Report No. 72061-LA Public Disclosure Authorized Public Disclosure Authorized Lao PDR Public Disclosure Authorized Trade and Transport Facilitation Assessment Poverty Reduction and Economic Management Sector Department East Asia and Pacific Region April 2014 Public Disclosure Authorized TTFA_2.indd 1 6/13/14 11:13 AM Abbreviations and Acronyms 3PL Third Party Logistics Provider ACP Africa, Caribbean and Pacific ADB Asian Development Bank AFAFGT ASEAN Framework Agreement for the Facilitation of Goods in Transit AFD Agence Francaise de Développement AFTA ASEAN Free Trade Area ALGI Association of Lao Garment Industries ASEAN Association of Southeast Asian Nations ASYCUDA Automated SYstem for CUstoms DAta B2C Business to Customer CAD Cash Against Delivery CAS Country Assistance Strategy CBTA Greater Mekong Sub-Region Cross Border Transit Agreement C&F Cost and Freight CF Clearing and Forwarding CM (or FOB1) Contact Manufacturer CMT Cut, Make, Trim CO Certificate of Origin DoA Department of Agriculture DTIS Diagnostic Trade Integration Study DWT Deadweight tons EBA Everything-but-Arms Initiative EDI Electronic Data Interchange ERP Enterprise Resource Platform EU European Union EWEC East West Economic Corridor FAO Food and Agriculture Organization of the United Nations FAQ Fair Average Quality FCA Free Carrier FCL Full Container Load FDI Foreign Direct Investment FEU Forty Foot Equivalent Unit FIATA Fédération Internationale des Associations de Transitaires et Assimilés (International Federation of Freight Forwarders Associations) FOB Free on Board GOL Government of Lao PDR GDP Gross Domestic Product GIZ Deutsche Gesellschaft für Internationale Zusammenarbeit GMO Genetically Modified Organism GMS Greater Mekong Sub-Region 2 Trade and Transport Facilitation Assessment GPS Global Positioning System GSC Garment Service Center GSP Generalized System of Preferences ICA Investment Climate Assessment ICD Inland Container Deport ICT Information Communications Technology IPM Integrated Pest Management IT Information Technology ITC International Trade Centre JETRO Japan External Trade Organization JICA Japan International Cooperation Agency L/C Letter of Credit LCA Lao PDR Coffee Association LCL Less than Container Load LIFFA Lao PDR International Freight Forwarders Association LNCCI Lao PDR National Chamber of Commerce and Industry LPI Logistics Performance Indicators MAF Ministry of Agriculture and Forestry MOIC Ministry Of Industry and Commerce NGO Non-Governmental Organization NSCEI National Steering Committee for Economic Integration NSEC North South Economic Corridor NVOCC Non-Vessel Operating Common Carriers ODM (or FOB3) Original Design Manufacturer OEA Original Equipment Assembler OEM (or FOB2) Original Equipment Manufacturer SAFRC Southern Agricultural and Forestry Center SEZ Special Economic Zone SOCB State-Owned Commercial Bank SRT State Railway of Thailand TEU Twenty Foot Equivalent Unit TF Trade Finance TRS Time Release Study TT Telegraphic Transfer TTFA Trade and Transport Facilitation Assessment VAT Value Added Tax VF Vendor Factory WFP World Food Program WTO World Trade Organization Trade and Transport Facilitation Assessment 3 Acknowledgements This report was prepared by a World Bank team led by The report has greatly benefited from the many inter- Richard Record (Senior Economist), with assistance actions with stakeholders in Lao PDR, from two pri- from Konesawang Nghardsaysone (Trade Economist) vate sector consultative workshops held in Vientiane and Liviu Sitrbat (Consultant). Charles Kunaka (Senior and in Pakse in December 2011, and a dissemination Trade Specialist) and Daniel Saslavsky (Consultant) workshop on the draft report in October 2012. The prepared the corridor performance analysis under active participation in the process by many staff from Part 1 of the TTFA. John Arnold (Consultant) and the Ministry of Industry and Commerce (Department Christian Ksoll (Consultant) prepared the supply of Planning and Cooperation, Department of Im- chain analyses under Part 2 of the TTFA. Primary ports and Exports, Department of Trade Promotion data collection was carried out by Emerging Mar- and Product Development and Economic Research kets Consulting (Laos) Ltd. Ratchada Anantavrasilpa Institute for Trade), by sharing views and feedback (Financial Sector Specialist) provided contributions on helped to shape the final document. We also thank all trade finance. Key inputs on trade logistics were also of those who provided comments on earlier drafts of provided by Prachit Sayavong (President of Lao PDR the study, including peer reviewers Clayton Kerswell International Freight Forwarders Association). Re- (Senior Trade Facilitation Specialist) and Duc Minh search assistance from Quentin Dumouilla (Research- Pham (Senior Economist). er), editing by Rena Whiteman (Consultant) and administrative assistance from Phet Udom Mainolath This research was made possible by resources pro- (Program Assistant) is gratefully acknowledged. Over- vided through the Lao PDR Trade Development Facil- all guidance was provided by Mathew Verghis (Sector ity, a multi donor trust fund financed by Australia, the Manager) and Keiko Miwa (Country Manager). European Union, Germany, Ireland and the United States of America, and administered by the World Bank. The findings and interpretations expressed here are those of the authors and do not necessar- ily reflect the views of the World Bank, its Executive Directors, or the countries they represent. 4 Trade and Transport Facilitation Assessment Table of Contents Executive summary ............................................................................................................................................................................................................ 6 1 Introduction ......................................................................................................................................................................................................... 11 2 Core logistics services ................................................................................................................................................................................. 14 2.1 Trade ............................................................................................................................................................................................................................. 15 2.2 Overall logistics performance in Lao PDR ....................................................................................................................................... 16 2.3 Regional institutional arrangements on trade facilitation and logistics ............................................................... 18 3 Supply chain analyses ................................................................................................................................................................................ 30 3.1 Methodology ......................................................................................................................................................................................................... 32 3.2 Coffee supply chain .......................................................................................................................................................................................... 35 3.3 Garments supply chain .................................................................................................................................................................................. 46 3.4 Fruit and vegetable supply chain ......................................................................................................................................................... 56 4 Trade finance ....................................................................................................................................................................................................... 65 5 Corridor performance analyses ........................................................................................................................................................ 68 5.1 Vientiane – Bangkok corridor .................................................................................................................................................................. 72 5.2 Savannakhet – Bangkok corridor .......................................................................................................................................................... 76 5.3 Pakse – Bangkok corridor ............................................................................................................................................................................ 79 5.4 Comparative assessment of corridor performance ............................................................................................................... 81 6 Conclusions for improving corridor and supply chain performance in Lao PDR ............................. 86 6.1 Regulations ............................................................................................................................................................................................................. 87 6.2 Infrastructure ......................................................................................................................................................................................................... 88 6.3 Logistics services ..............................................................................................................................................................................................