SPECIAL FEATURE
Hello, neighbor! So what is a geographically-isolated country to do? The answer lies in regional integration. Regional integration is more than just roads. It’s a whole system for developing
both physical and institutional infrastructure to increase, as the
World Bank puts it, the “flow of goods, services, capital, people and ideas.” Such integration is vital for LLDCs to achieve sustainable and inclusive economic growth, create decent jobs, and diversify their economies away from mineral dependence. Regional integration can also lower transport costs, increase foreign direct investment, and foster intra- regional trade. Landlocked countries often face challenges in accessing international markets due to their geographical disadvantages, which inhibit their full participation in global production networks and isolate them from global markets. The solution lies in strengthening regional trade, transport, communication and energy networks, promoting harmonization of regional policies and developing coherent regional infrastructure and trade facilitation measures. Additionally, regional integration can provide opportunities for LLDCs to pool resources and enlarge markets, while stimulating national production, trade and investment. Port of call For the symbiotic relationship landlocked countries and their coastal neighbors can have, consider the example of landlocked Ethiopia, which has long relied on Djibouti’s ports for its trade (see box, page 33). Indeed, an estimated 90-95 percent of Ethiopia’s imported goods transit through its neighbor. Much of the expansion in Djibouti’s trade has been supported by the traditionally high demand for imported goods in Ethiopia, with the total value of imports increasing by 12.5 percent on average per year over the last decade. As the second most populous country in Africa after Nigeria, with 110 million
inhabitants, Ethiopia has driven trade in East Africa despite years of crisis due to civil war and the COVID-19 pandemic. Between 2004 and 2019, Ethiopia had one of the world’s fastest-growing economies, averaging a GDP increase of 9.5 percent per year. It is expected to expand further as it rebounds from the pandemic, supporting economic growth in Djibouti as the two governments work together on several infrastructure projects.
But shipping isn’t the only way to move goods. Multi-modal freight transport is being developed to reinforce sea-air cargo, which saw a significant increase from roughly 64 tons in 2021 to around 222 tons in 2022. For goods travelling between Ethiopia and China, sea-air transport offers access to 16 cities across 14 countries. Multi-modal freight between China and Djibouti is expected to save shipping companies eight hours by air and five days by sea. Deal or no deal? One key element of regional integration are cooperation frameworks. On average, each country is party to four regional trade agreements, with the number of agreements per country ranging from one to 11. Trading under the African Continental Free Trade Area (AfCFTA) agreement officially began in January 2021, with 13 LLDCs having ratified the pact so far. These countries have agreed to liberalize up to 97 percent of tariffs on intra-African trade. The World Bank 1 estimates that by 2025, this agreement could boost Africa’s total exports by 29 percent, intracontinental trade by 81 percent and exports with the rest of the world by 19 percent.
Ethiopia relies on Djibouti’s ports for its trade, and between 2004 and 2019 it averaged a GDP growth of 9.5 percent per year .
1 World Bank: World Development Indicators https://databank.worldbank.org/source/world-development-indicators#
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