Connecting Landlocked Developing Countries: What have we learned during the Almaty Programme of

Action period?

Jean-François ArvisInternational Trade Department

The World BankWashington June 13, 2013

How to assess the impact of the APoA 2004-2013?

Several perspectives• Macro trends: trade, growth• Changes in access costs and connectivity• Effective action on the ground to address

sources of access costs and reduced connectivity.

Trends (2000-2011)

Revenue per capita in LLDC:• From 11.5 % to 15.6 % of world average• Annual growth 3.8% in LLDC (2.1% SSA) against

3.4% in transit countries, and 1.5% world averageTrade:• LLDCs from 0.5% to 1.1% of world trade• Transit countries from 10.3% to 21.7%=> NO BETTER TRENDS THAN TRANSIT COUNTRIES

Trade trends

High income developed

High income developing

Middle income

Low income

Landlocked developing

Sub-Saharan Africa

Central Asia

South Asia

Transit

World

0 20 40 60 80 100 120

201120062000

Trade Performance

Trade growth 2000-2011 (percent per year)

Lower middle income

Low income

Landlocked developing countries:

LLDC Sub-Saharan Africa

LLDC Central Asia

LLDC South Asia

Transit

World

0 5 10 15 20 25

ExportTrade

2000 2006 20110

20

40

60

80

100

120

High income developedHigh income developingMiddle income Low incomeLandlocked developingTransit

2000 2006 20110

20

40

60

80

100

120

Landlocked developingSub-Saharan AfricaCentral AsiaSouth AsiaTransit

Trade Openness (percent)

Trade costs and logistics performance

• Trade costs measure the “wedge” between international trade and domestic consumption= ad valorem price equivalent that explain reduction of bilateral trade flows as compared with domestic markets of exporter and importer= caused by distance but also endogenous factors such as connectivity, logistics, and trade facilitation.

• National logistics performance measured by Logistics Performance Index (LPI)

Trade costs:Evidence of LLDCs disadvantage

High income - OECD

High income - non OECD

Upper middle income

Lower middle income

Low income

Landlocked developing countries

Transit coastal countries

World

0 50 100150200250300350

USA

20092000

High income - OECD

High income - non OECD

Upper middle income

Lower middle income

Low income

Landlocked developing countries

Transit coastal countries

World

0 50 100 150 200 250

Germany

20092000

High income - OECD

High income - non OECD

Upper middle income

Lower middle income

Low income

Landlocked developing countries

Transit coastal countries

World

0 50 100150200250300350

Japan

20092000

USA

Germany

Japan

0 50 100 150 200 250 300 350 400

Sub-Saharan Africa

Coastal countriesLLCs

USA

Germany

Japan

0 50 100 150 200 250 300 350

South Asia

Coastal countriesLLCs

USA

Germany

Japan

0 50 100 150 200 250 300 350 400

East Asia and Pacific

Coastal countriesLLCs

USA

Germany

Japan

0 50 100 150 200 250 300 350 400

Latin America and the Car-ibbean

Coastal countriesLLCs

No cost of landlockedness for rich landlocked countries

Austria

Belgium

Switzerland

France

Italy

0 20 40 60 80 100 120 140 160

Japan

20092000

Austria

Belgium

Switzerland

France

Italy

0 20 40 60 80 100 120 140

USA

20092000

Logistics Performance

High income - OECD

High income - non OECD

Upper middle income

Lower middle income

Low income

Landlocked developing countries

Transit coastal countries

World

2 2.2 2.4 2.6 2.8 3 3.2 3.4 3.6 3.8 4

201220102007

regional average

landlocked countries

coastal countries

1.6 1.8 2 2.2 2.4 2.6 2.8 3

East Asia and Pacific

20122007

regional average

landlocked countries

coastal countries

1.6 1.8 2 2.2 2.4 2.6 2.8 3

Latin America and the Caribbean

20122007

regional average

landlocked countries

coastal countries

1.6 1.8 2 2.2 2.4 2.6 2.8 3

Sub-Saharan Africa

20122007

regional average

landlocked countries

coastal countries

1.6 1.8 2 2.2 2.4 2.6 2.8 3

South Asia

20122007

Logistics performance by regions

Connecting LLDCs

• Complex supply chains in transit system• Inefficiencies and fragmentation => logistics costs

Logistics Costs= Cost+ Time+ Reliability

Urban myths

• Transportation costs in LLDCs can represent 30% of import value in certain countries.

• Delays to import are exceeding 100 days in several landlocked countries.

• The main sources of costs and delays are the obstacles en route or at borders or bad infrastructure.

Costs

= out of pocket expenses for freight • In the absence of market distortion (e.g. freight allocation

system), …• road freight is relatively homogenous worldwide (1 to 1.5 USD per

km)• But :

– Imbalance– Legal and illegal rents plus overheads seeking activities (up to X2)– Other inefficiencies (e.g. idle time)– Market intervention (e.g. Central Africa ) (X2)

• Transport markup of being LLDC as compared with transit no more than 5%

Time

• Much less corridor time than transoceanic time– Lead time on corridors less than 15 days average

(more in Central and Eastern Africa)– 4-6 weeks for transoceanic(breakdown in cost would be more even)

• Most delays happen in ports and in transit countries.

Reliability: Looking beyond averages

• The spread of delays of transit containers in the port of Dar Es Salam

0 10 20 30 40 50 60 70 80 90 100 110 1200

0.01

0.02

0.03

0.04

0.05

0.06

0.07

number of days

prop

ortio

n of

cont

aine

rs

Address sources of fragmentation and unreliability

18

TOTAL LOGISTICS COSTS IN COMMERCETransportation 7% InterviewCertification 2% InterviewInventory 5% 40 days in transit +2 months inventory at 0.05% per dayLosses 3% InterviewOther administrative 5% Own estimateTotal logistics costs 22%

Losses,

theft (3%)

Cost of delays, long replenishment cycles and big inventories (2-3 months vs. 2

weeks in EU and USA)

Transportation costs

Logistics Costs and their impact; e.g. Kazakhstan

Transit system

"SOFT "AND "HARD" INFRASTRUCTURE

IMPLEMENTATION ACTIVITY

IMPLEMENTATION FOCUS

TRANSIT SYSTEM: IMPLEMENTATION MECHANISMS

CustomsTRANSIT REGIME

& Facilitation

Enforcement ofTRANSPORT Policies

CORRIDOR Management

International Movement of

GOODS

International Movement of Vehicles

& SERVICES

Cross BorderCOOPERATION &

information SHARING

Physical Connectivity

rail road

border ICT

Institutions

CustomsTransport

regional secretariat

Legal Framework

bilateral treaties

regional community

global tools

Private sector

banks

truckers forwarders

business assoc

Soft and hard infrastructure and implementation mechanisms

What has improved

• Infrastructure:– All weather connection for all LLDCs– Rehabilitation and maintenance

• Delays in ports – Rarely more than 2 weeks (6 weeks 10 years ago)– But not APoA specific: measure taken for coastal countries, not transit.

• IT and trade facilitation:– Border infrastructure– IT systems (e.g. Asycuda)

• International legal instruments (no obvious gaps)• Data collection by corridor (SSTAP, CAREC, IRU…)

What has not really improved

• Customs reforms in the smaller States (mixed success)• Some success stories with border posts (but over-

emphasized).• Market structure of trucking (virtually an ignored area)• Railways (mixed)• Transit system (some attention but often wrong focus

or wrong ideas)• Corridor management institutions

Some successes

• Malaba (Kenya-Uganda): 2day -> 2 hours at border

• Eurasian Customs Union: one border and $500 less per trip

• Cotonou (Benin-Niger): cleansing trucks in ports reduces delays from weeks to days

• TIM in Central America: the only successful implementation of regional transit out of EU

Where to push

• Transit regimes, tremendous potential in regionally integrated system (one procedure one bond). Only two designs to consider:– TIR for loosely integrated areas– EU Common transit for highly integrated regions

• Trucking agreements

=> Very much to do with deeper integration in sub-regions