Air-freight presents a unique opportunity for landlocked developing countries to access key markets around the world. Lionel Alva ...
World-over, throughout continents and geographies, several countries are landlocked and their access to world markets hinges greatly upon the availability of a trade corridor and transit systems. Access to key market regions remains a pivotal area of concern.
Ostensibly, it is here that air cargo can become a veritable enabling tool for such countries and become a lifeline for them. It can allow landlocked developing countries (LLDC) to overcome inadequate land transportation facilities and connect to markets across continents. Air cargo can be highly beneficial towards the movement of high value components and products. Hence, there is a need to delve into the possibilities of economic development through air-freight.
Understanding the challenges
According to World Bank estimates, one out of five countries in the world is landlocked. And 20 out of 54 low-income countries are landlocked while only three high-income economies out of thirty five are landlocked (not counting European micro-states and dependencies).
A country’s economic and political position to a large extent is decided upon by its geographical position. Landlocked countries, in general, are disadvantaged from fully utilising trade to foster economic development and relatively marginalised from major transportation and services like logistics and information technology networks as compared to other countries.
Landlocked countries also depend greatly on other countries’ transit routes for access to overseas markets. This dependence can take at least three forms: (1) dependence on transit infrastructure; (2) dependence on political relations with neighbours; (3) dependence on peace and stability.
“Landlocked countries are completely dependent on their transit neighbours’ infrastructure to transport their goods to port. This infrastructure can be weak for many reasons, including lack of resources, misgovernance, conflict and natural disasters. Regardless of the cause, weak infrastructure imposes direct costs on trade passing through a transit country and thus limits the ability of landlocked country products to compete in global markets,” highlights Halit Anlatan, cargo VP (sales & marketing), Turkish Cargo.
The many challenges of being landlocked have over time impacted the economic performance of LLDCs and their performance has been consistently worse in comparison to that of their neighbours. These factors coupled with high transaction costs and inefficiencies constitute important barriers to trade, FDI and consequently economic growth.
“The disadvantages of being a landlocked country have long been recognised, and throw into sharp relief the importance of logistics for trade and development. It is no surprise that two of our biggest markets since we started have been Kazakhstan and Afghanistan, both severely landlocked,” avers Liana Coyne, director and chief operating officer, Coyne Airways.
Presently, most landlocked developing countries have relatively limited air transport services because of their size and level of economic activity. The domestic air network is usually a hub and spoke arrangement with the airport nearest the capital city acting as both the domestic hub and the international gateway. On the trunk routes, passenger aircraft are primarily narrow bodied with limited cargo capacity. On other domestic routes, smaller aircraft with little or no cargo capacity are used. For international traffic, the national carriers serve relatively few international routes.
Paul Bingley, Key Account Manager, Ruslan International, observes, “Logistically, air operators have the advantage of being able to connect ports with land-locked regions. The main challenges are faced by surface transport. Factors affecting this can range from poor road infrastructure to security issues.”
Furthermore, Coyne highlights that air cargo, whilst capable of providing a vital bridge to link landlocked countries with world markets, comes at a cost: the World Bank estimates that air cargo is on average 4-5 times more expensive than road transport and 12-16 more than sea transport. Of course, not all air cargo is the same: passenger lift tends to be less expensive than freighter lift, but not all landlocked countries have large diasporas or vibrant tourism industries to benefit from regular flights year round.
Coyne adds, “Sometimes, the only way to make flights work cost-effectively and year round is to include multiple destinations on a single routing. We do this in Kazakhstan and are doing it increasingly in Afghanistan. However, the ability to do this and to provide an effective bridge between the country and world markets depends on the liberalisation of traffic rights.”
Despite the bleak scenario presented, the challenges that landlocked countries face are understood at an international level by policy makers and developmental institutions. The Almaty Programme of Action for LLDCs, transit countries and their development partners, adopted in 2003, was a major step in putting forward a consistent set of policies addressing these needs. The Almaty Programme of Action recognised the direct link between transport, international trade and economic growth and aims at ensuring fuller and more effective integration of LLDCs into the global economy.
Shabana Khan, vice president – Airfreight India, DHL Global Forwarding, India observes, “The pre-requisite to trade with landlocked countries is a reliable network with good infrastructure, which is not always economical. Landlocked regions are also vulnerable to oil costs. Hence, these markets are not always competitive and are price sensitive. Air freight to these landlocked countries is a challenge hence priced higher due to connectivity and frequency hurdles.”
Khan adds, “The key criteria to choose airfreight as logistic mode are- infrastructure and ground handling, capacity, commodity profile, speed versus cost requirements, ocean routings and transit times, road freight service connectivity to hub / gateway. Speed to market is of essence to drive airfreight service demands.”
Connecting landlocked countries
There are many factors that delineate connectivity for landlocked countries. Primarily, the availability of alternative routes and access to markets that depends on its relations with neigbours coupled with cost efficient airport infrastructure and availability of competent ground handling services.
“For the landlocked expanse of Central Asia, at the crossroad of some of the world’s greatest markets, the potential for aviation to drive economic growth and development is almost without limit. IATA is committed to working alongside all stakeholders in Central Asia and the Caucasus for the safe, efficient and sustainable development of air transport,” said Tony Tyler, director general and CEO, IATA. Tyler made his remarks in a keynote address to the Central Asia and Caucasus Aviation Day held in Astana, Kazakhstan.
The development of landlocked countries also depends on the nature of cargo that is available for export and import.
Anlatan adds, “In the case of Botswana, the economy’s heavy dependence on diamonds, which account for 84 percent of the total export value, allows the country to bypass transit neighbour infrastructure by utilising air transport. The high value/weight and value/volume ratios for diamonds make this possible, since air transport has a high cost/volume ratio.”
Some of the critical factors that shall bring about a change in the fortunes of landlocked developing countries include:
- The special focus by some international agencies like the World Bank, to connect LLDCs to markets and the promotion of infrastructure complemented by “soft” investment, especially in measures facilitating trade, transportation, and transit.
- Due to above measures the landlocked countries have witnessed significant reduction in transit time for imports and exports on most corridors.
- Regional integration offers landlocked countries substantial potential from competition and scale effects. Landlocked countries with their too small and fragmented region would face a challenge to achieve economies of scale on their own. Regional integration here could pool resources and enlarge markets, stimulating national production, trade and investment.
- There are numerous small countries which form part of landlocked regions in Latin America, Sub Sahara Africa, East Europe and South Asia. Some of these countries are emerging markets which provide great opportunity for international trade both intermodal and multimodal.
This holistic approach together with a clear call to ensure coherence with the global processes is expected to enable the LLDCs to achieve sustained and sustainable economic growth and ensure their meaningful integration into the global economy.
These policies shall also facilitate greater opportunities for the air cargo sector in landlocked countries and allow landlocked regions to build the much needed security and infrastructure.
“Security and infrastructure are the driving factors when transporting to or from land-locked countries. This was evident during recent conflicts in Iraq and Afghanistan, and in past mining projects in Southeast Asia and South America. For as long as these situations continue, the need for air transport to these regions remains vital,” observes Bingley.