Global Commodities Forum:
Turning higher prices into economic growth
Geneva: For decades, the basic farm goods and industrial raw
materials that underpin the economies of many poor countries sold at low
and volatile prices on world markets. Development experts and government
officials lamented that these low returns kept nations in Africa, Asia
and Latin America from expanding their economies and reducing poverty.
Since the end of 2002, however, commodity prices have staged an
unprecedented and long-lived boom, yet the windfall, while contributing
to notable increases in gross domestic product (GDP) in a number of
countries, especially in Asia, has been less significant in other
countries, and has not led in those cases to other economic progress
that was hoped for, such as economic diversification. In countries that
have done less well, there have been disappointingly small declines in
poverty rates.
Experts will gather on March 18 and 19 at the UNCTAD Global
Commodities Forum 2013 to review what happened, and discuss how the
commodities boom can be harvested to yield better benefits for the poor
and more durable, broad-based economic growth for developing countries.
The theme of this year’s Forum is 'Recommitting to commodity sector
development as an engine of economic growth and poverty reduction'.
Since the 2008 food crisis, when prices rose sharply, major food
commodities such as wheat, maize and rice have registered significant
additional price increases. Prices for wheat and rice climbed 170 per
cent between 2000 and 2012, and the price of maize rose by more than 200
percent.
Non-oil commodity price indices remained at historic heights in 2012,
some 2.4 times their average during the period from 1960 to 2012. The
price index for minerals, ores and metals was about three times the
average level for 1960–2012, and crude petroleum and gold prices
continued to break records in 2012. Crude oil averaged $105 per barrel,
and gold sold at an average of $1,670 per troy ounce.
World commodity exports increased fivefold from 1995 to 2011, and
world commodity trade as a share of total merchandise trade reached 33
per cent in 2011, compared to 24 per cent in 1995.
Given that low-income countries have registered an average growth
rate of about 5 percent per annum over the decade 2002–2012, the
commodities boom since the end of 2002 has certainly benefited these
countries. However, the impact of the boom on poverty levels remains
questionable.
Among the so-called Commodity-Dependent Developing Countries (CDDCs),
gross domestic product tripled between 2000 and 2011, and poverty levels
from 2002 until 2008, the latest year for which conclusive figures are
available, fell by 28 percent. But those figures mask less encouraging
performance in some nations. Many CDDCs are also classified as least
developed countries (LDCs), and even during the global economic boom,
the rates of extreme poverty in LDCs only declined from 58 percent in
2002 to 53 percent in 2007, and that was before the world food and
financial crises.
The World Bank has since estimated that the recent resurgence in food
prices, which in 2011 reached levels approaching their 2008 peaks,
pushed an additional 44 million people worldwide into extreme poverty.
It is an irony that a number of CDDCs, especially in Africa, are net
food importers. The boom in prices does not appear to have led to much
economic diversification in CDDCs, either. From 2002 to 2010, the number
of CDDCs increased from 85 to 91.
UNCTAD Secretary-General Supachai Panitchpakdi told the opening
session of the 2012 Global Commodities Forum that “while we have been
trying to find ways to advise countries to be less commodity-dependent,
CDDCs have actually become more heavily dependent on commodity exports.”
Experts say that one of the lessons of the commodities boom is that
high prices aren’t enough. Governments must combine the returns they get
from commodities with astute and well-coordinated strategies to
diversify the goods that their countries produce and to upgrade basic
farm goods and raw materials into finished products that command higher
prices and create greater number of jobs.
Economists and development specialists also contend that developing
countries and the international community must devote greater attention,
including research and development, to agriculture, after years of
neglect of the farming sector.
They say that particular emphasis should be placed on crops and on
methods that can be used by smallholder farmers. In addition,
cooperative efforts, perhaps led by governments, must be re-established
to help smallholder farmers band together to obtain inputs and to market
their harvests. Reforms carried out in the 1980s and 1990s under the
laissez-faire economic doctrine of the time abolished many government
programs for farmers. More efficient free-market substitutes for these
institutions did not arise as had been predicted.
Frequent fluctuations in commodity revenue do not allow for long-term
planning and management that is compatible with sustained growth and
development and with reductions in poverty.
The extractive sector, in particular, is technology-intensive, and
therefore, has limited capacity for job creation and poverty reduction.
To address this in their energy sectors, many companies have implemented
social and community investment programs in the areas in which they
operate.
Corporate commitments to enhancing shared prosperity and sustainable
development for CDDC populations are considered important for attracting
investment and for creating greater employment, including a broader
variety of jobs. Since it takes time to demonstrate sustained impact,
such companies have stressed the importance of seeking a balance between
small, tangible outcomes in the short term, and longer-term, sustained
positive impacts on living standards.
The energy industry has the potential to help host countries create
greater linkages between extracted raw materials and their upgrading
along domestic supply chains. Steps are envisaged that can foster local
entrepreneurs and local enterprises and can help in the transfer of
skills and technology.
Firms such as Total, GDF SUEZ, and Gas Natural Fenosa are involved in
such efforts. The Global Commodities Forum will open tomorrow with
addresses by UNCTAD Secretary-General Supachai Panitchpakdi, World Trade
Organisation Director- General Pascal Lamy, and UNCTAD Trade and
Development Board President Jüri Seilenthal of Estonia.
The keynote speakers at the opening session:
Prof. Michael Lipton of Sussex University (United Kingdom): 'Staples
production; efficient ‘subsistence’ smallholders are key to poverty
reduction, development, and trade'.
Vice President of Corporate Affairs for Europe, the Middle East and
Africa, of Cargill, Ruth Rawling: 'Lessons from experience; unlocking
farmers’ potential, enabling entrepreneurs', and
President of the Agricultural Society of Trinidad and Tobago, Dhano
Sookoo: 'The role of farmers’ organisations in promoting commodity
development and poverty reduction'.
Among the plenary themes to be considered through panel discussions
and open debate over the two-day forum are:
'Risk management and resilience: methods and mechanisms for
developing countries and small producers to prosper in spite of price
volatility in commodities markets';
'Playing catch-up in the agricultural sector: Investing in neglected
infrastructure and services in the agricultural sector; filling the void
left by the elimination of parastatal institutions';
'Improving transparency in commodities markets and value chains'; and
'Challenges and solutions in collecting, analysing and disseminating
market information and other commodities data'.
Forum partners are the United Nations Economic Commission for Europe
Gas Centre, Gasnat, and AFREXIMBANK.
-BBC
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