Bridging transport connectivity divides crucial to enhance productive capacities in landlocked developing countries

Written by: By Paul Akiwumi, Article No. 86 [UNCTAD Transport and Trade Facilitation Newsletter N°93 - First Quarter 2022]

Landlocked developing countries (LLDCs) face multiple trade and development challenges because of their geographical remoteness from international markets. Structurally, LLDCs are at a disadvantage compared to other economies because they lack direct sea access. Evidence shows that logistics for transporting high-volume and low-value primary commodities are more costly than those involved for transformed or value-added products, regardless of transport distances and modes. Studies have also confirmed the sustained commodity reliance of LLDCs over time, revealing key constrains these countries face to improve quality of transport infrastructure and become more competitive in regional and international markets.

In an effort to support LLDCs and other developing economies to overcome structural challenges, including transport, connectivity and other related challenges, UNCTAD developed its Productive Capacities Index (PCI). The PCI is an analytical tool designed to support developing countries in identifying their systemic vulnerabilities across different areas of productive capacity illustrated in Figure 1.
 

Figure 1: Productive Capacities Index components

The index draws on decades of extensive research and policy analysis work by UNCTAD, as well as technical support to the most vulnerable countries, including LLDCs, in developing key aspects of their trade and productive structures. It offers a tool that policymakers and other actors working on LLDC issues can use to identify challenges these countries face to pinpoint ways to enhance productive capacity and attain higher economic growth (UNCTAD, 2020a).

This article investigates the PCI’s transport component, with a focus on LLDCs. It aims to provide insights on how domestic and international actors can use the PCI to identify connectivity gaps in LLDCs and seek ways for addressing these as part of broader efforts to foster productive capacity enhancement, structural transformation and sustainable development.  

Using the PCI to analyse connectivity gaps across LLDCs

According to studies conducted by UNCTAD and UN-OHRLLS, LLDCs’ relatively higher transport costs are mostly due to their geographical remoteness and high commodity dependence. While they have documented how the conditions of being landlocked and relying on commodities present impediments to trade and development, LLDCs also grapple with infrastructure, connectivity and market access challenges due to their limited development of institutions, governance and productive capacities (UNCTAD, 2015). Identifying the extent of connectivity challenges these countries are facing is crucial to target resources and technical assistance in to bridge such gaps in transport and other productive capacity-building areas.

The PCI includes a transport component that captures levels of transport connectivity and physical infrastructure in each country or region. The PCI transport component is composed of indicators that report on units and passengers of air, road, and rail travel, as well as physical infrastructure, namely airlines, roads, and railways. It includes three indicators on air transport and travel, and two indicators on land infrastructure, listed in table 1.
 

Table 1: Indicators encompassed in the transport component of the PCI

Source: UNCTAD (2021). UNCTAD Productive Capacities Index: methodological approach and results
 

The transport component provides an analytical roadmap users can use for identifying connectivity gaps in LLDCs. One practical use is to compare levels of transport connectivity and physical infrastructure to those in other PCI components such as private sector, human capital, and institutions.

To illustrate this, Figure 2 presents the PCI scores by component for LLDCs. In 2018, the median PCI score for LLDCs was 26.1 points. Transport was the PCI component with the second lowest score after the component on information and communications technologies[i]. By contrast, LLDCs performed higher in the private sector and natural capital components. As transport is where LLDCs perform lower compared to most of the other components, this reveals a clear priority for intervention by policymakers and other development actors.
 

Figure 2: Median PCI scores by component in LLDCs, 2018

Figure 3 compares the median PCI transport scores of LLDCs to those observed among other country groups. It clearly shows that LLDCs have lower productive capacities in transport and connectivity than other developing economies.
 

Figure 3: Median PCI transport component scores across country groups by development status

Structurally, LLDCs are at a connectivity disadvantage compared to other economies because they lack direct maritime transport access. They can further experience transport costs challenges if their economies depend on primary commodity exports. Research shows that logistics for transporting high-volume and low-value primary commodities are more costly than those involved for transformed or value-added products, regardless of transport distances and modes.

The median PCI transport scores observed from 2000 to 2018 confirm the structurally lower productive capacities of LLDCs in comparison to other economies in the world. While slight improvements have been observed in recent years, LLDCs along with LDCs remain at the bottom of productive capacity levels in transport networks and physical infrastructure observed elsewhere.

Furthermore, the PCI can help regional development actors to identify specific productive capacity challenges facing LLDCs across geographical regions. Figure 4 presents median PCI transport scores for LLDCs in Africa, Latin America, Asia, and Eastern and Central Europe. It shows that LLDCs in Africa and Latin America are catching up in connectivity with their peers in Asia and Eastern and Central Europe.
 

Figure 4: Median PCI transport component scores in LLDCs by geographical region.

While Africa and Asia account for most of the LLDCs, comparing median PCI scores of the latter in other regions with better performance can help defining benchmarks to target productive capacity building efforts. Figure 4, for example, enables the exploration of the progress LLDCs have maintained in enhancing productive capacities in transport sectors over time and with respect to their peers in other geographical regions. Comparing PCI components such as the transport component by region can provide the basis to identify the magnitude of connectivity gaps between LLDCs and guide policymakers on the necessary reforms to bridge such gaps.[ii]

It needs to be mentioned that the challenges impacting LLDCs’ trade and development are not limited to transport connectivity. They encompass a range of other issues, including logistics, physical infrastructure and trade facilitation, time and monetary costs to export and import, which are reflected in other components of the PCI.

Conclusions

Assessing past and current developments of transport connectivity and physical infrastructure in LLDCs provides a starting point to understand LLDCs’ systemic vulnerabilities towards enhancing productive capacities. The PCI transport component results presented in this article are aligned to what previous studies have found on the connectivity challenges facing LLDCs. This group of countries tend to have lower connectivity levels than other countries mostly due to their lack of maritime transport access and high dependence on primary commodity exports. All these factors, compounded with poor logistics, transport infrastructure and trade facilitation procedures leaves LLDCs to grapple with high transport costs that constrain their ability to diversify their economic base and enhance productive capacities.

Policymakers and other development actors working on LLDC issues can benefit from the PCI to chart a roadmap for assisting these countries in developing key areas of their productive capacities. As documented by UNCTAD’s PCI report on LLDCs and a study on LLDC’s participation in commodity value chains, LLDCs need timely support in areas that go beyond transport connectivity and physical infrastructure, to include trade facilitation, institutional strengthening and innovation, among others. Identifying gaps in connectivity and other productive capacity areas through the PCI can support further efforts to mobilize resources and capacity building LLDCs need to be more competitive in regional and global markets and structurally transform their economies to achieve the Sustainable Development Goals.

[i] Scores for one PCI component are not comparable to those for other components because they reflect different variation levels within indicators used to compute each component. In other words, the variation between minimum and maximum values of indicators is not identical across all PCI components because of the country-level differences in each indicator included per component. For more information, please see UNCTAD,2020b
[ii] Analysing differences on PCI transport component results across countries and regions is subject so some caveats because they are sensitive to differences in geographical, demographic and economic conditions. For a more in-depth analysis, it is recommended to investigate more disaggregated comparisons at the subregional level or by groups of countries that are more comparable on different factors than those related to transport connectivity and physical infrastructure. For more information please see UNCTAD,2020b. 

For more information about the PCI please contact the UNCTAD Division for Africa, Least Developed Countries and Special Programmes (ALDC): ALDC@unctad.org

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