Commodity dependence and development: suggestions to tackle the commodities problem

Commodity price fluctuation hinders economic development for commodity-exporting developing countries. It translates into export earning fluctuations, which results in reduced domestic investment in productive assets, which further leads to macroeconomic instability. Recently, the commodities problem has been at the forefront of international debate, with industrial countries and international organisations pledging to step up their financial and technical assistance and create an environment conducive for enabling policies. <br /><br />This report argues that the focus of the development community should be on mobilising the political will to make progress on these issues. It considers that solutions for the commodities problem require an active government role through such mechanisms as supply management schemes for some commodities, as well as regulation and promotion of industrial policy with broad and strong stakeholders participation. In other words, governments play a crucial role in addressing the dysfunctionalities of market forces. Specific recommendations include: developed countries must fulfil their pledges to increase ODA and establish diversification funds existing rules which govern the flow of trade, investment, finance and technology&nbsp;should be&nbsp;reformed to promote development in developing countries national, regional and international competition policies could have a considerable role to play in addressing concerns related to corporate concentrations in commodity markets the UNCTAD code contains several clauses that may be useful to address some of the challenges of market concentration and could be used as a starting point for multilateral discussions on competition The report concludes by asserting that poor farmers' active and effective participation in all recommended mechanisms is crucial. To make sure any response to the current commodities crisis contributes to poverty reduction, it is essential that poor farmers' interests are represented through strong and transparent social participatory processes.<br /><br /><br /><br /><br /><br />