Explaining High Transport Costs within Malawi : Bad Roads or Lack of Trucking Competition?

What are the main determinants of
transport costs: network access or competition among
transport providers? The focus in the transport sector has
often been on improving the coverage of "hard"
infrastructure, whereas in reality the cost of transporting
goods is quite sensitive to the extent of competition among
transport providers and scale economies in the freight
transport industry, creating monopolistic behavior and
circular causation between lower transport costs and greater
trade and traffic. This paper contributes to the discussion
on transport costs in Malawi, providing fresh empirical
evidence based on a specially commissioned survey of
transport providers and spatial analysis of the country s
infrastructure network. The main finding is that both
infrastructure quality and market structure of the trucking
industry are important contributors to regional differences
in transport costs. The quality of the trunk road network is
not a major constraint but differences in the quality of
feeder roads connecting villages to the main road network
have significant bearing on transport costs. And costs due
to poor feeder roads are exacerbated by low volumes of trade
between rural locations and market centers. With empty
backhauls and journeys covering small distances, only a few
transport service providers enter the market, charging
disproportionately high prices to cover fixed costs and
maximize markups.