MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

TRADE FACILITATION IN SINGAPORE
AND LESSON LEARNT FOR VIETNAM
Major: International Trade Policy and Law

TRAN THUY LINH

HANOI - 2016


MINISTER OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

MASTER THESIS

Trade facilitation in Singapore and lesson learnt for Vietnam

Major: International Trade Policy and Law

Full name: Tran Thuy Linh
SUPERVISOR: Dr. Trinh Thi Thu Huong

Hanoi - 2016


ACKNOWLEGEMENT
I would firstly like to express my gratitude to my supervisor Dr. Trinh Thi Thu

Huong for her useful comments, remarks and encouragement through the
researching process of this master thesis. This thesis is a much work better thanks to
her supervision.
My thanks must also go to Master of International Trade Policy and Law‟s
lecturers who gave me aspiring guidance, invaluably constructive criticism and
friendly advice throughout the course. I am sincerely grateful to them for sharing
their truthful and interesting views on a number of issues related to the thesis.
Finally, I would like to thank my family and friends for all their precious support.


TABLE OF CONTENT

INTRODUCTION .....................................................................................................1
CHAPTER 1: OVERVIEW OF TRADE FACILITATION .................................6
1.1 Conceptualization of trade facilitation ..........................................................6
1.1.1 Definition.....................................................................................................6
1.1.2 TF Main Indicators ....................................................................................10
1.1.3 Impact of Trade Facilitation ......................................................................15
1.2 Relevant International Organizations’ Agreements/Initiatives on Trade
Facilitation ............................................................................................................22
1.2.1 WTO's Trade Facilitation Agreement .......................................................22
1.2.2 The Facilitation Agenda in Regional Integration Initiatives .....................23
1.2.3 Other international organizations promoting trade facilitation .................24
CHAPTER 2: THE CURRENT STATUS OF TF IN SINGAPORE .................27
2.1 Overview of the Singapore economy in main trade indicators .................27
2.1.1 Recent overall economic development .....................................................27
2.1.2 Foreign direct investment ..........................................................................28
2.1.3 International Trade ....................................................................................30
2.2 Transportation and logistics infrastructure in Singapore .........................33
2.2.1 Road infrastructure ....................................................................................33

2.2.2 Railway infrastructure and network ..........................................................35
2.2.3 Maritime and Ports infrastructure and network ........................................36
2.2.4 Airport infrastructure and network ............................................................38
2.3 Cross border administration ........................................................................41
2.3.1 Customs overall performance ....................................................................41
2.3.2 Information Technology (IT) ....................................................................43
2.4 Trade facilitation performance of Singapore through indicators .............46
2.4.1 Doing Business ..........................................................................................46
2.4.2 Corruption perceptions index ....................................................................48


2.4.3 Global Competitiveness Report 2015 - 2016 ............................................49
2.4.4 Global enabling trade index ......................................................................50
2.4.5 Logistics performance index (LPI) ...........................................................51
2.4.6 Liner Shipping Connectivity Index (LSCI) ...............................................53
2.5. The experiences behind Singapore’s performance in TF .........................55
2.5.1 Early awareness of TF issue and actively taking actions. .........................55
2.5.2 Keeping transparency and efficiency in government‟s trade regulation and
policies................................................................................................................56
2.5.3 Maintaining world-class transportations physical infrastructure ..............58
2.5.4 Taking advantage of advanced technological capability ..........................59
2.5.5 Building excellent global connectivity toward a preferred Asia logistics
and supply chain management hub ....................................................................61
2.5.6 Government and Private sectors are pro-active in co-operation ...............61
CHAPTER 3: CURRENT STATUS OF TRADE FACILITATION IN
VIETNAM ...............................................................................................................64
3.1 Overview of the Vietnam’s economy in main trade indicators .................64
3.1.1 Recent economic development..................................................................64
3.1.2 Foreign direct investment ..........................................................................66
3.1.3 International trade......................................................................................67

3.2. Transportation Physical Infrastructure .....................................................70
3.2.1 Road Subsector ..........................................................................................70
3.2.2 Railway Subsector .....................................................................................72
3.2.3 Inland Waterway Subsector (IWT) ...........................................................72
3.2.3 Seaports Subsector ....................................................................................73
3.2.4 Air Subsector .............................................................................................75
3.3 Cross border Administration........................................................................79
3.3.1 Overall of Customs performance ..............................................................79
3.3.2 Adoption of Modern Approaches to Customs Administration .................80
3.3.3 Information Technology ............................................................................83
3.3.4 ASEAN and National Single Window ......................................................86


3.4 Trade facilitation in Vietnam through international indicators ...............87
3.4.1 Doing Business ..........................................................................................87
3.4.2 Corruption Perception Index .....................................................................89
3.4.3 Global Competitve Index ..........................................................................90
3.4.4 Global Enabling Trade Index ....................................................................91
3.4.5 Logistics Performance Index .....................................................................93
3.4.6 Liner shipping connectivity index .............................................................95
3.5 Overall assessment of TF in Vietnam ..........................................................95
CHAPTER 4. LESSON LEARNT FOR VIETNAM FROM SINGAPORE’S
EXPERIENCES IN TRADE FACILITATION ...................................................97
4.1 Countries’ Performances Comparison ........................................................97
4.1.1 Soft Infrastructures ....................................................................................97
4.1.1 Hard Infrastructures ...................................................................................98
4.2 Lessons Learnt For Vietnam From Singapore’s Experiences ...................99
4.2.1 Setting the right mindset and attitude ........................................................99
4.2.2 Improving transparency and efficiency ...................................................100
4.2.3 Upgrading physical infrastructures .........................................................101

4.2.4 Enhancing public-private relationship ....................................................103
4.2.5 Increasing application of ICT ..................................................................105
CONCLUSION ......................................................................................................107
REFERENCES ......................................................................................................109
ANNEX


LIST OF TABLES
Table 1: Definitions of trade facilitation .....................................................................6
Table 2: Singapore international trade 2009-2015 ....................................................31
Table 3: Trading Across Border in Singapore (DB 2015) ........................................47
Table 4: Top 10 CPI 2015 .........................................................................................48
Table 5: Liner shipping connectivity index top 10 countries in 2016 ......................55
Table 6: Tangible benefits of TradeNet ....................................................................60
Table 7 : Vietnam National Accounts .......................................................................65
Table 8 : Vietnam international trade .......................................................................68
Table 9 : Vietnam main seaports characteristics, 2015 .............................................74
Table 10 :Vietnam‟s annual CPI result .....................................................................90
Table 11: Vietnam- Malaysia- Singapore LSCI .......................................................95

LIST OF FIGURES
Figure 1: Buy-Ship-Pay Model ...................................................................................9
Figure 2: The Global Competitive Index Framwork ................................................11
Figure 3: Singapore GDP at 2010 Market Price .......................................................28
Figure 4: Stock of FDI as at Year End (in SGD bil) .................................................29
Figure 5: Singapore Customs and Trade Facilitation................................................42
Figure 6: Singapore GCI scorecard ...........................................................................49
Figure 7: ETI 2014 top 5 scorecard...........................................................................51
Figure 8: Top 10 LPI economies, 2016 .....................................................................52
Figure 9 Vietnam in the areas measured by Doing Business ...................................88

Figure 10: Vietnam GCI scorecard ...........................................................................91
Figure 11: Vietnam ETI scorecard ............................................................................92
Figure 12: Vietnam‟s Logistics Performance Index (LPI) 2016 ..............................93
Figure 13: World Bank‟s Logistics Performance Index (LPI) 2010-Customs
Performance ..............................................................................................................94


LIST OF CHARTS
Chart 1: Road lane Length in Kilometres (end-of-year) ...........................................34
Chart 2: LPI of Singapore .........................................................................................53
Chart 3: Liner shipping connectivity index Singapore .............................................54
Chart 4: FDI project licensed in Vietnam (2010-2015) ............................................66
Chart 5: Exports and Imports of services in Vietnam ...............................................69


LIST OF SYMBOLS AND ABBREVIATIONS
APEC

: Asia-Pacific Economic Cooperation

OECD

: Organisation for Economic Co-operation and Development

UNECE

: United Nations Economic Commission for Europe

UNCTAD


: United Nations Conference on Trade And Development

WTO

: World Trade Organization

WCO

: World Customs Organization

UN/CEFACT

: United Nations Centre for Trade Facilitation and Electronic
Business

TF

: Trade Facilitation

LPI

: Logistics Performance Index

ETI

: World Economic Forum‟s Enabling Trade Index

GCI

: Global Competitiveness Index


LSCI

: Liner Shipping Connectivity Index

CPI

: Corruption Perception Index

GDP

: GROSS DOMESTIC PRODUCT

GETR

: The Global Enabling Trade Report

TI

: Transparency International

WB

: World Bank

EDI

: Electronic Data Interchange

IT


: Information Technology

TFA

: Trade Facilitation Agreement

TFAP

: Trade Facilitation Action Plan

ICT

: Information and Communication Technology

ASYCUDA

: Automated System for Customs Data and Management

CEFACT-UNECE : The Center for Facilitation of Procedures and Practices for
Administration, Commerce, and Transportation
GATT

: General Agreement on Tariffs and Trade

TTFA

: Trade and Transport Facilitation Audit

TFSP


: Trade Facilitation Support Program


FDI

: Foreign Direct Investment

FTAs

: Free Trade Agreement

LTA

: The Land Transport Authority

ITS

: Intelligent Transport System

ERP

: Electronic Road Pricing systems

MPA

: Maritime and Port Authority of Singapore

PPT


: Pasir Panjang Terminal

CAG

: Changi Airport Group

SIA Cargo

: Singapore Airlines Cargo

SC

: Singapore Customs

NPLs

: Non-Performing Loans

SOEs

: State-Owned Enterprises

TPP

: The Trans-Pacific Partnership

ASW

: ASEAN Single Window in custom procedure


VDR

: Vietnam Development Report

VPA

: Vietnam Seaport Association

IWT

: Inland Waterway Subsector

GDC

: General Department of Customs

VCCI

: Vietnam Chambers of Commerce and Industry

AEO

: Authorized Economic Operator

BPR

: Business Process Reengineering

VCIS


: Vietnam Customs Information System

NSW

: National Single Window

PPP

: Public-Private Partnership


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INTRODUCTION
1. The research issue
In today's open and interconnected global economy, efforts to streamline,
speed up, and coordinate trade processes, as much as efforts to further liberalize
trade policies, will contribute to the expansion of world trade and help countries to
connect to an increasingly globalized production system. The recent interest in trade
facilitation has come about for several reasons. Tariff and quota barriers,
particularly on general merchandise flows, are lower than in the past thanks to the
success of multilateral and preferential trade agreements along with the global
recognition of the benefits of international trade. This has sharpened the focus of
policy makers and traders on the costs of international trade, which can pose a
substantial barrier to trade. In deed, trade costs have been remained high due in part
to administrative burdens and inefficient customs procedures. In
a world
increasingly characterized by globalized manufacturing, just-in-time production,
and integrated supply chains, there the need for global rules to facilitate trade is
undeniable.
As a result, trade facilitation has emerged as a key issue for the world trading

system in recent years. Its importance was confirmed in December 2013, when
WTO members concluded the Trade Facilitation Agreement (TFA) at the WTO‟s
Ninth Ministerial Conference in Bali, and in November 2014, when WTO members
adopted a Protocol of Amendment to insert this new agreement into the Marrakesh
Agreement Establishing the World Trade Organization. While trade agreements in
the past were about “negative” integration - countries lowering tariff
and non-tariff
barriers - the WTO Trade Facilitation Agreement (TFA) is about positive
integration - countries working together to simplify processes, share information,
and cooperate on regulatory and policy goals. To date, 96 WTO Members have
ratified the Trade Facilitation Agreement (deposited an instrument of acceptance).
Vietnam utterly could not stand beside the global trend. However, the
countries performance in this area is still quite modest. In fact, there is a big gap in
comparison with not only developed countries like Hong Kong, or Singapore but


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also with other developing ones such as Malaysia. Due to the fact that Vietnam also
did ratify the Trade Facilitation Agreement of WTO in 15 December 2015, it has to
adapt quickly and figure out how to keep up with other members. Learning from
experiences of top performers is absolutely one of the ways. As a leading economy
in the Asia Pacific region, Singapore not only displays an impressive economic
growth but also an excellent practices in Trade Facilitation. Therefore, the topic "
Trade facilitation in Singapore and lesson learnt for Vietnam" is chosen to be
the topic of this master thesis.
2. Literature review and the most relevant previous findings
In recent years, with an increasingly important role in trade facilitation that
has attracted many attentions of researchers. Studies of trade facilitation related
countries experiences are also focused, out of which these following researches are
typical:

The publication on trade facilitation: “designing and implementing trade
facilitation in asia and the pacific 2013 update” is the outcome of a collaborative
effort between the Asian Development Bank (ADB) and the United Nations
Economic and Social Commission for Asia and the Pacific (ESCAP). This reference
book aims to support the implementation of trade facilitation measures in Asia and
the Pacific. It attempts to bridge the gap between theory and practice in trade
facilitation. It provides operational guidance on how to assess the status of trade
facilitation, what measures and reforms are necessary, how to design trade
facilitation initiatives, how to implement them at national and regional levels, and
which organizations can help. The book also provides lots of experiences of
countries within region, one of which is Singapore - for training on regional trade
policy and help shape future trade facilitation measures in Asia and the Pacific.
Next relevant publication is: “Trade Facilitation through Customs
Procedures: Assessment of APEC’s Progress” by APEC Policy Support Unit in
October 2011”. One of its main recommendations is that APEC should undertake
cases studies of effectiveness of customs procedures in the region. The research
emphasized: “there is a dearth of understanding about the effectiveness of customs


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and related border procedures, which is essential for streamlining such procedures
and minimizing transaction costs. A number of APEC economies have made wideranging changes that would be worthy of further study to distil the wider lessons
from their experiences. It is recommended that APEC undertake a series of case
studies on the effectiveness of customs procedures in the region, which could be
used as benchmarks by others.”
From the overview of these above studies, it can be seen that trade facilitation
has received a lot of interest from researchers all over the world as well as in the
region. However, it seems that there is very few works analysing trade facilitation
of Vietnam in comparison with Singapore. This comparison is very important

because the neighbouring country has had great success in facilitating trade so far.
Although the two countries do not contain lots of similarity in term of economic
development, there absolutely some precious lesson that suitable for Vietnam
situation. Being an underdog-country where the awareness of the importance of
trade facilitation is still weak, Vietnam definitely needs to learn experiences from
top runners. Therefore, it is suggested that there should exist a depth and
comprehensive research on the current status of Vietnam's trade facilitation and
Singapore‟s experiences in this issue.
3. The purpose of the study
The general objective of the thesis is to provide lessons learned from the
experiences behind Singapore‟s excellent performance in Trade Facilitation, then to
offer suggestions suitable for Vietnam. To achieve this overall aim, there are
specific tasks that the thesis needs to solve:
 Understanding of basic theoretical issues of trade facilitation, the impact of
trade facilitation and relevant international agreement/initiatives.
 Analysing the recent situation of the trade facilitation in Singapore, then
identifying the core experiences behind the country‟s practices
 Assessing the overall current situation of trade facilitation in Vietnam, then
identifying the shortcomings that the country is now facing.


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 Providing some suggestions for the future development of trade facilitation
in Vietnam by comparing the two countries performances and learning experiences
of Singapore.
4. The objecti and scope of the study
The studying object of the thesis is the status of trade facilitation in Singapore and
Vietnam and their underlying practices related to trade facilitation implementation. The
thesis refers to the theories and interpretation of some main trade facilitation

indicators also.
The thesis mainly analyses the performances in trade facilitation of the abovementioned countries within the period of recent 10 years. The recommendations are
also made to improve trade facilitation situation of Vietnam in short and medium
term (10 years).
5. New contributions of the study
In comparison with recent researches on the similar topic, the thesis provides
some new contributions:
 Creating a comprehensive theoretical basis on trade facilitation: the
diversification of trade facilitation definition, benefits and cost related to trade
facilitation implementation and summary of latest relevant international
agreement/initiatives.
 Analysing the current status of trade facilitation in Vietnam in comparison
with the situation in Singapore.
 Identifying the key experiences behind Singapore‟s excellent trade
facilitation practices.
 Giving the overall assessment on current issues that Vietnam has to face
when dealing with trade facilitation, and then making some recommendations to
improve the country situation in the future in order to soon keep up with the top
performers like Singapore.


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6. The structure of the thesis
Besides the Introduction, Conclusion, Reference and Annex, the thesis
consists of four chapters:
Chapter 1: Overview of Trade Facilitation
Chapter 2: The current status of Trade Facilitation in Singapore
Chapter 3: The current status of Trade Facilitation in Vietnam
Chapter4: Lessons learnt for Vietnam from Singapore‟s experiences



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CHAPTER 1: OVERVIEW OF TRADE FACILITATION
1.1 Conceptualization of trade facilitation
1.1.1 Definition
Trade facilitation is one of the four Singapore issues set forth at the 1996
Ministerial Conference, and it is generally referred to as a reduction of transaction
costs associated with unnecessary administrative burdens on cross-border
movement of goods and services between sellers and buyers.
Trade facilitation definition is definitely not a fixed term. Its flexible scope
leads to variety of definition depending on circumstances of different countries, the
nature of trade agreements or what people consider as priorities. The following table
demonstrates the flexibility of Trade Facilitation due to different context and
involved parties:
Table 1: Definitions of trade facilitation
International organizations
Institution/source

Definition
Trade facilitation refers to the simplification and

Asia-Pacific Economic rationalization of customs and other administrative
Cooperation (APEC)

procedures that hinder, delay or increase the cost of
moving goods across international borders.

Organisation for

Economic Co-operation Trade facilitation refers to policies and measures aimed at
and Development
(OECD)

easing trade costs by improving efficiency at each stage
of the international trade chain.

United Nations Centre
for Trade Facilitation and The simplification, standardization and harmonization of
Electronic Business
(UN/CEFACT)

procedures and associated information flows required to
move goods from seller to buyer and to make payment.


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United Nations
Conference on Trade
And Development
(UNCTAD)

Trade facilitation seeks to establish a transparent and
predictable

environment

for


cross-border

trade

transactions based on simple, standardized customs
procedures and practices, documentation requirements,
cargo and transit operations, and trade and transport
arrangements.
The avoidance of unnecessary trade restrictiveness. This

World Customs

can be achieved by applying modern techniques and

Organization (WCO)

technologies, while improving the quality of controls in
an internationally harmonized manner.
The simplification and harmonization of international
trade procedures, where trade procedures are the

World Trade
Organization (WTO)

activities,

practices,

and


formalities

involved

in

collecting, presenting, communicating, and processing
data and other information required for the movement of
goods in international trade.

Source: Word Trade Report 2015
In general, TF is a concept that considers the simplification, harmonization,
standardization and modernization of trade procedures. Its main purpose is to
reduce transaction costs, time and uncertainty in international trade. Nevertheless,
international agencies and regional initiatives have adopted various definitions of
trade facilitation, emphasizing its different aspects (table 1). The various definitions
of trade facilitation can be differentiated along at least two directions:
Broad or narrow: Narrow definitions focus on improving administrative
procedures at the border, while broad definitions include changes to behind- theborder measures such as technical barriers to trade as well.
Soft or hard infrastructure: Some definitions limit trade facilitation to
improvements in trade procedures which do not require making investments in
physical infrastructure (apart, perhaps, from better information technology


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equipment for customs), while other definitions of trade facilitation include
investments in hard infrastructure such as ports, transportation links within the
country (roads, railways, etc.) and information and communications technology as
well.

The narrowest definitions limit trade facilitation to customs and other border
operations such as, in practice, at-the-border measures. For example, the WCO‟s
definition of trade facilitation is associated with its mission, which is to enhance the
efficiency and effectiveness of customs administration by harmonizing and
simplifying customs procedures. The definition by APEC also focuses on at- theborder processes and procedures. These cover facilitation measures related to
preparation of customs and trade documents, customs clearance procedures, border
control, and release of goods.
The definitions used by the UN/CEFACT and OECD reflect a broader
approach to trade facilitation, covering international trade procedures and associated
information flows, and payment along the entire supply chain. These include some
behind- the-border measures such as product standards and conformity assessment
measures, business facilitation, e-commerce, trade finance, and logistics services.
In the UN/CEFACT definition, “procedures” are the activities, practices, and
formalities required for the movement of goods in international trade. Information
flows include both data and documents. This view of trade facilitation encompasses
both cross-border and other processes involved in international trade. The rationale
and scope of this definition was derived from the UN/CEFACT buy-ship-pay model
(Figure 1), which lays down three main processes in international trade transactions.
“Buy” refers to activities such as identifying a potential trading partner, establishing
a business contract, and placing an order. “Ship” is the most complex, with five
main activities: (i) preparing for export, (ii) export, (iii) transport, (iv) preparing for
import, and (v) import itself. “Pay” represents the payment activity from buyer to
seller. The various processes involved in trade transaction may be grouped into
commercial, transport, regulatory, and financial procedures. The Buy-Ship-Pay
Model suggests the application of a total transaction approach, which not only


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results in optimized regulatory procedures and government control but also in

improved business processes.

Figure 1: Buy-Ship-Pay Model
Source: United Nations Centre for Trade Facilitation and Electronic Business
(UN/CEFAC T). 2008.
On the other hand, the definition of Trade facilitation of Portugal-Perez and
Wilson (2012), which divided TF measures into two dimensions: investment in
“hard” infrastructure (highways, railroads, ports, etc.) and in “soft” infrastructure
(transparency, customs efficiency, institutional reforms, etc.) is an example of the
second direction. The research defined “soft” and “hard” dimensions of
infrastructure are as follow:
Hard infrastructure:
1. Physical infrastructure measures the level of development and quality of
ports, airports, roads, and rail infrastructure.
2. Information and communications technology (ICT) is interpreted as the
extent to which an economy uses information and communications technology to
improve efficiency, and productivity as well as to reduce transaction costs. It contains
indicators on the availability, use, absorption, and government prioritization of ICT.


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Soft infrastructure:
3. Border and transport efficiency aims at quantifying the level of efficiency of
customs and domestic transport that is reflected in the time, cost, and number of
documents necessary for export and import procedures.
4. Business and regulatory environment measures the level of development of
regulations and transparency. It is built on indicators of irregular payments,
favoritism, government transparency, and measures to combat corruption.
In this paper, trade facilitation is defined similarly with that direction. Hence

the analysis of each country situation will mainly focus on those four areas.
1.1.2 TF Main Indicators
Given the different definitions of trade facilitation employed by international
organizations and the academic literature, a wide range of trade facilitation
indicators has been developed. When last counted, more than a dozen indicators of
trade facilitation had been developed, testifying to the importance of the subject as
well as its complexity. Among others, the World Bank‟s Doing Business and the
Logistics Performance Index (LPI), the World Economic Forum‟s Enabling Trade
Index (ETI) and Global Competitiveness Index (GCI), the Liner Shipping
Connectivity Index (LSCI) by United Nations Conference on Trade and
Development (UNCTAD) and the Corruption Perception Index (CPI) are the
primary indicators used in this paper to demonstrate the above-mentioned 4
categories of TF
Doing Business: The Doing Business Report is a study elaborated by
the World Bank Group since 2003 that is aimed to provide objective measures of
business regulations and their enforcement across 185 economies. Doing Business
2016 measures aspects of business regulation affecting domestic small and mediumsize firms in 11 areas across 189 economies. Ten of these areas—starting a
business, dealing with construction permits, getting electricity, registering property,
getting credit, protecting minority investors, paying taxes, trading across borders,
enforcing contracts and resolving insolvency—are included in the distance to


11

frontier score and ease of doing business ranking. Doing Business also measures
features of labor market regulation, which is not included in these two measures.
Economies are ranked on their ease of doing business, from 1-189. A high of doing
business ranking means the regulatory environment is more conducive to the
starting and operation of a local firm, The rankings are determined by sorting the
aggregate distance to frontier scores on 10 topics, each consisting of several

indicators, giving equal weight to each topic. The rankings for all economies are
benchmarked to June 2015.
Global Competitiveness Index: Produced by World Economic Forum, Global
Competitiveness Index (GCI) attempts to quantify the impact of a number of key
factors which contribute to create the conditions for competitiveness, with particular
focus on the macroeconomic environment, the quality of the country‟s institutions,
and the state of the country‟s technology and supporting infrastructure. It measures
“the set of institutions, factors and policies that set the sustainable current and
medium-term levels of economic prosperity” (in other words, those factors that
facilitate or drive productivity).

Figure 2: The Global Competitive Index Framwork
Source: The Global Competitiveness Report 2015-2016


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The Global Competitiveness Report 2015-2016: provides an overview of the
competitiveness performance of 140 economies
and thus continues to be the most
comprehensive assessment of its kind. The GCI combines 114 indicators that
capture concepts that matter for productivity. These indicators are grouped into 12
pillars (Figure 2): institutions, infrastructure, macroeconomic environment, health

and primary education, higher education and training, goods market efficiency,
labor market efficiency, financial market development, technological readiness,
market size, business sophistication, and innovation. These
are in turn organized
into three sub-indexes, in line with three main stages of development: basic
requirements, efficiency enhancers, and innovation and sophistication factors. The
three sub-indexes are given different weights in the calculation of the overall Index,
depending on each economy‟s stage of development, as proxied by its GDP per
capita and the share of exports represented by raw materials. While all of the pillars

described above will matter to a certain extent for all economies, it is clear that they
will affect different economies in different ways corresponding with different stages
of development in the table below:
Global Enabling Trade Index: The Global Enabling Trade Report (GETR)
series has been published by the World Economic Forum since 2008, initially on an
annual basis, and biennially since 2010. From the beginning, the assessment has
been based on the Enabling Trade Index (ETI). For the 2014 edition, coverage
increased from 132 to 138 economies, which together account for 98.8% of world
GDP and 98.3% of world merchandise trade. The index is used to assess the quality
of institutions, policies and services facilitating the free flow of goods over borders
and to their destinations. The ETI framework captures the various dimensions of
enabling trade, breaking them into four overall issue areas, called Sub-indexes:
Sub-index A. Market access: measures the extent and complexity of a
country‟s tariff regime, as well as tariff barriers faced and preferences enjoyed by a
country‟s exporters in foreign markets.
Sub-index B. Border administration: assesses the quality, transparency and
efficiency of border administration of a country.


13

Sub-index C. Infrastructure: assesses the availability and quality of transport
infrastructure of a country, associated services, and communication infrastructure,
necessary to facilitate the movement of goods within the country and across the border.
Sub-index D. Operating environment: measures the quality of key institutional
factors impacting the business of importers and exporters active in a country.
These four areas are in turn subdivided into components, called pillars, that
capture more specific aspects within their respective broad issue areas. Each of
them is composed of a number of indicators.
Logistic Performance Index (LPI): The indicator has been introduced by

World Bank for every two years since 2007. The LPI is based on a worldwide
survey of operators on the ground (global freight forwarders and express carriers),
providing feedback on the logistics “friendliness” of the countries in which they
operate and those with which they trade. The LPI is an interactive benchmarking
tool created to help countries identify the challenges and opportunities they can face
in their performance on trade logistics and what they can do to improve their
performance. The LPI 2016 allows for the comparisons across 160 countries all
over the world.
The LPI measures the logistic friendliness of countries, ranking them
according to customs, infrastructure, ease of arranging shipments, quality of
logistics services, tracking, tracing and timeliness, which is explained as follow:
 Efficiency of the clearance process (i.e., speed, simplicity and predictability
of formalities) by border control agencies, including customs;
 Quality of trade and transport related infrastructure (e.g., ports, railroads,
roads, information technology);
 Ease of arranging competitively priced shipments;
 Competence and quality of logistics services (e.g., transport operators,
customs brokers);
 Ability to track and trace consignments;


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 Timeliness of shipments in reaching destination within the scheduled or
expected delivery time.
Liner Shipping Connectivity Index (LSCI) is one of trade facilitation‟s
indicators that is introduced by United Nations Conference on Trade and
Development (UNCTAD). This indicator captures how well countries are connected
to global shipping networks based on five components of the maritime transport
sector: number of ships, their container-carrying capacity, maximum vessel size,

number of services, and number of companies that deploy container ships in a
country‟s ports. The index is generated as follows: for each of the five components,
a country's value is divided by the maximum value of that component in 2004, and
for each country, the average of the five components is calculated. This average is
then divided by the maximum average for 2004 and multiplied by 100. In this way,
the index generates the value 100 for the country with the highest average index of
the five components in 2004.
The higher the index, the easier it is to access a high capacity and frequency
global maritime freight transport system and thus effectively participate to
international trade. Therefore, LSCI can be jointly considered as a measure of
connectivity to maritime shipping and as a measure of trade facilitation. It reflects
the strategies of container shipping lines seeking to maximize revenue through
market coverage
Corruption perceptions index: first launched in 1995 by Transparency
International (TI), Corruption Perceptions Index (CPI) is a composite indicator
annually ranking countries “in terms of the degree to which corruption is perceived
to exist among public officials and politicians” (Lambsdorff, 2010). This index is
based on corruption related surveys provided by several sources such as the
Freedom House, the Economist Intelligence Unit, the Global Insights, the Institute
for Management Development or the World Economic Forum. Data are rescaled,
standardizing the scores using “matching percentiles” between 0 and 10, and then
applying a beta-transformation to the matched scores. The final CPI score for a country
is the average of these transformed values (only if, at least three sources are available)


15

The Corruption Perceptions Index (CPI) 2015 was launched by Transparency
International (TI) on 27 January 2016 in Berlin, ranking 168 countries and
territories based on the business people and country experts‟ perceptions of public

sector corruption. Not one of the 168 countries assessed
in the 2015 index gets a
perfect score and two-thirds score below 50, on a scale from 0 (highly corrupt) to
100 (very clean). More than 6 billion people live in a country with a serious
corruption problem (countries with the score less than 50).
1.1.3 Impact of Trade Facilitation
1.1.3.1 The theory and measurement of trade facilitation
Existing models of international trade can be used to better understand the
trade and economic effects of the TF.
Trade facilitation aims to reduce trade costs, which includes all costs apart
from the cost of production incurred in getting a good from the producer to the final
consumer. Though trade models may differ in their assumptions, their conclusions
about how a reduction in trade costs creates economic benefits are in many ways
complementary.
The simplest framework that can be used to understand the effect of trade
facilitation is the “iceberg” model, which draws an analogy between the way trade
costs reduce the value of goods to both exporters and importers and the way an
iceberg melts as it moves through the ocean. Inefficient trade procedures result in
the importer paying a higher price for the traded good and the exporter receiving a
lower price for it. Compared to a tariff, inefficient trade procedures weigh more
heavily on economies, since in the case of a tariff, part of the difference between
what the importer pays and what the exporter receives ends up as tariff revenues to
governments.
If a country improves its trade procedures so that trade costs are reduced to
zero, this price wedge disappears. As a result, importers benefit from a lower price
at the same time that exporters receive a higher price for the traded good. Trade