Connecting Landlocked
Developing Countries to
Markets
Trade Corridors in the 21st Century
Edited by
Jean-François Arvis, Robin Carruthers,
Graham Smith, and Christopher Willoughby
CONFERENCE EDITION
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CHAPTER 1
Landlocked Developing Countries
and Their Developmental
Challenges: An Overview
A landlocked country has inherent disadvantages compared to countries
with seacoasts and deep sea ports. Trade is more difficult because access to
most international markets is more costly. Developing countries that are
landlocked, many among the world’s poorest countries, have even greater
economic disadvantages: typically they are isolated from major markets
and have small economies, limited natural resources, weak institutions,
and, in many cases, a recent history of conflict. They also have disproportionate numbers of poor people whose plight has drawn the attention of
the international community.
In 2001, the United Nations (UN) set up a special office to address the
needs of the least developed countries, landlocked developing countries
(LLDCs), and small island developing states. Thirty-one LLDCs joined this
group (listed in table 1.1). They are home to some 360 million people,
more than 6 percent of the developing world’s population. The largest concentration of landlocked countries and populations is in Sub-Saharan
Africa; the 15 fully landlocked African countries have a combined population of more than 220 million, nearly 30 percent of the region’s total. Sudan
and the Democratic Republic of Congo, which account for 12 percent of
the region’s population, are de facto landlocked, that is, they have only short
coastlines, far from their cities. Seven other longer standing LLDCs are
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Connecting Landlocked Developing Countries to Markets
Table 1.1
Landlocked Developing Countries
Region
Eastern Africa
Southern Africa
West Africa
Central Africa
South Asia
Central Asia
Caucasus
Eastern Europe
East Asia
Latin America
Total
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Country
Burundi
Ethiopia
Rwanda
Uganda
Botswana
Lesotho
Malawi
Swaziland
Zambia
Zimbabwe
Burkina Faso
Mali
Niger
Central Afr Rep
Chad
Afghanistan
Bhutan
Nepal
Kazakhstan
Kyrgyz Rep
Tajikistan
Turkmenistan
Uzbekistan
Armenia
Azerbaijan
FYR Macedonia
Moldova
Lao PDR
Mongolia
Bolivia
Paraguay
Population
(million)
GNI
($ billion)
GNI (PPP)
per head ($)
8.5
79.0
9.7
31.0
1.9
2.0
14.0
1.1
12.0
13.0
15.0
12.0
14.0
4.3
11.0
—
0.6
28.0
15.0
5.2
6.7
5.0
27.0
3.0
8.6
2.0
3.8
5.9
2.6
9.5
6.1
358.0
0.9
17.6
3.1
11.3
11.5
2.1
3.5
2.9
9.2
4.5
6.4
6.1
4.0
1.6
5.8
8.1
1.2
9.8
77.7
3.2
3.1
—
19.7
7.9
22.6
7.1
4.1
3.7
3.4
12.0
10.5
285.0
330
780
860
1,040
12,880
1,940
760
4,890
1,190
—
1,120
1,040
630
710
1,280
—
4,980
1,060
9,600
1,980
1,710
4,350
2,430
5,870
6,570
9,050
2,800
2,080
3,170
4,150
4,520
Source: World Bank data for 2007 or most recent year.
GNI = gross national income; PPP = purchasing power parity.
Note: The countries eligible to borrow from the World Bank (“Part Two Countries”) include three more LLDCs:
Belarus, Kosovo, and Serbia, which have not joined the UN group.
dispersed worldwide. They account for around 3 percent of the population
of two large regions: South Asia, with Afghanistan, Bhutan, and Nepal, and
Latin America, with Bolivia and Paraguay. The two landlocked countries of
East Asia, Laos and Mongolia, account for less than one-half of 1 percent of
that region’s population.
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Landlocked Developing Countries and Their Developmental Challenges
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In the 1960s through 1980s, LLDCs in Africa received economic aid
and advice as part of the international community’s attention to Africa
and other least-developed nations. However, they were given no special
consideration as a group.
Since the 1960s, the international community has increased its efforts
to improve international transport links for landlocked countries. For
example, urgent assistance was provided to help develop trade route
alternatives when political problems in the transit countries threatened to
interrupt operation of key routes to the sea, such as those from Zambia
in the 1970s and Malawi in the 1980s. Efforts were made to enable Africa
and other developing regions to open up their markets for international
road transport, applying elements of the reforms developed in Europe
after World War II.
In the 1990s, nine of the 15 former Soviet republics were added to the
list of landlocked countries when they gained independence, as were
three former Yugoslav republics (and a fourth, Bosnia, which is very
nearly landlocked). Nine of these nations meet the UN defintion of
LLDC. They account for some 80 million people, or more than 15 percent of the total population of Eastern Europe and Central Asia. As they
struggled to set up international borders and border agencies and their
income levels collapsed to less than half what they had been under the
Soviet Union, these countries received financial aid and advice as part of
the international community’s efforts to stabilize their economies in the
difficult transition period of the 1990s.
When the Cold War ended, the conviction that more open trade promotes economic growth gained prominence. The General Agreement on
Tariffs and Trade (GATT) was transformed into the World Trade
Organization (WTO) in 1995, and increasing numbers of countries
signed on. Also during the 1990s, the information technology revolution
and the development of the “Washington consensus,” an approach to help
reform the economies of crisis-wracked developing countries, greatly
expanded world trade volumes and brought in many new players seeking
to improve their competitiveness.
The WTO’s early focus was on lowering tariffs, mainly for imports. As
progress was made on that front, the international community became
more aware of the “softer” problems that are now listed under “facilitation,”
and began to channel international efforts into identifying and finding solutions for the more acute problems. The current Doha Round of WTO negotiations, launched in 2001, seeks to extend trade benefits to countries not
caught up in the initial “globalization” boom, as Thomas L. Friedman
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Connecting Landlocked Developing Countries to Markets
describes in his book, The World Is Flat: A Brief History of the Twenty-First
Century.
The 1990s saw rising concern in the development community about
the special difficulties landlocked countries face in a world where economic development is increasingly dependent on trade. As a result, the
Millennium Development Goals, which were adopted by the heads of all
governments at the UN in September 2000, include explicit commitment
“to address the special needs of landlocked developing countries.” Initiatives
also were launched at that time to make the world’s trading system more
inclusive.
As one of these initiatives, the UN organized the first global conference on the problems of landlocked developing countries, held in
Almaty, Kazakhstan, in 2003. It brought together the international
community at the ministerial level to focus on ways to overcome the
difficulties of LLDCs and their transit neighbors in ensuring reliable
and efficient transport. The resulting Almaty Programme of Action
stressed the need for major reforms over the next decade to overcome
inefficiencies as well as the need for investment to reduce operating
costs and delays. The 2008 mid-term review of the program reported
significant, faster progress with some positive results already visible, but
it called for acceleration to achieve solid improvements by 2013, the
tenth anniversary of the Almaty conference.
Transit Neighbors and Trade Corridors: Relationship Issues
Most landlocked countries depend on one or two overland routes through
“transit neighbors,” neighboring countries that have agreed to provide
access to LLDCs to carry their international trade to and from the sea. The
relationship raises many potentially divisive issues: infrastructure provision, maintenance and compensation; vehicle and driver entry rights,
licensing, and insurance. Customs agneices of both parties fear that the
merchandise will be disposed of en route without paying duties. Additional
issues relate to bilateral trade and transit of passengers between the LLDC
and its transit neighbors. The evidence shows that LLDCs have indeed
generally faced greater difficulties than coastal countries in expanding
international trade and increasing their incomes.
Infrastructure Support
Infrastructure has had its ups and downs in the agendas of the international aid community. Since about 2000, infrastructure has regained
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recognition as a critical requirement for growth, and funding for it has
recovered. Some international corridors have benefited from this assistance, notably, the Northern Corridor in East Africa and the Maputo
Corridor between South Africa and Mozambique.
Customs Reform
At the same time, international financial institutions have for the first
time become substantially involved in customs reform—notably the
Trade and Transport Facilitation for Southeast Europe program, under
which the World Bank, European Union, and other donors supported
customs modernization and related reforms in eight Balkan countries
between 2000 and 2004. This involvement showed the importance of
mobilizing sustained support for such reforms from the trading community (private sector), and also the importance of cross-border cooperation among governmental agencies (for example, customs at paired
border checkpoints).
Commodity Price Fluctuations
In the period from about 2003 to 2008, commodity prices—oil, minerals, and foodstuffs—rose rapidly throughout the world, to the benefit
of those landlocked countries rich in natural resources, in all regions.
China became very active in purchasing raw materials, especially in
Africa. As a result, resource-rich LLDCs recorded fast economic growth
and began to close the income gap with coastal neighbors. On the other
hand, those LLDCs that lacked natural resources faced ever harder
choices as their import bills soared and their trade deficits grew. At the
same time, some African LLDCs—notably, Ethiopia, Lesotho, and
Uganda—introduced policy measures to promote trade that proved effective. Thus, in this period, some LLDCs made significant progress, while
others faced ever greater economic hardship. What both groups had in
common is that they remained vulnerable to unforeseen sudden changes
in commodity markets.
Further Efforts Needed
A review by the UN of the progress under the Almaty Programme of
Action in 2008 showed some progress in pinpointing where “landlockedness” hurts and the reported progress in measuring its effects. Many
efforts so far had stressed infrastructure, technology, and legal instruments. However, these missed the social and political dynamics. First,
infrastructure, while a necessary condition, was not sufficient: thanks to
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large investments over the past two decades, landlocked countries no
longer suffer from bad roads much more than do the inland areas of transit countries. Second, technology, while undoubtedly helpful, was not
indispensable: the principles underpinning freedom of transit were in
operation for centuries before computers were invented. Third, it was not
for lack of legal instruments and treaties that success had been elusive. If
anything, there were too many of these, since much of what they contained has not been implemented.
Impact of the Global Financial Crisis
The vulnerability of LLDCs became very clear when the global financial
crisis hit in 2008–09. The advocacy for freer trade had presumed that
expanded trade was a “win-win” proposition for all participants—though
evidence suggested that, within countries, income distribution had become
more inequitable. The concern for LLDCs was that, because they had been
missing out on expanded trade, they had been getting poorer—if not
absolutely, then at least relatively. Now many nations have responded to
the crisis by taking protectionist measures, which, if sustained, will reduce
world trade and leave everyone poorer. However, the World Bank advises
against protectionism, whether countries are coastal or landlocked.
It is noteworthy that, during this crisis, LLDCs with substantial natural
resources did well while commodity prices were high. Some can expect to
find themselves in crisis if the global slump continues, unless they can
adjust their economies quickly. Diversifying their trade is one option for
adjusting; this World bank advice to the other LLDCs is valid for them, too.
This brings us to the present study. The World Bank’s global perspective
gives it an advantage in detecting common features across regions, learning
from the access problems and solutions of LLDCs in one region, and seeing the potential for application of those lessons in other regions, from
Mongolia to Bolivia, from Malawi to Armenia. The objective common to
all LLDCs is to connect effectively to international markets through
affordable and reliable supply chains.
A New Conceptual Framework
A review of the latest analytical research and evidence leads to the
conclusion that the best prospect for LLDCs to overcome their inherent disadvantage is to focus on international corridors integrating four
elements: infrastructure, regulatory reform, cross-border cooperation,
and private-sector support.
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This conceptual framework for viewing the access problem of landlocked countries differs from the traditional vision on the part of governments that focussed on physical infrastructure and emphasized
control, that is, the state-led access solution embodied in many treaties
still in force. Instead, the environment needs to be created for the private sector to deliver affordable and reliable services. This puts the role
of policies and cross-border cooperation in a different perspective.
This report summarizes the authors’ conclusions from the above analysis, identifying the critical areas for action and cooperation and recommending a policy and aid agenda for the international community, with an eye
to the Almaty Programme of Action target of achieving visible improvements by 2013.
The central objective of this book is to clarify the conceptual framework for a transit system for LLDCs and its components, what does and
does not work. This framework is based on three major assumptions. The
first assumption is that, at the heart of a functioning transit system is a
private/public partnership, a relationship between competent logistics
operators and the authorities of the country of transit that is mutually
beneficial and, in some sense, contractual. The second assumption is that
the principles of working transit procedures are essentially universal and
low-tech, the fruit of millennia of evolution, with variants depending
upon the degree of regional integration. The third assumption is that,
while managing transit is part of each country’s sovereignty, huge gains
may be realized from integrating transit systems within a region. Very efficient systems developed in Europe after World War II are the de facto
benchmarks for such transit regimes.
“Transit systems” refers here to the infrastructure, legal framework,
institutions, and procedures serving trade corridors, seen as a whole.
Conceptually a transit system must have the following components:
1. Political commitment to allow transit trade, formalized in treaties that
can be bilateral, regional, or multilateral.
2. The physical infrastructure, including border checkpoint facilities.
3. The capacity and competence of the public and private institutions
and people involved in the movement of goods along a trade corridor
to include:
• public agencies in the country of transit supervising the flow, mainly
customs and other agencies involved in controlling international
trade and transportation
• transportation services, including the trucking industry, customs
brokers, and freight forwarders.
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4. The legal and administrative provisions and procedures for moving
goods, including:
• Customs’ mechanisms for implementing the transit of goods
• Complementary mechanisms to facilitate the movement of vehicles
and people, including vehicle regulations, visas for drivers, insurance, and law enforcement.
Structure of the Report
This book is organized as follows.
Chapter 2 aims to show the importance for LLDCs of obtaining
affordable and dependable access. It reviews the commodities typically
exported by LLDCs and notes their vulnerability to global shocks, such
as the commodity price boom of the past decade and the financial crisis
that followed in 2008–09, as well as regional and national conflicts and
extreme weather. It presents recent evidence on the cost and time penalties incurred by the trade flows of LLDCs vis-à-vis their coastal neighbors, which fall especially on imports.
Chapter 3 focuses on the relationship between an LLDC and the transit country or countries it relies on for access to its markets. It assesses the
political economy inherent in that relationship: what each party stands to
gain from it and what economic policies and institutional arrangements
should be promoted to make the relationship beneficial to both sides,
within the recommended framework of public-private cooperation. In
particular, this chapter addresses the question of how an LLDC can gain
leverage to ease the constraints imposed by the reality of its access to markets depending on the goodwill and agreement of its neighbors.
Chapter 4 examines the concept of a transit corridor, with attention to
good practice in its management and how its performance can be measured consistently, in a way that best allows comparison across corridors.
The framework for the regional cooperation needed for trade and
transport is presented in chapter 5, which forms the core of this study.
This chapter sets out the universal principles that should underpin a transit system for LLDCs. The working details of the transit regime are
described in chapter 6, with reference to current experience in different
regions.
One of this study’s main policy recommendations is to reform the regulation of the road transport industry for freight (trucking), encouraging
the development of high-quality service among firms operating across
borders. Only through such quality improvement is the paradigm of
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mutual trust between transporters and border control agencies likely to
be achieved. How this can be done is explored in chapter 7.
Although road transport will remain dominant in the flow of goods
along most transit corridors, railways, air freight, and inland waterways
offer unrealized potential in certain markets. Chapter 8 examines the
conditions under which these forms of transport can best play this role,
and the policy implications for LLDCs. It also looks at the potential for
facilitating logistics services and e-commerce.
Chapter 9 concludes the book by bringing together the main policy recommendations that emerged from the study. Most of these recommendations are addressed to governments and private stakeholders involved in
trade along transit corridors. But suggestions are also offered on how the
international community can reorient its support to best effect.
Several appendixes provide supporting analysis of individual trade corridors, institutional arrangements region by region, and regional transit
systems and regimes.
Vision for the Future
The implementation of the recommended conceptual framework and its
main components will make landlocked developing countries more active
and successful participants in world trade. The framework does not
require major investments or resources, but primarily a change of mindset, departing from the vision of state-led access programs with emphasis
on infrastructure investment. Rather, the new vision for the future is that
of seamless transit systems involving mutually beneficial partnerships
between the governments of the landlocked and transit countries as well
as a more cooperative, facilitating relationship between them and the private logistic services operating in the trade corridors. This objective can be
achieved in a relatively short time with a catalytical contribution from
international agencies, not only in financial support and technical assistance, but also through harmonization of practices and procedures related
to transit and the trade corridors.
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Address:
Washington Office
1818 H Street NW
Washington, D.C.
20433, USA
Website: www.worldbank.org/trade
E-mail: [email protected]