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Advances in Spatial Science
Collaborative
Approach to Trade
Enhancing Connectivity in Sea- and
Land-Locked Countries
Advances in Spatial Science
Series editors
Manfred M. Fischer
Jean-Claude Thill
Jouke van Dijk
Hans Westlund
Advisory editors
Geoffrey J.D. Hewings
Peter Nijkamp
Folke Snickars
More information about this series at http://www.springer.com/series/3302
Francesca Romana Medda • Francesco Caravelli •
Simone Caschili • Alan Wilson
Collaborative Approach
to Trade
Enhancing Connectivity in Sea- and
Land-Locked Countries
Francesca Romana Medda Francesco Caravelli
QASER Laboratory QASER Laboratory
University College London University College London
London, United Kingdom London, United Kingdom
The study on which this book is based was originally commissioned by the World
Bank in order to build better foundations for future investment decisions, particu-
larly in Uganda and the South Pacific Islands. When we started this work, our
research group, the UCL QASER Lab, was relatively new. But, we all share the idea
that in order to develop a strategy for more inclusive and balanced economic
development, we would have to not only leverage the trade comparative advantages
of the regions under investigation but also begin with the premise that joint efforts
to create connections and collaborations among the main players in trade are
complementary to competition. In keeping with our starting point, we agreed that
we might require methodologies and models not generally within the orthodox
trade and logistics studies toolkit. In the end, we proposed to the World Bank a
vision and methodological means of arriving to the objectives which were chal-
lenging and innovative at the same time.
We are grateful to the World Bank and particularly to Charles Kunaka and
Daniel Saslavsky for having accepted this challenge and for their support in the
completion of the study. Their experience, knowledge and insights, along with
those of the World Bank team, have greatly helped us to refine the initial ideas, to
improve the analyses and above all to interpret the obtained results. The World
Bank has published two reports based on the analyses in this volume.
We have approached the study and in particular the two regions, Uganda and the
South Pacific Islands, with a sense of reverence. When we began we did not know
much about either of the two regions; we were just in London, in an office. So with
great commitment and energy we asked questions, compiled data and information
and listened to those ‘in the know’. Thereafter, we developed and tested the models
and then applied them to the proposed challenges. Over the course of these months,
we have learned and drawn conclusions from our analyses, showing how these
regions, identified as lagging, indeed have concrete potentialities for emerging from
an idled economic growth. Some of the policy recommendations proposed here we
think will boost development in these so-called lagging regions, enhance trade
activity and ultimately improve the welfare of their citizens. As global connections
v
vi Preface
have become paramount for economic growth more so now than in the past, these
connections are also becoming extremely complex due to the fact that they inter-
twine many interests and trends which are cultural, environmental, demographic
and political, to mention a few. We therefore argue in this book that the dilemmas
occur when decisions are made on short-term single interests, whereas we need to
facilitate collaborative actions and approaches in order to capture and create value
from the interdependency of these different interests.
In sum, the book does not aim merely to be a showcase for advanced regional
science analyses applied to trade; the models and techniques used in this volume
were selected in relation to the defined objectives. These methodologies were best
suited for us to tackle the complexity of trade connections and to delve deeply and
bring to the surface the types of problems whose solutions are effectively reached
through a collaborative approach to trade. For this reason, Uganda and the
South Pacific Islands are exemplars of the analytical approach we are proposing
in this book.
We are certainly indebted to Raul Oviedo Martinez, Luca Cocconcelli, Minette
Dasigi and Alessandra Coda for their direct contributions to the book. We would
also like to acknowledge the many reviewers and anonymous referees who pro-
vided us with useful comments on the manuscript. And finally, special thanks to
Susan Davis for her invaluable editing work.
vii
viii Contents
5 Port Attractiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.2 Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
5.4 Conclusions and Policy Recommendations . . . . . . . . . . . . . . . . 59
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6 Scenario Analysis of Shipping Networks: Consolidation . . . . . . . . . 65
6.1 Introduction: Towards Consolidation of Cargo and Reduced
Transport Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
6.2 Scenario 1: Existing Conditions Network . . . . . . . . . . . . . . . . . 68
6.3 Scenario 2: Fully Connected Network . . . . . . . . . . . . . . . . . . . . 73
6.4 Scenario 3: Multiplier Attachment Network . . . . . . . . . . . . . . . 77
6.5 Conclusions and Policy Recommendations . . . . . . . . . . . . . . . . 80
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
7 Trade Coordination Agreements . . . . . . . . . . . . . . . . . . . . . . . . . .. 83
7.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 83
7.2 Scenario 1: Existing Conditions Network with Bilateral
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 85
7.3 Scenario 2: Fully Connected Network with Bilateral
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 89
7.4 Scenario 3: Multiplier Attachment Network with Free Trade
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 93
7.5 Conclusions and Policy Recommendations . . . . . . . . . . . . . . .. 97
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 99
8 Synthesis: The Integrated Multilayer Model . . . . . . . . . . . . . . . . . . 101
8.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.2 The Vertical Network Model . . . . . . . . . . . . . . . . . . . . . . . . . . 101
8.3 Evaluation of External Shocks on Trade . . . . . . . . . . . . . . . . . . 104
8.4 Interactions Between the SPICs . . . . . . . . . . . . . . . . . . . . . . . . 107
8.5 Conclusions and Policy Recommendations . . . . . . . . . . . . . . . . 110
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Appendix to Part II: Data Requirements for the SPICS . . . . . . . . . . . . . 113
II.1 Data Sets for South Pacific Island Countries—SPICs . . . . . . . . 113
II.2 The Shipping Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Port Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Container Shipping Services . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
II.3 Cultural Links and Common Language . . . . . . . . . . . . . . . . . . 125
Trade Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
II.4 Transport Costs for SPICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Voyage Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Port Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Contents ix
Part IV Conclusions
14 Collaborative Approach to Trade . . . . . . . . . . . . . . . . . . . . . . . . . . 217
14.1 Methods to Study Interdependency . . . . . . . . . . . . . . . . . . . . . . 217
14.2 The Collaborative Approach to Trade . . . . . . . . . . . . . . . . . . . . 219
14.3 Trade Interdependency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
Authors
Francesca Romana Medda is the Director of the UCL QASER (Quantitative and
Applied Spatial Economics Research) Laboratory which specialises in applied
economics and finance. She is Professor in Transport and Infrastructure at the
University College London, Department of Civil, Environmental and Geomatic
Engineering. Since 2012, she serves as economic adviser to the UK Ministry of
Environment and Agriculture (Defra) and in 2014 at the Ministry of Finance (Her
Majesty’s Treasury) in the Infrastructure Interdependency Committee. Her research
focuses on critical and social infrastructure investments with particular interest on
transport, financial innovation related to new technologies, impact finance and
urban/regional investments. She is Vice-President of the UK Parliamentary and
Scientific Committee, House of Commons, and Fellow of the Institution of Civil
Engineers.
Simone Caschili, environmental engineer and PhD in urban planning, holds the
position of associate at LaSalle Investment Management where Simone is a mem-
ber of the Portfolio Asset Risk group within the Research and Strategy team. His
key responsibilities include risk analysis and property market modelling, to inves-
tigate real estate markets and yield socio-economic indicators and to monitor
capital market imbalances and fund/asset return performance. Simone is a senior
xi
xii Authors
research fellow of the UCL QASER Lab since 2010 where he directed his research
interests on a number of topics, including the modelling of urban and regional
systems, spatial and temporal modelling of transport networks and policy evalua-
tion for planning in both urban and environmental governance.
Alan Wilson, is Chief Executive of the Alan Turing Institute and Professor of
Urban and Regional Systems in the Centre for Advanced Spatial Analysis at
University College London. He is Chair of the Home Office Science Advisory
Council. He was responsible for the introduction of a number of model building
techniques which are now in common use internationally—such as the use of
‘entropy’ in building spatial interaction models—summarised in Entropy in urban
and regional modelling. His current research is on the evolution of cities and global
dynamics. He writes the Quaestio blog on research and interdisciplinarity. He is a
Member of Academia Europaea, a Fellow of the British Academy, a Fellow of the
Academy of Social Sciences and a Fellow of the Royal Society.
List of Figures
Fig. 1.1 GDP annual growth: average over 10 years. Data Source:
World Bank data set . .. . . . . . .. . . . . . .. . . . . .. . . . . . .. . . . . . .. . . . . .. . . . . . . 5
Fig. 2.1 Multilayer networks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Fig. 2.2 Outline of the applied methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Fig. 2.3 Functional relationships between layers . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Fig. 2.4 Schema of a supply chain . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . .. . . . . . 20
Fig. 3.1 Employment to population ratio. Data Sources: World Bank
data set, year 2012 . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . .. . . . . . 28
Fig. 3.2 Agriculture value added to GDP ratio. Data Source:
World Bank data set, year average (2000–2012) . . . . . . . . . . . . . . . . . 28
Fig. 3.3 Export per sector of the economy (to GDP ratio %).
Data Source: World Bank data set, year 2012 . . . . . . . . . . . . . . . . . . . . 29
Fig. 3.4 Main international trading partners of SPICs and Uganda.
Data Source: World Bank data set, year 2012 . . . . . . . . . . . . . . . . . . . . 29
Fig. 3.5 Exports of goods and services (% of GDP). Data Source:
World Bank data set; year 2012 . . . . . .. . . . . .. . . . . .. . . . . .. . . . . . .. . . . . 30
Fig. 3.6 Export indexes: volumes and values. Data Source:
World Bank data set, year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Fig. 3.7 Merchandise trade to GDP ratio (%). Data Source:
World Bank data set, year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Fig. 3.8 Foreign Direct Investment (% of GDP). Data Source:
World Bank data set, year 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Fig. 3.9 Net bilateral aid flows to GDP ratio. Data Source: World
Bank data set. QASER Lab elaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Fig. 4.1 Outline of the applied methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
xiii
xiv List of Figures
Fig. 7.7 Trade flows in the Fully Connected network with economies of
scale and agreement among PNG, Solomon Islands, Vanuatu,
New Caledonia, and Australia. The acronyms of the ports in
countries part of the agreement are: NOU, NOR, VLI, BNE,
HIR, MAG, KIM, ORO, RAB, PMB, LAE. Node size is
proportional to total flow passing through each port. Link width
is proportional to total volumes moved between two ports . . . . . . 91
Fig. 7.8 Trade flow values in the Fully Connected network with
economies of scale and agreement among PNG, Solomon
Islands, Vanuatu, New Caledonia, and Australia. Values are
expressed in thousands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Fig. 7.9 Trade flows in the Multiplier Attachment network with free
trade agreement in the SPICs. Node size is proportional to total
flow passing through each port. Link width is proportional to
total volumes moved between two ports . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Fig. 7.10 Trade flow values in the Multiplier Attachment network with
agreement in the SPICs. Values are expressed in thousands . . . . 95
Fig. 7.11 Trade flows in the Multiplier Attachment network with free
trade agreement in the SPICs and economies of scale. Node
size is proportional to total flow passing through each port.
Link width is proportional to total volumes moved between two
ports . . . . .. . . . .. . . . .. . . . . .. . . . .. . . . .. . . . .. . . . . .. . . . .. . . . .. . . . .. . . . . .. . . . 95
Fig. 7.12 Trade flow values in the Multiplier Attachment network with
free trade agreement in the SPICs and economies of scale.
Values are expressed in thousands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Fig. 8.1 Plot of randomly removed links versus total travelled distance
and linear fitting trend line between 16% and 52% of the
removed links (R2 ¼ 0.99) and after 52% (R2 ¼ 0.99) . . . . . . . . . . 105
Fig. 8.2 Potential Transhipment of ports in the Existing Conditions
network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106
Fig. 8.3 Plot of removed links of ports in Suva, Brisbane, Tauranga, and
Lae versus total travelled distance, and linear fitting trend line
between 1% and 25% removed links (R2 ¼ 0.99) and after
25.5% (R2 ¼ 0.98) . . .. . .. . .. . .. . . .. . .. . .. . .. . . .. . .. . .. . .. . .. . . .. . .. . . 107
Fig. 8.4 Geo-visualisation of port accessibility for the Existing
Conditions network (blue) and Multiplier Attachment network
(purple) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
Fig. II.1 Visualisation of the geographic location of the container ports
considered in the study . . . .. . . . . . .. . . . . . . .. . . . . . .. . . . . . .. . . . . . .. . . . . . 113
Fig. II.2 Geo-referred visualisation of Port Throughput . . . . . . . . . . . . . . . . . . . 118
Fig. II.3 Geo-referred visualisation of Maximum allowed
vessel Draft .. . . .. . .. . .. . . .. . .. . .. . . .. . .. . . .. . .. . .. . . .. . .. . . .. . .. . .. . . . 118
Fig. II.4 Geo-referred visualisation of national GDP in 2010 . . . . . . . . . . . . . 119
List of Figures xvii
Fig. 11.3 Uganda’s road infrastructure embedded into the model . . . . . . . . . 174
Fig. 11.4 Road improvements at 100% level of RAI for districts Luwero,
Mpigi, Masaka, Iganga, Mitiyana, Kamuli, and Mukono . . . . . . . . 175
Fig. 11.5 Improvements of Uganda Entebbe International Airport . . . . . . . . 177
Fig. 11.6 Comparison of the three scenarios in relation to the agents
exiting the market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178
Fig. 12.1 Map showing the districts of our analysis in dark colour:
Luwero, Mpigi, Masaka, Iganga, Mitiyana, Kamuli, and
Mukono . . . . . .. . . . . . .. . . . . . .. . . . . . .. . . . . . .. . . . . . .. . . . . . . .. . . . . . .. . . . . . . 185
Fig. 12.2 Map of the control points indicating warehouse locations in the
considered districts: Luwero, Mpigi, Masaka, Iganga, Mitiyana,
Kamuli, and Mukono . .. . . . . . . .. . . . . . . .. . . . . . . .. . . . . . . .. . . . . . . .. . . . . . 187
Fig. 12.3 Study areas depicting ABM-generated locations of farmers
(red), warehouses (green) and traders (dark green) . . . . . . . . . . . . . . 188
Fig. 12.4 Configured positions of 40 warehouses from the Existing
Conditions scenario . .. . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . .. . .. .. . . 190
Fig. 12.5 Warehouse use probability of 40 warehouses over a simulation
period of 6 months. We show the five warehouses (W1–5) with
the highest probability of being used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Fig. 12.6 Five optimal positions of warehouses obtained from the model . . . . . . 192
Fig. 12.7 Transport logistics cost impact on farmer inactivity . . . . . . . . . . . . . 194
Fig. 13.1 Subscriber and tele-density data, 2002–2012. Source: Uganda
Communication Commission (2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
Fig. 13.2 Fixed and mobile internet subscriptions, June 2013. Source:
Uganda Communication Commission (2014) . . .. . . . .. . . .. . . . .. . . . 199
Fig. 13.3 Number of farmers/agents exiting the market in relation to
Farmer Association and No Farmer Association . . . . . . . . . . . . . . . . . 201
Fig. 13.4 Total transport cost—Association vs. No Association . . . . . . . . . . . 202
Fig. 13.5 Average farm gate prices for Hot Peppers—Association vs. No
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202
Fig. 13.6 Average farm gate prices for Chillies—Association vs. No
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Fig. 13.7 Average farm gate prices for Matooke—Association vs. No
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203
Fig. 13.8 Average farm gate prices for Okra—Association vs. No
Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204
Fig. 13.9 Average farm gate prices for Sweet Potatoes—Association
vs. No Association .. . . .. . .. . . .. . . .. . .. . . .. . .. . . .. . .. . . .. . . .. . .. . . .. . . 204
Fig. 13.10 Amount of product sold to traders by farmers/outgrowers—
Association vs. No Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Fig. 13.11 Number of inactive traders/agents in relation to the
implementation of GAP policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
List of Figures xix
1.1 Objectives
Regional science offers a rich toolkit for analysis and policy development for
substantive applications. In this book, the science is applied to the challenge for
global investment agencies seeking to enhance trade in lagging regions. The
challenge is particularly acute for sea-locked and land-locked countries and striking
examples are provided by the widely scattered island countries of the South Pacific
on the one hand, and Uganda on the other. What is needed is an in-depth analysis of
trade routes as a basis for evolving policies to increase efficiency and reduce costs.
The two case studies presented here provide an excellent illustration of the power of
regional science, from assembling data bases in difficult situations, through to
developing and applying models of the trade system. We apply network analysis,
spatial interaction modelling and agent based models supplemented by appropriate
statistical techniques. Our final results for both countries allow for substantive
policy suggestions to be made.
The South Pacific Islands are separated from each other and from larger main-
land countries by vast distances, and as a result are served by a small number of
shipping routes that are both expensive and too slow for the efficient export of, for
example, agriculture products. What is shown here is that it is possible to model the
trade patterns of these countries with a rich multi-layered spatial interaction model
combined with network analysis. Our results offer up a tool with which to explore
the possibility of a major hub port investment—and the optimal location for this—
combined with a consolidation of shipping routes.
The Uganda situation, however, demands a different approach. The challenge
here is to improve the efficiency of the supply chain and to accelerate the speed of
export flows as they leave their agriculture source en route, for example, to Entebbe
Airport. Investigation shows a very complex supply chain, and an effective tool in
this case is agent based modelling, which represents the key players in the system.
In this case, a combination of transport infrastructure investment and effective
information exchange in the local economy are possible solutions for enhancing
trade.
A large number of elements tend to both impede and impact on trade and these
elements often diffuse into ripple effects on the overall growth of a country. For
instance, obstructions to trade may create country vulnerability, not only from an
economic point of view but they can also contribute to food insecurity, worsen
poverty, and exacerbate population displacement and conflict. If we examine with a
wider angle of analysis the interdependency between economic development and
long-distance trade, we can acknowledge that this is indeed a complex nexus
entangled by many strands. Numerous theoretical models and applied analyses
have contributed to the debate about the directionality, and importantly, the validity
of the hypothesis that increased trade fosters growth, but results of these models are
still inconclusive.
The hypothesis of trade-led-growth has been tested extensively through sophis-
ticated econometric approaches as with the use of co-integration and causality
models (Sannassee et al. 2014; Wacziarg and Welsh 2008; Greenaway et al.
2002; Frankel and Romer 1999), suggesting that trade may contribute positively
to growth, but research must also account for contingent relationships in trade and
economic development (Rodriguez and Rodrik 1999, 2001). In this respect, and
following a similar argument, Grossman and Helpman (1991) observe that many
channels should be examined in order to determine the relationships between trade
and economic growth; these include market size and access to markets, intensive
and extensive margins for trade, sectoral composition, investment levels, and
technological endowment, to name a few.
Given this background, the main objective of the present work is to examine how
some of these channels interact and connect in the search for new insights into how
to spur growth by enhancing trade. The potential gains likely to arise through a
better understanding of trade also motivate us to introduce new methodological
paradigms in our trade analysis. In Part I the model dedicated to the South Pacific
Islands is grounded in network analysis; the second model for Uganda is carried out
in an application of agent based modelling. These methodologies have been
selected because they are best able to examine the interdependency and the inter-
actions present among the numerous trade elements.
In both applications we ask the following questions
1. How can we improve collaboration in relation to national, regional and interna-
tional trade markets?
2. How can we reduce delays and costs in the connection of the trade network?
These two questions constitute the overarching framework of the case studies.
However, the two case studies examine the issues from two different perspectives.
In the case of the SPICs, we take an outward looking perspective where we analyse
how to improve connectivity, particularly through a wider dissemination of infor-
mation and lower price asymmetry in logistics. In the case of Uganda, we focus on
an inward looking perspective by studying agent behaviour in the operations, trade
and logistics networks in order to decrease costs through greater interactions among
1.2 The Current Situation 5
8
7
6
% GDP Growth
5
4
3
2
1
0
Fiji Kiribati Solomon Samoa Papua New Tuvalu Tonga Uganda
Islands Guinea
Fiji Kiribati Solomon Islands Samoa Papua New Guinea Tuvalu Tonga Uganda
Fig. 1.1 GDP annual growth: average over 10 years. Data Source: World Bank data set
agents, and testing how policy initiatives can impact on trade and ultimately on the
growth of the region. In this introduction we review the economic and trade
contexts of the South Pacific Islands and Uganda as they currently are, and then
discuss in detail the common theoretical elements that tie together the two case
studies.
We begin by reviewing the main economic parameters of the two regions: the South
Pacific Islands (SPICs) and Uganda. When looking at both regions’ GDP we can
observe steady growth over the last 10 years (2004–2014) (Fig. 1.1).
Over the 10 year period Uganda witnessed GDP growth, on average, of 6.7%.
Whereas in the SPICs, only Papua New Guinea (PNG) achieved an average 4%
GDP growth over the 10 year period. All of the other islands witnessed low
economic growth: in Samoa, GDP was 3%, the Solomon Islands 2.7%, and Kiribati
2.1%. Tuvalu, Tonga and Fiji experienced the lowest rate of GDP growth over the
same period among the SPICs. For instance, in Tuvalu one of the reasons for poor
GDP performance is due to its being heavily dependent on food imports and wholly
dependent on fuel imports. Tuvaluans work mainly in traditional agriculture and as
fishermen; it is noteworthy that Tuvaluans especially are employed abroad as
sailors and their remittances are major sources of income for their families back
home. On the other hand, the highest economic performance of PNG is attributed to
a relatively small formal economy consisting of workers engaged in mineral
production and the manufacturing sector, and a large informal sector where subsis-
tence farming accounts for the bulk of economic activity. There are clearly many
possibilities for development which we outline in the next section.
6 1 Enhancing Trade in Sea- and Land-Locked Countries
At first glance, the differences between the South Pacific Islands and Uganda loom
larger than their similarities, but it is precisely the similarities which are the
strongest threads in the present work. The first similarity in the two cases is their
small status. In SPICs we are considering the trade flows among the relatively small
islands in the South Pacific and the rest of the world, and in Uganda the main actors
in the agriculture trade and supply chain (the focus of our analysis) are smallholder
farmers.
Beginning with the capacity to export, theory suggests that firms which export
goods are usually larger and more productive than non-exporters, since fixed costs
are determinant factors for export (Helpman et al. 2008; Bernard and Jensen 1995,
1999). In both of our case studies the entities under analysis are small, and although
they are not firms, they nevertheless have difficulty gaining access to trade markets.
One of the major obstacles to trade is the asymmetric information present in both
case studies (World Bank 2013). Their small status as an exogenous attribute, along
with information bias, are often difficult to overcome in the face of (prevailing)
intense rivalry (ADB 2013) and cutthroat competition, which certainly do not foster
growth or development. In this respect, although the Ugandan agriculture market
and the SPICs shipping market may be considered as moderately contestable,
collaborative activities are nonetheless not yet fully developed in either region.
Collaborative actions are often studied as formal and informal agreements
among trade entities in order to achieve better common resource management
(Olstrom 2012). As we are considering demand-driven market processes rather
than a supply-based framework, we focus on collaborative approach of trade as the
primary way to overcome information asymmetry. Therefore, in our analyses we
follow the marketing literature (Rushton et al. 2010), where common actions are
seen as strategies for sharing know-how and best practice and as a way to pool
resources, improve productivity and economies of scale, enhance bulk marketing of
product due to stronger bargaining power, achieve penetration of new markets, and
gain access to larger markets. We can identify through the presence of six Cs what
we interpret as a collaborative approach to trade:
1) Cooperation. Cooperative organisations and collective actions, as in agree-
ments, can be considered as the backbone for increasing trust among trade
partners based on responsibilities, and also for reducing trade costs.
2) Competition. Trade liberalisation is seen here as a way to improve efficiency of
local production and to expand market share.
3) Consolidation. From the point of view of the optimisation of the logistics chains
and increase of economies of scale.
4) Coordination. Single small trade entities, such as the farmers in Uganda or the
islands in the South Pacific, can pool their resources, thereby amplifying their
results and decreasing transaction costs.
1.3 Possibilities for Development 7
Totta on, että erinäiset ihmiset eivät ole milloinkaan olleet vapaita
eriskummaisista mielipiteistä ja käsityksistä. He ovat aina
säilyttäneet jotakin oman kirkkonsa tai minkä tahansa muun kirkon
käsityksen ohella ja yksityiseenkään täysin mukautumatta. Mutta
terve arvostelukyky saattaa näin menetellä herättämättä pahennusta
tai joutumatta harhaoppeihin, sillä onhan, kaikkien
kirkolliskokouksien päätöksistä ja koulukuntien määritelmistä
huolimatta, vielä monta koskematonta ja mieleenjohtumatonta asiaa,
joita rehellinen järki huoleti voi vapaasti käsitellä silti ollen loitolla
kaiken harhaopin piiristä.
Jumala on viisas, koska hän tietää kaikki asiat, ja nämä hän tietää,
koska on ne itse tehnyt, mutta hänen suurin tietonsa on sen
käsittäminen, mitä hän ei ole tehnyt, nimittäin itsensä. Ja tämä on
myöskin ihmisen suurin tieto.