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On the way up


Increased trade and investment cooperation between countries of the Global South is helping to uplift them

Regional integration and inter-regional collaboration are important tools to attain the Sustainable Development Goals of the United Nations, as they help stabilize institutions, reduce incessant military intervention and conflicts, address diseconomies of scale, enhance international competitiveness, and promote regional growth and development. South-South Cooperation, a modality with the evident potential to foster knowledge-sharing and promote innovative solutions and mutual benefits for all parties involved, has facilitated regional, sub-regional and interregional integration through expanding cooperation in trade, investment, finance, social protection and governance, among other things.

Increased South-South trade and investment is an important part of uplifting developing economies and introducing more cohesive regional integration. Resulting from converging factors such as high rates of economic growth, added value and demand in some developing countries, South-South trade almost doubled between 2007 and 2018. In 2021, South-South trade growth was above the global average, with a 32 percent year-on-year increase.

A renewed focus on infrastructure development facilitated by South-South Cooperation provides greater connectivity across countries and lowers barriers to intra--and inter-regional trade and investment. For example, China, facilitated by the Forum on China-Africa Cooperation and the Belt and Road Initiative, is building integrated industrial corridors in Africa. South-South Cooperation also brings innovative approaches to development financing through strengthened regional and national development banks, blended finance and "aid for trade" initiatives.

Science, technology and innovation are enhanced and leveraged to deepen regional integration. South-developed technologies are often more attuned to the needs and conditions of developing countries, and are more flexible and can be adopted faster than those from developed markets. By knitting together networks of institutions, people and markets, the Global South obtains the essentials to set intra-regional innovation in motion.

Integration is also increasingly happening in peace and security, social, environmental, monetary, and cultural aspects of governance. South-South Cooperation enables countries of the South to develop joint solutions to cross-border development challenges, including responding to climate change and environmental degradation, strengthening social protection systems, and reducing inequalities. Countries of the South have also come together to try to reduce their vulnerability through the formation of regional payment systems that reduce their exposure to the gyrations of global foreign exchange markets. Culturally, South-South Cooperation, through platforms such as the Chinese Confucius Institutes, among others, also promotes people-to-people exchanges by creating cultural centers and research chairs worldwide.

Studying abroad, exchanges, export of media and popular culture, philosophy, literature and heritage are all formative aspects of cultural cooperation among the Global South countries that improve regional connections.

Nevertheless, a number of interconnected bottlenecks are hindering the full potential of South-South Cooperation. Value-chain dynamics seem to be dominated by businesses from regional economic powers, sometimes leading to a protectionist response to regional integration efforts. Some economies of the South, especially those in Africa and Latin America, are not diversified, essentially based on primary industry and are competing at similar points in the value chains.

The asymmetric inability of countries to manage and participate in South-South Cooperation also creates barriers and leads to less equal partnerships or unrealized gains. Varying technical standards, different procurement rules, diverging trade or currency exchange provisions, and unfamiliarity with the varying intellectual property right laws, environmental standards, and labor codes create "thick borders" between countries and hinder the scope of cooperation. The lack of infrastructure comes at enormous economic and social costs, and the full potential for cooperation in science, technology and innovation remains largely untapped. Africa's share of global research and development spending was only 0.9 percent in 2020, compared to 2.2 percent in South America and 44.3 percent in Asia. To further promote regional integration and intra-regional collaboration, various stakeholders involved in South-South Cooperation could consider the following actions.

Improving policy coordination and institutional building. Regional organizations can create or strengthen platforms and systems such as centers of excellence driven by the South to encourage national and regional dialogues and contribute to coherence among different national, regional, inter-regional and global agendas. The United Nations, regional commissions and think tanks and research institutions of the South can play vital roles in strengthening integration efforts in terms of understanding and making informed choices about domestic, regional and international concerns as well as providing evidence-based research.

Strengthening development finance. National and regional development finance institutions of the South can provide innovative funding modalities and lending with less rigid conditions than traditional finance institutions. South-South development finance should go beyond exchanges between the governments of nation states and promote private-to-private business interactions through forms such as joint ventures. It should also promote sectoral diversification, and include technological capacity building, advisory services on debt and prudent financial management in development finance packages as a means to strengthen the capacities of countries of the South to engage in debt sustainability practices.

Adopting a "developmental regionalism" approach. Rather than only focusing on the removal of trade barriers, development-based regional integration must be complemented, if not preceded, by advances in cooperation and coordination programs to address real economy constraints that may hinder trade and investments, such as cross-border infrastructure and regional industrial clusters.

Enhancing science, technology and innovation architecture and digitalization. A pool of resources in the form of a Global South Science, Technology and Innovation Fund can be created to coordinate the individual national efforts to foster such innovation capabilities. Countries may also consider linking their science, technology and innovation and sectoral policies, by encouraging university-business linkages so as to co-create technology and subsequently transfer it to small- and medium-scale industrial units. South-South Cooperation could also help share experiences on e-government; forge partnerships for building smart cities; and strengthen statistics for measuring digitalization.

Improving social protection and contributing more to regional peace and security. Social protection, including cash transfers, universal health coverage and access to other basic services, is central to uprooting the inequalities that have permeated societies. Regional institutions can jointly and creatively address intersectoral challenges and manage the pandemic response through coordinated action and pooling efforts and resources to mitigate the ravages of the health crisis and to build forward a better future. As peace and development are not siloed activities, regional organizations can come with a broader and more integrated approach and help bring the resources and leverage required to promote and sustain peace and security.

The author is director of the division of general affairs at the China Center for International Knowledge on Development. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn