Public Disclosure Authorized 95447 Improving Trade and Transport for Landlocked Developing Countries Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized A Ten-Year Review World Bank-United Nations report in preparation for the 2nd United Nations Conference on Landlocked Developing Countries (LLDCs) Improving Trade and Transport for Landlocked Developing Countries A Ten-Year Review World Bank-United Nations report in preparation for the 2nd United Nations Conference on Landlocked Developing Countries (LLDCs) November, 2014 Table of Contents Acknowledgements.................................................................................................................................... v Abbreviations.......................................................................................................................................... vii Foreword.................................................................................................................................................. ix Introduction............................................................................................................................................. xi Chapter 1  Economics of Landlockedness.................................................................................................. 1 Impact of Landlockedness on Development, Economic Growth and Trade Flows.................................................. 2 LLDCs: Little Diversification in Export Composition and Export Markets .............................................................. 7 Chapter 2  Connectivity Constraints.......................................................................................................... 9 LLDCs: Logistics Performance............................................................................................................................... 9 LLDCs still Face High Trade Costs........................................................................................................................ 11 Chapter 3  Hinterland Connections: Efficiency of Transport and Logistics Services................................. 17 Networks and Connectivity of Freight Terminals ................................................................................................. 18 Ports as Gateways to the Hinterland: The Case of West Africa........................................................................ 19 The Development of Rail Freight Terminals: Some insights from Central Asia................................................. 20 Road Transport and Logistics Services.................................................................................................................. 22 Challenges in the Trucking Industry................................................................................................................ 22 Quantitative vs. Qualitative Criteria for Access to Road Market...................................................................... 24 Improving Availability and Quality of Road Transport Services....................................................................... 25 Air Transportation................................................................................................................................................ 26 Other Transport and Logistics Services................................................................................................................. 29 Forwarders and Customs Brokers................................................................................................................... 29 Chapter 4  Transit and Trade Facilitation, Regional Integration ............................................................... 31 Importance of Regional Initiatives: Transit Systems and Components .................................................................. 31 What is Transit?.............................................................................................................................................. 33 Transit Trade is Still Being Overlooked........................................................................................................... 35 Regional Transit Systems ............................................................................................................................... 36 Other Transit Systems..................................................................................................................................... 37 Simplification of Procedures: Trade and Transport Facilitation............................................................................. 39 WTO Trade Facilitation Agreement (Bali Agreement)...................................................................................... 40 International Treaties...................................................................................................................................... 41 The Role of International Instruments............................................................................................................. 41 Land Border Crossing Points ............................................................................................................................... 42 Information and Communications Technology (ICT) as trade enabler............................................................. 43 iii iv Improving Trade and Transport for Landlocked Developing Countries Chapter 5  Physical Connectivity, Corridors............................................................................................ 47 Roads and Highways .......................................................................................................................................... 47 Harmonization of Road Design Standards...................................................................................................... 48 Standardization of Axle Load Limits, Vehicle Weights and Dimensions ......................................................... 49 Modalities for Infrastructure Cost Recovery (coupons, carnet, fuel levies, and tolls) ...................................... 50 Reviving Railway Systems................................................................................................................................... 50 International Interconnectivity Including Gauge Interoperability.................................................................... 51 Small Volumes of Traffic—Lack of Economies of Scale, Availability of Backhaul Loads................................... 52 Stiff Competition from Road Transport............................................................................................................ 52 Management and Operation of Railways across Borders ............................................................................... 53 International Border Crossings....................................................................................................................... 54 Ownership of Containers............................................................................................................................... 55 Infrastructure Investments to Connect Missing Links...................................................................................... 55 Intermodal Facilities............................................................................................................................................ 57 Addressing the Challenge of Infrastructure Maintenance..................................................................................... 57 Conclusion.............................................................................................................................................. 59 References............................................................................................................................................... 61 Annexes................................................................................................................................................... 63 Annex 1:  List of LLDCs and Transit countries..................................................................................... 64 Annex 2:   LLDCs: Economic and Social Context............................................................................... 65 LLDCs: Share of Top Five Products in Total Goods Exports, HS1996, 2-digit...................... 67 Annex 3:    Annex 4:  LLDCs: Share of Top Five Export and Import Partners ......................................................... 69 Logistics Performance of Landlocked Developing Countries (1=low to 5=high).................. 72 Annex 5:   Annex 6:  Doing Business Indicators “Trading Across Borders”.......................................................... 74 Annex 7:  The Trade Enabling Index................................................................................................... 76 Annex 8:  LLDCs: Access to ICT Infrastructure................................................................................... 77 Annex 9:  Maps of Landlocked Developing Countries ....................................................................... 79 Annex 10:  Institutional Support to LLDCs......................................................................................... 82 Annex 11:  LLDCs’ Participation by Instrument.................................................................................. 89 Acknowledgements T his joint World Bank-UN report was prepared by the World Bank’s Trade and Competitive- ness Global Practice Department and the United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and the Small Island Developing States (UN-OHRLLS) , under the guidance of Anabel Gonzalez (Senior Director), Mona Haddad (Practice Manager, Trade), Marc Juhel (Practice Manager, Transport), and Sandag- dorj Erdenebileg (Chief Policy Development, Coordination, and Reporting Service). The project leaders and main authors were Jean- Nicholas Jones, Daniel Saslavski, Gozde Isik, François Arvis (jarvis1@worldbank.org) and Karlygash Mombert Hoppe, Charles Schlumberger, Anasuya Raj Dairabayeva (kdairabayeva@worldbank.org). Authors and Patrick Ibay, Swarnim Wagle for the World Bank included Alberto Portugal (aportugalperez@world- and Dagmar Hertova and Gladys Mutangadura for bank.org), Charles Kunaka (ckunaka@worldbank.org), the UN contributed case studies, data, and graphical Cordula Rastogi (crastogi@worldbank.org), Olivier material. Hartmann (ohartmann@worldbank.org), and Virginia Tanase (vtanase@worldbank.org). v Abbreviations APoA Almaty Programme of Action AEO Authorized Economic Operator ASYCUDA Automated System for Customs Data ATP Agreement on the International Carriage of Perishable Foodstuffs and on the Special Equip- ment to be Used for Such Carriage CAREC Central Asia Regional Economic Cooperation CCTTFA Central Corridor Trade and Transport Facilitation Agency CIF Cost, Insurance & Freight CIM-SMGS CIM – Uniform Rules Concerning the Contract of Consignment, International Carriage of Goods by Rail; SMGS – Agreement Concerning International Freight Traffic by Rail (OSJD) CMR Convention on the Contract for the International Carriage of Goods by Road CPMM Corridor Performance Measuring and Monitoring CU Customs Union DPL Development Policy Lending DPO Development Policy Operation ECOWAS Economic Community of West African States EDI Electronic Data Interchange EU European Union EAC East African Community ECOWAS Economic Community of West African States GATT General Agreement on Tariffs and Trade GDP Gross Domestic Product GVC Global Value Chain LLDCs Landlocked Developing Countries LPI Logistics Performance Index MDTF Multi-Donor Trust Fund NCTS New Computerized Transit System NTMs Non-Tariff Measures vii viii Improving Trade and Transport for Landlocked Developing Countries IRU International Road Transport Union ICT Information Communications Technology OSBP One-stop border post PPP Purchasing Parity Power PPP Public-Private Partnership RECs Regional Economic Communities SACU Southern African Customs Union SADC Southern African Development Community SCO Shanghai Cooperation Organization SSATP Sub-Saharan Africa Transport Policy Program TEU Twenty-foot equivalent unit (= standard international container) TF Trade Facilitation TIR Transports Internationaux Routiers – International Road Transport TRACECA Transport Corridor Europe-Caucasus-Asia UN United Nations UNECE United Nations Economic Commission for Europe UN-OHRLLS United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States UNCTAD United Nations Conference on Trade and Development UNECA United Nations Economic Commission for Africa VAT Value Added Tax WAEMU West African Economic and Monetary Union WEF World Economic Forum WTO World Trade Organization Foreword H istorically, geography can influence economic development in many ways. While some countries, including a few landlocked countries have benefited from their central location, the majority of landlocked developing countries (LLDCs), however, still faces the constraints imposed by geography and remains on the periphery of major markets. The 32 LLDCs are often characterized by lower per capita incomes when compared to their transit neighbors and 17 of them are classified as least developed. Additionally, LLDCs are usually dependent on their transit neighbors’ markets, infrastructures and institutions. The special needs of LLDCs, especially those re- Along with other partners, the World Bank Group lated to the need to improve their accessibility and has been actively supporting countries in implement- connectivity, have been recognized for a long time by ing the actions contained in the Almaty Programme policy makers and developmental institutions. Some and in achieving its goals. The World Bank Group has needs are very specific and focused, for instance, on consistently financed transport and ICT infrastructure the development of efficient transit corridors in order projects, in parallel with an ever increasing emphasis to connect to other countries. Other needs are more on trade facilitation, connectivity, and corridor-based challenging and harder to tackle such as the higher projects in landlocked and transit countries. The Bank trade and transport costs, which dramatically con- has promoted institutional enhancement in such crit- strain the transformation of LLDC economies, pre- ical areas as customs reforms, or projects aiming at venting them from diversifying from what often times the reinforcement or diversification of productive represents a very small basket of export commodities. capacities. The Bank has also invested in policy re- The Almaty Programme of Action for LLDCs, tran- search and tools to better identify the source of the sit countries and their development partners, adopted constraints and the most appropriate solutions for al- in 2003, was a major step in putting forward a consis- leviating the access costs. tent set of policies addressing these needs. It is expect- This publication is based on the practical knowl- ed to be followed by a new Programme of Action to edge from implementing the Almaty Programme pol- be adopted at the 2nd United Nations Conference on icies, shared by both of our institutions. It provides a Landlocked Developing Countries to be held from 3 to snapshot of the economic trends in LLDCs, with re- 5 November 2014 in Vienna, Austria. The United Na- gard to trade costs, connectivity constraints and trade tions Office of the High Representative for the Least De- diversification. It reviews the key access policies in veloped Countries, Landlocked Developing Countries, the Almaty Programme of Action framework that in- and Small Island Developing States (UN-OHRLLS) has clude infrastructure, transport and logistics services, been supporting LLDCs and mobilizing international regional integration, trade and transit facilitation. It awareness and support towards the implementation of combines data and substantial feedback from imple- the Almaty Programme of Action and coordinating the mented projects and policy changes. The focus of the preparatory review process for the Conference. document is general in scope and does not include ix x Improving Trade and Transport for Landlocked Developing Countries detailed economic or policy analysis of all the poten- in logistics performance, which are driven primarily by tial components of reforms. improvements in infrastructure and basic border man- The current status and lessons emerging are en- agement. However, much needs to be done in terms of couraging but they also point to the importance of harmonization of transport and transit systems in co- persistence in reform implementation. In the decade operation with transit countries, and further improving of the implementation of the Almaty Programme of Ac- infrastructure development and maintenance. tion, with the exception of the period of the financial The present document provides an analysis of the crisis, resource-rich LLDCs have greatly benefited from current situation, constraints, priorities, and discusses high commodity and raw material prices. However, potential solutions to reducing LLDCs’ access costs. the export structure of many LLDCs still remains highly We hope that this document will continue to sup- concentrated in few mineral and agricultural products. port the broad community of policymakers, develop- LLDCs also continue to face high trade and transport ment practitioners and other stakeholders in LLDCs, costs. Substantial progress has been made in the area transit countries and beyond in implementing the of trade facilitation, ICT and transport infrastructure. new Programme of Action for LLDCs for the decade Furthermore, LLDCs have experienced improvements 2014–2024. Anabel Gonzalez Gyan Chandra Acharya Senior Director, Trade and Competitiveness Global United Nations Under-Secretary-General and High Practice Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Pierre Guislain Developing States (UN-OHRLLS) Senior Director, Transport and ICT Global Practice World Bank Introduction L andlockedness refers to the geographical situation of a country without direct access to the sea (Glassner, 1970). According to this definition, there are 44 landlocked countries in the world. Of these, the United Nations lists 32 as landlocked developing countries that are low- and middle-income countries based on the World Bank country classification (henceforth referred to as landlocked developing countries, LLDCs) with a population of nearly 440 million.1 Due to the lack of direct access to the sea Land- called for joint efforts by transit and landlocked coun- locked Developing Countries (LLDCs) are marginalized tries—with substantial technical and financial assis- from major transportation and services (logistics, infor- tance from other countries—to address the special de- mation technology) networks. Their international trade velopment needs and challenges faced by LLDCs. The depends on transit through other countries. In addition, final goal was to ensure fuller and more effective inte- long distance to world markets, cumbersome transit gration of the LLDCs into the global economy through: procedures and inadequate infrastructure contribute to (a) securing access to and from the sea by all means of high transport and trade costs thereby reducing exter- transport; (b) reducing costs and improving services so nal trade and subsequent economic growth. Access to as to increase the competitiveness of their exports; (c) major markets is one of the biggest constraints to pov- reducing the delivered costs of imports; (d) addressing erty reduction and economic integration of landlocked problems of delays and uncertainties in trade routes; developing countries (Faye, McArthur, Sachs and Snow, (e) developing adequate national networks; (f) reduc- 2004). Companies in landlocked developing countries ing loss, damage and deterioration en route; (g) open- are struggling to get the goods to their destination with- ing the way for export expansion; and (h) improving out major delays and increases in cost. the safety of road transport and the security of people Landlocked developing countries are completely along the corridors. The efforts included the revision of dependent on their transit neighbors’ infrastructure the regulatory framework affecting trade movements, and administrative procedures to transport their goods ways to improve trade-related infrastructure and trade to port. In many cases transit neighbors of landlocked facilitation. Under the priority areas fundamental tran- developing countries are themselves developing sit policy issues, and international trade and trade fa- countries, often of broadly similar economic struc- cilitation, the APoA identified policy reforms, legal and ture and beset by similar scarcities of resources. Their regulatory measures and actions to improve transport weak infrastructure and subpar customs and adminis- and trade facilitation that are important for decreasing trative systems result in higher costs on trade passing the trading and transport costs for LLDCs. through a transit country and thus limiting the abili- Under the priority area infrastructure development ty of landlocked developing countries to compete in and maintenance, the Almaty Programme of Action global markets. (APoA) identified specific actions required to improve In 2003, the Almaty Programme of Action (APoA) has been agreed upon at the First United Nations conference held in Almaty, Kazakhstan. The APoA 1  Annex 1 provides the list of LLDCs and their transit countries. xi xii Improving Trade and Transport for Landlocked Developing Countries the road and rail transport, ports, inland waterways, Conference on LLDCs. While a new Programme of Ac- pipelines, air transport and communications needed tion for LLDCs for the next decade (2014–2024) will for achieving the effective integration of the LLDCs be adopted at the Conference, UN-OHRLLS has ap- into the international trading system and the world proached the World Bank to prepare an in-depth pub- economy. Some of the actions involved considerable lication outlining the trends for LLDCs and the imple- investment to develop and upgrade the transport infra- mentation of actions, policies and reforms promoted structure and complete missing links, establishment of in the APoA in the areas of trade and transport. public-private sector partnerships, capacity building, This publication provides a comprehensive ten- and establishment of new policies and institutional re- year review in order to assess the progress made in form. At the regional level actions included adopting improving access of LLDCs to global markets, identify comprehensive approaches to develop and maintain the remaining challenges faced by LLDCs, and pres- transit corridors and development and effective im- ent improved and innovative ways to overcome them. plementation of regional agreements on the regional The team chose to organize the document around sev- transport and communications infrastructure. eral themes, rather than regions, as a way to provide The World Bank, among other international agen- more specific policy insight to better connect the LL- cies, has been actively involved in providing policy DCs regionally and globally. Thus, the publication is advice and financial support to LLDCs, as part of its organized as follows: broader program to improve the trade competitive- ness of all developing countries. The Bank’s contribu-  Chapter1: Economics of Landlockedness tion to the APoA comprises of a number of knowledge  Chapter 2: Connectivity Constraints products and technical assistance, including, among  Chapter 3: Hinterland Connections others, the mid-term review of the APoA in 2008, and a 2013 report presenting a ten-year comprehensive  Chapter 4: Transit and Trade Facilitation, Regional review of the APoA. Integration While the review of the APoA in the areas of trade  Chapter 5: Physical Connectivity, Corridors. and transport has raised the awareness of the chal- lenges faced by LLDCs globally, LLDCs still remain far This document is based primarily on the ex- from being fully integrated into international trading perience of project implementation by the World system. Bank, and on analytical work on trade corridors With a need for a new comprehensive Plan of Ac- and LLDCs, including reports and presentations on tion for the next decade, United Nations office of the progress in implementing the Almaty Programme High Representative for Least Developed Countries, of Action. These previous publications have been Landlocked Developing Countries and Small Island widely shared during activities organized by the UN- Developing States (UN-OHRLLS) has been designat- OHRLLS as contribution to the preparation to the ed as the United Nations system-wide focal point for new Programme of Action (PoA) for the next decade the preparatory review process for the Second UN of 2014–2024. Economics of Landlockedness 1 T his chapter provides evidence of the trade performance of landlocked developing countries compared with others, especially their transit coastal neighbors, and highlighting the impact of landlockedness. Export composition in LLDCs has not changed There are 44 landlocked countries in the world. significantly since the turn of the century; much of Of these, the United Nations lists 32 countries, home the LLDC export growth can be attributed to the rise to nearly 440 million, as landlocked developing of commodity prices. Indeed, over the period 2000 countries (LLDCs). Based on the World Bank country and 2012, resource-rich LLDCs have been growing at classification, the LLDCs fall into the low, lower-mid- an annual rate more than double of resource-scarce dle and upper-middle income categories.2 According countries income in terms of real per capita income to Collier (2007), the majority of these countries are and more than six times in terms of exports per capita. in the “bottom billion,” with an average real GDP per Its reliance on commodities makes them vulnerable to capita of US$808 (constant 2005 US$) compared to potential negative shocks in commodity prices. US$2,785 of transit countries in 2012 (see Table 1). Although resource-rich LLDCs still have an av- Except for landlocked countries in the upper-middle erage per capita income below that of costal transit income group,3 real GDP per capita (weighted aver- countries, its annual growth over the same period age) in low-income and lower-middle income coun- has been higher. Conversely, resource-scarce LLDCs tries in the last decade has been below than GDP growth has been slower than resource-scarce coastal per capita of non-landlocked countries in the same transit countries both in terms of income and exports income groups. per capita. The two large concentrations of landlocked de- As landlocked developing countries rely on their veloping countries are located in Sub-Saharan Africa neighboring countries to transit most of their imports and Central Asia. The 16 countries in Sub-Saharan and exports, coordinating effort with neighboring Africa have a population of more than 200 million, countries to improve the infrastructure (hard and soft) nearly 30 percent of the region’s total. The nine land- may serve as a useful way to improve the develop- locked countries in Central Asia and Eastern Europe ment prospects of LLDCs. have a population approaching 80 million people, or Landlocked countries are entirely or almost entirely about 17 percent of the region’s total. enclosed by land, entailing that they have no shoreline on open seas, in contrast to closed seas or freshwater bodies. They have inherent disadvantages compared to countries with coastlines and deep-sea ports. Trade is 2  Annex 1 provides the list of LLDCs and their transit more difficult and costly because a landlocked country countries. must access most foreign markets through international 3  Azerbaijan, Botswana, Kazakhstan, Macedonia FYROM transport corridors connecting them to ports in neigh- and Turkmenistan are the upper-middle income countries boring countries, here called “transit neighbors.” in the list of LLDCs. 1 2 Improving Trade and Transport for Landlocked Developing Countries TABLE 1    Real GDP per capita (weighted), 1990–2012 Average per capita income Compound annual (constant 2005 US$) growth rate (percent) Income group 2000 2008 2012 2000–2008 2010–12 2000–12 Upper middle income: LLDC 1,987 3,783 4,347 8.38% 4.17% 6.74% non-LLDC 2,392 3,588 4,276 5.19% 4.62% 4.96% Lower middle income: LLDC 610 824 926 3.84% 3.76% 3.54% non-LLDC 740 1,035 1,212 4.27% 3.62% 4.20% Low income: LLDC 234 310 366 3.57% 3.79% 3.79% non-LLDC 277 364 419 3.46% 4.04% 3.49% LLDCs 487 714 808 4.91% 3.42% 4.31% of which: Resource-rich 642 1,046 1,189 6.29% 3.51% 5.27% Resource-scarce 337 395 438 1.97% 3.18% 2.20% Transit coastal: 1,498 2,339 2,785 5.72% 4.59% 5.31% of which: Resource-rich 2,116 3,091 3,216 4.85% 2.62% 3.55% Resource-scarce 1,399 2,218 2,715 5.93% 4.97% 5.68% World 6,445 7,382 7,533 1.71% 1.35% 1.31% Source: WDI, World Bank, 2014. Note: GDP per capita (constant 2005 US$). Impact of Landlockedness on hampering the movement of people and diffusion of new ideas and technological advances. The impact on Development, Economic Growth and revenue and poverty is quite obvious as LLDCs tend to Trade Flows have lower per capita income than their neighbors (see Table 1). UN-OHRLLS has estimated that, on average, the level of development in LLDCs is 20% lower than Being landlocked does not necessarily lead to poverty what it would be, were they not landlocked. Individual or slow growth. Western European landlocked coun- country estimates show that the range of development tries have historically taken advantage of their central- cost for most LLDCs ranges from 10 to 30 percent. ized locations. However, in the development context, The impact of being landlocked on economic being landlocked translates into a reduced connec- growth is less pronounced and is, in fact, dependent tivity and a higher cost of access to global markets. on a given landlocked developing country and a time Therefore, it presents specific challenges to economic period under consideration. Sachs (2005) found that operators in all LLDCs. Traditionally, landlockedness being landlocked cuts off around half a percentage is seen as a major impediment to trade. UN-OHRLLS4 point off the economic growth rate. However, due has estimated that, on average, the volume of inter- to commodity-led growth in many LLDCs, this was national trade of a landlocked developing country is not true in the decade of the implementation of the only 60% of the trade volume of comparable coast- al country. At the same time, the development effects of landlockedness likely extend beyond a decrease in 4  Source: UN-OHRLLS (2013) “The Development Econom- trade, to include various other channels, such as qual- ics of Landlockedness: Understanding the development ity of institutions, the stage of economic development, costs of being landlocked.” Economics of Landlockedness 3 Landlocked Developing Countries: Merchandise Exports as Share of World Exports, 2000–2012 TABLE 2    Merchandise Trade Merchandise Exports As a share of world trade (%) As a share of world trade (%) Annual Annual Country group 2000 2006 2012 growth (%) 2000 2006 2012 growth (%) High income: OECD 73.9 65.5 57.3 7.5 70.4 64.4 57.8 7.4 High income: non-OECD 6.4 7.4 6.9 11.0 5.2 7.3 6.7 12.7 Upper middle income 6.5 6.0 5.7 8.9 6.5 6.4 6.0 8.9 Lower middle income 2.0 2.0 2.9 13.7 2.3 2.3 3.0 12.5 Low income 0.0 0.2 0.1 34.6 0.0 0.2 0.1 33.6 LLDC: 0.4 0.7 1.0 18.3 0.5 0.7 1.1 20.4 In Europe & Central Asia 0.24 0.39 0.59 21.1 0.27 0.45 0.78 24.5 In Sub-Saharan Africa 0.12 0.19 0.23 15.9 0.13 0.19 0.18 13.5 In South Asia 0.02 0.01 0.02 34.7 0.01 0.01 0.01 9.9 Resource-rich 0.3 0.47 0.74 20.6 0.34 0.57 0.94 23.3 Resource-poor 0.14 0.18 0.21 13.3 0.12 0.14 0.13 12.1 Transit 11.1 17.7 24.0 17.4 19.9 11.6 26.3 17.2 World 100.0 100.0 100.0 18.1 100.0 100.0 100.0 16.3 Source: WITS, World Bank. Note: See IMF, 2012 for a list of LLDC countries rich in non-renewable natural resources. Almaty Programme of Action. Apart from geograph- Among landlocked developing countries, (see ical constraints and higher transportation costs, they Table 1), resource-rich LLDC countries5 have been are highly dependent on their neighbors as markets growing at more than twice the growth rate of re- and their neighbors’ transport (hard and soft) infra- source-scarce countries (5.27% vs. 2.2%) since 2000, structure in order to connect to global markets. There- resulting in their GDP per capita income to become fore, having “bad” neighbors that have been economi- more than a double of that of resource-scarce countries cally stagnant for several decades (Zimbabwe), having in 2012 (US$ 1,189 vs. US$ 438). Resource-scarce experienced political instability (Central African Re- public), or being involved in a civil war has negatively affected to economic performance of LLDCs. In the 5  Due to volatility in commodity prices, there has been a past decade, LLDCs have been growing slower than difficulty in determining an exact threshold (as percent of the transit coastal countries. GDP, fiscal revenue, or exports) to consider a country to Distinguishing resource-rich LLDCs from re- be resource-rich. The RR (resource-rich) landlocked coun- source-scarce LLDCs, Collier (2007) finds that both re- tries group includes a sample of 17 landlocked developing source-scarce and resource-rich landlocked develop- countries in the low-income, lower-middle and upper-mid- ing countries have performed worse than the coastal dle income groups. The group was based on two criteria: (i) resource-scarce economies between 1960 and 2000. being either a low-income, lower-middle and upper-middle As shown in Table 1, this trend has been reversed for income country as classified by the World Bank using 2014 GNI per capita; and (ii) depending on natural resources for resource-rich LLDCs, which have been growing as fast at least 20 percent of export or fiscal revenue using aver- as the resource-scarce transit coastal countries be- age data for 2006–10 (see IMF, 2012). For the full list of tween 2000 and 2012. Table 1 also shows that income landlocked resource-rich countries, see Annex 1. This ap- growth was higher over the period 2000–2008 before proach has some limitations, e.g. Afghanistan has significant the recession following the global financial crisis. amounts of undiscovered non-fuel mineral resources. 4 Improving Trade and Transport for Landlocked Developing Countries TABLE 3    Exports per Capita, 2000–2012 Exports per capita, US$ Compound annual growth rate (percent) Income group 2000 2008 2012 2000–08 2010–12 2000–12 LLDCs 958 3,000 2,930 10.1% 6.6% 6.3% Resource-rich LLDCs 1,194 4,757 4,466 15.7% 16.3% 11.0%   Upper middle 2,924 12,550 11,041 15.7% 11.7% 11.71%   Lower middle 557 1,414 1,414 18.1% 11.5% 11.45%   Low 101 306 306 15.0% 9.9% 9.85% Resource-scarce LLDCs 723 1,243 1,393 4.5% –3.0% 1.7%   Upper middle 645 1,282 1,897 9.0% –0.1% –0.05%   Lower middle 1,194 2,173 1,908 –5.6% 4.0% 3.98%   Low 329 273 374 –12.5% 1.1% 1.08% Coastal transit: 34,511 84,533 77,309 4.6% 11.0% 10.98%   Resource-rich 615 2,103 2,701 8.3% 14.1% 14.10%   Resource-scarce 68,407 166,963 151,917 0.9% 7.9% 7.86% Source: WITS and WDI, World Bank. LLDCs have also been behind the resource-scarce tran- Exports per capita of resource-rich LLDCs have sit coastal countries in terms of GDP growth. been growing faster than that of resource-scarce LLDCs LLDCs’ share of exports represents a mere 1.1 per- and almost as fast as exports per capita of resource-rich cent of world exports even if this share has been grow- coastal transit countries. Resource-scarce LLDCs have ing on average at 18.3% annually between 2000 and also been lagging behind all other countries. 2012, whereas exports from transit coastal countries Figure 1 confronts the average trade-to-GDP ratios represent 24 percent of world exports, as shown in Ta- from 2000 to 2002 and from 2010 to 2012 against the ble 2. Unsurprisingly, the share of merchandise trade log of the average GDP per capita (PPP; 2011 inter- between 2000 and 2012 has increased more in re- national dollars) during the corresponding period. The source-rich LLDCs than resource-poor ones. The share dashed vertical line indicates the world’s median in- of exports from LLDCs in Europe and Central Asia is come. The fitted curve is obtained from regressing the the highest and has been growing at an annual rate of trade-to-GDP ratio on the log of GDP per capita and 24.5%, and changed from 0.27% in 2000 to 0.78% in its squared value. It reflects that countries tend to trade 2012, led by a surge in gas and oil exports in countries more (relative to their nominal GDP) as per capita in- like Kazakhstan, Azerbaijan and Turkmenistan. comes rises, but they do so at a decreasing rate. Similar to growth in terms of GDP per capita, Fig- Country-level evidence shows that the inter-coun- ure 3 shows that exports per capita in LLDCs have try differences among LLDCs to a certain extent can been growing, on average, slower than exports per be explained by good governance and openness to capita of transit coastal countries. Yet, in the peri- foreign trade (e.g., Paudel, 2014). The trade-to-gross od before the global recession (2000–2008) annual domestic product (GDP) ratio provides an indica- growth of exports per capita of LLDCs has been al- tion of the combined importance of exports and im- most double of that of transit countries, 10.1% vs. ports of goods and services in an economy. It is one 4.6%. Indeed, exports in 2012 have not yet reached of the most basic indicators measuring a degree of the 2008 level. a country’s openness to foreign trade and economic Economics of Landlockedness 5 FIGURE 1    Openness to Trade between 2000–02 and 2010–12 Openness to trade Openness to trade Average 2000–02 Average 2010–12 200 200 Trade to GDP (%), 2000–02 Trade to GDP (%), 2010–12 LSO SWZ TJK LSO 150 TKM 150 KGZ nonOECD MDA nonOECD MDA SWZ MNG MKD MNG MKD TKM ZWE PRY Upper BTN OECD 100 AFG Lower KAZ Upper OECD 100 BWA TCD KGZ PRY AZE BWA TJK ZMB Lower LAO BOL MLI ZMB LAO BTN ZWEARM MWI NER Low TCD SSD ARM AZE KAZ Transit MWI Transit MLI UGA UZB 50 NPL UZB BOL Low 50 BDI ETH BFA AFG ETH NER CAF UGA RWA NPL RWA BFA CAF BDI 0 0 6 7 8 9 10 11 6 7 8 9 10 11 Log of GDP per capita (PPP, 2011 intl.$), ave.2000–02 Log of GDP per capita (PPP, 2011 intl.$), ave.2010–12 Source: authors. Note: AFG=Afghanistan, ARM=Armenia, AZE=Azerbaijan, BTN=Bhutan, BOL-Bolivia, BWA=Botswana, BFA=Burkina Faso, BDI=Burundi, CAF=Central African Republic, TCD=Chad, ETH=Ethiopia, KAZ=Kazakhstan, KGZ=Kyrgyz Republic, LAO=Lao, PDR, LSO=Lesotho, MKD=Macedonia, FYROM, MWI=Malawi, MLI=Mali, MDA=Moldova, MNG=Mongolia, NPL=Nepal, NER=Niger, PRY=Paraguay, RWA=Rwanda, SSD=South Sudan, SWZ=Swaziland, TJK=Tajikistan, TKM=Turkmenistan, UGA=Uganda, UZ- B=Uzbekistan, ZMB=Zambia, ZWE=Zimbabwe. OECD = high-income OECD; non-OECD = high-income non-OECD; Upper=upper middle income; Lower=lower middle income; Low=low income; Transit = transit countries; “+”=Resource-rich LLDC countries. The fitted curve is obtained from regressing the trade-to-GDP ratio on the log of GDP per capita and its squared value. integration. Figure 1 shows that, although trade open- Kazakhstan Exports of Crude Oil: FIGURE 2    ness in mostly resource-poor LLDCS like Burundi or Value and Volume Malawi has remained stagnant in between 2000–02 (product code 270900) and 2010–12, trade openness in most resource-rich 60 1.2E+11 countries like Azerbaijan, Botswana, and Kazakhstan has increased as a result of high commodity prices.6 50 1E+11 The increase in exports from resource rich LLDCs 40 8E+10 US$ bln has often been driven by prices rather than volumes, 30 6E+10 like in the case of oil exports from Kazakhstan. Indeed, 20 4E+10 while the export value of Kazakhstan’s crude oil has in- 10 2E+10 creased more than 30-times from US$1.6 bln in 1998 to US$55.2 bln in 2013, the actual exported volume 0 0 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 has only increased by 3-times (see Figure 2). Commodity prices have driven exports in re- Net weight, kgm Trade value, US$ bln source-rich LLDCs until mid-2008, before the finan- cial crisis caused a sharp decline in commodity and Source: WITS, World Bank. raw material prices. As the global economy recovers, commodity prices are expected to climb again. In- deed the overall LLDC trade value in 2012 has recov- ered to the level of 2008 before the crisis occurred. According to Alcala and Ciccone (2004), when trade is divided by real GDP in PPP terms (and not 6  For instance, price of oil went from $15/barrel in 1999 to nominal GDP), the relationship is slightly different $130 in mid-2008, and has been hovering around $100 in because real openness corrects for distortions created the post-financial crisis period. 6 Improving Trade and Transport for Landlocked Developing Countries when non-traded goods are priced differently across being landlocked).7 The analysis provides us with a countries. Without putting other characteristics in better measure of what a country can be expected context, it can be difficult to say whether a country’s to trade given its structural characteristics. Figure 3 ratio of trade to GDP is relatively low or high. Gen- shows the difference between actual trade and trade erally, economies large in terms of geography or pop- predicted by the model from 2011 to 2012. The dif- ulation tend to have a lower trade-to-GDP ratio than ference between actual and predicted trade between smaller countries because they have the option of un- 2011 and 2012 appears to be the largest for Lesotho, dertaking a bigger share of trade within their borders. Kyrgyz Republic, Mongolia, indicating a greater eco- In addition to income, other structural character- nomic integration as opposed to Nepal, Central Afri- istics such as population and geography play a signifi- can Republic, Rwanda, and Burundi, which traded cant role in determining a country’s openness. All else less than predicted. equal, landlocked developing countries are at a great- er disadvantage when it comes to trade compared to countries with access to the sea. LLDCs: Little Diversification in Export Reis and Farole (2012) carry out a parametric Composition and Export Markets analysis by regressing trade-to-GDP ratios on GDP per capita, population, remoteness, and a measure Five products defined at the HS2-digit level make for general cost of trading (which is correlated with up for at least 90 percent of exports in one third of LLDCs. In general, exports in LLDC countries seem to remain quite concentrated within the last twelve FIGURE 3     Trade Potential: Difference years, as shown in Figure 4 depicting the evolution between Actual and Predicted of export composition in LLDCS between 2000 and Trade in 2011–12 2012. The share of fuels export in Azerbaijan, Kazakh- stan, and Bolivia has increased significantly as a result Lesotho of increases in oil prices. The reliance of resource-rich Kyrgyz Republic Mongolia LLDCs on commodity exports makes them vulnera- Moldova ble to potential negative shocks in commodity pric- Swaziland Macedonia, FYR es. Resource-rich countries should prioritize savings Niger and domestic investment in order to generate lasting Zambia Chad development gains, but also diversification. Collin Chad (2007) suggests, for instance, that LLDCs could be- Paraguay Azerbaijan come hubs for financial services or other types of ser- Lao PDR vices, for the neighboring region. Tajikistan Botswana Malawi Uzbekistan Kazakhstan Bolivia Uganda Mali Ethiopia Bhutan Armenia Afghanistan Burkina Faso Burundi Rwanda C.A.R. Nepal –50 –35 –20 –5 10 25 40 55 7  The model has been specified as follows: Trade (as % of GDP) = f(log(GDP per capita), log(GDP per capita)^2, Source: Authors’ calculations. A positive [negative] value is related to over trading log(population), Cost to export). [under-trading] as actual trade is larger [smaller] than trade predicted by the model. Economics of Landlockedness 7 LLDCs: Export Composition, 2000 and 2012, in US$ mln FIGURE 4    LLDC 2000 (Trade Value in thousands of USD) Kazakhstan Azerbaijan Kazakhstan Kazakhstan 52.79% 85.08% 26.19% 6.48% 4,567,329 1,484,904 2,265,756 561,093 Paraguay Uganda 42.43% 47.77% 368,889 192,447 Macedonia, FYR 30.64% Bolivia 405,285 16.58% Bolivia Bolivia Bolivia 12.19% 17.91% 10.64% Kazakhstan Botswana Mali 2.58% 82.98% 57.53% 2,292,447 Moldova Kyrgyz 41.91% Republic Bolivia Bolivia 11.73% 3 nulls LLDC 2012 (Trade Value in thousands of USD) Kazakhstan Azerbaijan Kazakhstan Botswana 69.88% 93.42% 13.08% 80.95% 64,485,650 22,259,198 12,067,087 4,833,867 Mali 65.81% Bolivia 11.56% Kazakhstan Bolivia 5.13% 17.58% 4,736,323 Bolivia 50.11% Niger 5,909,931 Kazakhstan 4.05% 3,737,331 Animal Chemicals Food products Footwear Fuels Hides and skins Mach and elec Metals Minerals Miscellaneous Plastic or rubber Stone and glass Textiles and clothing Transportation Vegetable Wood Note: select LLDC countries with reported data. This product group is largely based on World Custom Organizations (WCO) Sector classification for the Harmonized System (HS) product nomenclature with some minor difference. Connectivity Constraints 2 T his section provides evidence on connectivity constraints of landlocked developing coun- tries. It also provides the evidence on factors explaining differences in logistics performance and trade costs between landlocked developing countries (LLDCs) and their transit and coastal neighbors. Despite positive changes with regard to logistics performance and increased involvement of transit countries, LLDCs still experience considerably higher cost of trade when compared to the transit coastal countries: a mark-up of about 70 percent in ad-valorem equiva- lent. Distance alone cannot explain it; it is rather a lack of overall connectivity of international trade supply chain, related to logistics performance. Supply chain connectivity depends on the qual- ity of physical infrastructure and the quality and so- Box 1: What is Supply Chain Connectivity? phistication of services, including customs and border control, trade or transportation policies that affect lo- The reference to connectivity in the context of logistics has been popularized by the World Bank report on logistics perfor- gistics performance. mance “Connecting to Compete: Trade Logistics in the Global Supply chain bottlenecks are the primary cause of Economy” (World Bank 2007). In this context supply-chain frictions in trade; logistics (trade) costs increase with connectivity is the ability of the traders in one country to ef- decreasing logistics performance. Reducing logistics fectively establish reliable supply chains with their customers or suppliers. These supply chains are not taking one specific (trade) costs by half would raise trade by 15% and route or mode of transportation, but rather have several op- production by 5% globally (see Figure 5). tions. Their performance is dependent not only on the transport route but also on the logistics business environment, which depends on national or regional patterns (customs is a nation- wide agency). The criterion may depend on the product. LLDCs: Logistics Performance For instance, exporters of dried fruits from the Isfara region Most of the increase in logistics costs arises due to in northern Tajikistan are dependent on partnerships with lower reliability of supply chain. Launched in 2007, a long-distance road services with Russia and Europe to serve their customers and face potential issues in transit. They are Logistics Performance Index (LPI) is based on informa- also dependent on the local cross-border road network within tion from multinational freight forwarders and the main the Kyrgyz Republic to expand and diversify their collection express carriers with worldwide operations. They pro- area. In the case of the General Motors factory in Uzbekistan, vide an international benchmark for comparing logis- or a large wholesaler operating from Almaty, the concern will be the predictability of the rail transit to Almaty and beyond tics performance and effectiveness in facilitating trade from distant sources in East Asia, Russia, or the European across 150 countries. The LPI is a useful tool in com- Union, so as to avoid potential stock-outs. paring logistics performance across countries and iden- tifying key reform priorities within countries (see Box Source: The Eurasian Connection. Supply-Chain Efficiency along the Modern 2). The LPI survey is based on ratings by respondents Silk Route through Central Asia. Rastogi and Arvis, 2014. of logistics performance of their own and eight other countries on a scale of 1 (weakest) to 5 (strongest).8 8  Available at: http://lpi.worldbank.org/ 9 10 Improving Trade and Transport for Landlocked Developing Countries FIGURE 5    Country Trade Costs vs. LPI score, globally and regionally. From the comparison of logis- 2010 tics performance of landlocked and coastal countries by income group, it appears that between 2007 and 250% 2014 LLDCs have experienced the largest increase in 230% Ave.trade costs (% of goods value) LPI (14.2%), which significantly exceeds the increase 210% in LPI for transit coastal countries (6.8%). 190% However, in absolute terms, the LPI score for land- 170% locked developing countries has been historically low- 150% er than the LPI score of the corresponding transit coast- 130% al countries, and the increase in LPI for LLDCs between 110% 2007 and 2014 constitutes only 0.31. In comparison, 90% the LPI score of the high income countries has been 70% quite high and with little variation from year to year, 50% while the LPI score of the lower income countries has 2 3 4 5 LPI score (2010) grown by almost 8% and that of the low income coun- tries by a slightly higher rate of 8.6%. Overall, there is a Source: World Bank. persistent and large difference in logistics performance between countries with different income levels. Graphically, Figure 6 demonstrates how the six Specifically, among the landlocked developing LPI dimensions fit into the supply chain framework. countries, Rwanda, Afghanistan, Kazakhstan, and Ta- Table 4 provides a comparison of the logistics jikistan have experienced the largest increases in mean performance of landlocked and coastal countries, LPI score between 2007 and 2014 (see Figure 7) due to recent improvements in infrastructure and trade facili- tation efforts. On the other hand, Central African Re- Box 2: Logistics Performance Index (LPI) public and Turkmenistan have experienced a decline in their logistics performance as measured by the LPI. The overall Logistics Performance Index (LPI) is a composite Overall, there is strong evidence that landlocked index based on performance of countries on six dimensions developing countries remain at logistics disadvantage (indicators) of trade-related logistics performance. The indi- when compared to their transit neighboring countries. cators are: The difference between LLDCs and their transit neigh- • Efficiency of customs and other border agencies in expe- bors is more pronounced for countries in South Asia, diting cargo clearance. East Asia and Pacific, and Europe and Central Asia, • Infrastructure efficiency (in the quantity and quality of even though the difference between LLDCs in South transport infrastructure and information technology infra- structure for logistics). Asia and its transit coastal neighbors has been rapidly • Ease and affordability of arranging international shipments. declining (see Figure 6). • Competence of the local logistics industry, where the Table 5 provides detailed information on some freight forwarding operations are subcontracted to do- components of the LPI. In Sub-Saharan Africa, two LPI mestic agencies by the global logistics companies. components such as ease and affordability of arrang- • Ability to track and trace international shipments while the shipment is en route. ing international shipments and ability to track and • Timeliness of shipments in reaching destination. trace international shipments en route contribute to the gap between coastal transit and landlocked coun- Logistics performance is evaluated on a 5 point scale, with 1 the lowest and 5 the highest. This data is corroborated by fac- tries in 2014, as opposed to lack of competence of the tual information from domestic sources, for instance on time, local logistics industry in 2007. cost, or effectiveness of process and services. On average, In South Asia, the difference seems to stem from one LPI point less on this scale is the equivalent of six days all three LPI components shown below, but the gap for more to import and three days more to export. the infrastructure and tracking components between coastal transit and landlocked developing countries Source: World Bank. has been declining almost by half between 2007 and Connectivity Constraints 11 Six LPI Dimensions along the Supply Chain Framework FIGURE 6    Timeliness Customs International shipments Tracking and Tracing Customs Customs Infrastructure Delivery Alongside Unloaded to Dock Vessel on Dock Point of Origin Seller’s Factory Delivered to Buyer’s Warehouse Frontier/Border Services Quality Exporting Country Importing Country Source: World Bank. LPI Performance by Country Income Group, 2007–2014 TABLE 4    Income group 2007 2010 2012 2014 2007–2014, change 2007–2014, growth % High income: OECD 3.64 3.66 3.63 3.70 0.06 1.6 High income: non-OECD 3.13 3.19 3.21 3.18 0.05 1.6 Low income 2.22 2.38 2.37 2.41 0.19 8.6 Lower middle income 2.4 2.58 2.58 2.59 0.19 7.9 Upper middle income 2.64 2.74 2.78 2.82 0.18 6.8 LLDCs 2.18 2.46 2.40 2.49 0.31 14.2 Transit coastal countries 2.66 2.78 2.85 2.84 0.18 6.8 WORLD 2.74 2.87 2.87 2.89 0.15 5.5 Source: World Bank. 2014. In Central Asia, a low ability to track interna- LLDCs Still Face High Trade Costs tional shipments and predict their arrival is one of the main reasons for the low reliability of regional sup- The intensity of trade between countries is reduced ply chains. As a result, many companies are forced to by many factors that capture the degree of separation maintain higher inventory, which adds to their costs. between them. These factors fall into two main cate- These findings seem to be in line with recent 2014 gories. The first category consists of exogenous factors LPI findings for the low income country group, where that separate the exporter from the importer such as progress in logistics performance has been driven geographical distance, transportation costs, common primarily by improvement in infrastructure and basic features (language, border, history, participation in the border management. same economy community). The second category has Another effective way to quantitatively describe the to do with endogenous trade costs, which are factor trade connectivity patterns of LLDCs countries is to look specific to the origin or destination and are depen- at the bilateral trade costs with major trading countries. dent on particular policy choices. Examples include 12 Improving Trade and Transport for Landlocked Developing Countries LPI performance of LLDCs in 2007 and 2014 FIGURE 7    3 2 1 Uganda Malawi Kazakhstan Armenia Botswana Macedonia Moldova Bolivia Azerbaijan Burkina Rwanda C.A.R. Ethiopia Niger Uzbekistan Lao PDR Tajikistan Mali Turkmenistan Zambia Zimbabwe Nepal Bhutan Chad Lesotho Kyrgyz Republic Mongolia Burundi Afghanistan Paraguay LLDC LPI mean 2007 2014 Source: World Bank. Note: 2007 data are not available for Botswana, C.A.R., and Turkmenistan; 2010 scores were used instead. Mean Logistics Performance Index for Coastal and Landlocked Developing Countries, by FIGURE 8    Region Coastal transit LLDCs Region 0 2 1 3 0 1 2 3 2007 2014 Sub-Saharan Africa South Asia Middle East & North Africa Latin America & Caribbean Europe & Central Asia East Asia & Pacific Source: World Bank. Note: 2007 data are not available for Botswana, C.A.R., and Turkmenistan; 2010 scores were used instead. logistics performance (cost, delay and reliability) and in the origin and destination markets. Higher bilateral bottlenecks on international supply chains, interna- trade costs result in smaller bilateral trade flows. The tional connectivity (existence of regulator maritime recently published World Bank-UNESCAP dataset pro- services), tariffs and non-tariff measures.9 poses comprehensive measures of trade costs for 178 The trade cost is the price equivalent of the reduc- tion of international trade as compared with the poten- tial implied by domestic production and consumption 9  Rastogi and Arvis, 2014. Connectivity Constraints 13 LPI in Regions with Poorly Performing Landlocked Developing Countries TABLE 5    Sub-Saharan Africa Central Asia South Asia Landlocked Coastal Landlocked Landlocked Coastal Background data 2007 2014 2007 2014 2007 2014 2007 2014 2007 2014 Overall LPI 2.23 2.52 2.42 2.6 2.19 2.49 1.84 2.31 2.85 2.95 Selected LPI components: Infrastructure 1.92 2.35 2.21 2.39 1.95 2.31 1.61 2.09 2.64 2.77 Intl. shipments 2.27 2.47 2.44 2.69 2.19 2.63 1.79 2.34 2.9 3.14 Tracking 2.12 2.52 2.41 2.64 2.2 2.46 1.87 2.28 2.81 2.92 Source: World Bank. Trade Costs with Main Trading Countries by Income Group, 2000–2010 TABLE 6    With USA With Germany With Japan With China Income group 2000 2010 change 2000 2010 change 2000 2010 change 2000 2010 change High income – OECD 106.2 102.8 –3.2% 71.5 61.4 –14.1% 135.4 128.3 –5.2% 147.5 101.8 –31.0% High income – non 149.9 146.6 –2.2% 175.5 184.2 4.9% 189.1 215.1 13.8% 256.4 143.7 –43.9% OECD Upper middle income 161.2 160.2 –0.6% 178.6 153.8 –13.9% 227.6 224.1 –1.6% 262.7 186.9 –28.9% Lower middle income 196.5 187.4 –4.6% 203.0 189.0 –6.9% 243.8 225.8 –7.4% 253.6 196.0 –22.7% Low income 287.6 256.0 –11.0% 230.2 215.3 –6.5% 309.5 315.6 2.0% 303.2 206.0 –32.1% LLDCs 265.3 254.0 –4.2% 225.5 199.4 –11.6% 329.6 307.4 –6.8% 328.9 222.5 –32.4% Transit coastal countries 194.6 171.7 –11.8% 153.7 144.9 –5.7% 216.4 205.7 –5.0% 213.4 161.4 –24.3% World 178.5 174.1 –2.4% 172.8 162.0 –6.3% 221.4 223.9 1.1% 243.4 175.5 –27.9% Source: World Bank. countries over the period of 1995–2010.10 Trade costs not negligible—the landlocked developing countries’ are not to be simply understood as “out of the pocket” trade costs are over 1.5-times those of the correspond- expenses, they rather represent an ad-valorem equiva- ing transit countries. lent that captures the effect of distance, trade facilita- There is a noticeable improvement in trade costs tion and connectivity on trade. Arvis (2013) found that of LLDCs with Germany and China, which can be connectivity (e.g. shipping) and logistics performance attributed to trade facilitation efforts in Central Asian play an even more important role in explaining trade countries, namely Kazakhstan that has launched con- costs than distance, or traditional trade policies focused tainer block trains from China to Germany and a surge on tariffs. Unlike distance and geography, which are in Chinese investment to and trade with Sub-Saharan impossible to change, connectivity and logistics perfor- Africa. China has surpassed the US in the volume of mance can be addressed through various policies in the imports from Sub-Saharan Africa and has reached LLDCs and their transit neighbor countries. US$88 bln in 2013, while Chinese exports have From looking at Table 6, trade costs inversely correlate with the level of income, and landlocked 10  The trade costs are ad valorem equivalent computed from developing countries tend to have higher trade costs trade and production data. Trade costs in this construction compared to transit coastal countries. The difference is are symmetric. Arvis, Duval, Shepherd, Utoktham, 2013. 14 Improving Trade and Transport for Landlocked Developing Countries GDP per capita and Aggregate Trade Costs, 2013 FIGURE 9    400 Tonga 350 Antigua and Bardbuda Kiribati CAR 300 Samoa Aggregated trade cost Burundi Dominica Rwanda Vanuatu Lesotho Suriname 250 Burkina Faso Bhutan Cape Verde St.Kitts & Nevis Ethiopia Fiji St.Vincent & Grenadine Malawi Armenia Botswana 200 Nepal Kyrgyz Republic Guyana Azerbaijan Trinidad & Tobago Zimbabwe Moldova Mauritus 150 Paraguay Kazakhstan 100 50 0 2 2.5 3 3.5 4 4.5 5 5.5 log (GDP per capita) Source: Authors. Note: Data for aggregate trade costs is for 2009. LLDCs are shown in red; Small Island Developing States are shown in yellow. exceeded the US exports and reached US$70 bln in trade costs seem to be lower than those of Small Is- 2013; between 2005–2010 Chinese FDI constituted land Developing States. about 14% of China’s investment abroad.11 Resource-rich landlocked developing countries When using aggregate trade costs instead of bi- seem to have experienced a larger decrease in aggre- lateral trade costs, landlocked developing countries gate trade costs between 2000 and 2010, when com- in general are characterized by higher trade costs pared to their resource-scare peers, except for Armenia and lower per capita income (see Figure 9). Yet, their (see Figure 10). Among LLDCs, Kazakhstan appears to have the aggregate trade costs below the average of that of transit coastal countries. Although Kyrgyz Republic, Measure of Aggregate Trade FIGURE 10    Armenia, Zambia, Zimbabwe, and Uganda have ex- Costs, 2000–2010 perienced a drop in aggregate trade costs since 2000, the level of these costs in 2010 still remains high. On 5 Niger the other hand, Niger and Burkina Faso that are also aggregate trade cost, 2000–2010 (%) 0 Burkina Faso characterized by very high aggregate trade costs had High Income experienced increases between 2000 and 2010. Percentage change in Macedonia, FYR Malawi –5 In Central Asia, there have been a number of Bolivia Mali Botswana initiatives to raise awareness and help reduce bottle- –10 Burundi Transit coastal Uganda necks along certain road and rail corridors. Launched Azerbaijan –15 Zambia in 2009, the Central Asia Regional Economic Coop- Kazakhstan eration (CAREC) Program has developed corridor Kyrgyz Republic –20 Armenia performance metrics in terms of travel time and cost (Corridor Performance Measurement and Monitoring, –25 or CPMM) along the six transport corridors using ac- 0 50 100 150 200 250 300 350 Aggregate trade costs, 2010 tual commercial shipments (see Table 7). Field surveys point to high costs and border and transit delays, which Resource-rich LLDC Resource-scarce LLDCs results in low reliability of regional supply chains. Transit coastal High income Source: World Bank. 11  http://www.economist.com/node/18586448, IMF. Connectivity Constraints 15 Trade Facilitation Indicators, CAREC, 2010–2013 TABLE 7    2010 (Baseline) 2011 2012 2013 Mean Median Mean Median Mean Median Mean Median Time to clear a border crossing point, hrs 8.7 4.1 7.9 4.1 10.9 4.2 10 5.3 Cost incurred at border crossing clearance, US$ 186 114 156 90 157 76 235 120 Cost incurred to travel a corridor section, US$ 712 405 959 637 999 621 1482 1003 per 500km per 20ton Speed to travel on CAREC corridors, 23.5 22.6 21.9 20.2 22.9 25 19.9 18.2 kph (SWD) Speed without delay (SWOD), kph 35.2 37.5 38 39.9 37.8 35.5 36.1 34.2 Source: CAREC CPMM, Trade Facilitation Indicators, May, 2014. However, due to their focus on specific routes that LLDCs, on average, are characterized by a high- and corridors, such initiatives do not address policy er number of documents, a higher cost per contain- constraints at the nationwide level and do not facil- er and a longer period of time required to export or itate deeper regional harmonization and integration import compared to transit coastal countries Table 8. of cross-border or transit logistics. They rather provide This indicator does not reflect the actual time spent evidence of non-performance in terms of high costs to go through particular corridors or ports. It rather and lengthy periods of time required to cross border serves as a metric for bureaucracy and red tape at posts along certain corridors. cross borders. On the other hand, “Trading across Borders” indi- Evidence shows that in LLDCs logistics costs, other cator from World Bank’s Doing Business demonstrates than transportation, constitute a very high percentage Doing Business: Trading Across Borders, 2007–2014 TABLE 8    Exporting Importing Number of docs Days Cost per container Number of docs Days Cost per container 2007 2014 2007 2014 2007 2014 2007 2014 2007 2014 2007 2014 High income: 4 4 11 10 921 1014 4 4 11 9 997 1045 OECD High income: 5 5 17 14 737 1079 7 6 19 15 1160 1258 non-OECD Upper middle 6 6 26 19 1291 1276 8 7 30 24 1465 1589 income Lower middle 8 7 29 25 1019 1542 9 8 35 29 1323 1858 income Low income 9 8 45 36 1886 2591 11 10 57 41 2205 3128 LLDCs 9 9 51 41 2301 3142 11 10 59 47 2693 3732 Transit coastal 8 6 32 22 1295 1422 10 7 37 25 1525 1742 countries World 7 6 26 22 1241 1504 8 7 31 25 1425 1847 Source: World Bank. 16 Improving Trade and Transport for Landlocked Developing Countries of sales. In Kazakhstan, for example, such logistics Firm-level logistics expenditures FIGURE 11    costs are about 13% of total sales compared to 4–7% as percentage of sales, in high income countries in Europe (see Figure 11). 2011–2012 Due to unpredictability of supplies from abroad, man- ufacturing and retail companies are forced to maintain Kazakhstan 7% 13% high levels of inventory in order to operate smoothly. Addressing supply-side constraints and inefficiencies Estonia 7% 9% by establishing a secure and reliable transit transport system would allow LLDCs to reduce transport and Finland 5% 7% logistics costs. It has to be noted, however, that as LLDCs coun- tries strive to further reduce trade costs, the structure Germany 5% 4% of a retail system in many of these countries is such 0% 5% 10% 15% 20% 25% that mark-ups on certain categories of imported prod- ucts may still be quite high and significantly outweigh Transport cost Other logistics costs all the benefits of lower trade costs. Source: Authors, for Germany: TU Berlin, for Brazil: ILOS, for Finland: Turku School of Economics, for Kazakhstan: World Bank project. Hinterland Connections: Efficiency of Transport and Logistics Services 3 T he main obstacles to trade faced by landlocked developing countries involve transiting through territories of other countries. These obstacles include: long distances, inadequate transport services and infrastructure and inefficient institutional and operational transit regimes. Addi- tionally, in many locked developing countries, centers of production and consumption are located more than 800 kilometers (km) away from the closest seaport, which imposes a significant cost and time penalty on the manufacturers. Moving beyond cost and time parameters, it has been shown that unreliable hinterland connections have been the greatest impediment faced by manufacturers in landlocked in their attempt to increase regional trade as well as to enter global value chains (Faye et al, 2004; Arvis et al, 2011, UNCTAD, 2013). Efficient logistics services and transport operations are therefore crucial in reducing the effects of remoteness, in particular at modal interfaces, freight ter- minals, and ports, all of which play a fundamental role in trade of landlocked developing countries. The operation of these services is provided main- or terminals, are places where logistics activities take ly by the private sector or by commercially oriented place and where shipments are (i) received, unconsoli- public entities. Policy makers in LLDCs and transit dated and eventually cleared for imports; (ii) received, countries have a critical responsibility to ensure that reconsolidated and eventually cleared for exports; regulations at national, as well as at bilateral and re- (iii)  trans-loaded to another mode of transportation gional levels, promote efficient and cost-effective ser- (e.g. rail <> road); (iv) stored in warehouses; (iv) un- vices. Each of these help to overcome geographical dergo light transformations, like packaging for the lo- constraints or the lack of economies of scale due to cal market; (v) loaded on trucks for local or regional small transportation volumes. Unfortunately, many distribution; and (vi) reconsolidated and shipped to countries have inadequate policies that still favor distant satellite facilities. Efficient logistics nodes gen- closed but small and inefficient services markets. LL- erate economies of scale and facilitate consolidation DCs may be “policy locked” and a renewed focus on of transportation between them, with positive impact the efficiency of transport operations and logistics ser- in terms of reduced cost, delays and, most importantly, vices is long overdue. increased reliability. While transportation modes are The flow of freight from and to landlocked devel- an essential component of those systems, they can be oping countries as elsewhere requires the involvement grouped into three general categories: road, rail and, of logistics service providers and transport operators marginally, lake and river transport. In many land- into a succession of transport activities (by road, rail, locked developing countries, centers of production sea, waterways or air) along the networks connect- and consumption are located more than 800 kilome- ing the LLDCs. Nodes and gateways, such as ports, ters (km) away from the closest seaport (see Table 9). 17 18 Improving Trade and Transport for Landlocked Developing Countries TABLE 9    Distance to Ports from Select However, given that many landlocked countries are Landlocked Developing Countries faced with low freight volumes, these services are often provided in an environment with a low level of com- Landlocked petition and a weak regulatory framework. This chap- Developing Country Ports Range (km) Mode ter will assess the importance of transport operations Afghanistan 2 1,200–1,600 Road and logistics services for the efficiency of hinterland Armenia 2 800–2,400 Rail, road connections. Azerbaijan 2 800 Rail, road Bolivia 8 500–2,400 Rail, river, road Networks and Connectivity of Botswana 4 950–1,400 Rail, road Burkina Faso 5 1,100–1,900 Rail, road Freight Terminals Burundi 2 1,500–1,850 Lake, rail, road Given long distance to centers of production and con- Bhutan 1 800 Rail, road sumption in landlocked developing countries, freight Central African Republic 2 1,500–1,800 Rail, road terminals are critical nodes along transportation routes Chad 2 1,800–1,900 Rail, road (or networks of routes) that connect LLDCs. These Ethiopia 3 900–1,250 Rail, road points of interchange provide services for the loading, Kyrgyz Republic 4 4,500–5,200 Rail, road unloading and storage of freight in their facilities. Laos 3 600–750 Rail, road Freight terminals combine the physical handling of cargo and transport equipment (handling, storage, Lesotho 2 500 Rail, road interchange between modes if applicable, reception / Malawi 3 600–2,300 Rail, road delivery, etc.) and the associated documentation pro- Mali 6 1,200–1,400 Rail, road cess by the border management agencies. Mongolia 4 1,700–6,000 Rail, road While the freight terminal’s operator focuses on Nepal 2 1,100–1,200 Rail, road maximizing profits, from a development perspective, Niger 3 900–1,200 Rail, road one has to look at the role of freight terminals not in Paraguay 4 1,200–1,400 Rail, river, road isolation but in relation to the entire supply chain. Moldova 2 800 Rail, road Although the management and provision of accom- panying services for the terminal infrastructure are Rwanda 2 1,500–1,700 Lake, rail, road delivered by private operators, public agencies, espe- Swaziland 4 250–500 Rail, road cially in transit countries, also play an important role Uganda 2 1,300–1,650 Lake, rail, road in making the supply chain work seamlessly. Appro- Uzbekistan 3 2,700 Rail, road priate incentives and a suitable regulatory environ- Tajikistan 3 1,500–2,500 Rail, road ment, facilitation of choice of location or adequate Macedonia, FYR 1 600 Rail, road financing schemes under the PPP (public-private Turkmenistan 3 4,500 Rail, road partnership) are the prerequisites for ensuring that Zambia 8 1,300–2,100 Rail, road these facilities support trade and not hinder it. Zimbabwe 3 850–1,550 Rail, road Source: UNCTAD. Connection from the Port to the FIGURE 12    Hinterland Historically, carriage by road or sea has been per- Maritime gateway Freight Hinterland formed by private operators. Furthermore, the private sector has increasingly taken a larger role in the provi- Railway line Terminal sion of infrastructure services by expanding its involve- ment in domains that were traditionally dominated by public entities (such as ports or railways) and also in the provision and management of logistics facilities. Hinterland Connections: Efficiency of Transport and Logistics Services 19 Characteristics of West African Ports TABLE 10    Biggest ships Container Capacity Future add. By Port Length Draught TEU traffic 2011 TEU current TEU capacity Date Dakar 660 m 13 m 5100–7999 415,592 600,000 500,000 2020 Banjul 330 m 10 m 1000–1099 Conakry 270 m 10.5 m 1000–1099 135,075 a 160,000 300,000 2013 Freetown 722 m 9.5 m 1000–1999 75,000 300,000 Monrovia 600 m 11 m 2000–2999 59,746 a 75,000 San Pedro 325 m 13.5 m 5100–7999 80,000 120,000 500,000 2017 Abidjan 1000 m (limit to 250 m) 11.5 m 2000–2999 546,417 1,100,000 1,500,000 2018 Takoradi 190 m 9m 1000–1099 57,000 Tema 660 m 11.5 m 3000–5099 730,000 600,000 c Lome 430 m 11 m 2000–2999 350,000 350,000 1,000,000 2014 Cotonou 540 m 13.5 m 5100–7999 337,758 a 250,000 540,000 2013 Lagos (Tin Can) 770 m 11.5 m 2000–2999 1,413,276 b 400,000 3,000,000 b 2016 Lagos (Apapa) 500 m 13.5 m 5100–7999 850,000 Source: MLTC/CATRAM (2013). Note: Cells with red border indicate current capacity limits. a estimate; b traffic and future capacity for both ports; c future plans are considered not realistic. Ports as Gateways to the Hinterland: The African markets and export markets. Thus, in the fu- Case of West Africa ture, a model with a limited number of ports of region- The evolution and development of ports throughout al importance, served by secondary ports, is expected. the world as points of convergence between the land While traffic is increasing in volume, it is worth and maritime transportation is well known [Panayides, noting (see Figure 13) that the level of connectivity 2006]. As freight terminals, ports handle the largest of African port, as measured by UNCTAD13 does not amounts of freight, more than any other types of termi- seem to be progressing at a similar pace and, for in- nals combined and significant efforts have been made stance, much slower than that of Morocco,14 anoth- to improve the capacity of those gateways. These ef- er, arguably geographically very well placed African forts include, for example West Africa, where new ter- country. According to the data, there is not, at this minals are proposed to be developed in Abidjan, Con- stage, a discernible hub in the region (a country with akry, Lome and Cotonou. If those planned investments significantly higher connectivity). were to be realized, the current handling capacity of A good indicator on the unreliability experienced West African ports would triple by 2020 (see Table 10). at intermodal interface is dwell time. For freight termi- According to Alix (2011)12 growth in maritime nals and gateways, such as ports, dwell time refers to transport with West Africa is leading to an increase in the amount of time cargo stays in a terminal yard or the number of larger ships, able to handle 2,500–4,500 TEUs. The process of consolidation is also illustrated by the emergence of direct routes to the large West 12  Alix, Y., 2011. Growing containerized trade between West Africa and European and Asian economies, UNCTAD African gateways such as the ports of Abidjan and La- Trade Logistics Branch, Division on Technology and Logis- gos and sub-regional calling and feeder services that tics Transport Newsletter, No. 51. collect freight from smaller, more limited (for example, 13  Liner Shipping Connectivity Index in terms of draft or length of quays) port cities, and 14  As a result of the opening of the transshipment hub at connections through transcontinental hubs between Tangiers (Tanger-Med). 20 Improving Trade and Transport for Landlocked Developing Countries FIGURE 13    Liner Shipping Connectivity Index Recent research (Raballand, 2012) has shown of West African Ports (max = 100) that the long dwell time is in the interest of certain public and private actors in the system. Specifically, 60 importers use the ports to store their goods; in Douala 50 for instance, storage in the port is the cheapest op- 40 tion for up to 22 days. Customs brokers, meanwhile have little incentive to move the goods because they 30 can pass on the costs of delay to the importers. Worse 20 still, when the domestic market is a monopoly, the downstream producer has an incentive to keep the 10 cargo dwell times long, as a way of deterring entry 0 of other producers. The net result is inordinately long 2004 2005 2006 2007 2008 2009 2010 2011 2012 dwell times, ineffective interventions, such as building Morocco Nigeria Ghana Cote d'Ivoire berths or privatizing ports, and globally uncompetitive Benin Togo Senegal Mauritania industries in African countries. Gambia Cape Verde Guinea-Bissa Liberia Ginea Sierra Leone Source: UNCTAD (2013). The Development of Rail Freight Terminals: Some Insights from Central Asia In Sub-Saharan Africa and Central Asia, nearly all storage area while waiting to be loaded. In the case countries have, or are planning for, the development of ports in Africa, the amount of dwell time cargo of rail freight terminals (see Table 11). Given the much spends in the port terminal averages about 20 days— longer distances to port in Central Asia (see Table 12), compared with 3 to 4 days in most other internation- the railroad is the main solution for long distance al ports—despite the fact that additional berths have transportation. Central Asia also benefits from an been added and most ports are already run by private extensive, and relatively well maintained, extensive container terminal operators (Raballand, 2012). legacy rail network from the former Soviet Union. In comparison, the railways in Africa and other regions with LLDCs are shorter and not connected to the rail- road corridors. With few exceptions such as, Côte FIGURE 14    Cargo Dwell Times in Select d’Ivoire, Cameroon or South Africa, most railways African Countries (in days), have not maintained or regained significant market Weighted by Number of Imported share from a typically more agile and quite competi- Containers, 2011 tive road transport. The threshold for efficient opera- tions of general cargo (containers) is about 1–2 mln 16 14.11 tons per year (Arvis 2011), which is higher than cur- 14 rent market potential of most African LLDCs. It means Dwell time (number of days) 12 that the development of new railways just to satisfy 10 the needs of LLDCs is unlikely to happen in the short- 8.71 8 7.41 7.64 8.12 or medium-term. However, a lot can be done to im- prove the efficiency of existing networks. 6 3.93 The interface between railways and other modes 4 of transport takes place at freight terminals, which 2 have a unique characteristic related to shunting (or 0 switching) which requires separate yard facilities, of- Kenya Nigeria South Uganda Zambia Total Africa ten adjacent to the terminal, and at times independent facilities. Those terminals are typically located on the Source: Raballand, 2012. World Bank. outskirts of a hub city, where the price of land is lower, Hinterland Connections: Efficiency of Transport and Logistics Services 21 Examples of Rail Freight Terminals in Sub-Saharan Africa and Central Asia TABLE 11    Country Location Mode Transport Route Botswana Gaborone Rail/road Trans-Kalahari Burkina Faso Ouagadougou, Bobo-Dioulasso Rail/road Tema-Ougadougou, Abidjan-Ougadougou Cameroon Ngaoundere Rail/road Douala-Bangui Congo, Dem. Rep. Beni, Mwene Ditu (Kasai) Rail/road North-South, Dar Côte d’Ivoire Bouaké, Ferké Rail/road Abidjan-Ougadougou Ethiopia Mojo, Semera Rail/road Ethio-Djibouti Kazakhstan Almaty, Astana Rail/road China – West.Europe Kyrgyz Republic Bishkek, Karasuu Rail/road China-Uzbekistan Kenya Nairobi, Mombasa Rail/road Northern Mozambique Moatize Rail/road North-South Namibia Walvis Bay Port/rail/road Trans-Kalahari, Trans-Caprivi Nepal Sirsiya (Birganj) Rail India-Nepal Niger Dosso, Niamey Road Cotonou-Niamey Rwanda Kigali Road Northern, Central South Africa Johannesburg City Deep Rail/road North-South Tajikistan Nizhniy Pyandj Rail/road Tajikistan-Afghanistan Tanzania Isaka, Mbeya Rail/road Dar Turkmenistan Ashgabat, Serkhetyaka Rail/road Russia-Uzbekistan, Kazakhstan-Persian Gulf Uganda Tororo, Malaba, Kizarewe Rail/road Northern Uzbekistan Navoi, Angren Rail Afghanistan – Central Asia – Europe Zimbabwe Harare Rail/road North-South and arterial highways provide good access, and freight Terminal Joly) or by private operators. Private operators does not interfere with urban traffic or traffic at a rail naturally prefer to invest in places of larger econom- head. Rail freight terminals are found along most trade ic concentration, with existing terminals concentrated routes in all regions of the world. When these terminal in three regions: Western Kazakhstan (Aktobe, Atyrau), facilities are located near the final destination or an Northern Kazakhstan (Petropavlovsk, Astana, and Pav- economic center, they serve as cargo consolidation lodar) and South of the country (Almaty region). The and distributions centers. The role, location, and attri- railway company, to the contrary, operates 18 terminals butes of inland facilities and terminals, need to be as- in the country and it is currently modernizing 5 of them: sessed based on current traffic demand and forecasts Atyrau, Aktobe, Astana, Almaty, and Shymkent. and included in a respective transport master plan, The reason for the existing fragmentation, as op- irrespective of the financing source. posed to having one or two “200,000 TEU +” rail In the Central Asia region, as elsewhere, scheduled freight terminals, is essentially related to historical rail services imply consolidation of containers from patterns. These patterns have been formed as a result many shippers and concentration of service on relative- of distributing freight by rail to/from the industrial and ly few origins and destinations: currently, Almaty, the commercial districts. They may have provided bene- former capital of Kazakhstan alone has 10+ small scale fits in terms of having shorter truck journeys, or lower rail terminals in the city’s vicinities (20,000 TEUs). Be- congestion. Despite those developments, consolidat- yond Almaty, the current policy is to encourage invest- ing container transit traffic in a selected number (3–4) ment in terminals by the railway company (Kazakhstan of locations in the country with high throughput (for 22 Improving Trade and Transport for Landlocked Developing Countries Typical Land Distances for TABLE 12    Box 3: Belarus Logistics System Landlocked Developing Countries Belarus is a landlocked country and an upper-middle-income Region Typical corridor Distance economy. It is located in Eastern Europe, with a geographical position that allows it to be (together with Ukraine) a viable West Africa Abidjan – Ouagadougou 1,120km alternative land-linking EU, Russia, Asian and Central Asian East Africa Mombasa – Kampala 1,250km countries. Belarus optimized the good location and trans- Southern Africa Durban – Lusaka 1,628km formed the landlockedness into an opportunity, by adopting policies favorable to transit by foreign operators, which creat- Central Asia Hamburg-Almaty 4,900km ed business for nationals. South Asia Kolkata-Kathmandu 886lm Belarus is crossed by two Pan-European Transport Corri- East Asia Tianjin-Ulaanbaatar 1,690km dors (PETrC): II and IXb. Corridor II ensures the connection Latin America Arica-La Paz 470km between East and West on the alignment Berlin – Pozna – Warsaw – Brest – Minsk – Smolensk – Moscow – Nizhny Novgorod. Corridor IX ensures the connection between North (Helsinki) and South (Alexandroupolis) and its branch IXb provides access from Eastern Ukraine and central example, 100,000 TEUs) to accommodate high fre- Russia to the specialized ports of Klaipeda, Ventspils and quency of scheduled container train services should Kaliningrad. be considered. Such a development may be facilitated Given the projected annual growth rate of 4–10 per cent, it is with the arrival of major terminal operating compa- expected that by 2020 the transit of goods through the terri- nies to the country (e.g. Dubai Port World-Kazakhstan tory of Belarus will be 16–22 million tons, and there will be TemirZholy agreement). 1.8–2.4 million trucks passing through the Belarusian-Lith- uanian and Belarusian-Polish borders. The program “Roads of Belarus” for 2006–2015, approved by the Government, provides for the implementation of measures aimed at further Road Transport and Logistics Services development of transit potential of the country’s road network and increasing its attractiveness to foreign users. Taking into Challenges in the Trucking Industry consideration the growth of transit, the Republic of Belarus di- rected the investments in rehabilitating the two PETrC so as to Road transport has become the dominant transport provide competitive roads allowing for traffic of vehicles with mode for freight, even though the distance between 11.5 tons/axle. The same program foresees for the develop- the sea and the main economic centers of most land- ment of roadside services including gas stations, car washes, locked countries worldwide is typically within the parking facilities, retail outlets, eating establishments, service stations and roadside hotels. range where rail is competitive over road transport. Trucking prices for an articulated vehicle are over Following the same strategic thinking, the Government ap- $2 per km for the most competitive markets (such as proved in 2008 a Program for the development of the national logistics system up to 2015. The document provides for the in East and Southern Africa), and well over $3 per km establishment of logistics centers in Minsk, Brest, Vitebsk, for the least functional ones (as in West and Central Gomel, Grodno, Mogilev, Baranovichi, Bobruisk, Borisov, Zhlo- Africa). Accordingly, road transport is the largest com- bin, Mozyr, Orsha, and Pinsk, with priority given to the ones ponent of the total transport cost between the over- located on the main transit corridors. seas markets and the economic centers of the land- For the purpose of effective development of the logistics sys- locked countries. Fostering a competitive and efficient tem, various Decrees of the President of Belarus and Gov- ernment Resolutions grant benefits and privileges to local trucking industry is therefore critical. authorities which would facilitate the establishment of such At first sight, trucking is a highly competitive in- centers in their areas, as well as to investors who plan to in- dustry that meets the basic requirements for perfect vest in existing logistic centers, and in the construction of new competition: many suppliers, with none of them in an transport and logistics centers. ostensibly dominant position, similar nature of ser- vices (at least for the dry freight segment of the mar- Source: United Nations Economic Commission for Europe, Review of the Transport and Logistics System of the Republic of Belarus, 2013. ket), open information on prices, almost no barrier to entry and exit for operators. While these characteris- tics would suggest that the industry is indeed com- petitive, prices should equal marginal costs. However Hinterland Connections: Efficiency of Transport and Logistics Services 23 Prices and Costs for Road Transport FIGURE 15    Drivers & influences Intervention areas C&F agents, intermediaries Cartels Access to freight Transport price paid by shipper / trader Trucking company margin Competition Trade facilitation Transport costs Non trucking costs ‘Tracasseries’ Road blocks Access to Truck / fleet financing trucking profession Trucking fixed costs Operating conditions Company structure Driver Vehicle operating costs Infrastructure Fuel & tires Maintenance Source: Authors. Teravaninthorn & Raballand (2009) find that the trans- different type of intervention. The four main types of port of freight between Sub-Sahara Africa landlocked interventions are (i) improve the road infrastructure, developing countries and ports, and thus the world (ii) regulate the access to the industry to ensure only market, is at prices that significantly exceed underly- professional operators can provide trucking services, ing costs, suggesting large profits. They also find that (iii) trade facilitation, and (iv) regulate the access to these high profits can be attributed to rent-seeking freight to promote a competitive industry. Due to the road-transport cartels benefiting from oligopolies that inter-relations between the drivers and influences, exist as a result of existing governance and institu- acting on one of them in isolation is likely to have tional structures. They argue that, unless governments limited, or no, impact on the final price paid by the take steps to remove the structural distortions in the shipper. trucking market, there is little point in investing in in- The rationale for improving the road infrastruc- frastructure improvements, to reduce road-transport ture is that better roads reduce vehicle operating costs, as the cartels will capture the benefits from costs. The causal chain between better roads and lowered costs: prices will remain the same and cartel lower costs passes through several assumptions, members will benefit from higher profits. which may be true or not, therefore reducing the ac- Part of that apparent disconnect between prices tual impact on cost savings. The two main expected and cost relates to what is measured as price, and effects of better roads are on the driving speed, and what is measured as cost: the price is what is paid on the wear and tear of the vehicles. Increased driv- by the shipper, which is only loosely related to the ing speed is assumed to translate into reduced driving actual revenue of the trucker ultimately moving the time for a given trip, and therefore higher utilization cargo, due to a cascade of intermediaries. The figure of the trucks, lowering the incidence of fixed costs. below is providing a schematic view of the compo- This is false when the idle time is high, and for in- nents of the transport price and the factors influenc- stance, in West Africa, distances to the hinterland ing them. are short, around 1,000km, but roundtrips are long, Improving the trucking industry requires a mul- weeks. Reducing the driving time by a few hours will tipronged approach, as each of the drivers and in- have a very limited effect on the overall utilization of fluences of a given cost component respond to a the trucks. The second assumption is that better roads 24 Improving Trade and Transport for Landlocked Developing Countries reduce damage to trucks. This is true when the truck Quantitative vs. Qualitative Criteria for fleet is recent and in good conditions, as it is for in- Access to Road Market stance in the case in East and Southern Africa, but International trucking and bilateral agreements where the trucks are dilapidated and overage, such Quantitative restrictions are a major component of as in West and Central Africa, the savings on mainte- how bilateral and some multilateral agreements are nance expenses are largely overestimated. Infrastruc- implemented. Bilateral agreements typically restrict ture remains, however, critical to ensure connectivity the number of vehicles allowed to provide services between the main corridor network and the rest of between the two countries. The restrictions are ad- the country. ministered through permits designed to ensure eq- uity of participation in the transport markets of the respective countries, and to limit the activities of Soft measures other, third-country, foreign carriers. Countries prefer Such as trade and transport facilitation, tend to re- these agreements in part because they are easy to duce the costs of trade through various channels. negotiate and manage. However, the management of Arvis et. al. (2010) show that the main channel to quantity regulation brings with it institutions, proce- reduce trade costs is through reducing the value of dures, documentation, conditions, and penalties, the time the good spends in transit and increasing the re- cost of which is borne by the road transport indus- liability of the supply chain. Shippers or consignees try. The most common implementing structures may incur the higher costs in the form of extra inventory involve ministries in charge of transport, foreign af- or the cost of missed shipments as a result of lengthy fairs, or communications; road regulators/agencies; and, above all, unreliable transit supply chains. The road infrastructure administrations; border agencies; World Bank has found that commercial distributors chambers of commerce; and associations of trans- often have to maintain, on average, several months port operators. of inventories. Poor quality of the supply chain trans- lates into higher losses due to physical damage to and theft of, goods (which, for instance, represent National policies and access to profession several percent of good value, as found in Central Access to the trucking profession is equally critical. It Asia, see Rastotgi and Arvis, 2014). is a national prerogative, with eventually, rules set up Trade facilitation along the corridors has a pos- within a regional community. Worldwide experience itive impact on fixed costs through the reduction of has proven that strictly implemented, international, truck idle time, and potentially a better use of the qualitative regulation of access-to-the-market condi- trucks with higher mileage per year. The gains usu- tions has many benefits. The introduction of qualitative ally come from: i) optimizing the interface between criteria for access to the road transport profession and terminals and trucks (planning port delivery/pick- market (“domestic liberalization”) of transport services up, streamlining documentation, etc.), ii) ‘en route’ should replace quantitative restrictions of market ac- by reducing border crossing times and unnecessary cess. Examples of such regulation include requirements stops (roadblocks), and iii) finally, at destination, by related to the quality of professionals (e.g. logistics op- improving the clearance process and thus enabling erators, drivers, and freight forwarders), to road safe- earlier release of trucks. This has, for instance, been a ty, security, and protection of the environment. Intro- driver of reduction of transport costs in Eastern Africa duction of regulation of road transport services based over the last decade. However, in the context of mar- on qualitative criteria leads, in general, to free and ket interventions (e.g. freight allocation systems) and healthier competition in freight transport markets, a restrictions, these gains may not materialize. Arvis, subsequent fall in prices, emergence of new operators, Raballand, and Marteau (2010) point to a nexus be- greater competitiveness of freight rates (due to dimin- tween regulation and transport prices. They suggest ishing transport costs), and better international logistics that regulatory reform will decrease transport prices and supply chain service quality. The negative effects in a competitive market, but only if it also increases of imposing such regulation include a potential decline the utilization of trucks. in the profitability of the sector, a relative decline in Hinterland Connections: Efficiency of Transport and Logistics Services 25 wages, bankruptcies (WTO 2010), and absorption of Central Asian countries have developed a dual independent small operators by big companies. system, wherein international operators under the TIR In the LLDCs and, to a lesser extent, in transit system essentially operate under the European stan- countries, the regulator or by the truck professional dards in relatively large companies. However, the associations are very limited in their capacity to im- rest of the industry does not have proper regulation of plement the strict rules on access to the trucking pro- entry, and there is no clear distinction between one’s fession, even when proper regulatory framework has own account activities. Some countries still maintain been adopted. The situation varies significantly, de- monopolies for freight allocation (Rastogi et Arvis, pending on the region, and, more so than on policies, 2014). As a result, regional freight transportation is as it is essentially the result of historical trends that mixture of independent, small truck operations, and have shaped the current market organization. larger scale oligopolistic activities. Examples of different business models include small informal operators that transport for their own account; cargo handling companies delivering goods Improving Availability and Quality of within the metropolitan area of the maritime gateway; Road Transport Services relatively efficient trucking companies with direct Improving the competitiveness and efficiency of the contracts with Clearing and Forwarding agents, and trucking industry implies shifting away from current individual trucking companies that depend on several opaque practices for access to the transport market intermediaries. All those can be grouped broadly into towards a situation in which transport operators are three main categories comprising several sub-groups: recognized based on their ability to provide quality (i) commercial trucking—divided itself in several transport services in a professional manner, in view of classes of operators from large companies connect- their compliance with a number of access criteria. If ed to shippers or C&F agents with secured access to combined with measures to enhance the transparency freight to small scale operators, (ii) own account trans- of the allocation of cargo to transporters, a more com- port—with traders / industries operating trucks carry- petitive market structure will emerge that would lower ing their own goods, (iii) intermediaries, or brokers, costs and bring prices more in line with costs. Hence, with varying degrees of predatory practices, as com- the improvement of the road transport sector requires monly found in West and Central Africa). coordinated action on at least three areas: In Eastern and Southern Africa, the trucking market is rather efficient and is characterized by healthy compe-  Access to the profession of transport operator, tition between organized and professional firms. Much for which regional regulations have been devel- of supply is located in the coastal countries, but home- oped which cover most aspects, but with no, or grown competitive industries could also emerge in such limited, actual adoption by member states. As a LLDCs as Uganda, Malawi, Zambia or Zimbabwe. result of the revision of access criteria, some of On the other hand, countries in Western and Cen- the informal operators, with limited capacity of tral Africa are characterized by significantly less effi- compliance, will no longer be allowed to oper- cient trucking markets. Essentially, the lack of trans- ate, creating space for professional operators to parency and strict criteria for access to the profession operate at greater efficiency and profitability; has led to the emergence of a few dominant interme-  Liberalization of access to the transport market, diaries. These intermediaries allocate freight volumes both domestic and international, so as to intro- to truckers while pocketing a large commission and duce competition as an incentive for efficiency. leaving the operators physically moving the cargo This will imply formalizing the contractual rela- at barely break-even rates. This market structure has tionship between the trucking company and the triggered the emergence of widely different business shipper (or its C&F agents), eliminating unneces- models, depending on how they benefit from, or cope sary intermediaries; with, imperfect system incentives in order to provide  Trade Facilitation, in order to improve the operat- quality services and improve market transparency be- ing environment and establish the conditions for tween shippers and truckers. profitable trucking companies. 26 Improving Trade and Transport for Landlocked Developing Countries Box 4: Exports of Cut Flowers from Kenya and Freshwater Fish from Tanzania One of the prime examples of a strong perishables export industry are Kenya’s cut flower exports to the European Union. Over the past forty years Kenya has risen to the largest cut flower producer and exporter to the European market, maintaining a solid market share of 31 percent. Since inception, air transportation has been the basis for the global distribution of Kenya’s perishable goods. However, Kenya’s national air carrier does not have any dedicated freighter aircraft. Nevertheless, the airline transports about 90 percent of the country’s air cargo exports in the cargo hold of regular passenger aircraft with destinations in the United Kingdom, and the Netherlands. Only a small part of the overall exports are transported on dedicated cargo aircraft. This fact underscores the importance of passenger air services for air cargo, especially in countries which do not possess a large air cargo fleet or whose volume of cargo business is too small to support dedicated cargo operations. Another illustrative example of perishables is the export of fresh fish and seafood products. Traditionally, countries with a sea shore have de- veloped a fishing industry, providing opportunities for export (Mauritania). However, such countries have often developed their fishing industry over centuries, with well-established local distribution networks. Some nations have organized and managed their exports from fisheries by traditional means, such as transportation by sea or processing off-shore and freight forwarding by land, and some have assigned fishing rights to foreign operators. Air transportation has created a new export market for some landlocked countries or for countries with access to large freshwater reservoirs. The production of freshwater fish, such as the West Nile Perch or the Tilapia, has become a very lucrative export sector for a few developing countries. A good example is Tanzania, where the West Nile Perch was artificially introduced into the Lake Victoria in the 1950s and 1960s. The processing and export industry that arouse out of this freshwater fish production created an export market of about US$ 122 million in 2005. The center for Tanzanian fishing operations and processing is the city of Mwanza. According to the City Council of Mwanza, the fishing industry of Lake Victoria has created direct employment for over 8,000 local processing workers, and overall 300,000 indirect jobs. About 52,000 Tanzanian fishermen benefit directly from the Nile perch. The key logistics element for the timely export of the processed fish is air transportation. Mwanza disposes of an airport with a 3,300 meter (10’827 feet) long runway, and two non-preci- sion instrument approach procedures. This allows the take-off of medium-sized cargo aircraft, which are able to transport the fish products directly to destinations for distribution in Europe. Source: Bofinger (2007), Gibbs (1984), International Trade Statistics (UNCTAD/WTO). Note: About 400’000 kilograms fish pass through Mwanza airport each month. The declared value of the product is US$3.20 per kilogram, and the estimated overall cost of transport to final destination as value added to the product is about US$1 per kilogram. Under a system of quality licensing, trucking li- transportation has become indispensable, is tourism. censes are provided to enterprises that meet specified It is probably the largest sector overall, if all related minimum professional standards. Unlike the quanti- services and activities are included. ty-based freight allocation quota system, still in place in some LLDCs, the quality-based system does not set Air Connectivity limits on the number of operators. Instead, by imposing Combined, LLDCs represent about 1.5% of global air higher standards on truck drivers, operated vehicles, or transportation, providing few air freight transportation the financial, legal, and ethical status of the compa- services. The connectivity of LLDCs to the rest of the nies, it raises the professionalism of the industry. world depends on their connectivity to regional hubs. Air connectivity is determined by the number and frequency of connections to other countries and, in Air Transportation particular, to regional or extra-regional hubs. To mea- Air transportation plays an important role in connect- sure air connectivity of a country, the World Bank has ing LLDCs. Scheduled flights play an important role piloted an Air Connectivity Index, using the complex in moving goods in belly cargo, thus opening the way network theory. for non-traditional exports such as fresh agricultural The metric shown below is based on Arvis (2011) produce (exotic fruits, vegetables), freshwater fish, and shows a percentage of the air connectivity of a cut flowers (recent example is Ethiopia),15 meat from country as a share of the Highly Connected Country livestock, as well as time-sensitive high value goods such as electronic components for the computer in- http://www.aircargoworld.com/Air-Cargo-World-News/ 15  dustry (see Box 4). Another industry, for which air 2014/07/ethiopian-flower-market-bloom/6641 Hinterland Connections: Efficiency of Transport and Logistics Services 27 (in this case is the USA). Unlike LLDCs in Africa, which The level of airport charges plays a major role in are dependent on smaller regional air hubs, LLDCs in the development of affordable air services in devel- Europe, Central Asia and East Asia seem to have as oping countries. As cheaper secondary airports are high air connectivity as transit coastal countries. The less available, new air carriers are forced to establish reason for this is that main airports in these 2 regions their operations at a country’s primary airports. These are located relatively close to major global air hubs. airports experience not only higher levels of conges- Connectivity and the development of air transport tion, but also often demand higher airport charges services in developing countries are dependent on as justified by the complexity of their operations and several key policy areas to improve their connections expensive, and sometimes unnecessary, infrastructure to the regional hubs. These policy areas include: (i) air investments. In Zambia, for instance, the National Air- transport infrastructure and charges, (ii) air transport ports Corporation, a parastatal company, has recent- liberalization, and (iii) safety and security. ly introduced a new infrastructure and development charge to fund, develop, maintain, and manage four designated Zambian Airports.16 In some cases, air- Air Transport Infrastructure and Charges ports in developing countries can also prove to be an The air transport industry depends on adequate and important source of foreign revenue for governments, efficient airport infrastructure, which complies with and are, therefore, seen as “cash cows.” Furthermore, international standards. However, it is often not avail- at smaller airports, the lack of landside infrastructure able in developing countries. Structurally, landlocked and limited opportunities for commercial revenue countries have poor connectivity because of depen- creates a larger dependency on aeronautical charges dence on regional hubs and distance. Being faced with (landing fees, terminal-area air navigation, passenger a low traffic volume, their relatively simple service and cargo services, aircraft parking and hangars, se- offering requires only very basic facilities, including curity, airport noise, noxious emissions (air pollution), land (e.g., passenger services, food and beverage con- ground handling, and en route air navigation). This can cessions, duty free, car parking) and airside (airfield, have a detrimental impact on ticket prices. Taxes on a gates, air bridges, runways, aprons and taxiways) in- sample of West African routes represent in some cases frastructure. According to the World Economic Forum over 50 percent of the ticket price. Removing exces- (WEF) survey, air transport infrastructure in Africa, sive taxation can have a substantial positive impact on Asia and Latin America, and even in Eastern Europe, airfares, and the economy as a whole. Although these are still considered of poor quality (WEF, 2012). reasons help to explain why airport charges may be higher in developing countries, such generalizations are difficult to make. Further assessments need to be Connectivity as a % of the FIGURE 16    made on a country-to-country basis. connectivity of the USA (most connected country) Air Transport Liberalization 14.8% The probably most important element of the strong SAR 12.7% development of the global air transport industry in LCR 9.5% recent years has been the deregulation of the domes- 7.5% tic and international air transport markets, as well 23.6% ECA 16.3% as the establishment of transparent and competitive 19.9% markets without protected state-owned carriers. The EAP 13.9% example of liberalization of air services in developing 8.9% AFR 8.0% 0 0.05 0.1 0.15 0.2 0.25 16  Lusaka Times. 2012. Available at: http://www.lusaka- Transit LLDCs times.com/2012/08/11/national-airports-corporation-intro- duce-infrastructure-development-levy-departing-passen- Source: Arvis and Shepherd, 2011. gers-zambian-airports/ 28 Improving Trade and Transport for Landlocked Developing Countries Box 5: Open Skies for Armenia In early 2013, Armenia decided to implement an “Open Skies” policy, breaking apart from a long legacy of tight regulations in its commercial aviation market. The particularity of the Armenian case relies in its historical limited connectivity with international markets, partly determined by geography, and partly determined by geopolitical considerations. Besides being landlocked, the country has open land borders with only two of its four neighboring countries. Moreover, the size of its Diaspora is several times larger than the number of inhabitants currently resid- ing in Armenia. All these factors contribute to create frictions for the free movement of travelers, workers, knowledge and ultimately curtail the growth of the Armenian hospitality sector, which accounts for about 20 percent of all goods and services exports. For over 20 years—since the country became independent–attempts at setting up a national airline proved unsustainable. After the disband- ment of the Soviet Union, Aeroflot’s Armenian Directorate continued to operate under the name of “Armenian Airlines”—a company wholly owned by the Armenian State—until the year 2002, when it ceased operations due to insolvency issues. The following year, a joint venture between Russian and Armenian private capitals established “Armavia Airline Company”, under an investment agreement signed between the parties and the Armenian government. The agreement granted Armavia exclusivity rights for a period of 10 years, to operate on designated international routes, and “first refusal” rights on any new routes negotiated in bilateral air service agreements by the Armenian Government. During the duration of the contract, Armenia maintained a single designation policy—whereas only one airline per country is allowed to operate on every route—except for the case of the Russian Federation. Moreover, traffic rights were set up to match Armavia’s operational possibilities, as a way of ensuring a “balanced” share of traffic for the Armenian carrier. As a consequence of the restrictive aviation policies applied by the country, the number of flights that foreign airlines could offer was significantly constrained, and competition between carriers limited. Different studies carried out by international donors between 2010–2012 estimated that, as a result of these policies, inbound and outbound fares per kilometer into and out of Armenia (exclusive of taxes, fees and charges) evidenced a premium of 33 to 50 percent, as compared to neighboring Georgia –a country with a fully liberal aviation regime (e.g. Open Skies). During the period 2005–2011, passenger traffic growth rates in Georgia doubled those of Armenia after liberalizing its aviation policy. After facing a prolonged period of financial distress, Armavia ceased operations in March 2013. The demise of the Armenian carrier brought an agitated debate in Armenian policy fora over its aviation policy. The disappearance Armavia seemingly acted as a catalyst for the Govern- ment of Armenia to consider the liberalization of its commercial aviation market. In effect, through a series of Government decrees, Armenia adopted an Open Skies policy in late 2013. The result is such that any airline wishing to serve the Armenian market can do so (not including 5th freedoms) without any restriction in the number of frequencies or aircraft size, provided they comply with safety regulations. The Russian Federation and UAE were the first to amend the old air service agreements with Armenia. After almost a year, recent passenger traffic growth figures indicate that the Armenian market has expanded in 2014 by 25 percent (Jan-June) as compared to 2013, and the number of carriers serving Yerevan increased from 27 to 31. New services will also include not only a combination of international legacy carriers and regional airlines from the CIS countries, but also low cost carriers; the arrival of the latter will also bring a wider range of services offering, especially for the more price-sensitive segment of the market. In addition to this, Armenian sources indicate that fares have dropped up to 25 percent in certain routes, further stimulating demand growth. Source: World Bank project. countries is best illustrated by Air Transport Liberaliza- can be seen of countries opening up by applying the tion in Africa by the Yamoussoukro Decision, which Yamoussoukro Decision at the bilateral level. Given entered into force in the year 2000. The Declaration the current structure of the air transport sector in many committed all representative governments to making African countries, one can assume that about two- all necessary efforts to integrate their airlines within thirds are willing to apply the Decision because they eight years; it represents a radical move away from see little value in protecting their own markets from regulating air services between states on the basis of outside competition (Schlumberger, 2010). restrictive bilateral agreements. However, implemen- Another example of maintaining an open sky tation of the decision has encountered two quite op- policy, at least with regional partners, is Armenia (see posite realities. Implementation in terms of carrying Box 5). It shows that cross-country policy coordina- out public policy has seen little progress at the pan-Af- tion is beneficial to the LLDCs because it increases rican level. Many of the key policy elements are still the potential for human mobility to and from coastal missing or exist only on paper. At the same time, in countries and main partners. For business people, it terms of operational implementation, many examples improves access to regional economic centers. Hinterland Connections: Efficiency of Transport and Logistics Services 29 Safety and Security to fill out customs and transit declarations, and even- The state of air transport safety and security in a tually to perform other trade-related procedures, on country plays a critical role with regard to aircraft behalf of a client. In practice, the two activities are financing and insurance. The cost of purchasing or quite intertwined with each other. In most countries leasing aircraft can be significantly higher when forwarding companies also perform customs broker- standards are perceived to be inadequate in the age. Companies that once started as pure customs markets in which they operate.17 Indeed, aircraft representatives may eventually start providing freight manufacturers may be reluctant to sell aircraft due forwarding services. Customs brokers are regulated in to reputational risk. While Africa only accounted for the customs code, spelling the professional require- five percent of total accidents in 2012, 45 percent ment of individual brokers and the financial guaran- of all fatalities occurred in the region, and it still has tees (deposits or bonds) that companies offering bro- the largest number of accidents per million passen- kerage should offer. gers.18 The reason for the higher number of accidents In LLDC the two main issues are: i) the devel- can be found in various areas, including issues such opment and international connectivity of freight for- as operational shortfalls, insufficient and defective warders and 3PLs, and ii) the integrity of the brokerage equipment, inadequate maintenance of aircraft, activities. The situation is quite different depending on and/or lack of properly trained staff. These derive the regions. primarily from the lack of adequate infrastructure, For instance, in Africa, forwarding is dominated insufficiently trained human resources, and poor by international companies, and often tied to termi- oversight. nal operations or shipping lines. There are relatively few players; the share of regional firms is small, high- er in southern Africa, where integration links with Other Transport and Logistics Services the strong regional trucking industry plays a role. In the former Soviet Union, the forwarding industries is Forwarders and Customs Brokers largely home-grown, quite fragmented and largely Logistics agents not moving freight themselves play a comes from the externalization of commercial activ- critical role in organizing supply chains and moving ities of the railways (when the railroads emerged as goods on transit corridors: they are the freight for- national entities at the breakup of the Soviet Union in warders and the customs brokers. the 1990s). In contrast to Africa, international compa- The role of freight forwarders is to organize inter- nies in Central Asia have a small presence. The (small) national (or eventually domestic) logistics on behalf development of higher value logistics activities (3PLs) of shippers and consignee. This includes organizing is essentially tied to the presence of multinational transportations with railways or trucking companies, companies, which brings externalization of logistics and customs representation activities at the border. activities to 3 PLS, as part of their operations in LL- They make a key contribution to supply chains by DCs. International distributors (supermarket chains linking with forwarding partners abroad, which es- like Shoprites in Southern Africa, or Metro in Cen- sentially insures the continuity of the supply chain, tral Asia) or companies involved in the production and makes it possible to track shipments in transit. and distribution of consumer goods (Unilever, P&G) Eventually, stronger and diversified freight forward- would operate this way. ers may have evolved into third party logistics (3PLs) Proper regulation of customs brokerage by cus- offering, for instance, asset based services such as toms agencies is important to prevent non-profession- warehousing, or terminal operations for commerce al services (part-time brokers), monopolistic behavior, and industry. The professional criteria and the regula- tion principles have been set up by the International Federation (FIATA). Larger countries have member- ship of FIATA 17  World Bank. 2013. Doing Business: EAC. The role of customs representatives is more spe- 18  International Civil Aviation Organization (ICAO), 2013 cific, since they are accredited by customs authorities Safety Report. 30 Improving Trade and Transport for Landlocked Developing Countries or collusion among brokers and customs officials. In reduce the number of registered brokers to that of any recent years, customs reforms, including in low-in- regular profession. Trade Facilitation measures taken come countries, have paid attention to these aspects. to address transparency, including incentive to sub- Requirements have been adjusted, including the in- mit-declaration online, (next chapter) also increase troduction of a higher level of guarantees in order to the quality of provided services. Transit and Trade Facilitation, Regional Integration 4 R egional integration and facilitation of trade and transit are at the heart of efforts to reduce access costs of LLDCs. While transit cooperation encompasses legal issues, it is rather an issue of a proper implementation of transit agreements. With few successes in the past de- cade, the Vienna Programme of Action offers an opportunity for LLDC countries and development partners to pay close attention to the issues of transit. While traders in LLDCs, transit countries and development partners may be confronted with bad infrastructure or long distances to market, the main sources of higher cost have to do with unreliability of supply chains and delivery of goods. The main factors behind unreliability depend on the “soft infrastructure of LLDCs”, including the lack of proper implementation of a transit system, procedural complexity, and, in many cases, inefficient market for services such as trucking, reviewed in the previous section. Progress did happen in other areas where some trade facilitation practices, not specific to the needs of LLDCS, have been widely adopted worldwide such as the use of IT or modern border crossing facilities. More cross border cooperation is still much needed to fully integrate supply chains regionally and address one of the key access constraints of the LLDCs. Importance of Regional Initiatives: Europe that was highly fragmented territorially. Bonds, Transit Systems and Components seals, and carnets were designed so that traders ap- proved by the authorities could move, bypassing the The core of the cooperation between LLDCs and payments and controls applicable to goods for local transit countries aimed to improve LLDC’s access to consumption. global markets happens within a regional integration The primary sources of LLDCs’ access costs are framework. Main areas for regional integration poli- found by examining the inner workings of the corridor cies in developing countries target trade, customs and and its institutions, notably those involved in moving transport integration. These areas are especially im- goods and regulating vehicles, as well as by looking portant because they allow improving LLDCs’ access at mechanisms and incentives for cooperation be- by regulating the movement of goods in transit. tween participants in the corridor supply chain: trad- From the 13th century on, modern transit proce- ers, transport companies, and customs and control dures emerged in support of the commercial revolu- agencies. tion in Europe as goods began to move between dis- “Transit system” refers to the infrastructure, le- tant buyers and sellers thanks to a new banking and gal framework, institutions and procedures serv- trading system. Formal transit systems were needed to ing trade corridors. Transit system has the following help the transport operators move the goods across a components: 31 32 Improving Trade and Transport for Landlocked Developing Countries 1. Hard and soft infrastructure of the transit system: a. Political commitment to allow transit trade, Box 6: Transit Regime formalized in treaties that can be bilateral, regional, or multilateral; The supply-chain connectivity is the ability of the traders in one country to effectively establish reliable supply chains with b. Physical infrastructure, including border their customers or suppliers. These supply chains are not tak- checkpoint facilities; ing one specific route or mode of transportation, but rather c. Market for services available in the region, have several options. Their performance is dependent not including the trucking industry, customs bro- only on the transport route but also on the logistics business environment, which depends on national or regional patterns kers, and freight forwarders. (customs is a nationwide agency). The criterion may depend 2. Institutions that enable the transit system to move on the product. goods and vehicles on the corridor: For instance, exporters of dried fruits from the Isfara region a. Transit regime, implemented mostly by cus- in northern Tajikistan are dependent on partnerships with toms agencies, comprising the operating pro- long-distance road services with Russia and Europe to serve cedures that govern the movement of goods; their customers and face potential issues in transit. They are also dependent on the local cross-border road network within b. Transport policies and protocols that govern the Kyrgyz Republic to expand and diversify their collection the movement of vehicles. They are imple- area. In the case of the General Motors factory in Uzbekistan, mented in countries and across borders to or a large wholesaler operating from Almaty, the concern will regulate logistics services, recover infra- be the predictability of the rail transit to Almaty and beyond from distant sources in East Asia, Russia, or the European structure costs, and to improve competition Union, so as to avoid potential stock-outs. within and between modes of transportation. c. Initiatives to facilitate cooperation and to Source: Rastogi and Arvis, 2014. build trust between transit and landlocked countries and between public and private participants, including the setup of joint cor- ridor management institutions or the survey Regional Economic Cooperation (CAREC) Program or of corridor performance indicators common the Transport Corridor Europe-Caucasus-Asia (TRACE- solutions. CA) Program have focused on improvements of specif- ic and eventually competing routes.19 Building a suc- cessful transit system raises a need for resolving a wide Recent research (Arvis et al., 20114) shows that range of issues at the national or regional level—reg- transportation costs alone do not account for trade ulations, delivery of private services, institutions, and costs on corridors, and it is important to take into ac- organizations or partnerships, most of which are not count other important outcomes in corridor perfor- corridor-specific. It requires complementarity between mance, such as delays, reliability, or service quality. the various levels of legislature, e.g. between global/ The trade and transport costs borne by LLDCs now regional integration and bilateral treaties. depend more on operations than on infrastructure Nowadays, the focus has been shifting slow- capacity. The main factor is the fragmentation of the ly from corridor approach to the regional integra- supply chain. Few traders in LLDCs have access to the tion framework, global or regional connectivity and door-to-door logistics infrastructure that has devel- oped in industrialized countries over the past two de- cades. Instead, they rely on an extended sequence of distinct operations, with many procedures, agencies, 19  Africa’s geography and the number of its LLDCs make it and services, all prone to rent-seeking and overregu- highly dependent on transit corridors. It hosts several transit agreements on paper—but implementation has faced var- lation. The performance of the various components of ious challenges. There are four different regions with sep- this system explains in large part the outcome in trade arate sets of problems: West Africa (the West African Eco- and supply-chain connectivity in the region. nomic and Monetary Union [UEMOA] plus Ghana); Central Many initiatives in Central Asia and Africa, sup- Africa (the Douala Corridor); Eastern Africa (the Kenyan and ported by different institutions such as the Central Asia Tanzanian corridors); and Southern Africa. Transit and Trade Facilitation, Regional Integration 33 Components of the Transit System FIGURE 17    “Soft” and “Hard” infrastructure Transit system: Implementation mechanisms Implementation activity Implementation focus Truckers Forwarders Private sector Customs transit International regime & facilitation movement of goods Business Banks assoc Global Bilateral tools treaties Enforcement of International movement Legal transport policies of vehicles & services framework Transport Customs Regional Institutions community Corridor Cross border cooperation Regional management & information sharing secretariat Rail Road Physical connectivity Border ICT Source: Arvis et al. (2011). supply-chain performance. This framework is not 1. From border to border going through the country corridor-specific: it rather offers a complementarity (international transit) with corridor approach taken in the past. Such ap- 2. From border to an internal destination where proach is important but in practice it is rather about goods are cleared (national transit) implementation. In Central Asia especially, the corridor concept In both cases there are huge gains in making tran- so far has not solved fundamental issues concerning sit interoperable between countries so that there is institutional capacity and private sector competence. not duplication or differences in procedures. In the Most of the binding constraints are not route specific; context of a Customs Union such as the EU or the Eur- they are structural issues found to various degrees in asian CU, the transit regime between countries within all countries but are largely national. They have to be the CU is unique, like a national transit scaled to the addressed at the national level, eventually within a full CU. regional integration framework with a strong customs The following concepts are essential to a transit and transport component, such as the Eurasian Cus- regime: toms Union and/or the SCO.  Seals to secure the vessels What is Transit?  Documentation flow (transit declaration and its The transit customs regime is a very important compo- automation) nent of logistics of landlocked developing countries.  Principal (owner of the goods) and guarantor (a The transit regime makes possible the movement of party that agrees to pay jointly with the debtor goods not yet cleared by customs to move under cus- the duties and taxes that will be due if a transit toms control. Transit may happen: document is not discharged properly 34 Improving Trade and Transport for Landlocked Developing Countries  Guarantees (financial securities, bond by a bank, to make sure that a proper guarantee is issued by the deposits) transit operator. In many countries transit arrangements such as A functional transit regime ensures that the physi- guarantees are poorly implemented; other issues in- cal movements of goods, information flows and finan- clude weak information systems to reconcile the entry cial flows are effectively synchronous. and exit documents. The agent for a transit operation is the carrier or Transit requires an exchange of information from the freight forwarder, not an owner of the goods. The at least three places: a place of transit initiation, a agent furnishes the guarantee and files the transit dec- place of transit termination, and a place of the guar- laration with customs. Unlike for regular clearance, for antor (to validate and discharge the bonds). Pricing transit traffic, the due diligence by customs authorities of the guarantee (or bond) may vary but it is propor- is limited to affixing or checking the seals and verify- tional to the time between the initiation of the guar- ing the guarantee instrument. Customs do not need to antee and its discharge. Therefore, inefficient informa- value the goods precisely for each vessel—they need tion exchange between the three places and delayed The Transit Regime: International and National Transit and Final Clearance FIGURE 18    Transit country A Destination country B Destination Origin Border Transit Final clearance International National Freight forwarder/road (rail) carrier Declarant Principal of the transit operation for customs Principal of customs clearance: owner of goods or his agent (broker) Submit Submit Submit Transit declaration and bond Transit declaration and bond Import declaration(s), payment of duties Seals Seals Bond Bond Bond Customs A Customs B Customs and other Release goods control agency in B Transit information Transit information management management Initiation discharge Initiation discharge of transit of transit Source: Arvis et al. (2011). Note: Transit trade describes the inland movement of goods under customs control that is not cleared by customs. Transit can take place in the country of destination and origin of the goods (national transit) or in a third country where the merchandise is carried from an entry post to an exit post (international transit). Hence, a complete transit is a sequence of international and national transit links. Landlocked developing countries can trade with non-neighboring countries only through transit systems. Transit and Trade Facilitation, Regional Integration 35 discharge of bonds result in significant costs. NCTS partnership, a relationship, contractual in some cases, (New Computerized Transit System) in Europe is a between competent logistics operators and the author- good example of a seamless exchange of information ities of the transit country. The principles of working on a transit manifest or the initiation and termination transit procedures are essentially universal and pro- of a bond/guarantee. cedures involve a transit document and a guarantee Transit does not require a heavy border infrastruc- scheme that prevent multiple taxation of the goods in ture to check the transit manifest and the seals. Transit transit, also precluding revenue losses associated with flows should be separated from the flows cleared at leakage of the goods into the transit country. Sever- the border: a separate fast lane, etc. al legal instruments aimed at facilitating transit have Another important feature of a modern transit re- been developed in the past decades. Despite these ef- gime, such as the Common transit in Western Europe, forts, achieving an effective and working transit regime is that the requirements procedure applicable to the has been elusive in all regions outside Europe. transit operator may be simplified and the guaranteed Common implementation issues include weak in- lowered for regular operators with a demonstrated lev- formation systems and poor guarantee management, el of compliance and high volume. For instance typ- lengthy transit initiation procedures in a country of ically guaranteed are waived for railway companies. origin (usually port), lax regulation of entry for the The general idea is that transit operators (principal) are operators authorized to participate in transit opera- a special case of authorized economic operators. tions, control mentality and extensive use of convoys The main steps in this extended supply chain in- to escort the transit vehicle, misconceptions in transit clude (on the import side; the chain is reversed for ex- facilitation initiatives (e.g., it is proven that transit does ports) port handling, initiation of transit, loading and not require a heavy border infrastructure). multimodal operation, control en route, border proce- dures, and customs clearance at the destination. These activities take place mostly in the transit countries. Transit Trade is Still Being Overlooked For traders, the low reliability of transit supply Along most corridors in developing countries, the chain is more worrisome than the average transit time. time to initiate transit in a port is similar to the time to The many steps, the fragmentation of control and the clear goods for local consumption in a coastal coun- low quality of services make the supply chain un- try. In some instances, it can take even longer, despite predictable, which shows up in the spread in transit the fewer procedures and no payments involved. As times. The system lacks redundancy: if one link fails, shown by Raballand (2012), time to clear goods or ini- few alternatives are readily available. Other factors tiate transit is shorter, but can be still relatively long two that make the delivery process unpredictable or unre- to four weeks is the norm is the norm in most African liable from one end of the chain to the other include: ports today. There is no simple or single explanation for breakdowns of key infrastructure, transport equip- this problem, which affects both large and small transit ment, insecurity and fuel shortages. All these risks give operators. However, it seems that in many cases, cus- rise to additional inventories, emergency shipments, toms does not clearly separate clearance from transit suspended operations, and lost markets. procedures, but applies the same process to both. In Transit systems which govern the movement of reality, transit goods should not be subject to the same goods from origin (or port) to destination have seri- risk management and control as locally cleared goods. ous implementation issues and require more atten- Document checking classification and valuation should tion. Transit systems are based on the transit regime, not be sticking points for transit goods. In theory, transit which is the set of rules and regulations that govern can be initiated in a port using the information already the movement of goods from their origin in the tran- available in the shipping manifest. sit country (often a seaport) to their destination (such There is a high risk of policy makers and develop- as a clearance center in the destination country). The ment agency to concentrate their efforts on unproduc- efficiency of the corridor supply chain depends on its tive design and investments associated with transit. design and above all on its implementation. At the The tendency is to overregulate transit and not always heart of a functioning transit regime is a public-private address the most pressing issues. It is worth rectifying 36 Improving Trade and Transport for Landlocked Developing Countries some of the most widespread misconceptions. First, to repeat the paperwork or pay for the costs of several transit does not require a heavy border or ICT infra- guarantees, one at each border. This integration has structure; in fact, transit facilitation reduces the needs begun in Europe first with the TIR (available also in for border investment. Since the process at the border MNA countries and the CIS), and evolved in West- should be limited to fairly simple diligence—check ern Europe in the more integrated European common the manifest and the seals, no inspection—there is no transit system. Other have tried to develop regional need for a large transit infrastructure. Transit does not transit systems, to serve the need of regional trade. require specific border post arrangements, and tran- However, regional transit regimes have not succeed- sit flows should be separated from the flows cleared ed, apart from the TIR and the European common at the border. For example, there may be a separate transit system. fast lane at a border post with substantial activity (100 After World War II, there were two contradictory trucks a day). Information technology is critical, yet developments. On the one hand, truly efficient multilat- d overreliance on information communications tech- eral systems were created in Europe in the reconstruc- nology (ICT) solutions may be counterproductive. tion period, such as the TIR (Transports Internationaux Some simple ideas on where and how to clear, al- Routiers) system, allowing door-to-door international though apparently are common sense, do not work. trucking of goods, which has since become a primary An important series of misconception is that there long-distance transportation mode. On the other hand, are solutions within regional integration framework when newly independent countries emerged from for- that can dispense LLDCs from a transit regime: mer colonial empires or were formed otherwise, they keenly felt the need for border controls and transit sys-  For landlocked developing countries, clearance tems where there had been none. Hence, while trade at the port of entry in the gateway country. Be- corridors in Europe became more efficient, in the rest yond the obvious issues of territorial jurisdiction, of the world, they became more fragmented. the main problem with this idea is that the transit country, to prevent fraud or fiscal loss, still needs Trucking (TIR and European Transit) a system to make sure that goods are consumed In Europe, the TIR system allows for a unique docu- in the destination country. At best there can be mentation and guarantee managed by a network of preclearance, with the risk of adding a layer of national guarantee association. It evolved from the procedures. In rare instances, this is feasible, for 1950s, spreading from the Western Europe to the East example, where there is a very short transit corri- and is still very active and plays an important role in dor and a dominance of transit trade over domes- the former Soviet Union. tic trade at the port of entry. The main services involved in supporting trade  For a customs union to dispense with transit pro- and logistics are trucking, freight forwarders, cus- cedures entirely. In fact, since value-added taxes toms brokers, and third-party logistics (essentially (VATs) or sales taxes are collected in the country warehousing in the local context). Only international of consumption, some transit mechanism must trucking under TIR is following well established in- be maintained with border controls even if a col- ternational standards. Most other logistics companies lective mechanism is agreed for the collection of in the region do not offer very sophisticated services, extra-union duty (as in the European Union [EU] operate under loosely defined regulations and profes- and Southern African Customs Union [SACU]). sional standards, and are not integrated into the net- works of global logistics companies. Regional Transit Systems Transit essentially relies on a public-private part- Typically transit takes place over at least two territo- nership: the private sector provides financial guaran- ries: one or more transit countries, plus national tran- tees and applies operational procedures that make sit in the destination country. There are obvious ad- transit trade possible, and in return it obtains freedom vantages in harmonizing the procedures and chaining of transit under minimal supervision so that customs transit across-countries in the same region, so as not agencies can trace properly but not intrusively transit Transit and Trade Facilitation, Regional Integration 37 operations. The TIR implements these principles very available and allows for advanced notification of effectively: declaration before reaching borders.  TIR is universal instrument managed by the Inter- From the 1970s, the TIR was progressively re- national Road Union (IRU), under supervision by placed within the then-European Economic Commu- the UNECE (TIR convention) nity by a Common transit declaration (referred to as a  Operations happens under a TIR carnets, which is T1), with a unique customs document checked at each a transit declaration distributed by the IRU, with a border like the TIR, but backed by a common banking transit guarantee attached to it. guarantee from the country of origin. This was made  Operators must meet minimal international stan- possible by the integration of the community whereby dards, validated by the national association mem- a bank guarantee could be recognize across border. ber of the IRU. Since the turn of the millennium, the Common Transit  The IRU through its management of the carnet is automated with the introduction of the New Com- does offer a system of tracing and validation of puterized transit system (NCTS). This system covers the transit operations. IRU is also responsible for the EU and the EFTA countries (Norway, Switzerland). interoperability of transit guarantees across bor- der, a critical feature difficult to implement. Other Transit Systems  TIR trucks offering a better level of security, cus- The success of the TIR did inspire other regions to em- toms may differentiate depending on the quality ulate it and create comparable systems to facilitate of the operators and their vehicles, the sensitivity movement of goods across several borders. Most of of the goods carried, or both. these experiments started in the 1980s, and with very  Although TIR has been designed in the 1950s as few exceptions ended up in purely systems typically a purely manual system, it can benefits from au- lacking key ingredients such as: regulation of entry tomation: carnets and guarantees are managed in of the operators, lack of a common information sys- standards customs system, E-TIR is increasingly tem to trace the transit operations across borders, or a Box 7: European Transit System The European common transit system is the term used here for the European Community and common transit systems—systems that apply to goods imported into any of the 27 European Union member states and 4 European Free Trade Association countries from outside that area, as well as to exports in the reverse direction. The Community transit system applies to trade between European Union members and third countries, while the common transit system (in the more restricted sense) to trade between European Union and European Free Trade Association countries under essentially the same rules. The transit manifest is known as T1. Imports are subject to duty in the destination country in accordance with the European Union’s common external tariff, and to value added tax (VAT) in accordance with national tax rates. The recently implemented New Computerized Transit System (NCTS) has made the European common transit system even friendlier. Guarantees can be of three kinds: a cash deposit, guarantee by a guarantor (who vouches for the trader), or a guarantee voucher (a multiple of the standard € 7,000) valid for up to one year. For a regular procedure the guarantee must apply specifically to an individual trip. Authorized transporters (and other principals) may present comprehensive guarantees valid for multiple trips and longer periods, but covering only the total duty expected to be at risk in an average week—the so-called reference amount. The coverage of the comprehensive guarantee or guar- antees can be less than 100 percent of the reference amount, and it can even be waived if the principal meets conditions that imply low risk. The European common transit system represents a very streamlined evolution of regional carnet system. It is now fully computerized, it does not require the soft infrastructure of the TIR (the IRU and national associations), and it allows competition for guarantees. There is also less intermediation by brokers. In essence it is like a national transit system, but expanded into an economically integrated region. Source: World Bank. Note: The transit manual in the EU is a huge document of more than 400 pages that contains many details, available at: http://ec.europa.eu/taxation_customs/ customs/procedural_aspects/transit/common_community/index_en.htm 38 Improving Trade and Transport for Landlocked Developing Countries single guarantee instrument, the latter two are provid- Examples of Other Regional TABLE 13    ed by a single international body the IRU. Systems Beyond the EU, trade within the SACU is within a customs Union, but less complete than the EU. There Area Implementation In practice is not a single revenue mechanism and some internal ECOWAS ECOWAS Similar to a local No regulation of entry borders are maintained. During the period of the Al- (TRIE) countries, TIR No common in practice Common carnet, guarantee maty program, two new initiatives were implemented only UEMOA with payment and clearance that provide very positive examples of regional initia- countries to chamber of mechanisms (e.g. tives to facilitate transit: the Eurasian Customs Union commerce IRU) and the TIM in Central America. Does not work across border or dispense The Eurasian Customs Union (CU) includes Belar- from national transit us, Kazakhstan and Russia. Beyond the EU,20 the only CEMAC Cameroon, Not implemented example of a full customs union with revenue sharing Chad CAR and suppression of customs control at internal bor- COMESA Common So far, no ders. The CU indirectly benefits other Central coun- document tries beyond Kazakhstan (Rastogi 2014). However EAC Kenya, In progress Concept of clearance the CU rules in a number of areas including trucking Tanzania, of non-regional regulations or internal transit regime have not been Uganda, goods at the port of aligned with the EU, which potentially create conflicts Rwanda entry. (untested) with other provisions such as the TIR. Andean Common In connection with SIECA, since 2005 the In- Manifest document ter-American Development Bank has put into effect ATIT Mercosur Common Common guarantee based on truck value a regional transit system (TIM), which is one of the best systems operating outside Europe. It is based CBTA Greater Similar to a local No implemented Mekong TIR so far on an adaptation of the EU’s and EFTA’s Community countries Transit (NCTS). It is fully operational in 2012 on the Pan-American Highway and has significantly reduced waiting times at borders. Previously transit implied new procedures on each side of each border, involv- success in creating regional systems. First, an effi- ing customs brokers. cient transit regime depends on the other compo- TIM generates a single computerized document nents of the transit system, including institutional ca- from origin to destination, reducing border formalities pacities; private sector capacity, notably in transport and controls. The carrier creates the computer-gener- services; and other political economy constraints. ated TIM declaration either before departure or at the Second, misconceptions in transit design and im- first border, where it is recorded on the TIM regional plementation have appeared, even in environments server and shared among the countries. At the bor- that were conducive for a successful transit regime. der the driver shows his TIM carnet at the specialized Third, the conceptual differences between the TIR ‘transit’ window. Its barcode allows the customs offi- and the European common transit system are com- cer to automatically identify the truck and the driver, plex and not always fully understood. In most cases and unless there are problems, he gives immediate (below) the implementation of the regime did not approval to proceed. The driver’s immigration docu- include proper multi-national governance, compa- ments are checked at the same window. The transit rable to the IRU in the TIR, so that the transit opera- seals are community seals attached at the point of tions are properly traced, and guarantees managed departure of the transit, as under the TIR regime. As across borders. Under TIR, the driver handles the border formalities without need of brokers Several lessons emerge from the past problems with implementing transit regime and the lack of 20  and, potentially, the Switzerland-Lichtenstein CU. Transit and Trade Facilitation, Regional Integration 39 Box 8: Comparison of European transit with the Eurasian CU transit For instance, in Kazakhstan, like in other landlocked developing countries, transit may happen under: 1. The TIR 2. The provision of the customs union for instance for goods coming from the CU border to an internal destination within the customs union (when they are not cleared at the border), or for export from inside the customs union 3. Special provisions for trucks coming from Khorgos to inland depot in Almaty. From the interviews, the application of a concept of transit operators seems to be much more restrictive in the Eurasian CU when compared to the EU system, at least in its implementation. In application to Kazakhstan, this concept results in an exclusive class of transport customs brokers with a higher level of standing guarantees. Similar to the registration fee of brokers, the guarantee amount is fixed and is not tied to the volume of transit as in the EU or a typical transit guarantee system. In fact, the system should be enhanced to include: 1. Comprehensive guarantees issued to most large logistics and trucking companies, especially those operating under the TIRs; 2. Vouchers for occasional operators, which would still have to register with customs. For instance, this could apply to middle-size transport companies. Furthermore, the transit guarantees should be computerized under the same conditions as the import customs declarations (paperless trade). Critical to the system is the ability of the customs office at destination or en route to access the transit declaration initiated at the point of entry of the Customs Union. This raises an issue of IT connectivity within the CU, which in current situation is more of a legal/organizational issue rather than a technical one. Source: World Bank. Simplification of Procedures: Trade  Transparency of information of trade rules  Possibilities to appeal decisions made and Transport Facilitation  Integrity program to reduce collusions and illegal Trade facilitation is one of the areas, where the most payments progress has been made during the period of the Al-  Integration of control by different agencies (Inte- maty Program of Actions. However, this trend is not grated border management) to avoid duplication specific to the LLDCs but can rather be attributed to  Expedited schemes for compliant operators (au- global awareness on the importance of practical trade thorized operators regime) facilitation measures to reduce the trade costs at the borders. This global convergence shows in reduction Below are two examples of areas where some of delays and the trends in convergence in logistics practical progresses relevant to LLDCS: the improve- performance (LPI 2014 Report).21 This trend helps the ment of land border crossing points and the use of conclusion of the recent (2013) WTO agreement on information technology to process trade information, trade facilitation, which promote into a now legally and clear goods. These projects can be relatively com- binding framework a series of important principles, plex, but in some respects are the low hanging fruits of proven by experience. facilitation reforms. They rely primarily in investment Trade facilitation includes the following improve- in technology and physical facilities, not necessarily ment: deep change in institutions and business models. The benefits from those investments are fully reaped only  Reduction of procedures when these changes are implemented.  Automation of trade procedures  Improvement of border crossing facilities  Risk management: selectivity to reduce the rate 21  Connecting to Compete. Trade Logistics in the Global of physical inspections of goods by customs or Economy. The Logistics Performance Index and Its Indica- other agencies tors. Word Bank, 2014. 40 Improving Trade and Transport for Landlocked Developing Countries The key measures covered under the new agree- Box 9: Resource Material on Border Management ment include commitments on the publication and availability of information for traders, the adoption of Border Management Modernization Toolkit provides pol- modern approaches to customs and border manage- icymakers, development professionals and reformers with a broad survey of key developments and principles for achieving ment. The principles include: trade facilitation improvement through the adoption of con- temporary approaches to managing cross border trade. In 1. Operational standards by customs agencies in contrast to the traditional border management reform agenda, terms of risk management for clearance post with its focus specifically on improving customs operations and trade related infrastructure, this book addresses both clearance audit, customs reform and areas well beyond customs—a signifi- 2. Transparency measures such as: transparence on cant broadening of the traditional scope of reform efforts. It new legislation, appeals against administrative provides practical advice on how to develop a strong business decisions, advance rulings, case for reform and how to design and implement comprehen- sive border modernization programs in developing countries. 3. Improved cooperation between government agen- cies including the implementation of national sin- gle window systems 4. Guidelines for streamlining international transit procedures. In effect, the new agreement brings under the for- mal auspices of the WTO many of the standards and best practices enshrined in other international instru- ments and in many respects the Bali agreements spells out minimum common standards, and the full bene- fits of trade facilitation would only be fully realized if countries are prepared to go beyond, for instance in the context or regionally integrated facilitation frame- work similar to the ones available in the EU. However the agreement has a catalytic role in two areas. First the standards in the agreement are subject to the WTO’s binding trade disciplines, which was not the case in previous conventions. Furthermore, the agreement strengthens the delivery of technical assis- tance and capacity building support for developing Source: World Bank. and least developed countries. Indeed, global experi- ence suggests many of the measures contained in the agreement are relatively straightforward to implement while others, such as the introduction of national sin- WTO Trade Facilitation Agreement (Bali gle window systems, can be quite complex and will Agreement) require sustained effort from member governments. In After more than nine years of intense negotiations, recognition of the difficulties some countries may face WTO members finally reached consensus on a Trade fully implementing the new agreement many caveats Facilitation Agreement at the Ministerial Conference have been incorporated with developing countries and held in Bali, Indonesia, in December 7th 2013. The least developed countries afforded a great deal of flex- final agreement builds on the now 50 year old trade ibility on both timing and implementation modalities. rules covered by Articles V, VIII & X of the General Regarding transit, the article 11 of the agree- Agreement on Tariffs and Trade (GATT) and contains ment complement with implementation principle provisions for faster and more efficient customs and the GATT art V which endorsed the principle of free- border management procedures. dom of transit. There is need for clear rules on cross Transit and Trade Facilitation, Regional Integration 41 border charges—infrastructure consumption, axle load with United Nations Economic Commission for Eu- controls, insurance (if cross border operations are al- rope (UNECE) transport agreements, and so forth. lowed), etc. Article 11(3) makes it clear that national The first condition for granting access to markets is regulations, bilateral or multilateral arrangements relat- the mutual recognition of documents related to crew, ed to regulating transport will continue to play an es- transport means and goods. This recognition is possi- sential role. Also Clause 5 underscores the importance ble only if the documents have been issued based on of proper planning of border facilities, to spate traffic internationally agreed and mutually accepted norms flows into separate lanes. This would also include ca- and standards for training, inspection, examination tering for vehicles carrying fresh produce as provided and certification. Despite significant progress in terms for in Article 7 (9). Last but not least en-route check- of number of agreements ratified, the level of harmo- points and repeated weighing at weighbridges can be nization of technical standards and norms remains in included under “unnecessary delay” mentioned in Arti- general very low; consequently the progress in eco- cle 11(7). These principles endorse many of the practic- nomic integration has been rather slow. es already implemented on the ground especially with border crossing. However the agreement, because it is focused on unilateral facilitation measures, did not The Role of International Instruments address the main issues with regional transit systems The advantage relatively to identical measures taken including reference to the TIR or NCTS like mechanism at a purely bilateral or regional level that they consti- implemented regional to agree operators, manage tute a corpus for which the practical experience of the guarantee or transit documents across several borders. implementation of measures is available from interna- tional organizations or private sector institutions, such as the IRU for topics related to road transport. These International Treaties institutions are also capable of assisting the signatory Many landlocked developing countries negotiated at in the implementation and monitoring. bilateral, (sub)-regional or global level new treaties or The principal international conventions relating have become parties to existing ones in order to fa- to international trade facilitation, and notably within cilitate the access to markets and enhance economic the regional framework by land, are the following: integration. Experience and studies show, however, that signing or ratifying a treaty without proper sub- 1. The TIR Convention: TIR is the most widely used sequent enforcement fails to create change and attain system for international road transport; it al- treaty’s objectives. De Matons (SSATP, 2014) shows lows the movement of freight in customs transit that access to and ratification of basic international through several countries (1975) agreements on trade and transport facilitation remains 2. The CMR Convention: covering contracts for in- uneven, with significant discrepancies between legal ternational road freight transport (Geneva, 1956) instruments and their effective enforcement. 3. The ATP Agreement: governing international They should, therefore, carefully consider the transport of perishable foodstuffs and special ve- rights and obligations stemming from these interna- hicles (September 1, 1970) tional treaties when negotiating and implementing 4. The international convention on the simplifica- bilateral road transport agreements and when drafting tion and harmonization of customs procedures, national laws. Although bilateral agreements signed or Kyoto Convention (revised in 1999) between separate pairs of countries cannot interfere 5. The Geneva Convention on harmonization of with each other, they should respect multilateral obli- goods control at borders (1982) gations if both countries are also parties to a multilat- 6. Convention on road traffic (1968) eral convention that covers the same or similar issues. 7. Convention on road signs and signals (1968) For example, the obligations of bilateral agreements 8. Agreement Concerning the International Carriage may overlap with the World Trade Organization’s of Dangerous Goods by Road (1957) General Agreement on Tariffs and Trade (GATT) and/ 9. Customs Convention on the temporary importa- or General Agreement on Trade in Services (GATS), tion of commercial road vehicles (1956) 42 Improving Trade and Transport for Landlocked Developing Countries NB: This list is inspired by the list of conventions agreements. The trends is to evolve towards more lib- deemed essential by the United Nations Economic eral design and implementation of bilateral treaties.22 Commission for Asia Pacific (UNESCAP) in its resolu- However excessive implementation of freight sharing tion 48/11 of 1992. principle such as in Central Africa is the source of ma- At the other end of the legal infrastructure, bilat- jor inefficiencies, where freight is allocated by a public eral agreements should fulfill a different role, mostly body resulting in additional procedures and delays. as protocols to define practical details on the func- tioning of corridors such as layout and schedule of operations at the borders, and organizations of truck Land Border Crossing Points flows. General architecture of transit should belong to international or regional instrument. The reality on Land borders are customarily difficult to cross, and the ground is that bilateral agreements play a more often represent major obstacles to trade, especially extensive role in regulating corridors. for landlocked developing countries. Long queues of Road transport remains a dominant mode of trans- trucks clogging borders are a common image through- portation in landlocked developing countries. Bilateral out the developing world, and whenever drivers and agreements continue to prevail as the main instrument traders are interviewed, crossing times are measured to govern and regulate international road transport ser- in days, even sometimes in weeks. This time has a cost, vices. Few of them have been brought in conformity and traders are affected both directly and indirectly: with liberal principles that are adequate to today’s glo- directly through excess inventory costs tying up scarce balization. In addition, there appears to be little consis- resources and through hedging costs to protect from tency in the content of bilateral agreements. For exam- the consequences of uncertain transport time (the cost ple it is not unusual for a country to have agreements of excess stock to avoid disruptions risks caused by that are very different with each of its neighbors. Also, fluctuating delivery time, or the cost of lost business it is quite common for traffic rights exercised over more opportunities), and indirectly through more expensive than two countries to involve a chain of bilateral agree- logistics services, as idle trucks are not making money ments, substantially adding to the regulatory burden. (less trips mean less income, and higher fixed costs to Having a multitude of bilateral agreements puts cover on each paying trip). a burden on both operators and implementing agen- Facilitating land-border crossings has therefore cies, as they must keep track of all the agreements’ become a priority for governments and Regional Eco- provisions; it may create some confusion and opera- nomic Communities (RECs) in their efforts at boost- tional constraints which may affect the level of inte- ing intra-regional and international transit trade. On gration among road transport markets. In fact, the lack the assumption that border delays were caused by of a bilateral agreement results in a major obstacle to border agencies, one of the solutions rapidly gain- trade by creating a successive unloading and loading ing momentum in several regions of the world is the operations at each border crossing—this constraint is one-stop border post (OSBP) approach, in which, bor- increasingly rare but still in place in several borders is der agencies interventions from both countries are South Asia and East Asia. combined. This approach has two main variants, the The problem is that bilateral agreements are of- joint model, with common facilities for border agen- ten quite old and has not been designed as facilitating cies procedures at the border or at close proximity in instrument. Bilateral agreements are guided by princi- any of the two countries, or, for the second model, ples of reciprocity and territoriality, where the former refers to how parties mirror each other’s rights and ob- 22  Where bilateral agreements are based on a quota system, ligations and the latter to how operators have to abide the common practice is to fix the number of permits at the by the rules and conditions in the other contracting same level for both parties. However, if one party has bigger party. In reality unequal treatment of operators, based trade volumes or more efficient operators, then it may ex- on their nationality or country of vehicle registration, haust its quota faster than the other party. Unless the quota still exists. As evidenced in (Kunaka 2013), truck- is increased, the party with higher volume must pay for ad- ing bilateral agreements are primarily freight sharing ditional permits and access to infrastructure. Transit and Trade Facilitation, Regional Integration 43 specialization of the existing facilities on each side Proportion of Containerized FIGURE 20    of the border to jointly process import trade. Africa Trucks Crossing the Border within quickly adopted the OSBP as the ‘miracle solution’, Time Range, from Survey Sample with EAC implementing a regional program to convert 80% internal and external borders in East Africa into OSBP, 70% SADC having included OSBP for its Southern Africa 60% Infrastructure Master Plan, and ECOWAS implanting 50% its Joint Border Post program throughout West Africa. 40% However, combining two border posts into one is not a simple undertaking: physical facilities are not 30% necessarily adapted, and if this is certainly the most 20% visible obstacle, it is not the most important one. Or- 10% ganizing the cooperation between border manage- 0% 3h or less 3h–6h 6h–24h Second day Over 48h ment agencies, nationally, between the entire border management agencies represented at the border, and Before After internationally, between the border management agencies on each side of the border, constitutes both a legal and operational challenge not to underestimate. The East Africa experience with OSBP clearly Compared to relatively high expectations, the re- shows that reducing border crossing delays work, sults in terms of time savings for the few border posts enabling same day passage where in the past, delays that have been converted so far appear somehow dis- were counted in days. Critical enablers of that success appointing. Part of the problem is that the emphasis were the supporting IT and the connectivity between has been mainly on the physical facilities, whereas Customs agencies, the culture of cooperation that has most gains can be made through soft reforms, as the been cultivated among the two countries and the ef- East Africa experience with OSBP shows. Also, the fective involvement of the private logistics operators diagnosis needs to be nuanced. Border agencies are (truckers, drivers and C&F agents). frequently blamed for delays, but in reality, respon- sibilities are shared: operating hours play a role, as even if border agencies operate 24/7, agents often do Information and Communications not; trucking operations also accustomed to long stays Technology (ICT) as Trade Enabler at the borders, and adjusted the driving pattern to use Automation of documentation and electronic sub- them as convenient ‘rest stops’ for truck drivers. missions are becoming prevalent notably at customs border post and clearance facilities to process the cus- toms and transit declaration. IT software such as the Container Trucks in Malaba FIGURE 19    UNCTAD ASYCUDA are widely available and mas- (Kenya to Uganda tered. In fact availability of IT at processing point is no 30 more a major problems. The LPI survey did show that this is an area where LLDC do not lag behind more 24 advanced economies. Access to and affordability of the ICT infrastruc- 18 ture in many landlocked developing countries does Hours 12 not appear to act as a main impediment to smooth trade. It is rather a quality of services related to the 6 ICT infrastructure/ For instance, landlocked de- veloping countries have relatively accessible ICT 0 Before reform After reform systems at customs border crossing points. From Total border crossing Border agencies interventions the LPI 2014 survey, on a question to evaluate the quality of trade and transport related infrastructure 44 Improving Trade and Transport for Landlocked Developing Countries (telecommunications infrastructure and IT services), ($82) demonstrate the highest price for fixed (wired) the majority of respondents in 7 landlocked develop- broadband connection. Sub-Saharan countries such as ing countries (Bolivia, Kyrgyz Republic, Zimbabwe, Lesotho, Malawi, Swaziland and Zimbabwe stand out Uganda, Zambia, Ethiopia, and Mongolia) rated it in terms of higher price for mobile telephones. Such as quite low. On the other hand, Burundi, Lao PDR, higher prices in these countries may be due to a some- Tajikistan, Uzbekistan and Nepal rated the quality what monopolistic nature of the market structure for of the ICT infrastructure as average or slightly above these services. average. However there are quite a few issues in actually The penetration of ICT in general in LLDCS does fully reaping the benefits of IT for trade. As indicated help. When compared to the coastal transit countries, in the LPI 2014 survey, on a question to evaluate the LLDCs seem to have a lower access to ICT infrastruc- quality of trade and transport related infrastructure ture, measured as a number of subscriptions per 100 (telecommunications infrastructure and IT services), people for broadband internet, landline and mobile the majority of respondents in 7 landlocked coun- telephones. tries (Bolivia, Kyrgyz Republic, Zimbabwe, Uganda, Among the LLDCs, Azerbaijan, Kazakhstan, Zambia, Ethiopia, and Mongolia) rated it as quite Macedonia, FYR, Turkmenistan, Moldova, and Arme- low (see Figure 20). One of the issues is that in most nia are characterized by a significantly higher number countries electronic declarations still have to be ac- of subscriptions for wired broadband, landline and companied by a paper version of it. The second is mobile telephones per 100 people than the LLDCs or that most progress in many LLDCs is limited to pro- upper-middle income countries on average. cessing customs declarations, while traders are also In terms of affordability of ICT, Central African required to obtain and process the import license, Republic ($1,330 a month), Tajikistan ($363), Rwan- health, SPS, or veterinary permits, at other border da ($112), Lao PDR ($97), Lesotho ($85), and Zambia control agencies. These other control agencies can LPI Survey: Quality of ICT Infrastructure FIGURE 21    LLDC Transit Low income Lower middle income Upper middle income High income: nonOECD High income: OECD Macedonia, FYR Nepal Uzbekistan Tajikistan Lao PDR Burundi Mongolia Ethiopia Zambia Uganda Zimbabwe Kyrgyz Republic Bolivia –100% –80% –60% –40% –20% 0% 20% 40% 60% 80% 100% Very low Low Average High Very high Source: LPI 2014, World Bank. Survey Question: Please evaluate the quality of trade and transport related infrastructure (telecommunications infrastructure and IT services) in your country.a a Note: one has to be cautious in interpreting the results as the number of respondents in landlocked developing countries is relatively small when compared to countries with higher income. Transit and Trade Facilitation, Regional Integration 45 potentially hamper the progress achieved with the Box 10:  Improving Border Management in Cambodia processing of customs declarations. Eventually, pro- cessing of all these documents in a trade single win- In recent years Cambodia has made real progress in reforming dow should solve this problem. For instance, among and modernizing its import, export, and transit operations, in- cluding by streamlining and harmonizing customs procedures LLDCs, Lao PDR has followed this approach. The to international standards. These reforms have contributed to introduction of “single windows for trade” required Cambodia improving its LPI ranking from 129th in 2010 to an alignment of several government control agen- 101st in 2012 and to 83rd in 2014. With the introduction of cies and a very detailed and accurate data for poli- automated customs procedures and much of the hard infra- structure now in place at the Port of Sihanoukville and at bor- cy making and information sharing. Box 9 demon- der posts around the country, clearance times with physical strates an example of implementation of a national inspection of cargo have fallen from 5.9 days in 2010 to 1.4 single window and a trade information website in days in 2014. Likewise, the share of consignments selected Cambodia. for physical inspection has fallen from 29 percent in 2010 to 17 percent in 2014, suggesting that customs’ risk manage- ment capabilities are improving. Further gains in trade facilitation will require extending the reform program of the General Directorate of Customs and Excise to other border management agencies, because ad- vances made by customs are not being made elsewhere: 2014 LPI data rate the performance of quality/standards in- spections and health/SPS agencies lower than customs. More than 120 laws, royal decrees, sub-decrees, and regulations containing formal nontariff measures have been identified in a World Bank project, including various import- or export-related permits, licenses, and approvals needed to trade. Thus with World Bank support, the government is automating applica- tion and issuance of certificates of origin, as well as improv- ing transparency through a trade information website where all rules, regulations, fees, and procedures will be available. Other areas of collaboration include developing a blueprint to guide implementation of a national single window through which traders can conduct all their regulatory requirements. This will mean that data are submitted only once, and that pro- cessing, risk assessment, and inspection are well coordinated. Source: Connecting to Compete. Trade Logistics in the Global Economy. The Logistics Performance Index and Its Indicators. Word Bank, 2014. Physical Connectivity, Corridors 5 I n landlocked developing countries, infrastructure is often characterized by insufficient qual- ity, poor maintenance, and missing links, so these issues need to be addressed. This chapter highlights the importance of cooperation among the LLDCs and coastal countries for planning and prioritizing investments towards infrastructure in order to ensure proper interconnectivity and interoperability of services. Investments in infrastructure should seek to maximize the com- parative advantage of different modes of transportation, with appropriate and efficient movement of freight from one mode of transport to another. In the long run, maintenance of infrastructure is crucial for LLDCs to avoid the enormous costs associated with making overdue repairs. This requires LLDCs to conduct regular maintenance and maintain an upkeep budget for ongoing repairs and improvements. The evidence shows there are several constraints and avoid missing opportunities from technological to reducing trade costs for LLDCs, and they are: high development, prevent incompatibility with import- cost and poor quality of transport and logistics ser- ed transport equipment, and ensure good safety vices, regular delays for moving cargo in and out of performance. ports in transit countries, and delays in clearing cargo Investments in infrastructure should be prioritized through land border crossing points. across the different core components of corridors, in- Investments in infrastructure in LLDCs and coastal cluding in ports, roads and highways, railways, inter- countries remain relevant and necessary to increase modal facilities and border crossing points. capacity, connect missing links and enhance quality of transport services. In planning infrastructure invest- ments, the corridor approach can be utilized to prior- Roads and Highways itize certain investments across borders. To develop infrastructure connectivity and pro- Road transport is the most dominant mode of trans- mote inter-operability of services to better serve the port, as most trade traffic moves by road at some point. interests of LLDCs, one should look at current con- It is therefore critical for LLDCs to maintain road infra- dition of existing transport infrastructure, comple- structure as roads provide the main connectivity to the mentarity between various modes of transportation sea and for many of these countries, road transport is or extent to which corridor connects centers of eco- the only available mode for moving freight. Not sur- nomic activity (see Table 14). Technical parameters prisingly, road infrastructure is one of the most im- are particularly important in assessing the continu- portant factors affecting the performance of trade and ity and homogeneity of infrastructure in a corridor. transport corridors. Infrastructure investments tend to The parameters should be guided by international be a top priority in developing countries, partly based (rather than national) transportation standards in or- on the assumption that investments would significant- der to integrate the corridor into a regional network ly reduce transport costs. 47 48 Improving Trade and Transport for Landlocked Developing Countries Main Issues in Assessing Corridor Infrastructure TABLE 14    Parameter Main issue Length and condition of core infrastructure (ports, roads, rails, inland What is the extent and condition of transport infrastructure in each waterways) country, including inland container depots and dry ports? Are there missing links or links in poor condition? Geographical alignment of core corridor transport infrastructure between Are the corridor link alignments optimal in linking existing or planned economic centers in corridor countries economic centers (cities, mines, dry ports, sea ports, and so forth)? Technical parameters (national or international harmonization and What is the degree of technical harmonization of infrastructure interoperability) standards along the corridor? Delineation of corridor hinterland, including branches (length, formalization, How well is the corridor connected to surrounding regions and inclusion in the corridor, priority ranking) offline centers? What is the potential of the corridor to evolve from a transport to an economic and development corridor? Modal complementarities and competition Does the corridor infrastructure permit intermodal or multimodal operations? Is there appropriate equipment for the transfer of cargo between modes? Funding availability (commitment, national budget, joint funds, grants, and Do the corridor governments attach the same priority to financing so forth) and maintaining the corridor infrastructure? Border infrastructure Is there appropriate border-crossing infrastructure along the corridor? Node and link capacity What is the capacity of the different components of the corridor? Are there parts of the corridor in which demand exceeds infrastructure capacity? What are the node-related costs and charges? Road safety performance (road safety audits, parking places and other How safe is the corridor? Can accident “black spots” be identified facilities, and so forth) and addressed? What health and other infrastructure is available along the corridor? Source: Trade and Transport Corridor Management Toolkit Kunaka and Carruthers (2014). The main issues that need to be addressed are: Harmonization of Road Design Standards Roads provide the main transport infrastructure and  harmonization of road design standards, services linking most landlocked developing countries  standardization of axle load limits, vehicle to their transit neighbors, and for many of them it is weights and dimensions the only transport mode available. When developing  modalities for infrastructure cost recovery (cou- a transit connection, it is usually helpful if the coun- pons, carnet, fuel levies, tolls) and tries concerned are contracting parties to international  improving availability and quality of road trans- multilateral agreements that define technical norms, port services. standards, and parameters for infrastructure. It would allow for a smooth transportation of freight through The ultimate test of the impact of improvements the transit neighboring countries to LLDCs. An alter- in road infrastructure should be on the quality rather native is for the parties to agree on specific technical than on price of road transportation services. There parameters at the corridor level. If this path is taken, are numerous examples of where investments in road the parameters should be at least at the level of the infrastructure resulted in improved roads and road international ones, in order to integrate the corridor transportation services. However, end-users have not into a regional network and avoid missing opportu- benefited much from these improvements. The quality nities from technological development, prevent in- of regulation, especially of international road trans- compatibility with imported transport equipment, and port services is therefore key to maximizing the im- ensure good safety performance. Currently, none of pact on investments in infrastructure the bilateral agreements containing route restrictions Physical Connectivity, Corridors 49 along certain corridors (particularly, in Sub-Saharan Across the world, there are numerous examples Africa) stipulate mandatory technical parameters or of effective axle-load limit controls for trucks. The design standards of designated roads. Normally, these Sub-Saharan Africa Transport Policy Program (SSATP) parameters should comply with those of the regional has documented good practices in East and South- transport infrastructure networks in order to ensure in- ern Africa, including a system at the border between terconnectivity and interoperability. Botswana and South Africa where the weighbridge is linked to customs. Customs authorities can use infor- Standardization of Axle Load Limits, mation on the weight of trucks to verify loads. In fact, Vehicle Weights and Dimensions it is routine practice for trucks engaged in internation- Differences in technical standards for axle load limits, al transport to be weighed at border-crossing points. vehicle weights and dimensions, set by each country If they are not, a border or port weight certificate (or along the corridor can be a major impediment to the certificate issued at initiation of the journey) should smooth movement of trucks along corridors. The types be used to avoid intermediate en-route checks. For of trucks that are allowed may be determined by re- such a system to work, authorities along the corridor gional standards that relate to vehicle dimensions and have to have confidence in the integrity of the systems axle loads. However, as new countries join the corri- in place elsewhere for vehicle checks. On corridors dor, the vehicle standards in these adjoining members where standards are harmonized and the level of en- are not always harmonized to that of existing mem- forcement is good, successive weighing operations bers. For instance, in East Africa, the standards of new could be avoided by introducing a mutually recog- members of the East African Community (Burundi nized unified weighing certificate, as recommended and Rwanda) are different from standards of the older in Appendix 2 to Annex 8 to the International Con- members (Kenya, Tanzania, and Uganda). vention on the Harmonization of Frontier Controls of The modalities of taxation for overloaded vehicles Goods of 1982. In South Africa, the authorities have can also differ across countries along the corridor, introduced self-regulation for approved operators. creating confusion and opportunities for arbitrary en- Trucks belonging to such operators do not have to forcement and corrupt practices. Overloading is most stop at all weighbridges; instead, they are subject to common in markets lacking predictability and stabil- random checks. In Zambia, advocacy by one of the ity (fewer runs for higher profits) and in environments regional corridor groups was instrumental to a review with weak enforcement of regulations. Vehicle weigh- of national axle-load limits, leading to their standard- ing is an important operation, as overloading impedes ization with neighboring countries. competition, puts road safety at risk, and damages road Another possibility is to deploy new technologies, infrastructure. At the same time, successive and abu- including weigh-in-motion devices, to screen trucks sive weighing may slow traffic flow and add to trans- without bringing them to a complete stop. The SSATP port inefficiencies. For all these reasons, overloading has documented the importance of countries imple- of trucks needs to be prevented. It is common practice menting holistic vehicle overload control programs to fine drivers for failure to comply with weight stan- and has developed guidelines for the cross-border dards and to impose user charges proportional to the management of vehicle overload controls (Pinard, damage produced to infrastructure. This practice does 2010). International standards for the weights and di- not solve the problem, however. In Central Asia, for mensions of vehicles have been defined in connec- example, truck operators express their discontent with tion with the standards for road infrastructure or in truck weighting procedure claiming that scales are not various other forums, such as UNECE. Best practices always consistent (especially mobile ones, which may of harmonization exist at regional levels, notably in not have been properly calibrated). Also, truck weight highly integrated regions (the European Union). has to be distributed by axles and if merchandise Governments of LLDCs and transit countries are moves during transportation, it usually results in high- thus advised to refrain from imposing new barriers er penalties. Another issue is that truck companies are to trade in the form of technical, inspection-related, forced to reduce axle load in the winter season by a and other documentary requirements for international factor of two. haulage. They should draw on existing international 50 Improving Trade and Transport for Landlocked Developing Countries best practices covering the technical requirements for per ton-kilometer. Such a levy can be collected at a the vehicle, the driver, and the cargo, and simplify major gateway, such as a port of entry or some other technical documentation requirements.23 intermediate point. The main advantage of the usage levy system is that it is directly linked to traffic vol- umes along the corridor. The more traffic there is and Modalities for Infrastructure Cost Recovery the more efficiently it is moved, the lower the levy. (coupons, carnet, fuel levies, and tolls) The weakness is that the levy can become complex Clearly, a reform agenda for the road trucking sector and add to the cross-border charges that some stake- needs to be multifaceted, covering a number of regula- holders are seeking to eliminate or at least minimize. tory and economic issues. In addition to describing the In addition, it is not unusual for there to be a time types of vehicles that can be operated, the ways they can lag between making an investment in capacity and re- be licensed and financed, driver qualifications, institu- alizing the benefits. Still, if it is linked to demonstrated tional arrangements for oversight of the sector, safety benefits accruing to the stakeholder group in general and environmental protection, it should also account for and economies at large, a usage levy is a sustainable consumption of infrastructure and cost recovery mea- way of generating funding for corridor management sures. Infrastructure institutions governing road funding groups. It is the preferred mode of funding for corridor and maintenance, such as road fund agencies, focus pri- groups, as it achieves the twin objectives of ensuring marily on cost recovery for the corridor infrastructure to sustainability of the trade facilitation interventions ensure maintenance and continuity of service. and providing funding for the corridor management Unless roads are tolled, it is a common practice to institution. require foreign trucks to pay infrastructure usage fees While a conventional toll is easier to implement on crossing the border. For example, the Common and enforce, a vignette toll system is arguably a bet- Market for Eastern and Southern Africa (COMESA) ad- ter instrument for cost recovery because adheres to opted a standard and simple fee of $10 per 100 kilo- two main principles of payment collection: non-cash meters for all member countries. Such standardization payment system and non-discrimination. The vignette is particularly important if the tariffs are very high (in- toll system allows collecting payments in advance creasing transport cost) or benefit domestic operators avoiding payments in cash en route and is enforced over foreign registered fleets (reducing competition). on everyone using the road system, including foreign In the SADC, the types of charges payable by vehicle vehicles. National net benefits in the case of the vi- operators when entering a country and using its roads gnette toll system are high regardless of whether the vary considerably. There are two types of charges: taxes and fees are paid into the Central treasury or (1) compulsory access fees, which are all charges earmarked to a road fund. payable at border posts upon entering a country and (2) other fees, including charges payable on toll roads, fuel levies, and fuel taxes.24 Reviving Railway Systems Another alternative is to levy a charge on traffic passing through a corridor. Such traffic is expected to There is growing interest in railways as they have benefit from improved performance. Therefore, the great potential which is presently not fully exploited argument can be made that users should collectively for LLDCs. Rail transport can have an advantage over contribute to the funding of management functions. A traffic linked usage levy ensures sustainability of the corridor management arrangement while at the same 23  Quantitative Analysis of Road Transport Agreements. A World Bank Study. Kunaka, C., Tanase, V., Latrille, P., time maintaining pressure on the corridor group to Krausz, P. 2013. continue delivering benefits. Contributions should 24  SADC member states are Angola, Botswana, Demo- ideally reflect the proportion by which users benefit cratic Republic of Congo, Lesotho, Madagascar, Malawi, from handling the corridor tonnage. A levy based on Mauritius, Mozambique, Namibia, Seychelles, South Afri- the tonnage and distance that the traffic will move ca, Swaziland, United Republic of Tanzania, Zambia, and along the corridor can be introduced based on a rate Zimbabwe. Physical Connectivity, Corridors 51 Also, railways face significant challenges: Box 11:  Instruments for Charging Transit Traffic for Road Use  International interconnectivity including gauge interoperability A transit fee is generally collected at the border by vehicles  Small volumes of traffic—lack economies of scale entering or transiting a country. Member countries of the Unit- ed Nations Conference on Trade and Development may charge  Stiff competition from road transport transit fees only if they are fair, reasonable, and nondiscrimi-  Management and operation of railways, especial- natory, that is, related to the cost of providing the infrastructure ly international border crossings service and without discrimination on the basis of nationality.  Availability of backhaul loads Road tolls specific to each highway and each journey can  Ownership of containers be collected from transit traffic at a toll barrier just inside the  Investments to connect missing links. country. Revenue leakage may be a problem. A vignette is a form of toll paid in advance: a permit giving the right to use a country’s roads (motorways and expressways or International Interconnectivity Including the main transit corridors) once, a specified number of times, or an unlimited number of times within a defined period (a Gauge Interoperability week, a month, or a year). In the 1990s, Switzerland became The interconnectivity of railway tracks across bound- one of the first countries to introduce this payment instrument, aries is fundamental to the seamless movement of which has now been adopted by several European countries. trains across international borders. The same gauge All users of these roads must pay; foreign vehicles purchase must be used along the corridor or technical solutions a vignette upon entry at the border. Rates vary depending on the vehicle’s size or weight. Enforcement is by traffic police provided to effect efficient interchanges. In Central on the road, which may be problematic where such capacity Asia, rail transport has long dominated passenger and is limited. freight transport, where long distances between cen- A fuel tax is paid by all trucks in transit, independent of the ters and the movement of predominantly bulk com- roads they use, unless high local fuel prices compel truck modities make railway a competitive and preferred owners to carry with them all the fuel they will need, at least mode. Given their large railway stock, countries in for short trips. Fuel taxes can be either a fixed charge per liter or a percentage of the pump price; in the latter case, revenues the Central Asia region also continue to favor railway will rise or fall with the underlying price of oil. transport as a matter of strategic preference. How- ever, operations of trains crossing through the terri- Annual vehicle license fees can complement fuel taxes and offer the advantage that they can penalize trucks with tory of the former Soviet Union requires change of the most damaging axle configurations. Since the fees are not standard rail gauge (1435 mm) fitting platforms into payable by foreign trucks, they would mainly interest countries Russian gauge platforms (1520 mm) and back to stan- where domestic trucks perform much of the transit traffic (as dard gauge platforms at the EU or China borders. At in Tanzania and Thailand). the border between Kazakhstan and China (Dostyk and Alashankou), goods have to be transshipped and Source: Arvis, J-F., Carruthers, R., Smith, G., Willoughby, C. (2011). the operation can take several hours. At the border between Poland/Lithuania and Poland/Ukraine, the variable gauge system allows for through-operation road transport on long-distance or high-volume cor- as railway wagons can travel across a break of gauge ridors. For LLDCs which export mainly high-volume, by changing a gauge in a special gauge changing low-value bulk goods (such as minerals, cotton, and facility. timber in Africa and soy in Bolivia and Paraguay), and Even where trains can physically cross borders, freight along corridors can be served by well-run rail- delays may be experienced as a result of several oper- ways at lower cost than road transport. Railways also ational practices, including the following: offer other potential benefits: lower carbon emissions, congestion, accidents, reduced cost of road infra-  Transferring cargo or wagons at the border structure. However, landlocked developing countries  Carrying inspections on both sides of the border are highly dependent on infrastructure investments in  Congestion at border stations due to poor syn- neighboring transit countries. chronization of the movement of freight trains 52 Improving Trade and Transport for Landlocked Developing Countries  Breaking up of shipments in order to accommo- least for rail transport to the deep water port, as it has date differences in power of locomotives used by been done in Zambia. different railway administrations. Traffic volume and transport distance are the two factors that determine whether railways can compete with road freight transportation. Arvis et. al (2011) es- Small Volumes of Traffic—Lack of Economies tablish a threshold of 250,000 net tons per year for of Scale, Availability of Backhaul Loads railways to be financially viable (e.g. revenues cov- There are chronic imbalances in trade patterns of the ering operational costs). However, in the long run, economies in Sub-Saharan Africa and Central Asia railway freight traffic should exceed 1 mln net tons that have significant implications for flows along per year for railways to be able to invest in railway in- transport routes. There is a greater volume of inbound frastructure renewal and maintenance. There is also a loaded containers than outbound, although there are minimum distance threshold for railways to compete many notable exceptions with a large imbalance in with road transport. Regardless the lower en-route the other direction. Where the imbalance is large, the costs, railways have high terminal costs (with excep- charge in the direction with less demand can be a tion of a few instances where railways have a direct small fraction of that with greater demand, as the con- link to the final destination). In recent years, as a re- tainers would otherwise have to be transported emp- sult of use of unit container trains and efficient load- ty back to their origin. In Sub-Saharan Africa, certain ing and unloading of container wagons that distance commodities appear to be priced higher or lower than have been reduced. However, it still remains around others: in particular, commodities with high value 400–500km. In most LLDC countries the distance to such as oil and containers are charged tariffs that are the nearest seaport exceeds that threshold, except in 10–60% higher than average. Imports of high value Bolivia, where distance from La Paz to Arica, Chile is commodities are charged with higher tariffs. On the 470 km. The container service has been suspended as other hand, agricultural commodities that have low the distance was too short to sustain a railway service. value are enjoying the tariffs well below the average (anywhere between 10–40% less). Also, there is a low compatibility between con- Stiff Competition from Road Transport tainers and bulk products. In Central Asia, imports are The data presented in the rail market analysis of the brought by trucks or containers via rail, exports (bulk Economic and Sector Work (ESW) in Sub-Saharan Af- commodities such as oil or grain) are sent by rail. Such rica strongly suggest that the actual or potential com- imbalances make efficient operations in both modes petition from road operators drastically limits railway very difficult, because little opportunity exists for pricing power, even in situations where they do enjoy backhaul freight. As containers must be backhauled commanding market shares. The impact of road-rail anyway, it may be operationally feasible and finan- competition appears, nevertheless, to differ notice- cially viable to load grain and minerals into them, at ably from one corridor to another (see Table 15) as the Road vs. Rail Tariffs in Sub-Saharan Africa TABLE 15     Average tariffs per ton-km (US cents) Road vs. rail price Corridor Rail operator Road Rail surcharge Senegal-Mali Transrail 7.9 5.3 + 49% Cote d’Ivoire – Burkina/Mali Sitarail 7.9 5.5 + 44% Cameroon – Chad Camrail 11.2 6.3 + 81% Mozambique CCFB/CFM 10.0 5.5 + 82% Tanzania – Great Lakes TRC 13.5 4.3 + 213% Source: World Bank, 2006. Report No. 36491. Sub-Saharan Africa: Review of Selected Railway Concessions. Physical Connectivity, Corridors 53 spread between average road and rail tariffs varied in interested in a vertical integration of the transport dis- 2003 from a low point of 44% (e.g., Sitarail) to a high tribution chain and the second category that special- point of 213% (i.e., TRC). izes in a single transport activity and services non-ver- Interestingly, 74% of the modal difference in tically integrated enterprises. transport tariffs on all corridors appears attributable to In many countries, following the concession, the variation in road tariffs as rail operators charged aver- traffic volume carried by railways has increased. The age tariffs to their customers within a maximum range railway operators’ ability to charge abusive tariffs, re- of US Cents 2.0 of each other versus US Cents 5.6 for gardless of their market share, seems to be limited due their truck transport counterparts. Such findings seems to the threat of transport mode substitution (that is, to indicate that when it comes to road/rail competi- from rail to road). In Sub-Saharan Africa, increasing tion, railways, despite being more reliable and less rail competitiveness appears to benefit transport us- expensive, cannot charge abusive tariffs to their cus- ers primarily through lower road rather than lower rail tomers and may raise their tariffs up to a certain point transport costs. Until recently, participation in railway before users will switch to road transport. In addition concessions appears to have been driven more by the to that, unlike road transport, railways are slower and desire of firms to control logistical distribution chains require complex multi-modal solutions. Therefore, than by the desire to earn substantial direct returns the railway mode will be used less frequently unless on their investment. However, private sector operators improved infrastructure and structural reforms it more should be allowed to operate their own locomotives attractive. Within the ECA region situated between and rolling stock on the track by purchasing licenses Western Europe and Asia, road transport has become (Pearson and Giersing, 2012). increasingly competitive, gaining market shares in In Uganda and Kenya (which used to be a part both freight and passenger traffic from the tradition- of a regional system until 1970s together with Tan- ally predominant rail sector. Comparatively low labor zania) operation of the railways has been given to a costs and shorter border handling and control times single private operator (Rift Valley Railways, or RVR) are important factors working in favor of road trans- in 2005. The joint concession, which granted exclu- port. Railways seem to be able to preserve their mar- sive rights to RVR, enabled the railway company to ket share only on very long routes (over 3,000 km) exceed the minimum potential traffic thresholds for and in the northern territories of Kazakhstan and the viability and compete with road transport by offering Russian Federation where the harsh climate makes the lower prices. However, in other African countries, na- construction and operation of all-weather road net- tional railways, that used to be a part of integrated works extremely expensive.25 networks, are being concessioned without involving the neighboring countries. It often leads to decline in traffic capacity, an overall performance, and inabil- Management and Operation of Railways ity to maintain infrastructure. As a result, traditional across Borders railway traffic switches to road transport, which puts While in most countries in the East Asia and Pacific pressure of road infrastructure as well. region and the Middle East and North Africa railway Overall, concessionaires are reluctant to spend system is publically operated, in Latin America and more on infrastructure than is required for day-to-day the Caribbean and Sub-Saharan Africa, most railways maintenance. Thus, the funding of long-term asset are now run by the private sector under long-term renewal and upgrading remains an important issue concessions. A typical approach followed in many for the railway network in many countries. Railways countries is for the state to continue to own some or still offer the most economical solution to transport- all railway assets (typically infrastructure) and transfer ing non-time sensitive bulk freight on distances of at other assets (normally the rolling stock) as well as re- least 400 kilometers. As such, their revival through sponsibility for operating and maintaining the railway to a concessionaire under the terms and conditions stipulated in a concession agreement. There are two Joint study on developing Euro-Asian transport linkages, 25  types of concessionary operators: one category that is UNECE, 2008. 54 Improving Trade and Transport for Landlocked Developing Countries concessioning is warranted where business funda- in poor conditions that might cause safety problems mentals are sound. At the same time, better solutions or require repairs. If a wagon is rejected, it must be must be found to ensure that host governments con- shunted out of the train and the train must be remar- tinue to benefit from substantial economic rates of shaled. Where inspections are inconsistent, a wagon return from these concessions and private operators’ authorized to proceed in one country may be rejected financial returns are high enough to entice broader in another country. High variability in border-process- and more competitive investor participation. ing times combined with variations in train running performance can result in bunched trains and longer International Border Crossings waits at borders for processing. These problems can be Railways usually have shorter border delays than self-amplifying: unpredictable processing time at bor- trucks, for four reasons. First, railway border stations ders may itself be a major cause of service disruptions. are usually located at major railway stations/ junctions To avoid such delays, new container block trains in and marshalling yards, not necessarily on the border. Europe and Central Asia servicing routes between Chi- They therefore facilitate processing without the space na and Germany (“Chongqing—Duisburg”) have been constraints often found at border-crossing points. Sec- launched in April of 2011. In October 2012, that con- ond, rail traffic at border stations is usually cleared or tainer train started services with common CIM/SMGS inspected during scheduled stopping times, when oth- consignment note. Common CIM/SMGS consignment er needed technical operations (such as locomotive helps reduce time on the Customs Union—EU border, changes, shunting, maintenance, and gauge chang- because it eliminates transition from the SMGS railway es) take place. If border control fits in with the train’s consignment note, used in Russia, Belarus and China scheduled stopping time, there need be no additional to the CIM consignment note, used in the EU. That re- time-consuming delays. Third, rail transport avoids quired close cooperation between railway companies the informal checkpoints that hinder and add to the of transit countries, freight forwarders, clients and bor- cost of road freight. Fourth, rail has lighter and faster der control authorities, including Belorussian, Russian, transit arrangements, as there is often greater security Kazakh, and Polish Railways, Ministry of Railways of during transit, with few opportunities for cargo to be China and DB Schenker Rail (Germany). The forma- tampered with in movement. However, cross border tion of the Eurasian Customs Union in 2010 between railway services can still experience delays. Kazakhstan, Russian Federation and Belarus also had Documentation and other border-crossing re- a positive effect as it led to a reduction in a number of quirements for international rail freight movements border crossings and required paperwork. may be complicated and costly. Rail border cross- Key customers for this service are Original Equip- ings can entail operational procedures that typically ment Manufacturers such as Hewlett-Packard, Asus include inspections, break-of-gauge operations (as at and Acer, who are less sensitive to cost of transporta- the China/Kazakhstan border), marshalling (the clas- tion, but require short lead times and cargo security. sification and separation of railcars and the transfer The container block train was assembled in Chongq- and acceptance of railway documents on the rolling ing by YuXinOu (Chongqing) Logistics Co., Ltd., which stock and the freight), checks by customs agencies was registered as a Joint Venture between Chongqing (railway bills of lading against wagon lists and car- Transportation Holding Co. Ltd. (41.1%), RZhD Logis- go documents), and physical inspections on plant tics (16.3%), KazTransService (16.3%), DB Schenker and animal controls. A broken seal or documenta- China (16.3%) and China Railway International Mul- tion problem could delay a whole trainload of con- timodal Transport Co. Ltd (10%).26 On its route from signments, compared with just the truckload for road China to Germany, the train crosses 2 main customs freight. As a result, although rail freight delays are less borders—between China and the Customs Union frequent, incidents can be more costly. In addition to (Kazakhstan, Russia and Belarus), and between the that, unnecessary or incompatible train inspections Customs Union and the European Union. Since the may be a source of border delays. Receiving railways usually carry out mechanical inspections of trains. The objective of such inspections is to reject wagons 26  Kazakh Railways. http://www.railways.kz/ru/node/3544 Physical Connectivity, Corridors 55 launch of this container block train operation, lead result, these forms of transport are more likely to incur time was reduced from 18 to 15 days, due to contin- high demurrage charges. uous optimization of border crossing procedures and In Central Asia, for example, since containers paperwork. Currently, there are 14 block trains that have to be sent back empty most of the time, not all KTZ has been operating, including 11 from China to shippers are sending them back. Thus, the risk for a Europe, 1 from China to Uzbekistan, 1 from Russia to shipping line to lose them is high. The deposit per Uzbekistan, and 1 from Baltics to Uzbekistan.27 container is about 3,500 USD. In fact, some consign- The pilots of block trains are mostly full trains ees may prefer buying the container because it can organized by a single shipper. Typically, the shipper, be used for various purposes, including non-transport with a help of international freight forwarders, orga- usage, which is quite common. nizes the long distance logistics by himself, dealing directly with train operators, customs, local customs Infrastructure Investments to Connect representatives and forwarders. Unfortunately, this model is not scalable and should evolve further to Missing Links The analysis below shows the potential benefits from introduce scheduled trains that would allow con- connecting missing links in landlocked developing solidating cargo from several or many shippers. To countries. For instance, with construction of domes- avoid the problem with a lack of economies of scale tic missing railway links in Kazakhstan (Zhezka- and delays with forming block trains small countries zgan-Beyneu) the route from China (Dostyk) and Ak- could, for example, benefit from cooperation with the tau port (Kazakhstan) in the Caspian Sea is estimated neighboring transit countries. Nepal, for instance, as to be shortened by 1,200 km28 and thus impact transit a country with a limited number of container trains to time and costs of transporting from China to the Cau- operate, may “piggyback” on container trains going casus region.29 through India. However, that route has been suffering from the lack of transit traffic and not so competitive railway Ownership of Containers tariffs.30 In 2012, most of cargo in a form of exports Despite efforts to increase compatibility between for- of steel, grains and containers handled in Aktau port ward and backhaul loads, the high volume of imports has been transported via the North-South corridor compared with exports for most landlocked devel- to Iran and Persian Gulf countries.31 Therefore, the oping countries imposes another type of cost across investments in infrastructure to connect the missing corridors: demurrage charges for overdue containers. link (Zhezkazgan-Beineu) may not be economically The international shipping lines that own many of the justified in the short-term due to the lack of econo- containers in circulation impose time limits, enforced mies of scale (benefits of reducing lead transportation by financial penalties, on how long a container may time by 2 days may not justify the cost of constructing remain inland before being returned to the port. The limit is often as little as 15 days, and the daily penal- ty often increases with the number of over-limit days 27  KTZ materials. For comparison, Russia currently operates incurred. To avoid long delays, it is often less expen- about 1,000 block trains. sive for the importer to incur the cost of returning the 28  Infrastructure Projects for Development of Transport Lo- container to the port empty than to incur the penalties gistics, MoTC of Kazakhstan. http://mtc.gov.kz/index.php/ associated with waiting for a return load. Use of block en/komitet-avtomobilnykh-dorog/npa/166-press-tsentr/in- trains (trains in which all wagons start from and end formatsionnye-spravki/1137-zhezkazgan-beineu-and-arka- at the same point) and multiparty negotiations among lyk-shubarkol 29  That route caters to a major metallurgy company Arce- the railways of countries along a trade corridor, cus- lorMittal to transport rolled steel by wagons from Karaganda toms and border police of the transit country, and the oblast to Aktau in order to manufacture pipes at its own plant shipping lines that own the containers can help en- in Aktau and supply oil companies in Western Kazakhstan. sure that containers are returned to the port within the 30  http://kazakhstan.news-city.info/docs/sistemsr/ deadline. For single-wagon railway consignments and dok_ieryhb/. road freight, such negotiations are more difficult; as a 31  http://ru.government.kz/docs/p060916~2.htm. 56 Improving Trade and Transport for Landlocked Developing Countries Construction of Missing Railway Link in Kazakhstan FIGURE 23    Source: KazakhstanTemirZholy, MoTC. 988km of railways). In the long run, the construction to issue concessions; however, it has been im- of this railway link may allow increasing freight trans- plemented with mixed results. Pearson and Gi- portation from China and Kazakhstan (coal and metal ersing (2012) find that challenges governments products) to the Caucasus region. face in making concessions operate effectively To conclude, revival of railways is possible: and efficiently have more to do with the way the concessions were negotiated and the text of  Link railway development to other interventions, the final agreement, rather than with the act of especially large scale mining. This is particular- concessioning. Initially, concessions have been ly the case for Greenfield developments, which given to companies with a limited capital base should be linked to and bundled with mining or and once projected positive cash flows did not industrial development. Large-scale extractive materialize, these companies have experienced companies have the ability to guarantee the de- financial problems. Participation in railway mand for potential infrastructure and raise the concessions appears to have been driven more required capital. Apart from that, the extractive by the desire of firms to control logistical dis- companies are likely to insist on competitive tribution chains. Also, in some African coun- transport prices and timely deliveries (Columbia tries, national railways, that used to be a part Center on Sustainable Development, 2014). of integrated networks, are being concessioned  For many countries the required investments are without involving the neighboring countries. far beyond their financial capabilities and the Developing concession solutions in cooperation business climate is not satisfactory for attracting with the members of a regional railway network private capital. One popular solution has been would allow surpassing a minimum threshold Physical Connectivity, Corridors 57 for economies of scale required to achieve fi- through the territory of Djibouti is unencumbered nancial viability. In addition to that, offering sep- by the escort services and traffic-sharing obligations arate concessions to companies to either own/ that characterize transit trade in some countries. Final operate a track network or to operate trains on clearance then takes place on Ethiopian territory. a track network concessioned to other compa- Several ICDs in Africa are transfer nodes between nies (that is, non-exclusive track usage rights) road and rail transport. ICDs can be managed by ei- would allow for more efficient railway use. With ther the public or the private sector. the exception of United Kingdom, ownership of fixed infrastructure has remained with the state, although concessions typically involve some pri- Addressing the Challenge of vate investment in parts of the infrastructure as Infrastructure Maintenance well as privately operated services. Investments are required to maintain old infrastructure and to build new infrastructure to connect missing links. Intermodal Facilities However, the decision on building new infrastructure has to be strategic, and take into consideration the po- Until now, productivity problems in the state-con- tential savings in transit time and costs of transporting trolled rail sector, heterogeneous infrastructure and before attempting to connect missing links. While add- documentation standards as well as poor coopera- ing infrastructure links enhances the resilience of ex- tion between diverse mode operators have hindered isting supply chains, the infrastructure building efforts the development of overland multimodal transport. have to be realistic in terms of existing or projected It is important to develop multi-modal networks (rail, demand for transportation services and examine the road, air, and pipeline infrastructure projects). De- future demand trends. Investments in infrastructure lays are often experienced at modal interfaces (areas should seek to maximize the comparative advantage freight is being moved from one mode of transport to of different modes of transportation, with appropriate another)—so it is important to make sure that inter- and efficient movement of freight from one mode of modal facilities are appropriately located in order to transport to another. Investment efforts should also take reduce costs. Currently, intermodal facilities take the into consideration potential economies of scales, and form of inland container depots and dry ports. ideally be coordinated with infrastructure development Landlocked countries face a special problem and improvements in neighboring countries. when importing goods. The goods arrive at a port in a Building infrastructure is good but timely mainte- neighboring country—or even a neighbor of a neigh- nance is paramount. In the long run, maintenance of bor—and need to transit toward the destination coun- infrastructure is crucial for LLDCs to avoid the enor- try, where full customs clearance must take place. mous costs associated with making overdue repairs. A well-functioning transit system could deal with This requires LLDCs to conduct regular maintenance this problem easily, but transit systems do not func- and maintain an upkeep budget for ongoing repairs tion well in low-income countries. These difficulties and improvements. could be reduced if the landlocked country were to Historically, railways in LLDCs have suffered conduct some or all customs clearance procedures at from underinvestment in track and asset replace- the first port of call on the foreign territory. This is the ment, renewal and maintenance, and in some coun- practice in Djibouti, where since 1950 Ethiopian cus- tries, assets have been damaged or destroyed by war toms has been based to facilitate the transit of goods or other conflicts. Stiff competition from road trans- destined for Ethiopia. (Bhutan customs is based in the port leads to decline in railway revenue and deferred Port of Kolkata, in India, for the same purpose.) Transit maintenance. Conclusion 6 T he Almaty Programme of Actions recognized the special needs of landlocked developing countries in reducing their trade costs and promoting growth. The Programme and its imple- mentation, including with the support of international agencies like the World Bank, have been very much focused on connecting LLDCs to markets and the promotion of infrastructure complemented by investment in “soft” measures facilitating trade, transportation, and transit. Since 2003, there has been incremental progress However, progress has been slower in other ar- in structural transformation of LLDCs. With little di- eas. Such is the case, for instance, for implementation versification in exports composition, LLDC countries of regional cooperation schemes to facilitate transit of are more vulnerable than their coastal transit neigh- goods, or reform of the services sector such as truck- bors. In the period after 2000, resource-rich LLDCs ing. LLDCs are involved in many bilateral, regional, or outperformed their resource-scarce peers in terms of even multi-lateral agreements. However, quite often, real income and exports per capita. However, most of many transit agreements are written very loosely and that growth was based on a surge in commodity prices do not always specify the ways governments can im- in the last decade. Trade costs experienced by land- plement and administer them. Some agreements such locked countries remain still very much above those as bilateral treaties tend to be protectionist, and not of transit countries. These costs seriously constrain the conducive to the development of quality services. transformation of the economies of the LLDCs. For the next decade policy makers and develop- However, there have been many positive de- ment practitioners need to maintain focus in several velopments during the implementation of the Pro- areas to reduce trade costs and promote growth. gramme. First, there has been a priority given to in- In terms of infrastructure cost recovery and main- vestment in access infrastructure during the period. tenance of roads, LLDCs are recommended to adopt For instance, the World Bank has more than doubled a “vignette” toll system. For the railway system – one its share of projects contributing to the Almaty PoA of the potential solutions is to connect railway in- objectives. Furthermore, raising awareness of trade frastructure efforts with the extractive industry and facilitation issues resulted in significant reduction in require mining companies to raise capital for infra- lead time to import and export on most corridors. structure buildings and maintenance. This would help Dwell time in ports or at the borders has been re- LLDCs to achieve greater economies of scale. Also, duced significantly, as shown by the example of East scheduled maintenance is highly desirable to prevent Africa for instance. Facilitation and logistics indica- higher costs of deferring repairs. It is important to ex- tors such as the LPI or the Doing Business show that, plore innovative means to mobilize additional funds although LLDCs remain at a deficit of performance, to build and maintain existing transport infrastructure, they (slowly) converge to their transit neighbors. LL- e.g. concessions, or cross-border investment packag- DCs have also made important progress in related es. Overall, LLDCs are recommended to make invest- dimensions of connectivity such as the development ments only when traffic is expected to achieve econo- of ICT. mies of scale to cover the operating costs. 59 60 Improving Trade and Transport for Landlocked Developing Countries Despite significant progress in trade facilitation, initiatives to govern the cross-border movement of many challenges remain, especially to better integrate transport vehicles, albeit with a partial success. The border management and facilitation of procedure new efforts should focus on improving transit regime, beyond customs (interventions of other control agen- reforming transport market regulation, and optimizing cies). The Bali Trade Facilitation Agreement offers help multi-modal and railroad potential and exploring air to LLDCs that rely on transit through third countries to cargo transportation. access ports. However, it offers a partial solution be- More decisive action is needed to seriously ad- cause its main focus is on customs administration, use dress implementation barriers and to improve ef- of an IT system and access to information. The Bali TF ficiency of transit systems, following the TIR or Eu- Agreement describes some aspects of the governance ropean transit principles. These should include I) mechanism including establishment of a new Trade removing market distortions for international trucking Facilitation Committee and possible subsidiary insti- and promote incentive for quality and compliance tutions, but much of it still needs to be finalized. The (such measures can be complemented by capacity actual benefits of this FTA package will depend on the building), ii) implement a single international transit swift ratification of the agreement. document (“carnet”) within a region, without resub- Finally, a push is overdue in two related areas, mission at each border, iii) develop a proper region- which are by nature regional and cross-border: re- al IT system that allows initiation, tracing, and ter- form of the trucking sector and the implementation mination across border of transit operation (Central of transit regime. In most LLDCs, trucking remains America has implemented such as system recently, a main mode of freight transportation so a TIR-like the TIM), and iv) a common guarantee system, the system would benefit many LLDCs. There have been details of which depend on the regional architecture some reforms on improving transit regime, including of financial services. Priorities by Regions TABLE 16    Europe and Central Asia (incl. Afghanistan, Sub-Saharan Latin South East Asia Azerbaijan, Mongolia) Africa America Asia and Pacific Improving Transit Regime Development of Authorized Economic Operators and Traders X X X Customs guarantee system for transit traffic: financial X X X integration Facilitate transit and cross-border trade through X X X X X interconnections of the transit IT systems in the regional countries Road transport: Phase out existing obstacles to transit by trucks: bilateral X X X truck permits Prevent trans-loading at border X Rail transport: Alliances with international freight forwarders and railways X to set up consolidated block container trains Infrastructure maintenance, concessions X References Arvis, J-F., Carruthers, R., Smith, G., Willoughby, International Trade Statistics by Country and Product C. (2011). Connecting Landlocked Developing Group. International Trade Statistics 2001–2005 Countries to Markets. 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World Bank Report 36491. gci2012-data-platform/ Annexes 63 64 Improving Trade and Transport for Landlocked Developing Countries Annex 1: List of LLDCs and Transit Countries Income Country name Code Region group Transit countries Resource-rich Afghanistan AFG South Asia Low Pakistan, Iran Yes Armenia ARM Europe & Central Asia Lower-middle Georgia, Iran Azerbaijan AZE Europe & Central Asia Upper-middle Georgia, Turkey, Russia, Iran Yes Bhutan BTN South Asia Lower-middle India Bolivia BOL Latin America & the Caribbean Lower-middle Chile, Argentina, Brazil, Peru Yes Botswana BWA Sub-Saharan Africa Upper-middle South Africa, Namibia Yes Burkina Faso BFA Sub-Saharan Africa Low Côte d’Ivoire, Togo, Ghana Burundi BDI Sub-Saharan Africa Low Kenya, Tanzania, Uganda, Rwanda Central African CAF Sub-Saharan Africa Low Cameroon Yes Republic Chad TCD Sub-Saharan Africa Low Cameroon Yes Ethiopia ETH Sub-Saharan Africa Low Djibouti Kazakhstan KAZ Europe & Central Asia Upper-middle Russia, China Yes Kyrgyzstan KGZ Europe & Central Asia Lower-middle Russia, Kazakhstan, China Yes Laos LAO East Asia and Pacific Lower-middle Thailand, Vietnam Yes Lesotho LSO Sub-Saharan Africa Lower-middle South Africa Macedonia, FYR MKD Europe & Central Asia Upper-middle Albania, Greece Yes Malawi MWI Sub-Saharan Africa Low South Africa, Mozambique, Tanzania Mali MLI Sub-Saharan Africa Low Côte d’Ivoire, Togo, Ghana, Senegal Moldova MDA Europe & Central Asia Lower-middle Ukraine, Romania, Bulgaria Mongolia MNG East Asia and Pacific Lower-middle China, Russia Yes Nepal NPL South Asia Low India Niger NER Sub-Saharan Africa Low Togo, Benin Yes Paraguay PRY Latin America & the Caribbean Lower-middle Argentina, Brazil Rwanda RWA Sub-Saharan Africa Low Kenya, Tanzania, Uganda South Sudan SSD Sub-Saharan Africa Lower-middle Kenya Yes Swaziland SWZ Sub-Saharan Africa Lower-middle South Africa, Mozambique Yes Tajikistan TJK Europe & Central Asia Low Russia, Kazakhstan, Uzbekistan, China, Afghanistan, Iran Turkmenistan TKM Europe & Central Asia Upper-middle Russia, Kazakhstan, Uzbekistan, Iran Uganda UGA Sub-Saharan Africa Low Kenya Yes Uzbekistan UZB Europe & Central Asia Lower-middle Russia, Kazakhstan Yes Zambia ZMB Sub-Saharan Africa Lower middle Mozambique, Tanzania Yes Zimbabwe ZWE Sub-Saharan Africa Low South Africa, Mozambique Yes Source: UN-OHRLLS. Annexes 65 Annex 2: LLDCs: Economic and Social Context Adult literacy Population Urban GNI per capita, GDP growth rate, (%, ages 15 (Millions) population Atlas method ($) (avg. annual %) and older) 2000– 2012– 2000– 2012– 2000– 2012– 2000– 2009– 2000– 2012– 01 13 01 13 01 13 2008 2013 01 13 Afghanistan 21 30 21 24 695 7.3 10.8 Armenia 3 3 65 64 685 3,780 11.2 0.7 99 100 Azerbaijan 8 9 51 54 635 6,820 16.6 4.5 100 Bhutan 1 1 26 37 800 2,440 8.4 7.3 Bolivia 9 11 62 67 960 2,385 3.7 4.9 87 95 Botswana 2 2 54 63 3,015 7,690 4.5 3.4 87 Burkina Faso 12 17 18 28 245 670 5.6 6.2 Burundi 7 10 8 11 125 260 2.8 4.0 59 Central African Republic 4 5 38 39 260 405 3.0 –2.6 51 Chad 8 13 22 22 160 995 10.2 6.1 26 37 Ethiopia 67 93 15 17 120 440 8.0 10.3 Kazakhstan 15 17 56 54 1,305 10,590 9.4 5.4 Kyrgyz Republic 5 6 35 35 280 1,120 4.9 3.8 Lao PDR 5 7 22 36 290 1,365 6.8 8.1 69 Lesotho 2 2 20 29 610 1,515 3.8 5.1 86 Macedonia, FYR 2 2 59 59 1,740 4,755 3.2 1.5 98 Malawi 12 16 15 16 145 295 3.5 2.1 Mali 11 15 28 36 245 665 5.9 2.9 Moldova 4 4 44 49 385 2,305 5.9 3.2 97 99 Mongolia 2 3 58 70 475 3,425 6.8 9.3 98 Nepal 24 28 14 17 235 715 4.0 4.3 49 Niger 11 18 16 18 170 400 4.1 4.9 14 16 Paraguay 5 7 56 63 1,315 3,680 2.7 5.2 Rwanda 9 12 14 19 220 610 8.4 6.4 65 South Sudan 7 11 17 18 980 –2.4 Swaziland 1 1 23 21 1,500 3,090 2.4 1.4 82 Tajikistan 6 8 27 27 165 935 8.9 6.5 100 100 Turkmenistan 5 5 46 49 625 6,145 7.6 10.3 100 Uganda 25 37 12 16 250 495 7.2 5.8 Uzbekistan 25 30 37 36 595 1,800 6.3 8.2 99 100 Zambia 10 14 35 40 315 1,445 5.1 6.8 (continued on next page) 66 Improving Trade and Transport for Landlocked Developing Countries Annex 2: LLDCs: Economic and Social Context (continued) Adult literacy Population Urban GNI per capita, GDP growth rate, (%, ages 15 (Millions) population Atlas method ($) (avg. annual %) and older) 2000– 2012– 2000– 2012– 2000– 2012– 2000– 2009– 2000– 2012– 01 13 01 13 01 13 2008 2013 01 13 Zimbabwe 13 14 500 810 LLDC 11 14 25 28 612 2,304 4.3 4.6 70 84 Transit coastal 110 130 42 48 1,904 5,133 3.8 3.6 82 89 High income: OECD 33 35 76 83 23,542 42,848 3.5 0.8 99 99 High income: non-OECD 2 2 87 90 18,628 29,283 4.6 2.6 93 96 Upper middle income 10 11 70 77 3,203 7,185 2.7 3.9 87 93 Lower middle income 25 31 44 52 1,109 2,704 3.5 3.9 75 80 Low income 19 23 29 34 302 619 6.2 5.8 55 64 Source: World Bank. Annexes 67 LLDCs: Share of Top Five Products in Total Goods Exports, Annex 3:  HS1996, 2-digit Country 2000 2006 2012 Description, 2012 Resource-rich Afghanistan* 83.1 61.5 66.0 8-Edible fruits and nuts (19.5%), 52-Cotton (15%), 27-Mineral fuels (13.1%), 72- Yes Iron and steel (10.4%), 99-Unspec (7.9%) Armenia 59.3 78.0 65.4 26-Copper ore (22%), 22-Alcoholic bev (14.6%), 71-Pearls/gems (11.1%), 72- Iron and steel (9.3%) Azerbaijan 91.6 91.3 96.6 27-Mineral fuels (93.4%), 15-Animal fats (0.9%), 17-Sugar (0.9%), 8-Fruit/nuts Yes (0.9%), 39-Plastics (0.5%) Bhutan* 82.4 89.6 93.9 72-iron and steel (63.4%), 28-Inorgn chem (13.5%), 74-Copper and copper products (11.6%), 44-Wood (2.8%) Bolivia 59.9 81.5 86.6 27-Mineral fuels: natural gas (50.1%), 26-Ores (17%), 71-Pearls/gems (11.5%), Yes 23-Residue food industry (4.5%), 15-Animal fats (3.5%) Botswana 93.4 93.3 90.7 71-Pearls/gems (80.9%), 75-Nickel ores (5.6%), 26-Ores (1.6%), 87-Tramway Yes vehicles (1.4%), 85-Electrical machinery parts (2%) Burkina Faso* 78.9 87.6 88.9 52-Raw Cotton (45.9%), 71-Natural/cultured pearls, prec stone (34.6%), 12-Other Oily Seeds (3.4%), 8-Edible fruit and nuts (2.6%), 27-Mineral fuels (2.4%) Burundi* 95.6 82.0 91.9 9-Coffee, tea (71%), 26-Ores (10.6%), 34-soap, organic surface-active agents (5.8%) Central African 96.9 93.0 93.8 44-Wood products (39.8%), 71-Natural/cultured pearls, prec stone (34.5%), Yes Republic 52-Cotton (14%), 76-Aluminium and articles thereof (34.8%) Chad* 95.5 99.7 99.7 27-Mineral fuels (97%), 52-Cotton (1.5%), 13-Lac; gums, resins & other Yes vegetable (0.8%), 12-Oil seed (0.3%), 39-Plastics and articles thereof (0.1%) Ethiopia 86.9 78.3 83.3 9-Coffee, tea (39.9%), 12-Oil seed (21%), 7-Edible vegetables (17%), 6-Live tree (excludes and bulbs (11.3%), 7-Edible vegetables and certain roots (6.9%), 41-Raw hides Eritrea)* and skins (4.3%) Kazakhstan 84.6 88.2 88.5 27-Mineral fuels (69.9%), 72-Iron and steel (6.4%), 26-Ores (4.3%), 74-Copper Yes (4.1%), 28-Inorganic chemicals (3.8%) Kyrgyz 72.6 58.8 69.8 71-Pearls/gems: gold (39.5%), 27-Mineral fuels (12.2%), 62-Apparel (8%), Yes Republic 7-Edible vegetables (6.2%) Lao PDR* 90.7 86.5 76.6 74-Refined Copper (21.3%), 44-Wood products (18.8%), 27-Mineral fuels Yes (16.1%), 26-Ores (15.8%) (6.2%), 62-Art of apparel & clothing access (4.5%) Lesotho* 87.0 67.1 71-Natural/cultured pearls, prec stone (46.2%), 61-Art of apparel & clothing access (30.9%), 62-Art of apparel & clothing access (19.4%), Cotton (0.6%) Macedonia, 56.6 62.3 55.1 72-Iron and steel (18.9%), 38-Miscellaneous chemical products (12.5%), 62-Art FYR of apparel & clothing access (12%), 27-Mineral fuels (6.4%), 84-Nuclear reactors, boilers, mchy (4.9%) Malawi 87.6 83.5 30.0 24-Tobacco, raw (52.4%), 28-Inorgn chem (9.7%), 17-Sugar (8.2%), 9-Coffee, Tea (6.9%), 12-Oil seeds (5.8%) Mali 98.0 96.1 95.5 71-Natural/cultured pearls (70%), 52-Cotton (15.8%), 1-Live animals ex fish Yes (4.7%), 31-Fertilisers (4.2%), 41-Raw hides (0.8%) Moldova 58.5 50.4 52.0 22-Alcoholic bev (15.3%), 85-Elecl machinery parts (11.7%), 8-Edible fruits (11.3%), 12-Oil seeds (7.1%), 15-Animal fats (6.4%) Mongolia 84.9 86.4 92.9 27-Mineral fuels (48.5%), 26-Ores (38.4%), 71-Natural/cultured pearls, prec Yes stone (3.7%), 51-Wool/other (3.1%), 25-Salt, sulphur (2.2%) Nepal 80.3 74.8 57-Carpets and other textile floor (15.4%), 62- Art of apparel & clothing access (8.1%), 39-Plastics (6.9%), 22-Beverages, spirits and vinegar (6.9%) (continued on next page) 68 Improving Trade and Transport for Landlocked Developing Countries LLDCs: Share of Top Five Products in Total Goods Exports, Annex 3:  HS1996, 2-digit (continued) Country 2000 2006 2012 Description, 2012 Resource-rich Niger 83.7 74.9 89.1 26-Ores (56.2%), 27-Mineral fuels (19.4%), Unspec (7.5%), 63 -other textile Yes (3.1%), 1-Live animals (2.1%) Paraguay 70.5 72.8 82.2 27-Mineral fuels (21.2%), 12-Oil seed (22.9%), 10-Cereals (14.1%), 2-Meat (10.9%), 23-Residue food industry (3.1%) Rwanda 98.5 95.6 83.5 9-Coffee, tea (38%), 26-Ores (32.6%), 11- Prod.mill.indust; malt; starches (5.5%), 87-Vehicles of tramway (4.3%); 22-Beverages, spirits and vinegar (3%) South Sudan* n.a. n.a. 99.9 27-Mineral fuels (99.6%), Raw hides and skins (0.3%), Scrap Iron (0.023%), Yes 7-Edible vegetables and certain roots (0.1%), 72-Iron and steel (0.01%) Swaziland* 63.6 58.7 60.2 17-Sugars and sugar confectionery (20.6%), 33-Essential oils & resinoids (16.1%), 26-Ores (11.1%), 71-Natural/cultured pearls, prec stone (7.9%), Food products (20%) Tajikistan* 91.4 93.2 93.2 76-Aluminium and articles thereof (62.8%), 52-Cotton (13.2%), 26-Ores (11.8%), 8-Edible fruit and nuts (3.8%), 62-Art of apparel & clothing access (1.6%) Turkmenistan* 88.8 98.0 98.8 27-Mineral fuels (93.4%), 52-Cotton (3.4%), 39-Plastics (1.3%), 63-Other made Yes up textile articles (0.4%) Uganda 77.2 63.3 43.3 9-Coffee (19.2%), 85-Electrical machinery (7.5%), 27-Mineral fuels (6.6%), Yes 99-unspec. (5.1%), 25-Salt, sulphur (4.9%) Uzbekistan* 76.3 74.7 64.1 52-Cotton (22.6%), 87-Vehicles (14.7%), 74-Copper and articles thereof (12.5%), Yes 27-Mineral Fuels (7.1%), 8-Edible fruit and nuts (7.1%) Zambia 80.9 88.9 79.5 74-Copper (68.1%), 10-Cereals (4.4%), 71-Natural/cultured pearls (3%), Yes 81-Other base metals (2.3%), 28-Inorganic chemicals (1.7%) Zimbabwe 61.7 67.3 83.0 71-Natural pearls (36.9%), 24-Tobacco (21.3%), 26-Ores (9.5%), 75-Nickel (9.2%), 52-Cotton (6%) High income: 56.4 56.1 55.5 Lower-middle income 78.9 75.9 74.6 OECD High income: 77.2 81.2 79.4 Low income 86.8 85.2 75.6 non-OECD Upper-middle 77.3 76.1 71.8 World 75.3 74.9 71.4 income Source: WITS, World Bank. Note: *=mirror data used. South Sudan - special case. Annexes 69 Annex 4: LLDCs: Share of Top Five Export and Import Partners HH Market Share of top Share of top Concentration 5 exporters 5 importers Index** Country 2000 2012 2000 2012 2000 2012 Top 5 export partners, 2012 Top 5 import partners, 2012 Afghanistan 87.1 99.2 57.3* 93.4 0.14 0.30 Pakistan (46.9%), Unspecified Unspecified (50%), Pakistan (28.7%), India (16.3%), Iran (14.2%), China (11.5%), Japan (6.2%), China (1.1%) (9.7%), Iran (8%) Armenia 69.1 54.8 53.2 49.3 0.13 0.12 Russian Federation (19.5%), Russian Federation (24.7%), Germany (10.7%), Bulgaria (9%), China (9.3%), Iran (5.1%), Ukraine Belgium (8.9%), Iran (6.6%) (5.1%), Turkey (4.9%) Azerbaijan 74.8 53.1 53.1 52.1 0.14 0.13 Italy (23.3%), India (7.9%), France Turkey (15.8%), Russian (7.5%), Indonesia (7.4%), Israel Federation (14.3%), Germany (6.9%) (8.1%), United States (7.4%), China (6.6%) Bhutan* 85.4 94.7 95.1 82.6 0.72 0.76 India (84.8%), Nigeria (6.4%), India (55.5%), Greece (14.5%), Italy (1.7%), Japan (1.1%), China (5.1%), Thailand (4.9%), Germany (0.7%) Austria (2.6%) Bolivia 71.4 72.8 64.5 62.5 0.11 0.18 Brazil (31.1%), Argentina (17.9%), Brazil (18.4%), China (13.1%), United States (14.8%), Peru Argentina (13.1%), United States (5.3%), Japan (3.8%) (10.9%), Peru (6.7%) Botswana 97.1 89.1 88.9 89.9 0.65 0.50 United Kingdom (60.7%), South South Africa (62.8%), United Africa (13.1%), Israel (5.4%), Kingdom (16.7%), Namibia Norway (4.9%), Belgium (4.4%) (5.6%), China (2.8%), United States (1.9%) Burkina Faso 74.1 88.7 63.3 41.3 0.08 0.11 Switzerland (69.2%), South Africa France (12.1%), Cote d’Ivoire (10.3%), Singapore (4.7%), (10.7%), China (9.8%), United France (2.4%), Belgium (2.2%) Kingdom (4.4%), United States (4.3%) Burundi 75.3 95.8 56.3 49.3 0.08 0.10 Unspecified (76.9%), UAE Italy (17.6%), Saudi Arabia (16.3%), France (1.1%), Tanzania (8.2%), Belgium (7.9%), China (0.9%), Japan (0.6%) (7.8%), India (7.8%) Central African 47.3 54.4 81.2 66.3 0.53 0.16 Belgium (23.7%), China (20.9%), Netherlands (31.5%), France Republic* Indonesia (3.9%), France (3.5%), (14.5%), Korea, Rep (13.4%), Saudi Arabia (2.3%) Cameroon (10.1%), China (5.4%) Chad* 37.3 96.1 71.8 64.2 n.a. n.a. United States (81.8%), China China (23.1%), France (21.5%), (6.7%), Canada (3.5%), Other Cameroon (10.5%), United States Asia, nes (2.9%), Japan (1.1%) (4.6%), Italy (4.5%) Ethiopia (excl. 56.7 40.6 48.9 55.1 0.10 0.06 China (11.1%), Germany (10.8%), China (21.6%), Saudi Arabia Eritrea) Saudi Arabia (6.6%), Switzerland (14.1%), India (8.4%), Kuwait (6.1%), Netherlands (6%) (6.2%), Italy (4.8%) Kazakhstan 56.4 56.2 67.6 71.7 0.09 0.09 China (17.9%), Italy (16.7%), Russian Federation (38.4%), Netherlands (8.1%), Russian China (16.8%), Ukraine (6.6%), Federation (7.3%), France (6.1%) Germany (5.1%), United States (4.7%) Kyrgyz 74.8 84.6 64.1 74.1 0.18 0.25 Switzerland (32%), Kazakhstan Russian Federation (33.2%), Republic (24.1%), Russian Federation China (22.6%), Kazakhstan (13%), Uzbekistan (11.3%), China (9.7%), United States (4.7%), (3.6%) Japan (4%) (continued on next page) 70 Improving Trade and Transport for Landlocked Developing Countries Annex 4: LLDCs: Share of Top Five Export and Import Partners (continued) HH Market Share of top Share of top Concentration 5 exporters 5 importers Index** Country 2000 2012 2000 2012 2000 2012 Top 5 export partners, 2012 Top 5 import partners, 2012 Lao PDR* 53.6 77.3 89.5 92 n.a. n.a. Thailand (34.3%), China (22.5%), Thailand (62.5%), China (16.2%), Vietnam (12.9%), India (4.1%), Vietnam (7.5%), Korea, Rep. Japan (3.5%) (2.9%), Germany (2.9%) Lesotho* 86.9 67.1 95.6 84.2 0.66 0.50 United States (34.3%), Belgium China (36.1%), Other Asia, nes (29.9%), Botswana (1.3%), (28.8%), India (6.9%), United Canada (0.9%), China (0.6%) States (6.3%), Vietnam (6.1%) Macedonia, 70.6 65.4 49.8 44.8 0.09 0.11 Germany (29.4%), Serbia Greece (12.3%), Germany (9.7%), FYR (17.2%), Bulgaria (7.3%), Italy United Kingdom (8.6%), Serbia (6.9%), Greece (4.7%) (7.8%), Bulgaria (6.3%) Malawi* 38.1 29.9 68.7 71.8 0.06 0.04 Canada (7.8%), Germany (7.1%), South Africa (28.5%), China Russia (5.3%), United States (16.1%), Zambia (12.1%), India (4.9%), South Africa (4.8%) (8.4%), Tanzania (6.7%) Mali 94.7 80.5 60.9 59.8 0.05 0.34 South Africa (56.8%), Switzerland Senegal (21.4%), China (10.7%), (11.8%), Senegal (4.5%), Burkina France (10.3%), Cote d’Ivoire Faso (4.2%), China (3.6%) (8.1%), Benin (7.6%) Moldova 75.3 65.7 61.9 54.4 0.18 0.10 Russian Federation (30.3%), Russian Federation (15.7%), Romania (16.5%), Italy (9.4%), Romania (11.9%), Ukraine Ukraine (5.7%), United Kingdom (11.4%), China (7.9%), Turkey (3.9%) (7.5%) Mongolia* 83.4 91.9 77.2 83.8 0.30 0.54 China (84.8%), Canada (3.6%), China (37.8%), Russian Russian Federation (1.4%), Korea, Federation (26.4%), United States Rep. (1.2%), Italy (0.9%) (8.5%), Korea, Rep. (6.2%), Japan (4.9%) Nepal* 70.6 66.3 71.9 93.3 0.24 0.40 India (41.8%), United States India (50.6%), China (38.5%), (12.7%), Germany (5.4%), China Singapore (2.1%), Thailand (4.0%), United Kingdom (2.9%) (1.2%), Japan (0.9%) Niger 86.9 68.8 57.9 51.6 0.48 0.38 France (39.2%), Nigeria (9.1%), China (21.2%), France (11.8%), Mali (8.7%), Switzerland (6.8%), United States (6.7%), Nigeria Japan (4.9%) (6.1%), Japan (5.9%) Paraguay 76.3 66.4 72.1 78.2 0.18 0.08 Brazil (39.2%), Russian China (27.6%), Brazil (23.5%), Federation (9.7%), Argentina Argentina (16.4%), United States (8.3%), Germany (5.9%), Italy (8.1%), Japan (2.7%) (3.2%) Rwanda* 91.5 56.1 60.7 57.6 0.09 0.11 China (18.2%),Malaysia (16.1%), Uganda (23.7%), Tanzania United States (8.7%), Burundi (11.1%), China (9.5%), India (7.6%), Pakistan (5.5%) (7.4%), Belgium (5.9%) Swaziland 82.3 95.9 96.9 91 0.08 0.05 China (79.8%), United States South Africa (81.4%), China (4%), (2007) (13.8%), India (1.8%), Nigeria Japan (2.3%), Other Asia, nes (0.3%), Italy (0.2%) (1.9%), United States (1.4%) Tajikistan* 55.7 56.2 68.1 84.7 n.a. n.a. Turkey (28.8%), China (9.1%), China (44.9%), Russian Other Asia, nes (6.9%), Greece Federation (17.4%), Kazakhstan (5.8%), Kazakhstan (5.7%) (13.7%), Turkey (6.1%), Ukraine (2.6%) (continued on next page) Annexes 71 Annex 4: LLDCs: Share of Top Five Export and Import Partners (continued) HH Market Share of top Share of top Concentration 5 exporters 5 importers Index** Country 2000 2012 2000 2012 2000 2012 Top 5 export partners, 2012 Top 5 import partners, 2012 Turkmenistan* 80.8 82.3 57.4 68.7 0.29 n.a. China (72.3%), Italy (4.5%), China (21.8%), Turkey (18.9%), Turkey (2.5%), Russia (1.5%), Russian Federation (15.5%), Kazakhstan (1.49%) Ukraine (6.8%), United Kingdom (5.7%) Uganda 65.9 55.3 58.5 54.9 0.05 0.06 Sudan (17.3%), Kenya (10.8%), India (20.9%), China (11.3%), Congo, Dem. Rep. (10.2%), Kenya (9.8%), UAE (7.5%), Japan Rwanda (9.6%), UAE (7.5%) (5.4%) Uzbekistan* 45.2 80.8 55.1 73.2 n.a. n.a. Russian Federation (26.4%), Russian Federation (22.1%), China (20.8%), Kazakhstan China (16.9%), Korea, Rep. (15.4%), Turkey (15.3%), France (16.7%), Kazakhstan (12.7%), (2.9%) Germany (4.8%) Zambia (2011) 85.1 85.2 79.4 72.2 0.07 0.16 Switzerland (48.9%), China South Africa (35.7%), Congo, (16.7%), South Africa (9.3%), Dem. Rep. (18.5%), China (9.8%), Congo, Dem. Rep. (6.5%), United Kuwait (4.7%), India (3.5%) Kingdom (3.7%) Zimbabwe 52.2 93.3 72.9 78.5 0.04 0.13 South Africa (68.9%), UAE South Africa (42.2%), United (2001) (12.4%), Mozambique (7.3%), Kingdom (17.2%), United States Zambia (2.5%), China (2.2%) (7.6%), Zambia (6.7%), China (4.8%) Source: WITS, World Bank. Note: * = mirror data, ** = 2012 or latest year. 72 Improving Trade and Transport for Landlocked Developing Countries Logistics Performance of Landlocked Developing Countries Annex 5:  (1=low to 5=high) 2007 2010 2012 2014 Country Name Score Rank Score Rank Score Rank Score Rank Afghanistan 1.21 150 2.24 143 2.30 135 2.07 158 Armenia 2.14 131 2.52 111 2.56 100 2.67 92 Azerbaijan 2.29 111 2.64 89 2.48 116 2.45 125 Bhutan 2.16 2.38 128 2.52 107 2.29 143 Bolivia 2.31 107 2.51 112 2.61 90 2.48 121 Botswana 2.32 134 2.84 68 2.49 120 Burkina Faso 2.24 121 2.23 145 2.32 134 2.64 98 Burundi 2.29 113 1.61 155 2.57 107 Central African Republic 2.57 98 2.36 134 Chad 1.98 142 2.49 115 2.03 152 2.53 113 Ethiopia 2.33 104 2.41 123 2.24 141 2.59 104 Kazakhstan 2.12 133 2.83 62 2.69 86 2.70 88 Kyrgyz Republic 2.35 103 2.62 91 2.35 130 2.21 149 Lao PDR 2.25 117 2.46 118 2.50 109 2.39 131 Lesotho 2.30 108 2.24 142 2.37 133 Macedonia, FYR 2.43 90 2.77 73 2.56 99 2.50 117 Malawi 2.42 91 2.81 73 2.81 73 Mali 2.29 109 2.27 139 2.50 119 Moldova 2.31 106 2.57 104 2.33 132 2.65 94 Mongolia 2.08 136 2.25 141 2.25 140 2.36 135 Nepal 2.14 130 2.20 147 2.04 151 2.59 105 Niger 1.97 143 2.54 106 2.69 87 2.39 130 Paraguay 2.57 71 2.75 76 2.48 113 2.78 78 Rwanda 1.77 148 2.04 151 2.27 139 2.76 80 South Sudan Swaziland Tajikistan 1.93 146 2.35 131 2.28 136 2.53 114 Turkmenistan 2.49 114 2.30 140 Uganda 2.49 83 2.82 66 Uzbekistan 2.16 129 2.79 68 2.46 117 2.39 129 Zambia 2.37 100 2.28 138 2.46 123 Zimbabwe 2.29 114 2.55 103 2.34 137 By Income Group: High income: OECD 3.64 3.66 3.63 3.70 High income: non-OECD 3.13 3.19 3.21 3.18 (continued on next page) Annexes 73 Logistics Performance of Landlocked Developing Countries Annex 5:  (1=low to 5=high) (continued) 2007 2010 2012 2014 Country Name Score Rank Score Rank Score Rank Score Rank Upper middle income 2.64 2.74 2.78 2.82 Lower middle income 2.39 2.58 2.57 2.59 Low income 2.22 2.37 2.37 2.41 World 2.74 2.87 2.87 2.89 By Region: East Asia & Pacific 2.58 2.73 2.77 2.85 Europe & Central Asia 2.45 2.68 2.73 2.76 Latin America & Caribbean 2.53 2.72 2.67 2.74 Middle east & North Africa 2.36 2.60 2.58 2.50 South Asia 2.30 2.49 2.58 2.61 Sub-Saharan Africa 2.35 2.43 2.46 2.46 Source: World Bank. 74 Improving Trade and Transport for Landlocked Developing Countries Annex 6: Doing Business Indicators “Trading Across Borders” Documents Cost to export Documents Cost to import to export Time to export (US$ per to import Time to (US$ per (number) (days) container) (number) import (days) container) Country 2006 2012 2006 2012 2006 2012 2006 2012 2006 2012 2006 2012 Afghanistan 10 10 67 74 2,180 3,545 10 10 80 77 2,100 3,830 Armenia 6 5 37 16 1,670 1,885 6 8 37 18 1,860 2,175 Azerbaijan 9 9 34 29 3,155 3,345 11 11 36 26 2,945 3,405 Bhutan 9 9 38 38 1,150 2,230 12 12 38 38 1,780 2,505 Bolivia 7 7 24 19 1,425 1,425 6 6 36 23 1,452 1,747 Botswana 6 6 33 28 2,088 2,945 7 7 43 41 2,595 3,420 Burkina Faso 11 10 45 41 2,226 2,412 10 9 54 49 3,722 4,030 Burundi 9 9 47 35 2,287 2,905 11 11 71 54 4,035 4,520 Central African Republic 8 9 57 54 4,581 5,491 17 17 66 62 4,534 5,554 Chad 7 7 78 75 4,867 5,902 10 10 102 101 5,715 8,525 Ethiopia 7 7 47 44 2,037 2,180 10 10 41 44 2,790 2,660 Kazakhstan 11 10 89 76 2,730 3,130 13 12 76 62 2,780 3,290 Lesotho 8 8 44 31 1,188 1,680 8 8 49 35 1,210 1,665 Malawi 11 10 45 41 1,623 1,675 11 11 54 51 2,500 2,570 Mali 7 6 44 26 1,752 2,202 11 10 66 32 2,740 3,127 Moldova 7 7 32 32 1,415 1,545 8 8 35 35 1,740 1,870 Mongolia 11 11 49 46 1,807 2,265 13 13 49 47 2,274 2,400 Nepal 11 11 43 41 1,600 1,960 11 11 35 35 1,725 2,095 Niger 8 8 59 59 2,743 3,343 10 10 66 66 2,946 3,333 Paraguay 7 7 36 34 1,220 1,440 9 9 33 33 1,400 1,750 Rwanda 13 7 60 29 3,840 3,275 21 9 95 31 4,000 4,990 South Sudan ... ... ... ... ... ... ... ... ... ... ... ... Swaziland 8 8 21 18 1,798 1,855 7 7 30 25 1,820 2,030 Tajikistan 12 12 71 71 3,200 3,850 13 12 65 65 4,500 4,550 Uganda 12 7 38 33 1,050 2,880 20 10 64 31 2,945 3,015 Uzbekistan 13 13 86 77 3,685 4,285 15 15 104 92 4,050 4,650 Zambia 7 7 53 44 2,098 2,678 9 8 59 51 2,840 3,315 Zimbabwe 7 7 52 53 1,879 3,280 9 9 67 73 2,420 5,101 By Income Group: High income: OECD 4 4 12 11 773 764 5 4 11 10 713 795 High income: 6 5 17 14 640 733 7 7 19 14 638 773 non-OECD Upper middle income 6 6 26 21 719 750 8 7 29 23 761 734 Lower middle income 8 7 33 26 731 711 9 8 39 29 709 777 Low income 8 8 45 37 770 888 11 10 55 42 858 879 (continued on next page) Annexes 75 Annex 6: Doing Business Indicators “Trading Across Borders” (continued) Documents Cost to export Documents Cost to import to export Time to export (US$ per to import Time to (US$ per (number) (days) container) (number) import (days) container) Country 2006 2012 2006 2012 2006 2012 2006 2012 2006 2012 2006 2012 By Region: East Asia & Pacific 6 6 23 19 671 657 8 7 25 21 656 697 Europe & Central Asia 6 6 24 19 778 794 7 6 24 19 778 833 Latin America & 6 6 22 17 656 789 7 7 26 19 761 834 Caribbean Middle East & North 7 6 25 19 744 766 9 8 31 23 711 822 Africa South Asia 8 8 36 32 821 738 10 10 42 33 478 725 Sub-Saharan Africa 8 8 39 32 769 857 10 9 49 38 836 817 Source: World Bank. 76 Improving Trade and Transport for Landlocked Developing Countries Annex 7: The Trade Enabling Index 2008 2014 Country Region rank score rank score Resource-rich Afghanistan South Asia Yes Armenia Europe & Central Asia 61 3.9 53 4.3 Azerbaijan Europe & Central Asia 76 3.68 77 3.9 Yes Bhutan South Asia 107 3.5 Bolivia Latin America & the Caribbean 94 3.36 87 3.7 Yes Botswana Sub-Saharan Africa 88 3.7 Yes Burkina Faso Sub-Saharan Africa 99 3.33 133 2.9 Burundi Sub-Saharan Africa 117 2.7 132 3 Central African Republic Sub-Saharan Africa Yes Chad Sub-Saharan Africa 118 2.6 138 2.5 Yes Ethiopia Sub-Saharan Africa 106 3.06 118 3.2 Kazakhstan Europe & Central Asia 72 3.73 94 3.7 Yes Kyrgyzstan Europe & Central Asia 109 3.03 109 3.5 Yes Laos East Asia 98 3.6 Yes Lesotho Sub-Saharan Africa 95 3.36 108 3.5 Macedonia, FYR Europe & Central Asia 81 3.58 61 4.1 Malawi Sub-Saharan Africa 112 3.5 Mali Sub-Saharan Africa 90 3.42 123 3.1 Yes Moldova Europe & Central Asia 62 3.88 92 3.7 Mongolia East Asia 93 3.38 130 3 Yes Nepal South Asia 116 2.7 116 3.3 Niger Sub-Saharan Africa Yes Paraguay Latin America & the Caribbean 83 3.54 113 3.5 Rwanda Sub-Saharan Africa 66 4.1 South Sudan Sub-Saharan Africa Swaziland Sub-Saharan Africa Tajikistan Europe & Central Asia 104 3.13 Turkmenistan Europe & Central Asia Yes Uganda Sub-Saharan Africa 79 3.63 101 3.6 Yes Uzbekistan Europe & Central Asia 105 3.06 Yes Zambia Sub-Saharan Africa 85 3.52 91 3.7 Yes Zimbabwe Sub-Saharan Africa 112 2.98 134 2.9 Source: World Economic Forum. Annexes 77 Annex 8: LLDCs: Access to ICT Infrastructure Access: subscriptions (per 100 people) Affordability: sub-basket ($ a month) Fixed Mobile-cellular Fixed (wired)— Fixed Mobile-cellular Fixed (wired)— telephone telephone broadband telephone telephone broadband 2000– 2012– 2000– 2012– 2000– 2012– Country 01 13 01 13 01 13 2012 2012 2012 Afghanistan 0 0 0 68 0 0 2 10 54 Armenia 17 20 1 112 0 7 3 9 12 Azerbaijan 10 19 7 109 0 15 3 10 13 Bhutan 3 4 0 74 0 3 2 4 11 Bolivia 6 8 8 94 0 1 24 12 25 Botswana 8 8 16 158 0 1 18 13 57 Burkina Faso 1 1 0 64 0 0 15 12 47 Burundi 0 0 0 24 0 0 Central African 0 0 0 27 0 0 10 13 1330 Republic Chad 0 0 0 36 0 0 17 15 12 Ethiopia 0 1 0 25 0 0 1 4 24 Kazakhstan 13 27 3 184 0 11 3 11 13 Kyrgyz 8 9 0 123 1 1 6 13 Republic Lao PDR 1 8 0 65 0 0 5 6 97 Lesotho 1 3 2 81 0 0 14 20 85 Macedonia, 25 19 8 106 15 9 13 14 FYR Malawi 0 1 1 31 0 0 22 21 48 Mali 0 1 0 114 0 0 8 16 50 Moldova 15 35 5 104 0 13 1 13 13 Mongolia 5 6 7 123 0 4 1 6 10 Nepal 1 3 0 66 0 1 3 4 8 Niger 0 1 0 35 0 0 12 17 60 Paraguay 5 6 18 103 0 1 9 9 22 Rwanda 0 0 1 53 0 0 9 15 112 South Sudan 0 23 0 Swaziland 3 4 4 68 0 0 7 23 76 Tajikistan 4 5 0 87 0 0 1 9 363 Turkmenistan 8 11 0 116 0 Uganda 0 1 1 45 0 0 9 9 14 Uzbekistan 7 7 0 73 0 1 1 2 12 Zambia 1 1 1 73 0 0 7 17 82 (continued on next page) 78 Improving Trade and Transport for Landlocked Developing Countries Annex 8: LLDCs: Access to ICT Infrastructure (continued) Access: subscriptions (per 100 people) Affordability: sub-basket ($ a month) Fixed Mobile-cellular Fixed (wired)— Fixed Mobile-cellular Fixed (wired)— telephone telephone broadband telephone telephone broadband 2000– 2012– 2000– 2012– 2000– 2012– Country 01 13 01 13 01 13 2012 2012 2012 Zimbabwe 2 2 2 94 0 1 10 21 30 LLDC 5 7 3 80 0 2 8 12 93 Transit 11 13 8 99 0 6 High income: 53 42 63 122 2 29 25.2 20.6 29.2 OECD High income: 42 38 30 135 1 19 non-OECD Upper middle 16 18 10 110 0 8 9 15 18 income Lower middle 5 8 4 85 0 2 5 11 21 income Low income 1 1 1 51 0 0 9 12 47 Source: The Little Data Book on Information and Communications Technology, 2014. World Bank. Annexes 79 16 October 2014 Annex 9: Maps Annex Landlocked of of 9: Maps Developing Landlocked DevelopingCountries Countries Europe and Asia Regions MAP A9.1    Map A9.1: Europe and Asia Regions 96 80 Improving Trade and Transport for Landlocked Developing Countries 16 October 2014 Map MAP A9.2: A9.2  Africa  Africa Region Region 97 Annexes 16 October 2014 81 Map MAP A9.3  A9.3:   Latin American Latin American Region Region 98 82 Improving Trade and Transport for Landlocked Developing Countries Annex 10: Institutional Support to LLDCs World Bank projects contributing to the APoA include Communications Infrastructure Program (RCIP) oper- many trade facilitation, connectivity, corridor and ation financed by the World Bank is focused on the regional integration projects. These projects increas- terrestrial elements of the overall regional communica- ingly combine the hard (transport, ICT, customs infra- tions infrastructure and on activities generating demand structure) and the soft (technical assistance to reforms) for the infrastructure being put in place. The IFC project components in the same project package, as the ex- is focused on the EASSy (Eastern Africa Submarine Sys- perience shows that this comprehensive approach has tem) submarine cable. While the IFC and World Bank the most impact on the ground. initiatives are highly complementary, RCIP’s viability is not dependent solely on the EASSy cable. RCIP Phase I was approved by the Board of the Regional ICT Infrastructure Projects in World Bank on March 29, 2007 and includes opera- East, Southern and West Africa tions in Burundi, Kenya and Madagascar. Preparation work has started for operations in RCIP II countries. East & Southern Africa The Program is open to 25 countries: Angola, Botswa- Up until 2007, Eastern and South Africa (E&SA)32 has na, Burundi, Comoros, DRC, Djibouti, Eritrea, Ethio- been the only part of Africa that has not been connect- pia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, ed to the global optical fiber broadband infrastructure Mozambique, Namibia, Rwanda, Seychelles, Somalia, and accounted for only 0.07 percent of the world’s South Africa, Sudan, Swaziland, Tanzania, Uganda, international bandwidth capacity. Twenty countries of Zambia, and Zimbabwe, provided these countries are the region did not have direct terrestrial access to glob- eligible for IDA or IBRD financing at the time of their al Information and Communications Infrastructure (ICI) application for IDA/IBRD support under the Program. and networks and relied on expensive and poor quality A public website has been developed to facilitate this satellite connectivity to link up with each other and process (www.worldbank.org/rcip). By the end of the the rest of the world. Submarine cable backbone proj- program, all capitals and major cities in E&SA would be ects for the region have been proposed in the past, but linked to the Global Information and Communications none have materialized due to a combination of factors Network through competitively priced high-band- including poor regulatory, policy and investment cli- width connectivity. Traffic in the region is expected mates in the region, the complexity of a multi-country to increase by at least 36 percent annually and band- investment project and related concerns about finan- width costs projected to fall to under US$1,000 per cial sustainability. The lack of modern backbone infra- structure33 limited citizens’ access to broadband com- munication services at affordable prices. 32  Eastern and Southern Africa (E&SA) is defined to include The World Bank Operation under the Regional the following 25 countries: Angola, Botswana, Burundi, Comoros, DRC, Djibouti, Eritrea, Ethiopia, Kenya, Lesotho, Communications Infrastructure Program (RCIP) has Madagascar, Malawi, Mauritius, Mozambique, Namibia, been assisting East and Southern Africa (E&SA) coun- Rwanda, Seychelles, Somalia, South Africa, Sudan, Swazi- tries to implement a strategy of effective regional con- land, Tanzania, Uganda, Zambia, and Zimbabwe. nectivity and increased government efficiency through 33  For the purposes of this project, backbone infrastructure the use of this connectivity, by (i) offering technical refers to a collection of high-capacity fiber optic or point- assistance to promote further sector liberalization, (ii) to-point wireless (e.g., microwave) links between main pop- leveraging private investment in the deployment of re- ulated areas, both within countries and between countries, gional and national backbone infrastructure, as well which serve as the basis on which telecom operators pro- vide voice and data services. The text at some points will as rural networks through public private partnership make the distinction between: national backbone networks (PPP) arrangements and capacity purchase, and (iii) (within countries), regional backhaul networks (between leveraging the infrastructure to increase government neighboring countries, terrestrial networks), and regional efficiency and transparency through the selective de- backbone networks (between the region and the rest of the ployment of key e-Government services. The Regional world, e.g., undersea cables). Annexes 83 Mbit/s per month by 2010, which should translate into international network capacity. The team is reviewing end-user broadband access at under US$150/month the most viable options for reducing the cost of interna- and rapidly decline further. This in turn should lead to tional bandwidth to landlocked countries and possibly lower prices for telephone services and better access providing financing for the backhaul transmission in- to the Internet that will significantly improve foreign frastructure. One of the options is to develop backhaul and local private investment opportunities in the re- transmission infrastructure from landlocked countries gion, decrease the cost of doing business and increase to landing points in coastal countries using either bur- the prospects for job creation and wealth generation ied or aerial cable; another option would be to estab- while enabling countries to reap the benefits of ICT as lish virtual landing points which would be managed a platform to deliver services to their citizens. jointly by all the operators. There is more urgency for Burkina Faso, which is not associated with ACE (Africa Coast to Europe). For West Africa Mali and Niger, although they are landlocked, they Infrastructure has been critical to the West Africa re- are expected to gain access to the ACE cable through gion’s growth. It is estimated that between 1995 and their Orange subsidiaries who are members of the 2005, infrastructure improvements boosted West Af- ACE cable consortium. Subsequent phases of the pro- rica’s growth by about one percentage point per cap- gram will assess more effective connectivity solutions ita per year. The positive growth was almost entire- for these countries. ly attributed to the Information and Communication Technology (ICT) revolution while deficient power in- frastructure held back economic growth by about 0.1 Taking a Multi-Pronged Approach to percentage point per capita per year. It is estimated Project Design: The Example of the Nepal- that if infrastructure could be upgraded to the level of India Regional Trade and Transport Project the best performing country in Africa (Mauritius), the Over the past decade, the World Bank added to its al- impact on per capita economic growth would be in ready significant portfolio of trade and transport facili- the order of 5 percent. tation projects with a focus on landlocked developing The World Bank’s response and support to the re- countries. Recent projects have become progressively gion’s efforts is underpinned by a comprehensive Re- more complex reflecting the multi-sectoral nature of gional Integration Assistance Strategy, 2008 (RIAS) for the issues that have to be dealt with, which encom- the continent and Implementation Action Plan for West pass technical issues concerning infrastructure, poli- Africa (2011–2015). The purpose of the West Africa Re- cies and regulations governing transport and logistics gional Communications Infrastructure Project is to in- services provision, and cooperation and collaboration crease the geographical reach of broadband networks between countries and agencies that handle these as- and reducing the cost of communications services in pects. One example of a project that takes a compre- West Africa. Landlocked countries such as Burkina hensive approach is the Nepal-India Regional Trade Faso, Mali and Niger have always depended on their and Transport Project. neighbors for international access, often at high risk Nepal is a landlocked country in South Asia, and and uncompetitive prices. These countries, however, is among the landlocked countries with high trade can benefit from advantageous geographic positions in costs. Over the past decade and a half in particular, the center of West Africa, and could play a key route Nepal has invested in several initiatives to reduce for a number of the large telecom groups in the region. these costs, especially along the main corridor linking Burkina Faso for example has six neighboring countries it to the Kolkata/Haldia port complex in India. In the (Mali, Niger, Benin, Ghana, Togo, and Cote d’Ivoire) late 1990s, with support from the World Bank, among and could provide opportunity for such regional play- other improvements Nepal constructed three Inland ers to complete their international connections and re- Container Depots at the major border crossing points gional rings. There is, therefore, a significant potential with India. One of the three ICDs has a rail connec- international demand provided Burkina and the oth- tion to Kolkata, and has since emerged as the larg- er landlocked counties can offer robust national and est trans-loading node for Nepal’s international trade. 84 Improving Trade and Transport for Landlocked Developing Countries Trade traffic coming or going through Indian ports is national single window. The latter will allow traders to moved by rail between the port and the ICD, where submit and have processed all required import, export, it is then transferred between road and rail transport. and transit documentation electronically via a single Shippers prefer the railway because it is cheaper than gateway, instead of submitting essentially the same road transport, while Indian authorities prefer it as information numerous times to different government they can implement a more secure transit regime than entities, as is the case at the moment. is the case with road transport. However, while the The design of the project builds on available railway now handles more than 60 percent of Nepal’s evidence gathered by the World Bank that suggests containerized third-country trade traffic, operations that reducing trade and transport costs for landlocked are hampered by the requirement to run block trains countries requires a multi-pronged approach. In fact, carrying only Nepalese traffic, which due to limited the analysis of the likely impacts of the project clearly cargo volumes increase headway between trains and points to most of the benefits flowing from the non-in- cargo dwell time in the port. At the same time, road frastructure elements. Yet, these can only be unlocked transport, which is the alternative mode, offers poor if the core infrastructure is strengthened. There are, as quality services with high costs, partly due to informal such, synergies between the components that are fun- cartels active in the market. As a result, trade flows damental to the project meeting its objectives. and transit times for Nepal are characterized by a high degree of uncertainty, which increases logistics costs. In an effort to address the continuing challenges, South-West roads—Western Europe– the government of Nepal has worked with the World Western China International Transit Bank Group to prepare a new comprehensive project Corridor to improve trade facilitation especially along its main The geography, population, economy, and trade flows trade corridor. Total financing is US$ 101 million, a of Central Asia have an important bearing on transpor- third in grants, which fund the soft trade facilitation tation challenges in Kazakhstan. Within the region, components, and the remainder in credits funding distances are substantial (2,000 km from the Kyrgyz the trade-related infrastructure. The project seeks to Republic to Russia) and access to major markets in- decrease the time and cost of moving goods between volves very long travel distances. There are also signif- Nepal and its main seaport gateway in India. The icant non-physical barriers to trade, including ineffi- project has three main components: the first seeks to ciencies at border crossings, unofficial payments, and improve selected trade-related infrastructure, mainly the lack of harmonization of basic transit documents though improving a section of the road in Nepal that and regulations, all of which have been subjects of handles more than two thirds of the country’s interna- discussion at the Central Asia Regional Economic Co- tional goods trade flow, the construction of a new ICD operation (CAREC). For the region, trade with Russia in Kathmandu, and the improvement of two existing continues to be important mainly due to historical ICDs. The second component focuses on moderniz- reasons, with much of this trade transiting through ing transport and transit arrangements between Nepal Kazakhstan due to the availability of transport infra- and India. The component has three main activities: structure. China is growing in importance as a trad- i) introducing a modern and effective transit regime, ing partner for Central Asia, with Kazakhstan taking including technical assistance in enhancing the capac- the largest share. Other significant trading partners ity to negotiate trade and transit treaties; ii) simplifying of the CAREC countries include Japan, Korea, Turkey, and harmonizing customs and border management and increasingly, the EU countries. The CAREC coun- procedures, processes and systems, especially to pro- tries have designated six major transport corridors, vide for electronic interchange of transit data between four of which transit through Kazakhstan. Although Nepal and India; and iii) strengthening and moderniz- current trade movements are relatively low, the trade ing the regulation of national and international truck- directions indicate significant potential for trade with ing services. The third component seeks to strengthen Europe, China, and South Asia in addition to current trade-related institutional capacity in Nepal, mainly trade with Russia. This perceived trade potential is the through to introduction of a trade portal and electronic main reason for the establishment of the six CAREC Annexes 85 corridors. While rail transport accounts for more than the need to re-build a framework across national bor- 75 percent of the combined ton-km of freight carried ders, including a regionally and locally integrated in Kazakhstan, past trends show a ten percent increase trans-border road transport network capable of con- in road freight per annum since 2002. necting people and businesses to local and global ser- Roads are a key element of the Kazakhstan trans- vices and markets across borders. The objective of the port system, playing an important role in the provi- proposed Program is to increase cross-border connec- sion of basic access to rural areas, and providing es- tivity and enhance regional economic development, sential transit corridors for trade. The key issues facing which can be achieved by rehabilitating priority road the management of the Republican road network are: links and improving transport operations and mainte- a) outdated organizational structure and weak institu- nance practices. Financing activities proposed under tional capacity to plan and manage the road network, this Program are expected to have substantial positive mainly because the Committee has few trained person- regional spill-over effects and promote positive change nel; b) inefficient allocation of funds; c) poor condition in the region. In line with the overall objective of the of the network, with over 50 percent of roads requiring Program, sequential entry of countries is proposed, ini- major maintenance or full rehabilitation; d)  inappro- tially starting with the Kyrgyz Republic and Tajikistan. priate maintenance practices that are reactive rather The financing requirements for this transformational than preventive (i.e., repairs are done once defects Program are estimated to be at least US$ 400 million. appear), resulting in higher costs; e) poor quality of construction; f) very poor road safety record, with in- dications that this will increase; g) unsatisfactory con- Regional Trade Facilitation and dition of local road networks, thereby limiting access Competitiveness Development (Burkina for rural communities to essential social services and Faso and Cote d’Ivoire) work opportunities; h) lack of services to transporters The Regional Development Policy Operation (RDPO) along the transit corridors; and i) non-physical barriers is aimed to support regionally oriented reforms in the in the form of unofficial payments and unscheduled transport sector and more generally regional coopera- inspections for transit traffic. The overall objective of tion in Burkina Faso and Cote d’Ivoire. WAEMU (West the government’s WE-WC Corridor development pro- African Economic and Monetary Union) and ECOW- gram is to improve transport efficiency and safety, and AS (Economic Community of West African Countries) promote development along one of Kazakhstan’s main have taken the lead in steering a regional transport strategic road transport corridors. Transport and trade facilitation agenda, including through regional direc- efficiency will be improved through provision of better tives. Ministers of all eight WAEMU member countries infrastructure and services along the entire corridor to meet regularly and have convened national stake- reduce transport costs, and through gradual reform of holder workshops to build consensus around these di- the entities responsible for all categories of roads. rectives. Based on this framework, both Cote d’Ivoire and Burkina Faso have developed ambitious reform programs of the transport sector aimed at liberalizing Proposed Central Asia Road Links (CARs) the industry and significantly reducing transport costs. Program However, in the past, implementation of reforms has Initiated by governments in respective Central Asian been hampered by lack of instruments needed to countries, the proposed Central Asia Road Links foster the required simultaneous actions by all rele- (CARs) Program is currently being considered for fi- vant actors and to deal with the complicated political nancing by the World Bank. Realizing the necessity for economy of the industry. The renewed reform impetus collective action, the proposed CARs Program will ad- in Cote d’Ivoire following the end of the civil war and dress some of the development challenges which have the close partnership with Burkina Faso, manifested come about with the recent ‘disruptive’ breakup of the in regular high-level government consultations, have Former Soviet Union, the emergence of new markets, favored the development—in consultation with major and the growing disparities between capital cities and stakeholders—of a comprehensive program of reforms peripheral regions. At the core of these challenges is of the transport sector that offer better prospects of 86 Improving Trade and Transport for Landlocked Developing Countries implementation, especially if supported by the Bank the Abidjan-Ouagadougou corridor. To this end, the through a regional Development Policy Operation. operation spells out a programmatic set of reforms in Reducing transport prices is not only important to the areas of (i) trucking industry and organization of facilitate the much-needed structural transformation, the road transport market; (ii) competitiveness of the but has also direct poverty-reducing impacts through gateway and inland platform; and (iii) border man- better regional integration. Notably, lower prices of agement and customs. Reforms of the railway which transport and more efficient logistics services for food could play a critical role in improving the transport staples will enhance food security by avoiding loss of corridor could be included in future operations, as crops during transport, while it also helps to strength- soon as there is greater clarity on the direction the en the competitiveness of traditional exports of land- governments intend to take in this area. The set of locked countries in the Sahel, such as cattle. measures for each pillar was discussed in a series In early 2014, highlighting their renewed reform of consultations with stakeholders in each country, commitment, Cote d’Ivoire and Burkina Faso have as well as with the regional economic communities requested support from the Bank through a regional (RECs), and other donors. These national stakeholders Development Policy Operation (regional DPO). and the RECs were also consulted at a workshop in Abidjan in end-September 2013 with participation of  First, a number of reforms detailed further be- key stakeholders from Burkina Faso and Cote d’Ivoire low—many of them requiring significant political and benefits from a variety of studies that have been commitment—can only become fully effective undertaken in the transport sector. Demonstrating cli- if implemented by both countries. Hence, one ent engagement, the majority of measures are already country will only implement reforms, if it has as- part of the governments’ programs for the next years. surances that the other will do the same. A DPO will provide a platform for agreeing on such joint Other Projects by the World Bank Trade & actions as well as assurances that they will be im- plemented, as disbursement will only take place Competitiveness Global Practice The trade policy agenda within the Trade and Compet- after both countries have implemented the action. itiveness Global Practice (T&C GP) supports the design  Second, past efforts of the Bank to support re- of commercial policies that affect market access and form in this sector through investment lending trade in goods and services. The focus goes beyond tra- operations, including trade, transit and transport ditional policies such as import tariffs to cover also be- facilitation projects throughout Africa, have only hind-the-border policies—such as non-tariff measures had mitigated progress.34 The authorities argue (NTMs) and regulations in services industries—that that DPOs designed in a regionally coordinated can affect trade patterns and the allocation of factors manner may provide for more effective support of production across industries within a country. These towards the implementation of joint and politi- reforms have increased the productivity of developing cally difficult reforms, in view of the incentives countries and allowed them to take better advantage implicit in much-needed concessional financing of global trade opportunities. Today, developing coun- of the budget to (i) catalyze reforms in multiple tries account for more than 30 percent of global trade, policy areas at the same time; and (ii) raise the up from just 10 percent in the mid-1990s. profile of required policy measures vis-a-vis se- nior policymakers.  Third, the authorities consider the support and the Multilateral and Regional Trade Agreements role of the Bank to be vital, in view of its conven- Multilateral trade agreements and regional integration ing power and credibility with the government efforts can be important mechanisms for intensifying and donors, as well as its technical expertise. and accelerating domestic policy reforms. In Belarus, It is the first in a planned programmatic series of 34  For example, the Abidjan-Lagos corridor project is cur- four DPOs designed to facilitate trade and enhance rently rated marginally unsatisfactory for implementation competitiveness by reducing transport prices along progress. Annexes 87 Nepal and Turkmenistan we have provided guidance T&C’s ongoing work in Lao PDR addresses the and assessed the economic rationale for joining the labor market challenges associated with the small, WTO, the likely impact on tariffs as a result of WTO low-productivity garment industry and the impact accession, and the regulatory reforms needed for trade of mining and hydro-electric exports on incomes in both goods and services. Following an agreement through welfare effects rather than direct job cre- with ASEAN, we are undertaking NTM surveys in Lao ation (through a programmatic AAA and through PDR, Cambodia and Myanmar, which has led to sev- TA for capacity-building under the Lao PDR Trade eral positive avenues for streamlining NTMs. Development Facility II project). T&C’s recent work In Southern Africa, the T&C GP is supporting an on South Sudan looked at the poverty effects of the Accelerated Program of Economic Integration (APEI) border closure with Sudan and the poverty impact of which is providing technical inputs to the prepa- increased domestic market integration (for the recent ration of a regional DPO to assist the countries in- South Sudan AAA on trade integration and the ongo- volved—Malawi, Mauritius, Mozambique, Seychelles ing CEM). Additional ongoing work includes analysis and Zambia—in implementing their commitments to of the labor content of exports in South Africa and liberalize regional trade and improve the business cli- Botswana for the programmatic AAA on GVCs in mate for trade and investment. In West Africa, T&C Southern Africa. is providing Support for West Africa Regional Integra- tion (SWARIP) by informing and supporting the dia- logue between the regional economic communities Customs and Border Management (ECOWAS, WAEMU and MRU), member governments The World Bank Group is involved in helping over and private sector and civil society stakeholders, and 50 countries to improve their customs and border by influencing country and regional engagement pro- management regimes. Results to date are impressive grams by the Bank and other donors to address the and demonstrate the Bank group’s capacity to support real bottlenecks to regional integration. meaningful reform in an important and complex area. The Bank has active customs and border management reform projects in Lao PDR, Cambodia, Nepal, Ka- Reducing Poverty and Creating Jobs through zakhstan, and is assisting client countries to adopt Increased Trade and Competitiveness WTO and WCO reform initiatives in all World Bank A key role of Trade & Competitiveness Global Prac- Group regions. tice is to identify the transmission channels through The Trade Development Facility and Customs which trade and competitiveness affect poverty and and Trade Facilitation projects in Lao PDR helped to the well-being of the bottom 40 percent of the income develop a National Trade Facilitation Strategy and es- distribution in developing countries, measure the size tablish a Secretariat, supported implementation of an of these impacts, and use the findings to develop poli- automated Trade Information Portal and an automated cies, projects, technical assistance and other interven- processing system covering all key checkpoints and tions that foster increased trade and competitiveness 90 percent of all import and export transactions, re- and reduce barriers harmful to poorer income groups. viewed NTMs and implemented an NTM rationaliza- Trade affects welfare through various channels. For tion process, established a Trade and Private Sector individuals and households at the lower end of the Working Group, developed a blueprint for a National income distribution, the main channels of direct in- Single Window, and supported WTO accession, with fluence in the short run are through: consumption of membership achieved in 2013. final goods, especially food; consumption of inputs Under the Trade Development Support Facility to household production; and employment links to in Cambodia, T&C support has helped: improve the the tradable sectors. For trade policies that translate Logistics Performance Index (LPI) overall ranking by into a change in the relative price of traded goods, the 46 places since 2010; reform, simplify and automate short-term response of consumers and producers will procedures for issuing and applying Certificates of Or- determine whether the trade-related shock is welfare igin; implement a Customs IT system rolled out to 21 improving for the poor and the bottom 40 percent. checkpoints; and develop a blueprint for a National 88 Improving Trade and Transport for Landlocked Developing Countries Single Window. Positive results include a drop in cus- Software refers to the reengineering of systems toms clearance time from 5.9 days (2010) to 1.4 days and procedures, reducing red tape, improving the (2014) and a reduction in physical inspections from competitiveness of transport and logistics markets, 29% (2010) to 17% (2014). institutional development of trade-related agencies, A US$101 million Trade and Transport Facilitation and increasing the professionalism of logistics service project in Nepal covers both the hardware of trade providers. Hardware, on the other hand, deals with (roads and storage facilities) and the software com- trade-supporting infrastructure investments such as ponents of trade (customs and border management roads, ports, cargo handling facilities, and ICT sys- reform and ICT). Immediate results achieved include tems. T&C works closely with other practices, espe- the establishment of a National Trade and Transport cially Transport & ICT, on elements of the above topics Facilitation Committee and the preparation of a blue- Examples of advisory services and technical assis- print for the National Trade Portal and Single Window tance (TA) include: system.  Reimbursable Advisory Services on Improve- ments of Freight Logistics and Supply Chains: Streamlining Non-Tariff Measures Kazakhstan; The NTM agenda can be addressed through a range  Regional flagship reports: SAR (City linkages), and of Bank tools including diagnostic toolkits, databases, ECA (Eurasian Connection and Diversification); country-specific analyses (AAAs), Systematic Country  Other regional reports: AFR (West Africa Logis- Diagnostics (SCDs), technical assistance to client gov- tics Costs, East Africa Comparative Assessment ernments, and development policy loans (DPLs) that of Uganda Corridors, West Africa Regional address competitiveness issues. Food Staples Trade, West African Regional Trade The NTM toolkit has been implemented to vary- Solutions); ing degrees in Indonesia, Mauritius, Kazakhstan, and  Trade and Transport Facilitation Assessments and the Central America region. Current engagements in- Supply Chain Analysis: AFR (Zimbabwe TTFA), clude Lao PDR, Cambodia, Myanmar, Tajikistan, and EAP (Cambodia, Lao PDR), ECA (Kazakhstan, Re- Nepal. Employing this general framework, the Bank public of Tajikistan, Uzbekistan, Kyrgyz Republic, supported ASEAN in drafting its “Work Programme Republic of Turkmenistan, Belarus, Georgia), LAC on Streamlined ASEAN Non-Tariff Measures for 2013- (Nicaragua). 14”, which was adopted by its member states in 2012. The application of the toolkit has resulted in four Examples of investment projects and develop- modules of technical assistance, which can be ap- ment policy loans (DPLs) include: plied together or separately according to the specific client needs. In Lao PDR, the MDTF-TD2 has assisted  Great Lakes Region Trade Facilitation Project in implementing and developing the NTM technical (regional); assistance component of the Trade Development Fa-  Central Asia Road Links Program (regional); cility II program.  Nepal-India Regional Trade and Transport Project (regional); Trade Logistics & Supply Chains  Regional Trade Facilitation and Competitiveness T&C support for improved trade logistics and more Project (regional); efficient supply chains focuses on both the software  APEI Regional DPO (regional); and hardware components of trade.  Armenia Competitiveness and Connectivity DPO. Annex 11: LLDCs’ Participation by Instrument ATP Agreement (Agreement on the CMR International TIR Convention Carriage of Convention (Convention Perishable Agreement (Convention on the Foodstuffs Concerning on Contract and on the Geneva the Customs International for the Special Convention on International Convention on Transport of International Equipment Harmonization Carriage of the Temporary Goods Under Carriage of to be Used of Goods Convention Convention on Dangerous Importation of Cover of TIR Goods by for Such Kyoto Control at on Road Road Signs Goods by Commercial Carnets) Road) Carriage) Convention Borders Traffic and Signals Road Road Vehicles LLDC country 1975 1956 1970 1999 1982 1968 1968 1957 1956 Afghanistan x x Armenia x x x x x Azerbaijan x x x x x x x x x Bhutan Bolivia Botswana x Burkina Faso Burundi Central African x x Republic Chad Ethiopia Kazakhstan x x x x x x x x Kyrgyz Republic x x x x x x x Lao PDR x Lesotho x x Macedonia, FYR x x x x x x x x x Annexes (continued on next page) 89 90 Annex 11: LLDCs’ Participation by Instrument (continued) ATP Agreement (Agreement on the CMR International TIR Convention Carriage of Convention (Convention Perishable Agreement (Convention on the Foodstuffs Concerning on Contract and on the Geneva the Customs International for the Special Convention on International Convention on Transport of International Equipment Harmonization Carriage of the Temporary Goods Under Carriage of to be Used of Goods Convention Convention on Dangerous Importation of Cover of TIR Goods by for Such Kyoto Control at on Road Road Signs Goods by Commercial Carnets) Road) Carriage) Convention Borders Traffic and Signals Road Road Vehicles LLDC country 1975 1956 1970 1999 1982 1968 1968 1957 1956 Improving Trade and Transport for Landlocked Developing Countries Malawi x Mali x Moldova x x x x x x x Mongolia x x x x x x Nepal Niger x Paraguay Rwanda x South Sudan Swaziland x Tajikistan x x x x x x x Turkmenistan x x x x Uganda x Uzbekistan x x x x x x x Zambia x Zimbabwe x x Source: UN Treaty Collection, UNECE, WCO. 1818 H Street, NW Washington, DC 20433