Agricultural Trade Facilitation : An Overview Khan Salehin

Agricultural Trade Facilitation : An Overview
and Business Process Analysis (BPA) Findings in Myanmar
Khan Salehin
Trade and Investment Division, ESCAP
Trade Training Institute, 2 July 2014
OUTLINE
 Agriculture and Agro-food Trade in the Asia-Pacific
Region
 What is Trade Facilitation for Agro-products?
–
Facilitating trade in agro-food products: key issues
 Findings from Business Process Analysis (BPA)
studies in Myanmar
Agriculture in the Asia-Pacific Region
 Agriculture accounts for a quarter of the gross domestic
product (GDP) of Asia‐Pacific’s developing countries and
employs about 60% of the region’s working population (ESCAP
2008).
 Improving agricultural productivity could pull 218 million
people out of poverty in this region (ESCAP 2008).
 It can bring investment opportunities for the private sector,
and be a driver for boosting agriculture related industries.
 The World Bank estimates that GDP growth originating in
agriculture is at least twice as effective in reducing poverty as
GDP growth originating outside agriculture.
Percentage 2007
60
50
40
30
20
10
0
Australia
Bangladesh
Cambodia
China
India
Indonesia
Japan
Kazakhstan
Korea, Rep
Lao PDR
Malaysia
Mongolia
Myanmar
Nepal
New Zealand
Pakistan
Philippines
Sri Lanka
Thailand
Vietnam
0
Source: FAO 2009
Nepal
Lao PDR
Myanmar
Cambodia
Bhutan
Viet Nam
Afghanistan
China
India
Bangladesh
Pakistan
Sri Lanka
Thailand
Indonesia
Philippines
Iran
Mongolia
Kazakhstan
Malaysia
New Zealand
Rep. of Korea
Australia
Japan
Percentage 2006
Agriculture in the Asia-Pacific Region
Agricultural Population as Share of Total Population in
Selected Asia-Pacific Countries
100
50
Contribution of Agriculture to GDP in
Selected Asia-Pacific Countries
Source: FAO 2009
34%
4
Key Drivers of Agricultural Trade
Population
Growth
Change in
Dietary
Practices
Increased
Disposable
Income
Agricultural
Trade
Growth
Change in
Commodity
Prices
Other Factors
(export
policy,
capacity etc.)
Trade Facilitation
 What is Trade Facilitation?
Any measure that reduce barriers to the movement of
goods between buyers and sellers throughout the
international supply chains (ESCAP 2010)
– Simply any measure that facilitate and simplify
movement of goods and information along the supply
chains
- i.e. TF reduces time, cost and complexity of trade
transactions
–
 What is agricultural trade facilitation?
Trade facilitation of agricultural or food products
- For example, facilitating development of product
standards; improving SPS certification procedures,
improving storage facilities, reducing paperwork for
agro trade or implementation of e-traceability
-
Source: ESCAP-World Bank Trade Cost Database, updated August 2013
Cambodia
Lao PDR
Bangladesh
Nepal
Pakistan
Iran (Islamic Rep. of)
Maldives
Fiji
600
Turkey
700
France
Russian Federation
India
Sri Lanka
Malaysia
Germany
United Kingdom
Indonesia
Philippines
Australia
New Zealand
China
Vietnam
Thailand
United States
Rep. of Korea
Tariff-equivalent trade costs (percent)
Comprehensive Trade Costs (excluding tariff) for
Agricultural Goods with Japan (2000-2005, 2006-2011)
800
Agriculture (2000-2005)
Agriculture (2006-2011)
500
Manufacturing (2006-2011)
400
300
200
100
0
Benefits of Trade Facilitation
GDP gains from 25% reduction in time to export/Import, GMS and China
Source: Strutt, Stone, and Minor (2008) simulations
Why Facilitating Agricultural Trade is Crucial?
Long Term Impact of Agricultural Trade Facilitation :
- Poverty Reduction and Food Security
- Improves overall environment for agro-trade (domestic too)
- Opportunity for integration of smallholders into agri supply chains
- Upgrading of small farmers in terms of production practices or capacities
Trade Facilitation
Measures Applied in
Agricultural Supply
Chains/Sectors
Improved Trade Policies,
Efficient Trade Processes
Reduced Transaction Cost,
Improved Trading
Environment
Greater Income for Poor
Greater integration of
MSMEs including
Producers
Improved Trade
Competitiveness
Source: ESCAP (2011) Facilitating Agricultural Trade in Asia and the Pacific, Studies in Trade and Investment No. 74
9
Trade Facilitation for Agro food Products
What is so unique about it?
 Perishability – time and temperature sensitive
 Food Product and Process Standards,
Technical Regulation (SPS, private standards)
 Logistics (warehousing)
and infrastructure – special requirements
 Financing is difficult
 Cost of trading is higher than manufactured goods
Trade Facilitation for Agro-food Goods: Challenges
There are significant constraints to Trade Facilitation in agriculture which eventually
impact trade competitiveness.
These constraints can be divided into four main categories:
Trade Procedures
Product Standards
Trade Logistics
Trade Finance
11
Trade Procedures: A Generic Agricultural Product Supply
Chain Structure
Information,
documents,
procedures
Information,
documents,
procedures
Information,
documents,
procedures
Information,
documents,
procedures
Building 2
Wholesalers
Exporter
Regulatory Agencies
Export Customs
Transport
Producer
Bank
Consumer
Retailers
Importer
Source: Sirimanne 2011
Import Customs
Import Agent
12
Product Standards
Standard
“A document established by
consensus and approved by a
recognized body that provides for
common and repeated use, rules,
guidelines, or characteristics for
activities or their results, aimed at
the achievements of the optimum
degree of order in a given context.”
ISO (2004)
Ensuring product standards for international trade of
agricultural products is a complex topic and It
encompasses:
Institutions.
• Accreditation body
Infrastructure.
• Mutual Recognition of conformity
Logistics.
assessment standards
Administrative Issues.
• National capacity development
13
Trade Logistics
Poor Trade Related Infrastructure
and Transportation System
Infrastructure
and
Transportation
Services
Share of Transport Costs as percentage
of transaction cost in Central Asia
Border
Procedures
Transport and Handling Cost as percentage
of transaction cost in South Asia
Export
Import
Kazakhstan
10%
8%
Kyrgyzstan
13%
10%
Tajikistan
14%
10%
Uzbekistan
12%
8%
Source: ADB 2006
Agro-products
Export From
Export To
Transport & Handling Cost
(% of transaction cost)
Frozen Shrimp
Bangladesh
Japan
29
Cotton Yarn
India
Bangladesh
31
Hydrogenated Veg. Oil
Nepal
India
80
Tea
Sri Lanka
Japan
22
Source: Business Process Analysis Studies ESCAP 2010-11
14
Trade Logistics (contd.)
Spoilage during Post-harvest Handling: Absence of warehousing facility,
inappropriate goods vehicles or trucks, long distance from nearby railways or
inland waterways stations and so on.
 FAO (1994): Total loss of agro-products during storage and transport could be
as high as 16%.
 World Bank in India shows that the lack of adequate storage and marketing
infrastructure can be as high as 20-40 % of the total production (ESCAP 2009).
 IFC estimated the wastage caused by poor transportation and logistics system
at $13 billion per year there (2010).
 Thai fresh produce exports of fruits and vegetables, producers and exporters
lose 2.92 billion baht (about $96.4 million) a year due to spoilage and poor
storage.
15
Trade Finance
Trade Finance
is
’financing of
imports and
exports’’
It is the most difficult bottleneck to overcome for agricultural trade
Risk of
spoilage
Poor storage
facilities
Price volatility
Weather
conditions
Seasonality of
production
Varied quality
of products
Reasons for not increasing lending in this sector
Inability of producers
to meet the big
collateral guarantees
Lenders’ Lack of
Understanding
Knowledge Gap of
SMEs/producers
Stringent terms of
trade
16
Business Process Analysis (BPA) of
Agro products in South and
Southeast Asia
Why conduct a Business Process Analysis?
Business Process Analysis is a practical study
 to understand attributes of business processes,
and their relationships
Who
involved
Procedures
and Documents
required
Related Rules
and Regulations
Some
quantitative
indicators
18
Business Process Analysis (BPA) Studies for Five
Countries in South and Southeast Asia
Bangladesh
Business (Trade) Process Analysis (BPA) for
Export of Jute Bags to India and Import of Wheat
from India
Cambodia
BPA for Export of Maize and Cassava to China
Lao PDR
BPA for Export of Maize to Thailand and Import of
Animal Feed from Thailand
Myanmar
BPA for Export of Mango and Rice to China, Import
of Palm Oil from Malaysia
Nepal
BPA for Export of Cardamom to India and Import of
Rice from India
Available at: http://unnext.unescap.org/pub/bpa-cam.pdf
Use Case Diagram – Export of Rice from Myanmar
Time Procedure Chart – Export of Rice from Myanmar
Time Chart for the Export of Rice to West Africa
25
2 days
Total Time
23 days
2 days
Total Time
19 days
1 day
20
7 days
1 day
15
Time in days
10
1 day
7 days
1 day
5
1 day
1 day
1 day
1 day
1 day
1.1
2.1
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
1 day
7 days
1 day
1 day
3.4
3.5
3 days
Conclude Sales Contract
Make Advance Payment
Obtain Export License
Arrange Shipping (Maritime)
Arrange pre-Inspection and Fumigation
Declare CusDec 2
Terminal Procedure and Customs Exam at Port
Arrange Berthing
Arrange Port Clearance for Vessel Departure
Prepare Shipping Documents
2 days
1.1
2.1
3.1
3.2
3.3
3.6
3.7
3.8
Process
Assumptions:
- Cash is paid immediately after the sales contract is concluded (buyer has the enough working capital to make the payment)
- Exporter starts obtaining Export License immediately after the payment is made (not payment received)
2 days (1-3 days)
3-7 days
1 day
1 day
1 day
3-5 hours
5 hours
7 days
1 day
2 days (2-3 days)
Use Case Diagram - Import of Palm Oil in Myanmar
Time Procedure Chart – Import of Palm Oil in Myanmar
Time Chart for the Import of Palm Oil from Malaysia
Total Time
25
With the Original Bill of Lading
7 days
Without the Original Bill of Lading
2 days
20
Time in days
4 days
1 day
15
1 day
26 days
1 day
23 days
4 days
2 days
1 day
10 days
10
3 days
1.1
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
3.1
1 day
4 days
5
2 days
1 day
1.1
2.1
2.2
2.3
2.4
2.5
2.6
Process
Assumptions:
- Storage Tank is available
- No unexpected delays in document processing or shipment
- The necessary documents for process 2.7 are obtained in process 2.6 after 6 days
Conclude Sales Contract
Prepare for Import Recommendation Application
Obtain Import Recommendation
Obtain Import License
Make Storage Contract
Opening Letter of Credit
Declare CusDec 1
Obtain Delivery Order (with/without Original Bill of Lading)
Arrange Berthing
Examine, Inspect, Test, Take Sample and Discharge Cargo
Finalize CusDec 1
Payment concluded in step 2.5 through Letter of Credit
2.7
2.8
2.9
2.10
3.1
1 day
2 days
4 days
3 days
5 hours
10 days
2 hours
2 hours / 4 days
2 days
4 days
2 hours
(in step 2.5)
Activity Diagram – Obtaining Import Recommendation
Activity Diagram: Examine, Inspect……….(Import of Palm Oil)
Key Findings: Business Process Analysis Studies
(South and Southeast Asia)
Export
country and
product
Destination No. of
days
No. of
actors
involved
No. of
processes
Cambodia –
Maize
China
Lao PDR Maize
Thailand
Myanmar –
Rice
West Africa
BangladeshJute bag
Nepal Cardamom
20
15
13
22
12501360
16
11
8
21
735
19-23
20
10
>25
425
India
10
15
12
24
-
India
15
11
9
14
1213
Source: ESCAP BPA Study Reports 2013-14, available at:
http://unnext.unescap.org/tools/business_process.asp
Type of
documents
required
Cost ($)
Obtaining Sanitary and Phyto-sanitary Certificate for export of
agro-food products
Trading
Partner
and
Export
Products
Number of
Days
Required
Documents (i)
Required
(ii)
iii)
iv)
Stakeholde
rs Involved
Direct
Costs
Bangladesh
Cambodia
Lao PDR
Myanmar
Nepal
India,
Jute Bags
China,
Maize
Thailand,
Maize
West Africa,
Rice
India,
Cardamom
4
2-5
2
2
1
Proforma
invoice
packing list,
oil content
certificate,
Certificate of
Origin (COO)
• Exporter (or
representative)
• Department of
Agricultural
Extension
(DAE)
• Clearing and
Forwarding
(C&F) Agent
USD 10
(i) Phyto sanitary
certificate
application
(ii) Commercial
invoice
(iii) Packing lists
(iv) Release
container,
(v) Fumigation
certificate
•
•
(i) Phytosanitary
application form
(ii) Packing list,
(iii) Export license
(iv) Customs
certification
(v) Business license
from Vientiane
Capital
Agriculture
Department
(vi) Commercial
contract among
importer and
exporter
(vii) Pro-forma
invoice
Exporter
• Exporter or
representative
Ministry of
Agriculture
• Vientiane
Forestry and
Capital
Fisheries
Agriculture
(General
Division Directorate of
Agriculture
Agriculture)
Quarantine
Section
$730 or $58
(Fumigation 28
Fumigation/
CCIC 700
Inspection 30)
(i)
(ii)
(iii)
?
?
?
?
•
•
Shipping
instructions
National
Registration
Card
Sealed case
file from
Customs head
office Export
Declaration
Export
License
Invoice
Packing list
Exporter
Ministry of
agriculture
More than USD 300
(i)
(ii)
(iii)
(iv)
(v)
Letter from
Customs to
Food
Quarantine
Office
Commercial
Invoice
Packing List
Customs
Declaration
Form
Sample
• Exporter
• Clearing agent
• Food Quarantine
Office
• Customs Office
USD 5
Recommendations – Simplifying Processes for Export
of Rice
Process
Recommendation
Benefits /Reduction of
Docs
(No)
2.1) Make
advance
payment
3.1) Obtain
Export License
- Introduce e-banking to facilitate payment
- Reduce administrative requirements in payment procedures e.g.
•Eliminate unnecessary forms (application letter, export letter with
bank seal)
•Reduce process steps
•Eliminate hard copies
- Eliminate export license altogether
- Use private banks for collection of fee in addition to MCB
(If eliminating the Export License is not a policy option, simplifying
the procedure for amending the Export License needs to be
considered. At present, amending the License as well as other
documents is difficult and takes almost as long as applying for a
new Export License despite all necessary documents have already
been submitted when obtaining it)
Time
(Days)
Costs
(USD)
1
75
2
<5
Recommendations – Simplifying Processes for Export
of Rice (contd.)
Process
Recommendation
Benefits /Reduction of
Docs
(No)
3.4) Declare
CusDec 2
- Introduce e-banking to facilitate payment
- Reduce internal process steps within the Customs department (this may
require an internal restructuring)
- Introduce IT in internal processing of exports to enable the
simultaneous review/approval of an export document
3.5) Terminal
procedure and
Customs exam at
port
- Introduce a port EDI system to provide seamless and instant
communication between all actors involved in this process
- Reduce administrative requirements in terminal and Customs procedure
e.g.
•Eliminate unnecessary forms by making them available in the EDI
system (sealed case files, shipping instructions). For Export License see
3.1.
•Reduce internal process steps within Customs department
•Combine terminal Customs and port Customs into one unit (reduce
organizational and administrative redundancy)
•Apply risk management and reduce physical inspections of cargo. Where
necessary, carry out joint inspections
Time
(Days)
Costs
(USD)
Recommendations – Simplifying Processes for Import of Palm Oil
Process
Recommendation
Benefits /Reduction of
Docs
(No)
Time
(Days)
Costs
(USD)
2.1) Prepare
Import
Recommendation
application
- Eliminate this process (see process 2.2)
4
2
2.2) Obtain Import
Recommendat
ion
- Eliminate this process as it is a pre-test. Instead, the Government
should publish quality, health, and other requirements for
palm oil imports. These requirements should be tested once
the actual palm oil shipment arrives in Yangon (see process
2.9). Ensuring that the oil meets all specifications set by the
Government should be left to the private sector. However,
this requires high levels of transparency on how the public
sector tests the requirements, e.g. what tests, what
methodology, etc. will be employed
If eliminating this process is not a policy option, the certification
process should be decentralized. To date, it is still necessary to
bring the documents to Nay Pyi Taw whereas most importers
are in Yangon. Making the same services available in Yangon
as in Nay Pyi Taw will save time and costs for travel and
arranging logistics.
7
4
47
2.3) Obtain Import
License
- Eliminate this process
If eliminating this process is not a policy option, the alteration of
the Import License process must be simplified (see process
2.5)
6
3
>135
Processes
Recommendations
High transport cost due to road condition
and syndicate system
•Enforce Competition Promotion and Market
Protection Act effectively
Burden of levy of export fee by DDC (local •Remove export fee in conformity with the policy of
authorities)
making export tax free
Myanmar – Export of
Rice
Country
Nepal – Export of
Cardamom
Recommendations – Export (South and Southeast Asia)
Customs related offices are scattered
•Locate all Customs related offices within Customs
premises
Customs do not accept electronic copies
of documents except Customs
Declaration Form
• Accept electronic copies of all documents by the
Customs
•Develop system of electronic submission of
documents
- Introduce e-banking to facilitate payment
- Reduce administrative requirements in payment
procedures e.g.
• Eliminate unnecessary forms (application letter,
export letter with bank seal)
• Reduce process steps
• Eliminate hard copies
•Eliminate this process step unless buyer requests a
tested sample
Make advance payment
Arrange pre-inspection
Recommendations – Export (2) South and Southeast Asia
Bangladesh- Lao PDR – Export Cambodia- Export
Export of
of Maize
of Maize/Cassava
Jute Bags
Country Processes
Recommendations
Apply for Phytosanitary Certificate
Reduce activity 2.2 apply for Phytosanitary
Certificate from 5-day to 3-day.
Apply for Certificate of Origin (COO)
Reduce activity 2.7 apply for Certificate of
Origin from 2-day to 1-day.
All container goes through rigorous
security check and scanning at the Port
of entry.
Customs should use risks based assessment
coupled with exporter and freight forwarder
profile for selective scanning. Waive mandatory
scanning for export.
The process of application and issuance of COO
should be initiated simultaneously with the
application for Phytosanitary and/or fumigation
certification.
Automation of overall export system is very
essential. It will reduce the time taken to travel
from one place to another for submission of
documents.
Submission of Export Registration Certificate
(ERC) should be removed.
Submission of Certificate of Origin (COO) should
be dropped
One of them should be dropped as both serves
the same purpose (showing country of origin)
Issuance of Certificate of origin (COO)
can be processed after or
simultaneously with the phytosanitary
and fumigation certification process.
Submission of documents in processes.
Obtaining SAPTA certificate
Obtaining Phytosanitary certificate
Obtaining both COO and SAPTA
certificates
Recommendations – Import (1) South and Southeast Asia
Lao PDR –
Import of Animal Feed
Nepal – Import of
Animal Feed
Country Processes
Electronic copies of documents except
Customs Declaration Form are not
accepted by the Customs
Customs related offices are scattered
Inspection of the importer's site by
VCFD, VCTD and other concerns
Inspection of all the consignments by
Customs and Quarantine officers at the
border checkpoint are conducted
separately.
Recommendations
Accept electronic copies of all documents by
the Customs
Develop electronic submission system of
documents
In selected surveyed Customs points, related
offices particularly Plant Quarantine Office and
Food Quarantine Offices were found to be
located outside of the Customs area. If these
offices are located within Customs premises it
can save time and document.
The accompanying by the Vientiane Capital
Trade Division during the site visit should be
dropped and the brief of importer/farm's site
visit by VCLFD should be shared instead for
acknowledgement; in this way, the site visit will
be shorter and efficient
It can be organized at one time. The report of
inspection can be simplified into one single set
of reports that will consist of the following main
finding: customs declaration, goods inspection,
certification of products in terms of quarantine
rule and technical procedures
Recommendations – Import (2) South and Southeast Asia
BangladeshImport of
Wheat
Country Processes
Issuance of
Quarantine
Certificate
Opening Letter
of Credit (L/C)
Recommendations
Currently a copy of the IRC is required is obtaining a
quarantine certificate. This is redundant information in issuing
quarantine certificate and hence needs to be removed.
Currently hard copy of the L/C details and IRC are required in
opening L/C. The process can be simplified if scanned copies
of the details are accepted by the banks.
BPA Study Reports 2013-14, available at:
http://unnext.unescap.org/tools/business_process.asp
TF Measures by Cambodia
Rice Export Policy: Enhancing trade facilitation, reducing informal fees and
eliminating check points
Measure 1: “MEF/General Department of Customs and Excise (GDCE), MAFF and
MoC/General Department of CAMCONTROL and relevant agencies shall: develop
a specific strategy to identify and streamline export processing procedures
including inspection, documentation requirements, fees and time required to
process export applications; define clear and publicly transparent division of
responsibilities among export regulating ministries/agencies; consider milled rice
export as a top priority in order to reduce to a minimum informal payments and
time required to export by extending “special treatment” similar to the garment
sector.”
Measures by Cambodia (Contd.)
Measure 2: Implement a single-stop service for export processing:
MEF/GDCE, MAFF and MoC/ CAMCONTROL and relevant agencies
shall set up a Single Stop Service for export processing and issuing
certificates for SPS, fumigation, grading and quality, quantity and weight,
and customs declaration.
Publication
“Facilitating Agricultural
Trade in Asia and the
Pacific”
Overview, TF issues, Good
practices
Available at:
http://www.unescap.org/publicat
ions/detail.asp?id=1480
THANK YOU!
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