Trade Facilitation:

Trade facilitation is defined by UNECE as “the simplification,

standardization and harmonization of procedures and associated

information flows required to move goods from seller to buyer and

to make payment”.

Trade Facilitation aims at easing the trade

among the countries through decreasing the burden of procedures

and trade costs. Firms face various costs when trading internationally including export and

import procedures, customs formalities, transportation and logistics problems that trade costs.

WTO notes that trade costs can reach 134 per cent ad valorem tariff equivalent on a product in

high-income countries whereas they can be 219 per cent tariff equivalent in developing

countries.

Studies, such as WTO (2004) and De (2009) suggest that higher transport costs is in many cases

more restrictive to trade than high tariffs. Various studies have been conducted to measure the

impact of transport constraints on international trade. For example, based on their research on

Middle East and North Africa (MENA) region, Bhattacharya and Hirut (2010) suggest that

reducing the transport constraint from the average in the region to the world average could have

a significant impact on trade volumes, raising exports by 9.5 percent and imports by 11.5

percent, while all other determinants are constant (ceteris paribus).

There are several indices or reports developed by the international institutions to identify the

bottlenecks in countries which hinder international trade. The World Bank Doing Business

Report is one of these reports. World Bank introduced a new methodology for measuring ease

of trading across borders in 2015. Trading across borders, measures the time and cost

(excluding tariffs) for documentary compliance and border compliance within the overall

process of exporting and importing a shipment of goods.

The distance to frontier (DTF) score

shows how far on average an economy is from the best performance achieved by any economy

on Trading Across Borders indicator. Figure 51 below shows the DTF scores for OIC compared

to other regions. OECD high income countries are very close to the frontier while OIC countries

are slightly above 50 per cent. This underlies the importance of policies to facilitate trade in the

OIC countries.

Figure 51: Comparative DTF Scores

Source: Authors’ calculation based on WB Doing Business data

For detailed information on the methodology please visit World Bank

100

Distance to frontier score

Trading Across Borders - Distance to Frontier

Middle East & North Africa

OECD high income

Sub-Saharan Africa

OIC Average

“Trade Costs are

higher in Landlocked

Member States”