Trade and Transport Corridor Management Toolkit

Trade and Transport Corridor Management Toolkit

Charles Kunaka

Robin Carruthers

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Attribution—Please cite the work as follows: Kunaka, Charles, and Robin Carruthers. 2014. Trade and Transport Corridor Management Toolkit. Washington, DC: World Bank. doi: 10.1596/978-1-4648-0143-3. License: Creative Commons Attribution CC BY 3.0 IGO

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ISBN (paper): 978-1-4648-0143-3

ISBN (electronic): 978-1-4648-0144-0

DOI: 10.1596/978-1-4648-0143-3

Cover design: Debra Naylor, Naylor Design, Inc.

Library of Congress Cataloging-in-Publication Data

Kunaka, Charles.

Trade and transport corridor management toolkit / Charles Kunaka, Robin Carruthers.

pages cm

Includes bibliographical references and index.

ISBN 978-1-4648-0143-3—ISBN 978-1-4648-0144-0

1. Transportation corridors—Planning. 2. Trade routes—Planning. 3. Business logistics. I. Carruthers, Robin. II. Title.

HE323.K86 2014

388.3'242—dc23

2014001154

CONTENTS

Boxes

Figures

Tables

FOREWORD

Trade and transport corridors—major routes that facilitate the movement of people and goods between regions and between countries—have existed for millennia. They enable regions and countries to offer high-capacity transport systems and services that reduce trade and transport costs by creating economies of scale. Regional corridors are particularly important to landlocked countries, where they are economic lifelines, often providing the only overland routes to regional and international markets.

Despite the long history of corridors, there has been a lack of guidance on how to design, determine the components to include, and analyze the likely impact of corridor projects. The Trade and Transport Corridor Management Toolkit fills this void, making an important contribution to knowledge of corridors.

The Toolkit synthesizes the best knowledge available on the implementation of corridor projects. It presents in a succinct form the experiences of the World Bank and other development agencies in assessing, designing, implementing, and evaluating the impact of trade and transport corridor projects. Before now, this knowledge was spread out in disparate project documents, often beyond the reach of project teams preparing and implementing projects. By presenting this information in one volume, the Toolkit saves task managers the tedious task of looking for the best available tools. It also ensures greater consistency, which will also facilitate comparison and benchmarking of performance, which are of great value to the private sector.

The Toolkit should also be of immense value to policy makers in provincial and national governments as well as regional economic institutions, for several reasons. First, corridors affect the space economy of countries; they are best developed with clear estimates of what the spatial impacts are going to be. Second, a corridor is a system made up of several components, including infrastructure (roads, railways, ports), transport and logistics services and regulations (typically influenced by policy choices of and financing from the public sector). It is important that policy makers appreciate the linkages between these components, particularly as the overall performance of a corridor is determined by the weakest component. Third, the Toolkit deals with the concept of corridor management and the motivations of the various parties that may have interests in its development. It argues that both the public and private sectors should have a say in corridor development processes and operations.

Well thought-out corridor projects can have significant impacts, reducing trade costs and enhancing the competitiveness of cities, communities, regions, and countries, especially where they are landlocked. I hope the advice, guidelines, and general principles outlined in the Toolkit are of help to all who work on corridor projects and enable them to better appreciate both the importance of good corridor project design and the challenges of and possibilities for improving performance and reducing trade costs.

Mona E. Haddad

Sector Manager, International Trade

World Bank

ACKNOWLEDGMENTS

This Toolkit is the product of a collaborative effort involving many colleagues at the World Bank and the African Development Bank, as well as practitioners in countries and regional economic communities. Its preparation was funded by the World Bank and a grant from the Multi-Donor Trust Fund for Trade and Development.

The project benefited immensely from the contributions of various people at the World Bank, particularly John Arnold, Jean-François Arvis, Henry Bofinger, Ranga Krishnamani, Jonathan Stevens, and Virginia Tanase, who drafted specific modules. Anca Dumitrescu, Olivier Hartmann, Tadatsugu (Toni) Matsudaira, Daniel Saslavsky, Jordan Schwartz, Graham Smith, and Maika Watanuki reviewed and commented on early drafts. Jean-François Marteau, Cordula Rastogi, and Tomas Serebrisky peer reviewed the Toolkit at the concept stage and helped shape the final product. Dorsati Madani, Jean-François Marteau, and Cordula Rastogi (World Bank); Jean Kizito Kabanguka and Tapio Naula (African Development Bank); and Tengfei Wang (United Nations Economic and Social Commission for Asia and the Pacific [UNESCAP]) reviewed and provided invaluable comments for the finalization of the draft.

The authors are also extremely grateful to members of the Sub-Saharan Africa Transport Policy Program Regional Economic Communities Transport Coordinating Committee, the Korea Transport Institute, officials of several governments, and participants at seminars held at the World Bank who provided comments at various stages during preparation and testing of the Toolkit. Their comments helped immensely in maintaining the practical relevance of the final product.

The authors would also like to acknowledge the support of several colleagues in the International Trade Unit of the World Bank who helped finalize the manuscript, in particular Cynthia Abidin-Saurman, who prepared the draft for publication, and Amir Fouad, who guided the publication process. Their generous and patient assistance is greatly appreciated.

Last and by no means least, special acknowledgment goes to Mona Haddad (Sector Manager, International Trade, World Bank) for her strong leadership, enthusiastic encouragement, insightful guidance, and provision of resources.

ABOUT THE AUTHORS

Robin Carruthers is a consultant on transport, trade, and infrastructure and a former lead transport economist at the World Bank. Before joining the Bank, he spent three decades as a partner of a transport consulting firm in Argentina, Australia, and the United Kingdom. He recently conducted a facilitation and infrastructure study of the Mashreq countries, evaluated the marine electronic highway planned for the Straits of Malacca and Singapore, advised the government of Paraguay on integrating its transport and logistics strategies, and assisted the Inter-American Development Bank on the design of a maritime corridor, logistics, and trade facilitation strategy for the Caribbean.

Charles Kunaka is a senior trade specialist in the World Bank’s International Trade Unit. He has a background in transport economics and policy and is an expert on analyzing and designing trade and transport corridor projects. He recently coauthored a book on bilateral road transport agreements and a pioneering study on logistics services for small-scale producers in rural areas. As regional coordinator for the Bank-hosted Sub-Saharan Africa Transport Policy Program in East and Southern Africa, he led work on regional transport and integration. Before joining the Bank, he worked for the Southern African Development Community (SADC) as a senior transport policy officer, championing the integration of transport markets across SADC’s 14 member countries.

ABBREVIATIONS

All amounts are presented in U.S. dollars unless otherwise indicated.

INTRODUCTION

Purpose and Use of This Toolkit

Global trade moves along a few high-density routes. Partly as a result, trade and transport facilitation projects are increasingly designed around regional trade corridors.

Trade corridors are not a new phenomenon: they have been used for trade and transport for centuries. The ancient Silk Road is probably the best-known trade corridor in the world, one that has had an enduring impact on the social and economic development of the regions it crossed. It continues to be a source of learning even today.

A trade and transport corridor is a coordinated bundle of transport and logistics infrastructure and services that facilitates trade and transport flows between major centers of economic activity. A formal trade and transport corridor is typically coordinated by a national or regional body, constituted by the public or private sectors or a combination of the two.

Interest in exploiting the corridor approach to trade and transport facilitation has increased significantly in recent years. All regions of the world, developed and developing, have several trade and transport corridor initiatives.

The corridor agenda is increasingly widely adopted by governments, the private sector, and development agencies. There is a realization that poor corridor performance can hurt the economic prospects, especially of landlocked developing economies, with disproportionate impacts on their small and medium-size enterprises. Over the past three decades, the World Bank alone has financed more than 100 trade and transport corridor–based projects and studies, and many similar projects and studies are in the pipeline (box I.1). Other international agencies have also provided support to private sector organizations and governments in developing countries for building infrastructure, institutional and legal frameworks to improve corridor performance. Clearly, there is both recognition of the importance of corridors and emphasis on using this approach to meet trade and transport development objectives. Most projects focus on infrastructure development, typically road infrastructure. The soft dimensions, especially regulatory and procedural controls and the quality of logistics services, do not always receive the attention needed to maximize the benefits of investments in infrastructure.

BOX I.1

Lessons from Corridor and Regional Projects by the World Bank

The World Bank has financed corridor projects across all regions of the world. Although most projects have a national focus, a large and growing number are regional, involving at least two countries. Most such projects have been in Sub-Saharan Africa and Europe and Central Asia, two regions with a large number of landlocked countries. Most projects in these regions in particular but also elsewhere seek to connect landlocked countries to external markets, typically through seaport gateways.

Corridor projects implemented by the World Bank often involve four main types of interventions:

• Infrastructure typically accounts for most of the funding, as much as three-quarters in some cases. The focus is typically on the rehabilitation and upgrading of transport infrastructure, including roads, rail, and seaports as well as airports, border facilities, and other inland cargo facilities. Road safety measures along trade and transport corridors can be part of infrastructure improvements.

• Transit and trade facilitation includes the transit regime, border-crossing improvements, transport services, and modernization of customs. In recognition of the fact that the incidence of human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) is particularly high among truck drivers and commercial sex workers along transport corridors, one recent project included HIV/AIDS interventions along transport corridors.

• Institutional strengthening usually includes support for trade facilitation and capacity building for managing projects. In a few instances, this component may include efforts to promote private sector participation in the management of corridors.

• Analytical work and no-lending technical assistance help countries gather evidence in order to better understand corridor performance and design well-informed interventions.

In The Development Potential of Regional Programs: An Evaluation of World Bank Support of Multi-country Operations, the Independent Evaluation Group (IEG 2007) reviews regional projects, several of which were corridor projects. It reports a few important findings and makes some recommendations:

• Regional programs can deliver strong results.

• Success and sustainability depend on strong ownership of all participating countries.

• Analytical work and resource mobilization are often necessary to reconcile potentially conflicting interests of different countries.

• There is need for clear delineation and coordination of the roles of national and regional institutions, accountable governance arrangements, and planning for sustainability.

• Cooperation between development partners is often necessary to put together grant and loan financing packages for regional programs. Grant resources are often needed, especially at the beginning, to support analytical work and strengthen regional cooperation mechanisms.

There are several compelling reasons why the corridor approach is widely used:

• It is critical to providing landlocked countries in particular with basic access to maritime ports for their overseas trade.

• Regional integration improves the growth prospects of middle- and low-income countries, especially landlocked countries. Transport corridors provide a visible and direct opportunity to bring about regional integration.

• Regulatory and other constraints to trade facilitation attain practical relevance at the corridor level, enabling the design of appropriate interventions.

• Corridors provide a spatial framework for organizing cooperation and collaboration between countries and public and private sector agencies involved in providing trade and transport infrastructure and services.

For these and other reasons, there is a growing network of international transport corridors across the developing world.

Why a Toolkit?

Analyzing transportation and logistics performance along a corridor is a complex undertaking. Many components are involved, covering among others, technical issues concerning transport systems, policies, regulations governing service provision, and cooperation and collaboration between institutions. The information required for proper analysis of a corridor has to be acquired from many different sources. The task of assembling all relevant data and constructing a complete picture of the operation and performance of an entire corridor can be daunting, but it is precisely because the various components are interlinked that a holistic picture is needed. A corridor is a set of interconnected and complementary subsystems; this interconnectedness is fundamental to how it plays its role. Project managers and officials concerned with trade and transport should make judgments about bottlenecks and barriers and decide on strategies for improving overall system performance rather than simply optimizing parts of it.

This Toolkit is designed to help project managers in public and private sector agencies address the challenges associated with the design of corridor projects. Despite the volume of work on corridors, little guidance material is available on how to approach corridor projects. Task managers spend considerable time looking for the best available tools. They often find it difficult to ascertain what already exists and where to find it. Studies have been duplicated, because previous work is not always widely disseminated or easily discoverable. In addition, the lack of consistency in approaches makes it difficult to ensure that task managers are getting consistent advice even within individual organizations.

Providing a comprehensive guide to tools and techniques for corridor projects is important, as the volume of such projects is likely to increase. Corridors remain very important, especially to landlocked countries and postconflict countries and regions. Both the World Bank Group Trade Strategy (World Bank 2011) and its Transport Business Strategy (World Bank 2008) emphasize trade and transport corridors as priorities for the Bank’s work on trade facilitation and logistics. The Transport Business Strategy proposes encouraging client countries to adopt corridor approaches to investing in transport infrastructure and improving transport services, especially along multicountry regional routes. It seeks to reduce the costs associated with moving goods along international supply chains, by enhancing the performance of trade corridors used by land-linked developing countries, especially in Africa, among other measures. Other development agencies, such as the Asian Development Bank and the African Development Bank, have similar strategies.

Analytical work on corridors is widely dispersed. Examples of the few documents by the World Bank are two papers, Best Practices in Management of International Trade Corridors (Arnold 2006) and Institutional Arrangements for Corridor Management in Sub-Saharan Africa (Adzigbey, Kunaka, and Mitiku 2007), and a comprehensive book, Connecting Landlocked Developing Countries to Markets: Trade Corridors in the 21st Century (Arvis and others 2011), which provides the conceptual underpinnings to this Toolkit. Based on analytical research, the book uses numerous case studies to illustrate how landlocked countries can improve their connectivity to international markets. Some of the measures proposed include the following:

• reengineering transit regimes based on the well-established and successful regime used across most of Europe and Central Asia

• rethinking the approaches to transport service regulation by promoting quality-based regulation in road transport and developing multimodal transportation

• promoting comprehensive corridor management initiatives to build trust within and between countries.

Other organizations have also conducted studies, although most tend to be specific to a region or corridor. For example, the Islamic Development Bank’s A Study of International Transport Corridors in OIC Member Countries (2011) assesses the role and contribution of transport corridors to economic growth and cooperation, trade, and regional integration in the 57 Organization of Islamic Cooperation (OIC) member countries and identifies priority transport corridors and challenges faced along them. The report notes that transport corridors are increasingly important, particularly in developing economies and emerging markets, because of their role in spurring economic development and facilitating trade.

This Toolkit provides a comprehensive and holistic compilation of approaches and techniques on corridor diagnostics, performance assessment, management, operations improvement, and impact evaluation. It addresses many of the requests from task managers at international agencies for more holistic advice on corridor management. It brings together and updates existing knowledge and fills in gaps. It can be used for both international and national trade corridors. It also addresses capacity-building needs for corridor management and identifies the legal and trade agreements that determine the trade context within which a corridor functions.

Organization of the Toolkit

The Toolkit is designed for national and international public sector agencies and the private sector actors that have to design, develop, or provide services using a trade and transport corridor approach. It provides tools to answer four main questions:

• What are the approaches to identifying the main issues and constraints to movement of trade and transport along a corridor?

• How well is the corridor performing, and where are the weaknesses?

• What are the options for improving the performance of the corridor?

• What are the likely impacts of investments or improvements to the corridor?

These questions guide the iterative steps in designing and implementing a corridor project (figure I.1).

FIGURE I.1 Corridor Project Cycle

The Toolkit groups the four main questions into three parts, which comprise 13 modules (table I.1). Part I includes four modules on how to carry out a corridor diagnostic. These modules focus on the infrastructure, regulatory, and institutional framework for a corridor. Part I also includes a critical module on corridor performance indicators. Part II comprises eight modules on specific corridor components. It explains how performance can be improved through targeted interventions. Part III consists of a single module, on assessing the impact of a corridor.

TABLE I.1 Contents of Trade and Transport Corridor Management Toolkit

What Goes into a Corridor Diagnostic?

International trade and transport corridor projects are complex to design and implement. They often take considerable time, involve several components, and require the involvement of different stakeholders, implementing agents, and impact indicators. Typically, preparatory work, including diagnostic studies and consultations with stakeholders in all corridor countries, starts a year or more before a project can be clearly articulated.

The Toolkit describes approaches to conducting a corridor diagnostic. A diagnostic takes three main forms: determining the development and trade context, assessing corridor-length performance, and conducting a detailed diagnostic at specific locations, or chokepoints, along a corridor to identify practical intervention measures (Raballand and others 2008).

The diagnostic process collects quantitative and qualitative data to identify the major impediments to trade facilitation and the capacity within the public and private sector for removing them. Quantitative data are collected on all corridor components and from various service providers. Qualitative data are collected through surveys of logistics service providers, shippers, and government officials involved in the logistics and transportation sectors. The diagnosis involves discussions with groups as well as individuals, normally conducted by technical experts familiar with trade and logistics or their representatives.

How Is Corridor Performance Measured?

The Toolkit defines core corridor performance measures and explains how to interpret them. The proposed core indicators are volume, cost, time, reliability, and safety and supply chain security. Ultimately, trade corridors are about trade competitiveness. If a subregion has no strategy to benefit from the increased flows, it may not be worth developing a trade corridor.

How Can Corridor Performance Be Improved?

The Toolkit identifies mechanisms for improving the performance of the corridor through initiatives by the public and private sectors. These initiatives include investments in infrastructure and modification of policies and regulations, especially related to trade facilitation. It also considers the government’s capacity to maintain the infrastructure and regulate the flow of goods along the corridor and the private sector’s ability to provide a variety of levels and quality of services, as measured in terms of time and cost. As the interventions require interaction between the public and private sectors, the Toolkit proposes measures to enhance the involvement of a variety of stakeholders.

Corridor performance is affected by various parties, both public and private, which have to collaborate. The overall level of performance is determined by the weakest link among these parties. For this reason, it is important that corridor projects include a capacity enhancement component. The regulatory authorities may exhibit weaknesses or lack of awareness about what is needed to improve overall performance, or practices in the private sector may compromise performance. Corridor performance indicators are a valuable starting point in identifying areas in which capacity needs to be built and the type of support required.

The public and private sectors implement priority interventions using their own resources or support from development agencies. The World Bank; regional development banks (the Asian Development Bank, the African Development Bank, the Inter-American Development Bank, the Islamic Development Bank, and others); and other UN agencies (the United Nations Conference on Trade and Development [UNCTAD], the United Nations Economic and Social Commission for Asia and Pacific [UNESCAP], the United Nations Economic Commission for Africa [UNECA], the United Nations Economic Commission for Europe [UNECE], and others) support numerous corridor projects across the developing world. Implementation involves the procurement of goods, works, and services, as well as any environmental and social impact mitigation set out in agreed plans. A common challenge with international projects is how to synchronize processes and specifications across borders. Doing so calls for close interaction and at times the use of the same vendors for project components in different countries. Because of their complexity, corridor projects often experience delays, and unexpected events sometimes prompt the restructuring of the projects.

How Is the Impact of Corridor Interventions Estimated?

The economic evaluation of a corridor project attempts to determine whether the reductions in cost of current trade and the generation of new trade are worth the investment cost needed to bring them about. Although the development objective of the project may be expressed in terms of increasing export growth, the economic evaluation should also take account of the reduction in import costs. Questions that need to be answered include the following: How will improvements along the corridor affect trade competitiveness in regional and international markets? How do changes in transportation costs and the attractiveness of a region affect the location and relocation of enterprises? The same questions can be asked at the level of a facility or component of a corridor, where isolating impact is probably much more complex.

The link between corridor improvements and trade impacts can be indirect. In some instances, it is possible to assess impact only in terms of estimates of time and cost savings. Translating these savings into trade and other developmental impacts tends to be difficult, but this kind of analysis is particularly informative to the design and execution of projects. Knowing when, where, and how to intervene within the corridor could have great potential in maximizing trade impacts.

How to Use the Toolkit

Parts I and III of the Toolkit cover the basic principles governing the analysis of trade corridors and the measurement of the impact of interventions. Both are essential reading. The modules in Part II are relevant depending on the components found on a specific corridor. Not all of the modules will be used for every corridor. Figure I.2 shows the structure of the Toolkit and how the different modules can be utilized.

FIGURE I.2 Structure of