The Case for Aid for Trade in Logistics

November 19, 2007

November 19, 2007 -- In the booming, rapidly modernizing economies of China, Malaysia, and Chile, it takes just 20 days to transport goods from major cities to port and onto ships that export them around the world.
But in the Central African Republic, transporting an export container from Bangui to the nearest port and fulfilling all the customs, administrative and port requirements to load the cargo onto a ship is a 116-day ordeal, according to World Bank Group research.
The Central African Republic, emerging from a fragile political situation, is land-locked and has a poor transport system. Many other developing countries have similar problems and pay a heavy price in terms of their competitiveness in global trade.
Countries with the most predictable, efficient, and best-run transportation routes and trade procedures are also the most likely to take advantage of technological advances, economic liberalization, and access to international markets, says a recent World Bank study, Connecting to Compete. The study features the Logistics Performance Indexwhich ranks 150 countries on their ability to connect to global markets.
Countries with poor logistics performance, on the other hand, are “likely to miss the opportunities of globalization,” the study adds.
Poor roads and ports, poorly performing customs and other border agencies, weaknesses in regulatory capacity, and limited access to quality finance, logistics and business services all make it harder for the least developed countries to compete in world markets, as Connecting to Compete, the Bank Group’s Doing Business Report and other trade research show.
“From our perspective, a key constraint is high operating and transactions costs – firms don’t have access to the infrastructure and other services they need to be competitive in the major markets. Even if they’re of high enough quality, the cost structure is much higher in Malawi than in Mexico,” says Bank trade expert Bernard Hoekman.
He says such constraints help explain why the least developed countries stagnated or lost ground while the developing world as a whole experienced strong economic growth and doubled its share of world trade in non-oil exports between 1990 and 2005.