Taming volatile price shifts for crude oil and other raw materials that many developing countries export and depend on for economic growth will require a better mix of policies and market mechanisms by governments, producers, those involved in international financial and credit markets, and others, according to speakers at UNCTAD's inaugural Global Commodities Forum this morning.
UNCTAD Secretary-General Supachai Panitchpakdi, opening the two-day conference, said over 85 developing countries depend on commodities for more than 50 per cent of their export earnings. The commodities boom that began in 2002 after more than two decades of declining prices raised hopes that such nations could reinvest climbing profits into reducing poverty and diversifying their economies, he said -- but then the boom turned to bust as the global recession struck in 2008.
Prices are only now beginning to recover, Supachai said, and immense challenges remain for commodity-dependent countries seeking to meet the Millennium Development Goals and other poverty-reduction targets. In addition to seeking ways to increase stability in commodities markets, he said the Forum will highlight how countries -- both importers and exporters -- can limit their exposure to commodity price volatility and mitigate the detrimental effects of commodity price swings.
The Forum will also address other pressing issues in the sector, including recent developments in the extractive industries; investment in improving the productive capacities of the commodities sector; options for mitigating risks in commodities production and trade; commodity finance and related legal issues; and policy options for minerals and metals producers.
Jean Feyder, Ambassador of Luxembourg and President of UNCTAD's Trade and Development Board, told the meeting that the Forum, or GCF, is intended to provide a neutral, high-level platform for reaching a convergence of views on price volatility and other commodities issues. The relationship between commodities exports and prices and poverty reduction also must be discussed, he said.
Mohamed Saleh Al-Sada, Minister of State for Energy and Industry Affairs of Qatar, said the price of oil, despite the best efforts of the Organization of Petroleum Exporting Countries (OPEC) to stabilize it, had tripled to over US$ 145 per barrel in July 2008 and then had fallen to less than $40 per barrel six months later. Since then, prices had recovered to about $70-80 per barrel. Speculation in commodities markets had contributed to the price swings, and speculation thrives on uncertainty, he said. Transparency in production and pricing can reduce the opportunity for such exploitative practices. What is needed are prices high enough to provide for economic growth and ensure long-term investment to ensure future supplies. Disparities between oil and gas prices also need to be addressed, the Minister said.
Germanico Pinto, Minister of Non-Renewable Natural Resources of Ecuador, and President of OPEC, said petroleum markets are enduring a period of great uncertainty. The challenges are complex and international cooperation is vital, as the global economy, especially in the energy field, is thoroughly interconnected. Increased speculative activity has led to price fluctuations that do not reflect actual supply and demand, Pinto said. Any global energy dialogue must focus on security of energy demand and supply -- consumers must be certain that their needs for energy will be met, while producers must have sufficient certainty of demand that they can invest in harvesting future supply, he added.
Ali Mchumo, Managing Director of the Common Fund for Commodities (CFC), said the Fund now has 106 member countries, and its intent is to harvest stable development from commodities production and exports. The sector must be transformed to become a major contributor to poverty reduction. Many developing countries remain highly dependent on commodities exports, and hence are vulnerable to the price volatility that plagues the sector, he said. While using commodity exports for growth, such countries must eventually break away from their extreme dependence on the sector.
Richard H Jones, Deputy Executive Director of the International Energy Agency, said the agency was founded in 1974 in the immediate aftermath of the 1973 oil shock. Its main aim is to promote energy security, and its member countries maintain oil stockpiles so that supply can continue at times of uncertainty and disruption. Market transparency and openness are vital for taming uncertainty and limiting shifts in prices, he said, adding that the organization uses research and forecasts to help keep current situations clear and to give an indication of future supply and demand.
Marwa J Kisiri, Head of the Geneva office of the African, Caribbean and Pacific Group of States (ACP), said many ACP countries are highly dependent on commodity exports, and the long-term trend has been towards declining returns from the sector; supply-side constraints also hinder the growth prospects of such nations. A development perspective is vital if international efforts are to succeed in responding to the challenges facing commodity-dependent countries, he said, and a successful conclusion to the Doha "development round" of trade negotiations also is needed.
Pierre-Francois Unger, National Councillor and Head of the Department of Economy and Health of the Republic and State of Geneva, said a multi-disciplinary approach is needed for facing commodities problems, and Geneva , an international city, is a fitting location for the Forum. Geneva is one of the world's leading centres for commodities trading, especially oil trading, second only to London, Unger said.
