CHAPTER 5
The Impact of Market Structure and Business Practices on the Cost of Being Landlocked As documented in the previous chapter, the magnitude of delays and, even more important, the lack of reliability of supply chains serving landlocked developing countries (LLDCs) lead to significant added costs for shippers willing to export or import from these countries, largely because of the low quality of services and the complex processes described in Chapter 3. However, this situation is reinforced by the characteristics shared by many LLDCs, which generally have a small market size in comparison to their neighboring transit and coastal countries. This small market size has two main consequences: a mechanical one, whereby tariffs are impacted because of low bargaining power for shippers and unbalanced trade; and an induced one, whereby this situation has traditionally led to rent-seeking activities on both sides of the border, in that the market size disparity often provides one of the few opportunities for rent extraction (in LLDCs) or an easy captive target (for transit countries). Small size, with the resulting market unbalances and rent seeking behaviors, probably accounts for the highest added cost of being landlocked. For the rent-seeking cost, a total reversal of behavior by all stakeholders is often needed to improve the situation.
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