Landlocked countries can improve their connectivity by strengthening cooperation with their transit neighbors and other global partners, as well as pursuing specific actions to reduce trade and transport costs while expanding broadband coverage.

This was one of the main conclusions of the Second United Nations Conference on Landlocked Developing Countries (LLDCs), hosted by the government of Austria in Vienna from November 3-5. The UN Conference also adopted a new Program of Action for LLDCs to be implemented over the next decade.

The Program of Action establishes six priorities, including:

• Fundamental transit policy issues

• Infrastructure development and maintenance

• International trade and trade facilitation

• Regional integration and cooperation

• Structural economic transformation; and

• The means of implementation

The World Bank’s delegation was led by Senior Director for Transport and ICT Global Practice, Pierre Guislain, who strongly welcomed and supported the new Program of Action for LLDCs.

“The World Bank will actively support LLDCs and their transit neighbors through programs that work towards the reduction of transport and trade costs along the main trade routes important to LLDCs,” Guislain said in a statement delivered at the plenary of the conference.

Guislain also mentioned the importance of strengthening the transport and logistics sectors by phasing out anti-competitive practices; improving intermodal connections, especially at the interface between ports and rail or roads, as well as in the aviation sector; and expanding broadband coverage.

Landlocked developing countries are home to 440 million people, but represent only about one percent of world trade, due to inherent geographic disadvantages compared to countries with seacoasts and deep-sea ports.

“Despite some gains in the past decade, these 32 countries remain marginalized in the global economy, facing costs of trade that are 70 percent higher than transit coastal countries,” Guislain explained at the conference’s plenary. “Most LLDCs are also in the ‘bottom billion’, with an average real GDP per capita of $800, compared with $2,800 for transit countries.”

In order to help address some of the challenges land-locked countries face, the World Bank Group provides more than $2 billion per year in investments and technical assistance projects. Some of these projects, for example, include major regional transport corridor programs in Central Asia or broadband fiber connectivity for landlocked countries in Africa. 

In addition to funding ‘hard’ infrastructure, the Bank also works with clients on the policy interventions that underpin many of today’s LLDC success stories: from customs reform to better regulation of trucking and other transport segments.

The World Bank also encouraged landlocked and transit countries to follow the UN Broadband Commission’s recommendations, in particular the adoption of a national broadband strategy and making broadband affordable to all through adequate regulatory and market reforms.

“Allow me to reiterate our strong commitment to work with you as clients and partners of the World Bank Group towards our common goal of ending extreme poverty and bolstering shared prosperity in the landlocked developing countries of the world,” Guislain concluded.

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Report: Improving Trade and Transport for Landlocked Countries

Context: The Almaty Programme of Action

Most landlocked developing countries (LLDCs) face specific constraints imposed by geography. They remain on the periphery of major markets. They exhibit lower per capita income compared to their transit neighbors, and they are usually dependent on their transit neighbors’ markets, infrastructure and institutions.

The Almaty Programme of Action, adopted by the United Nations in 2003, recognized that landlocked developing countries have specific needs in reducing their trade costs and promoting growth. The program and its implementation, including 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 “soft” investment, especially in measures facilitating trade, transportation, and transit.

This publication, Improving Trade and Transport for Landlocked Developing Countries: A Ten-Year Review, anticipates a renewal of the Programme of Action in November 2014. It reviews the progress to date of the initiative and provides an analysis of the current situation, constraints, and priorities of LLDCs. It also discusses potential solutions to reducing LLDCs’ access costs, and the contributions of the World Bank Group to that effort.

Priorities Going Forward

For the next decade, policy makers and development practitioners need to maintain focus in several areas to reduce trade costs and promote growth.

Infrastructure

• To ensure the most efficient infrastructure cost recovery and maintenance of roads, LLDCs should adopt a vignette toll system.

• For the railway system, one of the potential solutions is to connect railway infrastructure efforts with the extractive industry and require mining companies to raise capital for infrastructure buildings and maintenance. This would help LLDCs to achieve greater economies of scale.

• Scheduled maintenance is highly desirable to prevent higher costs of deferring repairs.

• It is important to explore innovative means to mobilize additional funds to build and maintain existing transport infrastructure, e.g. concessions or cross-border investment packages. Overall, LLDCs should make investments only when traffic is expected to achieve economies of scale to cover the operating costs.

Trade Facilitation

Despite significant progresses in trade facilitation, many challenges remain, especially in better integrating border management and facilitation of procedures beyond customs (interventions of other control agencies). The Bali Trade Facilitation Agreement offers help to LLDCs that rely on transit through third countries to access ports. However, it offers only a partial solution because its main focus is limited to customs administration, use of an IT system, and access to information. The Bali TF Agreement describes some aspects of the governance mechanism including establishment of a new Trade Facilitation Committee and possible subsidiary institutions, but much of it still needs to be finalized. The actual benefits of this FTA package will depend on the swift ratification of the agreement.

Reform of the Trucking Sector and Implementation of Transit Regimes

Finally, a push is overdue in two related areas, which are by nature regional and cross border: reform of the trucking sector and implementation of transit regimes. In most LLDCs, trucking remains a main mode of freight transportation so a system similar to an International Road Transport (TIR) system, in which customs control is operated in an internationally harmonized manner, would benefit many LLDCs. There have been some reforms to transit regimes, including initiatives to govern the cross-border movement of transport vehicles, but these have only achieved partial success. The new efforts should focus on improving the transit regime, reforming transport market regulation, optimizing multimodal and railroad potential, and exploring air cargo transportation.

More decisive action is needed to seriously address implementation barriers and to improve efficiency of transit systems, following the TIR or European transit principles. These should include:

• Removing market distortions for international trucking and promoting incentives for quality and compliance (such measures can be complemented by capacity building);

• Implementing a single international transit document (“carnet”) within a region, without resubmission at each border;

• Developing a proper regional IT system that allows initiation, tracing, and termination across border of transit operation (Central America has implemented such as system recently, the TIM); and

• Enacting a common guarantee system, the details of which would depend on the regional architecture of financial services.

Download the report below.