Land-locked Country and Port Accessibility: Mongolian Case

Land-locked countries tend to have bottlenecks and problems of high transport costs, complicated cross border procedures, long distance and remoteness to the global market, and limited accessibility to the sea.

Mongolia as a land-locked country recorded comparatively low economic growth rate in the 1980s and 1990s but it could obtain a new momentum of economic growth from the late 2000s due to a continual price increase of mineral resources and other export goods. However, high transport costs and low accessibility to the sea prevent Mongolia from diversifying its trading partners and export goods. This paper examines elemental factors of transport costs between Mongolia and trading partner countries through regression of transport costs, particularly using the ratio of cost, insurance and freight (CIF) amounts to free on board (FOB) amounts and container transport costs. This also scrutinizes the deciding variables of trade volume between Mongolia and trading partner countries by using the gravity model.

In a transport cost analysis, transport costs of less than container load (LCL) cargo are affected directly by the distance of land transport and shipping transport, and common border sharing with Mongolia. The effects from the density of transport infrastructures in a transit country and a partner country which were thought to be decisive in the paper by Limao and Venables (2001) are not clear in the analysis. In the gravity model on trade volume between Mongolia and trading partners, decisive factors are Gross Domestic Product (GDP) of a trading partner, and distance from Mongolia to trading partners.