Although its title suggests the focus on Central Asia, G. Raballand’s book Central Asia or the Casualty of Landlockedness goes well beyond a single region or issue-area. It is an outstanding contribution to the literature on economic development and regional economic policies. It is unique in its breadth, depth, conceptual approach and remarkable combination of theory, empirical analysis and implications for policies. It is also very comprehensive in terms of literature covered and clarity of presentation of complex issues. Contrary to the dominant themes in literature on globalisation and international trade, it points to a largely overlooked paradox that technological change may contribute to integration of some regions while elevating barriers to integration of other remotely located regions, mainly landlocked and small island economies. As such, it also provides a much needed correction to contemporary theories of optimal size of state pointing to its dramatic ‘downsizing” thanks to world trade liberalisation (national borders are not borders to economic activity) and collective security (if under a security umbrella, size does not matter to assure the country’s security). In the presence of high costs of moving goods to external markets, the effect of trade liberalisation may fail to materialise.
Before providing ammunition to the praise of the book expressed above, an explanation of the book’s title—which I did not catch on the first reading—is in order. A layman can figure it out only after reading the discussion on the difference between terms: ‘centrality’ and ‘landlockedness.’ The distinction is important as it highlights that the latter needs not to be the curse as ‘land-locked’ location can be advantageous when it is ‘central.’ The critical issue is not geographical location itself but what it implies in terms of access to external markets. Switzerland and some other European countries—as Raballand reminds—is landlocked but centrally located and exposed to international competition. Thus, the title heralds an important political economy dimension: whether Central Asia becomes ‘central’ or remains ‘landlocked’—implying being trapped in low-level equilibrium—depends on gamut of factors including the quality of infrastructure, the quality of governance also in bordering countries and the extent of regional cooperation. These largely appear to be wanting in Central Asia: G. Raballand’s analysis leads him to conclude that “Central Asia is more landlocked than central” (“l’Asie centrale est plus enclavée que centrale” p. 301).
The book has five chapters and two annexes. It begins with a theoretical discussion of unique traits of landlocked economies (Ch. 1); followed by the discussion of the impact of remoteness on foreign trade (Ch. 2); an examination of regional integration as a remedy to landlockedness (Ch. 3); drawing the parallels between landlocked and small island economies (Ch. 4); and assessment of trading cost of Central Asian economies (Ch. 5). Annex 1 lists landlocked countries in the world and Annex 2 provides dates and names of regional arrangements in the post-Soviet space in 1991-2002. The common theme of the book boils down to providing answers to a question of what concepts and theories should inform students of economic development, analysts and policy makers from landlocked countries as exemplified by Central Asian states. The discussion throughout the book neatly outlines major findings of new economic geography and regional integration with an emphasis on their relevance to countries located remotely from large markets, that is, not necessarily landlocked. Chapter 1 contains a very thorough discussion of new economic geography. The description of the evolution of new economic geography is not only well structured but it also nicely combines a very clear presentation of sophisticated theoretical concepts with empirical applications.
Chapter 2 builds upon concepts examined in Chapter 1 expanding the analysis to address a critical question why land-locked countries trade less than countries with access to sea. Since this observation does not apply to all of them (e.g., landlocked countries in Europe), exceptions offer clues why trade of other landlocked countries remain suppressed. The subsequent discussion seeks an explanation through outlying the methodology of gravity modelling together with its history, its various applications and results as they apply to landlocked countries. Quantitative estimates point to the huge impact of multiplication of borders on transaction cost of foreign trade activity. While the links between gravity-type analyses (Chapter 2) and new economic geography (Chapter 1) are multiple, the one that tops them all is the impaired capacity of landlocked firms to tap economies of scale due to high transaction costs. The latter determine—to allude to the author’s distinction between ‘centrality’ and ‘landlockedness’—whether an economy is a victim of the curse of geography. High transaction costs, mainly driven by transportation costs and the cost of border-crossing(s), erect a barrier to participation in modern division of labour based on ‘just-in-time’ production management within networks built around large multinational corporations and foreign direct investments.
Since some components of the transaction cost are not ‘geography-made’ but ‘policy-induced,’ this begs the question of what can be done to reduce the latter. Chapter 3 explicitly addresses this question and points to potential benefits that can be derived from regional cooperation and integration. Potential benefits abound. Regional cooperation supported by international donors might address the infrastructure deficit. G. Raballand, pointing to a paradox of landlocked countries obtaining relatively less aid to develop transportation and communication networks than other developing countries, argues that the lack of infrastructure sets into motion a vicious cycle of economic backwardness, as it discourages investments, both local and foreign. Regional integration contributes to lowering transport costs through another modality—that of allowing transport firms to tap economies of scale thanks to access to larger regional markets. Last but not least, regional integration leads to lower costs of border crossing: these costs are responsible for higher cost of continental than maritime transport. The author addresses two further questions: What regional groupings that exist in the post-Soviet economic space offer largest rewards? What should be the geographical direction of unlocking? As for the first question, the answer based on a gravity model, points to Euro-Asian Economic Community as the best venue for Central Asia. The answer to a second question is not so straightforward: Instead the author gives an overview of controversies surrounding this issue.
Having established the crucial importance of transport cost, the analysis of the last two chapters turns to a detailed examination of its role in shaping unique developmental traits of remotely located economies (Chapter 4) and estimation of trading costs faced by Central Asian firms (Chapter 5). G. Raballand shows that both landlocked economies and remotely located economies with access to sea face similar development challenges, which he links to transportation cost. His analysis of the impact of the containerisation revolution in transport provides a strong warning against quick generalisations that the fall in transport cost inevitably leads to the increased pace in global economic integration. In fact, G. Raballand shows that containerisation has not reduced but increased ‘distance’ from major markets for remotely located economies. While consumers and producers located close to large ports, hubs, witnessed huge decreases in transport cost, those located far from hubs did not experience similar reductions, as they had to rely on costly feeders. The cost of transport fell in many instances, but the differential vis-à-vis ‘hub-only’ users increased. In consequence, their competitiveness has declined forcing these countries to greater reliance on international assistance and exports of labour (remittances).
The dissolution of the Soviet Union has exacerbated the negative consequences of geographical remoteness for Central Asian economies, as amply demonstrated in the last chapter. Detailed estimates of costs of moving goods to major world markets suggest that indeed that the region faces huge transport cost. This is so not only because of geography and the emergence of borders (border effect) but also due to the legacy of transport development in the former Soviet Union. It neglected road transport as roads whose construction was driven by military rather than economic considerations. Furthermore, it relied on railroads linking former republics to Moscow in a hub-and-spoke pattern. Will Central Asia remain a casualty of landlockedness or will it enter the path of sustainable economic growth? While Gaël Raballand’s book does not provide an unambiguous answer to this question, it shows that many barriers keeping them far from markets are mainly political not physical. It shows huge costs of political inaction and, by the same token, huge rewards of regional cooperation and integration. Since human beings usually respond to opportunities for positive-sum interaction, one expects greater cooperation in the removal of policy-induced transport barriers. Recent developments in Central Asia point in this direction.