Better Transport and Logistics Key to Sustained Export Revival Says World Bank

May 27, 2010

Kyiv, May 27, 2010 – Today, the World Bank issued a new report, Ukraine: Trade and Transit Facilitation Assessment. The report, prepared with financial assistance of Dutch grant assisting Ukraine to improve its international competitiveness and public finance management, provides a basic diagnostic of trade and transport logistics and facilitation issues in the country. It looks at trade and transport facilitation from the point of view of exporters and importers and makes recommendations how Ukraine can fully exploit its geographic location to become a transit hub in the region.
“Ukraine’s transit and trade potential are far from fully exploited. At a time when the country needs a revival of exports to drive the economic recovery, this report explains the critical role that trade and transit facilitation plays in this regard,” said Martin Raiser, World bank Director for Ukraine, Belarus and Moldova.  

The report argues that the country suffers acutely from insufficient transport infrastructure. There are high costs associated with the limited and poorly maintained road network, the financial conditions and governance of the state railways, and the weak capacity and reliability of the ports.

Moreover, the report shows that poor logistics and cumbersome and time consuming border crossing procedures represent significant additional barriers to trade that keep Ukraine far below its potential as a transit hub and impose significant economic costs given the country’s dependence on foreign trade. Key logistics and border related obstacles include:

  • Unreliable and costly logistics services;
  • Scarce and expensive warehousing capacity (including cold storage), which in turn is hampered by land policy and construction permits problems;
  • Cumbersome border crossing and customs clearance procedures;
  • Complexity of regulations relating to exports and imports, including numerous pre-customs permits, registration licenses, technical regulations, and certification which generate high compliance costs; and
  • Corrupt practices at the border.

“The private sector could save up to 3% of GDP per year in logistics costs by just improving border and customs operations and addressing corrupt practices,” said Oleksiy Balabushko, Economist at the World Bank.

The World Bank’s Logistics Performance Index (LPI) in its latest survey (2010) places Ukraine on 102nd place out of 155 countries. For comparison Poland ranked 30th, Romania 50th, and Russia 94th.  The ranks are based on assessments made by freight forwarding/logistics professionals and based on six areas of performance such as efficiency of the clearance process by customs and other border agencies, infrastructure for transport logistics, ease and affordability of arranging international shipments, competence of the local logistics industry, ability to track and trace international shipments, and timeliness of shipments in reaching.

The Ukraine Trade and Transit Facilitation Assessment analyzes in more detail the barriers in each of these dimensions. Addressing these barriers would yield rapid gains in trade and logistics performance and consequently in international competitiveness. The most important areas to be addressed include:

  • Investing in transport infrastructure under a comprehensive multi-modal transport policy umbrella to ensure the most efficient use of investments.
  • Encouraging investments in logistics facilities in key geographic areas to enable cost savings and to facilitate exports and transit.
  • Streamlining of border–crossing operations and customs clearance procedures.
  • Combating unofficial payments in the process of border-crossing.