Boosting regional growth through global trade

1 October 2013
ITC News
Helping developing and least developed countries to better access global markets by improving logistics.

As the world’s largest logistics company, DHL connects suppliers with consumers around the globe. Business experience has demonstrated the importance of this linkage for economic growth, especially in emerging markets. But how can developing and least developed countries gain access to global value chains? What are the necessary conditions that let them profit from them? And once the countries connect to those value chains, what are the consequences for the future of global trade?

Transport and logistics are key competitive advantages and the central enabler of international commerce because they involve everything from transport to warehouse management and customs, to security and insurance. As a consequence, the efficiency of logistics activities determines how well individual companies and, therefore, entire economies compete on the world stage. The results of the 2012 DHL Global Connectedness Index clearly show that the logistics performance of a country is a significant predictor of how intensely the country trades with the rest of the world, the so-called ‘trade depth’: an increase in trade depth leads to an increase in the level of a country’s prosperity.

The importance of the role of trade in the economic development of a country is evident in countries such as Viet Nam. From 1989 to 2011, gross domestic product (GDP) per capita increased from US$ 94 to US$ 1,400. This positive change was driven mainly by the liberalization of trade policies, such as the lifting of restrictions on the commodities that firms are allowed to export, as well as the elimination of import quotas. The entry into a series of multilateral trade accords, such as with the Association of Southeast Asian Nations, and stronger cooperation with the World Trade Organization are important factors that contributed to Viet Nam’s economic growth and helped it to attract foreign investment.

But to drive economic development through trade, countries need efficient logistics, which depend on government services, policies and investment. Building reliable infrastructure, developing a regulatory regime for transport services, and designing and implementing efficient customs-clearance procedures are areas in which governments play an important role. National governments can facilitate trade through investment in both hard infrastructure, such as bridges, roads and communications, and soft infrastructure, such as laws, the financial system, health care and social welfare. Implementing strategic and sustained interventions, mobilizing actors across traditional sectors and involving the private sector are steps that help countries improve their logistics performance. Government prioritization of investment and the safeguard of collaboration across countries result in lower costs and more efficient global supply chains, which benefit consumers.

The future looks promising: As multinational corporations continue to expand their international production networks, developing and least developed countries have unprecedented opportunities to link to, and benefit from, the global trading system. Today, new forms of multilateral cooperation with a broader scope could help developing and least developed countries to better connect to logistics value chains.