant

THAILAND

No restriction

SINGAPORE

MYANMAR

PHILIPPINES

MALAYSIA Transposing of vehicles allows 60 trucks for cross-border transportation which is very less

Requires balance of import and export. The value of import must equal the value of export. This requires finding an exporter who can balance accounts.

LAO PDR

INDONESIA

CAMBODIA

BARRIER TO LOGISTICS SERVICES IN ASEAN

BRUNEI

SERIAL NO.

Ratings: 6-Critically Significant; 5-Very Significant; 4-Moderately Significant; 3-Significant; 2-Slightly Significant; 1-Not Significant

No restriction

Restriction on import of high value items and commodities (e.g., rice and sugar)

No restriction

6

6

4

1

3

1

1

EDI is not fully functional.

Critically Significant

A. BARRIERS RELATED TO CUSTOMS PROCEDURES AND INSPECTIONS

1

Restriction on weight and value of the shipment

No. of Respondents Rating

2

Time consuming documentation requirements


No restriction

No restriction

Restriction on import of high value items, commodities (e.g., rice and sugar), used parts

No restriction

1

6

2

3

6

1

1

3

1

1

6

Little automation (EDI) and hence lots of paper work required. Five forms are needed to be filled for transit goods from Lao PDR. The customs regulations are also not clear.

EDI efficiency is good, still the payment is done manually. Some paperwork is also required.

EDI efficiency is very poor. The documentation must be made 5 days in advance before the arrival of the ship. Documentation is very time consuming (3 weeks). Also, payment in manual

EDI is present but not yet fully automated.

EDI is fully functional including payment gateway.

5-7 days for documentation and lots of stamps and paperwork is required. The documentation also require lots of details on documentation, long review and lots of uncertainty

Not fully EDI. Prepare documents in the computer, save it into disk and then give it to ports.

EDI efficiency is poor. The Government is less willing to change.

Import license is required for importing any good. EDI efficiency is poor and lots of paper work is still required. The government lacks transparency

4

6

11

3

12

5

8

13

14

10

3

5

6

6

2

6

4

1

4

3


6

77


3



4

Regulations that limit foreign firms' ability to provide brokerage services No. of Respondents Rating

5

Limited hours of operations at customs facilities


78

WTO standards regarding inspection are followed. 100% checking is not done

If inspection is required, one needs to find out own labor and equipment to load and unload truck for inspection.

Inspection is done when there is an issue, such as smuggling. One needs to find out own labor and equipment to load and unload for inspection. Around 35% of shipment crossing border are not recorded.

4

2

5

2

6

3

3

6

7

5

2

3

6

3

2

3

4

1

4

3

6

No limitation

Only 3-4 companies possess brokerage licences. Foreign firms not allowed to own customs brokerage licences

Foreign firms not allowed to own customer brokerage licences

Foreign firms not allowed to own customer brokerage licences

Foreign firms not allowed to own customs brokerage licences


Customs brokerage licences are limited to individual citizens.

No limitation


Brokerage services can only be provided in designated industrial parks.

Slightly Significant

1

2

3

1

3

1

3

3

3

3

1

5

3

3

5

3

1

1

3

5

2

It is possible to complete in normal working hours (10.30 - 4.30). They may or may not accept overtime depends on the amount of cargo

The operating hours are restricted with no operations on weekends or public holidays.

Open 24 hours, 7 Days a week.

The operating hours are restricted with no operations on weekends or public holidays. Overtime is possible.

Closed on holidays and weekends.

Significant

For taxable goods, 1% of inspection per consignment. For the tax paid goods, need to be put into warehouses.

Find out one's own labor and equipment to load and unload truck for inspection.

Inspection is mostly done manually and sometimes by machine. Export inspection (1 day), import inspection (2-3 days)

Very high landing charges for documentation and clearance (double of other ASEAN)

Inspection is quite fast. Careful inspection of goods like cigarettes and liquor.

Careful inspection is carried out for high value items.

When documents are in good order, customs clearance takes less than 3 days for normal goods and 3-5 days for transit goods .


Operating hours are little flexible with overtime on weekends.


East and West Malaysia do not work on Saturday and Sunday. If goods arrive on Friday, it has to wait till next Monday.

3

3

6

1

7

3

5

7

7

5

2

3

3

3

3

2

3

1

2

3

Overtime is possible based on payment by freight forwarders. Friday closed


The problem is with corrupt practices behind inspection and not with the inspection itself. Without unofficial money, clearance time increases to 4-5 days

Time, Quality and Reliability

Restricts business for foreign firms

Quality and Reliability

Airport is open 24 hours, Road border sometimes closed

Time and Reliability

3



6

Discriminatory inspection practices No. of Respondents Rating

Security related delays

Not prevalent

Not prevalent

8

Different classification of goods in different countries


9

Arbitrary independent rulings No. of Respondents Rating

Not prevalent

Not treated equally

Not prevalent

Not prevalent

Not prevalent

Not prevalent

Documentation is easy for domestic companies, 1 day for local, 2-3 days for foreigner

Significant

1

2

4

1

4

1

2

3

3

2

1

1

4

1

2

1

1

1

1

2

3

Not a major issue

Customs regulations are strict but not unreasonable

Not a major issue

Strict at MalaysiaThailand border due to incidents of crime and pilferage.

Not a major issue

Related to under table money

No problem

Strict security requirements requiring extensive documentation. Mainly related to arbitrary money.

Not a major issue


1

5

2

3

6

6

5

3

1

4

1

Different interpretation of codes in order to get arbitrary money

Codes are quite clear. Customs officials are not fully conversant with technical product categories, such as electronics.

Not a major issue

7


Have protective regulation by imposing VAT on imports.

2

3

4

1

1

3

1

1

1

Same HS code, but different duties in different gateways

Exports from Myanmar are agricultural products which are easy to classify. Imports from Singapore are generally machinery and from Vietnam generally electronic products

Codes are quite clear, although there is some misinterpretation

Codes are quite clear.

HS code is a biggest problem due to lack of experience and education. Customs do not want to be educated.

Misinterpretation due to language problem. Customs official are not fully conversant with English. Lack of knowledge of technical product categories

Different perception of laws and codes due to language barrier. Does not allow the import of used parts which increases potential of misclassification of goods

2

4

8

1

9

4

6

9

9

8

4

4

6

3

3

3

6

1

4

2

6

No problem

Customs officers pass arbitrary rules

No problem

No problem

Rules change very fast

No problem

Different interpretation of existing regulations. Rules are not clear

No problem

Moderately Significant

No problem

1

1

4

1

4

1

3

4

4

3

1

1

5

1

1

4

1

1

1

1


Quality

Security is a global problem but not necessarily impede free trade. Less security inspection may not make any difference

Time and Cost

Misinterpretation of HS code is either due to lack of familiarity with HS codes, or due to wanting to make profit from delay. Customers also play around with HS code for saving tax

Time and Cost

Related to corrupt practices and inhibit free trade

Time and Cost

2

Customs officials are not fully conversant with technical product categories, such as electronics. However, it is less as the trading is done mainly for agricultural products.

No problem

Restricts free trade across countries


4

79


10

Lack of border crossing coordination with regional neighbours


Volatility in border traffic 11 No. of Respondents Rating

12

Multiple uncoordinated offices No. of Respondents Rating

Improper penalties

From Brunei to Malaysia, need to get 7 stamps. Customs of each country do not coordinate with each other leading to duplication of documents.

80

Customs of each country do not coordinate with each other leading to duplication of documents.

Not Applicable

5

1

6

1

5

4

6

4

Subject to congestion at borders, especially on Friday.

Not much shipment, so less congestion.


2

2

5

5




3

6

5

4

1

2

4

4

5

Not Applicable

Congestion at Malaysia border.

Subject to congestion at borders due to restricted hours of entry for trucks.

Subject to congestion at borders.

Significant

Very Significant

Mostly exports, so less congestion at borders.

Not much shipment, so less congestion.

Only bordering with East Malaysia.

Shipment volume is low, but bureaucracy is very high. Congestion at Thailand and Vietnam border.

1

2

3

1

3

1

\

3

3

2

3

3

3

4

5

3

1

2

4

4

4

No problem at the major ports. Small ports lack coordination.

No problem

East Malaysia and West Malaysia lack coordination in terms of customs rules.

No problem

Lack coordination between north and south harbour ports.

No problem

Large number of private ports which lack coordination.

No problem


2

3

1

3

1

3

3

3

3

1

1

4

1

4

1

5

1

4

1

4

Not so common

Imposes penalties on late submissions, amendments and inspection in order to charge arbitrary money.

Raising of improper penalties is quite common

Not so common



Not so common

No problem

Not so common

Not so common


1

2

3

1

3

1

2

3

3

2

1

1

6

1

1

1

1

1

1

1

No problem

1

13



Border Customs (With Singapore, Thailand and Brunei and Indonesia) do not coordinate with each other leading to duplication of documents.

At border with East Malaysia customs do not coordinate with each other leading to duplication of documents.

No problem

Lack of border coordination delays the shipment considerably and increases inefficiency

Time

Inspection time for land is more followed by ocean and it is least for air

Time

Lack of port coordination results in following of different rules at different customs

Quality

Corruption and lack of transparency in customs procedures results in improper penalties

Time, cost and quality

4



14

15

Customs department raises fees unilaterally No. of Respondents Rating

Inefficiency of inbound clearance process


Other customsrelated barriers 16


Not very common

Not very common

Very common

Not very common

Not very common

Not very common

Very common

Not present

Not very common

Not very common

1

2

2

1

2

1

2

2

2

2

2

2

5

2

2

2

5

1

2

2

3

Lacks transparency in clearance times.

Lacks transparency in clearance times. The inbound clearance process is very time consuming and complicated.



It takes 3 weeks for licences approval. After the approval clearance process begins.


Very transparent, fast and easy.

Lacks transparency in clearance times. The inbound clearance process is very time consuming and complicated.


Very Significant

1

2

4

1

3

1

4

4

5

4

2

4

6

4

4

6

4

1

5

4

5

Uses Lao language. No foreign language between Lao PDR and Vietnam

As foreign firms cannot open bank accounts in Myanmar, it is difficult to remit money to another country from Myanmar. Speed of work is very slow

Does not use English on documentation forms. Customs processing speed is very slow.

Uses English on documents

Customs processing speed is very slow.

People in logistics know only their own language and are not good at English. Customs processing speed is very slow.


Quite transparent

Customs processing speed is very slow.

Uses local language on documentation forms and not English

Uses English language

1

1

1

1

1

1

1

1

1

1

3

4

4

1

4

4

1

1

2

4


Uses English on documents

Significant

Lack of transparency in clearance increase inefficiencies from both the customer and the customs side

Time

Lack of common language increases duplication of customs documents and hence clearance time

Time

4

81

11

13

9

1

1

5

4

Not required

Licensing requirements mainly for transportation. Domestic transportation services can only be offered by local or majority.

Difficult to get licences. They have different kinds of licences. Local transportation restricted to local firms.

PERFORMANCE MEASURE


7

PERFORMANCE

VIETNAM


THAILAND

Foreign ownership is restricted to less than 50%. Have opened up transportation sector. Difficult to find right partners.

SINGAPORE No restriction to foreign investment.

Foreign ownership is restricted to less than 50%. Foreigners can invest but the board must have7 Local directors.

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.


Problem is in getting the right partner. From trade flow perspective, the biggest concern is management control


In almost all countries, except Singapore, there are investment regulations. However, these regulations as such do not hurt foreigners too much and neither do they impact foreign trade very much

Time and quality

Problem is service quality because you cannot fully own the company. Information is transparent


B. BARRIERS DUE TO CROSS-SECTORAL INVESTMENT, LICENSING REQUIREMENTS, TRANSPARENCY, AND LABOUR LIMITATIONS

1

Foreign ownership regulations

No. of respondents Rating

Foreign ownership is restricted to less than 50%. Have opened up transportation sector.

Transposing of vehicles allows 60 trucks for cross-border transportation which is very less

Foreign companies can own up to 100% equity depending upon their size and equity capital employed.

No Problem

4

5

10

3

11

5

1

4

5

4

5

4

Foreign firms can apply licences through joint ventures.

A firm can obtain licences, but local transportation is restricted to local firms.

Does not grant licences to foreigners. Local transportation delivery restricted to local firms.

1

6

2

3

7

7

5

3

4

5

4

1

3

5

Once you get license you can operate no problem

Foreign firms are not favoured for government projects. They are also not given trucking and brokerage license.

No discrimination. transparency is good

No Discrimination

No Discrimination, One needs to have local shareholding to do trucking.

Foreigners can buy a truck but cannot loan it out. Bonded warehouses tend to favour Thai entity more than a foreign entity.

No Discrimination. VAT is imposed on goods.

1

5

2

3

5

6

4


Difficult to obtain licences. There are different kinds of licences.

Requires license for transportation

No. of respondents

3

2

7

Rating

3

3

4

2

82

Foreign ownership restricted to less than 50%. Allows warehousing and distribution, but not transportation.



3

No restriction to foreign investment.

Foreign companies can own up to 100% equity depending upon their size and equity capital employed.


No discrimination

No discrimination

Representative office cannot have sales (cannot issue invoice). For transportation there are only limited licences for which local firms have priority.

No. of respondents

1

2

5

4

Significant

3




4

Rating

1

1

4

Duplicative licensing requirements depending upon services

Investment regulation mainly for transportation. Domestic transportation can only be offered by locals.


1 4

No. of respondents Rating Labor policies 5


Cultural differences

Difficulty in hiring / firing

5

Foreigners not allowed to run customs brokerage services. For warehousing and transportation need more than 3 different licences for all firms

Transportation sector has opened up

East Malaysia and West Malaysia have different state controls and hence licensing is different.

No problem

1

1

1

1

1

4

4

2

4

1

1

1

3

No problem


Transportation sector has opened up

1

1

1

1

1

4

3

3

In favor of labour

In favor of labour


No problem

1

Liberal

In favor of labour

In favor of labour

In favor of labour

In favor of labour

In favor of labour

In favor of labour

1

1

4

1

4

2

2

4

5

2

1

2

2

2

2

2

2

1

2

2

Language differences pose problem in efficient logistics. labour are not well educated. Productivity is low

Low productivity. No language problem

No language problem

Language differences pose problem in efficient logistics. People use local Thai language at the local level. Productivity is OK

Language differences pose problem in efficient logistics. Productivity of people is low

4

Significant

Discrimination in certain services such as warehousing and freight forwarding, although not significant, raises barriers to free trade


Quality

2


Language differences pose problem in efficient logistics. During fasting season productivity slows down. Productivity is low


Low productivity. Low barrier to language as people are better exposed to English. Things slow down during fasting month.

3

4

7

1

7

3

4

6

6

4

1

3

4

3

4

3

2

1

3

3

2

Difficult to layoff. Severance package is very costly.

Difficult to layoff.

Difficult to lay-off. 6months to 1 year severance fee. Even with one month notice, it is not easy to lay-off



Tight labour market. Can lay-off workers with the requisite notice period

Cannot fire people

Difficult to lay off

Significant

No Language problem

Can fire people


7 No. of respondents Rating

1

Laws are skewed toward firms

6


3

2

2

6

1

7

3

5

6

6

5

1

3

3

3

3

3

3

1

4

3



Difficult to get qualified local people. However, it is not a big issue in ASEAN for free trade. Language can be a problem when transporting dangerous goods

Quality

Countries would definitely protect local labour, however, labor take advantage by not working

Cost and Quality

3

83

PERFORMANCE

PERFORMANCE MEASURE

No Cabotage

Does not allow foreign flag shipping. Foreign flags can only to big ports.


VIETNAM

No Cabotage

THAILAND

PHILIPPINES

No Cabotage

Cabotage regulations from one port to another port within the country.

SINGAPORE

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.


Liberalization will increase efficiency in transportation. Foreign feeder ships can operate on multiple ports thus increasing overall efficiency and reduce handling.

Time, Cost, and Quality

Reduces the efficiency of shipping

Time

Foreign ships are allowed facilities at port

--

C. BARRIERS DUE TO MARITIME SPECIFIC RESTRICTIVE LAWS AND REGULATIONS


No Cabotage

No Cabotage

1

2

3

4

84

Cabotage regulations from one port to another port within the country.

Not Applicable


Significant

No. of respondents

3

2

2

0

3

3

2

3

3

2

Rating

1

1

6

0

1

1

6

1

0

4

3

No restriction

Reservation of Government and state owned enterprise cargoes, which must be carried by Indonesianflag vessels

Not Applicable

No restriction

Government cargo requires a waiver to move on nonPhilippine vessels.

No restriction

No restriction

Does not allow foreign flag shipping


Cargo reservation laws

No. of respondents Rating Ability of foreign maritime firms to access government-owned port facilities No. of respondents Rating Restriction on foreign maritime firms to provide their own or third party port-related services No. of respondents Rating

No restriction

Exists, but not significant

3

3

3

0

4

3

3

4

4

3

1

1

s

0

3

1

3

1

1

4

2

No restriction

No restriction

No restriction

Not Applicable

No restriction

No restriction

No restriction

Priority to big vessels for loading and unloading.

No restriction

No restriction


3

4

4

0

5

3

4

5

5

4

1

1

1

0

1

1

1

3

1

1

2

Allowed with equity joint venture

Equity restriction

Equity restriction

Not Applicable

Allowed with equity joint venture

Equity restriction

Equity restriction

Only towage is allowed

Equity restriction

Provided exclusively by Vietnamese enterprises.

Not Significant

2

3

3

4

3

3

3

3

3

3

5

5

3

6

5

3

5

6

Cargo handling is a sensitive issue and hence cannot be relegated completely to the foreign firms

1



5

Regulations that allow foreign maritime firms to provide port-related services but subject them to foreign equity, nationality, or licensing requirements No. of respondents Rating

6

Absence of general competition legislation in liner shipping No. of respondents Rating

7

8

Limit on foreign equity participation


Pilotage is not allowed. Towage is opened to foreign firms.



No restriction


1

1

1

1

1

1

1

1

1

1

2

2

2

2

2

2

2

2

2

Market is very small to permit competition.


Does not allow free competition.




Only 2 port operators (Does not allow free competition).



Significant

2

1

1

2

1

1

2

1

1

1

1

2

2

1

2

1

2

2

3

Liberalizing its maritime port sector.

No major problems.

Philippines port authority collects wharfage charge on the cargo handled at their facilities.

Cargo handling considered a sensitive issue, therefore, only 2 operators

Quite open in cargo handling

No major problems.


Not Applicable

Not Applicable


Monopolized handling of cargo

No major problems.

No major problems.

No major problems.


2

2

3

4

1

3

4

3

3

1

1

1

3

1

1

4

3

1

2

Major transhipment and feeder port.

Major port, but less dependent on transhipment and feeder services.

Yes


Reliance on transshipment and feeder services No. of respondents Rating

9

Limit on foreign equity participation. The port operator provides both pilotage and towage

Limit of foreign equity participation to around 30%

Directional Imbalance No. of respondents Rating

No problem as it ships directly to East Malaysia.

Feeder Port

2

3

2

4

Not Applicable

Major transhipment port.

Feeder Port

3

4

2

3

4

3

3

5

4

4

4

6

2

4

2

Imbalance is high on small ports, but not on major ports.

Less problem, as it tries to balance exports with imports.

Very big problem.

Imbalance for feeder ships going out of Singapore

Less imbalance, as it is mainly an exporting country.

It is importing country, so considerable directional imbalance

Very Significant

Feeder Port

Not Applicable

Feeder Port

High, Brunei has no exports except oil and gas

Imbalance is a problem.

Imbalance is manageable

1

3

3

3

2

3

3

3

3

6

3

3

2

1

3

2

3

6


Not Applicable

Cargo handling is a sensitive issue and hence cannot be relegated completely to the foreign firms

Free competition among 3 firms can improve efficiency


Cargo handling is a sensitive issue. Countries grant monopoly for security reasons


ASEAN relies largely on transhipment and feeder services

Time and Cost

Directional imbalance increases the cost and inefficiency

Time and Cost

5

85


10

Absence of adequate warehousing and specialized storage facilities No. of respondents Rating

11

Inefficient ports, such as inability to handle large cargo volumes


86

Limited warehousing is available, but it is not a problem as trade volume is low.

Small ports do not have adequate facilities.

1

2

3

2

3

5

Inefficient

Main ports are efficient. Others are manual in operation

Catching up with Singapore transportation is more high tech

Inefficient

No problem

Efficient port

Not Applicable

Not Applicable

Facilities are adequate but of low standard.

Struggle to find adequate warehousing facilities

No problem

5

1

3

4

3

3

2

3

5

1

1

4

5

Manual in operation

Competitive port. High exchange rate, but the turnaround time is quite competitive and good connectivity

Not enough time to berth. Manual in operation

Inefficient port. Manual in operation

Moderately significant

No problem

No problem

The facilities are not adequate.

5

5

7

8

2

6

8

7

6

2

2

4

2

3

4

1

3

3

Very Significant

Warehousing facilities are required to enhance free trade

Cost and Quality

Better port facilities attract foreign firms


4


Problem of connectivity and choice of aircraft

No problem

Not significant

PERFORMANCE MEASURE


No problem

PERFORMANCE

VIETNAM

No problem

THAILAND

PHILIPPINES

No problem

SINGAPORE

MYANMAR


MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.


Not a major problem in ASEAN

None

3rd parties have economies of scale in ground handling. Also, ground handling services being restricted to few companies is quite normal for security reasons. However, choice is helpful

None

D. BARRIERS DUE TO AVIATION SPECIFIC RESTRICTIVE LAWS AND REGULATIONS

1

Allocation of take-off and landing slots No. of respondents Rating

2

No problem

No problem

No problem

No problem

2

1

2

1

4

1

3

5

4

3

1

1

1

1

1

1

1

1

2

1

Ability of airlines to provide their own or thirdparty groundhandling services

Not required as two players are good enough for small market.

Not required. Only one operator and hence no competition.

Not required, Only one operator (PT Jet) and hence no competition.

Not required.

Not required, only one operator and hence no competition.

Not required, Only one operator and hence no competition.

Not required, Few operators and hence competition is present.

Not required, Three operators are sufficient in Singapore.

Two operators, restriction in customer clearance.

Not required, Only one operator and hence no choice.

No. of respondents

2

2

4

1

4

1

4

5

4

4

Rating

1

1

1

1

1

1

1

1

1

1


1

Not significant

1

87


Access to cargohandling and storage and warehousing facilities

3


Usage of third-party provider for ground handling services

4

No. of respondents Rating Foreign ownership regulations that restrict the right of foreign entities to invest in domestic airlines

5



6

88

No choice between service providers

Limited faciltiies, but no restriction

No choice between service providers. For chartered flights, application should be made one week in advance for space and security reasons

No problem since the market is small


Little bit problem as Indonesia has limited warehousing facilities. There is no central warehouse

4

2

5

2

5

2

5

6

5

6

1

3

3

3

3

3

3

1

1

3

Not required

Not required

Not required

Not required

Not required

Not required

Limited facilities

Not required

No problem

Not required

No problem

Not required


Not required

1

2

3

1

2

2

3

3

3

3

1

1

1

1

1

1

1

1

1

1

Too small market to justify investment


Disintegrated market


Not allowed


Not allowed

Small market


3

2

3

4

4

2

3

4

3

3

1

1

1

1

1

1

1

1

1

1

Not allowed to fly everywhere into the country; Open air may act to the disadvantage of local firms.

Low cost carriers are not allowed to land in Singapore but cannot carry cargo and Malaysia as pre IATA ruling thus impeding competition.

No problem as there is only one airport.

Not allowed to fly everywhere into the country; Open sky policy may act to the disadvantage of local firms.

Not allowed to fly everywhere into the country; Open air may act to the disadvantage of local firms.

Not allowed to fly everywhere into the country. Open sky policy act to the disadvantage of local firms.

Restricted by traffic rights such as 10 flights per week.

No domestic market

Controls traffic to East Malaysia ports which has low cost carriers and good connectivity to domestic operations.

No problem

Restricted by traffic rights such as 10 flights per week


Warehousing facilities restrict the ability of airlines to carry cargo into the specific country

Time

Airlines do not prefer to provide ground handling services in another country as it requires huge investment on infrastructure

None

Airlines are not interested in domestic airlines due to lack of infrastructure, small domestic market for cargo movement

None

Most of the economic activities center on major ports. Unless the consignment size is large, it may not be of any interest for foreign firms to operate domestic cabotage services.

Cost

4

Not significant

1

Not significant

1

Very Significant




Lack of sufficient airport infrastructure

No. of respondents Rating Limited lift capacity and directional imbalance

3

2

3

3

3

3

3

4

3

2

5

1

2

No Problem

Poor. The turnaround time is quite high.

Less no. of carriers to and from Singapore


Only 2 carriers between Singapore and Malaysia; No problem in terms of infrastructure


OK

No Problem

Less no. of carriers to and from Singapore, Infrastructure is OK

Poor; Small airport problem in warehousing facilities

5

1

6

2

5

7

5

5

4

4

3

4

2

1

3

4

3

Quite balanced

No problem

Quite balanced

It is importing country, so considerable directional imbalance


3

3

3

3 2

4

Significant

Poor

Quite balanced

Exports are not balanced

Quite balanced

Poor; Only imports and vegetables cannot be exported by air

1

1

3

1

2

1

3

4

4

2

3

2

5

2

1

2

5

4

Very susceptible to demand


Significant

2

3

4

2

4

2

5

5

5

5

4

4

3

4

2

4

3

1

2

2

Cost

3

PERFORMANCE MEASURE


Air freight relates to economic activities, however, it is not a problem

PERFORMANCE




Cost

VIETNAM


Directional imbalance causes inefficiency

THAILAND


Cost

SINGAPORE


The requirement for airport infrastructure depends upon the market size which is quite small in most ASEAN

PHILIPPINES


MALAYSIA


LAO PDR

Changes in demand for air cargo services

Very susceptible to demand; In peak season provide more flights.


4

Poor; Only imports one way. Exports are oil and gas which are rare

INDONESIA

SERIAL NO.

9

1

3

MYANMAR


3

3

CAMBODIA

8

2

1

BRUNEI

7

2

No such limitation.

Malaysian trucks are allowed to enter Singapore for pick and drop and not for conducting business.

No such limitation.

No such limitation.

Very significant

Cross-border transportation can influence free trade significantly

Time and cost

4

6

6

5

E. BARRIERS DUE TO ROAD TRANSPORTATION SPECIFIC RESTRICTIVE LAWS AND REGULATIONS

1


The life of truck fleet is limited to 12 years.

No such limitation.

No such limitation.

No problem. Uses old and inefficient trucks.


No. of respondents

4

1

5

2

6


No barrier to trucking within country. Rice export through trucks is not allowed to prevent illegal exporting 4

89


Rating

2



3

Prohibiting operation on during certain days of a week or on certain highways No. of respondents Rating

4

Poor road conditions


90

1

1

1

1

5

2

1

1

1

1

5

Does not allow trucks from other countries to go in; Bilateral agreement between Lao PDR and Thailand for unloading but not for business

Trucks can travel only domestically and to Singapore (but not allowed to do business). Big problem to trace the trucks

Need to change trucks at borders

Trucks can travel only domestically; Big problem to trace the trucks

Allows Malaysian Trucks to enter Singapore

Trucks can travel only domestically. Big problem to trace the trucks. Foreign equity < 50%.

Trucks can travel only domestically

Very significant

Malaysia restricts Indonesian trucks to enter Brunei; Trucks can travel only domestically

Malaysian trucks are not allowed to enter Cambodia.

Foreigners are not allowed to own a transport company. Big problem to trace the trucks

4

2

8

2

9

6

6

10

10

7

4

5

5

5

6

5

5

1

5

5

5

Big trucks cannot go into the city during peak hours.

The border is open sometime and closed sometimes with no reason. Need to apply license

No problem

No problem

Restriction on truck operations in city area from 9.00 AM to 9.00 PM

No problem


No problem

No problem

No problem

No problem

1

2

1

1

1

2

1

1

2

2

1

1

1

1

1

3

1

1

3

1

2

Fewer roads and frequent traffic jams. Difficult to turn-around.

Lots of curves in roads. Road connecting China is bad, but to Thailand and Vietnam is good

Roads are fair but there are traffic jams which make turnaround difficult.

Poor road conditions. To Thailand/ China it takes 3 days for a short distance.

Fair

Good

Road conditions are good

Highways are less and roads have lots of curves.

Significant

Good

Poor

2

1

4

1

5

2

2

5

6

3

1

5

4

4

2

4

2

1

2

3

Cross-border transportation can influence free trade significantly

Time and cost

Prohibiting operations at certain time of the day is to prevent congestion

Time and cost

Poor road conditions influences trade by increasing inefficiency in logistics services

Time and cost

3


PERFORMANCE

PERFORMANCE MEASURE


VIETNAM

THAILAND

SINGAPORE

PHILIPPINES

MYANMAR

MALAYSIA

LAO PDR

INDONESIA

CAMBODIA


BRUNEI

SERIAL NO.


Increases the cost of transport as armed escorts are required to accompany the vehicle thus increasing the cost of transportation by 50%

Time, Cost and Reliability

Malpractice is definitely a problem. In the long run no body benefits. Nowadays, countries are becoming more transparent

Time, Cost and Reliability

F. BARRIERS DUE TO ISSUES SUCH AS MALPRACTICES, CRIMES ETC.

Criminal practices

No problem

Cargo Hijacking

Crimes and theft in transport; Stealing of petrol etc, from running trucks; Terrorists gunning down the drivers


1

2

2

1

3

2

1

3

1

1

1

5

6

5

4

3

3

1

3

3

Not much

High corruption

Very High (All cargo is not entered into export document); 25% arbitrary money for road transport. Fuel cost (30%), rest arbitrary money, profit (5%); ranking -1

High corruption

High corruption

High corruption

Very High corruption

No corruption

Very High, Corruption

30-35% under the table money for road transport. Fuel cost (30%), rest under table money, profit (5%)

3

6

8

4

8

3

5

8

9

8

2

4

6

4

3

4

5

1

2

3

1

2

Malpractices (facilitation money)



Cargo Hijacking


Little Problem

Little Problem

No problem

Little Problem

Little Problem

Significant

3

Moderately significant

4

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C. APPENDIX 3: ABOUT THE AUTHORS 1. Robert de Souza, Executive Director, The Logistics Institute - Asia Pacific Dr. Robert de Souza is the Executive Director of the The Logistics Institute - Asia Pacific (TLI - Asia Pacific). Robert is a Chartered Engineer and a distinguished writer, speaker, consultant and advisor in the area of supply chain management. Prior to this appointment, effective May 1st 2004, Dr Robert de Souza served as Deputy Executive Director (Industry) and IT Director at TLI - Asia Pacific. Previously, Dr de Souza was Executive Vice President (Asia Pacific) for V3 Systems. His extensive tenure in the industry also includes serving as the Corporate Senior Vice President and Global Chief Knowledge Officer at Viewlocity Inc. and co-founder, Vice Chairman and CEO of SC21 Pte, Ltd., a Singapore-based supply chain software firm. As an educator, Dr de Souza is an Adjunct Professor in the School of Industrial and Systems Engineering at Georgia Institute of Technology in Atlanta and also a Senior Fellow in the Department of Industrial and Systems Engineering at the National University of Singapore and has previously served as a professor and in several senior positions in the School of Mechanical and Production Engineering at Nanyang Technological University in Singapore. Dr. de Souza is a member of the Editorial Boards of the International Journal of Computer Integrated Manufacturing and the International Journal of Logistics Research and Applications. Dr de Souza also serves on the Advisory Panel of The Chartered Institute of Logistics and Transport, Singapore (CILTS), as a Council Member of the Singapore eSupply Chain Management (eSCM) Council and on the Boards of Directors/Advisors of several ITbased corporations. 2. Mark Goh, Director (Industry Research), The Logistics Institute - Asia Pacific A former Colombo Plan Scholar, Dr. Goh holds a Ph.D. from the University of Adelaide. In the National University of Singapore, he holds the appointments of Director (Industry Research) at the Logistics Institute-Asia Pacific, a joint venture with Georgia Tech, USA, Principal Researcher at the Centre for Transportation Research, and was a Program Director of the Penn-State NUS Logistics Management Program. He also used to be Director of Supply Chain Solutions for Asia/Middle East with APL Logistics, crafting logistics engineering solutions for major MNCs in this part of the world. Dr. Goh was a Board Member of the Chartered Institute of Transport (Singapore), past Chairman of the Academic Board of Examiners for the Singapore Institute of Purchasing and Materials Management, member of the Advisory Committee of the Transportation Resource Centre (NUS) and a past Vice President of the Operations Research Society of Singapore, Associate Senior Fellow of the Institute of South east Asian Studies. His other professional affiliations include membership of INFORMS, and the Academy of International Business. His biography appears in Who's Who in Asia and the Pacific Nations, Who's Who in the World, and Outstanding People of the 20th Century. He has been involved in executive training for various key organisations in Singapore, for example, PSA Corp., MIS, SIPMM, PSB, J&J, Siemens Nixdorf, CIT, CAAS, Fuji-Xerox AP, Applied Biosystems, Danzas, DHL, Samsung, SembCorp Logistics, Exel, CEI and Mindef. Prof. Goh has also acted as a consultant to organisations both in Singapore and overseas, like Lucent Technologies, Pentex Schweitzer, Trans-Link Express, Perkins Parts, Singapore Post, NCB, Unilever East Asia Pacific, MSAS, TDB, Hewlett-Packard Far East, Siemens Nixdorf, APO, Confectionery Transformation, Danzas-AEI, Bossard Asia Pacific, BBraun AP, Pasminco, Mindef, Cleanaway (China), IE Singapore, Knight Frank, and FXS. He has held appointments as a visiting Professor in Business Logistics Strategy at Chulalongkorn University, Commonwealth Fellow to the UK, Citibank International Fellow to the US, visiting research fellow at UMIST, visiting scholar at Beijing University, visiting professor at Melbourne University, and adjunct professor at the University of South Australia. 92



He is currently on the editorial boards of the Journal of Supply Chain Management, Q3 Quarterly, Journal for Inventory Research, and Advances in Management Research, and has served as an associate editor for the Asia Pacific Journal of Operational Research. His current research interests focus on supply chain strategy, performance measurement, buyer-seller relationships and reverse logistics. With more than 130 technical papers in internationally refereed journals and conferences, some of his recent academic articles on supply chain management have appeared in the Journal of Purchasing and Materials Management, Industrial Marketing Management, European Journal of Purchasing and Supply Chain Management, IIE Transactions, Naval Research Logistics, Physical Distribution and Logistics Management, Production and Operations Management, EJOR, Supply Chain Management Journal, Industrial Organisations, and Logistics Information Management. 3. Sumeet Gupta, Research Fellow, The Logistics Institute - Asia Pacific Sumeet Gupta received his PhD (Information Systems) from School of Computing, National University of Singapore. He graduated with MBA from NUS Business School, Singapore. He has been involved in various research and consultancy projects with SAP. His research interests are in logistics and supply chain management, e-commerce with specific focus on IT post-adoption, Internet Shopping and Virtual Communities. He has published in Decision support systems, Information resources management journal and has also presented his work at various logistics (Thinklog 2006) and IS conferences (ICIS, AMCIS, ECIS and PACIS). 4. Luo Lei, Research Fellow, The Logistics Institute - Asia Pacific Luo Lei completed her PhD (Finance and Accounting) from NUS Business School, National University of Singapore. Her research interests are in logistics and supply chain management, corporate governance and firm disclosure. Her paper "The Determinants of Corporate Governance and the Link between Corporate Governance and Performance: Evidence from the U.K.: Using a Corporate Governance” has won The Vernon Zimmerman Best Paper Award for Best Doctoral Student Paper in 17th Asian-Pacific Conference on International Accounting Issues.


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