Preliminary estimates of the staggering costs of inefficient trade regulation in Mongolia

The country ranks 159th out of 183 economies surveyed on the "Trading Across Borders" indicator of the 2012 Doing Business survey. This low rank arises because the number of documents and the time and expense required to export and import are higher than average. The analysis focuses on the document preparation phase of the export/import process, which is the simplest phase in which to make reforms in the near term. Mongolia requires eight documents and 28 days to export and import in the document preparation phase, whereas France requires only two and other countries just three or four. The calculations assume that Mongolia eliminated five documents, each of which takes the same time and expense to prepare, based on averaging the World Bank's total time and cost figures for the document preparation phase. The results of the calculations indicate that the costs of inefficient trade regulation in Mongolia include almost $20 million annually in unnecessary document costs, about $80 million annually in lost opportunity costs from reduced returns on invested capital, more than $2 billion in reduced trade volumes every year, and the associated loss of about $154 million in revenues collected by the Customs General Administration on imports. Additionally, the calculations suggest that close to $2 billion in GDP growth is lost due to inefficient trade regulation. The calculations also estimate the impact of a 17.5-day delay in the export/import process. This delay is assumed to result in a 17.5% reduction in trade volumes, which translates to a loss of $840 million in exports and $1.16 billion in imports. Furthermore, the delay is estimated to result in a loss of $981 million in GDP from export delays and $793 million in GDP from import delays. The analysis highlights the need for reforms in Mongolia's trade facilitation regime to reduce the number of documents and the time and expense required to export and import. A time-release study to be undertaken by the Mongolian Customs General Administration with support from USAID's Business Plus Initiative project will provide specific time and expense information for each document and procedure, helping to prioritize reforms and provide a baseline from which the benefits of reform can be calculated more exactly.