By Dr. Talat AnwarAdvisor Centre for Policy Studies, CIIT, Islamabad Centre for Policy Studies, CIIT, Islamabad Presentation in National Seminar on "South-South Cooperation: Towards a Sustainable Future", September 14, 2015, CIIT, Islamabad, Pakistan

Outline Origin and Principles of South-South Economic Cooperation Emerging Economic Trends: Trade, and Investment Scope for SSEC Challenges

South-South Cooperation: Rationale, and Concept SSC aims to discover and exploit the principle of ‘complementarity’ in production, consumption, trade, investment, and technological and development cooperation. The sharp expansion in trade and investment linkages among Southern countries underlines this phenomenon.

South-South Economic Cooperation (SSEC) : Principles SSEC is any action or policy by a developing country that privileges economic transactions with one or more developing country This requires policies that encompass a significant portion of transactions in trade, investment or financial flows. This could also cover cooperation between developing countries to bring about changes in international economic governance; coordinated action at the G20 or UN level or in specific organizations i.e. WB

South-South Trade Developing countries had desire for greater cooperation since the Bandung conference in 1955 Push for South-South Trade (SST) gained momentum ISI, High costs of production; stagnant exports => BOP crises in DCs during 1970s and 1980s PTAs were recommended by experts (Prebisch, Singer) to allow for specialization and establishment of plants that benefitted from economies of scale Latin American Free Trade Agreement, The Central American Common Market, The East African Community between Kenya, Uganda and Tanzania. Limited progress because of fear of unequal benefits

Emerging Trends in Exports Table 1: Share of Exports Destined for Developing Countries (% of Total Exports) From World Developing Countries East Asia South Asia Latin America Middle East & North America Sub-Saharan Africa Source: UNCTAD STAT

Table 1: Growth of Exports by Destination (% increase) ToE.AsiaS. AsiaLACMNASSA East Asia South Asia Latin America Middle East & North America Sub-Saharan Africa Source: UNCTAD STAT

Table 3: Distribution of Exports to Developing Regions (%)—Intra regional Trade Diversification E.AsiaS. AsiaLACMNASSA East Asia South Asia Latin America Middle East & North America Sub-Saharan Africa Source: UNCTAD STAT

Export of IT Related Services

Inwards Flows of FDI (Percent of GDP) (Average for the period) World High Income Middle Income Low Income EAP ECA LAC MNA S.Asia SSA Emerging Trends in Foreign Investment

Inwards Flows of FDI (Percent of GDP) (Average for the period) Argentina Brazil Mexico Russia Saudia Arabia South Africa Turkey China India Indonesia Korea Source: World Bank Development Indicators

Reserves as % of GDP Argentina Brazil Mexico Russia Saudia Arabia South Africa Turkey China India Indonesia Korea Emerging Trends in Forex Reserve

Scope for SSEC SSEC has to encompass more than trade. Splintering production process; different parts are produced in different countries and then assembled; Due to the increased role of TNCs, South-South transactions have spread from trade to outward flows of FDI and to transfer of technologies creating scope for cooperation in science and technology. Large commercial banks have arisen in south creating the opportunity for financial collaboration & establishing branches of developing country banks

Challenges Trade among developing countries can be expanded through tariff preferences since tariffs remain much higher than in developed countries. Non-tariff barriers are substantial. Lack of information and complex procedures and documentation are serious barriers to SS trade Challenge is to alter anti-dumping and countervailing duty procedures to reduce their use as non-tariff barriers. The dispute settlement procedure could be improved

Challenges Challenge is to foster the growth of SST through explicit bound Southern preferences; this involve the creation of a new Southern trade organization where members commit to preferences to each other. Main hurdle in reaching an agreement is the perception of sharply unequal benefits to individual countries A system of financial transfers to a country likely to be affected can be introduced to widely distribute benefits

Challenges The main challenges are in the areas of financial and monetary cooperation as to how can the surplus savings of some countries be transferred for investment in savings deficit countries? Effectiveness of international economic institutions (IMF/WB, WTO) has been eroded overtime. These institutions cannot be reformed on their own terms. Research is needed on what reforms would be possible and the process by which these reforms would be reached, so that SSEC can be harnessed to improve international economic governance.

Thank you!