Think Railways

The gap between the countries that perform best and worst in trade logistics is still quite large, despite a slow convergence since 2007, according to a new World Bank Group Logistics Performance Index (LPI) Report 2014. This gap persists because of the complexity of logistics-related reforms and investment in developing countries, and despite the almost universal recognition that poor supply-chain efficiency is the main barrier to trade integration in the modern world.

Connecting to Compete 2014: Trade Logistics in the Global Economy report ranks 160 countries on a number of dimensions of trade -- including customs performance, infrastructure quality, and timeliness of shipments -- that have increasingly been recognized as important to development. The data comes from a survey of more than 1,000 logistics professionals. The World Bank Group’s International Trade Unit has produced the Logistics Performance Index (LPI) about every two years since 2007.

“The LPI is trying to capture a rather complex reality: attributes of the supply chain,” said Jean-François Arvis, Senior Transport Economist and the founder of the LPI project. “In countries with high logistics costs, it is often not the distance between trading partners, but reliability of the supply chain that is the most important contributor to those costs.”

In the 2014 LPI report, Germany showed the world’s best overall logistics performance. Somalia had the lowest score. As with previous editions, the 2014 report finds that high-income countries dominate the world’s top-ten performers. Among low-income countries, Malawi, Kenya, and Rwanda showed the highest performance. In general, the trend across past reports has been that countries are improving and low-performing countries are improving their overall scores faster than high-performing countries.

The 2014 report finds that low-income, middle-income, and high-income countries will need to take different strategies to improve their standings in logistics performance. In low-income countries, the biggest gains typically come from improvements to infrastructure and basic border management. This might mean reforming a customs agency, but, increasingly, it means improving efficiency in other agencies present at the border, including those responsible for sanitary and phyto-sanitary controls. Often, multiple approaches are required.

“You can’t just do infrastructure without addressing border management issues,” Arvis said. “It’s difficult to get everything right. The projects are more complicated, with many stakeholders, and there is no more low-hanging fruit.”

Middle-income countries, by contrast, usually have fairly well-functioning infrastructure and border control. They generally see the biggest gains from improving logistics services, and particularly outsourcing specialized functions, such as transportation, freight-forwarding, and warehousing.

In high-income countries, there is a growing awareness of – and a demand for – “green logistics,” or logistics services that are environmentally friendly. In 2014, about 37 percent of LPI survey respondents shipping to OECD countries recognized a demand for environmentally friendly logistics solutions, compared with just 10 percent of those shipping to low-income destinations.

Selection of countries from the report	Overall LPI
Country	Score	Rank
Germany	4.10	3
Austria	4.06	5
Greece	3.36	29
China	3.32	30
Turkey	3.15	34
Hungary	3.15	35
Slovenia	3.14	37
Czech Republic	3.13	38
Poland	3.04	40
Latvia	3.02	42
Estonia	2.95	47
Slovak Republic	2.92	50
Romania	2.91	51
Bulgaria	2.87	55
Lithuania	2.78	58
Croatia	2.71	63
Ukraine	2.55	73
Belarus	2.53	74
Iran	2.51	78
Bosnia and Herzegovina	2.46	88
Macedonia	2.43	90
Russian Federation	2.37	99
Kyrgyz Republic	2.35	103
Moldova	2.31	106
Bolivia	2.31	107
Azerbaijan	2.29	111
SerbiaMontenegro	2.28	115
Uzbekistan	2.16	129
Armenia	2.14	131
Kazakhstan	2.12	133
Albania	2.08	139
Tajikistan	1.93	146

The report is available at this link