By Mr. Sandagdorj Erdenebileg, Chief, Policy Development Coordination, Monitoring and Reporting Service, UN-OHRLLS
Introduction
Landlocked Developing Countries face major development challenges due to their lack of territorial access to the sea which causes them to incur very high transport and transaction costs thereby imposing serious constraints on their ability to trade, generate economic growth and invest in social development. Th e First UN International Ministerial Conference of Landlocked and Transit Developing Countries and the Donor community on Transit Transport Cooperation, held in 2003 in Almaty, Kazakhstan, adopted the Almaty Programme of Action which is a comprehensive development agenda adopted by the international community in 2003 as a framework to support the special needs of LLDCs. It is however focused too much on transit cooperation.
Th e priority areas of the APoA include: Fundamental transit policy issues, Infrastructure development and maintenance;
International trade and trade facilitation; International support measures, and Implementation and review.
Progress achieved in implementing the APoA
Th e implementation of the APoA over the past 9 years has resulted in a growing recognition of and interest on the special needs of LLDCs and transit issues for international trade. Since the adoption of the APoA, the special needs of LLDCs are now featuring in declarations of United Nations conferences and there has been increased number organizations who have prepared reports focused on the needs of the LLDCs. Th e last ten years have also seen stronger support from development partners towards transport infrastructure development, and trade facilitation and support from transit countries to harmonize transport and transit policies, simplify border control and procedures and facilitate trade.
Since the adoption of the APoA, the LLDCs as a group have achieved higher rates of economic growth. Th e group’s average annual growth rate was 6% over 2003-2007. It slowed down to 5.8% in 2008, and 3.1% in 2009 and recovered in 2011 to 6%. Most of the LLDCs have improved macro-economic policy and governance reforms. Th is has supported positive economic growth.
On the social development front, LLDCs have experienced a positive trend in the Human Development Index between 2003 and 2011. Th e LLDCs have also made advances on some MDGs including: primary education, gender parity in primary education, increased percentage of women in decision-making power and stemming the spread of HIV/
AIDS. However more still needs to be done in particular on poverty reduction, reducing hunger and the health MDGs.
Progress achieved on Priority area 1. Fundamental transit policy issues
LLDCs have increased harmonisation of transport and transit policies, laws, procedures and practices with transit countries. Th ere has been increased establishment, adoption and implementation of regional and sub-regional agreements including the Intergovernmental Agreement on the Asian Highway and Railway Networks. Th e Africa region is also developing an intergovernmental agreement to underpin the Trans African Highway.
LLDCs have developed supportive institutional framework for example, transport and trade facilitation bodies or coordination committees, and road funds. Th ere has been increased ratifi cation of international conventions and agreements such as the TIR and the Harmonization Conventions.
Border facilities and procedures have been streamlined and harmonized leading to increased effi ciency and fewer delays.
For example: one stop border controls have been established at Zambia-Zimbabwe Chirundu Border, and at Malaba, between Kenya and Uganda; a yellow or white card motor vehicle insurance schemes – COMESA; common visa sticker for drivers eg. In the Economic Cooperation Organization (ECO) region; and the use of ICTs for customs clearance.
38
According to the World Bank’s doing Business Report 2012, the number of days that LLDCs take to import has decreased from 58 in 2006 to 49 in 2012 and the number of days to export have reduced from 49 to 43 days over the same period. Although this is a major achievement, the number of days taken by LLDCs to import and export is still almost double that of transit countries.
Progress achieved on Priority area 2. Infrastructure development and maintenance
Th ere has been development and upgrading of both the Asian Highway and the Trans-Asian Railway networks. Th e Africa region is implementing the Programme for Infrastructure Development in Africa (PIDA). Th e South America region is implementing the Initiative for the Integration of Regional Infrastructure. All LLDCs have experienced an increase in cellular subscription and internet users over the review period. Dry ports are being established in all regions eg. Nepal, Burkina Faso, Mongolia and Ethiopia.
Progress achieved on Priority area 3. International trade and trade facilitation
LLDCs’ exports increased from $42 billion in 2003 to $154 billion in 2008. Th ey however declined in 2009 due to the fi nancial and economic crisis. In 2010, exports increased to $158 billion, showing some recovery.
However, LLDCs’ share of the world’s overall trade remains close to 1% and two countries Azerbaijan and Kazakhstan accounted for more than 50% of the group’s total. LLDCs heavily rely on the export of few “low-value – high-bulk”
commodities and are therefore vulnerable to commodity price volatility. LLDCs have low productive capacities and have failed to structurally transform their economic base. Currently 22 LLDCs are Members of the WTO and 8 are Observers and are in the accession process.
Trade Facilitation under the DOHA Round
Trade Facilitation in the Doha Development Round has the potential to address many of the fundamental transit policy issues that aff ect LLDCs’ exports. Th e negotiations aim to clarify and improve relevant aspects of Articles V, VIII and X of the GATT 1994 with a view to further expediting the movement, release and clearance of goods, including goods in transit. GATT Article V is on Freedom of Transit while Article VIII is on Fees and Formalities connected with Importation and Exportation and Article X is on Publication and Administration of Trade Regulations.
Th e LLDCs’ relevant text in the current draft negotiating text include: expedited release and clearance of goods in Article 7; improved border agency cooperation in Article 9; review of formalities connected with importation and exportation and transit in Article 10; and freedom of transit in Article 11 of the draft consolidated text on trade facilitation. Th e ultimate objective in the trade negotiation on trade facilitation must be the lowering of transaction costs by reducing transport time and increase effi ciency of transit operations, clarity, predictability and transparency of rules and procedures.
Progress achieved on Priority area 4. International support measures Net ODA received by LLDCs has been increasing since 2003 as shown in fi gure 1.
Figure 1: Net ODA received By LLDCs – Millions US$
Source: UN-OHRLLS
Similarly Aid for Trade disbursements to LLDCs have increased from US$4 billion in 2005 to US$6 billion in 2010.
Aid for trade has helped improve trade facilitation and trade related infrastructure. For example: A regional project in East Africa improved transit times at the border from three days to three hours; the Zambia and Zimbabwe’s Chirundu One Stop Border Post has reduced border crossing time; and an Asian Development Bank project helped cut travel time between Lao PDR and Vietnam from 10-12 hours to 2-3 hours.
FDI net infl ows to LLDCs also increased over the review period. However due to the impact of the fi nancial and economic crisis FDI infl ows to LLDCs decreased in 2009.
Figure 2: LLDCs FDI net Infl ows – Millions US$
Source: UN-OHRLLS
40
Unfi nished Agenda
Although some progress has been achieved since 2003, there is still more to be done. A study by OHRLLS in 2012 on the Cost of being landlocked applied a gravity model to data from 150 countries including LLDCs and coastal countries over the period 1980-2010. Th e study’s main fi nding was that the LLDCs on average had a lower trade volume when compared to a representative coastal economy – in 2010 the LLDCs’ trade was just 61% of the trade volume of coastal countries. In 2004 it was 57%. Th e study also revealed that in 2010, LLDCs incurred transport costs that are 45 percent higher than the representative coastal economy. In 2004 it was 42% of the coastal economy showing that transport costs for LLDCs have increased over time.