the challenges facing landlocked developing countries: a case study ...

1.1. INTRODUCTION
The Human Development Report 2002 paints a stark picture for most of the world’s
landlocked countries. None of the non-European landlocked countries are classified as “high
human development;”
1 thirteen landlocked countries are classified as “low human
development;” and nine of the world’s twelve least developed countries are landlocked. The
challenges of landlocked countries are not new. Two hundred and twenty-six years earlier,
Adam Smith (1776) observed that the inland parts of Africa and Asia were the least
economically developed areas of the world.
Why do landlocked countries face such persistent challenges? Smith argued that, due to the
difficulty of trade, geographically remote areas had difficulty realizing gains to specialization
and associated benefits. He based his analysis on the difficulty of land transportation over
great distances – a problem that, despite huge technological advances, still remains today.
High transportation costs typically place landlocked countries at a distinct disadvantage
relative to their coastal neighbors when competing in global markets.
Of course, distance alone does not explain why landlocked countries might be in a different
situation from equally remote, inland regions of large countries. Indeed, some regions of
China, India and Russia lie further from the coast than many landlocked countries like
Azerbaijan and Moldova. While these subnational regions are indeed at a transit cost
disadvantage relative to their maritime counterparts, Smith identified an additional reason for
why borders matter for transit trade:
The commerce besides which any nation can carry on by means of a river… which runs into another
territory before it reaches the sea, can never be very considerable; because it is always in the power
of the nations who possess that other territory to obstruct the communication between the upper
country and the sea.
(Adam Smith, Wealth of Nations I.3.8)
In other words, landlocked countries not only face the challenge of distance from port, but
also the challenges that result from the necessary passage through a sovereign transit
country. 2 While rivers were a more common form of trade transit in Smith’s time, the
principle of dependence on neighbors applies equally to the more modern transport modes of
roads and railways.
In examining the nature of landlocked countries’ dependence on transit nations, one realizes
that obstruction of transit access to markets can take many forms, some of which are much
less intentional than the power games suggested in Smith’s quotation above.
1 The European landlocked countries consist of Austria, Andorra, Belarus, Czech Republic, Holy See, Hungary,
Liechtenstein, Luxembourg, San Marino, Slovakia, Macedonia, Moldova and Switzerland. Moldova is the only
European landlocked country with a HDI of less than 0.76.
2 This report defines a “transit country” as one through which trade from a landlocked country must pass in
order to access international shipping markets.
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