Prepare a 2-3 page case study that summarizes the Small Island Development Trade Challenges. Research additional sources and comment on what you have found regarding the challenge

GE.14-16181 (E)



Trade and Development Board Trade and Development Commission

Multi-Year Expert Meeting on Transport, Trade Logistics and Trade Facilitation

Third session

Geneva 24–26 November 2014

Item 3 of the provisional agenda

Small island developing States: Challenges in transport and

trade logistics

Note by the UNCTAD secretariat

Executive summary

Small island developing States (SIDS) are a diverse group of island countries that

share some common features and vulnerabilities such as insularity, geographic remoteness,

and smallness of economies, populations and area. Together, these factors emphasize the

importance of well-functioning, reliable, sustainable and resilient transportation systems, in

particular maritime and air transport for SIDS development and survival. In this context

and capitalizing on the renewed international commitment to advance the sustainable

development agenda of those States, UNCTAD is increasingly focusing its attention on to

tackle challenges in transport and trade logistics faced by SIDS. Relevant activities include

a special chapter of the annual Review of Maritime Transport 2014 (forthcoming) devoted

to developments in the maritime transport sector of SIDS, an ad hoc expert meeting held on

11 July 2014 considering the theme “Addressing the transport and trade-logistics

challenges of the small island developing States: Samoa Conference and beyond”, and a

contribution to the Third International Conference on Small Island Developing States

(Samoa Conference) in the form of a substantive report entitled “Closing the Distance:

Partnerships for Sustainable and Resilient Transport Systems in SIDS” (forthcoming).

This paper highlights some of the key challenges in transport and trade logistics

facing SIDS and identifies areas of potential action with a view to meeting these challenges

and explores potential opportunities. Considerations raised seek to inform deliberations at

the meeting and stimulate discussions with a view to shaping the way forward, in

particular, in the light of the outcome of the Samoa Conference and the post-2015

development agenda.

United Nations TD/B/C.I/MEM.7/8

United Nations Conference

on Trade and Development

Distr.: General

15 September 2014

Original: English

TD/B/C.I/MEM.7/8

2

Introduction

1. SIDS1 are a diverse group of island countries in terms of geographical location, land

area, population size and markets, gross domestic product (GDP) and level of development.

Despite these differences, however, SIDS share some common features that distinguish

them as a special sustainable development case.2 These include insularity, geographic

remoteness, and smallness of economies, populations and area. As a by-product of these

features, SIDS have extensive territorial waters and exclusive economic zones, high export

concentration, deep openness to international trade, heavy import reliance, significant

exposure to external shocks, and vulnerability to environmental degradation and threats, in

particular natural disasters or extreme events. SIDS are threatened by factors affecting

climate change, particularly sea-level rise and extreme weather events.

2. With SIDS being sea locked, access to well-functioning and reliable transportation

systems, in particular maritime and air transport systems, is vital. Seaports and airports are

the lifelines sustaining the survival of these States, especially since they are highly

dependent on transport-intensive imports for much of their consumption needs, for example

food and energy. While maritime transport accounts for nearly 80 per cent of world

merchandise trade by volume, this share is higher for SIDS. Although maritime transport is

the predominant mode used to carry cargo and freight, air transport is relied upon primarily

for passenger and tourist transport and domestic inter-island shipping and mobility.

3. Recognizing the special case of SIDS and related sustainable development

challenges, the United Nations system has worked towards mitigating their vulnerabilities.

In 1992, the United Nations Conference on Environment and Development – the Earth

Summit – defined SIDS as a distinct group of developing countries with specific economic,

social and environmental vulnerabilities. In 1994, the Programme of Action for the

Sustainable Development of Small Island Developing States (Barbados Programme of

Action) was finalized and adopted. It was reviewed in 2005 and revamped by the Mauritius

Strategy for the Further Implementation of the Programme of Action for the Sustainable

Development of Small Island Developing States. In September 2014, the Third

International Conference on Small Island Developing States, held in Samoa, provided the

international community with a fresh opportunity to revisit the vulnerabilities of SIDS in

the light of changing global circumstances and new insights, including in relation to the

impacts of climate variability and change.

4. Capitalizing on this opportunity and in accordance with its most recent Doha

mandate which directs UNCTAD to “advise SIDS on the design and implementation of

policies addressing their specific trade and trade logistics challenges linked to their

remoteness and geographical isolation” (para. 56 (j); see also paras. 6 and 48). UNCTAD

has carried out a number of activities to help advance the transport agenda of SIDS. These

include a special chapter of the annual Review of Maritime Transport 2014 (forthcoming)

1 For the purposes of this paper and unless otherwise specified the term refers to the following 29 SIDS

categorized by UNCTAD: Caribbean – Antigua and Barbuda, the Bahamas, Barbados, Dominica,

Grenada, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and

Tobago; Pacific: Fiji, Kiribati, Marshall Islands, the Federated States of Micronesia, Nauru, Palau,

Papua New Guinea, Samoa, the Solomon Islands, Tonga, Tuvalu and Vanuatu; Indian Ocean and

West Africa – Cabo Verde, Comoros, Maldives, Mauritius, Sao Tome and Principe, Seychelles and

Timor-Leste.

2 See in particular R Read, Trade, Economic Vulnerability, Resilience and the Implications of Climate

Change in Small Island and Littoral Developing Economies, ICTSD Issue Paper No. 12, June 2010;

L Briguglio and W Galea, 2003, Updating and Augmenting the Economic Vulnerability Index,

Occasional Paper by the Islands and Small States Institute of the University of Malta.

TD/B/C.I/MEM.7/8

3

devoted to the maritime transport sector in SIDS, as well as an ad hoc expert meeting on the

theme “Addressing the transport and trade-logistics challenges of the small island

developing States: Samoa Conference and beyond”. Held on 11 July 2014, the meeting

offered an opportunity to discuss the specific transport-related challenges facing SIDS and

consider ways in which these could be better understood and adequately addressed. Insights

gained from the meeting3 helped inform the contribution of UNCTAD to the Samoa

Conference in the form of a substantive report entitled “Closing the Distance: Partnerships

for Sustainable and Resilient Transport Systems in SIDS” (forthcoming).

5. Against this background and drawing in particular on the outcome of discussions at

the ad hoc expert meeting of July 2014,4 as well as on the contribution of UNCTAD to the

Samoa Conference, this paper highlights some of the key transport and trade logistics-

related challenges facing SIDS and identifies areas of potential action with a view to

meeting these challenges and exploring potential opportunities. The aim of the paper to is to

stimulate discussions at the meeting and shape the way forward in the light of the outcome

of the Samoa Conference and the post-2015 development agenda.

I. Key challenges in transport and trade logistics faced by small

island developing States

6. The small size, remoteness and insularity of SIDS pose daunting challenges in

transport and trade logistics and undermine their ability to achieve their sustainable

development goals. While their unique vulnerabilities with regard to transport had been

recognized decades ago, they, nevertheless, remain ever more present today and are further

exacerbated by concurrent trends such as globalization, environmental degradation, climate

change and limited financial resources for infrastructure development and maintenance. In

relation to maritime transport, relevant challenges are affecting, among others, shipping

services, transport costs, port infrastructure and equipment, as well as markets and

operations.

A. Shipping

1. Cargo volumes and imbalances

7. Small cargo volumes in SIDS limit their ability to benefit from economies of scale

or attract shipping services and investors. Smaller vessels need to be used, which bring

higher costs per 20-foot equivalent units (TEUs) than larger vessels. When combined with

relatively low and imbalanced import and export volumes, remoteness, which results in

long and indirect transport routes, can have a significant impact on transport costs.5

Meanwhile, significant trade imbalances are also creating operational challenges and higher

costs. In this context, considerations of ship economics (ship size in relation to volume of

3 Ad Hoc Expert Meeting on Addressing the transport and trade-logistics challenges of the Small

Islands Developing States: Samoa Conference and beyond, Summary of Discussions and Outcomes,

UNCTAD/DTL/TLB/2014/3.

4 For presentations and documentation, see http://unctad.org/en/pages/MeetingDetails.

aspx?meetingid=586.

5 Apart from Trinidad and Tobago, Seychelles, Papua New Guinea and the Solomon Islands, import

values are many times the export values. Available evidence suggests that this is also the case for

weight-based data. UNCTAD estimates the total volume of goods unloaded in developing Oceania

(i.e. the Pacific SIDS) at 13.1 million metric tons in 2013, nearly twice the weight of goods loaded

(7.5 million metric tons). (Review of Maritime Transport 2014 (forthcoming), chapter 1).

TD/B/C.I/MEM.7/8

4

cargo, required service frequency, route length, ship speed, physical constraints to ship size

at ports and time in ports) and indivisibilities in associated seaport infrastructure,

superstructure and equipment can all drive up transport and import costs, and reduce the

competitiveness of exports.

2. Access to global shipping networks

8. Participation in global trade depends significantly on a country’s ability to access

reliable transport services that connect regional and global trading partners and to do so

cost effectively. A country’s position within the global liner-shipping network depends

largely on factors that determine transport cost levels. These include in particular,

geographical location, the hinterland and the captive cargo base, as well as port

characteristics and overall non-physical aspects, including efficiency, process and the

underlying regulatory framework. The UNCTAD liner shipping connectivity index

computed for the first time in 2004 illustrates the difficulties faced by SIDS in accessing

regional and global markets. Symptomatic of their underlying transport challenges, SIDS

rank very low on the index.6

9. SIDS are very remote from the major global markets located in Asia, North

America, North Europe, the Mediterranean, Western Asia and the Indian subcontinent. The

weighted average distance from these markets is around 8,200 kilometres (km) for

Caribbean SIDS and around 11,500 km for Pacific SIDS. This remoteness is an important

factor contributing to higher transport costs in these States. As SIDS are not in the path of

the main shipping lanes network connecting these markets, they are served primarily by

north–south shipping routes based in major relay or transhipment hubs located on the east–

west container belt. Among others, the smaller container volumes on the north–south routes

means that the vessel sizes employed on these routes are smaller with concomitant higher

costs per TEU.

3. Inter-island domestic shipping

10. While international and regional transport connectivity is important for all SIDS,

inter-island domestic transport is of equal importance, not only to reach outer islands that

are spread across vast distances, but also to service productive sectors such as tourism,

fisheries and agriculture. For example, domestic inter-island shipping services in many

countries of the Pacific region – especially to outer islands – are infrequent and unreliable.

This has a negative impact on the production and income generation possibilities of islands,

as regular access to markets is a critical factor. The lack of adequate shipping services

limits the ability of islanders to generate the income necessary to pay for shipping services,

while infrequent and unreliable shipping schedules also lead to increased safety risks to

passengers and cargo, and added costs for outer island transport. These conditions in turn

limit opportunity for social interaction; access to education, health, and business

development services; and the ability of public agencies to deliver programmes and develop

social infrastructure in the outer islands. They also increase the prices of essential goods

6 UNCTAD has estimated the minimum theoretical number of transhipments necessary to ship a

container between country pairs when no direct connections exist between them. For the Caribbean

SIDS, the average minimum number of transhipment moves required to ship a container from the

Caribbean to Europe is 0.8; to the Americas, 0.9; to Asia, 1.3; to Africa, 1.9; and to the Pacific region,

2.3. The average number of required transhipments for containers from Africa and Indian Ocean

SIDS to Africa, Asia, Europe, the Americas and the Pacific region are 1.1, 1.1, 1.5, 1.9 and 2.4,

respectively. To ship containers within the Pacific, to Asia, the Americas, Europe and Africa,

UNCTAD estimates the average number of required transhipments as 0.5, 1.0, 1.8, 2.2 and 2.3,

respectively.

TD/B/C.I/MEM.7/8

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and discourage production and marketing of local products, for example copra, fruits,

vegetables, fish and handicrafts.

11. To address these concerns, franchising schemes7 have been used, for example, in the

Pacific region. These schemes allow governments to contract private operators to deliver

inter-island shipping services of a predetermined quality to specified populations have been

implemented in Pacific Island countries with varying degrees of success.8

4. High degree of dependency on energy imports

12. SIDS are highly dependent on fossil fuel imports; most of them spend more than 30

per cent of their foreign exchange earnings, annually.9 Moreover, with oil prices having

increased significantly over the past decade and sustained elevated

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