World Economic Forum (WEF) Issues Global Enabling Trade Report 2012 – Malaysia’s Ranking Improves by 6 Positions to 24th Among 132 Countries.
24 May 2012 11:38 AM

1. The Geneva based non-profit foundation, World Economic Forum, today released the fourth edition of its Global Enabling Trade Report 2012entitled “Reducing Supply Chain Barriers”. The report measures the extent to which individual economies have developed institutions, policies and services facilitating free flow of goods over borders to destinations. A total of 132 countries were surveyed for the 2012 Report compared to 125 in 2010.

2. In this report, Malaysia strengthens its overall enabling trade performance by 6 positions and moves up to 24 th position out of 132 economies (2010: 30 out of 125 economies). This ranking places Malaysia among the top 20% of global trade enabled economies.

3. Among Asia Pacific countries, Malaysia improved two positions, ranking 6 th among 21 Asia Pacific countries, ahead of Taiwan (7 th ) and Korea (8 th ). The top 10 most trade enabled economies are Singapore, Hong Kong, Denmark, Sweden, New Zealand, Finland, Netherlands, Switzerland, Canada and Luxembourg.

4. The findings of the WEF Report are based on an analysis of 4 enablers of trade:

   • Business Environment

   • Market Access
   • Border Administration
   • Transport and Communications Infrastructure.

5. Malaysia registered the biggest improvement in the Business Environment category, achieving an improved ranking of 21 positions to 30 th from 51 st position in 2010. This is attributed to improvements in efficiency of the financial market (8 th ), the strong business impact of rules (11 th ), strong domestic competition (13 th ) and solid property rights (24 th ).

6. Malaysia continues to rank high in the category of Transport and Communications Infrastructure (20 th ). This is attributed to the availability and quality of transport infrastructure (12 th ) and services (10 th ), transshipment connectivity (13 th ), the quality of port infrastructure (15 th ) as well as liner shipping connectivity index (7 th ). It is notable that Malaysia is the benchmark country in this category, ranking 1 st for indicators on cost of imports and exports. The Report noted that the cost of imports and exports for Malaysia is the lowest among 132 countries.

7. The Report not only measures the abilities of economies to enable trade, but also highlights strengths and areas where improvements are most needed. Areas of concern identified are:
   

   • Efficiency of Customs Administration (47 th)

   • Physical Security (46 th )
   • Transparency of Border Administration (42 nd )
   • Availability and Use of ICTs (37 th ).

8. Malaysia's improved ranking in this WEF Report reflects the impact of the measures the Government has undertaken over the last two years to improve the competitiveness of the Malaysian economy. These wide ranging measures include improvements in the delivery and efficiency of public services, and increased transparency and accountability.

9. The Government welcomes these findings of the WEF Report, and will continue with the transformation programme to make Malaysia one of the most competitive nations in the world.

Minister's Office
Ministry of International Trade and Industry
Kuala Lumpur, Malaysia
23 May 2012

THE ENABLING TRADE INDEX

The Enabling Trade Index (ETI) was developed within the context of the World Economic Forum's Transportation Industry Partnership program, and was first published in The Global Enabling Trade Report 2008. A number of Data Partners have collaborated in this effort: the Global Express Association (GEA), the International Air Transport Association (IATA), the International Trade Centre (ITC), the United Nations Conference on Trade and Development (UNCTAD), The World Bank, the World Customs Organization (WCO), and the WTO. We have also received significant input from companies that are part of this industry partnership program, namely Agility, Brightstar, Deutsche Post DHL, DNB Bank ASA, FedEx Corp., A.P. Möller Maersk, the Panama Canal Authority, Stena AB, Swiss International Air Lines, Transnet, UPS, Volkswagen, and AB Volvo.

The ETI measures the extent to which individual economies have developed institutions, policies, and services facilitating the free flow of goods over borders and to destination. 2 The structure of the Index reflects the main enablers of trade, breaking them into four overall issue areas, captured in the subindexes:

Each of these four subindexes is composed in turn of a number of pillars of enabling trade, of which there are nine in all. These are:

The domestic and foreign market access pillar measures the level of protection of a country's markets, the quality of its trade regime, and the level of protection that a country's exporters face in their target markets.

The measures taken into account include average applied tariffs but also the share of goods imported duty-free, the variance of tariffs, the frequency of tariff peaks, the number of distinct tariffs, and the like. Protection in foreign markets is captured by tariffs faced, but also the margin of preference in target markets negotiated through bilateral or regional agreements or granted in the form of trade preferences such as the Everything but Arms (EBA) program.

The efficiency of customs administration pillar measures the efficiency of customs procedures as perceived by the private sector, as well as the extent of services provided by customs authorities and related agencies.

Figure 1: Composition of the four subindexes of the ETI

 The efficiency of import-export procedures pillar extends beyond customs administration and assesses the effectiveness and efficiency of clearance processes by customs as well as related border control agencies, the number of days and documents required to import and export goods, and the total official cost associated with importing as well as exporting, excluding tariffs and trade taxes.

Given the significant hindrance that corruption can provide in trade, the transparency of border administration pillar assesses the pervasiveness of undocumented extra payments or bribes connected with imports and exports, as well as the overall perceived degree of corruption in each country.

The availability and quality of transport infrastructure pillar measures the state of transport infrastructure across all modes of transport in each country, as demonstrated by the density of airports and the percentage of paved roads as well as the extent of transshipment connections available to shippers from each country. Also captured is the quality of all types of transport infrastructure, including air, rail, roads, and ports.

The availability and quality of transport services pillar complements the assessment of infrastructure by taking into account the amount and the quality of services available for shipment, including the quantity of services provided by liner companies, the ability to track and trace international shipments, the timeliness of shipments in reaching destination, general postal efficiency, and the overall competence of the local logistics industry (e.g., transport operators, customs brokers). This pillar also takes into account the degree of openness of the transport-related sectors as measured by countries' commitments to the General Agreement on Trade in Services (GATS).

Given the increasing importance of information and communication technologies (ICTs) for the management of shipments, as well as the central role these technologies play in facilitating customs clearance and communication, the availability and use of ICTs pillar includes the penetration rates of these tools— including mobile phones, Internet, and broadband—in each country. We add measures of the perceived use of Internet by business for buying and selling goods and an index of the online readiness of government services.

The regulatory environment pillar captures the extent to which the country's regulatory environment is conducive to trade. Included are indicators that capture the general quality of governance, but also indicators concerned with openness to foreign participation, which covers the ease of hiring foreign labor in the country (important for companies moving goods across borders), the extent to which the policy environment encourages foreign direct investment, the availability of trade finance, and an index of multilateral treaties signed by the country pertaining to trade.

The security environment is of great importance for ensuring the delivery of goods to destination without major frictions. In this context, the physical security pillar specifically gauges country-level violence (both in terms of general crime and violence as well as the threat of terrorism), as well as the reliability of the police services in enforcing law and order.

Each of these pillars is made up of a number of individual variables. The dataset includes both hard data and survey data from the World Economic Forum's Executive Opinion Survey (the Survey). The hard data were obtained from publicly available sources and international organizations active in the area of trade (such as IATA, the ITC, ITU, UNCTAD, the UN, and the World Bank). The Survey is carried out annually by the World Economic Forum in all economies covered by our research. It captures the views of top business executives on the business environment and provides unique data on many qualitative aspects of the broader business environment, including a number of specific issues related to trade. For detailed descriptions of all the indicators included, please see the Technical Notes and Sources at the end of this Report.

The nine pillars are grouped into the four subindexes described above, as shown in Figure 1, and the overall score for each country is derived as an unweighted average of the subindexes.

As econometric tests of the ETI 2009 demonstrated, the ETI has explanatory power with respect to a country's trade performance. The analysis has shown that a 1 percent increase in the ETI score in the exporting country is associated with an increase of 1.7 percent in that country's exports. This effect is even higher with respect to the importing country: the model predicts that a 1 percent improvement in the ETI score would lead to a 2.3 percent rise in imports. Taken together, these two effects predict that a 1 percent increase in the average ETI score of any given country pair would be associated with a 4 percent increase in bilateral trade, all else being equal.

CHANGES TO THE INDEX METHODOLOGY

 The Index methodology has undergone only minor changes this year, which do not inhibit the ability to compare the 2012 results with the 2010 results. In the first pillar, the indicator on non-tariff measures (1.02) has been removed from the Index calculation. As indicated in the 2010 edition of the Report, the ITC is currently expending considerable effort to collect up-to-date and comparable information about the incidence of non-tariff measures across countries. To date, these data are available for only approximately 61 countries, a country coverage that is too small to include these data. Although the indicator has been dropped in this year's edition, we will re-instate it once the data coverage is expanded to a larger number of countries. Appendix B reports the data for 2010 without the non-tariff measure indicator, to highlight the impact of removing this variable on the results. Box 2 analyzes the importance of nontariff measures.

In pillar 8, an indicator assessing access to trade finance, based on results from the Survey, has been added. At the same time, the variable measuring the extent of capital controls has been removed, as it has been dropped from the Survey. And finally, the fixed telephone lines indicator in pillar 7 was removed, as the indicator assesses data that are less relevant today, while the number of Internet users was added to this pillar.