The Economic Struggles of Landlocked Countries

Why Are Only a Few Landlocked Countries Successful?

Two men comparing their diferent-sized piggy banks.
While some landlocked countries are wealthy, most are not. (Photo by yuoak / Getty Images)

If a country is landlocked, it is likely to be poor. In fact, most countries that lack coastal access are among the world’s Least Developed Countries (LDCs), and their inhabitants occupy the “bottom billion” tier of the world's population in terms of poverty.*

Outside Europe, there is not a single successful, highly developed, landlocked country when measured with the Human Development Index (HDI), and most of the countries with the lowest HDI scores are landlocked.

Export Costs Are High

The United Nations has an Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries, and Small Island Developing States. The UN-OHRLLS holds the view that high transport costs due to distance and terrain detract from landlocked countries’ competitive edge for exports. 

Landlocked countries that do attempt to participate in the global economy must contend with the administrative burden of transporting goods through neighboring countries or must pursue costly alternatives to shipping, such as air-freight.

The Wealthiest Landlocked Countries

However, despite the challenges that most landlocked countries face, a few of the world’s wealthiest countries, when measured by GDP per capita (PPP), happen to be landlocked, including:

  1. Luxembourg ($92,400)
  2. Liechtenstein ($89,400)
  3. Switzerland ($55,200)
  4. San Marino ($55,000)
  5. Austria ($45,000)
  6. Andorra ($37,000)

    Strong and Stable Neighbors

    There are several factors that have contributed to the success of these landlocked countries. First, they are simply more geographically fortunate than most other landlocked countries by virtue of being located in Europe, where no country is very far from a coast.

    Furthermore, the coastal neighbors of these wealthy countries enjoy strong economies, political stability, internal peace, reliable infrastructure and friendly relations across their borders.

    Luxembourg, for example, is well-connected to the rest of Europe by roads, railways, and airlines and can count on being able to export goods and labor through Belgium, the Netherlands, and France almost effortlessly. In contrast, Ethiopia’s nearest coasts are across borders with Somalia and Eritrea, which are usually beset with political turmoil, internal conflict, and poor infrastructure.

    The political boundaries that separate countries from coasts are not as meaningful in Europe as they are in the developing world.

    Small Countries

    Europe’s landlocked powerhouses also benefit from being smaller countries with longer legacies of independence. Nearly all of the landlocked countries of Africa, Asia, and South America were at one time colonized by European powers that were attracted to their vast size and plentiful natural resources.

    Even when they gained independence, most landlocked economies remained dependent on natural resource exports. Tiny countries like Luxembourg, Liechtenstein, and Andorra do not have the option of relying on natural resource exports, so they have invested heavily in their financial, technology, and service sectors.

    To remain competitive in these sectors, wealthy landlocked countries invest heavily into the education of their populations and enact policies that encourage business.

    International companies like EBay and Skype maintain European headquarters in Luxembourg because of its low taxes and friendly business climate.

    Poor landlocked countries, on the other hand, have been known to invest very little into education, sometimes in order to protect authoritarian governments, and they are plagued by corruption that keeps their populations poor and bereft of public services – all of which precludes international investment.

    Helping Landlocked Countries

    While it may appear that geography has condemned many landlocked countries to poverty, efforts have been made to soften the limitations posed by a lack of sea-access through policy and international cooperation.

    In 2003, the International Ministerial Conference of Landlocked and Transit Developing Countries and Donor Countries on Transit Transport Cooperation was held in Almaty, Kazakhstan.

    Participants designed a Program of Action, recommending that landlocked countries and their neighbors,

    • Reduce customs processes and fees to minimize costs and transport delays
    • Improve infrastructure with respect to existing preferences of local transport modes, with a focus of roads in Africa and rail in South Asia
    • Implement preferences for landlocked countries’ commodities to boost their competitiveness in the international market
    • Establish relationships between donor countries with landlocked and transit countries for technical, financial, and policy improvements

    Were these plans to succeed, politically-stable, landlocked countries could feasibly overcome their geographical barriers, as Europe’s landlocked countries have done.

    * Paudel. 2005, p. 2.