Deep dependence on commodities proves problematic for developing nations; they need to focus on adding value to break free from this trend and improve their economic standing.
UNCTAD Report Highlights Persisting Challenges of Commodity Dependence in Vulnerable Economies
The latest edition of the UNCTAD "The State of Commodity Dependence" report has shed light on the ongoing struggle faced by least developed countries (LDCs), landlocked developing countries (LLDCs), and small island developing states (SIDS) in breaking free from their reliance on commodity exports. This dependence, the report notes, is severely constraining economic development in these regions.
More than 80% of LDCs, LLDCs, and SIDS are heavily dependent on a narrow range of unprocessed primary commodities, making them vulnerable to global commodity price volatility and limiting their economic diversification. This is particularly true for LLDCs, whose geographical challenges increase trade costs and delay market access. For instance, transport costs in LLDCs are about 50% higher than the global average, and transit times for imports can be twice as long.
Small island developing states and LDCs face similar challenges, but their vulnerability to climate change impacts is intensified by their commodity-export-driven economies and limited financial capacity. The limited diversification tied to primary commodities makes adapting to climate shocks more difficult.
The report emphasises that commodity dependence creates a narrow economic base dominated by unprocessed raw materials, locking these economies into volatile export markets and hindering development. In 2021 and 2023, two thirds of developing countries, 95 out of 143, remained commodity dependent.
Africa, a continent heavily reliant on commodity exports, saw a 5.6% decrease in its commodity exports between 2021 and 2023, primarily due to a decrease in energy products from Nigeria, Angola, and Algeria. Despite growth in the agricultural and mining sectors, this decrease offset any potential gains.
On a global scale, the value of world trade in goods increased by 25.6% during the same periods, while the value of commodity trade expanded relatively slowly at 15.5%. Commodities can be categorized into three main categories: energy, mining, and agriculture. Energy products made up 44.5% of the total value of global commodity trade during 2021-2023, down from 52.1% a decade before, due to lower oil prices and shifting energy demand, including the transition to renewable sources.
The UNCTAD report suggests that improving trade facilitation and pursuing economic diversification are priorities to shift away from vulnerability rooted in commodity dependence. Strategic regional integration, digital transformation, and trade facilitation can help overcome the constraints faced by LLDCs and improve connectivity. New global policy frameworks, such as UNCTAD’s emphasis on regional integration and the Awaza Programme of Action, include climate adaptation measures recognising how climate vulnerability intertwines with commodity dependence in these states.
Asia and Oceania maintained their position as the world's largest source of commodity exports, comprising 37.1% of the global total during 2021-2023. Mining products, such as minerals, ores, and metals, had a 33.4% increase in export value, averaging US$1.65 trillion annually during 2021-2023.
Despite the challenges, the report underscores that targeted reforms in trade, digitalization, regional cooperation, and diversification offer routes to transform these constraints into growth opportunities.
In the ongoing struggle faced by least developed countries, landlocked developing countries, and small island developing states, the heavy dependence on a narrow range of unprocessed primary commodities, such as those found in sports like football (soccer) and hockey, makes these regions vulnerable to global commodity price volatility and limits economic diversification.
The UNCTAD report underlines that strategic regional integration and digital transformation, crucial elements in modern sports management, can help overcome the constraints faced by landlocked developing countries and improve connectivity.
