Study Showcases Hefty Economic And Strategic Toll Of Ethiopia’s Landlockedness

Ethiopia’s status as a landlocked nation, compounded by severe port-related constraints, costs the country between USD 19 billion and USD 31 billion annually in lost GDP. These inefficiencies have scaled in tandem with Ethiopia’s economic expansion, according to a landmark study by the Ethiopian Policy Studies Institute (PSI).

The research, titled “Reclaiming Sovereignty at Sea: The Historical, Geopolitical, and Economic Imperatives Behind Ethiopia’s Legal Claim to Sovereign Port Access,” was recently reviewed during a validation workshop hosted by PSI’s senior directorate.

The findings suggest that by 2024, losses related to landlockedness accounted for a staggering 13 to 23 percent of Ethiopia’s total GDP.

To quantify this burden, PSI researchers developed a multidimensional model assessing direct port fees, indirect delays, and the broader macroeconomic chokehold on international trade.

Jemal Mohammed (PhD), a senior researcher at PSI and a primary architect of the model, explained that the calculations utilized trade values, measured as CIF for imports and FOB for exports, multiplied by specific cost factors.

He noted that while the findings indicate a range rather than an exact figure due to the exclusion of variables like potential port construction costs, the data remains stark. Direct port fees sit at roughly 12.2 percent of trade value, with an additional three percent lost to delays and product damage, placing total port-related trade costs at approximately 15.2 percent.

The study characterizes these costs as a permanent tax on Ethiopian trade that increases in absolute terms as trade volumes expand. In 2024 alone, exports suffered losses of approximately USD 3.7 billion, contributing to a cumulative USD 38 billion loss over the last two decades.

Total trade losses for 2024 exceeded USD 16 billion, a figure the researchers contextualized by noting it was equivalent to 193 percent of the country’s external debt servicing for that year. Furthermore, cumulative losses over twenty years amounted to more than 270 percent of total debt repayments during the same period, illustrating how landlockedness directly exacerbates Ethiopia’s chronic foreign exchange shortages.

On an individual level, the research pinpointed the impact on per capita welfare, estimating an annual loss per person ranging from USD 145 to USD 235, or up to 35,000 Birr.

Jemal argued that these persistent losses have translated into foregone poverty reduction and a widening welfare gap with significant long-term social implications.

Since losing its centuries-old access to the Red Sea littoral following Eritrea’s independence in 1993, Ethiopia has relied on Djibouti for approximately 95 percent of its foreign trade. This shift created vulnerabilities related to trade security and political leverage, making the restoration of efficient, diversified port access a prerequisite for sustained economic growth and industrialization.

The research also highlighted an asymmetric dependence on transit neighbors that exposes Ethiopia to access risks and rent-seeking behavior. Inefficiencies can become sources of revenue for certain actors, reducing incentives for reform and potentially heightening regional tensions.

Qualitative findings underscored severe operational challenges, including port congestion and prolonged delays, with testimonies indicating waiting times of up to 30 months in extreme cases due to vessel queues and inadequate equipment. These delays often result in missed shipments, contract cancellations, and heavy financial penalties.

Additionally, the study pointed to chronic container shortages and high, unpredictable costs, such as excessive demurrage and mandatory foreign currency requirements, which can add more than USD 10,000 per shipment and severely strain firm profitability.

From a spatial and fiscal perspective, the researchers argued that transit dependency contributes to a phenomenon described as the “tunnel effect.” This occurs when infrastructure development becomes radially oriented toward transit corridors, causing capital city hyper-primacy while bypassing secondary cities.

Beyond economics, Ethiopia’s landlocked status results in significant security concerns. While the Red Sea and Gulf of Aden function as Ethiopia’s strategic breathing space, the region remains a source of vulnerability due to external rivalries, fragile neighboring states, and the interventions of extra-regional powers.

The paradox of the region is further illustrated by Ethiopia’s environmental contributions. Through the Abbay, Awash, and Wabi-Shebelle rivers, Ethiopia provides a substantial volume of water to the surrounding territories, yet it lacks maritime autonomy.

Key factors restricting this control include the Arabization of the Red Sea and the high level of militarization in the Horn of Africa. Active military bases operated by global powers—including Turkey, Russia, China, Japan, France, Saudi Arabia, Italy, the United States, and the UAE—illustrate a trend toward the militarization of ports rather than their commercialization.

Researchers on the study team, concluded that despite its geographic proximity, Ethiopia remains geopolitically peripheral and highly vulnerable.

While international instruments such as the UNCLOS, the 1974 OAU Declaration, and the AU’s Agenda 2063 recognize the importance of transit freedom, they do not provide enforceable sea-access rights. This leaves landlocked states vulnerable to shifting political dynamics.

In response, the researchers proposed the development of a unifying “Grand Narrative” that situates Ethiopia’s historical ties to the Red Sea at the core of national identity. They argued that sovereign sea access should be framed as a long-term national project of comparable significance to the Grand Ethiopian Renaissance Dam (GERD).

To achieve this, the report recommends robust diplomacy involving neighboring countries and Middle Eastern powers, alongside the acceleration of regional economic integration through frameworks such as the AfCFTA and IGAD.