Discuss whether or not developing countries benefit from producing mainly primary products.
Primary products are goods that are available from cultivating raw materials without a manufacturing process. Significant primary product industries include agriculture, fishing, mining, and foresting.
Developing countries may benefit from producing mainly primary products for several reasons
· For many developing economies, their main comparative advantage will be in producing primary products. The industry becomes an important source of economic growth, employment, tax revenue and export earnings. Without primary products, countries would be worse off.
· Developed countries may have the resources to produce high quality and low-cost primary products
· If more can be exported, revenue can be used for development
· Specialisation can reduce average costs. Output can be increased, enabling advantage to be taken of economies of scale
· Demand for primary products may be increasing some primary products can be sold for high prices e.g. oil.This will increase living standards The firm may be able to raise revenue as the demand for some primary products, e.g. oil, is price inelastic
· Countries may lack education -primary sector provides some unskilled jobs
Producing primary products,may be a disadvantage for a country:
· Demand for primary products does not tend to rise as rapidly as demand for manufactured products and services and tend to have less valued-added
· The production of some primary products may be adversely affected by bad weather and diseases, this may disrupt supply farmer's income may fluctuate working conditions may be poor
· Developed countries may impose trade restrictions on primary products from developing countries
· The primary sector does not tend to offer many high skilled jobs. People may have low pay and low living standards
· There are risks of over specialisation - a more diversified economy would be in a stronger position to resist economic downturns
· Developing countries will be dependent on other countries for manufactured goods and services