Connecting Landlocked Developing Countries: What have we learned during the Almaty Programme of Action period? Jean-François Arvis International Trade Department The World Bank Washington June 13, 2013

How to assess the impact of the APoA ? 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 ( ) 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 average Trade: 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

Trade Performance Trade growth (percent per year)

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

No cost of landlockedness for rich landlocked countries

Logistics Performance

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 Address sources of fragmentation and unreliability

18 TOTAL LOGISTICS COSTS IN COMMERCE Transportation7% Interview Certification2% Interview Inventory5% 40 days in transit +2 months inventory at 0.05% per day Losses3% Interview Other administrative5% Own estimate Total logistics costs22% 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 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