UNCTAD Background Guide - National Model United Nations

II. Harnessing Resource Extraction for Further Development Gains
“Resource-rich countries often do not pursue sustainable growth strategies. They fail to recognize that if they do not
reinvest their resource wealth into productive investments above ground, they are actually becoming poorer.” 120
Introduction
The financial stability of commodity-dependent developing countries (CDDCs) continues to fluctuate on the volatile
shifts in international markets. 121 Of the 141 states classified as “developing” by the United Nations Development
Programme, 95 depend on resource extraction and primary commodities for at least 50 % of export revenues. 122
Record-low commodity prices in the 1980s and 1990s led to widespread underinvestment in agriculture and resource
extraction industries, setting the stage for volatile swings in commodity prices throughout the least decade. 123 In that
decade alone, the number of CDDCs jumped from 85 states in 2002 to the current 95. 124 That rapid increase,
combined with a deepening dependence of CDDCs to commodity exports, has prompted the United Nations
Conference on Trade and Development (UNCTAD) to highlight the issue of development and resource
extraction. 125
Resource extraction, broadly, encompasses mining, oil, gas, forestry, and agricultural industries. While agriculture
does not meet the traditional definition of resource extraction—namely that the resource be exhaustible—the
discussion on commodity dependence and sustainable development is the same for all primary commodities. 126 The
inherent issue of commodity dependence is managing price volatility; for sustainable development, a state must
invest profits from periods of high prices to strengthen their economy for periods of low prices. 127 Aggregate trends
over the past fifty years of all commodities show a 39 % decline in real prices. 128 In recent years, prices declined
from 1995-2001 before dramatically increasing from 2002-2008. 129 To better demonstrate the recent market
volatility, prices at the end of 2001 were 33 % below 1995 levels, yet from December 2001 to April 2008 prices rose
224 %. 130
Despite price volatility, primary commodities as a share of total exports in least developed countries (LDCs) rose
from 70 % in 2000 to 78 % in 2009. 131 The largest increase occurred in the Pacific region where the export share
rose from 67 % to 80 %, however, Africa retained the largest dependence on commodities with the export share
rising from 89 % to 92 %. 132 In relation to development, these changes in commodity prices have an 87 %
correlation to economic growth rates in LDCs. 133
120 Stiglitz, From Resource Curse to Blessing, 2012.
121 South Centre, Problems and Policy Challenges Faced by CDDCs, 2005, pp.5-9.
122 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 58.
123 United Nations Conference on Trade and Development, Global Commodities Forum 2011 Report, pp. 11-16.
124 United Nations Conference on Trade and Development, Commodity-producing countries need to benefit from value-added
exports, says UN, 2012.
125 United Nations Conference on Trade and Development, Commodity-producing countries need to benefit from value-added
exports, says UN, 2012.
126 Collier, Managing Resource Revenues in Developing Economies, 2012, pp.1-2.
127 Jourdan, Challenges of LDC Resource-Based Development, 2008, p. 2.
128 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 62.
129 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 62.
130 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 62.
131 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 62.
132 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 62.
133 United Nations Development Programme, Toward Human Resilience: Sustaining MDG Progress in an Age of Economic
Uncertainty, 2011, p. 68.