This paper covers Trade and Transport Facilitation (TTF) issues in Armenia, Azerbaijan,
Georgia, the Kyrgyz Republic, Moldova, Tajikistan and Uzbekistan (as the CIS 7), as well as
Kazakhstan and Turkmenistan since they are part of the Central Asia region and play a critical
role in facilitation solutions. They all share similar constraints of international trade and
transport, and their foreign trade is characterized by distant export markets dominated by few
commodities. They all need to build the institutional and legal foundations of a market economy,
attract foreign investment, and make better use of their natural resources. The resolution of these
issues is critical for their economic development.
The goal of the paper is to (i) sensitize politicians, bus iness leaders and donors that TTF is key
for economic development and consequently for sustainable poverty reduction; (ii) demonstrate
that TTF is a multi-sectoral challenge with political, economic, administrative, technical and
technological issues, and to (iii) ask for patience, consistency and long term commitment for
TTF reforms on all levels as required by their complexity. The paper will be presented at the CIS
7 Conference to be held in Lucerne, in January 2003.
Worldwide, transport costs in foreign trade are at least three times the rate of customs tariffs. In
the CIS 7 + 2 transport costs are at least three times higher than in the developed countries.
Unofficial payments further exacerbate this situation and deteriorate their international
competitiveness (For example, truckers that transit Caucasus or Central Asian countries typically
have to pay up to USD 1,500-2,000 in unofficial payments or for semi-compulsory guard
services.) Depending on the world market prices of the commodities, total transportation costs
(official and informal) in these countries may amount up to 50 percent of the value of the goods,
, which far exceeds the comparable costs of the main competitors outside the CIS 7+2.
The costs on the different transport corridors show a great variation, e.g. the USD per km costs
from Almaty to Moscow, Baku, Tehran or Urumqi routes can be between 0.76-1.90 for road and
0.27-0.76 for rail transportation. Small and medium sized enterprises (SMEs) with little
international experience suffer the most.
There is a long list of barriers to trade and transport that drive the costs high and make them
unpredictable. The CIS - 7 countries have small and fragmented transport markets (this is not
the case for Kazakhstan or Turkmenistan) that seldom can enjoy scale economies in their
operations. When a country is landlocked the problem is even worse, as it is detached from the
major transport and trade flows. Therefore closer regional cooperation could lead to better
utilization of the scale economies also in transport. The serious regional issues that currently
constrain trade and economic growth in CIS 7+2 countries can only be effectively addressed
through improved cooperation among the countries.
Among the more specific barriers, traders and transport operators consider corruption as the most
serious one. The business community needs better access to reliable information with regard to
international trade and transport. Gradually, they become partners to the authorities in improving
governance and facilitating international economic cooperation. The role of the state is critical in
bargaining for better conditions and more access rights to international markets, but also in
becoming the engine for further reforms and facilitation measures in customs, as well as
transport. The currently under-developed logistics services, as well as the low performance of
transport operators and the lack of the conducive environment for the development of multimodal
impediments. Customs Administrations in all the CIS 7+2 have launched modernization
programs. Further efforts are needed, however to improve cooperation among all the border
agencies within and among the countries..
Since the value of foreign trade is above 70 percent in most CIS 7+2 countries, trade and
transport facilitation would benefit a large number of economic players. According to the UN,
TTF interventions can produce savings between 2-3% of the total trade va lue. In case of the CIS
7+2, the potential savings due to TTF can be around US$1 billion in a year. The distribution of
the savings would most likely benefit first of all the SME sector as they are the most vulnerable
to the current barriers.
It is recommended that all the CIS 7 + 2 prepare (or revise) their National Trade and