Resource-based Development

Developing countries, in particular the nations of Sub Saharan Africa (SSA) are still significantly defined by resource dependency. Many SSA countries remain highly dependent on resource extraction and exports, despite efforts to promote industrial development as well as the diversification of exports and production. Rising commodity prices can benefit these countries, in particular through increased export and fiscal revenues. Yet, neither do these revenues reach the majority of the population per se nor are they used for sustainable economic development, diversification and poverty reduction. Furthermore, the high volatility of commodity prices leads to external vulnerability and makes the macroeconomic management of resource-based economies difficult. The discussion on a fairer distribution of resource revenues has intensified as a consequence of the commodity price boom in recent years, which has furthermore brought the issue of resource-based development strategies back on the agenda of development debates.

As part of the research project “Financial Markets and the Commodity Price Boom”, funded by the Österreichische Nationalbank, ÖFSE analyses the macroeconomic implications as well as the effects of current commodity price dynamics on the development of resource-dependent low-income economies in SSA. Key issues are, firstly, how countries deal with the high volatility of commodity prices and the associated macroeconomic implications and how they can reduce their external vulnerability, as well as, secondly, how the commodity price boom can be used to achieve sustainable economic development effects and diversification. A structuralist Computable General Equilibrium (CGE) Model is developed in order to analyse the macroeconomic effects of commodity price developments and the interactions of import-export dynamics on these economies. The possibilities of resource-based development are analysed in the context of the global production network approach. The project focuses on the priority countries of the Austrian Development Cooperation, namely Burkina Faso, Ethiopia and Mozambique, whose economies are dependent on the export of cotton, coffee and aluminium, as well as on imports of corn and oil.

Based on this research project, ÖFSE will launch a new project on “Financialising commodity markets and global value chains in cocoa and coffee? The role of commodity trading houses“ in 2016/17 to analyse the impact of commodity trading houses on commodity-based development strategies for coffee and cacao producers in Sub-Saharan Africa.

For more information contact:

Cornelia Staritz

Ms. Cornelia Staritz
Senior Researcher
Tel.: +43 1 317 40 10 – 116  
E-Mail: c.staritz@oefse.at
 
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