Regional overview: East Asia and Pacific
The East Asia and the Pacific region confirms its strong performance with its trade hubs Singapore and Hong Kong SAR ranking 1st and 3rd respectively, followed in the region by Japan (16th, up five) and New Zealand (18th, down four). All countries in the region have improved their scores, although some of them have slipped in the rankings, overtaken by faster improvers. The Mekong River area shows particular dynamism, with all four countries improving significantly their positioning: Thailand (63rd, up nine), Vietnam (73rd, up 14), Lao PDR (93rd, up seven) and Cambodia (98th, up four). Among the advanced economies in the region, the Republic of Korea climbs seven notches (27th) and overtakes Taiwan (China) (35th, down six). With a slight improvement in its score, land-locked Mongolia slips further down at 119th; making 118 ranks the gap between the best and the worst performer in the region.
Focus on selected economies in Asia and the Pacific region (in rank order)
Singapore remains the global leader on enabling trade, topping the ETI for the fifth consecutive edition. Singapore scores in the top 3 on five pillars. Its domestic market is one of the world’s most open, with 99.7 percent of goods entering duty free. Its border clearance processes rank as the best in the world, led by top marks for efficiency, predictability and transparency. Singapore Customs is world renowned for implementing the first single-window system three decades ago, but more recently has served as an example of best practice in the difficult mission of moving the institutional mindset from a regulatory to a more service-oriented, trade-facilitation focus. On the private sector side, Singapore ranks 3rd globally for its offer of transport services, and 2nd for its overall operating environment, with especially high marks for the efficiency and trust in public institutions. The only pillar where Singapore lags behind is on access to foreign markets, where its exports enjoy low tariff preferences relative to peers.
Hong Kong SAR ranks 3rd globally, trailing Singapore and the Netherlands. The territory comes in first place on the infrastructure pillar, with the best overall score for its transport infrastructure, and 2nd on the availability of transport services, reflecting the country’s role as a key player in global trade. Its border processes are rated as efficient by business, with especially high ranks for predictability. Border compliance is set to become even easier with the development of a full-fledged electronic single window allowing for around the clock submission of documents and real-time status tracking. Hong Kong’s overall operating climate also comes in as the global leader, driven by its role as a financial services hub and openness to foreign investment and workers. Its goods market is also the most open in the world, with all goods entering duty-free. However, its exports continue to face high trade barriers abroad.
Japan ranks 16th overall, retaining the third position in East Asia. As is this case with a number of its regional rivals, Japan performs very well on six of seven pillars, but continues to score poorly in terms of market access for its exports. Indeed, Japan comes in fourth from the bottom on this pillar, with its exports facing an average tariff level of 4.9% and very low preference margins. For its domestic market, Japan’s import duties are relatively low and close to 80% of goods enter duty free, although its tariff structure remains complex with over 750 distinct tariffs. Japan’s trade facilitation environment is overall very positive, receiving high marks for efficiency and transparency, though the time and cost for border compliance remains high compared to other advanced economies. Japan’s infrastructure receives excellent scores, especially in terms of transport infrastructure, a critical piece of the enabling trade equation.
Australia performs well, ranking 26th globally on the ETI, and as in previous editions, it has a particular strong performance across six of the seven pillars, with low scores only on the foreign market access front. Indeed, Australia’s domestic market is one of the most open, with low tariffs and a simple tariff structure, while its exports face some of the world’s highest tariffs and weakest preferences. In terms of border administration, the clearance process is seen as fairly efficient and predictable, although the cost of compliance, estimated at just over $600 per container, remains high. Similarly, on the export side, compliance is costly and time-intensive according to the World Bank estimates, which are based on meat exports that tend to require more careful oversight. In terms of infrastructure and the overall climate for business, Australia continues to perform well, notably coming in 2nd globally on the Government Online Service Index.
The Republic of Korea ranks 27th, moving up seven places. The economy performs extremely well on infrastructure (10th globally), led by strong port infrastructure and connectivity, as well as a strong uptake of internet by both government and the private sector. Similarly, Korea’s border administration remains one of Asia’s most efficient, with trade compliance requiring only an average of seven hours on the import side, although the cost remains a bottleneck. However, Korea retains fairly high tariff rates, including an average of over 60 percent for agricultural goods, the highest for countries covered by the ETI. Bringing in skills from aboard also remains difficult, as does overall compliance with government rules and regulations, despite the country’s leadership in rolling out e-government access.
China comes in at 61st, well ahead of the other BRICS, except South Africa (55th), but with significant variation across the ETI pillars. China’s transport infrastructure, especially in terms of air and port connectivity, scores overall very well (12th globally), although ICT connectivity lags somewhat behind. In terms of market access, China remains one of the most closed markets, with average applied tariffs of 11.1 percent. At the same time, its exports face relatively high tariffs of around 4.5 percent. In terms of trade facilitation, China performs fairly well according to business leaders, but the overall cost of compliance with trade procedures remains high (about $950 per container), especially for imports. Given China’s dominance as a trading power, it remains the most connected economy in terms of shipping, resulting in good scores on the availability of transport services (32nd).
Indonesia moves up four places in the rankings to 70th. The largest economy in the dynamic ASEAN region performs well on market access, especially in terms of the complexity of its tariff regime. Its exports continue to enjoy fairly low tariffs, although border compliance on the export side is an important bottleneck, taking an average of almost five days and costing over $500 per container. Import procedures remain burdensome as well, although Indonesia has seen some improvement in the predictability of these procedures, with upgrades of key functions of the Indonesia National Single Window. Infrastructure is also a barrier for trade given the country’s geography, but Indonesia ranks well in terms of its airport connectivity, though internet connectivity rates remain relatively low for the region.
Vietnam has improved significantly its capacity to enable trade and climbs 14 ranks in this year’s ETI, to 73rd. This is largely driven by improvements in border administration, with improved customs efficiency (now at 66th) and reduced times for documentary and border compliance for both importing and exporting (a reduction of approximately 30 total hours for both cases). These changes reflect recent efforts by the government to streamline procedures at the border and reduce the burden of inspections by multiple agencies, but the country has a long way to go and rise to international standards, ranking 86th (up 16) in this dimension. Vietnam has also improved access to its domestic market (74th, up four), increasing the share of goods imported free of duty (71 percent, up from 55 two years ago), but also the average tariff applied to dutiable imports (7.9 percent, from 6.8). Vietnam’s possibility to penetrate foreign markets has also improved, thanks to a lower average faced tariff (3.3 percent, down from 3.8) and increased margin of preference vis-à-vis other countries. Infrastructure performance has been uneven, with improvements in transport infrastructure (up 14, to 66th), including a significance advancement in maritime connectivity (19th, up eight), and a deterioration of services (down nine, to 60th). Operating environment has also been enhanced, thanks in particular to stronger protection of property rights and increased efficiency of public institutions.
Cambodia climbs four positions to 98th, on the back of improved market access (23rd, up 57). The country faces the lowest average tariff in the world (only 2.2 percent, down from an already low 2.7 percent in 2014) and enjoys a good margin of preference over other countries (13th), granting it the fifth-best foreign market access globally. Cambodia has also started to open its domestic market to foreign companies, as the share of duty-free imports has increased from 7.3 to 44.6 percent and the average applied tariff decreased from 13 to 9.1 percent. Yet, the benefits of improved market access will not accrue unless the country tackles the significant issues it faces in terms of trade facilitation: 132 hours are needed for documentary compliance when both importing and exporting (113th and 124th globally) and border procedures are inefficient (69th) and not transparent (116th), contributing to the high incidence of corruption (125th). This is not surprising in light of the government’s overall performance when it comes to providing online services to the population (134th). On the positive side, the ratification and implementation of the WTO Trade Facilitation Agreement will help address these issues in the future. Yet Cambodia’s reform efforts will need to be broad and far-reaching across a number of issues, including transport infrastructure (113th, down nine) and services (87th, up 12) and the overall operating environment (94th, down 22), especially when it comes to enforcing contracts (134th) and protecting property (118th).