Trade Facilitation in the South Caucasus. Jan Forest USAID Consultant June 13, 2012 Tbilisi, Georgia

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1 Trade Facilitation in the South Caucasus Jan Forest USAID Consultant June 13, 2012 Tbilisi, Georgia

2 Legal Framework for Trade Facilitation WTO Agreements WCO Revised Kyoto Convention WCO SAFE Framework of Standards UNECE International Convention on Harmonization of Frontier Control of Goods Free Trade Agreements 2

3 WTO Definition of Trade Facilitation Measures that are undertaken to simplify, harmonize, standardize and modernize trade procedures Trade procedures are the activities, practices and formalities involved in collecting, presenting, communicating and processing the data needed for the movement of goods in international trade (BIS; Dee and Findlay, 2006; WTO website, 2011; World Bank, 2010). 3

4 Goals of Trade Facilitation Simplifying formalities and procedures Standardizing documents used in international trade and transport Using risk management techniques and information technology in customs Moving from transaction-based controls to audit based controls Introducing legal frameworks for trade facilitation Source: Revised Kyoto Convention 4

5 Role of Customs in Trade Facilitation All goods entering or leaving a customs territory are under the control of Customs, including the means of transport (RKC 6.1) If necessary, control can extend beyond a border to a trader s commercial systems (RKC 6.10) Border security Enforcement powers granted to Customs 5

6 Performance Indicators for Border Crossings Time-cost study (UNESCAP) Time-release study (TRS) (WCO) Trade and Transport Facilitation in Southeast Europe (TTFSE) (World Bank) Border crossing times (International Road Transport Union) Doing Business Indicators (World Bank) Logistics Performance Index (World Bank) 6

7 Doing Business Rankings (2012) (Trading Across Borders) Armenia 104/183 economies Azerbaijan 170/183 economies Georgia 54/183 economies 7

8 Doing Business (Exporting) (2012) Number of documents to export Armenia - 5 Azerbaijan - 8 Georgia - 4 Number of days to export Armenia - 13 Azerbaijan - 38 Georgia - 10 Cost to export Armenia $1,815 Azerbaijan - $2,905 Georgia - $1,595 8

9 Doing Business (Importing) (2012) Number of documents to import Armenia - 8 Azerbaijan - 10 Georgia - 4 Days to import Armenia - 18 Azerbaijan - 42 Georgia - 13 Cost to import Armenia - $2,195 Azerbaijan - $3,405 Georgia - $1,715 9

10 Country Trade Profile Armenia WTO accession February 5, 2003 Merchandise exports (2010) - $1,041,000 Major export destinations (2010) EU, Russia, US, Georgia, Iran Merchandise imports (2010) - $3,749,000 Major import sources (2010) EU, Russia, China, Ukraine, Iran Source: WTO Website 10

11 Country Trade Profile Observer to WTO Azerbaijan Merchandise exports (2010) - $26,476,000 Major export destinations (2010) EU, Israel, US, Ukraine, Croatia Merchandise imports (2010) - $6,746,000 Major import sources (2010) EU, Russia, Turkey, China, Ukraine Source: WTO Website 11

12 Country Trade Profile Georgia WTO accession June 14, 2000 Merchandise exports (2010) - $1,574,000 Major export destinations (2010) EU, Azerbaijan, Turkey, US, Armenia Merchandise imports (2010) - $5,249,000 Major import sources (2010) EU, Turkey, Ukraine, Azerbaijan, China Source: WTO Website 12

13 Exports Major Exports and Imports Armenia Pig iron, unwrought copper, nonferrous metals, diamonds, mineral products, foodstuffs, energy Imports Natural gas, petroleum, tobacco products, foodstuffs, diamonds Source: The CIA World Factbook 13

14 Exports Major Exports and Imports Azerbaijan Oil and gas (90%), machinery, cotton, foodstuffs Imports Machinery and equipment, oil products, foodstuffs, metals, chemicals Source: The CIA World Factbook 14

15 Exports Major Exports and Imports Georgia Vehicles, ferro-alloys, fertilizers, nuts, scrap metal, gold, copper ores Imports Fuels, vehicles, machinery and parts, grain and other foods, pharmaceuticals Source: The CIA World Factbook 15

16 Challenges in the South Caucasus Political Closed borders Multiple trade agreements Infrastructure Roads Railroads Power 16

17 Challenges in the S. Caucasus (2) Border crossing/customs Lack of communication among three countries Customs Services Lack of cooperation among government agencies Inadequate staff and facilities at borders Cumbersome customs procedures Corruption 17

18 Key Trade Issues Armenia Export concentration, weak competitiveness, low productive capacity and trade deficit Market concentration Limited access to finance Cumbersome regulatory and business environment Underdeveloped physical infrastructure Underdeveloped institutional and quality management infrastructure Source: International Trade Centre 18

19 Key Trade Issues Azerbaijan Overreliance on energy resources, weak competitiveness and low productive capacity Market concentration and WTO accession Underdeveloped physical infrastructure Underdeveloped institutional and quality management infrastructure Limited access to finance Burdensome regulatory and business environment Source: International Trade Centre 19

20 Key Trade Issues Georgia Weak competitiveness, low productive capacity and trade deficit Market concentration Underdeveloped quality management infrastructure Limited access to finance Continued need to improve customs procedures Source: International Trade Centre 20

21 Achievements in the South Caucasus Integrated border management (IBM) (Armenia) Cross-border cooperation agreement (Georgia and Armenia) Redesign of Georgia/Armenia border crossings Training Kars-Tbilisi-Baku Railroad Project 21

22 Gaps Harmonization of legal and regulatory framework Standardization of document requirements Integration of border agencies Improved transport Regional website for laws and regulations Public-private partnership 22

23 Goals for Stakeholder Meetings Customs Service input Input from service providers Brokers Freight forwarders Private sector input Chamber of Commerce Business Associations Industry input 23

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