International ministerial conference of landlocked and transit developing countries and donor countries and international financial and development instistutions on transit transport cooperation
(Almaty, 28-29 August 2003)
UNECE Side Event
Efficient trade and transport facilitation within an integrated, holistic framework
From analysis to implementation - Introducing trade and transport facilitation measures
in an integrated environment
Statement by Mrs. Brigita Schmögnerová,
Landlocked developing countries face very specific challenges ranging from geographical distance from the markets, poor infrastructure and maintenance problems, inadequate trade, customs and institutional environment to their vulnerability with regard to their neighbours, i.e. the transit countries. Therefore, being landlocked certainly accounts for many economic, infrastructure and political hardships. However many problems landlocked countries face have the potential to be overcome or at least mitigated in the long run, with the right mix of policies at country- and regional levels. These policies should address weaknesses in infrastructure, in capacity (both human and physical), in institutional, administrative and regulatory frameworks that characterize all landlocked developing countries. Governments of landlocked and coastal countries as well as the international community and donor agencies should attach increased importance to this multifaceted and closely linked mix of problems and attempt to deal with them in their many aspects. In order to provide some guidance in this respect, UNECE has attempted to link three concepts, which have recently been developed by well-known economists. They characterize very well the three main areas of challenges faced by landlocked developing countries, that is:
- The physical distance - a geographic given,
- The political distance - determined by the landlocked country's relationship with its neighbours, and
- The economic distance - defined by the actual costs and the predictability of reaching markets
There is no doubt that the geographical distance to markets is one of the most important growth factors for landlocked developing countries. It is, however, not only the physical distance, i.e. geography, that influences their economic success or failure. Political instability, security problems, bad neighbourly relations and high costs linked to inefficient administrations or cumbersome procedures can further aggravate the situation and effectively prevent a landlocked country from trading internationally. Likewise, even if the infrastructure is in place, trade will not take off if the relevant trade procedures are too complicated and trade institutions are inadequate.
The success of a landlocked country to become part of international markets, its competitiveness as well as its growth prospects are therefore a function of these three distances, the physical, the political and the economic. Policymakers of course need to take account of all three aspects and carefully plan any kind of reform around them. The UNECE Parallel Event on Trade and Transport Facilitation as well as the background paper prepared for this purpose, however, will focus on just one of these distances: the economic distance and its reduction through trade and transport facilitation.
For disadvantaged landlocked countries, integrated trade and transport facilitation measures can be a particularly effective tool in offsetting the barriers they face in regional and global trade. Improvements in transport and transit facilities, lower transaction costs and higher customs revenue as well as increased traffic volume will eventually benefit all and have an impact on economic growth and income distribution. Trade facilitation is often identified with highly technical and expensive procedures, but there are some very simple, basic measures which are neither very costly nor complicated to implement, and which can make a huge impact on the way trade and transport function. Such simple measures include adequate opening hours at border stations, joint customs posts with neighbouring countries, or the publishing of applicable rules, laws, procedures or security measures. Traders and investors look for predictability, accountability and reliability. If such basic enabling conditions are not given, trade flows are simply diverted.
Trade facilitation measures require realistic timeframes that have to include long-term implications, acquire the support of all stakeholders, public and private, and take into consideration the financial viability of projects.
As in developing countries the dominant actors are small firms whose trade transaction costs are disproportionately high, they would consequently benefit most from the introduction of trade facilitation measures. The removal of the barriers and the related costs can therefore entail quite significant advantages. In a study published in 2002, the UNECE estimated that potential benefits resulting from trade facilitation measures can range from between 2 to 3 percent of the total trade value. They can be arguably more important than tariff reductions as trade development instruments. Likewise, a study published by UNECE in 2003 found that long-term effects on growth can only be achieved when an open and liberal trade policy is combined with trade and transport facilitation measures. This means that there is a compelling need for an open liberal trading environment with functioning institutions and good trading conditions, which trade facilitation measures can help to create.
However, trade facilitation on its own, is not enough to tackle the complex situation faced by landlocked developing countries. An integrated, holistic approach to their problems is therefore recommended to achieve any kind of tangible result. An integrated strategy should therefore encompass reforms in the areas of:
- trade facilitation with a realistic, comprehensive and targeted agenda;
- transport and transit facilitation including the physical infrastructure, economic implications and capacity building;
- the enabling environment with institutional reforms and institution building, legal and regulatory reforms as well as their implementation and enforcement, as the quality of institutions and the lack of a conducive growth-promoting and investment climate have a decisive impact on the economic situation of a country. Fraud, corruption and informal trade are direct symptoms of institutional malfunctioning and as such are to be blamed for many costs incurred throughout the documentation and transit chain.
- and finally the regional approach with a coherent regional cooperation framework to negotiate solutions and linkages between all related issues. In addition, given the close dependency between landlocked and coastal countries, particular attention should also be given to the positive impact of regional cooperation on good neighbourly relations.
In the area of trade facilitation, international and regional organizations (including UNECE) have elaborated many tools, instruments and recommendations on which any integrated development plan should draw. Further, such an integrated framework needs to take into consideration regional aspects. The regional commissions are well positioned to assist in the regional development work and should be called upon to provide a forum for discussion and advice. Many of the tools that UNECE has developed over the years tackle many of the practical problems faced by landlocked developing countries especially in the area of trade and transport facilitation. They range from the harmonization of documents as set out in UNECE Recommendation 18, the use of the same location codes as e.g. define by the UN/LOCODE or the establishment of trade facilitation bodies to foster the dialogue with the private sector described in Recommendation 4. Technically more advanced initiatives such as the use of electronic codes and documents, include UN/EDIFACT and more recently UNeDocs. A further extremely important contribution of UNECE to the reduction of the economic distance of landlocked countries is the TIR Convention in the area of transport facilitation which up to now is the only universal Customs transit system in existence.
Other organizations as well have developed a whole range of instruments including UNCTAD's Automated System for Customs Data (ASYCUDA) or the Advanced Cargo Information System (ACIS) as well the revised Kyoto Convention on the Harmonization and Simplification of Customs Procedures elaborated by the World Customs Organization.
An integrated trade facilitation framework that includes all these different aspects and adapts them to each country's or region's particular situation can have the potential to reduce the economic distance that separates landlocked developing countries from their markets. However, it requires to be backed by strong political will and has to be integrated into a wider policy and development framework of governments and international organisations.
Thank you for your cooperation.