Aid for trade: assessing the effects on recipient exports of manufactures and primary commodities to donors and non-donors

Primary commodity dependence continues to be a major concern of various developing countries. The commodity sector often constitutes the key economic activity in terms of foreign exchange earnings, fiscal revenues, income growth, and employment creation: ‘Out of 151 developing countries, 100 depend on commodities for at least 50 percent of their export earnings; moreover half of the countries in Africa derive over 80 percent of their merchandise export income from commodities’ (UNCTAD 2012: 11). Conversely, manufactures contribute a relatively small share to overall merchandise exports in developing countries with low and lower middle income. This share has hardly risen since the early 1990s, in contrast to the corresponding share for developing countries with upper middle income (Table 10.1). As stressed by Collier (2003), primary commodity dependence and weak export diversification are problematic in several respects. In addition to the well-known problem of coping with volatile export prices of raw materials, primary commodity dependence tends to be associated ‘with various dimensions of poor governance’ and increases ‘the risk of civil war’ (Collier 2003: 140). In particular African countries have traditionally been plagued with these problems.