Table of Contents

  • A substantial proportion of the raw materials produced in developing countries is processed in developed countries and very little change is taking place in this location pattern of processing activity. It has been clear for some time now that in many cases economic considerations are not the determining factor in the pattern of location of processing and that among the many constraints to the development of processing in developing countries are unfavourable trading policies including restrictive business practices as well as factors related to underdevelopment. It is likely therefore that the removal of these constraints and the positive encouragement of processing could make a substantial contribution to economic development especially in view of the vast scope for increasing value added in raw material production in these countries.

  • A variety of policy proposals and options have been put forward in recent years with respect to the role of primary commodities in the development process. This has been due to a number of factors which include a perceived failure of trade to act as agent of dynamic internal economic change; the many problems encountered with the level and stability of primary export revenues; the terms of trade of exporters of primary commodities; the fact that during the United Nations First Development Decade (1960-70) the position of LDCs generally worsened vis-a-vis the advanced economies, and in some respects even absolutely;(1) an increasing pursuance of economic nationalism and emphasis on self-reliance. All these elements culminated in collective action at an international level, aiming at the establishment of a New International Economic Order. (2)

  • Despite a certain ‘restructuring of exports’ from LDCs in favour of processed and resource-based manufactured products, and the increase in absolute terms of both the volume and value of their exports to DCs over the period 1966 to 1973, the relative share of developing countries in the world export markets nonetheless remains small and is actually declining for a number of processed raw materials. This is particularly the case for many processed foodstuffs, including beverages and tobacco.

  • Developing countries face a number of constraints to an expansion of domestic raw material processing facilities, whether for export or local markets. A recent UNCTAD study (1) lists the major obstacles to downstream processing as follows: tariffs and non-tariff trade barriers, the restrictive practices of vertically integrated companies, difficulties in competing with established brands, shortage of capital, lack of technology and skilled manpower, high transport and energy costs, lack of proximity to consumer markets, inadequate infrastructure, lack of necessary complementary materials, unsuitable climate and so on. However, not all these obstacles are specific to processing industries, and indeed, inadequate infrastructure confronts LDCs in all spheres of development.

  • Developing countries are confronted by many obstacles to establishing and expanding local processing facilities for indigenous natural resources, whether for the domestic market or for export. The term ‘natural resources’ covers a vast heterogeneous collection of commodities; therefore all policy proposals must necessarily apply more or less according to the type of commodity, which particular constraints it faces, in which country it is produced, as well as a host of determining factors like the political ability of governments, the social and economic situation and so on. But in all cases LDCs generally need to improve the necessary infrastructure, develop local markets (often largely rural) and develop co-operative measures by joint action, specifically in relation to expanding processing local raw materials.