Improving Competitiveness of the GMS in e-Trade Facilitation: What needs to be done?

Session II: Enhancing Competitiveness on Sustainable Sourcing and Tracing of Agri food Products in the GMS Agri-food

Dr. Somnuk Keretho Director, Institute for Di ecto Instit te fo IT Inno ation Innovation Kasetsart University, Thailand The Eighth Meeting of the Working Group on Agriculture (WGA-8) 25-26 October 2011, Siem Reap, Cambodia

Objectives of this presentation

1. Propose a recommended framework and methodology* to help us thinking on what needs to be done? (towards improving the GMS trade competitiveness through applying ICT for trade and trade facilitation of agri-food products) p 2. Present a draft outcome of the first step of this framework (a conceptual proposal on what needs to be done as an initial concept paper for discussion and refinement; and for a decision to go on or not or on which directions not, hich but not necessary the final commitment).
This discussion is about scoping for the next step of a further detailed feasibility study and high-level master plan development, then using it for again further refinement, decisions, and perhaps funding and commitment commitment.
* Referring to a SWIF framework, this presentation is based on a draft Managers Guide for Single Window Planning and Implementation, in which a global training will be conducted in December 2011, Geneva.
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and basic requirements?

Vision: Improving Trade Competitiveness in GMS through trade and trade facilitation of agri-food products agri food
1. 2. 2 3. 4. 5. 6. 7. 8. 9.
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What is our Vision

Producing and exporting agri-food products Sustaining for S t i i f smallholder f llh ld farmers ( (pro-poor) ) Reaching GMS intra-region and global markets (demand-driven) Meeting consumers-required standards and quality assurance Applying green energy and climate-friendly good practices Supporting foods traceability Involving cross-border supply chain thru the economic corridors Using regional and PPP collaboration approach Building upon the AINS with e-Trade, e-Trade Facilitation, etc. e Trade, e Trade Applying ICT as enabling tools to realize the above visions
The 8th Meeting of the GMS-Working Group on Agriculture, 25-26 October 2011, Siem Reap, Cambodia Dr. Somnuk Keretho

Why we need a systematic framework to implement our Vision? p

GMS Trade Competitiveness Vision
e.g. e g 5% GDP increasing through exporting agri food products by 2015 agri-food
Therere so many complicated challenges to transform our Vision into Reality.

Packaging Harvesting Product Quality Awareness Market access Complicated Logistics & Traceability Supply-side Capability Export Procedures p Many Stakeholders M St k h ld Business Model Post-Harvesting
Conflict of Interest est e t Investment Complicated Standards Funding Capacity Building

Laws and Regulations

Complex Importing Procedures I ti P d

People and Business In-Readiness Inadequacy in Technology Infrastructure Barriers in Interoperability

Regional Harmonization C Compliance li Many different ICT systems Governance

Change Management

Reality
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The 8th Meeting of the GMS-Working Group on Agriculture, 25-26 October 2011, Siem Reap, Cambodia

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We need a commonly-agreed Architecture for managing and migrating the vision into reality WGA needs to agree on a holistic & integrated architecture to support policy managers and stakeholders in their decision decisionmaking, management and implementation of the vision. Scoping the vision ( h possible, with quantitative goals) (where ibl ith tit ti l ) With pictures, systematically decomposing our challenges into smaller subcomponents, along with their relationships subcomponents and related governing rules (e.g. who is in charge). Developing several levels of pictures, so called blueprints, appropriate for different viewpoints describing both the As-Is architecture and the To-Be (future) architecture From the To Be architecture we can effectively develop To-Be architecture, the high-level master plan and then the detailed action plans,... then implementing and overseeing those plans
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A High-level Architecture (critical success components)

for the GMS smallholder farmers to export agri-food Products to the World Market

GMS Trade Competitiveness Vision

e.g. 5% GDP increasing through exporting agri-food products by 2015
Systematically decomposing our challenges into smaller and easier manageable components

Complicated Standards Conflict of Interest3. 7-P collaboration & sound business model and Regulations Capacity Building Laws Market access P-auditors, P-freight, P-public, P-regional platform) (small P-farmers, larger P-cooperatives, P-financial, Investment Regional Connectivity Compliance People and B i P l d Trade and 4.Business Transport Facilitation (TTF) Enhancement Many different ICT systems Governance In-Readiness (improving TTF and engaging with freight forwarders, other logistics providers, and regulatory agencies) Inadequacy in Technology Infrastructure Change Management g g 5. 5 New business process enabling with new technology
(Improving product packaging and value-added manufacturing etc., and implementing farm management IT systems with traceability and connecting with regulatory Single Window system(s) A. Understand the As-Is conditions of the above components
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1. Demand-driven strategy (gradually meeting the requirements of domestic, intra region, then global markets) Post-Harvesting Packaging Post domestic intra-region Harvesting Harvesting Awareness Logistics & Traceability 2. Contract-farming management Complicated Supply-side Capability (involving smallholder farmers) Export Procedures Many Stakeholders y Business Model

Barriers in Interoperability

Reality

B. Define the To-Be (better, faster, more profitable) conditions of the above components
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Supply Chain Management ( (7-P collaboration) )

In country
Distribution

Market

Export

Importing p g Country

Freight/Logistics 5. Company
Information

6. Public Sector
ADB & Regional 7. Platform Technology and Quality Auditor
Tec chnology and d Know wledge transf fer

3. Financial Sector
Financial loan to build farm

2.Cooperatives or Company
Tec chnology and Know wledge transfe er Sell organic p products back k S Sell suppliers a and feedback k

Knowledge transfer

4.

1. Farmers

Quality Auditing and Certifying and technology transfer

Ref: Modifying from Dr. Pornsris CP presentation: during Asia-Pacific Trade Facilitation Forum, Korea, October 2011
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a case example

Small farmers through co-op exporting bananas to Japanese Markets with a barcode traceability system p y y
70-75% banana maturity t it for post harvesting at the farms

Ready for truck transportation and exporting to Japan by ships Traceability information, e.g. each banana package coming from which farm, is available on the internet for Japanese consumers to access and check check.

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The 8th Meeting of the GMS-Working Group on Agriculture, 25-26 October 2011, Siem Reap, Cambodia

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Proposed Management Actions

1. In this meeting, review and refine the proposed conceptual architecture e g refining the scope, critical success components and e.g. scope components,
the proposed conceptual project roadmap (slides 3, 6, 7, 9, 10-13)

2. After this meeting, conduct a further detailed study including g y g the as-is conditions and proposed To-Be architecture, highlevel master plans and/or action plans for the next 4-5 years 3. In the next meeting, collaboratively review and refine the proposed architecture and plans, and secure the political will and necessary resources & funding 4. Then, implementing, monitoring and controlling the plans iteratively, e.g. iteratively e g starting with a complete cycle pilot project(s) complete-cycle project(s),
then extending to more number of participants and extending to cover more products, etc.

5. Collecting lessons learned, and improving in each iteration

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Conceptual Project Roadmap

Objectives: Step-by-step transition for GMS smallholder farmers to export Quality Agri-Food Products to the World Market What we needs to do: 1st Stage (Beginning): Capacity building for farmers & farm groups, and starting cross-border supply-chain pilot project(s) with one common strategic product and limited number of stakeholders within GMS, e.g. quality rice or organic rice.
Demand-driven: Find the market first, then understand and start to gradually g y meet the importing countrys requirements,
for example, no chemical usage at least 3 years consecutively to export organic rice to EU, so starting the day 1 by stopping any chemical usage in the rice fields, using seeds without insecticides, adopting GAP, then the 1st year we should reach the local markets and/or within GMS,

Contract farming & sound business models: better management for harvesting/production, collection, processing, logistics, etc. New business process and information systems: developing Farmer Management Information Systems with crop management, packaging, S stems ith management packaging traceability with barcodes, trade/transport facilitation e-documents,
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A lot of opportunities for improvement

Trade Facilitation Supply Trade
Exporter & Freight Transport Providers Regulatory Gov Agencies Regulatory Gov Agencies Importer & I t Freight Transport Providers

Trade
Buyer Importer

Demand Demand Market

Harvesting Seller & value added Exporter manufacturing

across a dry border or across the ocean E-Trade Improving with productions traceability to meet the requirements of the demand Market & applying ICT for Harvesting and Traceability
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E-Trade Improving ICT Single Window at the exporting country, e.g. paperless customs, l e-permit, e-SPS, Meeting ICT C e-document requirements of the importing country, e.g. paperless customs of Thailand, and ICS of EU d f EUs, Understand and meet the buyers requirements

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Conceptual Project Roadmap (cont)

2nd Stage (Extending): Extending the pilot project to involve more farmers and business participants, and cover more agri-food products p p , g p
Promoting Good Agriculture Practices (GAP) starting with the countrys defined certification requirements, and/or if possible other more simplified regional or international standards and/or using climate-friendly fertilizers standards, climate friendly fertilizers, Harmonizing acceptable quality requirements within GMS countries Establishing Agri-food products Business Associations within GMS countries Identifying and implementing for more strategic products, e.g.
Cambodia: rice, soybean Lao PDR: rice, papaya, cabbage p p y g Myanmar: rice, tomato PRC: rice, strawberry Thailand: jasmine rice, sweet corns j , Vietnam: rice, dragon fruits

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Having appropriate schema for handling lower quality agri products, e.g. with dried preserved & canned processing start practicing GMP dried, processing, GMP Further enhancing/developing IT systems to support the above
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Conceptual Project Roadmap (cont)

3rd Stage (Popularizing): Popularizing the projects to cover other agrifood products and with more numbers of farmers and business participants, involving with more strict/global requirements
Promoting International good agriculture practices, and certification requirements, e.g. requirements e g EU markets NOP (US markets) Global GAP markets, markets), Fostering Business Associations within GMS countries Further improving management for production, collection, processing, g g g logistics, etc. Proving hand-on capacity building and training

4th St Stage (R (Reaching Gl b l Markets): M ti th requirements of global hi Global M k t ) Meeting the i t f l b l markets, e.g. EU markets and US markets organic requirements, and obtaining the necessary certifications.
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Fulfilling the global standard requirements, Obtaining the world-recognized quality certifications Exporting more t the global markets E ti to th l b l k t Maintaining the quality, etc.
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Transforming AINS into e-Trade and e-Trade Facilitation Platform

Objectives: ICT supporting systems enabling smallholder farmers to export agri food agri-food products to the World Market Expected Functions: Member systems (farmers, farm groups/cooperatives, freight forwarders,) Harvest Management for farmers and cooperatives, e.g. crop/areas identification/tags and crop management, auditing & certification information, Post-Harvesting: packaging information, farms and logistics tracking and traceability with barcodes barcodes, E-Trade: demand-side information access (e.g. to Alibabas rice trade pp y) product information, order submission, order fulfillment, opportunity), p banking interface for e-payment, E-Trade Facilitation/e-Logistics: import/export procedures and document management, management connectivity with national (export) Single Windows and Windows, (import) Single Window or ICS (Importing Customs System)..
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for transforming GMS Vision into Reality, and transforming AINS into e-Trade Platform
(used in the conceptual analysis, used in the detailed study analysis, used in formulating the plan(s), and also for managing and overseeing the project execution)

An Architecture Development Methodology

Obtain Political Will Agree on the vision & scope

Preliminary

Propose next improvement(s) Collect lessons learned Ensure business continuity & security
H Architecture Change Management A Architecture Vision

Establish service level agreement G Oversee the Implementation p Governance deployment Monitor the phasing F Implementation Migration

Requirements Management

Mandate SW implementation Establish co-stakeholder platform Appoint SW task force B Conduct Business Business Architecture Process Analysis Create awareness C Information Provide training
Systems Architecture

Simplify documents with data harmonization

Agree upon Application Architecture

E Planning Migration planning Opportunities Layout ICT infrastructure and Conduct financial Solutions Enact e Transaction laws e-Transaction d l d model study Establish standards for Interoperability
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D Technology Architecture

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Conclusion
This presentation proposes 1. a recommended architecture approach to help us systematically thinking on how to analyze, plan, manage and i l d implement our vision(s) t i i ( ) 2. an initial concept and a conceptual roadmap on what needs t b d d to be done f f th refinement and decisions for further fi t dd i i

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Conclusion
Recommend some points for further discussion & refinement
Clarify the vision and scope (slide 3) Discuss critical success components (slide 6, 14),
e.g. will, models, management, e g political will business models stakeholder management funding and resources, capacity building, readiness, .

Discuss conceptual project roadmap (slide 10-13) and some key features within each stage Discuss the scope and deliverables of a detailed study to be
conducted to propose a more concrete To-Be architecture of all those key components and refined roadmaps for the next 4 years, and propose detailed functional requirements of the extended AINS e-trade/e-trade facilitation platform, etc..

Discuss other concerns, e.g. what should be the scope of a pilot project, etc

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References
Eveline van Stijn, Thayanan Phuaphanthong, Somnuk Keretho, Markus Pikart, Wout Hofman, and Yao-Hua Tan, Single Window Implementation Framework , , g p (SWIF), Free University Amsterdam, Kasetsart University, Bangkok, UNECE and published as an EU-supported ITAIDE D5.0:4b deliverable. Eveline van Stijn Thayanan Phuaphanthong Somnuk Keretho Markus Pikart Stijn, Phuaphanthong, Keretho, Pikart, Wout Hofman, and Yao-Hua Tan, An Implementation Framework for e-Solutions for Trade Facilitation, in the book Accelerating Global Supply Chains with IT Innovation, Innovation, Springer, 2011. Thayanan Phuaphanthong, Tung Bui, and Somnuk Keretho, Harnessing Interagency Collaboration in Inter-organizational Systems Development: Lessons Learned from an E government Project for Trade and E-government Transport Facilitation, International Journal of Electronic Government Research (IJEGR), Vol. 6, No. 3, July-September 2010. S Somnuk Keretho, (d f ) Managers Guide f S l Window Planning and k h (draft) G d for Single d l d Implementation October 2011, to be published as an UNNExT guide and a global training will be conducted in December 2011, Geneva http://www.unece.org/tradewelcome/capacity-building-for-trade-facilitation/globalhtt // /t d l / it b ildi f t d f ilit ti / l b l trade-facilitation-conference/workshop-programme.html
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Thank you. you

Dear friend, I pray that you may enjoy good health and th t D fi d th t j d h lth d that all may go well with you, even as your soul is getting along well.
3 John 2 [The Holy Bible].

Dr. Somnuk Keretho Director, Institute f IT I Di t I tit t for Innovation ti Kasetsart University k@k i sk@ku-inova.org

Trade Logistics 3 Kinds of Flow

Seller (Exporter)

Physical Goods

Buyer (Importer)

Payment

Information/Documents
Customs Other-Government-Agencies g

Ship Agent Transport-Operators Freight Forwarders Terminal-Operator Banks

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Carriers

Cargo Insurance
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Documents needed to Export Rice (from Thailand)

(from purchase order until the cargo container leaving the sea port) 36 Documents involving 15 parties, and more than 700 data elements
1. 2. 3. 4. 5. 6. 7. 8. 8 9. 10. 11. 12. 13. 14. 15. 16. 17. 18 18. 19. 20.
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Proforma Invoice (35) Purchase Order (39) Commercial Invoice (50) Application for Letter of Credit (24) Letter of Credit (32) Packing List (25) Cargo Insurance Application Form (20) Cover Note (23) Insurance Policy (24) Booking Request Form Border Crossing (24) Booking Confirmation Border Crossing (31) Booking Request Form Inland Transport (16) Booking Confirmation Inland Transport (18) Bill of Lading (40) Empty Container Movement Request (TKT 305) (19) Request for Port Entry (TKT 308.2) (27) Equipment Interchange Report (EIR) (24) Container Loading List (18) Container List Message (32) Outward Container List (34)

21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 30 31. 32. 33. 34. 35. 36.

Master Sea Cargo Manifest(17) g ( ) House Sea Cargo Manifest (37) Export Declaration (75,39) Good Transition Control List (22,3) Application for Permission to Export Rice (KP. 2) Sales Report (KP 3) (21) Application for the Collection of the Permit for the Export of Rice (A. 3) ( ) Permit for the Export of Rice (A. 4) (32) Application for Certificate of Standards of Product (MS. 13/1) (44) Certificate of Analysis (17) Certificate of Product Standards (MS. 24/1) (45) Certificate of Fumigation (21) Application for Phytosanitary Certificate (PQ. 7) (29) pp y y ( )( ) Phytosanitary Certificate (34) Application for Certificate of Origin Certificate of Origin (38)

* Number in parenthesis is the no. of data elements

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Conduct Business Process Analysis - Exporting Jasmine Rice from Thailand Day
20 16 15
3 days

Time-Procedure Chart
4 days 1 day 13 14 1 day 11 12

10
2 days 6 5 7

1 day 8

10

5
2 days

2 days 2 1

3 days 3

10

11

12

13

14 Process

1. Buy - Conclude sales contract and trade terms 2. Obtain export permit 3. Arrange transport 4. Arrange the inspection and fumigation 5. Obtain cargo insurance 6. Provide customs declaration 7. Collect empty container(s) from yard
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8. Stuff container(s) 9. Transfer to port of departure 10. Clear goods through customs 11. Handle container at terminal and stow on vessel 12. Prepare documents required by importer 13. Verify the accuracy/authenticity of exported cargo 14. Pay - Claim payment of goods
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A lot of opportunities to improve export/import procedures and documents requirements to improve GMS trade competitiveness

Indicators Documents to export (number) Time to export ( y ) p (days) Cost to export (US$ per container)

Lao PDR 9 44 1,880

Cambodia 9 22 732

Thailand 4 14 625

Reference - World Banks Doing Business Trading Across Border (24 Oct 2011) www.doingbusiness.org The costs and procedures involved in exporting (and importing) a standardized shipment of goods are studied. Every official procedure involved is recorded - starting from the final contractual agreement between the two parties, and ending with the delivery of the goods.

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Time & Documents needed for export a standardized cargo*

4 documents needed 9 documents needed

* More documents will be needed for agriculture or dangerous goods.

Reference - World Banks Doing Business Trading Across Border (24 Oct 2011) www.doingbusiness.org

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through reform, and applying IT for Paperless Customs and Thailand Nation Single Window

Measurement on Impacts of Trade Facilitation Improvement

Transaction Cost reduction from 848 to 625 (~220 USD) per container ( 3 5 million TEU per year) = 770 Milli (x 3.5 illi ) Million USD t transaction cost reduction per year ti t d ti
By World Bank www.doingbusiness.org Feb 2009
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