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A United Nations report recently revealed that poor maritime connectivity continues to keep smaller and weaker economies from reaching world markets. However, for those few landlocked countries that have defied their geographical limitations and developed a maritime industry, the risk seems to have been worth it.

Seaborne trade is often seen as the backbone of economic growth and development, and the challenges faced by landlocked developing countries (LLDCs) are proof of this.

Over the years, multiple studies have shown that the pace of development in areas remote from the coast slows down as the distance from the sea increases. Today LLDCs are, as a group, among the poorest in the world.

A new report compiled by the United Nations Conference on Trade and Development (UNCTAD) reminded policy-makers that low shipping connectivity makes weaker economies more vulnerable, and the world is experiencing “a growing rift between the best and worst connected countries”.

There are currently 48 countries (including four partially recognised states) that are completely surrounded by at least one other country. For those most affected, their lack of sea access means they have to contend with fewer, less frequent, less reliable and more costly transport connections. 

However, the United Nations Convention of the Law of the Sea (UNCLOS) of 1982 recognises the right of “every state, whether coastal or land-locked to sail ships flying its flag on the high seas”.

As such, a number of landlocked countries around the world have chosen not to pass on the economic opportunities that a maritime industry can offer. Whether by training seafarers for navigation on the high seas, manufacturing shipping parts, shipbreaking, or the less reputable practice of lending flags of convenience, LLDCs are developing their own blue economies.

Luxembourg’s success story

Speaking in front of the European Commission on Maritime Day in 2016, Luxembourg’s minister for the environment, maritime affairs and fisheries, Karmenu Vella, made an impassioned case for giving landlocked states the opportunity to develop and grow their own blue economies.

“To many, speaking about the maritime economy in landlocked countries might seem counterintuitive, like placing fire extinguishers on a ship,” he said. “But all of us here know better. We know that blue growth is not just for coastal states. And we have the examples to prove it.”

Luxembourg for one is “punching far above its weight”, as Vella put it.

Since the creation of its national shipping register in 1990, the number of ships registered in Luxembourg has increased from nearly 150 to around 240 in 2015. Gross tonnage has also tripled from one to three million tons over the same period. This means that today, Luxembourg taps into the European blue economy valued at approximately €500bn.

Its maritime administration (Commissariat aux affaires maritimes) became the country’s first governmental agency to earn an ISO 9001 quality certification and in 2011, Luxembourg became the fifth EU country to ratify the International Labour Organization’s Maritime Labour Convention.

The country’s tax regime and legislation have also been developed in such a way that allowed the industry to flourish.

“Numerous synergies involving the financial, insurance and logistics sectors have since then emerged,” writes Robert Biwer, the government commissioner for maritime affairs. “These have led to the creation of the Luxembourg Maritime Cluster, and today a developing maritime sector fits in with the Luxembourg Government’s economy development policy.”

Austria’s blossoming involvement

Austria has also reached out to surrounding coasts, although more modestly.

The country has two main gateways operated by shipping carrier ZIM, one to the north and one via the Adriatic. According to the carrier’s website, both gateways are linked from various terminals inside Austria, with block trains operating to the each of the cargo gateways.

The carrier operates about 80 vessels, with a 344,460 TEU capacity, and its ships stop at 180 ports around the world.

The Port of Hamburg has also been running its own representative office in Austria since 1951, working to establish good contacts with shippers, forwarders, shipping agencies and operators, as well as trade associations and institutions in the maritime sector.

Mongolia: a muddled approach to maritime growth

As the largest landlocked country in the world, Mongolia has developed a maritime industry whose legitimacy is often disputed by international bodies.

The Mongolian Ship Registry was first established under then Prime Minister Nambaryn Enkhbayar in February 2003, as “one of the many projects the country has undertaken to improve the investment and economy of the country,” according to its mission statement.

Although the registry, officially based in and operating from Singaporean offices, is fully authorised to issue the necessary certificates and documents for ships, multiple investigations have cast doubts on its legality, raisings suspicions that it is in fact giving out flags of convenience.

According to the International Ship Registries, shippers might opt for a Mongolian registration thanks to a range of benefits, such as low taxes or no additional costs, no restrictions on crew nationality, and no restrictions on the ownership of any vessel.

A UN report from 2013 found that over the course of the decade, Mongolian merchant fleet grew to reach a total dry weight tonnage capacity of 643,000 tons, the vast majority as bulk carriers or general cargo ships.

Inspections of these vessels under the Tokyo Memorandum of Understanding (MoU), which holds regular port state controls in the Asia-Pacific region, have raised numerous alarms and Mongolian ships have often been blacklisted. For example, in 2016, out of 108 inspections, 96 of the ships were found to have “deficiencies”, resulting in 16 detentions. Mongolia is also present on the list of under-performing ships.

Bolivia’s fight for coastal access

Bolivia lost its territorial access to the sea in the early 1900s, after post-war border divisions between itself and Chile left it a landlocked country.

Although past negotiations looked into the possibility of providing Bolivia with a “corridor to the sea”, this was never achieved and today, all containers arriving via the Pacific Ocean need to pass through Chilean ports, a difficult and volatile process that often sees Bolivian lorries having to wait in long queues at the mercy of Chilean bureaucracy or internal labour issues.

That’s why in 2013, Bolivia filed a lawsuit against its neighbour with the International Court of Justice in The Hague in order to reclaim access to the sea.

Speaking in September last year, Chilean Foreign Minister Heraldo Muñoz refuted any possibility of dialogue yet again, saying that “there is no obligation to negotiate sovereign access”.

The case hearings are still ongoing; in the meantime, Bolivia continues to celebrate its traditional Day of the Sea on 23 March each year, and still hosts a navy force. (source: www.ship-technology.com)

 

Ethiopia’s Potential Blue growth

1. as Exporter of skilled seafarers

Ethiopia is located just 60km from Red Sea with the nearest sea port being Assab port. Currently there are two maritime training facilities in Ethiopia. One is located in Debre Zeit which is owned by the national flag carrier Ethiopian Shipping Lines (ESLCE). The other one is located in Bahir Dar which is owned by private company Ethiopian Maritime Training Institute. However despite the fact that both training facilities own state of the art infrastructure, they are still struggling to dominate the world maritime manpower market. If these institutes are supported with the right government policy and market strategy, Ethiopia can transform itself in to main exporter of skilled seafarers.

Considering recent peace deal with Eritrea, both countries can look in to possibility of establishing regional maritime academy (the same way five countries in West Africa has established Regional Maritime Academy in Ghana). This will also facilitate the possibility of establishing the “East Africa Regional Maritime Academy  (EARMA)” in one of the Eritrean sea ports. Countries like Sudan, Eritrea, Djibouti, Kenya and Somalia can be part of this ambition.

2. as Flag of Convenience (FOC)

Ethiopia can also work towards providing flag registration as FOC joining the likes of Bahamas, Cyprus, Liberia and Panama. The flag administration does not need to be managed from the country itself. Business model of Liberia (flag administration is done from USA), and Mongolia (flag administration is done from Singapore) flag administration can be replicated to provide East Africa regional flag of convenience registration service.

3. as Logistics Hub for maritime industry

Due to the fact that Ethiopia has one of the best air connectivity through Ethiopian Airlines, it is possible to establish Logistic facilities which provide service to maritime industries. This includes providing connection of spare parts, repair and technical support to ships calling at East African ports.  Once again this will work if it is supported by government policy and removing each and every bottle neck with our customs and immigration procedures.

The above listed topics require in-depth analysis, re-examining current policies and long term commitment from the government. However, if we start looking in to the right directions, I am confident that in the long run we can tap in to our blue economy.

Feel free to comment below, if you have any more points to discuss with.

One thought on “Can landlocked countries develop a blue economy? Can Ethiopia replicate other LLCs success stories?

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