Landlocked Countries Aspire to a Transit Role 50 Transit Systems: from Vicious to Virtuous Cycles 52 Note 55 References 55
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Public Disclosure Authorized DIRECTIONS IN DEVELOPMENT Trade Public Disclosure Authorized Connecting Landlocked Developing Countries to Markets Trade Corridors in the 21st Century Public Disclosure Authorized Jean-François Arvis Robin Carruthers Graham Smith Christopher Willoughby Public Disclosure Authorized Connecting Landlocked Developing Countries to Markets Connecting Landlocked Developing Countries to Markets Trade Corridors in the 21st Century Jean-François Arvis, Robin Carruthers, Graham Smith, and Christopher Willoughby © 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 14 13 12 11 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The bound- aries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries . Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-8416-9 eISBN: 978-0-8213-8417-6 DOI: 10.1596/978-0-8213-8416-9 Library of Congress Cataloging-in-Publication Data Arvis, Jean-François, 1960- Connecting landlocked developing countries to markets : trade corridors in the 21st century / Jean-Francois Arvis, Graham Smith, Robin Carruthers. p. cm. Includes bibliographical references and index. ISBN 978-0-8213-8416-9 — ISBN 978-0-8213-8417-6 (electronic) 1. Developing countries—Economic conditions. 2. Landlocked states. 3. Developing countries— Commerce. 4. Transportation—Developing countries. 5. Transit, International—Developing coun- tries. 6. Transit by land (International law) I. Smith, Graham, 1945- II. Carruthers, Robin. III. Title. HC59.7.A8338 2010 382—dc22 2010017086 Cover photograph: Graham Smith Cover design: Naylor Design, Washington, D.C. Contents Foreword by Cheick Sidi Diarra xiii Foreword by Bernard Hoekman and José Luis Irigoyen xv Acknowledgments xvii About the Authors xix Abbreviations xxi Chapter 1 Landlocked Developing Countries and Trade Corridors: An Overview1 A Renewed Development Priority2 Transit Neighbors and Trade Corridors4 A New Conceptual Framework: Transit Systems and Corridor Performance 7 Structure of This Volume 9 Notes 11 References 11 Chapter 2 The LLDC Access Problem and the Performance of Trade Corridors 13 Economic Potential of LLDCs 14 The Corridor Supply Chain and Its Bottlenecks 17 v vi Contents Unreliability of LLDC Corridors Carries a High Cost 21 Market Structure and Competition in Logistics Services 24 Unnecessary Overhead and Informal Payments 27 Investing in Infrastructure: Does It Actually Promote Trade? 27 Supply Chain Linkages: Exports vs. Imports, Extra- vs. Intra-regional Trade 30 Notes 31 References 31 Chapter 3 The Complex Political Economy of Trade Corridors 33 LLDC Relationship with the Transit Country: Beyond Dependence 34 Transit Corridors: A History of Public-Private Partnership with Mutual Benefits 45 How LLDC Traffic Benefits Transit Countries 48 Landlocked Countries Aspire to a Transit Role 50 Transit Systems: From Vicious to Virtuous Cycles 52 Note 55 References 55 Chapter 4 Moving Goods on Corridors: Transit Regimes 57 Role of the Transit Regime 58 The Basics of Transit 59 Key Concepts and Practices in Transit 62 Regionally Integrated Transit and Carnet Systems 65 Global Standards and International Legal Agreements Relevant to Transit 73 Conclusions 77 Notes 77 References 77 Chapter 5 Improving Transit Regimes and International Cooperation 79 Implementing Transit Regimes in Developing Regions 79 Integration of Transit: An Unreached Goal 84 Contents vii Too Many Legal Instruments? 87 Reengineering the Transit Regime: A Priority for LLDC Corridors 88 Pilot Transit Regime Improvement Program: The Douala Corridor 92 Technology Helps Manage Transit Trade 94 Conclusions: Progress Toward Global Standards 96 Notes 97 References 98 Chapter 6 Improving Road Freight Transport 99 Importance of Road Transport in Transit Countries 100 Structure of Road Freight Industries 102 Contracting Between Clients and Trucking Companies 106 Procedures for Movement of Trucks and Drivers Across Borders 107 Quota Systems and Bilateral Transit Agreements 109 Facilitating Truck Movement Through Transit Countries 114 Recommendations 118 Notes 120 References 120 Chapter 7 Alternative Transport Modes and the Role of Logistics Intermediaries 123 Rail Transport: Underused Potential 125 A Regional Perspective on Railway Services to LLDCs 130 Air Freight: A Niche Market for LLDCs 139 An Overview of Inland Waterway Transport 143 Development of Logistics Services 149 Recommendations 156 Notes 158 References 159 Chapter 8 Managing Trade Corridors 161 Four Corridor Management Models 162 Efficient Corridor Management 165 viii Contents Monitoring the Performance of Trade Corridors 170 Total Logistics Costs on a Transit Corridor 174 Designing the Monitoring System for Corridor Performance 175 Corridor Monitoring in Practice: Observatories in Africa 178 Conclusions 180 Notes 180 References 181 Chapter 9 Bringing Together the Solutions 183 Building Trust 185 Making Transportation and Logistics Services Work for Trade 185 Redefining or Improving Transit Systems 186 Developing Global Initiatives to Promote Common Approaches for Redesigning Transit Regimes and Monitoring Trade Corridor Performance 188 Note 188 Appendix 1 Landlocked Developing Countries (LLDCs), Their Transit Neighbors, and Main Trade Corridors, by Region 189 Appendix 2 Assessment and Policy Recommendations by Region 199 Eastern and Southern Africa 200 Western and Central Africa 204 Latin America 209 Central Asia 213 South Asia 216 Other LLDCS: Armenia, Lao PDR, FYR Macedonia, and Moldova 220 Overview of the Policy Recommendations: Impact and Ease of Implementation 225 Appendix 3 Trade Growth and Logistics Performance: LLDCs and Transit Neighbors 229 References 235 Contents ix Appendix 4 Survey Findings on LLDC Logistics Performance 237 Global Enabling Trade Report 2010 237 Connecting to Compete: The Logistics Performance Index (LPI) 2010 239 Doing Business in Landlocked Economies 2009 240 Comparing the Experience of Countries by Region 240 The Penalties by Region of Being Landlocked 241 Notes 245 References 245 Appendix 5 Measuring Transit Corridor Performance Parameters 247 Locations at Which Measurements Will be Made 248 The Products and Their Transport Unit and Transport Route 249 The Cost and Replicability of Making the Measurements 250 Note 251 Reference 251 Appendix 6 Maps of LLDCs and Transit Corridors, by Region 253 Appendix References 260 Index 261 Boxes 1.1 Almaty Programme of Action (2003) Focus Areas5 2.1 Spread in Delays and Predictability of Supply Chains 22 2.2 Infrastructure Investment in Africa and Asia: NEPAD and the Asian Highway Network 28 3.1 Connecting Malawi to Markets: A Private Sector Choice 38 3.2 Instruments for Charging Transit Traffic for Road Use 49 4.1 General Requirements With Respect to Seals 62 4.2 Legal Instruments Governing Transit Regimes 74 5.1 India-Nepal Bilateral Transit Agreement 89 5.2 Authorized Economic Operators (AEOs) 90 5.3 Impact of Information Technology: Streamlining Transit Information at Beitbridge 95 6.1 IRU Training Courses 104 6.2 UNECE Resolution R.E. 4 110 xContents 6.3 SADC Cost Recovery Mechanism 115 7.1 Railway Border Performance Indicators 128 7.2 Contrasting Railway Concessions in Côte d’Ivoire and Senegal 133 7.3 Rail Container Services to Central Asia 137 7.4 Increased Competition Pushes Kenya to Higher Unit-Value Exports and Air Freight 142 7.5 Institutional Arrangements for Managing the Paraguay–Paraná River Waterway (“Hidrovia”) 147 7.6 International Waterway Commissions 148 8.1 National Trade and Transport Facilitation Committees 168 8.2 FastPath Shows Corridor Performance Strengths and Weaknesses 173 Figures 1.1 The Transit System and Its Components 8 2.1 An Extended Chain of Operations 18 3.1 Market Shares of Corridors Serving Burkina Faso, 1991–2004 39 3.2 Vulnerability of the Supply Chain to Rent-seeking Activities 44 4.1 The Transit Regime: International and National Transits and Final Clearance 60 4.2 The TIR Operation: Sequence of Procedures 69 4.3 Conceptual Difference of Bond Management between TIR and European Common Transit 72 8.1 Typical Output of a UNESCAP Corridor Performance