Archives For March 23, 2014

jll_year_of_the_distribution_center_wide_imageSouth Africa has been ranked number 34 out of 160 countries in the World Bank’s 2014 Logistics Performance Index (LPI), which is topped by Germany, with Somalia ranked lowest. Africa’s largest economy remained the continent’s highest placed LPI participant, but South Africa’s position was well off its 2012 ranking of 23 and its position of 28 in 2010.

In February, the World Bank argued in a separate report on South Africa that the country’s high logistics costs and price distortions were an impediment to export competitiveness. That report noted, for instance, that South Africa’s port tariffs on containers were 360% above the global average in 2012, while on bulk commodities they were 19% to 43% below the global average. Similar commodity biases existed in the area of rail freight.

But the new report, titled ‘Connecting to Compete 2014: Trade Logistics in the Global Economy’, still clustered South Africa as an “over-performing non-high-income” economy along with Malaysia (25), China (28), Thailand (35), Vietnam (48) and India (54).

The report draws on data arising from a survey of more than 1 000 logistics professionals and bases its LPI rankings on a number of trade dimensions, such as customs performance, infrastructure quality, and timeliness of shipments. Besides China, South Arica also performed above its ‘Brics’ counterparts of Brazil (65),Russia (90) and India.

Germany was followed in the top 10 by other developed economies, namely Netherlands, Belgium, the UK, Singapore,Sweden, Norway, Luxembourg, the US and Japan. Among low-income countries, Malawi, Kenya and Rwanda showed the highest performance.

The report warns that the gap between the countries that perform best and worst in trade logistics remains large, despite a slow convergence since 2007. The gap persists, the study asserts, because of the complexity of logistics-related reforms and investment in developing countries. This, despite strong recognition that poor supply-chain efficiency is the main barrier to trade integration.

However, senior transport economist and founder of the LPI project Jean-François Arvis stresses that a country cannot improve through developing infrastructure, while failing to address border management and other supply-chain issues.

Logistics performance is strongly associated with the reliability of supply chains and the predictability of service delivery for producers and exporters, the report notes, adding that supply chains are only as strong as their weakest links. They are also becoming more and more complex, often spanning many countries while remaining critical to national competitiveness.

“It’s difficult to get everything right. The projects are more complicated, with many stakeholders, and there is no more low-hanging fruit,” Arvis argues.

The report also finds that low-income, middle-income and high-income countries will also need to adopt different strategies to improve their standings in logistics performance. “Comprehensive reforms and long-term commitments from policymakers and private stakeholders will be essential. Here, the LPI provides a unique reference to better understand key trade logistics impediments worldwide.” Source: Engineering News

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digital-ownershipIn the past, nations with the best ships and ports were able to establish global trade leadership and the growth that came along with it. Today, global trade has gone digital.

In the digital economy software-enabled products and services such as cloud computing and data analytics are the key drivers of growth and competitiveness. In fact, the world now invests more than $3.7 trillion (R40 trillion) on information and communications technologies a year.

In South Africa, we spend $26 billion a year and the total for the Middle East/Africa region is $228bn. However, to maximise our return on that investment, it is important for policymakers to eliminate barriers that could inhibit the continued expansion of digital trade.

It is clear that software-driven technology is transforming every sector of the global economy. For example, thanks to unprecedented processing power and vast data storage capabilities, banks can detect and prevent fraud by analyzing large numbers of transactions; doctors are now able to study historical trends in medical records to find more effective treatments; and manufacturers can pinpoint the sources of delays in global supply chains.

Against the backdrop of this kind of innovation, any country that wants to compete in today’s international marketplace must have a comprehensive digital agenda at the core of its growth and development strategy. In addition to domestic initiatives such as investment in education and skills training, or development of information technology infrastructure, policymakers can succeed in laying the groundwork for broad-based growth in the digital age if they focus on three big priorities.

First, any bilateral or multilateral trade agreement needs to facilitate the growth of innovative services such as cloud computing. As part of this, there should be clear rules that allow information to move securely across borders and prevent governments from mandating where servers must be located except in very specific situations.

Second, to promote innovation and foreign investment, continued intellectual property protection is vital and the use of voluntary, market-led technology standards – instead of country-specific criteria that force firms to jump through different technical hoops every time they enter a new local market – should be encouraged.

Third, all governments should ensure there are level playing fields for all competitors so customers have access to the best products and services the world has to offer.

At the same time, disclosures about government surveillance programmes in the US and other countries have sparked a renewed focus on data protection and personal privacy. Those concerns are worthy of debate and careful reform. But it is critically important not to conflate separate issues: We can’t let national security concerns derail digital trade.

There is precedent for navigating periods of change such as this in the global trade arena. Policymakers stood at a similar inflection point in the 1980s when they recognised the keys to growth in the coming decades would be intellectual property, services and foreign direct investment.

With foresight and hard work, they updated trade rules in the Uruguay Round of multilateral negotiations to ensure commitments were in place to provide a check against protectionist impulses. Now, as governments pursue robust growth agendas for the digital economy, it is critical we modernise trade rules again. Source: The Software Alliance (South Africa).