GLOBAL MARKET MEANS POOREST COUNTRIES’ TRANSPORT SYSTEMS MUST MEET GLOBAL STANDARDS, THEMATIC SESSION OF BRUSSELS CONFERENCE TOLD

                                                      DEV/2330                                                                      21 May 2001

GLOBAL MARKET MEANS POOREST COUNTRIES’ TRANSPORT SYSTEMS MUST MEET

GLOBAL STANDARDS, THEMATIC SESSION OF BRUSSELS CONFERENCE TOLD

(Received from a UN Information Officer.)

BRUSSELS, 19 May -- In the face of globalization, it was no longer enough to perform well -- to remain competitive, transportation systems of least developed countries (LDCs) had to perform to global standards, the keynote speaker said this afternoon, during a thematic session on “Transport and Development” at the United Nations Conference on Least Developed Countries in Brussels.

Tomaz Augusto Salomao, Minister of Transport and Communications of Mozambique, stressed the importance of regional cooperation in improving transportation, citing, as an example, the Southern African Development Community (SADC).  The countries of southern Africa were trying to create a seamless, integrated, cost-effective and responsive transport system, based on partnerships between the public and private sectors.  To that end, they had embarked on coordinated legislative reforms and begun harmonizing their customs documentation and information systems.

The purpose of the thematic session was to examine how to improve the transport costs of LDCs through enhanced efficiency and management.  The common transportation shortfalls of LDCs include reduced transport availability, excessive costs, poor infrastructure and management, lack of political commitment, weak government, and corruption.

George Mpundu Kanja, Senior State Advocate, Attorney-General’s Chambers, Ministry of Legal Affairs of Zambia, said that it must be stated from the outset that some LDCs’ political and regulatory frameworks for transportation were not adequate, neither able to attract the private sector, nor make it efficient enough to facilitate trade.  Least developed countries were not only hindered by the lack of financial resources; they also lacked the experience and expertise to implement the reforms and run the institutions set up to administer them.  That was where the international community cooperating partners could play an important role -- providing targeted financial support and expertise.  There was also an urgent need for private sector capital and management expertise.

Among the most prominent obstacles to the LDCs’ participation in the increasingly globalized economy was the prohibitive cost of transport and logistics services, a panellist from the World Bank, Mark Juhel, said.  Striving to become “an agent of change”, the Bank was promoting trade and transport

facilitation measures at border crossings and transit interfaces.  The programme was aimed at:  customs reform; streamlining administrative procedures; regional

cooperation through transit agreements and harmonization of administrative monitoring; and promoting integrity.

One of the session’s co-Chairs, O.I. Djama, Minister of Equipment and Transportation of Djibouti, said that his Government was encouraging the private sector to invest in major equipment to make up for public sector shortfalls.  Management of the Djibouti Port had, thus, been delegated to a strategic partner.  The same would be done with the railway.  In order to upgrade its human resources, the Government was working on a diversified programme to train professionals for both the public and private sectors.

In a lively interactive dialogue that followed the panel presentations, speakers discussed the a number of measures proposed in a working paper by the United Nations Conference on Trade and Development (UNCTAD), which included recommendations on institutional capacity-building and regulatory reform, and introducing sustainable technology applications through the transfer of knowledge.  Also raised in the discussion were such issues as equipment upgrades; local roads infrastructure; a possible “renaissance” in the railroad system in Africa; tourism; the port system; bank lending policies; and human resources and training policies.

Luis Filipe Marques Amado, Secretary of State for Foreign Affairs and Cooperation of Portugal, co-chaired the session.  Other panellists were:

H. Maldonado, Universidad Simón Bolivar, Venezuela; P. Jourdan, Chief Executive Officer (CEO), Mintek, South Africa; H. Boyd, CEO, Safmarine, South Africa; R.B. Rauniar, Interstate Multi-Modal Transport, Nepal; and F.L. Perret, Vice-President, EPFL, Lausanne, Switzerland.

The Secretary-General of UNCTAD, Rubens Ricupero, made a closing statement.

At 9:30 a.m. tomorrow, the last of the Conference’s thematic sessions will be held, on “Financing Growth and Development”.

Thematic Session

Issues Note

An issues note on Transport and Development (document A/CONF.191/BP/1), which began “transport is central to development”, contains two sections: transport and development of least developed countries (LDCs); and strategies to improve transport efficiency.

The first section addresses such issues as globalization, foreign direct investment (FDI), electronic commerce, private/public partnerships, transport policy, legal framework, and infrastructure requirements.  The second section describes such things as reform measures, information technology solutions to transit/transport management and administration, regional integration, establishing and strengthening of professional associations, and human resources development and training.

The note points out that there is a cause-and-effect relationship between the availability of adequate transport services, the access thereto, and the scope for trade-based development processes.  Trade success or failure in LDCs trading low-value goods is largely determined by transport availability and cost.  The share of freight cost in import values can serve as an indication of the impact of transport cost on the ability of countries to effectively participate in global trade.  Landlocked LDCs face freight costs of up to 40 per cent of import value, compared to the world average of 6 per cent.

The note goes on to describe a number of activities that could have a direct impact on the transport situation of LDCs, which largely relate to improvements in the working of institutions, regional agreements, management assistance (particularly through the application of information technology), and the transfer of knowledge.

Opening Statements

LUIS FILIPE MARQUES AMADO, Secretary of State for Foreign Affairs and Cooperation of Portugal and a co-Chair of the session, said it was important to identify strategic areas to mobilize support for the LDCs.  In contrast to the LDCs development potential were their handicaps, in view of which transport infrastructures and equipment acquired particular importance.  To achieve progress, it was important to identify the best policies and programmes.  Institutional management should be aimed at adapting the structural conditions in the LDCs to their particular needs.  Specific strategic issues needed to be addressed to facilitate the LDCs’ integration in the global markets.  Promotion of good governance and improved regulatory functions was of particular importance, especially in the liberalization and privatization of transportation.

Continuing, he stressed the importance of regional efforts, which could complement the measures at the national level.  It was necessary to create regional information systems to improve the efficiency of the transport sector.  International transactions required an integrated approach, which would be important not only in time of peace, but also in emergency situations, which required fast delivery of medicines, food and supplies.  Joint efforts could be contemplated with development partners and international institutions in training of personnel for transport services.

Market operation and social protection were among the most important factors in the LDCs, he added.  Urban and rural transport systems in the developing countries should ensure access to work, education and services.  The international community could play an important role in developing the LDCs’ transport capability.

      O.I. Djama, Minister of Equipment and Transportation of Djibouti, also a  co-Chair, said transport was a key tool for his country’s sustainable social and economic development.  Due to its geo-political position, and in light of trade flows through that part of world, Djibouti’s transport systems had to be adapted in terms of capacity, performance, and international standards.  In short, it had to become an engine of high performance, so that it could be an engine of development in the Horn of Africa, while turning Djibouti into an international site.

He said his Government was encouraging the private sector to invest in major equipment to make up for public sector shortfalls.  Management of the Djibouti Port had, thus, been delegated to a strategic partner.  The same would be done with the railway.  Also, human resources must be upgraded.  The Government wanted a diversified programme to train professionals for both the public and private sectors.  An additional pressing issue was regional integration and, by extension, the need to take full advantage of trade opportunities in the global marketplace.  A subregional framework must be created to rationalize the transport of goods and optimize physical and information flows.

In his keynote speech, TOMAZ AUGUSTO SALOMAO, Minister of Transport and Communications of Mozambique, said that it was important to improve the transport infrastructure in terms of coverage, quality and safety, as well as operational efficiency of transport-related enterprises.  The countries of the Southern African Development Community (SADC) were convinced that transport and communications infrastructure was important for their domestic human capacity; poverty alleviation; removal of barriers; and good governance.  He went on to describe the SADC regional transportation infrastructure and added that if its general condition could be considered fair to good, there were areas where the network was in a very poor condition, due to outdated design or poor maintenance.  Estimates indicated that an alarming 30 to 35 per cent of the value of goods in the region was due to transport costs, and the countries were committed to addressing that problem.

Regional cooperation was deepening, reforms were accelerating, and prospects for the region looker brighter than ever, he said.  However, in the face of globalization, it was no longer enough to perform well.  Transportation systems had to perform to global standards, if the region was to remain competitive.  It was necessary to create in southern Africa a seamless, integrated, cost-effective and responsive transport and communications system, based on partnerships between the public and private sectors.  The countries had embarked on coordinated legislative reforms in order to achieve that goal.  Customs documentation and information systems were being harmonized, and regional private associations were being encouraged.

Continuing, he said that his country had completed the “concessioning” of the Maputo port to an international consortium.  The Nacal railway and port had previously undergone a similar transformation.  The country had also embarked on telecommunications reform.  The ultimate goal was to modernize the entire sector, with the aim of cutting costs and expanding the services to the rural areas.  The SADC countries believed that it was strategically important to secure greater involvement of the private sector. The public/private partnership offered important financial and non-financial benefits, including private-style management and the means to bridge the financing gap.  An example of what could be achieved through political good will, regional cooperation and public and private partnership was the Maputo Development Corridor.

Panellists

P. Jourdan, Chief Executive Officer (CEO), Mintek, South Africa, said the private sector was needed to help the transport sector infrastructure, but they needed immediate returns and security of investment.  A synchronous position was needed, but that was difficult.  A private company would not put in an investment until there was an operational structure, but then one could not put the latter in place without the former.  It was a classic case of the problem of what came first –- the chicken or the egg?  The only way of overcoming that hurdle was by having integrated investments.  Therefore, cargos needed to be in place at same time as money.  While it was not the easiest thing in the world to do, it had to be attempted.

He said the danger was that public and private sector partnerships were by nature problematic.  Infrastructure by nature lent itself to being monopolized. Another unrelated challenge that needed to be addressed was the natural advantage given to coastal centres and the disadvantages faced by inland countries.  On way forward was to identify natural development zones, which were inevitably cross-border and integrated the economic infrastructures.

H. BOYD, CEO of Safmarine, South Africa, said that he strongly believed that the transport sector needed to be developed in order to build national capacity and international competitiveness.  Handling the ocean leg of trade operations, he could say that, without an effective cost base, marketing strategies and quality control, it was impossible to be internationally competitive.  Companies could lose customers by being a week late in the delivery of materials, and it was important to be efficient.  With 10 per cent of the world population in the LDCs versus 0.4 per cent of world trade, it was important to develop the potential of those countries.  It was not only the trade itself; it was also the services that accompanied it that needed to be developed.

Transport needed to be considered along with other components of development, in a measurable way, he said.  For LDCs, ocean freight was cost effective and it did not provide competitive disadvantages.  The costs of land transport needed to be considered, along with ocean transportation, and the inefficiencies of the land transportation system needed to be addressed.  Ports needed to be efficient, with good management and equipment.  Port charges should be standardized, for exaggerated charges represented hidden taxation.  Standardized procedures and documentation needed to be worked out, as countries moved away from State monopolies.  It was also of the utmost importance to take measures against corruption.  When looking for sources of taxation, governments needed to tax proceeds and not goods.  Securing access to markets was a key element of development, and in that transportation could play a leading role.

R.B. Rauniar, Managing Director, Interstate Multi-Modal Transport, Nepal, said gross domestic product (GDP) per capita in his country was less than $1 per day.  It was landlocked and transport to the sea was, thus, a problem.  The current session was being held to examine how to improve the transport costs of LDCs through enhanced efficiency and management.  The common shortfalls of LDCs when it came to the transport sector were:  geography; the effects of natural catastrophes; poor infrastructure; poor implementation due to poor governance; lack of political commitments; weak government; and corruption.

He said efficient transport combined with low costs was no doubt a very important factor for LDCs.  If progress were slowed by high costs, it would have a direct effect on the economy of the country. Unfortunately, many LDCs produced low-value goods.  Profits depended on the value of goods, distance to the nearest port, transport costs and volume of goods.  Many inland LDCs had to rely on road or rail transport.  Also, the high investment costs made it impossible for some countries to put down good surface transport routes.  Nepal, however, had the potential for hydroelectricity, which meant it could produce cheaper fuel than that generated by hydrocarbons.  That source of fuel, coupled with the potential use of electric rail, would have to be explored.

GEORGE MPUNDU KANJA, Senior State Advocate, Attorney-General’s Chambers, Ministry of Legal Affairs, Zambia, said poor transport infrastructure and the high cost of production hampered the competitiveness of exports from LDCs in regional and international markets.  There was often a lack of adequate government financial resources to maintain appropriate levels of investment, both in the maintenance and modernization of infrastructure.  That situation was made worse by the decline in concessional aid for infrastructure development, and the demand for efficient and sophisticated logistical services by customers.  All those factors had created an urgent need for private sector capital and management expertise.

He said creating a conducive and enabling environment for the private sector and having efficient transport and transit systems required continued support for policy, legislative and institutional reforms at both the national and regional levels.  It was imperative to state right from the outset that a number of LDCs’ policy, legal and regulatory frameworks in the transport sector were not adequate.  They neither attracted the private sector to transport nor brought efficiency to the transport sector.

He said Zambia, like many other LDCs, realizing the need to reduce transportation and transaction costs, as well as improving the transit system at all levels, had entered into regional trade and transportation agreements.  The LDCs were committed to undertaking legal and regulatory reforms and to implementing trade and transport agreements.  They were, however, hindered by a lack of financial resources.  Furthermore, most of the reforms were new and so were the institutions set up to administer and implement them.  Thus, the institutions themselves needed strengthening.  The countries concerned had neither the experience nor the expertise for that.  That was where the international community’s cooperating partners could play an important role -- providing targeted financial support and expertise.

MARK J. JUHEL, Lead Transport Specialist, World Bank, said that competitiveness was one of the important points which could help LDCs increase their market share.  Among the most prominent obstacles to LDCs’ participation in the increasingly globalized economy was the prohibitive cost of transport and logistical services.  Striving to become “an agent of change”, the Bank was continuing to address that issue.  The Bank’s “Border Agenda” dealt with trade and transport facilitation measures at border crossings.  The programme was aimed at: customs reform; streamlining administrative procedures; regional cooperation through transit agreements and harmonizing administrative monitoring; and promoting integrity.  Since the end of the 1970s, the Bank had been involved in those measures, in close cooperation with the United Nations Conference on Trade and Development (UNCTAD).  Less than a month ago, the latest trade facilitation project had been completed. 

Inland transport networks and services were another area of interest to the Bank, he said, encompassing policy and regulatory measures to enhance competition in the delivery of transport services through more open access to markets, unbiased modal competition and the removal of legal impediments to the development of multi-modal transport.  Those efforts required better information on particular countries’ preferences, costs and conditions.  Sustainable arrangements needed to be in place to maintain the infrastructure, and the Bank was paying particular attention to that area.  The Bank’s ongoing road maintenance scheme had brought some interesting results.  Community involvement in road maintenance was also important.

Through regional and global initiatives, the Bank had launched the global facilitation partnership for transportation and trade, in cooperation with the International Chamber of Commerce.  That was an attempt to bring together various players on that specific topic.  A document had been just posted on the World Bank’s Web site on port reform, which he hoped would be easy to use.  The Bank’s other initiatives included the Sub-Saharan Africa Transport Policy Programme, which was focusing on enhancing regional integration prospects by reducing bottlenecks in the region.

F.L. PERRET, Vice-President of EPFL, Lausanne, Switzerland, said that when it came to providing training in the transportation sector, there were as many approaches as there were professors.  Some programmes had sought to address some of the basic questions raised in today’s debate.  Transport was not an end in itself; it was designed to improve human mobility.  It was also important to remember that good governance could not just be transposed to all countries, like a carbon copy.  For that reason, the rationale of training had to be multicultural.

The question of transportation could not be considered from a sectoral point of view, he said.  It needed to be considered in the global context.  Quality service was expected from modern transportation, but even a slight improvement could be very costly.  Information technology could provide for proper tracking and tracing of goods, leading to increased customer satisfaction.  An ever larger number of global transportation companies were operating under their own rules and procedures.  They played an increasingly important role in the competitive markets.  In training young professionals, it was important to take those aspects into consideration.  Several higher education institutions, including his own, were incorporating them into their programmes.

H. MALDONADO, Universidad Simón Bolivar, Venezuela, and moderator, said it was quite clear from the presentations that there was a definite relationship between transport and development.  The question, again, was, what came first? That link had to be taken into account whenever there was a discussion on development.

He said another point raised was the need for governmental agendas in LDCs to include transport as an important factor.  If that was not done, the situation could deteriorate.  Another important issue was the question of a comprehensive approach to transport, which would integrate all factors.  Approaches should be looked at regionally, globally and nationally.  Any weak point in that chain would weaken the whole system.  Any approach also had to be systemic. 

He said good governance and good management had also been highlighted.  There had to be efficiency between the work of the private and public sectors.  If that were not the case, business structures would collapse.  The link between the two sectors was a golden rule.  Panellists had also expressed the need for an integrated global approach to human resources.  Bolivia, a landlocked country in South America, had benefited from being the central link that connected the Pacific side of the continent to the Atlantic.  He asked panellists if that success story could be used elsewhere, as a solution.

Interactive Session

One speaker noted that the issue of local roads, which was very critical, had been neglected in today’s discussion.  It was stressed that local roads were just as important as the big ones.  There were some industries that were not dependent on big industries for their development.  Local and rural roads served those enterprises.  In that context, the question was raised as to why there were not as many bicycles in Africa as there were in Asia.  The Ho Chi Minh trail, for example, was successful because of the bicycle.

In response to that, another speaker noted that many rural African roads were made of either sand or dust, which made them hazardous for travel by bicycle, especially during the rainy season, when they turned to mud.

A renaissance in the railroad in Africa was perhaps something that had to be looked at, a speaker said. There were no easy solutions. It was also not attractive for sponsors to upgrade and modernize a railroad only to make it viable for a private investor.  Modernization of the railroad required strategic,

in-depth discussions, so that the vital steps to revitalize the railways could be taken.  Now was the time to start a debate on that.  Another speaker added that tourism, which was the topic of discussion earlier this week, required efficient transport systems.

Addressing the issue of the development of landlocked countries, the concept of a dry port system was supported.  With such a system, a country could be traversed, as persons or cargo moved from one coast to another.  Speakers also called for the reduction of transport costs for goods from LDCs.

It was also proposed that UNCTAD, the International Union of Railways, and the World Bank publish on the Internet indicators of best and worst rail practices and information on rail traffic, among other things.  The benefits from such a venture could affect rail management and railroad efficiency.  Seminars could also be organized under the auspices of the three organizations to discuss methods to achieve best practices with rail managers.

Other questions raised concerned what could be done to improve the flow of funds to railway infrastructure development and what was the World Bank’s lending policy vis-à-vis loans for private or public sector investment in transport.  Addressing the issue of human resources and training policies, it was stressed that training had to be active and the agent of change -- not a process that followed change. 

Mr. JOURDAN reiterated that there was a big risk in investment in the transport sector, which was why there was so much reticence by the private sector. The biggest risk was that there would be no cargo after the investment had been made.  Least developed countries had to be flexible, while the risk must be positioned where it could be most reduced.  In other words, the cargo should be located with either the producer or generator of the cargo.  Transcontinental corridors could help landlocked States and would open up a country like Botswana in the SADC.  The ultimate problem, however, was that landlocked countries had high costs, whether they went east or west to the coast.  They were far away from ports, and they would always have higher costs.

Mr. JUHEL, responding a question on World Bank loans to private or public sector investors in the transport sector, said Bank lending for that area had remained very steady over the last 10 years or so.  What was changing was the way in which projects were looked at.  There was a more global and holistic approach. The Bank would be quite ready to undertake financing for transport financing and even help countries to prepare the ground to attract finances from other sources.

Mr. Amado said the session underlined the importance of transport services to the development process.  The session also identified a number of areas requiring improvement -- ports, inland transport and rural roads.  While it had also been underscored that partnerships with private sector offered many LDCs the opportunity to improve transport infrastructure, it was repeatedly stressed that the State still had a responsibility.

RUBENS RICUPERO, Secretary-General of UNCTAD, said transport was vital not only because of trade, but also because of the opportunity it offered for integration in the broader sense.  An example was to be found in the countries that became independent after colonial rule.  The roads prior to independence had been shaped by a political system that was not bent on fostering relations with neighbours.  For all intents and purposes, those roadways still remained untouched and unaltered today.  Many countries either still could not reach their neighbours, or did so in a very hazardous way.

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