LPI Component Prediction

As proposed in the previous chapter that once the indicators have been identified, and the model to predict LPI component are conducted, the result of this SUR model is showed in Table 3. Each equation in this model have 168 observation from 42 country sample multiply with four years of observation data. The table below shows that almost all of the indicators are statistically significant to their dependent variables, the un-significant indicators are document to export on LPI customs, transport service export value on LPI logistic competence, and mobile phone subscription on LPI tracking and tracing.

There is some assumption need to fulfill when apply SUR model, one of the assumption is, there should be no autocorrelation in the equation, therefore the Durbin-Watson test is conduct and the result shows there is no autocorrelation in the equations Taking from Durbin Watsons test results which was conducted earlier on reveals the nonexistence of autocorrelation in the equation. This is because the D-W value for LPI customs, LPI Infrastructure and LPI logistics competence are 2.135, 2.025, and 1.903 respectively. The value of upper bond (du) and lower bond (dl) for n=168 and k=6 are 1.550 and 1.803 respectively. Therefore, there is no autocorrelation in these three models and the correlation residuals for each models also shows that error correlation between equations are exist.

GDP per capita and cost to export are two indicator that includes in all of three LPI input category, GDP per capita have a quite constant coefficient for each dependent variables which means that the effect of this indicator is slightly the same to LPI input category components. Meanwhile, cost to export have a quite different coefficient value as shown in Table 3. This indicator affecting LPI customs more than the other dependent variables, with coefficient (-0.492), it indicates the cost reduction or improvement on policy might affect more to LPI customs, than infrastructure and logistics competence.

Table 4 SUR model result for LPI component

Control of corruption 0.545***

(0.115) Note: Standard error are shown in parentheses.

LPI custom: observation = 168; log likelihood = -4.919 ; D-W = 2.135;

LPI Infrastructure: observation = 168; log likelihood = 1.6821; D-W = 2.025.

LPI logistics comp: observation = 168; log likelihood = 7.846; D-W = 1.903.

LPI int. shipping: observation = 168; log likelihood = 21.662; ; D-W = 1.7367 *** p < 0.01 LPI tracking: observation = 168; log likelihood = -5.9088; ; D-W = 1.8018 ** p < 0.05 LPI timeliness: observation = 168; log likelihood = 9.5920; D-W = 1.7645; * p < 0.1

Transport service export value and internet users are two indicator that includes in all of three LPI outcomes category, it is can be explained because LPI outcomes category represents logistics service performance and transport service export is the indicator that reflect the logistics service in that country because the main activity of logistics is transferring goods. This indicators is affecting each LPI component in positive sign and tend to have same coefficient. While internet users is affecting LPI tracking more than the other LPI component, this explain that the better internet network coverage will help country to increase their logistics quality in terms of tracking and tracing quality.

The comprehensive analysis of each LPI component and how the indicators affecting it is described below, while the detail information about the coefficient and standard error for each indicator can be seen on Table 4. The descriptions are:

• LPI customs

Indicators that affecting this LPI component are GDP per capita, time to export, quality of port infrastructure, and control of corruption. GDP per capita represent the average income. In terms of customs quality, high GDP shows the goodness of the trade flow in the country supported by an efficient custom policy. Time to export indicator measures the time from which an export procedure starts from the moment it is initiated and runs until it is completed including the time related to customs procedures. The indicator might as well reflects the efficiency of customs procedures.

Quality of port deals with the port infrastructure quality which is also necessary to support the customs regulation and a well develop infrastructure will enhance the possibility of applying an efficient and flexible custom regulations. Cost to export indicator (cost in the indicator) includes all of the cost related to custom administration and therefore time and cost are key factors that represents the customs efficiency. For social aspect, control of corruption is also highly related. In many developing countries and for which their customs efficiency is hampered by widespread corruption thereby creating a major obstacle to trade expansion and logistics performance.

• LPI Infrastructure,

The indicators that affecting it are road fatalities, GDP per capita, quality of port, cost to export, internet users/100 people, and air transport freight. Road fatalities indicator represents the land transport infrastructure quality. Quality of port infrastructure is measure to logistics infrastructure quality for sea port where most of the international trading activities are conducted, while air transport freight might reflect the air transport infrastructure quality, and Internet users/100 people shows the information and communication technology

infrastructure development as one of supporting aspect of logistics activities. GDP per capita represents the income of a country and the financial capability to develop their logistics infrastructure.

• LPI logistic competence

This measures competence and quality of logistics services which affecting by transport service export value, time to export, cost to export, fixed broadband internet user, and air transport freight. Transport service export value is represent the quality of logistics service provider in a country, where time and cost to export were also measure the time and cost for logistics service providers company to do export procedure. Fixed broadband internet

• LPI international shipment

Indicators affecting the LPI international shipment are time to export, the number of unemployment, internet user per 100 people, cost to export and transport service export value.

Cost to export is an indicator that is highly related to LPI international shipping where it’s (i.e.

the LPI) component is used for arranging competitively priced shipment and hence cost to export indicator enhances the measurement the components. Time to export is also related to the LPI component. This is because time and cost are related in the positive way and the longer the time, the more cost will increase.

• LPI tracking and tracing

The variable affecting the LPI tracking and tracing are Internet users, mobile subscribers, transport service export value and quality of port. Mobile subscribers and Internet users represents the Telecommunication infrastructure which is an important factor for tracking and tracing quality. Quality of port is related to tracking and tracing at some point in terms ability as a well-developed port should have a real time monitoring system so that tracking of shipments can be easily handled.

• LPI timeliness,

This LPI component is affected by time to export, clearance time without physical inspection, internet users, transport service export value and documents for exportation. The time to export and clearance time without physical inspection are both indicators of time in which their LPI component measures the expected and frequency that the shipment will arrive as scheduled. Document to export represents the time of the export activity and each of the component are directly proportional to each other (i.e. document and time). This depicts that if more documents is need for the exportation process, then it will also affect the time factors as it will also increase.