Commodity rates soared dramatically in new millennium start: WB

KARACHI: At the beginning of the new millennium, the prices of commodities on global markets increased dramatically, chief among them fuels, food, metals, and agricultural raw materials. In 1989, oil prices had been below $30 a barrel, sinking further in 1999 to $15 a barrel, but by mid-2008, prices had reached $130 a barrel, falling temporarily during the financial crisis, and then rising again to above $100 a barrel, according to a World Bank report.

Throughout the 2000s, the surge in commodity prices, especially for oil, brought substantial income to Eurasia and consequently much improvement to the living standards of most Eurasian citizens, particularly the 250 million people in the six resource-rich countries. Per capita incomes increased, social services were restored and pensions paid, education attainment levels rose, life-expectancy increased, and poverty was significantly reduced.

Eurasia is one of the most natural resource-rich regions in the world, with 31 percent of its proven natural gas reserves, 17 percent of oil reserves, 23 percent of iron ore, 14 percent of gold, and 7 percent of copper.

Endowed with such a vast quantity, the region has been able to benefit enormously from the export of natural resources.

Russia has the largest share of oil, gas, mineral reserves, and agricultural land in the region, and is the biggest hydrocarbon exporter. Azerbaijan, Kazakhstan, Turkmenistan, Ukraine, and Uzbekistan, are also resource-rich and hydrocarbon exporters, while Armenia, Belarus, Georgia, Kyrgyz Republic, Moldova, and Tajikistan are less resource-abundant.

Natural resources have undeniably been very good for Eurasia, but the region must now ensure that its “blessing” does not become a “curse”, as has sometimes happened in Africa and Latin America. Despite the recent economic progress, Eurasia continues to face development challenges and there is growing unease about its long-term future. Many leaders in the region are concerned that an over-dependency on natural resources has created a vulnerability to future market fluctuations and a risk of instability. This is especially true for Azerbaijan, Kazakhstan, Russia, Turkmenistan, Ukraine, and Uzbekistan, the largest hydrocarbon exporters in the region.

Eurasian economies need to become more productive, more participative, and more stable. Forced diversification of production and trade is not likely to achieve that. Higher education levels, better infrastructure, and efficient institutions that ensure access of all citizens to competitive markets are prerequisites for more productive economies.

In this respect, Eurasian countries can learn a great deal from countries like Australia, Canada, Chile, and Norway, which have extensive experience managing their own abundant natural resources. These countries owe much of their successful economic development to investment in a diverse range of assets, including “intangible” assets such as institutions, education, and business enterprise.

Most resource-rich economies, whether advanced or emerging, still rely on their natural resource wealth as an important economic sector in its own right, primarily for export receipts and government revenue.

Eurasia has already integrated to some degree into global markets with the export of its natural resources, but the region can do much more by expanding trade with East Asia and by enhancing its trade flows with Western Europe.

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