Azerbaijan - Logistics performance index: Overall (1=low to 5=high)
Definition: Logistics Performance Index overall score reflects perceptions of a country's logistics based on efficiency of customs clearance process, quality of trade- and transport-related infrastructure, ease of arranging competitively priced shipments, quality of logistics services, ability to track and trace consignments, and frequency with which shipments reach the consignee within the scheduled time. The index ranges from 1 to 5, with a higher score representing better performance. Data are from Logistics Performance Index surveys conducted by the World Bank in partnership with academic and international institutions and private companies and individuals engaged in international logistics. 2009 round of surveys covered more than 5,000 country assessments by nearly 1,000 international freight forwarders. Respondents evaluate eight markets on six core dimensions on a scale from 1 (worst) to 5 (best). The markets are chosen based on the most important export and import markets of the respondent's country, random selection, and, for landlocked countries, neighboring countries that connect them with international markets. Scores for the six areas are averaged across all respondents and aggregated to a single score using principal components analysis. Details of the survey methodology and index construction methodology are in Arvis and others' Connecting to Compete 2010: Trade Logistics in the Global Economy (2010).
Source: World Bank and Turku School of Economics, Logistic Performance Index Surveys. Data are available online at : http://www.worldbank.org/lpi. Summary results are published in Arvis and others' Connecting to Compete: Trade Logistics in the Global Economy, The
Development Relevance: The LPI measures on-the-ground trade logistics performance, helping national leaders, key policymakers, and private sector traders understand the challenges they and their trading partners face in reducing logistical barriers to international commerce. As the backbone of international trade, logistics encompasses freight transportation, warehousing, border clearance, payment systems, and many other functions. These functions are performed mostly by private service providers for private traders and owners of goods, but logistics is also important for the public policies of national governments and regional and international organizations. Because global supply chains are so varied and complex, the efficiency of logistics depends on government services, investments, and policies. Building infrastructure, developing a regulatory regime for transport services, and designing and implementing efficient customs clearance procedures are all areas where governments play an important role. The improvements in global logistics over the past two decades have been driven by innovation and a great increase in global trade. While policies and investments that enable good logistics practices help modernize the best-performing countries, logistics still lags in many developing countries. Indeed, the "logistics gap" evident in the first two editions of this report remains. The tremendous importance of logistics performance for economic growth, diversification, and poverty reduction has long been widely recognized. National governments can facilitate trade through investments in both "hard" and "soft" infrastructure. Countries have improved their logistics performance by implementing strategic and sustained interventions, mobilizing actors across traditional sector silos, and involving the private sector. Logistics is also increasingly important for sustainability. A focus on the environmental impacts of logistics practices was recently included in the LPI.
Limitations and Exceptions: The Logistics Performance Index is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance. Feedback from operators is supplemented with quantitative data on the performance of key components of the logistics chain in the country of work. Thus, the LPI consists of both qualitative and quantitative measures. In addition, despite being the most comprehensive data source for country logistics and trade facilitation, the LPI has two important limitations. First, the experience of international freight forwarders might not represent the broader logistics environment in poor countries, which often rely on traditional operators. And the international and traditional operators might differ in their interactions with government agencies - and in their service levels. Second, for landlocked countries and small-island states, the LPI might reflect access problems outside the country assessed, such as transit difficulties. The low rating of a landlocked country might not adequately reflect its trade facilitation efforts, which depend on the workings of complex international transit systems. Landlocked countries cannot eliminate transit inefficiencies with domestic reforms.
Statistical Concept and Methodology: The indicator presents data from Logistics Performance Surveys conducted by the World Bank in partnership with academic and international institutions and private companies and individuals engaged in international logistics. The Logistics Performance Index (LPI) uses a structured online survey of logistics professionals at multinational freight forwarders and at the main express carriers. The 2012 LPI data are based on the 2011 survey, which was administered to nearly 1,000 respondents at international logistics companies in 143 countries (domestic performance indicators). The international LPI covers 155 countries. The LPI assesses both large companies and small and medium enterprises. Most of the responses are from small and medium enterprises, with large companies (those with 250 employees or more) accounting for roughly 18 percent of responses. The respondents include groups of professionals who are directly involved in day-today operations, from company headquarters and from country offices such as senior executives, area or country managers, and department managers. Many of the respondents are at corporate or regional headquarters or at country branch offices. The rest are at local branch offices or independent firms. The majority of respondents are involved in providing most logistics services as their main line of work such as warehousing and distribution, customer-tailored logistics solutions, courier services, bulk or break bulk cargo transport, and less-than-full container, full-container, or full-trailer load transport. Each survey respondent rates eight overseas markets on six core components of logistics performance (the efficiency of customs and border management clearance, the quality of trade and transport infrastructure, the ease of arranging competitively priced shipments, the competence and quality of logistics services, the ability to track and trace consignments, and the frequency shipments reach consignees within scheduled or expected delivery times). The components are rated on a scale (lowest score to highest score) from 1 to 5. The eight countries are chosen based on the most important export and import markets of the country where the respondent is located, on random selection, and - for landlocked countries - on neighboring countries that form part of the land bridge connecting them with international markets. The method used to select the group of countries rated by each respondent varies by the characteristics of the country where the respondent is located. If respondents did not provide information for all six components, interpolation is used to fill in missing values. The missing values are replaced with the country mean response for each question, adjusted by the respondent's average deviation from the country mean in the answered questions. The LPI is constructed from the six indicators using principal component analysis (PCA), a standard statistical technique used to reduce the dimensionality of a dataset. In the LPI, the inputs for PCA are country scores on questions 10-15, averaged across all respondents providing data on a given overseas market. Scores are normalized by subtracting the sample mean and dividing by the standard deviation before conducting PCA. The output from PCA is a single indicator - the LPI - that is a weighted average of those scores. The weights are chosen to maximize the percentage of variation in the LPI's original six indicators. To construct the international LPI, normalized scores for each of the six original indicators are multiplied by their component loadings and then summed. The component loadings represent the weight given to each original indicator in constructing the international LPI. Since the loadings are similar for all six, the international LPI is close to a simple average of the indicators. To account for the sampling error created by the LPI's survey-based dataset, LPI scores are presented with approximate 80 percent confidence intervals.
Aggregation method: Unweighted average
Sub-Topic: Trade facilitation