Usefulness of the article: The first step is to determine the typical profile of landlocked countries and understand the obstacles they face. Once the diagnosis has been made, the article proposes solutions that these countries can incorporate into their development strategies.
Summary :
- Most landlocked countries are developing landlocked countries (DLDCs). They account for 7% of the world’s population but only 1% of global GDP.
- According to the United Nations, landlocked countries see their GDP per capita reduced by 20% simply because of their geographical location.
- The costs of international trade in landlocked countries are on average 30% to 40% higher than in the rest of the world.
- LDCs have several tools at their disposal to reduce the negative impact of their lack of coastline. Switzerland, Austria, and Luxembourg show that alternatives are possible.
- In terms of GDP growth, LDCs are performing better than other developing countries (+2.6% annual average for LDCs compared to +1.8% for all developing countries between 2017 and 2020).
Currently, globally, maritime transport accounts for around 90% of the volume of goods traded. In addition, the oceans are home to valuable fishery and natural resources (oil, gas, etc.), not to mention the fact that coastlines play an important role in the tourist appeal of countries.
Access to the sea is therefore a strategic issue, as evidenced by the numerous conflicts over the appropriation of territorial waters, the most well-known of which involves seven countries in the South China Sea (Taiwan, Vietnam, the Philippines, Malaysia, Brunei, China, and Indonesia).
Countries with coastlines enjoy significant advantages. But what about landlocked countries that are deprived of access to these coveted coastlines? Can they compensate for this handicap, or are they doomed?
- The Profile of Landlocked Countries (PSLD)
There are 43 landlocked countries in the world (plus five other partially recognized states). Although some of them are among the most developed countries in the world (Luxembourg, Switzerland, and Austria), 32 are developing landlocked countries (DLDCs) , 16 of which are located in Africa. The latter (excluding developed countries) represent a population of 533 million people,or 7% of the world’s population, but contribute only 1% to global GDP . They are located on average 1,370 kilometers from the nearest seaport.
Map of the thirty-two landlocked developing countries
Several indicators show how far behind developing landlocked countries are:
- The average annual GDP per capita was only $1,625, compared to $5,620 for developing countries as a whole and $11,100 for the global average (2019).
- Nearly 30% of the population lived on less than $1.90 per day (2019).
- The Human Development Index averages 0.59, which is similar to that of Equatorial Guinea (ranked 144th globally).
- The share of services in GDP in 2020 was 47%, compared to 56% worldwide.
Transport and telecommunications infrastructure is deficient, obsolete, or non-existent. As a result, only 58.7% of the population had access to electricity in 2018 (89.6% worldwide) and nearly 70% still do not have access to the internet (50% worldwide). LDCs account for no more than 2% of freight transport (excluding maritime transport).
- Barriers to the development of LDCs
According to the United Nations (UN), landlocked countries see their GDP per capita reduced by 20% due to their lack of coastline. For example, with a GDP per capita reduced by 20%, Germany would be below the eurozone average.
This phenomenon can be explained by the difficulties LDCs face in integrating into global value chains and participating in international trade. Their competitiveness is hampered by a number of factors. One of the main obstacles is the additional transport costs incurred by their exports and imports. According to UN estimates, the costs of international trade in landlocked countries are on average 30% to 40% higher than in the rest of the world. Before reaching a neighboring country’s port and being loaded onto a ship, goods must be transported from the landlocked country and cross one or more borders. This increases delays and costs (payment of potential customs duties, multiple customs checks, etc.), especially since, as indicated, the nearest port to LDCs is located 1,370 kilometers away on average. Obsolescence and lack of infrastructure (roads, dry ports, riverway development) make foreign trade all the more costly and complex.
The low rate of urbanization (38.6% compared to 64.9% worldwide) and underdevelopment prevent the widespread deployment of new information and communication technologies (NICTs). As a result, the internet, which plays a crucial role in logistics, remains very limited or even inaccessible in some areas.
Added to this are other handicaps such as dependence on transit countries for access to the seaport where goods are loaded. The geopolitical aspect is therefore crucial.
- Beinga landlocked country does not necessarily spell doom
So far, we have painted a rather pessimistic picture. However, although the road is fraught with obstacles, a landlocked country can overcome the challenges outlined above. Switzerland, Luxembourg, and Austria are perfect examples of this.
Switzerland, although landlocked in a mountainous territory, is now one of the most developed countries in the world. Even without being part of the European Union, it has forged strong partnerships with its European neighbors, with whom it maintains good diplomatic relations. Unfortunately, not all landlocked countries are fortunate enough to be surrounded by rich and stable countries. Switzerland also relies on its river network and the integration of new and emerging technologies, which helps to reduce transportation costs.
In addition to the example of Switzerland, it should be noted that landlocked developing countries (LLDCs) are pursuing policies aimed at limiting the negative impact of their isolation. To do so, they can use various levers.
Firstly,trade integration with neighboring countries is crucial. This is why, on average, LDCs are party to four trade agreements (ranging from one to eleven depending on the country). Some of these agreements are very ambitious, establishing a customs union, as in the case of MERCOSUR, which includes two LDCs (Paraguay and, soon, Bolivia). However, this customs union is still far from complete.
Landlocked countries can also occupy a geostrategic position thanks to corridor projects from which they can benefit. This is the case for Paraguay, which is located on the route of the mega-project for a bi-oceanic corridor aimed at connecting the Atlantic (Brazilian side) and Pacific (Chilean side) coasts by road and potentially by rail. Paraguay would then benefit from better access to the coast, lower export and import costs, and the creation of logistics centers.
In addition, SLDPscan encourage competition between different ports, although this is not always possible.
Improving and developing infrastructure, including riverinfrastructure , is crucial to limiting the consequences of landlockedness. In this regard, between 2008 and 2017, Bolivia devoted an average of 5.4% of its GDP to infrastructure investment (compared to only 2% on average in Latin America and the Caribbean).
PSLDs can also work on trade facilitation, i.e., simplifying, modernizing, and harmonizing export and import processes. To date, they have implemented 50.7% of the commitments of the World Trade Organization (WTO) Agreement on Trade Facilitation (TAF).
Furthermore, the quality of institutions and legal stability remain essential pillars for PSLDs. Botswana is a good example of this, with a stable macroeconomic environment and higher quality institutions than its neighbors. As a result, it ranks second in the Global Competitiveness Report among Sub-Saharan African countries (excluding Mauritius and Seychelles).
Other factors can help these countries, such asdevelopment aid ( €28 billion in 2018) and certain initiatives (e.g., the Vienna Program of Action for LDCs). Although this aid is positive in principle, its effectiveness is the subject of much debate. Its impact depends on many factors, such as investment sectors, corruption, the volatility of aid flows, project monitoring, the absence of aid conditionality, etc.
Partly as a result of these efforts, LDCs have experienced more dynamic growththan other developing countriesin recent years (an average annual growth rate of 2.6% for LDCs compared to 1.8% for all developing countries between 2017 and 2020).
Conclusion
Landlocked countries are more affected by underdevelopment dueto their geographical position, which entails a whole series of handicaps, particularly in terms of access to international trade.
Nevertheless, as Switzerland, Austria, and Luxembourg demonstrate, this is not inevitable. LDCs can implement a strategy based on signing trade agreements with neighboring countries and establishing major corridors linking two coastlines (e.g., Paraguay). Customs simplification, the integration of NICTs, competition between transit ports, and the quality of institutions are also essential. These efforts seem to be bearing fruit, promoting more sustained growth than in other developing countries.
Bibliography
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Infrastructure investment in Latin America and the Caribbean fails to take off, 2020, Inter-American Development Bank
WTO examines progress in landlocked developing countries’ trade performance, 2021, WTO
WTO INPUT FOR UN-SG REPORT ON VPOA 2021, 2021, WTO
How many countries are landlocked and how does this affect their economies?, 2018, Semana
UN calls for more aid for landlocked countries such as Bolivia and Paraguay, 2019, La Vanguardia
Landlocked Developing Countries and Covid-19 Pandemic, 2021, Eurasian Research Institute
