Source: Financial Times

What do Bolivia, Mongolia and Burkina Faso have in common? The three are members of the rapidly growing category of commodities-dependent countries—nations that rely on minerals and hydrocarbons for more than 25 percent of their exports.

The number of commodities-dependent countries has risen sharply over the past 15 years in tandem with the increasing prices fetched by raw materials. The trend is particularly pronounced from 2002 when miners and oil companies moved to frontier territories, putting more countries on the world's resource map.

According to a recently published study by consultancy Oxford Policy Management, the number of commodities-dependent countries with low and middle incomes is up from 46 to 61 countries. The rise has profound implications both for the global economy and the natural resource industry. The increase means that more low-and-middle-income countries have become dangerously dependent on commodities exports, leaving them highly vulnerable to a global economic downturn. Moreover, the recent and rapid rise in commodities dependence would suggest that more countries are at risk of the “resource curse”—where commodities wealth does more ill than good to poor countries. Mongolia was one of 12 nations mentioned by Oxford Policy Management that is at risk from the resource curse for minerals.

The rise in the number of commodities-dependent countries also presents a challenge, usually in the form of demands for much higher revenues from the extraction of commodities; including royalties, taxes, salaries, and social investments. The fundamental mismatch between local expectations and what companies can actually deliver in terms of benefits is a driver of much of the social tensions witnessed in relations to resource projects over the last decade. Worse, “local conflicts can easily escalate to national-level political battles,” as almost occurred here in Mongolia when 20 MPs demanded a larger stake in the Oyu Tolgoi project.