Dependence on commodity export earnings
Lack of horizontal commodity diversification
[Developing countries] One of the characteristics of the less developed countries is the extent to which the growth or extraction of a single commodity tends to dominate the economy. This lack of diversification makes the economy vulnerable to unpredictable factors such as variations in harvests, and price slumps on the world export market. It aggravates short term instability and intensifies the problem of long term growth. The commodities produced may have weak world market prospects, lack a domestic market which would permit actual or potential import substitution, fail to provide additional rural employment and fail to lend themselves to processing by domestic industry. Nearly 50% of the developing countries earn more than 50% of their export receipts from a single commodity. As many as 75% of them earn more than 60% from three primary commodities. In only 6 of these countries do exports of manufactured goods amount to as much as 10% of total exports. Diversification is particularly urgent in the case of commodities subject to over-production or to competition from synthetic substitutes.