45790 Improving Trade and Transport for Landlocked Developing Countries World Bank contributions to implementing the Almaty Programme of Action A report for the mid-term review October 2008 LLDC 1001.indd 1 10/1/08 11:10:44 AM © 2008 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the views of the Executive Directors of the International Bank for Reconstruc- tion and Development / The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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If you have any questions or comments about this report, please contact: International Trade Department The World Bank 1818 H Street NW, Room MSN MC2-201, Washington, DC 20433 USA Telephone: 202-473-8922 E-mail: tradefacilitation@worldbank.org Web site: www.worldbank.org or www.worldbank.org/tradefacilitation All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax:202-522-2422; e-mail: pubrights@worldbank.org. LLDC 1001.indd 2 10/1/08 11:10:44 AM preface TheUNGeneralAssemblycalledforamid-term at UN headquarters in New York and then at review of the Almaty Programme of Action the World Bank in Washington--on ways to on October 2­3, during its 63rd session. This reduce the obstacles to landlocked countries' report, contributed by the World Bank, is based trade and growth. on the outputs and experience of current World This report was prepared in the Interna- Bank projects, notably a program on Trade and tional Trade Department of the Poverty Re- Transit Facilitation, supported by a grant from duction and Economic Management Vice- the Bank of Netherlands Partnership Program. Presidency (PRMVP) of the World Bank, by Itsummarizesthepresentationsanddiscussions Jean-FrançoisArvis(teamleader),RobinCarru- at several preconference workshops organized thers, and Christopher Willoughby. Additional jointly by the Office of the High Representative contributions were provided by Mona Haddad for the Least Developed Countries, Landlocked (sectormanager),GrahamSmith,MonicaAlina Developing Countries, and the Small Island Mustra, Tugba Gurlancar, Gaël Raballand, Ge- Developing States and the World Bank, includ- rard Luyet, Marc Juhel, Henry Bofinger, and ing expert meetings on June 2­3, 2008--first Jack Stone. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes iii LLDC 1001.indd 3 10/1/08 11:10:45 AM Table of contents Preface iii The Almaty Programme of Action (2003) v Summary vi Introduction viii 1 The economic impacts of being landlocked 1 Potential per capita income increases 1 Increases in trade 2 Commodity prices and volumes 2 2 The logistics performance of landlocked developing countries 4 3 Understanding access to landlocked countries 7 Beyond infrastructure 7 Inefficient operations and services on LLDCs supply chain 7 4 A focus on transit countries 10 5 Trade facilitation and regional transit systems 13 6 Filling some of the gaps in implementing the Almaty Programme 15 Trade corridor performance monitoring 15 Re-engineering transit regimes 17 Diversifying the transportation mode: air freight's potential 18 7 The road ahead 20 Annex 1 World Bank projects relevant to LLDCs 22 List of landlocked developing countries and transit countries 25 Notes 26 References 27 iv ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 4 10/1/08 11:10:45 AM The almaty programme of action (2003) The Almaty Ministerial Conference (2003) was · Transit policy and regulatory frame- the first global venue to specifically address the works: landlocked and transit coun- problems of landlocked developing countries tries to review their transport regula- (LLDCs). It brought together Landlocked and tory frameworks and establish regional Transit Developing Countries, Donor Coun- transport corridors. tries, and International Financial and Develop- · Infrastructuredevelopment:landlocked ment Institutions. The Conference and the Pro- countries to develop multimodal net- gramme of Action adopted at the Conference works (rail, road, air, and pipeline address the access problem of LLDCs, with the infrastructure projects). following seven objectives: · Trade and transport facilitation: land- · Secureaccesstoandfromtheseabyall locked countries to implement the means of transport according to appli- international conventions and instru- cable rules of international law. ments that facilitate transit trade (in- · Reducecostsandimproveservicessoas cluding the WTO). to increase the competitiveness of their · Development assistance: the interna- exports. tional community to assist by provid- · Reducethedeliveredcostsofimports. ing technical support, encouraging for- · Address problems of delays and uncer- eign direct investment, and increasing tainties in trade routes. official development assistance. · Develop adequate national networks; · Implementation and review: all parties reduce loss, damage, and deterioration to improve their monitoring the imple- en route. mentation of transit instruments and · Openthewayforexportexpansion. conducting a comprehensive review of · Improve safety of road transport and their implementation in due course. security of people along the corridors. In order to reach those objectives, the Pro- Source: Almaty Programme of Action: Addressing the gramme of Action highlighted five priority pol- Special Needs of Landlocked Developing Countries within icy areas for landlocked and transit countries to a New Global Framework for Transit Transport Cooperation address: for Landlocked and Transit Developing Countries (2003). ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes v LLDC 1001.indd 5 10/1/08 11:10:45 AM summary This report offers the World Bank's perspective neighbors for their trade. The Logistics Per- on progress in implementing the Almaty Pro- formance Index, a measure the World Bank de- gramme of Action. Most of the information veloped to score logistics systems, consistently comes from an ongoing World Bank knowl- ranks landlocked countries lower than their edge program for trade and transit facilitation. coastal neighbors. The differences are greatest The report provides an update on the access of in East Asia, least in Sub-Saharan Africa. The Landlocked Developing Countries (LLDCs) to more detailed data behind the LPI shows that global markets since the Almaty Declaration in being landlocked adds about four days to the October 2003, highlighting new directions to time for exports to reach a port but about nine reach the Almaty objectives. days for imports. The import times show wide Since the Almaty Conference international variation, indicating the uncertainties in tran- support to the LLDCs has increased substan- sit times are perhaps more of a barrier to trade tially. Lending by the World Bank quadru- growth than the average times. pled--to more than US$1.5 billion last year, Corridor indicators detail where the delays with a substantial pipeline of new projects for and variation in transit times occur, and how the next five years. This assistance includes cor- the costs of transit for landlocked countries ridor projects, customs reform, multimodal compare with those for coastal countries. For transport, railroad projects, and restructuring both the largest delays are in bringing contain- airport and aviation services. Increasingly the ers through the port system, closely followed by Bank is linking lending with advisory activities border crossings. Despite the long and variable to stimulate change in such areas as trade facili- transit times, the maritime share of a container tation, customs, and transit systems. traveling between a landlocked and a developed Between 2003 and 2007 the export value country makes up more than half the total. For of LLDCs more than doubled, while that of most landlocked countries the cost of the mari- transit countries increased rather less, as global timeshareofthetotalisalsomorethanhalf.For exports rose 60 percent. Per capita incomes of six corridors with data, the cost of transporting LLDCs increased by about 28 percent, slightly acontainerfromanLLDCtoadevelopedcoun- less than the 33 percent increase of the transit try port was about US$4,500, about 20 percent countries but still well above the global average more than from a coastal country. of a little more than 10 percent. But in absolute The studies behind the corridor indicators values LLDC trade and incomes still lag far be- show that distance and quality of infrastructure hind those of the transit countries and the glo- also impede LLDC trade, but not much more bal average. In addition, the recent increases in than for inland destinations in large coastal LLDC and transit trade reflect rising commod- countries. Rent-seeking activities, inadequate ity prices, with little achieved in product diver- transport markets, and times spent at borders sification and export competitiveness. lower the productivity of services and bump up Even with freedom of transit, regional and the prices, especially for trucking. But the main bilateral agreements, and trade facilitation re- sources of higher costs are unreliable import forms, LLDCs are still hampered in their ac- and export chains--due to inadequate transit cess to markets, since they depend on their procedures, overregulation, multiple controls, vi ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 6 10/1/08 11:10:45 AM and poor service. Transit in Europe, by contrast, and implemented. The transit system devel- has evolved into effective and seamless systems, oped in Europe over the last 50 years has been which allow for smooth door-to-door logistics expanded geographically to include many land- across land borders. locked countries of Eastern Europe, bringing Most trade facilitation impediments have to advantages to all participating countries. But do with the procedures and services in the tran- it has proven difficult to implement this or a sit country and the weak incentives for public comparable system or to develop alternatives in and private stakeholders to facilitate transit and other regions. That is why the World Bank has deliver good service. Many needed measures been piloting, with its partners, a new approach are not specific to landlocked countries and are to re-engineering transit systems. often more beneficial to the transit countries-- A second priority is for landlocked coun- such as improving transport services, notably tries to make more use of air freight as a way to trucking, and reforming ports and customs to overcome what has been called the tyranny of reduce delays and costs. distance. While air freight is costly, it does have For transit countries to address the trade the advantage of speed, and for some products of their landlocked neighbors, they need to see this can overcome the penalty of cost. But for some advantages to their own economies. Most landlocked countries to get started in using air oftheadvantagescomefromprovidingthetran- freight they need to use the freight capacity in sit transport and associated services at marginal aircraft providing passenger services. With few cost, and from capturing economies of scale in exceptionsthetransitcountrieshavemanymore the port, maritime, and aviation services that passenger services than their landlocked neigh- serve their own trade. Transit countries will bors. By taking advantage of these services, their also facilitate the trade of landlocked countries financial sustainability can be increased to the when the products complement those of their benefit of the transit country. own economy rather than compete with them. A third priority is cross-country and cross- In addition to the investment and techni- regional monitoring of trade corridors, includ- cal assistance that are part of the Almaty Pro- ingalldimensionsofcosts,delays,andreliability, gramme of Action, a high priority is to design repeated at frequent intervals. This information and implement transit regimes, which with few can inform policy makers and stakeholders and exceptions are either absent or badly designed sustain the drive for improvements. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes vii LLDC 1001.indd 7 10/1/08 11:10:45 AM Introduction The Almaty Programme of Action is predicated Development Association (IDA), are directly onthefactthatlandlockeddevelopingcountries involved in efforts to reduce the adverse conse- had grown more slowly than other low-income quences of countries' lack of direct access to the countries and that unless their trade competi- sea. Just over half are landlocked, and the rest tiveness improved significantly, this situation have infrastructure used by landlocked neigh- was likely to continue. Major factors underlying bors for transit. the slow trade growth were believed to be the This report summarizes the World Bank's low quality and inadequate capacity of trans- contribution to implementing the Almaty Pro- port infrastructure and the resulting high cost gramme of Action and its understanding of the and unreliability of transport services between causes and potential remedies of the trade com- these countries and world markets. petitiveness consequences of being landlocked. The Millennium Development Goals It has seven sections. The first summarizes what agreed by all UN member states in September is known about the economic impacts of being 2000 included a commitment to address the landlocked on trade and growth, and their im- special needs of landlocked countries. In 2001 provements since Almaty. the General Assembly established the post of The second section provides information Office of the High Representative for the Least on the logistics and facilitation performance of Developed Countries, Landlocked Developing LLDCs compared with their transit neighbors Countries and Small Island Developing States and other developing countries, based on analy- topromoteunderstandingandsupportforthese ses at the country level, and comes mostly from countries. the recently developed Logistics Performance A ministerial intergovernmental confer- Index.1 The third section analyzes the sources ence in pursuit of these commitments was held of high access costs and the role of inefficiencies in August 2003 in Almaty, Kazakhstan. The in the supply chain of products imported and conference agreed to an Almaty Programme exported by LLDCs. of Action calling for joint efforts by transit and The fourth section brings a new focus on landlocked countries--with substantial tech- the transit countries as a potential source of nical and financial assistance from other coun- increased trade competitiveness for the land- tries--to revise their regulatory frameworks af- locked countries that depend on them. Fa- fecting trade movements and to improve their cilitation depends on the political economy of trade-related infrastructure. trade and transport systems between countries. In line with the Programme of Action and Transit countries need to see an economic and requests from member countries, the World political advantage in facilitating transit trade Bank intensified its program of policy advice that goes beyond pressure to comply with inter- andfinancialsupportforlandlockeddeveloping national obligations not to discriminate against countries (LLDCs) as part of its broader pro- their landlocked neighbors. gram to improve the trade competitiveness of all The fifth section provides more analysis of developing countries. Nearly three-fifths of the one of the greatest impediments to trade and 81 countries now eligible for assistance from the transport from landlocked countries: the tech- World Bank's soft-loan arm, the International nical arrangements for transit. In addition to viii ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 8 10/1/08 11:10:45 AM transport services and infrastructure, efficient attractive to transit countries, exploring the po- transit regimes must allow the passage of freight tential for expanding transit guarantee systems, based on documents, seals, and bonds that guar- and exploring the circumstances in which air antee payment of customs and trade duties if freight can be used as an alternative to land and the goods do not exit the transit country on maritime transport. schedule. Despite the obvious benefits of such The conclusion proposes a series of themes, schemes, designing, signing, and implementing and areas for assistance, that should receive par- them has proven surprisingly difficult. ticular attention during the second half of the The sixth section outlines some steps re- implementation period to achieve the objectives cently initiated by the World Bank in conjunc- of the Almaty Programme. tion with others to complement and catalyze An annex summarizes the lending, techni- the implementation of the Almaty Programme cal assistance, and knowledge activities under- of Action. These activities include producing taken as part of World Bank projects to contrib- corridor performance indicators, undertaking ute to the Almaty Programme of Action, and to trade and transport facilitation audits, find- help improve the competitiveness of landlocked ing ways to make facilitating transit trade more countries. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes ix LLDC 1001.indd 9 10/1/08 11:10:45 AM LLDC 1001.indd 10 10/1/08 11:10:45 AM noITCes1 The economic impacts of being landlocked This section provides evidence of the trade perfor- grew about 1.5 percentage points slower per mance of landlocked developing countries com- year than those not landlocked.3 Commercial pared with others, especially their transit neigh- quantities of natural resources improved the bors. It finds that since the Almaty Programme of situation of some landlocked countries. Over Action was announced, the total trade and GDP 1960­2000 resource-scarce landlocked coun- per capita of LLDCs has increased faster in per- tries outside Africa averaged 1.5­2.0 percentage centage terms than the transit country and global points slower growth in per capita income than averages. But much of the LLDC growth can be nonlandlocked countries.4 Per capita income attributed to increases in commodity prices. For growth in the resource-scarce landlocked coun- the per capita income of LLDCs to come closer to tries of Sub-Saharan Africa (except Botswana, the global average, their per capita incomes will Zambia, and Zimbabwe) also fell short by about have to grow even faster. the same amount. The world has two large concentrations of Since 2001 (the base year for much of the landlocked developing countries. The 15 coun- evidence presented at the Almaty Conference) tries in Sub-Saharan Africa have a population the average per capita income of the 29 land- of more than 200 million, nearly 30 percent of locked countries (those with sufficiently com- the region's total. Sudan and the Democratic plete data) has increased by about 5.3 percent Republic of Congo, which account for a further a year, far above the global average of 1.9 per- 12 percent of the region's population, are also cent and even above the 4.2 percent for the sometimes considered to be landlocked given 44 transit countries with data.5 The average their very restricted access to deep-water sea- growth rate for all low-income countries was ports. The nine landlocked countries in Central about 4.8 percent, so again the landlocked Asia, and a few small states in Eastern Europe, countries performed well in comparison. But have a population approaching 80 million peo- in absolute per capita incomes, the LLDCs ple, or about 17 percent of the region's total. have not kept pace with the other groups of Less than 3 percent of the population in countries other than their low-income peers South Asia (Nepal and Bhutan) and Latin (table 1.1). America (Bolivia and Paraguay) are in land- locked countries. The two landlocked countries Potential per capita of East Asia (Lao People's Democratic Repub- income increases lic and Mongolia) account for less than half a In 2006 the per capita income of LLDCs was percent of the region's population. No countries only 13 percent of the global average (table 1.2). are landlocked in the Middle East and North If the objective of the Almaty Programme was Africa. interpreted as increasing this to 25 percent of For the period before the Almaty Confer- the global average by 2013, and if the global ence there was compelling evidence that being average were to continue growing at about 1.9 landlockedsharplydepressedbothpercapitain- percent a year, LLDC per capita income would come and its growth.2 Data for 92 low and mid- need to surge by 15 percent a year, clearly infea- dle-income countries for 1980­96 show that sible. To reach close to 20 percent of the global the per capita income of landlocked countries average, LLDC per capita incomes will have ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 1 LLDC 1001.indd 1 10/1/08 11:10:45 AM Table 1.1 GDP per capita and its growth, 2001­06 Increases in trade Part of the explanation for the low per capita Average per capita income (2006 US$) incomes of LLDCs is their low participation Income group 2001 2006 Increase Growth (percent) in world trade. About a third of them have less High income 32,800 35,700 2,900 1.7 than US$40 per capita in exports, but less than Upper middle income 5,500 6,600 1,100 3.5 5 percent of their transit neighbors fall to this Lower middle income 1,500 2,100 600 6.9 level. Fewer than one-third of LLDCs have Low income 500 670 170 4.8 imports greater than US$100, while only one Landlocked developing countries 760 970 210 5.3 transit country (Somalia) has imports below Transit 1,500 2,000 500 4.2 this threshold.6 World 6,700 7,400 700 1.9 The per capita incomes of LLDCs have in- Note: Data for LLDCs exclude Azerbaijan, Botswana, Kazakhstan, and Zambia. In 2005­06 these countries had a very high proportion of creased since the Almaty Conference. Their exports of just one commodity: Azerbaijan (76 percent) and Kazakhstan (69 percent) petroleum, Botswana (73 percent) precious stones, and total trade and share of world trade have accel- Zambia (65 percent) copper (UNCTAD 2008). Source: World Bank Development Data Platform. erated even more. Since 2001 the value of inter- national trade of LLDCs has increased by more than 170 percent (an average of 21 percent a Table 1.2 Potential increases in average per capita income, 2006­13 year), a growth slightly less than the 182 per- cent (23 percent a year) of the transit counties Country group 2006 (US$) Growth rate (percent) 2013 (US$) but much higher than the global average of 90 Landlocked developing countries 970 8.0 1,700 percent (14 percent a year). The LLDC share of Transit 2,000 5.0 2,800 world trade remains small at a little under 0.6 World 7,400 1.9 8,500 percent. But this is a significant proportional in- LLDC world share (percent) 13.0 n.a. 19.6 crease (about 10 percent) from the 2001 share of n.a. is not applicable. justover0.5percent.Thetransitcountrieshavea Note: Data for LLDCs exclude Azerbaijan, Botswana, Kazakhstan, and Zambia. In 2005­06 these countries had a very high proportion of exports of just one commodity: Azerbaijan (76 percent) and Kazakhstan (69 percent) petroleum, Botswana (73 percent) precious stones, and much higher share at about 6.4 percent, a slight Zambia (65 percent) copper (UNCTAD 2008). Source: Analysis by World Bank International Trade Department. increase since the 2001 share of 6 percent. More significant than the total trade of LLDCs are those of exports, where their post Table 1.3 Landlocked developing countries: merchandise trade, 2001­06 Almaty performance has been even better. The export value of LLDCs has increased more than Merchandise trade Merchandise export trade 190 percent (24 percent a year) compared with Share of world Share of world 148 percent (19 percent a year) for the transit trade (percent) Annual trade (percent) Annual growth growth countries and the global total of 90 percent (or Country group 2001 2006 (percent) 2001 2006 (percent) 14 percent a year). The export share in the total Low income 2.1 2.2 21 2.0 2.7 20 trade of LLDCs has increased from 45 per- Middle income 19.7 20.3 20 20.6 27.4 21 cent in 2001 to more than 50 percent by 2006. High income 78.2 77.5 12 77.4 69.9 12 Another reflection of the same trend: LLDCs Landlocked developing countries 0.5 0.6 21 100.0 100.0 14 achieved a small overall trade surplus for the Transit 11.9 12.6 24 0.5 0.8 24 first time in recent history in 2006. World 100.0 100.0 14 12.7 20.1 24 Source: Comtrade data. Commodity prices and volumes Much of the increase in the per capita income and the export performance of LLDCs has to grow about 8 percent a year, a formidable come from increases in commodity prices and challenge but feasible. Even this would not in the volumes exported by LLDCs. It is diffi- be enough to reduce the absolute difference cult to generalize the impact on the exports of between global per capita incomes and those all LLDCs because of the wide range of com- of LLDCs. Indeed, the deficit would increase modities and products. But trade data show two more than US$300. relevant trends: 2 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 2 10/1/08 11:10:46 AM · Higher commodity prices contributed top three products make up more about two-thirds of the growth in value than 75 percent. There are some no- of exports from LLDCs between 2001 table and encouraging exceptions, and 2006. The rates of increase are un- including Nepal, Moldova, Swazi- likely to be sustained (and for some the land, and Uganda, where the top prices have already started to fall). So, three products account for less than LLDCswillneedotherwaysofincreas- half the total export value. This has ing or at least sustaining their GDP per come about through diversifying into capita growth. manufactured products and convert- · The diversification of exports has not ing some basic mineral and agricul- changed much since implementation tural exports into higher value prod- of the Almaty Programme. For more ucts. These examples show how other than 20 percent of LLDCs, three LLDCs might increase the total value products make up 90 percent or more of their exports while reducing their of the total value of their exports, and dependence on a small range of basic for another third of the countries the commodities. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 3 LLDC 1001.indd 3 10/1/08 11:10:46 AM noITCes2 The logistics performance of landlocked developing countries This section provides evidence on the logistics such as Doing Business8 and Global Competitive performance of landlocked countries and their Index.9 transit and coastal neighbors, as well as on fac- Tables 2.1 and 2.2 compare the logistics per- tors explaining differences in performance. formance of landlocked and coastal countries, The World Bank launched a Logistics Per- globally and regionally. formance Index (LPI) in 2007 (box 2.1).7 The From the comparisons of logistics perfor- LPI and its component indicators are based mance of landlocked and coastal countries by on information from multinational freight region, it appears that: forwarders and the main express carriers with · ForeachregionotherthanEurope,the worldwide operations. They provide an inter- logistics performance of coastal coun- national benchmark for comparing logistics tries is much better than that of land- performance and effectiveness in facilitating locked countries. trade across 150 countries. This information · BycontrastEuropeanlandlockedcoun- completes and expands the one found with tries are not at a disadvantage com- longer established competitiveness datasets pared with their coastal transit coun- try. This is to be linked to the existence of smooth transit systems through Box 2.1 Assessing logistics performance coastal countries, with delayed clear- ance at destination. The overall Logistics Performance Index (LPI) is a composite index based on per- · Therelativeperformanceoflandlocked formance of countries on six dimensions (indicators) of trade-related logistics per- countries is worst in South Asia (43 formance. The indicators are: percent penalty when compared with · Efficiency of customs and other border agencies in expediting cargo coastal countries) and East Asia (20 clearance. percent). The contrast is larger as the · Infrastructure efficiency (in the quantity and quality of transport infrastruc- main transit countries (India, China) ture and information technology infrastructure for logistics). · Ease and affordability of arranging international shipments. are emerging economies with already · Competence of the local logistics industry, where the freight forwarding sophisticated logistics systems, yet the operations are subcontracted to domestic agencies by the global logistics transit arrangement serving LLDCs companies. are known to be more restrictive in · Ability to track and trace international shipments while the shipment is en Asia (section 5). route. · Thedifferencebetweenlandlockedand · Timeliness of shipments in reaching destination. coastal countries is still significant but Logistics performance is evaluated on a 5 point scale, with 1 the lowest and 5 notassharpinAfrica.Costalcountries, the highest. This data is corroborated by factual information from domestic sources, for with the exception of South Africa, instance on time, cost, or effectiveness of process and services. also experience such serious problems On average one LPI point less on this scale is the equivalent of six days more as port congestion, which reverberate to import and three days more to export. The highest ranked country is Singapore on the countries in the Interior. (4.19), the lowest Afghanistan (1.21). Table 2.2 provides some of the background data that goes into calculation of the LPI 4 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 4 10/1/08 11:10:46 AM calculations for three regions, and a compari- Table 2.1 Logistics Performance Index of coastal son of landlocked and coastal countries for two and landlocked countries, 2007 of them. From these data one can see that: Coastal advantage · The transport infrastructure of land- Regional Landlocked Coastal over landlocked Region average countries countries (percent) lockedcountries in Sub-SaharanAfrica World n.a. 2.42 2.80 16 is a slightly lesser penalty (only 7 per- Sub-Saharan Africa 2.35 2.22 2.43 9 cent worse than for coastal countries) East Asia and the Pacific 2.58 2.17 2.59 19 than other dimensions of the LPI such Latin America and as the competence of services or the the Caribbean 2.57 2.44 2.58 6 trade processes (on average about 10 South Asia 2.30 1.84 2.64 43 percent worse than coastal countries), Europea 2.64 2.64 2.63 0 which reflects the hierarchy of con- n.a. is not applicable. straints as they appeared in case stud- a. Central Asia is excluded because all the countries in the subregion are landlocked. Landlocked countries in Europe include, in addition to the high-income countries of Austria and Switzerland, countries that became independent in the 1990s, such as Armenia, Belarus, Czech Republic, ies or projects (section 3 and 4). Hungary, Moldova, Serbia, and Slovak Republic. Note: Logistics performance is evaluated on a 5 point scale, with 1 the lowest and 5 the highest. · Interestingly the data for time to ex- Source: World Bank n.d. (http://www.worldbank.org/lpi). port or import in Africa suggest the same conclusion: · Being landlocked adds four days Table 2.2 Regions with poorly performing landlocked countries to exports or the fastest imports, which corresponds to the distance Central Sub-Saharan Africa Asia South Asia that can be covered given the cur- Background data Landlocked Coastal Landlocked Landlocked Coastal rent infrastructure, plus clearance Overall LPI 2.22 2.43 2.25 1.84 2.64 at destination. Selected LPI components · Howevertheaverageimportstake Logistics competence 2.21 2.45 2.18 1.84 2.69 much longer to transit--about Infrastructure 1.97 2.11 1.98 1.61 2.41 nine days--which shows that the Customs and trade processes 2.10 2.30 2.04 1.69 2.34 bulk of delays happen with the LPI input data transit system. Customs clearance (days)a 3.2 4.7 n.a. 2.6 2.2 · Customs clearance itself does not Physical inspection (percent)b 62 42 n.a. 56 27 take more time in landlocked Possibility of review (percent)c 52 19 n.a. 33 30 countries, also highlighting the Lead time to (days) transit procedure, which takes Export (median) shipper­port 11.8 6.2 n.a. 6.5 2.5 place before clearance. Import (median) port­consignee 18.4 9.3 n.a. 14.7 3.3 · The average for Africa covers wide dis- Import (10 percent best) port consignee 9.1 5.0 n.a. 11.0 2.5 parities. The median import time for n.a. is not applicable landlocked countries in Central and a. Customs clearance is days between customs' acceptance of declaration and clearance. b. Physical inspection shows the proportion of respondents' import consignments inspected. Eastern Africa can be over four weeks. c. Possibility of review shows the proportion of survey respondents believing that they would be able to secure review of a customs decision they disagreed with. · For landlocked countries in South Note: LPI is Logistics Performance Index. Asia, transport infrastructure is a se- Source: World Bank n.d. (http://www.worldbank.org/lpi). rious constraint (50 percent worse for landlocked than coastal countries), but again it is not a significantly greater Two landlocked countries in Sub-Saharan problem than the border and services Africa, Mali and Uganda, appear among the components of the LPI (which on av- best performers in the region in expanding erage are about 42 percent worse for exports of goods and services over a fairly landlocked than for coastal coun- long period and in recent times. Uganda's ex- tries). Transit time is also dispropor- ports rose from 7 percent of GDP in 1990 to tionately high for those countries. 12 percent in 2003 and 14 percent in 2006, ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 5 LLDC 1001.indd 5 10/1/08 11:10:46 AM Table 2.3 Importance of service quality in supply chain competitiveness and Mali's from 17 percent of GDP in 1990 to 26 percent in 2003 and 30 percent in 2006. Infrastructure Logistics Timely Overall Rank in Mali and Uganda are among the top perform- Country rating competence Delivery LPI score Africa ing countries in the region based on their LPI Uganda 2.17 2.55 3.29 2.49 8 score, outranking some of the coastal countries Mali 1.90 2.21 2.88 2.29 21 (table 2.3). Ghana 2.25 1.75 2.50 2.16 30 Tanzania 2.00 1.92 2.27 2.08 35 Source: World Bank n.d. (http://www.worldbank.org/lpi). 6 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 6 10/1/08 11:10:46 AM noITCes3 understanding access to landlocked countries Traders in LLDCs may be confronted with bad port or their main trading partner within 4 infrastructure or long distances to market, but days, down from 10 days or more.11 the main sources of higher cost have to do with rent-seeking, inefficient markets for services such Inefficient operations and as trucking and inadequate transit procedures. services on LLDCs supply chain On top of the direct costs, traders also have to cope The trade and transport costs of landlocked with the low reliability of the logistics chain in developing countries relate more to opera- LLDCs. tions than to infrastructure capacity.12 The Regarding the source of cost and the im- main factor is the fragmentation of the supply portance of the organization of the transit chain. Traders in LLDCs have no access to the supply chains, recent research, surveys, and door-to-door logistics that developed over the experience from projects point to the same last two decades in industrialized countries. conclusion as the logistics indicators. They Instead, they depend on an extended sequence also provide a more detailed micro-economic of operations, with many procedures, agencies, understanding. and services, all prone to rent-seeking and over- regulation. LLDCs face multiple clearances and Beyond infrastructure even transloading, most in the transit countries The traditional culprit for the high costs and (figure 3.1). Therefore, the logistics costs sup- low competitiveness of landlocked countries ported by the traders in LLDCs consist of more is the low availability and quality of transport than just transport costs. infrastructure, especially road and rail. Build- As noted earlier, under those operating ing and maintaining adequate infrastructure in conditions, the average transit time is longer in both the transit and the destination country is large part because of the time it takes to initi- widely accepted and indeed stands prominently ate transit trades at the point of origin (such as in the Almaty Programme. the port) and to less extent because of delays at Ten years ago, research based on the inter- the border crossing or controls en route. Even nationally available indicator relating to the so, the average transit times for exports, and quality of transport infrastructure reached with few exceptions for imports, remain much the conclusion: "An improvement in own below transoceanic shipping times to and from and transit countries' infrastructure from the markets in industrialized countries (sections 2 25th percentile to the 75th percentile over- and 6). comes more than half of the disadvantage For traders the low reliability of transit sup- associated with being landlocked."10 But im- ply chain is more worrisome than the average provements embraced operations and physi- transit time. The many steps, the fragmentation cal equipment, since no separate indicators of control, and the low quality of services make were available. the supply chain unpredictable, which shows Thanks to the contribution by donors since up in the spread in transit times (box 3.1). the beginning of the decade, the state of most Other factors make the delivery process unpre- road corridors is much better. All capital cit- dictable or unreliable from one end of the chain ies in LLDCs are accessible from their gateway to the other: breakdowns of key infrastructure ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 7 LLDC 1001.indd 7 10/1/08 11:10:47 AM Figure 3.1 An extended chain of operations Port of Rail Multimodal Road Border Road Final entry transit transfer transit crossing transit clearance Check points International transit National transit Source: Authors. (such as bridges),13 breakdowns of transport operate under systems that limit productivity, equipment, insecurity, and fuel shortages.14 discourage competition, and often perpetuate All these factors mean additional inventories, poor-quality services and excess capacity, all emergency shipments, suspended operations, of which bump prices up to twice what they and lost markets. should be: A second source of cost is the operation and · OntheDouala-NdjamenaCorridorin- market structure of services, particularly truck- tervention by the Freight Bureau dou- ing services.15 Transporters on trade corridors bles road freight rates. · On the Vientiane-Bangkok Corridor Box 3.1 The unpredictability of the supply chain in opening Lao transit trade to all Thai landlocked developing countries truckers reduced logistics costs by 30 percent. Half the containers going to Uganda and Rwanda from the port of Mombasa are · In Southern Africa the quality and or- cleared for transit within nine days, but 1 in 20 takes more than a month. ganization of long distance transpor- tation are similar to those in Europe, Figure Probability distribution of delays with comparable operating costs (US$0.08 per ton per kilometer in Probability (percent) summer 2008). But on international 160 routes freight rates can be pushed up 10­30 percent due to queues at the bor- 120 der or market restrictions that prevent optimization of backhaul loads, and re- 80 duce productivity. Finally, compared to domestic freight ser- vice, transit is subjected to "overheads" for 40 unnecessary services, charges, and bribes, in both the public and private sectors. These can 0 add 50 percent or more to transport costs be- 1 3 5 7 9 11 13 15 17 19 21 23 25 27 2930+ tween a port and a landlocked country. On the Time in days Lomé-Ouagadougou corridor, shippers pay an additional 70 percent on top of freight costs, Source: Arvis, Raballand, and Marteau 2007. only 15 percent of which is justified by actual forwarding services, the rest paid in bribe (28 8 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 8 10/1/08 11:10:49 AM percent) or legal but superfluous procedures or shippers often support expensive, nonessential services.16 overheads--from corruption, overregulation, Neither the distance covered nor the unit and private inefficiencies. Delays and low reli- cost of available transport services is necessar- ability and predictability raise total logistics ily much higher in landlocked developing coun- costs, hamper productivity, and create massive tries than in the wealthiest countries. Instead, disincentives to invest. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 9 LLDC 1001.indd 9 10/1/08 11:10:49 AM noITCes4 a focus on transit countries The potential for improving and facilitating neighbors. Pilot studies of Chile, Kazakhstan, transit largely depends on the political economy Tanzania, and Thailand using this framework of trade and transport in the transit country as are already under way, and at least one or two well as across borders. Complementarities in others are planned. The framework includes five trade, investment, and the organization of truck- layers of possible costs and benefits: revenues ing should be taken into account when designing from users, scale economies from increased facilitation measures or investments. This section volumes, negative externalities such as envi- presents the preliminary findings of an analytic ronmental damage and propagation of disease, framework developed by the World Bank. new investment and production opportunities The Almaty Conference and Programme of created by the larger market, and improved sta- Action stressed the partnerships between land- tus and leverage of the transit country within locked countries and their transit neighbors, the region. including both public and private sectors, to Evidencefromthestudiesindicatesthatrev- bring about real improvements in arrangements enues from transit users is probably sufficient to and facilities for international trade flows. Of yield net benefits to transit countries where the special importance is the political economy for transit traffic makes use of infrastructure and win-win situations across groups of stakehold- service capacity that would otherwise have been erswithinandacrosscountries.Fortransittrade unused.19 Important exceptions might be where from LLDCs to increase, transit countries and infrastructure costs in the transit country are their landlocked neighbors need to develop a recovered mainly through fuel taxes, and where more forward-looking vision of development the resulting intercountry differences in retail possibilities. While some win-win agreements fuel prices are large enough to cause truck-driv- between countries can still be found, most is- ers to fill their tanks outside the transit country. sues that remain will need innovative and imag- Where the combination of transit and national inative strategies to overcome, or at least reduce, traffic makes full use of existing capacity, pric- the concerns of interest groups that stand to lose ing for the use of the new infrastructure has to from change, especially those benefiting from be enough to generate revenues for the transit rents. Corridor management arrangements to country such that it does not incur overall net facilitate trade on several corridors have solved costs. some implementation issues and overcome the For the other more indirect costs and ben- natural reluctance of transit countries for tran- efits, transit traffic can sometimes augment sit trade.17 overall volumes enough to induce shipping The importance of policies and attitudes in companies to offer more frequent and direct transit countries has been highlighted by several sailings, better vessels, and lower freight rates authors and policy makers. At the time of the from the transit country ports. This appears to conference Jeffrey Sachs drew the attention to be so in East Africa, where transit trade is about the implication of this dependence of LLDCs.18 a third of total port traffic. The better and more The World Bank is developing a conceptual frequent services can reduce shipping costs to framework for identifying the costs and ben- transit country traders. Similarly, overland tran- efits of a country's providing transit services to sit traffic can, by adding to national traffic, also 10 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 10 10/1/08 11:10:49 AM improve quality and reduce prices of road and Figure 4.1 Categorization of transit countries rail freight services. Negative externalities need regulation and should be reflected in charges for using infrastructure. Evidence on the fourth Complementary products and fifth potential benefits, including produc- tive investment opportunities created, has so A far proved harder than expected to find. But D research is continuing on timber and textile processing on the road between Vientiane and Transit traffic Transit traffic Insignificant Highly significant Bangkok and on minerals-based development B in some parts of Africa. C Trade and investment linkages between the transit country and the landlocked country also directly influence the transit facilitation frame- Competitive products work. Investments by the Thai garment indus- try in Laos helped develop the corridor to Vien- Source: Authors. tiane. The efficient chain of exports of Mali and the Burkinabe exports of mangoes developed from Ivorian investments. few trade competitiveness issues, but measures The relevance of transit traffic to transit to increase the benefits of transit traffic can be countries can be considered in two dimen- implemented that could make its facilitation sions: the extent to which the transit products more attractive. are complementary to or competitive with the Thereisalargegapbetweenwhatroadtrans- products of the transit country, and the impor- port services between landlocked and transit tance of transit traffic to the transport activities countries could cost, based on assessments of within the transit country. Taking these two vehicle operating costs and trucking company dimensions together results in a matrix of four finances, and what they actually cost. West possibilities. and Central Africa indicates that cross-border First are the country pairs where the transit trucking services can incur charges more than country has a strong incentive to support transit 50 percent higher than what a moderately effi- traffic from its landlocked neighbor (A in figure cient operator would charge. Some of the excess 4.1). For most of the transit countries in these is to cover the many informal tolls charged on countrypairslittlemoreneedstobedonetoadd trucks operating on the main highways of the to the incentives already there. At the other ex- region, some to cover the above average vehicle treme are the country pairs where there are few maintenance costs on roads in less than optimal incentives for the transit country to support condition, and some to cover the relative lack transit trade (B in figure 4.1). For the transit of productivity of the trucks. But even when al- countries in these country pairs, with a few ex- lowances are made for all of these, the tariffs are ceptions, there is little that improved trade fa- still unreasonably high. cilitation can do to overcome the product com- The probable explanation is a lack of com- petitiveness issues. The other two groups (C and petition in the way road transport services are D in figure 4.1) are those where there are some provided. Some countries apply a tour de role but not compelling incentives for the transit system, aimed at giving protection to existing country to support transit trade. truck operators and ensuring that the demand Improved trade facilitation has the most to for their services is spread "equitably" among offer to country pairs where the products are them.20 Sometimes the rules require trucks that complementary but where the transit traffic is are not locally owned or registered to go to the relatively unimportant to the transit country. end of the queue. This makes it time-consuming For these countries (D in figure 4.1) there are for an operator to wait for, rather than contract, ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 11 LLDC 1001.indd 11 10/1/08 11:10:49 AM abackhaulload--soitcanbelesscostlyforthem countries market sharing between freight for- to return empty rather than wait. The rules pre- warders keeps a large number of small com- vent shippers and truckers from negotiating di- panies in business. But they have limited fi- rectly for contracts and leave trucks and truck- nancial resources to fund the bonds needed ers waiting in long queues. They can also involve for transit freight. So, they have to wait for reciprocal exchanges of quotas for international existing bonds to be cleared (by the bonded trips, further restricting entry into the market. freight being delivered to its destination or Such schemes affect road transport services leaving the transit country). Any other trucks inthetransitcountryandoncross-bordertraffic have to wait at the border until the existing to landlocked countries. And since the average bonds are cleared. travel distance of transit freight in the transit Changing such systems has proven difficult country is generally much longer than for na- because many individuals and companies ben- tional freight, the impact on each consignment efit from them as they are. The beneficiaries of is greater. any change would be different from the poten- The lack of competition from market-shar- tial losers, who have a high incentive to prevent ing in other transport-related services can also change--and often the political and economic affect transit freight. In some East African strength to do so. 12 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 12 10/1/08 11:10:50 AM noITCes5 Trade facilitation and regional transit systems Landlocked countries depend on transit systems and avoid excessive fragmentation of the supply that allow them to trade with and through their chain and cost escalation (the alternative would neighbors and to facilitate the movements of goods be a succession of imports and exports, loading and vehicles. For most landlocked and transit andunloading).Andinmanyinstancesclearance countries the lack, or inadequacy, of implemen- at the border may not be an efficient solution. tation mechanisms has jeopardized the develop- The transit procedure relies primarily on a ment of seamless transit systems in Europe over private-public partnership: the transit operator the last half century. has freedom of transit in the customs territory Proper transit systems must be in place re- as long as it is qualified and provides financial gionally or at least bilaterally to move goods security to the customs (figure 5.1). Implemen- and vehicles across borders and over land. The tation requires rather simple and universal in- most important constraint is to design a tran- struments and principles, such as: sit regime to move goods in the transit country · Securedvessels(seals). while the duties are collected in the country of · Financialguaranteetofiscalriskofthe destination (landlocked country for imports, or customs of the country of transit. its final commercial partner for exports). Since · Proper documents and tracing the in- World War I international law has recognized bound and outbound shipments in the the importance of accessibility and instituted country of transit. the principle of freedom of transit, such as the · Authorizationoftransitoperators. GATT Art V,21 and the 1958 Geneva Conven- Transitregimesareimplemented,inthefirst tion on High Seas (further developed in the place, by national institutions and private oper- 1982 Montego Bay Convention). ators. But there are major gains in harmonizing In practice, a transit system requires: and chaining a transit regime within a regional · Physicalcross-borderinfrastructure. system, for instance a single document and a · An enabling framework for cross-bor- single guarantee recognized across borders. der operation: specific (bilateral or re- Western Europe went furthest in the devel- gional) agreements, typically a trans- opment of such simple door-to-door transit. It port treaty for the movement of goods began in the 1950s with the Transports Interna- andvessels(suchastrucks).Thismayin- tionaux Routiers (TIR) system, which provides clude movement of vehicles and drivers a reliable system based on a single manifest (car- and mutual recognition of insurance. netTIR)andachainofguarantees,whichelimi- · Adequate transit procedures to imple- nated duplication of procedures and sped move- ment the agreements. mentthroughborders.Thecarnetsorguarantees · Capable national agencies to imple- are produced and distributed through respon- ment the system. sible private channels--road transport associa- · Competentserviceproviders. tions--to professionally and financially quali- The cornerstone of a transit system is the fied freight transporters. A union of national customs regime in both transit and destination associations of operators, the IRU, provides countries. Transit is a delayed clearance regime, oversight and capacity building to the members which developed to facilitate overland trade over handling the work.22 With deepening integra- long distances and potentially several territories tion, this system evolved into a common transit ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 13 LLDC 1001.indd 13 10/1/08 11:10:50 AM Figure 5.1 The principles of implementing transit documentation and guarantees Western Africa the TRIE has been the equiva- lent of the TIR since 1984, but it does not apply regulationsofentry,duetothepressureoftruck- ing lobbies, or proper mutual guarantees. Lesscomprehensivetransitarrangementsare Financial guarantee in place between many landlocked and transit 6. Discharge of guarantee countries. They include agreed documentation, 2. Issue guarantee temporary imports of vehicles, recognition of Customs drivers' licenses, and even acceptance of vehicle 1. Issuing of transit 5. Validate documents 3. Affix / Check 4. Check seals manifest insurance.Someguaranteetocustomsandother seals duties is also necessary, but this often has to be purchasedseparatelyfromacommercialbankfor Initialize transit Country of transit Discharge transit each consignment or vehicle transit (by a freight Source: Adapted from Wulf and Sokol 2005. forwarder, transport operator, or the trading company). Where such agreements are not in system(fortheEUandEFTA)andasingletran- place, a costly and time consuming transfer of sit regime for the EU as a customs union.23 freight from one vehicle to another is necessary. A regional transit regime has long been rec- Theprocessofteninvolvesanintermediatetrans- ognized as beneficial. But except for the exten- fer to another vehicle for the border crossing. sion of the TIR regime to countries trading by Most Asian countries retain considerable land with the EU (former USSR, Turkey), it has restrictions on passage of foreign-registered not yet been replicated in other regions. freight vehicles, and they have no interna- The main reasons for the slow progress are tional transit regime in operation, although the the wide range of institutions whose coopera- ASEAN countries are moving slowly toward tion is required, and their capacity to imple- one (table 5.1). In Latin America the situation ment the transit regime. (In many LLDCs cus- varies but there are still no broad regional tran- toms does not properly trace the manifest and sit systems. A transit agreement between Russia, the bonds.) In many instances the initiative to Mongolia, and China has been under negotia- design a domestic or regional system deviated in tion for a long time and is nearing closure. Al- some significant way from the core principles. though the draft agreement does not include a The lack of trust between the public and private guarantee system, Russia and Mongolia are al- parties and the many concessions to various in- ready members of the TIR system, and China is terests compromise the system. For instance, in negotiating membership. Sub-SaharanAfrica,withneedsinsomeways Table 6 Status of main transit building blocks in developing countries most similar to those of Europe due to the large numberofinlandinternationalfrontiers,ismore East Africa and West Africa and opentointernationalfreightmovementsandhas Building block Latin America East Asia South Asia South Africa Central Africa negotiated a range of subregional transit agree- Restrictive Andean Regional agreements countries Open Very ments. The freedom of movement of vehicles on transport Mercosur Very restrictive restrictive Open Very open is more advanced and effectively implemented Strength of relevant Varies by Varies by than in most other parts of the world. But weak institutions Varies by country country country Weak Very weak Ad hoc national institutions, and inherited mindsets attuned to or per corridor Ad hoc control and rent-seeking rather than to provid- Transit regime and Some components national National systems Nominal, and implementation missing Very weak None No chain almost unused inggoodservicestocompeteforcustomers,have Regulation of resulted in very little effective implementation. transit operators Varies by country Fair Poor Varies by country Very poor The binding constraint is often not the lack Transport market Weak, except structure Varies by country Thailand Weak Good Very weak of regional or bilateral agreements, but the un- willingness to implement them, or the inad- Source: Analysis by World Bank International Trade Department. equacy of implementation mechanisms. 14 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 14 10/1/08 11:10:50 AM noITCes6 filling some of the gaps in implementing the almaty programme The Almaty Programme has stimulated an of the facilitation problem of LLDCs and tran- enthusiastic response from the international com- sit countries have been implemented since Al- munity, including the World Bank. However, a maty, in the form of Trade and Transport Fa- recent review revealed some implementation cilitation audits, often as part of the cooperative gaps. This section gives some examples of activities Integrated Framework program. Data from the designed to fill some of these gaps. Logistics Performance Index and the Doing There has been an explosion of activity by Business indicators27 also help in this effort. the international community to address the Al- Another interagency program to support the maty Programme of Action. An internet search negotiations on trade facilitation at the WTO for publications on trade and transit in land- has assessing needs in many LLDCs (including locked countries in July 2008 produced more Zambia, Rwanda, and Mali). than 33,000 responses. Without diminishing To understand how all these activities are the importance of the others, three of them meeting the Programme of Action and assess taken by agencies other than the World Bank potential gaps, the International Trade Depart- stand out as being indicative of what is being ment of the World Bank instituted a compre- done. In 2003 UNESCAP published a report hensive program on trade and transit facilita- on Transit Transport Issues in Landlocked and tion.Aspartofaninitialreview,theWorldBank Transit Developing Countries24 and went on to produced a report on Best Practices in Manage- produce a method of generating corridor per- ment of International Trade Corridors.28 The formance indicators. In 2006 UNCTAD pub- review revealed that while most of the compo- lished Facts and Figures for Landlocked Develop- nents of the Programme of Action were being ing Countries.25 For the first time this provided addressed to a greater or lesserextent,somewere a data base on which assessment of the overall not receiving the attention they deserved. The performance of LLDCs could be used as a basis implementation gaps were in three areas: for prioritizing actions to address their issues. · Thegenerationofdataandknowledge. The Asian Development Bank produced a com- · Thescopeoftechnicalassistance. prehensive review of the issues facing its land- · Theorientationofinvestments. locked members,26 which goes beyond the Facts This section of the report provides one ex- and Figures to provide more detail on what is- ample of how gaps in each of the three areas are sues are in most urgent need of attention. The being addressed within the overall framework other regional development banks and regional of World Bank activities to address the Pro- UN agencies have undertaken similar activities gramme of Action. in support of implementing the Programme of Action. Trade corridor performance Internationalagencieshavebeenimplement- monitoring ing the Almaty Programme of Action through One of the knowledge gaps was in the inconsis- analysis, technical assistance to reforms and in- tencyofapproachesofdifferentagenciesinmea- vestment projects. The World Bank has been suring corridor monitoring indicators. Interna- active in areas such as corridor facilitation, or tional agencies involved in implementing the customs reforms projects (annex A). Diagnosis Almaty Programme (including UNECE and ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 15 LLDC 1001.indd 15 10/1/08 11:10:51 AM UNESCAP as well as the regional develop- is perishable fresh fruits in refrigerated contain- ment banks) strongly support an international ers.31 The indicators cover cost and time (both agreement on use of a common corridor moni- formal and informal), and their variability, for toring framework, leaving its application to a six main stages in the journey from origin to wide variety of parties. They also support an destination. approach based on factual information, partic- The indicators can be used for three pur- ularly for more detailed performance at border poses. First, they can measure the performance crossings, to complement the subjective assess- of a particular corridor, where most of the costs ments in the LPI and other surveys. and transit times are incurred and where the The LPI and its underlying indicators give greatest uncertainties and unreliabilities occur. valuable information about how countries com- These results will show where improvement in pare with one another and which dimensions of performancewillhavethegreatestimpactonfa- logistics performance most need improvement. cilitation and trade. Since the surveys and anal- However, more specific and precise data are ysis are simple,theycan bereplicatedfrequently, needed about main routes, their reliability, and perhaps every two years. the time and money costs of using them. The second purpose is to see if and where Past studies have not used consistent defini- performance in a corridor is changing over tions of costs and times for assessing corridor time.Thisisparticularlyusefulinshowingwhat performance, or even of the products trans- changes are most likely to be cost-effective. ported. This inconsistency has made it difficult The third purpose is to compare the perfor- to compare the performance of one corridor mance of one corridor with another. The com- with another. More consistency has been intro- parison can be between two corridors linking duced in the last few years through two meth- the same LLDC to a developed country market, ods, one designed by UNESCAP29 and one by between corridors to the same developed coun- USAID.30 But even these two methods are not try market from different LLDCs, to a particu- sufficiently consistent for comparing the results lar developed country market from an LLDC from one method with those from the other. and one of its transit neighbors, or one of the Despite the inconsistencies, a common feature LLDC's main competitors in that market for of studies using both methods is that uncertain- thesameproduct.Thecomparisoncouldevenbe ties in cost and time are more important than between corridors from the same LLDC to dif- their minimum values. ferent developed country markets, to see which The World Bank is now applying a method has the greatest potential for development. that uses the best features of both approaches, A comprehensive review of the trade com- one that is fairly easy to apply and is acceptable petitiveness of an LLDC could involve all three to all interested parties. It measures separately types of comparison. Together, they can provide the performance for imports and exports and indicatorsmorepracticalthanthe moreconven- for maritime transport and land transport. tional country indicators, and they can comple- The system is now being pilot-tested on ment the country data that accompany the Lo- seven major corridors, including three from gistics Performance Index. coastal countries. As for most other corridor Asresultscomeinfromthesevenpilots,and performance indicators, data are collected from a second round of pilots now being planned, the structured interviews with samples of freight Bank will consult intensively with other inter- forwarders, transport operators, and traders, ested agencies to further improve the method together accounting for large proportions of developed. It hopes to reach a consensus on the the products under consideration. For five of basic elements of a common system, or at least the corridors the product group is containerized on core concepts and definitions. This would industrialized products with a value of about enable the investigation and analyses by any US$20,000 per twenty-foot equivalent unit. agency to be largely compatible with those by For the two other corridors the product group others. 16 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 16 10/1/08 11:10:51 AM Some early indications from the first pilots Figure 6.1 Transit times (in days) for export containers from two support and expand many observations from landlocked countries other recent studies32 including: · The times for maritime transport ex- Landlocked country Landlocked country ceed those for land transport, even for transport transport 2 Border crossing 2 the most disadvantaged LLDCs (figure Border crossing 4 3 6.1). The average total transit time for Transit country Transit country an export container from a landlocked land transport land transport 4 7 country to a developed country port is about 50 days and the cost about Maritime Port 3 22 US$4,700 per twenty-foot equivalent Maritime unit. 35 Port 12 · Road transport tariffs in transit coun- tries are higher than truck operating costs. Corridor A Corridor B · Informal tolls add about 8 percent to costs and about 20 percent to times. Source: World Bank Corridor Monitoring Analysis: Ulaanbaatar and Kigali. But the uncertainty they create is far more important. cost penalty is about 30 percent, with · Average time to deliver an export con- a time penalty of about 30 percent for tainer to a ship is about 19 days from exports from LLDCs compared with a landlocked country and 7 days for a those from their transit neighbors. coastal country. More than a third of · Thetimeandcostpenaltiesvarygreatly the difference is taken up by transport from one corridor to another. in the transit country, less than a third Other agencies involved in implementing by transport in the landlocked country the Almaty Programme (including UNECE itself, with an average of two days at the and UNESCAP) strongly support an inter- border. national agreement on a common monitoring · Customs at both the port and the framework, leaving its application to a wide va- border take longer for imports than riety of parties. They also support an approach exports; imports are subject to more based on factual information, particularly for controls. Land transport charges for more detailed performance at border crossings, imports and exports are similar, but to complement the subjective assessments in the maritime tariffs for exports are gener- LPI and other surveys. ally less than those for imports because of the imbalance of trade flows to the Re-engineering transit regimes transit country (imports to LLDCs In the previous section this report showed the consistently exceed exports, leaving importance of transit regimes and the advan- empty capacity on the return leg). tages to LLDCs if they can be implemented. · Timespentinportvarieswidelyforim- The review of activities to implement the Pro- ports, less so for exports. gramme of Action highlighted the lack of · Including the maritime transit in the progress in design and implementation of such total time significantly reduces the regimes. percentage time penalty for landlocked One of the most promising ways to help countries, but has no impact on the ac- countries and regions bring about on-the- tual penalty in numbers of days. The ground improvements to transit trade is to overalltimepenaltyisabout40percent, incorporate into local or regional procedures compared with more than 100 percent the elements that have proved most useful for just the land segment. The overall elsewhere--and notably in Europe, including ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 17 LLDC 1001.indd 17 10/1/08 11:10:51 AM the TIR. Instituting a proper transit regime, transport between the two countries and Cam- by creating or revamping systems, is the key eroon (mainly the port of Douala) is managed to improving the international connectivity under bilateral conventions by freight bureaux of LLDCs. A good transit system will provide enforcing mandatory freight allocations and seamless door-to-door, or ship-to-door, logis- queuing. tics, reducing delays and increasing reliability. The main problems with the existing tran- It will also insist on professional requirements, sit regime included very slow release of goods which are incentives for improving private ser- from the port of Douala, with seven documents vices, such as trucking or freight forwarding. required, all to be cleared by three separate of- Conceptually, the architecture of a func- fices. There were also multiple checkpoints and tional transit regime is universal, whether na- controls on the roads to the landlocked coun- tional or regional. It includes transit manifests, tries. Both transport charges and the guarantees financial guarantees, information for monitor- required from banks were significantly more ing, and the requirements and authorizations of costly than for comparable services in other transit operators. However, and with the excep- countries. The negotiations of the transit group tionofthespecificTIRmanual,thereisadearth set up by the government went through many of standards and guidelines to help countries ups and downs due to the multiple rents in the and subregions implement a re-engineering ef- system and the reluctance of their recipients to fort. And the awareness of most policy makers lose them. on what it takes to implement a working system Thanks mainly to strong leadership and is very low. International organizations could pressure for reform from the Cameroon govern- fill this gap. ment, and especially Cameroon customs, agree- Technical assistance can also be provided to ment was eventually reached on a substantially countries and subregions to promote systemic revised transit system. The main elements: in- changes in their transit regime. Until now, aid troduce one common transit document (based has focused on partial solutions (such as using on the model of the single administrative docu- information technology) but has not addressed ment), remove all check-points on the roads, use changes in architecture or the role of private information technology based on UNCTAD's operators. The challenge is to design a prag- ASYCUDAsystem,addabarcodetothetransit matic sequence for moving toward European document and container with optical reading at best practice. The sequence will take into ac- the start, destination, and border, and simplify count the political economy and the technical transit procedures for use by authorized freight constraints coming from the organization of forwarders who had obtained a standing cus- the freight markets and regional financial ser- toms guarantee from the banking system. The vices, while sticking to the essential working changes are expected to yield substantial ben- principles. efits in shorter delivery times, greater predict- Such an approach has been piloted as part of ability, and lower prices. the Central Africa Transport and Transit Facil- itation Project now being implemented with fi- Diversifying the transportation nancing from IDA, the European Commission, mode: air freight's potential the African Development Bank, and the Agence The review of activities related to the Pro- Française de Développement. The object is to gramme of Action showed that despite a wealth meet the needs of two landlocked countries-- of attention to international aviation agree- Chad and Central African Republic-- that suf- ments, there was still little knowledge of what fer some of the highest international transport conditions favor the development of air freight costs and worst logistics conditions among de- services to land-locked countries. There is even veloping countries. A TIR-based international less understanding of what can be done to stim- road transit convention (TIPAC), signed in ulate the expansion of such services, and what 1991,wasneverfollowedthrough.International benefits such an expansion might bring about. 18 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 18 10/1/08 11:10:51 AM Exports by air from landlocked countries in significant part to the cargo capacity in air have so far been very limited despite air trans- passenger services. Exports of seafood and fresh port's advantages in avoiding many of the com- fish to the US and the EU have been developed plications involved in transiting other coun- by Ecuador (now some US$95 million a year) tries. The World Bank has reviewed the growth and Tanzania (US$70 million), though with of exports by air from the developing countries, some negative ecological consequences (West generally focusing on experiences most likely Nile Perch introduced into Lake Victoria are to be relevant to landlocked countries. Each of incompatible with native species). An interest- the examples that emerged had benefited from ing example in the electronics field is the US$70 particular combinations of factors and circum- million export trade developed by Singapore stances, especially of supply and demand for the on the basis of semi-conductors manufactured product exported. But in almost all cases com- (from air-freighted materials) in the Philippines parable combinations could be offered by some and forwarded for assembly into larger products landlocked countries. Fuel costs rising in line in Malaysia, whence they are air freighted to with present prospects will constrain opportu- OECD countries. nities but not eliminate them. These examples illustrate how air export Among the largest products of relevance are opportunities tend to depend on well-in- the exports of fresh cut flowers from Columbia formed entrepreneurs spotting promising co- to the US and from Kenya and Tanzania to incidences of specific conditions--particularly the EU. While not landlocked countries, these at the source, in low-cost production potential provide valuable lessons on the conditions that for particular goods, and at the market, in scale LLDCs need to emulate their success. The Co- of demand and the prices people are prepared lombian trade was the first to develop, in the to pay. The coincidence can also be in trans- 1970s, and has risen to reach about US$1 bil- port, by availability on the relevant routes of lion a year. Kenya's sales to Europe increased air-freight capacity not fully used and hence greatly in recent years, rising from US$120 available at attractive prices, or in the cost and million in 2002 to US$400 million in 2005. price equation, due to trade preferences or tax The key factors were appropriate year-round subsidies. climatic conditions and good road access from The role of governments in developing air rural growing areas to an airport with interna- freight markets has been marginal, and at times tional passenger services. Analyses of the car- counterproductive.33 Their most effective role bon footprint of flowers flown to the EU show appears to be in the provision of information that it is lower than was required for year-round and resources for investigating the potential of greenhouse cultivation in Holland of the types innovative new markets. They have also proven of flowers replaced by the imports. In the last useful in maintaining skeletal infrastructure few years cultivation of flowers for export by air such as airports in relevant areas (preferably has begun from some landlocked countries, no- with satellite navigation facilities) and good ac- tably Ethiopia and Uganda. There may also be cess to potential areas of production. But they significant potential in Rwanda, perhaps shar- should be very cautious about handling more ing regional freight air services with neighbor- specialized infrastructure, leaving this to pri- ing exporters. vate initiative.34 When private business enter- Other substantial precedents include cloth- prises identify promising potential air freight ing, seafood and fresh fish, and light-weight markets, they benefit from having governments electronic products. For clothing and textiles, ready to adapt existing policies or regulations to air transport is mainly used for high-value and facilitate the trade. Traders benefit when they time-sensitive fashion clothing, and as back-up are ready to accept changes that have a sound transport to more conventional clothing mar- rationale and that avoid creating obstacles to kets. Mauritius' clothing exports to the EU the subsequent development of competing (some US$400 million a year) owes its origin enterprises. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 19 LLDC 1001.indd 19 10/1/08 11:10:51 AM noITCes7 The road ahead The international aid community, transit coun- These tools will be available free to all tries, landlocked countries, and regional organi- countries. zations need to pay direct attention to seven pol- · Further development of knowledge on icy areas likely to have a strong impact on trade howtoharnessglobalizationforgrowth growth. and overcoming poverty, and to inform Among others, the World Bank will sig- key trade policy debates. nificantly expand the number and scope of its Several strategic themes are emerging, from activities that will contribute to the Almaty experience, research, and consultations with Programme of Action, as well as completing other stakeholders. Seven lines of action merit the studies under way and ongoing lending consideration for possible inclusion in country projects. While many activities planned by the or regional strategies, or in future multilateral World Bank for the second half of the Almaty initiatives: Programme period are specific to that Pro- · Support to initiatives by transit coun- gramme, others are part of the expanded World tries to work out with their landlocked Bank efforts to help countries take advantage neighbors detailed plans and time- of the global market to accelerate economic boundtargetsforfull,custom-designed growth and overcome poverty. These areas in- packages of reforms and related mea- clude (annex A): sures to lower the cost and improve the · More support to country programs on quality and timeliness of transit trans- trade and competitiveness, including port services. This support is consistent policy analysis, lending, and technical with the Almaty Programme's empha- assistance. sis on win-win partnerships and bet- · More resources for trade-related ter communications. It is also a logical infrastructure. follow-on to the promising approaches · Expanded programs for financing developed since 2000 in Africa, as il- trade through the Bank's private sec- lustrated by Kenya-Uganda-Rwanda tor arm, the International Finance and more recently Cameroon-Central Corporation. African Republic-Chad. · Expanded assistance in trade facilita- · Under the umbrella of the United Na- tion, including logistics, transport, and tions, small technical working parties supply chains. should prepare drafts of agreed best- · More investments in training and ca- practice standards on four subjects vital pacity building for policy makers, par- to efficient transit: transit manifests, ticularly in low income countries. information systems for international · More work on tools to help countries transit trade including tracing, crite- analyze trade obstacles, as well as in- ria and procedures for designation of dicators comparing countries, such as authorized transit operators, and ar- the recently released Logistics Perfor- rangements for purchasing customs mance Indicators, to guide policy mak- guarantees and border processing of ers to areas in need of improvement. trucks having such guarantees. This 20 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 20 10/1/08 11:10:51 AM work can fit in the work program of trade-carrying corridors between the WTO negotiating party on trade landlocked developing countries and facilitation (GATT Article V), and of major OECD markets, including at theUNECE.Butitwouldbenefitfrom least one for each landlocked coun- the involvement of the World Customs try. To comply with this schedule will Organization, UNCTAD, and private require substantive progress over the parties from the IRU or its member as- next nine months toward agreement sociations and from the banking and on the monitoring system specifica- insurance sector. tions and then, for effective imple- · International agencies, including re- mentation, contributions from many gional organizations, should work to- sources, including developing coun- gether and help re-engineer transit re- try governments, regional and subre- gimes on the ground. This should be gional economic coordination bodies, based on identified best practices, in- and interested aid agencies. cluding the European systems, and · As part of ongoing aid-for-trade initia- anticipate the process of convergence. tives, special attention should be given This can take the form of technical as- to the needs of LLDCs to mobilize sup- sistance along the lines experimented port from all interested aid agencies by the World Bank in Central Africa. and other bodies. This will help ensure · Restructuring trucking markets. Coun- ready technical assistance for the im- tries that have found ways to restruc- provement of transit regimes in coun- ture market-sharing agreements in tries carrying trade to and from land- truckingandrelatedserviceshavemuch locked developing countries. lower trucking tariffs.35 The Bank is re- · Further consideration will need to be viewing successful reforms of trucking given in the coming years to both the need markets to see what features they have for, and means of, providing additional in common and how they can be ap- stimuli to the trade competitiveness of plied in countries that still have highly LLDCs and their capacity to diversify regulated trucking services. A similar their export structure. This has not been review is under way for the reform of highlighted in the current report since related transport service markets, such its task is to identify what can be done as freight forwarding. in trade and transport facilitation to · Generally acceptable corridor moni- reduce trade costs. But countries and toring indicators are needed to assess researchers in the field appear to be progress on changes in logistics and moving toward the conclusion that trade facilitation practices. The aim transport and transit solutions, essen- would be to produce by December tial though they are, need often to be 2009 (and annually thereafter) an in- supplemented by other support, espe- tegrated set of corridor performance cially for initial major export develop- monitoring results covering all main ment initiatives.36 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 21 LLDC 1001.indd 21 10/1/08 11:10:52 AM x World Bank projects nenaa relevant to LLDCs The World Bank is boosting aid for trade of devel- infrastructure, border management, oping countries, focusing on trade and transport and trade transit systems. Examples facilitation for landlocked countries. include regional trade facilitation proj- The World Bank has been supporting the ects in Central, Eastern, and Western agenda of the Almaty Programme with lend- Africa and Central Asia, and Paki- ing, technical assistance, and knowledge gener- stan-Afghanistan. Similar projects are ating projects. To improve the access of LLDCs underpreparationinEastAsia(Greater to regional and global markets, the Bank is tar- Mekong corridors) and in the Ben- geting transit systems, trade-related infrastruc- gal region (India, Bangladesh, Nepal, ture, services, and the capacity of key agencies Bhutan). in landlocked and transit countries. The IBRD · Customsmodernizationprojectsremain and IDA lending for trade-related projects in amajorpartoftheportfolioworldwide. LLDCs, now averaging more than US$1.5 bil- TheBank,withotherdonors,hasdevel- lionayear,hasmorethandoubledsincethePro- oped sustainable assistance to customs gramme of Action started (figure A1). either as stand-alone projects (Laos) or The investment and technical assistance as part of regional projects (Southeast projects directly benefiting landlocked devel- Europe). oping countries include (box A1): · Multimodal transport and railroads · Corridor projects, which typically projects have the potential to reduce cover several countries and simulta- freight costs and carbon footprints. Di- neously address gaps in the transport lapidated infrastructure and declining Figure A1 World Bank lending directly relevant to the Almaty Programme Value (US$ billions) Number of projects 2.0 20 1.5 15 1.0 10 0.5 5 0 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08 Source: World Bank Projects database. 22 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 22 10/1/08 11:10:52 AM service quality have in many cases prevented rail freight from contribut- Box A1 The World Bank Global Trade and Transit Facilitation program ing its full potential. And despite the privatization of most rail freight opera- Initiated 18 months ago, the Trade and Transit Facilitation program revisits the prob- tions, rail transport remains a logistics lems of overland transit trade, especially in landlocked countries. It directly supports constraint for many LLDCs. Sitarail the Almaty Programme of Action. It also involves partnerships with other organiza- in Côte d'Ivoire, serving Burkina Faso tions such as UN­ECE, IRU, and UNCTAD.37 and Mali, Camrail in Cameroon, serv- The program combines research, case studies, indicators, and pilot technical ing Chad and Central African Repub- assistance. The main areas of focus include: lic, and the Central East African Rail- · Corridor management. · Economics of transit and analysis of cost structure for transit supply way, serving Malawi and Mozambique chains.38 could pave the way for a resurgence of · Trade corridor performance indicators for several pilot corridors, and the railways as a competitive access solu- design of a new cost model. tion for LLDCs. The corridor projects · A pilot technical assistance program in Central Africa to redesign the tran- in Eastern and Central Africa include sit regime, to be expanded in one or two other regions in fiscal 2009. railways. · Performance and impact of alternate modes of transportation, such as · Investment and capacity building in air freight. aviation is also essential to promote ac- Source: www.worldbank.org/trade. cess, notably compliance with interna- tional safety standards. Air freight can offer access to international markets Table A1 World Bank LLDC commitments by region for niche products from LLDCs. New since the Almaty conference technology for in-flight air traffic con- trol can keep costs low while maintain- Other trade development Almaty relevant projects projects for LLDCs ing or even improving safety. The Bank Region US$million Projects US$million Projects has developed regional projects in West Africa 1,786 21 2,263 41 Africa and Central Africa. East Asia and the Pacific 106 2 83 6 The International Finance Corporation Eastern Europe and Central Asia 1,064 9 1,007 15 (IFC)alsocontributestotheseobjectives,aswhen Latin America 74 1 30 1 financing transport services and investment op- South Asia 148 2 84 3 erating on trade corridors serving LLDCs.39 It contributed to the privatization of the rail- Source: World Bank Projects database. way system in the two eastern Africa corridors (Northern corridor through Kenya, Central Most of the lending, both by number of corridor through Tanzania). Projects in gateway projects and value, has been for the Africa re- countries, such as port improvement or customs gion. In general the distribution of lending by reform, often directly contribute to reducing the both measures has been similar across regions, trade costs of landlocked countries by address- except for East Asia where the average project ing problems in the transit country, even though sizehas beenaboveaverageand EastEuropeand they are not explicitly the trade of the hinterland Central Asia where it has been below average. and are not counted in these statistics. Projects directly related to the Almaty agenda, Regional projects in energy and telecommu- atanaverageofjustunderUS$100million,have nication also contribute to reducing the costs of been almost twice the size of other projects in- being landlocked, for instance by reducing reli- directly related to LLDCs. ance on imported fuel. The World Bank is help- ing landlocked Malawi connect to the large Ca- Advisory support hora Bassa hydropower dam in Mozambique. The Bank and other international agencies Private sector development projects also con- have been backing lending programs with tribute to this broader objective. advisory work to facilitate trade and improve ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 23 LLDC 1001.indd 23 10/1/08 11:10:52 AM have been covered, in some cases more than Box A2 Trade and transport facilitation audits once, which can contribute to the preparation or design of lending projects. The facilitation audit diagnoses, as comprehensively as possible, procedural or op- erational constraints to external trade and international transportation services. The Knowledge, data, and toolkits three main areas are the procedures and regulatory requirements for international The World Bank has also stepped up knowledge trade transactions, the efficiency and market structure of transport services and and analytical activities directly relevant for the infrastructures, and the measurement of costs and delays. This analysis is carried facilitation of trade of landlocked countries, out through interviewing of private sector operators and public agencies. including: The methodology published by the World Bank as Trade and Transport Facili- tation: a Toolkit for Audit, Analysis and Remedial Action is available on the Global · New data such as the Logistics Perfor- Facilitation Partnership website (www.gfptt.org). An updated version of this toolkit mance Indicators (LPI). is being prepared. · The publication of toolkits for policy makers and development--a customs modernization handbook, for instance export competitiveness. Most LLDCs have (box A2). taken advantage of eligibility to the Integrated · Innovative regional studies, such as a Framework program to contract for Diagnos- recent truckers' survey in Africa. tic for Trade Integration Studies. Similar work The Bank also initiated a specific program has been implemented for many countries that targeting trade and transit facilitation for are not eligible. Since 2003 almost all LLDCs LLDCs. 24 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 24 10/1/08 11:10:52 AM List of landlocked developing countries and transit countries Country name Transit countries Subregion Afghanistan Pakistan, Iran South Asia Armenia Georgia, Turkey Europe­Central Asia Azerbaijan Georgia, Turkey, Russia, Iran Caucasus Bhutan India South-Asia Bolivia Chile, Argentina, Brazil, Peru Latin America Botswana South Africa, Namibia Southern Africa Burkina Faso Côte d'Ivoire, Togo, Ghana Western Africa Burundi Kenya, Tanzania East Africa Central African Rep. Cameroon Central Africa Chad Cameroon Central Africa Ethiopia Djibouti East Africa Kazakhstan Russia Europe­Central Asia Kyrgyz Rep. Russia, Kazakhstan Europe­Central Asia Lao PDR Thailand, Vietnam East Asia Lesotho South-Africa Southern Africa Malawi South-Africa, Mozambique Southern-Africa Mali Côte d'Ivoire, Togo, Ghana, Senegal Western Africa Moldova Europe Mongolia China, Russia East Asia Nepal India South Asia Niger Togo, Benin Western Africa Paraguay Argentina, Brazil Latin America Rwanda Kenya East Africa Swaziland South-Africa, Mozambique Southern-Africa Tajikistan Russia, Kazakhstan, Uzbekistan Europe­Central Asia Turkmenistan Russia, Kazakhstan, Uzbekistan, Iran Europe­Central Asia Uganda Kenya East Africa Uzbekistan Russia, Kazakhstan Europe­Central Asia Zambia South-Africa, Mozambique, Tanzania Southern Africa Zimbabwe South-Africa, Mozambique Southern Africa Macedonia (FYR) Europe ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 25 LLDC 1001.indd 25 10/1/08 11:10:52 AM notes 1. http://www.worldbank.org/lpi. party, via the routes most convenient for international 2. Calculated values for total GDP and GDP per capita depend transit, for traffic in transit to or from the territory of other very much on the units. To aggregate data for different contracting parties." countries a common currency is needed, and US dollars 22. Union Internationale des Transports Routiers, are used. To take out the effects of inflation, constant value headquartered in Geneva. US dollars are used. Estimated growth rates in GDP and 23. The EU is a real customs union where duties can be GDP per capita are not so dependent on the units. So far collected at the border of the Union, irrespective of the as possible all data is expressed in constant US$2000 final destination. Two other examples are Switzerland- and used per capita GDP and its growth rate rather than Liechtenstein and the South African Customs Union. total GDP. 24. UNESCAP (2003). http://www.unescap.org/publications/ 3. MacKellar, Landis, and others; Wörgötter and Wörz (2000). detail.asp?id=987. Economic Development Problems of Landlocked Countries. IHS Transition Economic Series No. 14, Institut für Höhere 25. UNCTAD (2006). http://www.unctad.org/Templates/ Studien, Wien. webflyer.asp?docid=7273&intItemID=3617&lang=1. 4. Collier, Paul (2007). 26. ADB (2006). http://www.adb.org/Documents/Reports/ ca-trade-policy/. 5. The transit countries include some from all per capita income groups. 27. http://www.doingbusiness.org/. 6. A higher threshold for imports than exports is used 28. http://www.worldbank.org/transport , Publication and because for LLDCs the total value of imports is more than Reports, under Knowledge Resources. double the total value of exports. 29. UNESCAP (2004). http://www.unescap.org/ttdw/index.asp 7. Arvis and others (2007). ?MenuName=RouteStudiesWelcome. 8. http://www.doingbusiness.org/. 30. http://www.satradehub.org/index.php?id=543. 9. http://www.weforum.org/en/initiatives/gcp/Global 31. Perishable goods are included because some landlocked percent20Competitiveness percent20Report/ index.htm. countries have climates appropriate for their production. 10. Limão and Venables (2001), p. 452. 32. The initial findings are presented for average corridors, but the real value of the corridor approach is in the details 11. The only capital city of an LLDC not having all-weather it reveals for each corridor. There is wide variation among access is Bangui, but a paved road to Douala is being built. corridors in their costs, times, and variations for each of 12. Arvis, Raballand, and Marteau (2007). the six stages of transit considered. The details of these 13. In the summer of 2008, the main route to Burkina Faso variations are lost in the averages. from the port of Lomé was interrupted when bridges where 33. For example, in providing subsidies for trade that turns out washed away, implying several delays to move the cargo to be unsustainable. through Benin and Ghana. 34. Building cold storage facilities at airports does not appear 14. Lower taxation or subsidies of diesel in LLDCs are to have influenced the development of air freight in potentially a fiscal drain, as truckers from transit countries perishable products. will fill up in the LLDCs. 35. A recent review of the impact of trucking market 15. Raballand and Teravaninthorn (2008). reform in Rwanda indicated a 50 percent reduction in 16. Arvis, Raballand, and Marteau (2007). truck tariffs ten years after the reform took place in 17. Arnold (2006). 1994. Similar results were found for trucking market reforms in Mexico. (see http://lnweb90.worldbank. 18. Sachs and others (2004). org/oed/oeddoclib.nsf/DocUNIDViewForJavaSearch/ 19. This is where the marginal revenue exceeds the marginal 02BA59E41714B982852567F5005D8A07) cost. When the transit traffic creates a need for additional 36. In addition to Collier (2007), see Collier and Venables (2007). infrastructure capacity the marginal cost might increase 37. The program was made feasible by a grant of the Bank of more than the marginal revenue. Netherlands Partnership Program. 20. Under these systems clients are forced to use the trucker 38. Arvis, Raballand, and Marteau (2007). who has been waiting longest. 21. Article V of the GATT (1947) states that "there shall be 39. Over the period, IFC financed four projects directly relevant for the Almaty Programme (all in Africa) for about freedom of transit through the territory of each contracting US$85 million. 26 ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes LLDC 1001.indd 26 10/1/08 11:10:52 AM references Arnold, J. 2006. "Best practices in management of International Southern Africa Global Development Hub. 2007. "Issue No. Trade Corridors." Transport Paper 13. World Bank, 46: A monthly update of upcoming activities from the SA Washington, DC. 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"Transport price [http://www.integratedframework.org/]. and cost in Africa, Direction in Development." World Bank, Washington, DC. http://www.worldbank.org/transport, Publication and Reports, under Knowledge Resources. Sachs J., M. Faye, J. McArthur, and T. Snow. 2004. "The Challenges Facing Landlocked Developing Countries." Journal of Human Development 5. 5 (1): 32­68. ImprovIng TraDe anD TransporT for LanDLoCkeD DeveLopIng CounTrIes 27 LLDC 1001.indd 27 10/1/08 11:10:53 AM