Technological capacities can help overcome commodity dependence | Sunday Observer

Technological capacities can help overcome commodity dependence

18 July, 2021
A female worker dries coffee beans
A female worker dries coffee beans

Developing countries whose economies depend on commodities must enhance their technological capacities to escape the trap that leaves most of their populations poor and vulnerable, says UNCTAD’s Commodities and Development Report 2021, published recently.

About two-thirds of developing countries were commodity dependent in 2019, meaning at least 60% of their merchandise export revenues came from primary goods, such as cacao, coffee, copper, cotton, lithium and oil.

The report, “Escaping from the commodity dependence trap through technology and innovation”, highlights the correlation between low technological capacities and high commodity dependence.

It warns that most of the 85 commodity-dependent developing countries (CDDCs) will remain trapped for the foreseeable future unless they go through “a process of technology-enabled structural transformation”.

About 95% of countries that were commodity dependent in 1995 remained so in 2018, according to the report.

“Commodity dependence is a state that’s hard to change,” UNCTAD Acting Secretary-General Isabelle Durant said, “but it 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.”

Ms. Durant said building technological capacities must be a priority as CDDCs try to recover from the Covid-19 crisis, and that the current high prices of many commodities should not encourage these countries to “produce more of the same”.

“Otherwise, these nations and their populations will be just as vulnerable to the next shock as they were to the effects of the coronavirus pandemic.” The report’s analysis shows the odds of commodity dependence are strongly associated with low levels of technology.

For example, in the Technology Development Index presented in the report, CDDC’s median score is 1.55 compared with 5.17 for developing countries that are not commodity dependent (non-CDDCs), such as China, India, Mexico, Turkey and Viet Nam. Another index in the report, on frontier technology readiness, paints a similar picture. CDDCs, whose median score is 0.25, are less prepared than non-CDDCs (0.47) to use technologies such as artificial intelligence, the internet of things, blockchain and robotics

In a business-as-usual scenario, the report calculates it would take the average commodity-dependent country 190 years to reduce by half the difference between its current share of commodities in total merchandise exports and that of the average non-commodity-dependent country.