DEVELOPING COUNTRIES SHORT-CHANGED ON COMMODITIES
by Ranjit Dev Raj
Bangkok, 14 Feb 2000 (IPS) -- The falling prices of commodities is a serious threat to stable development for the least developed countries (LDCs), who find themselves left out of global trade, political leaders and analysts at the UNCTAD X conference here say.
Indeed, Uganda's deputy prime minister Moses Ali had to remind delegates at the UNCTAD X conference here, that this trend was not just an "academic" issue since a good number of the poorest countries rely on a limited number of commodity exports for income.
Other delegates to the first international economic conference of the new millennium, such as Cambodian Prime Minister Hun Sen, were more forthright in accusing the developed countries of manipulating commodity prices in their favour and denying them market access.
"Commodity prices stand artificially lowered through substantial subsidies in the developed countries which protect their own labour forces against healthy competition," Hun Sen said in his remarks to the plenary session. Cambodia is one of the 48 LDCs.
On the other hand, modern technology and even life-saving medicines were priced out of the reach of the needy. "Free competition is still a somewhat one-way street," Hun Sen observed.
According to Saudi Arabia's Abdulaziz Al-Turki, who represented Asia at a symposium on commodities organised Sunday evening by the Common Fund for Commodities (CFC) and UNCTAD, there seemed to be a lack of will in the world to confront the problem face-to-face.
An intergovernmental financial institution, the CFC has, since 1991, worked through the novel approach of commodity focus rather than the traditional country focus with emphasis on socio-economic development on commodity producers.
Many developing countries derive livelihoods from commodities, which have suffered a continuous decline in prices. "We are losing time - the ranks of the LDCs have grown from 25 in 1971 to 48 at present," Al-Turki pointed out.
Significantly, the share of these 48 LDCs in world trade has been declining in recent dates, as the UNCTAD's just released 1999 report on LDCS, says. Over the last 30 years, only one country, Botswana, has graduated from that list.
Several experts at the UNCTAD conference, which opened on Feb 12 and ends on Feb 19, advocated vertical and horizontal diversification of product range and value addition to the greatest extent possible as a solution for the LDCs.
Carlos Fortin, deputy secretary general of UNCTAD, cited the example of Bangladesh, where clothing is now its main foreign exchange earner replacing jute which has "low value addition and is subject to large price fluctuations."
There seemed to be no dearth of solutions but as Peter Baron, who represented the world sugar industry at the symposium, pointed out the real problem is that it has never been possible to negotiate price ranges which truly reflects market reality.
"While price ranges are negotiated politically, at the market political will stops quickly," Baron said.
However, Baron also pointed to the lack of "discipline" among producers with the result that there was currently some 15 million tonnes of accumulated surplus sugar in the global market. "There is no legal means to punish violators."
Baron also said that it was really up to the LDCs to approach the markets, which according to him responded to human relationships better than modern high-speed communication networks.
But the hard reality was that developing countries were steadily losing their hold, even on traditional items like coffee, said Robert Mabele, former director of the Economic Research Bureau at the University of Dar-es-Salaam in Tanzania.
"The share of the developing countries in coffee has declined from some 85% to 66%. Countries like Germany have become very important exporters too," Mabele said.
At a meeting Sunday with ministers from the LDCs, UNCTAD secretary- general Rubens Ricupero said liberalisation and globalisation have added "new dimensions to the now familiar supply-side constraints."
"Commodities is an issue that must be revisited to try to find a way out," he explained.
Many countries and officials here have called on industrialised countries to drop their double-standard practices and put in binding trade agreements full market access for the poorest countries' commodity exports.
But the other half of opening up this avenue lies in the improvement by the LDCs themselves of their capacities to take advantage of such access.
Market access is not a panacea, says an UNCTAD official, "but it is a necessary condition for integration into the market economy". Fortin said this would push local industries to improve commodity exports.
Ricupero said enhanced access to expanding global markets required efficient production structures capable of meeting increasingly exacting demands in terms of quality, cost and delivery structures on international markets.
"These requirements contrast sharply with the salient characteristics of the LDC's export sector: serious lack of diversification, exacerbated by widespread shortages of entrepreneurial and managerial skills, low technological capacities, poor physical infrastructure and support services such as finance, marketing and insurance," Ricupero said.
He minced no words in saying that the real challenge facing the developing countries and the LDCs was "how to establish and maintain effective access to knowledge and devise mechanisms for deploying it effectively within the domestic economy."
According to the CFC, out of 2.4 billion people employed in agriculture in the developing countries, 800-900 million derive a significant part of their income from the production of export commodities.
That figure would be higher if commodity production for national consumption and subsistence was included. It is frequently the poorer strata of the population which is involved in commodity production. (SUNS4606)