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TradeGlobal issues

UN: Resource-rich countries face commodity trap

July 7, 2021

Countries heavily reliant on commodities export must use revenues to boost productivity and technology to escape the "resource curse," the UN said. A majority of the world's developing nations are commodity-dependent.

A copper and cobalt mine in Zambia
Countries that depend too much on exporting natural resources face continued poverty, the UN saidImage: Imago Images/Zumapress

Developing countries dependent on commodity exports face economic challenges that keep their population poor and vulnerable, according to a United Nations report published Wednesday.

In 2019, two-thirds of the world's poorer countries were trapped in commodity dependence, meaning more than 60% of their export revenue came from the sale of primary goods, according to the UN Conference of Trade and Development (UNCTAD) report.

"Commodity-dependent developing countries seem to be locked into this undesirable state," the report said.

UNCTAD classifies countries that derive more than 80% of merchandise exports from primary goods as strongly commodity-dependent.

'Low levels of technology'

According to the UNCTAD, commodity dependence was "strongly associated with low levels of technology," as well as "low levels of labor productivity, low productivity growth."

It said countries that are "more reliant on agriculture exports usually have a lower technological level, followed by countries dependent on mining and then those dependent on fuels."

There is a 7% chance that a country will move from "strong commodity-dependent" to just "commodity-dependent," the report said.

It cited the example of countries such as Costa Rica, Malaysia and Indonesia that managed to break the so-called "resource curse" and develop strong manufacturing sectors.

Escaping the 'resource curse'

The report added that commodity dependence will not disappear on its own.

"Unless these countries take strong action to change the status quo, they will remain commodity-dependent for the coming centuries."

However, UNCTAD Acting Secretary-General Isabelle Durant said commodity dependence "must not be seen as fate."

"If developing countries embrace new technologies and innovation, and receive the right support from the international community, they can transform and use their resource wealth for better outcomes," she said in a statement.

Being environmentally friendly and independent

adi/sms (dpa, EFE)