Regional Cooperation in Transit Transport Geneva September 2007 Graham Smith World Bank

1. Analysis of the cost of transitand World Bank program on transit facilitation in landlocked countries Regional Cooperation in Transit Transport Geneva September 2007 Graham Smith World Bank

2. A. The cost of transit Relationships between being landlocked and economic development The cost framework Cost of transportation Cost of logistics Cost of delays and unreliability Tentative conclusions on priority actions

3. Relationship between being landlocked and economic development Being landlocked • is a characteristic of many of the poorest countries • results in much lower trade: - 30% • has a high impact on economic growth: - 1.5%

4. The cost framework There are three main components in total transit costs • Transportation cost per se: fees paid by the shipper to truckers or rail operators for actual transit transportation services • Other logistics costs: various fees and charges paid for transit procedures, freight forwarder cost, legal or illegal facilitation payments • Costs of time and delay: cost of inventory in transit, and cost of unreliability

5. 1 - Cost of transportation Despite poor road condition, the cost of trucking services is not necessarily higher in less developed countries: • Investment costs are much lower • Labor costs are a small percentage of total operating costs (5% versus 50% in Western Europe) • Other variable costs are higher (fuel consumption, maintenance costs) However • Monopoly systems and queuing systems can increase substantially transportation cost • Trade unbalances can reduce load factor

6. Cost of transportation (2) Comparison of truck operating costs in Western Europe, Eastern Europe, and Africa

7. 2 - Cost of Logistics • Freight forwarder cost: reflects the complexity of the transit process, sometimes the problematic structure of the profession • Transit related fees: numerous because of the multiplicity of regulations, and often overpriced • « Facilitation » payments, especially at road blocks, border crossings, and weighbridges

8. Costs of logistics – Estimates for Lome Ouagadougou corridor (40 ft container) Breakdown of logistics costs

9. 3 - Cost of time and delay • Cost of inventory in transit: • Financing charges, damage and losses, container rental, demurrage charges, etc • About 0.1% of the value of shipment per day • Costs of delays and unreliability • Excess inventory, disruption in the production chain, additional cost of alternative transport, loss of contract, loss of agriculture produce, etc • About 0.8 % of the value of shipment per day

10. The skewed distribution of travel times • Occurrence of long delays is unavoidable • These are the most disruptive for the shippers and the costs are very high From Buenos Aires to Sao Paulo

11. A tentative summary of costs(40 ft container)

12. Tentative conclusions on priority actions The three areas with the largest possible gains in total logistics costs are the following: • Measures that enhance supply chain predictability • Measures reducing rent-seeking activities • Reforms of market structure and elimination of cartels and syndicate freight associations

13. Political economy of transit: breaking the Vicious Circle

14. B - World Bank Program on Transit Facilitation in Landlocked Countries • Objectives • Content • Program schedule • Thematic case studies • Pilot activities

15. Program Objectives • Provide capacity development for government and private sector agencies. • Strengthen partnerships with donors, and international organizations. • Foster cross-regional experience sharing. • Directly contribute to facilitation projects. • Contribute to other developmental objectives that are dependent upon good inland freight logistics.

16. Program Content:Fill Knowledge Gaps & Support Operational Work • Provide reliable Information on transit trade issues and practices (case and thematic studies). • Develop consistent performance measurement systems for major transport corridors. • Contribute to the implementation of improved transit systems.

17. Program Schedule Preparation, Initial Outputs Knowledge: Thematic and Case Studies Pilot capacity building Projects Flagship and Dissemination

18. Thematic Case Studies Studies Completed: • Corridor Management. • Transit economics & trade costs. Studies Underway or being considered: • Technology aimed at securing the supply chain (e.g. cargo tracking...). • Management of guarantee systems. • Impact of transit on the economy of transit countries. • Supply chain management in LLDC’s (shippers’ survey). • Consolidation and small-scale shipments. • Air freight. • Border management.

19. Pilot Activities • Transit Regimes and Carnet Systems: • Initial feasibility studies • Capacity building at sub-regional level • Global partnerships and capacity building under development • Corridor Performance Indicators • Stock-taking of existing experiments • Toolkit for the development of relevant cost-effective measures • Pilot implementation

20. For additional information Please contact the Trade Logistics Group Email address: Tradefacilitation@worldbank.org

21. Thank you for your attention