Saturday, January 21, 2012

Meet to consider how developing countries enhance benefits from exports of farm goods

A two-day meeting in Geneva will focus on how poor countries can gain more lasting value from their exports of agricultural products and natural resources. The third annual UNCTAD Global Commodities Forum will attract government ministers, academics, development economists and business leaders in the field of commodities. They are discussing higher credit costs as a result of the fallout from the Euro-zone debt crisis, which is raising loan rates globally, and mounting food and petroleum bills for poor nations.
Many developing countries are heavily dependent on exports of basic farm goods and natural resources. Since 2002, the number of countries whose commodity exports represents more than 60 per cent of merchandise exports has risen from 85 to 91.
Commodity prices increased considerably over that period. Yet climbing commodity prices appear to have had limited positive impacts on living standards in exporting countries. Many commodity dependent developing countries (CDDCs) are also classified as least developed countries (LDCs), and even during the global economic boom, rates of extreme poverty in LDCs declined only from 58 per cent in 2002 to 53 per cent in 2007 – and this was before the world food and financial crises.
The World Bank estimates that the recent resurgence in food prices, which in 2011 reached levels approaching their 2008 peaks, has pushed an additional 44 million people worldwide into extreme poverty. The theme of the conference is “Harnessing development gains from commodities production and trade”.
While a part of the increase in the number of CDDCs to 91 is due to the rising prices of commodity exports, it also indicates that the commodities boom generally has not resulted in a diversification of economic production and exports, as recommended by development economists.
Diversification is recommended in part because commodity prices are historically volatile, leaving these nations vulnerable to sudden drops in the prices of their major exports – or to sudden price increases for commodities they must import, on which they are also often heavily dependent.
Most CDDCs, for example, are net importers of oil and food. Prices for oil climbed from $20 per barrel in 2002 to $132.50 in July 2008, fell to $42 in early 2009, but climbed back to $105.36 in November 2011. In late 2011, prices for many staple food crops matched or even exceeded their levels during the much-publicized 2008 food crisis.
The food price index of the Food and Agriculture Organisation of the United Nations, an average of staple food costs, increased from 90 in 2002 to 200 in 2008, fell as low as 157 in 2009 and then climbed to 238 in February 2011. Wheat prices escalated from $192 per ton in 2006 to $326 in 2008, fell during the global recession, then rose to $311 per ton in August 2011 before declining to $273 per ton in November.
Continued price volatility in commodities markets recently has prompted high-level collaborative international action, including most recently by the United Nations High-level Task Force and the Group of Twenty.
Another reason economic diversification is recommended for CDDCs is because the processing of raw materials and basic foods into higher-quality goods is where the highest economic returns lie. In many cases, commodity-exporting countries receive only a small proportion of the final sales price of their commodities on world markets.
The bulk of the revenues accrue to those involved in refining and processing the products overseas. A major topic of debate at the Forum will therefore be how CDDCs can carry out more of the commodities 'value chain' within their own borders.
One barrier to diversification in CDDCs has been that the rising costs of the commodities that have to be imported to a great extent offset rising revenues from the commodities that are exported. Oil imports are an especially critical factor, as higher energy costs affect everything from farming machinery to industry. Development economists also say that government policies on how to invest royalties earned through commodities exports can have a major effect on whether CDDCs are able to diversify.
The Forum will consist of two parallel streams of meetings. The Plenary A stream will focus on the overall theme of how to derive stable economic growth and rising living standards from commodities trade.
The Parallel B stream will concentrate on the issue of improving the abilities of CDDCs to process raw commodities into finished products that yield higher economic returns. The Forum will emphasise practical project implementation, and the programme includes sessions devoted to case studies of successful commodity-related development projects, as well sessions aimed at identifying new projects and possibilities.


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