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The Cost of Being Landlocked

Small Is Not Beautiful: The Curse of Small Shipments and Exports High land transportation costs can be partially attributed to the fact that (1) landlocked countries export less than they import, and (2) low trade volume from and to landlocked countries prevents economies of scale. The impact of trade imbalance and low volume is even less documented than that of transit overheads, but anecdotal evidence shows that it is a major concern. Weak positioning in the global market results in low trade and prevents most LLDCs from developing scale economies. The average traffic at many “major” border posts is often in the range of 5–10 containers per day, and the busiest border post in east Africa (Malaba) sees only 200 to 300 trucks per day. The annual containerized imports of Rwanda or Burundi would fit into a single large container vessel. This means that almost no shipper has the required scale for a strong bargaining position with global logistics groups if it wants to import or export. Transit to Rwanda and Uganda is dominated by large freight-forwarding groups with large truck fleets. As another illustration, Tanzania Railways Corporation (TRC) used to charge 30 percent more for a transit container to Rwanda from Dar-es-Salaam to Isaka (990 kilometers) than for shipping the same container to Mwanza, Tanzania, which is 1,230 kilometers from Dar-esSalaam on the same railway line.1 The relatively minor share of traffic to or from landlocked countries also limits their bargaining power for preferential treatment in coastal ports. In west Africa, transit traffic is less than 10 percent of the total traffic through Abidjan, even though more than two-thirds of Mali and Burkina Faso trade transits are used to transit through its piers. The same applies to Chad and the Central African Republic with respect to Douala, Cameroon. Even Uganda, which is probably in the strongest bargaining position in the continent, gets no more than 20 percent of the port traffic of Mombasa, Kenya, although the port handles 90 percent of Uganda’s external trade. Landlocked countries in Central or South Asia have even lower bargaining power, given the demand in Indian ports. In small developing economies, including landlocked countries, arranging small-scale shipments and consolidating them into a single container remain difficult issues in terms of both cost and in-service availability. In a case study of Laos, Arnold (2005) showed that availability and cost of these services are critical to export growth and diversification. Ojala et al. (2005) documented the steep increase incurred by loads below one container size in central Asia (see table 5.1).

The Cost of Being Landlocked  

This book proposes a new analytical framework to interpret and model the constraints faced by logistics chains in landlocked countries. The...

The Cost of Being Landlocked  

This book proposes a new analytical framework to interpret and model the constraints faced by logistics chains in landlocked countries. The...