Friday, February 1, 2013

Lack of Transport Infrastructure a Growth Obstacle: Report

Deficiency in transport and communications infrastructure is one of several supply chain barriers that act as obstacles for speeding up global economic growth, according to a recently released report by the World Economic Forum.

The report, entitled “Enabling Trade: Valuing Growth Opportunities,” was prepared by the World Economic Forum in collaboration with Bain & Co. a Boston-based global management consulting firm.
The report was made public Jan. 23 at the opening of the 11th annual World Economic Forum in Davos, Switzerland. The forum is a gathering of the world’s political and business leadership.

The report highlights a variety of identified supply chain barriers – ranging from poor physical and technical infrastructure to border controls, customs paperwork, lack of coordination between national agencies and regulations favoring local products over imported ones.

“This report makes clear that transportation infrastructure investment can have a very positive and immediate impact on trade growth and economic and social development, particularly in emerging market areas,” noted APM Terminals CEO Kim Fejfer, who took part in the forum, which was held Jan. 23 to 27.

AP Moller-Maersk, the parent company of APM Terminals, is an active participant in the World Economic Forum group that prepared the report.

The WEF study estimates that global trade would increase by an estimated $1.6 trillion, or 15 percent, while global GDP would rise by $2.6 trillion, or roughly five percent, if every country improved two key supply chain barriers just halfway to the world’s best practices: improving inadequate infrastructure and adopting modern communications technology such as electronic freight releases, and by streamlining and simplifying border administration procedures.

“Addressing infrastructure requirements to facilitate global market access is a relatively straightforward process when strong local partnerships can be forged,” Fejfer said. “We share a common interest in creating modern port and inland transportation facilities so local communities can benefit from trade-driven development.”

The study’s authors examined the effects of trade barriers by contacting about 90 internationally active companies representing combined annual revenue of $800 billion. Of these companies, 35 provided input, with 21 of these participating in preparing 18 case studies representative of major industries, barriers and supply chain functions.

The telecom and transport infrastructure components were defined by the report’s authors as the availability and quality of transport infrastructure; the availability and quality of transport services; and the availability and use of information and communication technologies.

Increased operational costs, increased demands on investment and working capital, and cargo delivery delays were found to be the consequences of inadequate infrastructure, discouraging individual company trade growth and participation.

The report’s executive summary can be read or downloaded at: