The Cost of Being Landlocked : Logistics Costs and Supply Chain Reliability

In the last two decades new emphasis has been given to the economic impact of geography, especially on the cost of being landlocked. From a development perspective, understanding the cost of being landlocked and its economic impact is critical, since one country of four in the world is landlocked (almost one out of three in Sub-Saharan Africa). Attempts to address the cost of being landlocked have mainly focused on regional and multilateral conventions aiming at ensuring freedom of transit, and on the development of regional transport infrastructure. The success of these measures has been limited, and many massive investments in infrastructure seem to have had a disappointing impact on landlocked economies. Although there may still be an infrastructure gap, this book, based on extensive data collection in several regions of the world, argues that logistics and trade services efficiency can be more important for landlocked countries than investing massively in infrastructure. Logistics have become increasingly complex and critical for firms' competitiveness, and a weakness in this field can badly hurt firms based in landlocked countries. This book proposes a revised approach to tackling the cost of being landlocked and a new analytical framework which uses a microeconomic approach to assess the trade and macroeconomic impacts of logistics. It takes into account recent findings on the importance of logistics chain uncertainty and inventory control in firms' performance. It argues that: (i) exporters and importers in landlocked developing countries face high logistics costs, which are highly detrimental to their competitiveness in world markets, (ii) high logistics costs depend on low logistics reliability and predictability, and (iii) low logistics reliability and predictability result mostly from rent-seeking and governance issues (prone to proliferate in low volume environments).