Danial Norjidi
The World Bank released a new report on April 21, providing the latest view on trade logistics performance across 139 countries.
Titled Connecting to Compete 2023: Trade Logistics in an Uncertain Global Economy, a key highlight of the report is the logistic performance index (LPI), which provides a measure of countries’ ability to move goods across borders with speed and reliability.
The LPI measures the ease of establishing reliable supply chain connections and the structural factors that make it possible, such as the quality of logistics services, trade- and transport-related infrastructure, and border controls.
Among the report’s key messages is that this year’s report, which is its seventh edition, includes an extended data set consisting of the survey-based LPI, which results from the traditional LPI survey of logistics professional and new key performance indicators (KPIs) measuring the actual speed of trade around the world.
“The new KPIs are derived from large global tracking datasets (big data) covering shipping containers, air cargo, and parcels. The new KPIs are not yet included in the construction of the main LPI indicators (country scores and ranks), which remain solely based on the LPI survey. The two categories of indicators provide a complementary yet consistent understanding of logistics performance.”
Another key message is that logistics services were broadly resilient for both top performers and bottom performers in the LPI, despite a more challenging operating environment.
“Even with the COVID-19 pandemic–induced disruptions to shipping and the global supply chain crisis, the average overall score in the 2023 LPI was broadly the same as in the last survey in 2018. This resilience partly reflects the robustness of the LPI survey, which captures structural factors that were not directly affected by the recent crisis, such as the quality of infrastructure or customs.
“The 10 countries with the best logistics performance continued to offer high-calibre logistics – rated 4.1 out of 5 on average compared with 4.0 in 2018. The average rating of the 10 poorest performers did not fall, despite challenging circumstances, and remained at 2.1 out of 5, as in 2018. But the 2023 edition included 21 fewer countries, many of them low-income, than the 2018 edition.”
A third finding is that mid-level logistics performers are showing progress. “More countries scored higher in the LPI compared with previous years. The average overall country score has steadily risen over the past decade, with more countries clustered at an overall score of 3 to 4.”
Also among the report’s key messages is that supply chain reliability is critical. “For containers, the average time across all potential trade routes from entering the port of export to exiting the destination port is 44 days, with a standard deviation of 10.5 days.
About 60 per cent of the time it takes to trade goods internationally is spent at sea. But the biggest delays occur when containers are held up at the origin or destination – at ports, airports, or multimodal facilities. Policies targetting these facilities, such as investing in port productivity, modernising customs, and new technologies, can improve reliability.”
An additional key message is that performance transcends income. “This is especially apparent with new key performance indicators, such as the time containers spent in ports (dwell time). Emerging economies tend to have shorter delays than industrialised economies, possibly because of the lingering effects of the 2021-22 supply chain crisis, the effects of Russia’s invasion of Ukraine on logistics in Europe, and the leapfrogging of richer economies in port productivity and digitalisation of end-to-end supply chains. Middle-income countries with consistent performance across the six LPI components could outperform both their peers and more advanced countries.”
The report also provided a look at policy highlights, with one being that improving customs and infrastructure matters most for raising the overall score of bottom performers.
“The performance of customs and border agencies, as well as the quality of trade – and transport-related infrastructure, is particularly weak in the lowest performing countries,” said the report. “These countries, many of them in the Middle East and North Africa and in Sub-Saharan Africa, experience much longer delays than advanced and emerging economies and many middle-income countries. On average, export delays are of the same magnitude as import delays but for different reasons: export delays are tied more to the quality of service or to economies of scale.”
Also mentioned is that addressing bottlenecks in landlocked developing countries is beyond the scope of unilateral interventions and requires coordinated interventions across borders, such as introducing robust transit regimes.
“The LPI is closely associated with connectivity indicators such as the number of maritime or aerial connections. Landlocked developing countries face long delays in transit countries, and small island states depend on transshipment and suffer from less frequent connections, which increases lead time and reduces reliability.”
Another policy highlight is that environmentally sustainable logistics options can lessen the carbon footprint of supply chains and keep trade moving. “Environmentally friendly options include shifting to less carbon-intensive freight modes, more energy-efficient warehousing, or better capacity utilisation.”
The report added that demand for green shipping options is highest (75 per cent) for exports to countries in the top two performance quintiles and lower for exports to countries in the middle (over 20 per cent) and bottom two (10 per cent) quintiles.
In a press statement, Global Director for Trade, Investment, and Competitiveness at the World Bank Mona Haddad said, “Logistics are the lifeblood of international trade, and trade in turn is a powerful force for economic growth and poverty reduction. The LPI helps developing countries identify where improvements can be made to boost competitiveness.”
Meanwhile, Senior Economist with the World Bank Group’s Macroeconomics, Trade and Investment Global Practice Christina Wiederer, the report’s co-author, said, “While most time is spent in shipping, the biggest delays occur at seaports, airports, and multimodal facilities. Policies targetting these facilities can help improve reliability.”
