By Thalif Deen
UNITED NATIONS, Oct 7 2004 (IPS)

China and India, the world’s two most populous nations, will soon be potentially big markets for a wide range of commodities, like cotton, rice, coffee, cocoa, palm oil and rubber, which should translate into a rare boon for the developing countries that produce them, says a new U.N. report.

”Thailand expects its rice exports for this year to increase by one million tonnes, to nearly eight million tonnes, because of strong Chinese demand, earning revenues of 2.4 billion dollars compared to 1.9 billion dollars last year,” said the 20-page study from the U.N. Department of Economic and Social Affairs.

The accelerating demand for rubber from China’s fast developing automobile industry has also created ”a boom” for rubber industries in neighbouring countries.

The east Asian giant is set to overtake India as the world’s leading importer of vegetable oils, and is expected to buy up to 5.5 million tonnes of palm and Soya bean oil in 2004, up from 4.2 million tonnes in 2003.

”India’s share of world consumption of major commodities is relatively modest,” says the study, ”but China’s rapid industrialisation has led to it becoming a major market for most raw materials”, including copper, iron ore, lead and zinc.

China and India have a combined population of 2.3 billion people, about 37 percent of the world’s population. A 100-dollar increase in the per capita income of these two countries (representing a 10 percent rise in China and 20 percent for India) would translate into about 230 billion dollars in additional demand for commodities, according to the report.

General economic recovery and rapidly increasing demand in Asia, particularly China, were the main reasons for the increases.

The study, which will go before a U.N. committee at the current session of the General Assembly, scheduled to end mid-December, says that over the long term increasing Chinese demand for vegetable oils, particularly palm oil, will benefit Malaysia, which accounts for 50 percent of global production, and Indonesia, another significant producer.

According to figures released by the U.N. Conference on Trade and Development (UNCTAD), 95 out of 141 developing countries are more than 50 percent dependent on commodity exports, including oil. For most sub-Saharan African nation, the figure is 80 percent.

”This dependence makes most countries particularly vulnerable to commodity market fluctuations and is a real handicap to economic development,” UNCTAD said in a report released at a U.N. conference in Sao Paulo, Brazil, last June.

The world’s 50 least developed countries (LDCs), "the poorest of the poor," now depend heavily on commodities for their economic survival.

Since 1997, the fall in prices of some commodities, including coffee, cotton and sugar, has been ”dramatic”, causing large economic losses and increased poverty in several developing nations.

According to UNCTAD, about 70 percent of the world’s coffee supply is provided by smallholders. Coffee growing supports about 40 percent of the rural labour force in countries such as Nicaragua.

”Essentially depressed coffee prices have been caused by five consecutive years (1998-99 to 2002-03) in which total coffee production has exceeded demand,” UNCTAD said.

Phil Bloomer, head of Oxfam’s ‘International Make Trade Fair Campaigns’, says that ”commodity dependence is the single most important trade issue for the world’s poorest nations.”

The countries most affected by plummeting prices are in Africa. Burkina Faso and Mali depend on cotton, Ghana on cocoa and gold, Kenya and Malawi on tea, and Ivory Coast on cocoa and cotton. Coffee accounts for 67 percent of the income of Ethiopia and 79 percent of that of Burundi.

But the study says African countries experienced a 10 percent annual increase in agricultural exports to China from 1995 to 2002.

Anwarul Karim Chowdhury, U.N. under-secretary-general for least developed countries, says commodities occupy a very important place in those nations’ quest for equitable trading arrangements.

The development efforts of most LDCs – 34 of which are from sub-Saharan Africa – ”can only go forward if their primary commodities, which traditionally come from the agricultural sector, generate sufficient export earnings and employment,” Chowdhury told IPS.

Besides increasing South-South trade, he said, the rising demand for commodities from China and India would provide a much-needed stimulus for the world’s developing and poorer nations.

In order to assure fair commodity pricing and reduce their volatility, he argued, there is an urgent need to reach an effective agreement to allow the LDC commodity exporters to compete on a level playing field with richer nations.

”Assuring LDC producers their fair share will not only benefit their agricultural sectors, by increased employment savings and reduction of poverty in rural areas, but the economies of the LDCs by allowing any surplus generated to be reinvested, including in other necessary services and infrastructure,” Chowdhury added.

The U.N. study says the importance of the relationship between commodity production and both the incidence of poverty and the potential to reduce it is illustrated by the basic fact that more than two billion people in the world are employed in commodity production – ”and that the majority of them are poor.”

But the report strikes a positive note when it concludes, ”the coming years may see an unprecedented opportunity for developing countries to increase exports of commodities, particularly to other developing countries, as a result of favourable market conditions over the medium term, both for raw materials and for food commodities.”

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