he case of weak infrastructure in maritime countries has long been held as the major reason behind the slow economic progress in developed nations. This has been particularly a major issue in the landlocked developing countries where the principal source of income is through exportations of low value goods and importation of high value goods. With such an unfavorable, balance of payments, the added costs have invariably proved to be detrimental to trade and have, ultimately, impacted investments in the LLDCs negatively. The East African region has been the most affected by weak infrastructure. For instance, the country of Burundi, which is essentially a landlocked nation, has some of the most developed infrastructure in the region. However, for the country to effectively carry out its trading activities, it has had to be dependent on the central corridor (the Dares Salaam route). A confounding challenge with this route is that the level of infrastructural development in Tanzania is quite poor. Therefore, Burundi has to rely on the longer Northern corridor which passes through Mombasa, Kenya. Such susceptibility to the levels of infrastructural development in the neighboring countries has posed challenges in the speed of development in landlocked countries.
Similarly, countries such as the Central African Republic do not have clearly dependable transport routes that can deliver goods to the sea. Agreeably, this has been a major impediment to successful integration and cooperation with neighboring countries, leading them to use longer routes to access the sea. Comparatively, countries that are located close to neighbors with good infrastructure should be expected to have better economic progress due to the ease of moving goods along the cross border. However, Collier makes an important distinction explaining why growth spillovers are not always the case even in countries where it is clear that the maritime country is better economically as compared to the landlocked country. For instance, despite Thailand’s advanced infrastructural system, Laos – a neighboring landlocked country – has not been in a position to maximize the growth spillover (Thomas et al 45). Collier explains that this phenomenon occurs where the two countries do not have matching levels of development in the transport infrastructure (Collier 59). Therefore, in circumstances where the country with access to the sea has commendable transport facilities yet the landlocked country has poor infrastructure, the latter creates an internal trade barrier to its own development.
The case of political relationship between maritime and landlocked countries has also been a fundamental impediment to trade and subsequent development among the landlocked nations. Similar to the infrastructure, unfavorable political relations have been strongly felt in the Asian and African continents. For instance, Uzbekistan, being a landlocked country, has strained relations with four out of her five neighbors. Certainly, such a situation has meant that the country has stagnated economically, with minimal prospects of making substantial gains from exports and imports. Similarly, the strained relations between Azerbaijan and Armenia led to the closure of the Armenia-Turkey border, a factor that had aggravating effects on the trading relations between the countries. A similar case can also be made for the conflicts that rocked Ethiopia and Eritrea. In this case, Eritrea had access to the Indian Ocean, and the conflict meant that Ethiopia had to look for an alternative country through which it would carry its importation and exportation business. Consequently, Ethiopia shifted to the more expensive and poorly constructed infrastructure of Djibouti. As can be seen from the above examples, poor political relations among nations have the capacity to bar economic growth in landlocked countries through the restriction of movement of goods (MacKellar 3).
A more recurrent concern among landlocked nations is the eruption of war civil conflicts in the countries with access the sea. The immediate effect of this is that landlocked countries may fail to get their goods delivered to the required destination. In the long-run, continuous civil strife in maritime nations has adverse effects in landlocked nations. The West African nations have borne the blunt of civil strife due to the incessant unrests among the coastal neighbors. For example, Mali has been at the center of warring neighbors, a position that has made it extremely difficult for the country to engage the global economy in trade. Further, such conflicts lead to massive damages to the infrastructure of the coastal countries, making it impassable in the event that the landlocked countries need to use the route to transport goods to the port. In fact, most of the coastal nations in West Africa have suffered from intense civil wars, and this has led to poor GDP performance among the landlocked countries within these regions (Wacziarg & Welch 2008). A country such as Guinea has been through several coups, making it difficult for the neighboring countries to access the sea. A similar trend could be observed in Malawi which suffered economically following the civil strife that had been going on in the neighboring Namibia, Mozambique, and Angola. In response, the country had to reroute to the Durban port which was, agreeably, more expensive. Although cases of civil conflicts have been few in the Asian region, the destruction of internal infrastructure resultant from a few of the cases such as the during the Georgian conflicts in the 1990s still serve as evidence of the impact of civil strife on the economic performance of landlocked countries.
Administrative charges have been an equally fundamental barrier to progress among landlocked countries. Invariably, border crossing is marred by bureaucracies and overwhelming paperwork that not only delays movement but also leads to additional costs for landlocked countries. Moreover, the customs charges are burdensome to shippers and, the overall effect is that most of the goods reaching their destinations end up being highly overpriced in order to meet the high administrative and operational costs incurred en route (Trebilcock 62). Some of the worst affected regions in the world by the high costs include the nations along East Africa, West Africa, and Central Asia. For instance, in the Central Africa Republic, customs clearance is an overly slow process that take officers between two weeks to one month to clear. Similarly, the port of Mombasa, which is mainly used as the major entry point of goods on transit to Burundi, Rwanda, and Uganda, has been known to have extensive delays of up to 3 weeks before goods can be released by the ports authority (Thomas et al., 48)
Moreover, Kenya’s unreliable rail transport affects the delivery of goods for exports as well as imports, thus, making it inherently difficult for importers and exporters in far-off Burundi and Rwanda to get their goods on time. Agreeably, such delays and the associated charges are as a result of lack of coordination between the transit companies and the landlocked countries. In the case of Central Asia, the major cause of high transit and administrative charges have emanated principally due to recurrent cases of corruption in the region.
Agreeably, the economic development challenges among developing countries arise from different factors. However, most development models stress out on the importance of high exports in facilitating a country’s economic growth. As a result, landlockedness takes a much stronger position as a barrier to such development, as countries that cannot freely and easily export their products are bound to lag behind economically. Therefore, while we recognize that landlocked counties do, indeed, face some other economic development challenges, the principal focus in testing the various theories in this essay will be on the relevance of the theories to the fundamental precepts of landlocked countries, and how being landlocked affects the performance of such nations.
The Neoclassical Theory
Ideally, landlocked countries incur a lot of overhead costs in the process of moving goods from maritime countries to their respective destinations. Besides the customs duty, landlocked nations have to cater for the additional expense of changing the mode of transport (in the event of loading and offloading) and also incurred expenses in form of storage costs (MacKellar 3). In the long-term landlocked countries suffer from unfavorable terms of trade.
The neoclassical theory postulates that due to the challenges faced in the movement of their goods through other countries, LLCs are usually more likely to export less and import less. In this regard, LLCs do not have the privilege of having import substitutes and at the same time do not have the much needed comparative advantage that can make their goods competitive in the global market (Uprety 15). As such, LLCs incur high export and income expenses which, ultimately, led to losses as reflected in the terms of trade figures achieved by the country. Ideally, when a country cannot continue to import goods due to the high overhead costs incurred, then they have to rely entirely on the locally manufactured goods within the country. Such substitution is seen to have a direct effect on the net imports and exports, thus affecting the GDP.
A critical analysis of this theory shows that it, indeed, reflects the reality within most of the LLCs. Particularly, for landlocked countries that export raw materials and import finished goods, the overall effect of trade bottlenecks on the country’s terms of trade is clearly detrimental. Apart from the low level of economic activity, Collier also goes ahead to distinguish that countries with weak GDP growth per capita and low levels of per capita income fall under the categorization of fragile states (Collier 98).
Still, the neoclassical theory offers the perspective that the high costs that are imposed on the goods that are transited through the maritime countries and other transit countries could justify the poor economic performance in the LLDCs. In this regard, incoming goods are charged with hefty tariffs while goods being ferried to the sea for export are heavily taxed. The concept is that the transit companies act as a form of monopoly where the landlocked countries have no choice but to comply with their demands (MacKellar 4). Therefore, the price elasticity of supply and demand in the LLCs will depend on the import and export share. In such cases, transit countries approach price inelastic imports by hiking the total amounts of tax imposed.
Moreover, the possibility of strategic disruption of the operations of LLCs is another factor that threatens the consistent development agenda in the LLDCs. While most of the countries under the category of LLDCs are usually actively involved in trade within their own borders, their dependence on the maritime and transit countries makes it inherently difficult to achieve economic impact without the incessant disruptions. For the most part, these come in form of compliance requirements to bilateral treaties. Still, in order to ensure their survival in the competitive market, most of the LLCs diversify their choice of transit states, as this helps them to have a fall back plan in the event that they do not enjoy the same cordial relation with the neighboring countries (Uprety 19). Moreover, in the event of strained political relations within the transit countries, LLCs who have developed relations with other transit countries can engage them in the transport of their commodities in and out of the country.
The New Trade Theory
The arguments posited in the neoclassical theory offer a valid case for why LLDCs are usually at a risk in the short-term. While the arguments presented are largely valid, they fail to point out the long-term effects of continued lack of support or strained ties within LLDCs and their maritime counterparts. However, it does not take into consideration the critical question on whether landlocked countries can build long-lasting solutions to deal with the apparent challenges, the neoclassical theory cannot be used as a representative study for all the phenomena that are explicated in the LLCs.
The fundamental precepts of the new trade theory pose that the coordination among different economic sectors within the landlocked countries is one of the most essential catalysts for the long-term growth in the landlocked countries. Agreeably, most economic models show that a large majority of the European countries enjoy stellar growth despite being landlocked (Jerome 21). The justification for this has largely been due to the cordial political and bilateral relations with neighbors. Still, a much more essential vindication for this observation can lie in the coordination of the different economic sectors in the country. The findings as espoused by this theory intimate that when a country introduces policy measures along the different economic facets, there are bound to be drastic changes in their approach to economic development. Therefore, besides supporting research and development, and public policy amendments, it is imperative that most of these landlocked countries make substantial investments in their own economy could have a lasting impact on the long-term growth and development, and this can be best observed in growing GDP figures (Uprety 46).
Therefore, the approach to the predicament of LLDCs as explicated by the new trade theory is that despite the existing externalities and their effects on the ease of access to global markets, landlocked countries should take the initiative to invest in their own technologies and in industries that are more likely to give a high return on the overall performance. However, it should be noted that one of the major downsides of this approach is that it has the potential to stifle the growth of entrepreneurial spirit as it does not heavily engage foreign competition due to the high costs (Srinivasan 37). Still, the advantages of agglomeration are seen as a strategic approach to improving industrialization in the LLDCs and, by extension, are representative of the strategies adopted by most of the landlocked countries that are deemed to be the more developed.
There are many ways to show how being landlocked has affected the economy of many countries. As well as to help understand how the economic blow of these countries due to their landlockedness is a reality and not a mere coincidence. The following is data that shows the relation and similarities of all the landlocked countries around the world.
Copyright 2019 - Education WordPress Theme.