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The Cost of Being Landlocked
Based on country-specific works, one general observation is that, for most landlocked countries, export of processed or manufactured goods will typically be small in volume compared with imports of general cargo. The existence of a directional imbalance of trade is usually directly beneficial for exports that can use the same mode of transportation, especially containerized goods: manufactured and semiprocessed (such as tea, tobacco, cotton, sugar). With truckers competing for backloads on trade corridors, significant discounts are available for exports as compared to imports—up to 40 percent for the same distance on the Northern Corridor from Mombasa. However, high-volume exports, such as minerals and other commodities, often have their own logistics system that is separate from imports; these systems result in imbalances in both directions and diminish opportunities for economies of scale. Routes or modes may be not compatible. In Bolivia, for example, the main export, soya, is exported from the eastern part of the country by barges on the Paraguay River; such a route is too slow and indirect for the imports of the main population centers in central and western parts of the country, which take the more expensive, high-altitude routes from the port of Arica in Chile.
Transit’s Extreme Vulnerability to Rent-Seeking Activities Although the factors developed in the following discussion directly impact prices, most impacts will be felt through transit overheads (item 2 of table 3.2, in Chapter 3). Ordering and processing shipments imply a series of overhead expenses, which fall into two categories: 1. Transit overheads attached to transit and added to transport fees. These include procedural fees, illegal facilitation payments, and mandatory private or public services associated with transit (authorization or mandatory documents). The shipper may internalize the overheads, but in practice, fees are paid to other parties either directly or through agents (for example, freight forwarders), who will charge an additional fee for processing. 2. Administrative costs for shipments.4 These are the fixed costs that the shipper has to take into account to make the logistics possible. The first category pertains to procedures and regulations, and the second reflects quality and affordability of key services. Both are clearly affected by the small size of the economies.