Connectivity and Supply Chain

Performance
Presented by

Akhmad Bayhaqi
APEC Secretariat (Policy Support Unit)

Copyright 2013 APEC Secretariat

Outline

Introduction
APEC connectivity blueprint
APEC supply chain connectivity framework
Infrastructure investment to support Supply
Chains
Global connectivity
Outlook and Key issues

APEC Member Economies

APEC Official Observers

Association of South East Asian Nations (ASEAN) Secretariat
Pacific Economic Cooperation Council (PECC)
Pacific Islands Forum (PIF)

Copyright 2013 APEC Secretariat

Source: APEC in Charts, 2014 (PSU).

Copyright 2013 APEC Secretariat

Source: APEC in Charts, 2014 (PSU).

Regional Integration
Integrating the region and ensuring that goods,
services and people move easily across
borders is at the core of APECs work.
Members facilitate this trade through faster
customs procedures at borders; more favorable
business climates behind the border; and
aligning regulations and standards across the
region.
For example, APECs initiatives to synchronize
regulatory systems is a key step to integrating
the Asia-Pacific economy. A product can be
more easily exported with just one set of
common standards across all economies.
Source: http://www.apec.org/About-Us/About-APEC/Fact-Sheets/RegionalEconomic-Integration-Agenda.aspx

APEC Connectivity Blueprint

Physical connectivity that improves
supply chain performance, connects
and integrates logistics, transport,
energy, and telecommunication
infrastructure in the APEC region.
Institutional connectivity that
advances regulatory and procedural
cooperation and coherence among
our economies.
People-to-people connectivity that
enhances interaction, mobility and
joint endeavors.

Key Initiatives for Enhanced

Physical Connectivity
Public-Private Partnerships
Multi-Year Plan on Infrastructure Development and Investment (MYPIDI)
Designed to alleviate private sector concerns such as an unclear regulatory
environment and reduce long-term risks
Long-term aim is to create a regional infrastructure financing market by stitching
together these enhanced local institutions and joining them together into a
regional network
PPP Expert Advisory Panel
Group of PPP experts have begun providing assistance to Indonesia as they
implement the APEC PPP Pilot Center
PPP Guidebook
Project under the Investment Experts Group
Aims to compile information on the variety of PPP frameworks already in place
in each APEC economy
Will provide a general overview of the process and requirements to establish a
PPP project
Copyright 2013 APEC Secretariat

Multi-Year Plan on Infrastructure

Development and Investment (MYPIDI)

Workstream 1:
Fostering a business
friendly environment
for infrastructure
development and
investment, through
a solid regulatory
framework, that
minimizes
uncertainty and
maximizes
transparency and
predictability.

Workstream 2:
Development
and Refinement
of an Integrated
planning system
mechanisms

Workstream 3:
Development of
government
capacity to
identify and
generate a
pipeline of
bankable
infrastructure
projects

Workstream 4:
Development or
further
improvement of
financing and
funding
environment to
encourage long
term investors

Key Initiatives for Enhanced

Physical Connectivity

Source: Railway Handbook 2013

Key Initiatives for Enhanced

Physical Connectivity
Land Transportation
Global passenger and freight travel is expected to double from 2010-2050 requiring a
land transport network 60% larger than 2010 levels
25 Road Infrastructure Projects and 3 Rail Projects submitted by Member Economies
Examples of APEC work include the Energy Working Groups Maximizing Energy
Efficiencies of Supply Chain Connectivity by Improving Rail-Waterway Intermodal
Transport in APEC Economies project
Air Transportation
Enhanced airport capacity is a key initiative to enhance both trade and tourism
22 ongoing or recently completed Air Infrastructure Projects submitted
Examples of potential future APEC work streams include enhanced tracking and
monitoring of goods traded by air and air transport market liberalization

Key Initiatives for Enhanced

Physical Connectivity
Maritime Transportation
Cargo ships carried over nine billion tons of traded goods in 2012 representing 80% of
global merchandise trade, demonstrating the importance of quality port infrastructure
25 Maritime Infrastructure Project submitted by Member Economies
Examples of potential future APEC work streams include building on a pilot project that
examined Real-Time Tracking and Monitoring of Cargo Containers
Telecommunications and ICT Development and Energy Infrastructure
A 10% increase in broadband internet access is associated with a growth in per capita
GDP of roughly 0.2%, demonstrating real results for personal economic development,
according to the United Nations
US$ 1.7 trillion of energy infrastructure investment is needed globally by 2035 with 60%
of the total coming in the electricity sector
14 ICT Infrastructure Projects and 10 Energy Infrastructure Projects submitted by
Member Economies

Key Initiatives for Enhanced

Institutional Connectivity
Customs and border agency (trade facilitation)

The goal of encouraging each member economy to develop its own Single Window system
by 2020
APEC Customs 3M Strategic Framework that encourages member economies to cooperate
through mutual assistance, mutual recognition, and mutual sharing (abbreviated as 3M)
The 2014 APEC MRT: the formulation of the Guidelines for APEC Customs Transit and
continuing work on the Time Release Study

Supply-chain connectivity

APEC Pathfinder to Enhance Supply Chain Connectivity by Establishing a Baseline De

Minimis Value
APEC's Strategies and Actions Toward a Cross-Border Paperless Trading Environment: to
enable the electronic transmission of trade-related information across the region by 2020
The 8th APEC Transportation Ministerial Meeting instructed the TPTWG to develop a
transportation Connectivity Map that will visualize APECs ideal of physical and
institutional integration to be reached by the year 2020

Key Initiatives for Enhanced

Institutional Connectivity

Finance:
The Asia Region Funds Passport provided the following common
objectives (among others):
a) A more diverse range of investment opportunities
b) Deepen the regions capital market to attract finance for growth
c) Grow the pool of funds available for investment in the region

Structural Reforms
Economic Committee also outlined the importance of establishing a
competitive market, by supporting and facilitating more open, wellfunctioning, transparent, and competitive markets.

Key Initiatives for Enhanced

People-to-People Connectivity
Business Mobility
APEC Business Travel Card: helps accredited business travelers move
across the region; 152,543 holders as of 2013
BMG is working on extending ABTC validity from 3 to 5 years and
improving end-to-end administration
Need to reduce time to obtain ABTC and harmonize requirements

Cross-Border Education Cooperation

Scholarship grants, bilateral student exchange programs, and education
cooperation, APEC Study Centers
HRDWG: Education Cooperation Project (2013-2016); Higher Education
Diploma Supplement
Need to promote developing economies as destinations for student
exchange. Also need a more coordinated approach to cultural exchange:
partnerships with private sector could help

Key Initiatives for Enhanced

People-to-People Connectivity
Tourism Facilitation
Tourism outreach and promotion
Visa facilitation and immigration/customs streamlining
TWG: harmonization of visa/immigration policies, tourist-friendly airports,
Smart Traveller Program, air connectivity and open skies
Need to do more on easing visa restrictions, exchange of security
information (e.g., trusted travellers), passengers bill of rights

Professional and Labor Mobility

Bilateral MRAs, working visa facilitation, MOUs on protection for workers
HRDWG: standards harmonization for TVET; qualifications benchmarking
for transport and logistics industry workers; Skills Mapping Project; TWG:
MRAs for workers in tourism industry
Need to coordinate on APEC-wide MRAs, establish monitoring mechanism
for labor imbalances, and expand ABTC to cover professional and technical
workers

Supply chain Connectivity

Framework Action Plan
Overall objective: 10% reduction of trading time, cost & uncertainty by 2015
Clusters

Building
infrastructure
& capacity

Action Plan

Chokepoints

Infrastructure

Inefficient or inadequate transport infrastructure; lack of cross border physical linkages (e.g.
roads, bridges).

Logistics
capacity

Lack of capacity of local / regional logistics sub-providers

Connectivity

Underdeveloped multi-modal transport capabilities; inefficient air, land, and multimodal

connectivity

Clearance

Inefficient clearance of goods at the border; lack of coordination among border agencies,
especially relating to clearance of regulated goods at the border

Documentation

Burdensome procedures for customs documentation and other procedures (including for
preferential trade).

Transparency

Lack of transparency/ awareness of full scope of regulatory issues of affecting logistics; lack
of awareness and coordination among government agencies on policies affecting logistics
sector; absence of single contact point or champion agency on logistics matters.

Regulations &
standards

Variations in cross-border standards and regulations for movements of goods, services and
business travelers.

Transit

Lack of regional cross-boarder customs-transit arrangements

Streamlining
procedures

Strengthening
rules &
institutions

Financing Gap
Global demand for the funding of infrastructure investments: $57
trillion by 2030.
Long-term investors: hold around $85 trillion in assets under
management
[Brookings Institute]

Source: The Economist

Importance of Infrastructure
Three aspects of (physical) infrastructure that are important for business and
trade:
1.
2.
3.

Costs: efficiency of the existing infrastructures and services

Infrastructure quality services: speed and reliability of delivery.
Accessibility or extensiveness: wider coverage means wider access
Scenarios For Global Infrastructure Investment Needs Versus Public Sector Funding Sources
To 2030

Total need through

2030
Government
spending
Total gap
Annual gap

Base case
$57 trillion

Downside
$57 trillion

Upside
$57 trillion

3% of GDP

2% of GDP

3.5% of GDP

$8.4 trillion
$500 billion

$24.6 trillion
$1.5 trillion

Zero
Zero

Source: OECD; McKinsey & Co.; Global Insight in Standard and Poors.
Copyright 2013 APEC Scretariat

Importance of Infrastructure
Assessing the Gap in the Infrastructure between the APEC
Region and the OECD
Indicator
Quality of overall infrastructure
Quality of roads
Quality
of
railroad
infrastructure
Quality of port infrastructure
Quality of airport
infrastructure
Availability and quality of
transport infrastructure
Availability and quality of
transport services

APEC
4.96
4.86
4.2

OECD
5.48
5.17
4.48

Gap
0.52
0.31
0.28

4.91

5.18

0.27
0.52

5.20

5.41

4.62

4.69

(0.07)

4.89

5.16

0.27
Copyright 2013 APEC Scretariat

The Gap in the ICT between the APEC Region

and the OECD
.

Indicator
Technological adoption, 1-7
(best)
Availability
of
latest
technologies
Firm-level
technology
absorption
FDI and technology transfer
ICT use , 1-7 (best)

APEC

OECD

5.18

5.41

5.44

5.91

5.23
4.88
4.62

5.46
4.86
4.69

Source: WEF (World Economic Forum): Global Competitiveness Report 20132014 data

Gap
0.23

0.47
0.23
-0.02
0.07

APEC Transport Infrastructure

Quality

Source:
World Bank
2014.

Infrastructure needs
Infrastructure Expenditure Needs (%GDP)

Source: Yepes (2008) (quoted in Fay et al. 2011) in Inderst and Stewart 2014.

Estimated Infrastructure Investments in

Developing Countries

Source: Bhattacharya et al. (2012) in Inderst and Stewart 2014.

Impact to growth capacity

Source: Estache and Garsous (April 2012)

Value added in APEC Exports

Source: World Bank 2014.

Intra-APEC trade accounts for

around two-thirds (67%) of
APECs total merchandise trade
(exports and imports)

World Trade Network in Gross Value

Terms, 2009

Graphical Representation of the

World Trade Network in Value
Added Terms, 2009

VALUE CHAIN CONNECTEDNESS

Figure 8 Simple Average Connectedness Score for Total Value Added Trade, by Economy Group,
2009

Source: APEC PSU (2014c)

Global Connectedness: Pole of Growth

Source: DHL Global Connectedness Index 2014

Source: DHL Global Connectedness Index 2014

Important issues for global

connectivity
1. Trade costs
2. Global value chains
3. New normal for global trade?

Trade Costs
Trade Costs for Manufacturing
Goods, APEC Economies,
excluding tariff costs, percent
ad valorem equivalent

Source: ESCAP-WB Trade Costs

Database (from ESCAP website:
http://www.unescap.org/tid/artnet/trade
-costs.asp) and PSU calculation.

Trade Costs
Trade Costs for Manufacturing Goods, selected Regional
Groupings, excluding tariff costs, percent ad valorem equivalent,
2009

Note: APEC LA: consist of Chile, Mexico and Peru; APEC NLA: consist of the remaining APEC economies where data is
available; ASEAN-4: consist of Indonesia, Malaysia, the Philippines and Thailand; EA-3: consist of China, Japan and Korea.
Source: ESCAP-WB Trade Costs Database (from ESCAP website: http://www.unescap.org/tid/artnet/trade-costs.asp) and
PSU calculation.

Nominal Costs to Trade

Costs to Trade, APEC and OECD
1200
1000

800
600
400

200
0
APEC Import APEC Import OECD Import OECD Import APEC Export APEC Export OECD Export OECD Export
(LPI)
(DB)
(LPI)
(DB)
(LPI)
(DB)
(LPI)
(DB)
2009

2013

Global Value Chains

Global Value Chains play a dominant role in global trade and business. The
increase in global trade has been attributed to the increased activity of GVCs,
with multinational corporations (MNCs) contributing around 80% of global
exports (WEF 2013). Growth in GVCs also encourages FDI.
Table 1 Selected key performance indicators, foreign affiliates of TNCs, 2013

2013 Level

Change over 2012

71 million of employees

+5%

$35 trillion of sales

+9%

$7 trillion of value added (~10% of global GDP) +6%

$97 trillion of managed assets

+8%

$8 trillion of exports

+3%

Source: World Investment Report 2014.

Global Value Chains

Twenty years ago, 60% of world trade was
between developed countries (North
North), 30% was between developed and
developing countries (NorthSouth) and
10% was SouthSouth. By 2020, we are
expecting it to be split equally three ways,
so the relative weight of NorthNorth
trade will have been halved in just 30
years or so.
Interestingly, almost 60% of trade in
goods is now in intermediates, i.e. goods
used as inputs in the production process.
[Pascal Lamy, Future of Trade, 18
December 2013]
Source: Oxford Economics, 2014 PwC APEC CEO Survey

Entering Value Chains

Entering Value Chains

New normal for global trade?

Source: WTO World Trade

Report 2014.

New normal for global trade?

Figure 1. Trade in global value chains has decelarated more rapidly than total trade

Source: Datastream, International Trade Commission (ITC), World Bank

in Ferrantino and Taglioni 2014.

New normal for global trade?

Figure 2. Motor vehicles and parts trade has led the decline in the current and previous
slowdowns

Source: International Trade Commission (ITC), World Bank in

Ferrantino and Taglioni 2014.

New normal for global trade?

Source: OECD; Johansson and Olaberra (2014).

Thank You
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