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Poverty Number 20

International Policy Centre for Inclusive GrowthPoverty Practice, Bureau for Development Policy, UNDP

South-South CooperationThe Same Old Game or a New Paradigm?

2 International Policy Centre for Inclusive Growth

G U E S TE D I TO R S

T his Poverty in Focus is being launched to mark important eventsfor the Global South that will take place in Brasilia: the India-Brazil-SouthAfrica (IBSA) and the Brazil-Russia-India-China (BRIC) summits.

The International Policy Centre for Inclusive Growth (IPC-IG), whoseheadquarters is in Brasilia, is privileged to be closely involved in a numberof the activities associated with the summits, especially the organisation of the“Academic Forum: A Policy Dialogue” for the IBSA gathering.

I expect these meetings to have great resonance for the future shapeof South-South cooperation. The first decade of the twenty-first centuryhas been marked by the intersection of three debates that previously hadbeen conducted in separate domains with limited interaction. Traditionally,the debate on global economic governance has been situated in the G-8and in discussions associated with the governance of the World BankGroup, the International Monetary Fund and the World Trade Organisation.The debate on development cooperation has largely been conducted fromthe perspective of donors, and has mostly been about aid, whether for oragainst. Foreign policy strategies have been viewed principally from theperspective of national strategic interests and, apart from specific initiativesrooted in the history of the Cold War, have been typically bilateral in scopeand nature, other than for past and present superpowers.

The rapid increase in the number of emerging economies as globalplayers—leading to a significant re-examination of the fundamentalassumptions regarding voice, domain and the agency of global economicgovernance—is closely related to their greater involvement in developmentcooperation. This is rooted in a deep historical engagement with the globalSouth and is based on political solidarity with other developing nations.It is now apparent that foreign policy strategies will have to take accountof the growing role of the emerging economies in shaping the futurearchitecture of global economic governance and development cooperation.For that reason the IBSA and BRIC summits are front-page news in capitalsacross the world. The neat division between bilateral, regional and globalforeign policy strategies has become more diffuse. There is a fork in theroad. Will the rise of the emerging economies portend just a broadeningof the “great game”, the only result being a little more elbow room fordeveloping countries in their engagement with the G-20 economies?Or will the global South seize this opportunity to forge a new and moreinclusive paradigm that secures faster and more sustainable developmentfor all citizens?

The articles in this issue of Poverty in Focus address different dimensions ofthis challenge. South-South cooperation has a specific history rooted in the“making of the Third World”. Will the opportunities of the moment translateinto better voice for and more inclusive cooperation with least developedcountries? Can we look forward to exciting paradigm shifts in the discourseson global trade, aid, development cooperation and the rhetoric of bestpractice? Will emergent regional and global plurilateral groupings affordnew avenues for effective development cooperation? What does South-South cooperation look like from the perspective of the political economyof Sierra Leone, emerging from conflict and making heroic advances againsttremendous odds, as it establishes institutions for governance andsocioeconomic development?

I am confident that the articles in this issue will stimulate “out of the box”thinking about the possibilities for South-South cooperation, and willinform policymaking on this important subject at a very critical juncture.

Rathin Roy

Poverty in Focus is a regular publication ofthe International Policy Centre for InclusiveGrowth (IPC-IG). Its purpose is to present theresults of research on poverty and inequalityin the developing world.

Guest Editors

Rathin Roy and Melissa Andrade

Desktop PublisherRoberto Astorino

Copy EditorAndrew Crawley

Front page: Union. Joining efforts successfullyis an art. It requires maturity and a sharedvision. It is crucial to any great endeavour. Withthis photograph the editors acknowledge thework of those who strive for the well-beingof the global community. South-Southcooperation should be part of that greatereffort . Photo by Obraprima and SXC.hu<www.http://www.obraprima.ppg.br> and<http://www.sxc.hu/photo/265374>.

Editors’ note: IPC-IG and the editors gratefullyacknowledge the generous contributions,without any monetary or material remuneration,by all the authors of this issue.

IPC-IG is a joint project between the UnitedNations Development Programme and Brazil topromote South-South Cooperation on appliedpoverty research. It specialises in analysingpoverty and inequality and offering research-based policy recommendations on how to reducethem. IPC-IG is directly linked to the PovertyGroup of the Bureau for Development Policy,UNDP and the Government of Brazil.

IPC-IG DirectorRathin Roy

International Policy Centre for InclusiveGrowth (IPC-IG), Poverty Practice,Bureau for Development Policy, UNDP

Esplanada dos Ministérios, Bloco O, 7º andar70052-900 Brasilia, DF Brazil

[email protected]

The views expressed in IPC-IG publicationsare the authors’ and not necessarily those ofthe United Nations Development Programmeor the Government of Brazil.

Rights and Permissions – All rights reserved.The text and data in this publication may bereproduced as long as written permission is obtainedfrom IPC-IG and the source is cited. Reproductions forcommercial purposes are forbidden.

Poverty in Focus 3

It can be argued that it allstarted with the “makingof the Third World”,to use the expressioncoined by Escobar (1995).

As developing countriesrealised that they werebetter off acting togetherrather than being allies ofeither of the superpowers,South-South cooperationemerged as a practice in the internationalpolitical arena.

South-South cooperationand learning are not new developmentpractices, as this article will indicate, butthey have been significantly revampedin the last 10 years. The purpose of thearticle is to present, in a systematic way,the ups and downs of South-Southcooperation on the internationalagenda, as well as the factors that havecontributed to its powerful resurgencein the present decade.

It can be argued that it all started withthe “making of the Third World”, to use theexpression coined by Escobar (1995).Harry Truman, in his 1949 speech aboutthe “underdeveloped regions of theworld” and the need to assist them(most likely against communism),formally created a construct that lumpedtogether all countries that were neitherindustrialised nor socialist. If that madethe “Third World” a very heterogeneousgroup of countries, it also gave them acommon identity.

They were countries that werestruggling to overcome their colonialheritage and were being pressed to takesides in the Cold War. The understandingof their common interests and of themutual benefits of cooperation wasthe seed for the creation of institutionalframeworks for South-South Cooperation,such as the Non-Aligned Movement andthe Group of 77 (G-77).

As developing countries realised that theywere better off acting together rather thanbeing allies of either of the superpowers,South-South cooperation emerged as apractice in the international political arena.Both the Non-Aligned Movement andthe G-77 were instances of jointpolitical mobilisation and collectivebargaining, wherein propositions suchas a “new international economic order”were advanced.

Although this initial period lasted formore than 30 years, it did not yieldthe sort of economic self-reliance andpolitical independence that developingcountries had sought. As the two oilcrises of the 1970s led to a substantialrise in international interest rates, mostdeveloping countries entered the 1980sswamped by foreign debt and sufferingfrom high inflation.

The “debt crisis” significantly reducedmutual cooperation efforts betweencountries of the South and made themvery inward-looking. That was a periodof demobilisation in the history ofSouth-South cooperation, and it lastedfor another 20 years.

Developing countries’ priorities becamethe fulfilment of a to-do list prescribedby the international financial institutionsupon which they depended for externalfunding. Structural adjustment in the1980s and early 1990s was followedby a central concern about how to dealwith its consequences, such as increasedpoverty and inequality, the dismantlingof social services and the increasinglyuncontrollable movement of internationalfinancial flows. The latter factorcontributed to severe financial crisesin Southeast Asia, Russia, Mexico, Brazil,and Argentina in the late 1990s.

The precursors of a re-emergencefrom this period of gloom can be foundin the revitalisation of multilateralismthat followed the end of the Cold Warand the series of international conferencesthat were organised during the 1990s.

After decades of separation andantagonism between East and West,the 1990s saw the re-birth of globalinternational cooperation. The provisionand development of such cooperation,however, was still very much dominated

How Did We Get Here?The Pathways of South-SouthCooperation1

by Michelle Morais de Sá e Silva,Teachers College, Columbia University

1. This article is a revised and summarised version ofMorais de Sá e Silva (2008) as published in Chisholm andSteiner-Khamsi (2008).


by the North and basically involvedassistance or “aid” from the North to theSouth. It was still a prescriptive kind ofcooperation, based on the experiencesof the North and the mainstreamtheories developed there.

Only in the new century was South-South cooperation to embark on anew and third phase in its development.It is now a “buzz word” in developmentparlance and there is much euphoriaabout its potential. Several factorscontributed to that circumstance.

First, the joint commitment to achievingthe Millennium Development Goals(MDGs) by 2015 created a sense ofurgency towards the problemsof the South.

Second, there was much disappointmentwith the mainstream models ofdevelopment cooperation, which atthe time mostly meant North-Southcooperation. After decades of multilateraland bilateral aid and technical cooperation,development had still not materialisedfor an important share of the world’spopulation. Hence there was andstill is a desire for a new and moreeffective model.

Third, at the beginning of the presentdecade some developing countriesshowed signs of economic recovery andof having made social gains, which madethem potential role models for the restof the developing world.

Examples include Brazil, Mexico,India and South Africa, which became

strong political leaders in their regions.The realisation of their individualstrength led those “emerging economies”to join forces, forming plurilateralblocs such as IBSA—India, Brazil andSouth Africa; this is a formal trilateralinitiative dating from 2003.

Informally, the expression “BRICcountries” (Brazil, Russia, India and China)also became widely known and wasused to represent the group of fast-growing developing economies.At the multilateral level, the G-20 is anexemplary case. In the framework of themultilateral negotiations of the WorldTrade Organisation (WTO), specificallythe Doha Round, a group of developingcountries united to negotiate issues suchas the reduction of agricultural subsidies.

The group initially had 20 membersand currently has 23.2 Interestingly,these groups were followed by more“alternative” South-South blocs, suchas the Bolivarian Alliance for the Americas(ALBA) and, to some extent, the Unionof South American Nations (UNASUR).

The third and current phase ofSouth-South cooperation, therefore,has shown some interesting features.On the one hand, it retains someattributes of the first phase, suchas its role as a tool for the politicalstrengthening of the South.

On the other hand, the currentphase has added new energy, newactors and new practices to South-Southcooperation. It is no longer limitedto the fields of trade and industrialdevelopment, but has expanded tosectors such as education, health andsocial protection.

This expansion has been stronglysupported—and financed—byinternational organisations andbilateral agencies, which have served asimportant bridges for the exchangeof experiences among countries ofthe South. Naturally, internationalorganisations and bilateraldevelopment agencies havetheir own interests in this process.

One such interest is to improvetheir own effectiveness in delivering

development cooperation, since it ishoped that South-South cooperationwill be better placed to improve socialindicators in various developingcountries, especially as regardsprogress towards the MDGs.

Second, South-South cooperationhelps international organisations andbilateral development agencies redefinetheir role and mission in emergingeconomies, which are now lessdependent on foreign fundingand technical assistance.

There have been two importantconsequences of this expansion of theSouth-South cooperation agenda andthe pool of practitioners. The first isan attempt to promote South-Southlearning with regard to social policiesand programmes. Most of the existingexperiences have centred on the transferof “best-practice” programmes from onecountry of the South to another.

A second important consequence hasbeen the upsurge in enthusiasm forSouth-South cooperation, leading toits inclusion on many countries’ foreignpolicy agendas, in the strategic planningof various organisations, and in theresearch agendas of some scholars.

There is certainly no lack of political willto create new South-South cooperationinitiatives; the problem may lie in howto maintain them and make them trulyeffective development tools. If currentexpectations are not met (and they aresignificantly high), the next phase ofSouth-South cooperation may onceagain be one of demobilisation.

Escobar, A. (1995). EncounteringDevelopment: The Making and Unmakingof the Third World. Princeton, PrincetonUniversity Press.

Morais de Sá e Silva, M. (2008).‘South-South Cooperation: Past andPresent Conceptualization and Practice’ inL. Chisholm and G. Steiner-Khamsi (eds),South-South Cooperation in Educationand Development. New York, TeachersCollege Press.

2. This is not to be confused with the other G-20,more prominent in the global media, which is the“Group of Twenty Finance Ministers and CentralBank Governors” and which comprises the world’s19 largest economies plus the European Union.

Both the Non-AlignedMovement and theG-77 were instancesof joint politicalmobilisation andcollective bargaining,wherein propositionssuch as a “newinternationaleconomic order”were advanced.

Poverty in Focus 5

The differences within the“global South” have widenedin recent years, it remainsto be seen whether thiswill have any impact onthe tradition of solidaritythat has developed, andwhether in time therewill be a trend towards a“South within the South”.

Beyond economic impacts atthe country level, LDCs maybe squeezed further inmultilateral processes.

The agenda of the G-20 haspaid only cursory attentionto the acute, crisis-inducedchallenges faced by LDCs.

The poorest countries arenot invited, and have noinstitutionalised way offeeding their perspectivesinto decisions that will haveprofound effects on theirfuture opportunities.

People and agencies in the“developed” world are, on the whole,guilty of portraying countries inthe “developing” world as the same.In fact, beyond the obvious differencesin geography, language and culture lievast differentials in income, populationsize and outcomes related tohuman development.

For example, income per capita in 2008was US$140 in Burundi, US$1,420 inGuyana and US$7,240 in Gabon (Atlasmethod: World Bank, 2009). Eight timesmore children under the age of fivedied in Guinea-Bissau in 2007 than inEl Salvador.1 And China has roughly halfa billion more people within its bordersthan all of the least developed countries(LDCs) combined; that is equivalent to100 times more people than thepopulation of Zambia.2

Despite these differences, there is a historyof strong solidarity among developingcountries and regions. This goes beyondformal trade and investment linkages,extending to political coordinationwithin structures such as the Groupof 77 and cooperation frameworks suchas that provided by the Buenos AiresPlan of Action on cooperation amongdeveloping countries. Nonetheless, asdifferences within the “global South”have widened in recent years, it remainsto be seen whether this will have anyimpact on the tradition of solidarity thathas developed, and whether in timethere will be a trend towards a“South within the South”.

The shifting of tectonic plates within theglobal South has led to divergences ineconomic growth, social developmentand political weight. In the past 10 years,for example, China and India have hadeconomic growth rates in excess of 7per cent each year. This is nowmanifesting itself in significant

Between a Rock anda Hard Place:LDCs in a G-20 World

structural and relational changes onthe international stage. During the pastdecade, countries deemed strategicallyimportant have been invited to certainG-8 summits. Brazil, China, Ethiopia,India, Mexico and South Africa wereinvited to participate in some partsof the Gleneagles Summit in the UnitedKingdom in 2005. Following the globaleconomic and financial crisis, and theemergence of the G-20 leaders’ summits,many countries that form the continentalcornerstones of the South have beenbrought more formally into the tent.In addition to China, Russia, India andBrazil, these include countries such asArgentina, Indonesia, Mexico and Turkey.

Negotiations within internationalpolitical processes now also have adifferent dynamic. Even before theeconomic crisis, many strongerdeveloping countries signalled theirunwillingness to accept least-worstcompromises—for example, in the DohaRound of trade negotiations, wherepromises have been made to delivera development-focused outcome.Now, in the choppy waters followingthe economic crisis, developingcountries do not feel that the “globalNorth” is in any position to impartlessons on economic and financialmanagement, a lens that is easilyextended to other areas such as industrialpolicy and technology development,including for climate change.

The face of development cooperationis also changing. Financial transfersfrom the North to the South stilldominate, especially for the poorestcountries. In 2007, aid from members ofthe Development Assistance Committee(DAC) as a share of national incomewas close to 50 per cent in Burundi,above 30 per cent in Guinea-Bissauand about 25 per cent in Mozambique(World Bank, 2009). But many developing

by Paul Ladd,UNDP Bureau for Development Policy

1. Guinea-Bissau (198) and El Salvador (24) deathsper 1,000 live births in 2007: UN Statistics Division.

2. UN Population Division, UN Department forEconomic and Social Affairs.


,

countries now have a broader arrayof partners to help them meet theirdevelopment aspirations. Within the South,trade and investment are important pillars.Investment originating in developingcountries rose to 16 per cent of the totalin 2008, up by 3 per cent from theprevious year (UNCTAD, 2009). Additionally,activities traditionally defined by DACdonors as “cooperation” now also havenew important contributors. The WorldBank estimates that China was responsiblefor US$7 billion in infrastructure projectsin Africa in 2006 (Foster et al., 2008).

But south-south cooperation has adistinctly different flavor. It tends tobe driven not by charity but by mutualeconomic and commercial linkages,including access to dwindling naturalresources. It also has a greater emphasison technical cooperation and knowledgetransfer than conditionality-basedproject, programme or budget support.

Notwithstanding the global crisis, theselarge political and economic shifts arelikely to continue. Because of strongperformance in other countries of theSouth, and regional integration, growthwill not be limited to China, India andBrazil. In 2008, Mongolia, Uruguay,Uzbekistan, Uganda and Panama allgrew at more than 9 per cent (IMF, 2010).But in this scenario, whither the LDCsand other low-income countries?

LDCs are well placed to benefit from thebroader array of partners for trade andinvestment, and of sources of finance,knowledge and expertise. In the area oftrade and investment, a wider rangeof markets and investors shouldserve to reduce risk and vulnerability.This is not insignificant given thatone of the criteria for LDC classificationis based on the concept of economicvulnerability.3 For knowledge andexpertise, greater competition in themarketplace should in theory betteralign itself with the expressed needsand demands of LDCs.

But the picture is particularly complicatedfor concessional finance that may bemade available by cooperation partners.Again, greater competition should helpreduce the existing aid oligopoly. It mayalso dilute the policy conditionality

that donors insist on attaching to theirincreasingly coordinated programmes.Recipient governments often prefer toapproach different donors for differentreasons, sometimes as a deliberate strategyto maximise their basket of support.

But it is also possible that officialdevelopment assistance will become evenmore splintered, uncoordinated anduntransparent than it is already. This wouldbe a step backwards. Despite issues ofownership and, above all, weak executionof the Paris agenda on aid effectiveness,there is much merit in attempting toensure that aid does what it is supposedto do, benefiting people by increasingtheir access to economic opportunitiesand improving the quality of their lives.Greater transparency in resource flowswould do a great deal to help citizensin recipient countries to hold bothgovernments and donors to account.

Moreover, the conditionalities of olddonors, often based on current receivedwisdom or the donors’ value frameworks,may be replaced by the conditionalitiesof new donors. Rather than the LDCsbeing beneficiaries of a more vibrantmarket for assistance, they may insteadbecome the battleground in wars ofscarcity for oil, gas, minerals and timber.

Beyond economic impacts at the countrylevel, LDCs may be squeezed further inmultilateral processes. The agenda of theG-20 has paid only cursory attention tothe acute, crisis-induced challenges facedby LDCs. The poorest countries are notinvited, and have no institutionalised wayof feeding their perspectives intodecisions that will have profound effectson their future opportunities. Thegenerosity of members of the WorldTrade Organisation (WTO) in promisingto address development issues may slidefurther down the agenda as muscles areincreasingly flexed—failure to deliver theheralded Development Round is clearlynot the fault of the LDCs. Whilegovernance reform of the World Bank andIMF may yield additional votes for theBRICs, there is a risk that it is not only therich countries that have to cede influenceto achieve this, but also the poorest.

Of course, this dynamic is natural andnot new; power manifests itself for self-

interest. But from a human developmentperspective there is a risk that LDCs maybe squeezed between the old worldand the new, with fewer rather thanmore opportunities to follow paths thatexpand economic and social opportunities.

How Can Governments, the UnitedNations and Other Bodies Assist?In May 2011, the fourth conference onLDCs will be held in Turkey. Participantsat the conference will review progressagainst the previous “Brussels Programmeof Action: 2001–2010”. The outcome of thisconference will have to recognisethe continued vulnerabilities facedby the LDCs, particularly those caused byglobalisation. It will have to producestrong commitments from all countries—traditional donors as well as newcooperation partners, in a coordinatedway—that address the full range ofLDC priorities: infrastructure, technology,sustained trade opportunities, employmentand improved living standards.

As regards LDC voice, steps will also beneeded to ensure that LDC influenceis not eroded further in governancereforms of the World Bank and IMF,nor lost completely in new plurilateralgroupings such as the G-20. In Washington,the shareholders of the internationalfinancial institutions could considergiving greater weight to their clients, interms of both seats and votes. And if theG-20 continues as a forum, steps will beneeded to include the perspectives ofcountries that are affected by G-20decisions. Here, the UN will serve as acatalyst to bring forward the voicesof the global South, not just theemerging economies.

Foster, Vivien et al. (2009). BuildingBridges: China’s Growing Role as anInfrastructure Financier for Africa.Washington, DC, World Bank.

International Monetary Fund (2010).World Economic Outlook: Update.Washington, DC, IMF.

United Nations Conference on Trade andDevelopment (2009). World InvestmentReport. Geneva, UNCTAD.

World Bank (2009). World DevelopmentIndicators. Washington, DC, World Bank.

3. The three criteria for LDC classification are based onlow income, human capital and economic vulnerability:<http://www.unohrlls.org/en/ldc/related/59/>.

Poverty in Focus 7

While South-South trade hasgrown significantly and manydeveloping countries havebenefited, LDCs, which aremarginalised in North-Southtrade, are also increasinglybeing marginalised in South-South trade.

Indeed, while the share of LDCimports that originate inother developing countrieshas risen substantially, thereverse is not true. Instead,other developing countriestoday import a smaller sharefrom LDCs than they did inthe early 1980s.

The Changing Global ContextA number of countries of the South areleading world economic growth andhave been doing so for several years.During the 2001–2008 period, developingcountries as a whole grew at more thantwice the rate of high-income countries.But some, such as the least developedcountries (LDCs), are being left behind;rather than converging, they arediverging in their long-term economicgrowth and development prospects.

Although the economic growth ofLDCs as a group has improved becauseof their increased export volumes, highercommodity prices and greater inflowsof foreign direct investment, a closerexamination of their overall performancereveals sizeable differences among LDCs.In half of them, growth either failed toaccelerate or declined; in a third of them,per capita GDP either fell or grew by lessthan 1 per cent in real terms; and in mostnon oil-exporting LDCs, export activitiestend to remain in enclave sectors withvery weak linkages to the rest of theeconomy. Moreover, the 2008–2009global financial and economic crisisundermined the factors that enabledstrong GDP growth performance amongLDCs between 2002 and 2008, againexposing both the lingering structuralweaknesses of their economies and themyth of self-regulating markets.

For many LDCs, trade accounts for asignificant proportion of economicactivity. Indeed, their trade-to-GDPratios are often higher than those inmany developed and emerging-marketcountries. They also tend to have veryopen trade regimes, marked by lowtariff and non-tariff barriers, as a resultof structural adjustment and otherconditionalities stemming fromsuccessive loans from internationalfinancial institutions. Economic

South-South Cooperation:Potential Benefits for theLeast Developed Countries1

by Kamal Malhotra,UNDP, Malaysia

integration and high levels ofinternational trade, however, do notseem to have produced a commensurateeconomic development that addressesfundamental problems such as povertyand inequality.

As regards integration into theglobal economy, LDCs are in a veryvulnerable position because theytypically have small economies, limitedproduction capacities and difficulttopographies, and are located far frominternational markets in which they areminor and weak players. Nonetheless,international trade can play apowerful role in poverty reduction inLDCs, and is a more sustainable route tolong-term poverty reduction than aid.Trade is also important because exportscan generate foreign exchange revenue,which is a significant source ofdevelopment finance. Exports canalso facilitate technology transferand the development of productivecapacities, and can expand employmentopportunities and promotesustainable livelihoods.

Growing South-South Trade andDevelopment Cooperation with LDCsSouth-South trade has expandedconsiderably over the past quarter-century, albeit from a very smallbase: as of 2008, it accounted for about20 per cent of world trade, comparedwith 7 per cent in 1985 (UNCTAD, 2009).This has resulted in a changing geographyof trade and investment for the South,a circumstance that has also helpeddetermine and reinforce the direction ofSouth-South development cooperation:newly industrialised and middle-incomeemerging developing countries arebecoming contributors of increasingdevelopment assistance, particularlyto the LDCs. Such assistance to countriesin neighbouring subregions is seen by

.

1. The author acknowledges Anita Ahmad’s contributionto this article. Any errors are the author’s alone.


many emerging countries as a“win-win” that is likely to increase tradeopportunities for them in the mediumto long term. Partly for this reason,developing countries, including LDCs,are increasingly engaging in the growingmaze of intraregional and interregionaltrade, investment and other agreementsand arrangements.

While South-South trade has grownsignificantly and many developingcountries have benefited, LDCs, which aremarginalised in North-South trade, arealso increasingly being marginalisedin South-South trade. Indeed, while theshare of LDC imports that originate inother developing countries has risensubstantially, the reverse is not true.Instead, other developing countriestoday import a smaller share fromLDCs than they did in the early 1980s.To counteract these developments, themore industrialised developing countriesshould open their markets to LDCexports. In this context, an importantinstrument that countries should usemore is UNCTAD’s Global System ofTrade Preferences among DevelopingCountries. The recent offers of tradeconcessions to LDCs by countriessuch as Brazil and India are positivedevelopments that need to go furtherand be extended to all LDCs by dynamic,middle-income developing countries.

The more successful developingcountries are also gearing their South-South development cooperation effortstowards achieving the internationallyagreed development goals, including theMillennium Development Goals (MDGs)in LDCs. A number of middle-incomedeveloping countries are now withinreach of achieving the MDGs, at least inaggregate terms. This opens up space forthem to play more active roles in South-South Cooperation by various means,which may be better suited to the needsof poorer developing countries than thetraditional assistance these countriesreceive from rich, industrialised nations.

In some middle-income developingcountries, governments have nowstreamlined their South-Southcooperation practices at the foreignpolicy level as a result of their increasingrole in development assistance. For many

of them, such cooperation has assumeda permanent, built-in function in theirintergovernmental relationshipswith neighbouring and many otherdeveloping countries. It also drivestheir participation in regionalintegration efforts, from the subregionalto continental levels, and influencestheir contacts and collaboration withcountries in other continents of theSouth as well as the North.

For many LDCs, such South-Southcooperation has also increased the rangeof opportunities for developmentassistance. It has offered a significantresource channel that supplements theirtraditional donor sources of foreignfinancing and it is on different terms(often with much less stringentconditionality). Indeed, growing South-South development assistance hasserved to highlight the differencebetween traditional Northern donorpolicies and aid practices, on the onehand, and South-South developmentassistance cooperation on the other,thereby providing recipient countrieswith more options in support of theirdevelopment needs and efforts.

Increasing Voice in Global GovernanceThe changes described in the precedingparagraphs illustrate why and how theglobal architecture is slowly but surelychanging in a more inclusive direction, asa number of new Southern powers riseto the fore. While a major and highlytrumpeted aspect of this new globalorder is the growing economic andpolitical influence of relatively large

emerging economies, especially China,India, Brazil and South Africa, it is equallytrue that other emerging middle-incomecountries, such as Egypt, Indonesia,Malaysia, Mexico, Nigeria and Singapore,are also already playing or are likely toplay key strategic roles on the globalstage in the coming decades. Oneimportant consequence of the rise ofthese newly emerging industrialisedeconomies is the increasing and morevocal call for changes in globalgovernance, as regards both itsinstitutional architecture and thepolicies that govern globalisation.

To some extent these calls have alreadyresulted in some important power shiftsin international institutions such asthe World Trade Organisation (WTO),especially after the failure of its Cancunministerial meeting in 2003. It has beenclear since then that no major decisionon multilateral trade negotiations ispossible without the agreement of Indiaand Brazil, and more recently China.

By developing closer strategicrelationships with such countries,LDCs can only benefit in terms of theirvoice in global governance, which atpresent is marginal. In the context of thisarchitectural shift, regional cooperation,through South-South Cooperation, couldalso offer greater potential economicopportunity and provide a goodplatform for LDC development.

The Way ForwardOver the last few years, greater attentionhas been paid to the benefits of South-South cooperation in general and forLDCs in particular. Some developingcountries have become importantmarkets, emerging as significantinvestors in or suppliers of technology,producers of generic medicinal drugs,and providers of technical assistanceand financial aid to LDCs.

Nevertheless, more can and should bedone for LDCs by emerging developingcountries through the provision ofinvestment, trade opportunities, technicalcooperation and other relevant resourcesin order to promote poverty reductionand foster sustainable development.In particular, developing countries—especially nations such as China, India

Developing countries—especially nations such asChina, India and Brazil—can make immensecontributions to theweakest members of theglobal community bymeans of policy action intheir own countries whichis geared to the specialneeds of LDCs.

Poverty in Focus 9

and Brazil—can make immensecontributions to the weakest membersof the global community by means ofpolicy action in their own countrieswhich is geared to the special needsof LDCs. By opening more of theirmarkets to LDC exports, cancelling theirdebts, investing in them over the longterm and providing technology transferand technical assistance, these and otheremerging developing countries couldmake the slogan “trade not aid” a realityfor many, if not all, LDCs.

Johnson, A., B. Versailles and M. Martin,(2008). South-South and TriangularDevelopment Cooperation. Background

Study for the 2008 DevelopmentCooperation Forum. New York, UnitedNations Economic and Social Council.

Malhotra, K. (2008). ‘Strategy Paper on theUNDP’s Role in South-South Cooperation’.New York, UNDP. Mimeographed document.

Organisation for Economic Cooperationand Development (2006). ‘South-SouthTrade: Vital for Development’, Policy Brief.Paris, OECD.

Das, S., L. de Silva and Y. Zhou (2007).Towards an Inclusive DevelopmentParadigm: South-South DevelopmentCooperation. Paper presented to a paneldiscussion on ‘Enhancing South-South andTriangular Cooperation’, UN Department ofEconomic and Social Affairs, 17 October.Mimeographed document.

United Nations Conference on Trade andDevelopment (2004). The Least DevelopedCountries Report 2004: Overview.Geneva, UNCTAD.

United Nations Conference on Tradeand Development (2006). The LeastDeveloped Countries Report 2006:Developing Productive Capacities.Geneva, UNCTAD.

United Nations Conference on Tradeand Development (2009). Handbookof Statistics Online, UNCTAD website,<http://www.unctad.org/Templates/Page.asp?intItemID=1890&lang=1>.

United Nations Development Programme,UN-OHRLLS and Government of Turkey(2008). Making Globalization Work forthe LDCs. New York, UNDP.

South-South trade is no magicpanacea if conducted onexactly the same terms asNorth-South trade.

Regional integration,including regional trade,needs to be paced, sincecountries in most subregionshave developed unevenly.

Often, in World Trade Organisation(WTO) circles and discussions, South-South trade is viewed as a sacred cow—not to be disturbed and certainly to beenhanced. Any measure that mightlessen the flow of South-South trade isviewed negatively, almost to be avoidedat all costs.

South-South trade, however, is no magicpanacea if conducted on exactly thesame terms as North-South trade.The regulation of South-South trade,ensuring that it is conducted strategicallyrather than conforming to a one-size-fits-all paradigm, is therefore paramount.But so far there has been insufficientdiscussion of how South-Southtrade can be regulated in order toachieve the development goalsof the countries involved.

The premise of this article is that anincrease in trade (North-South or South-South) in and of itself does not leadto development. Countries need acombination of tools for development,and exports comprise only one such tool.

The reports on least developed countries(LDCs) by the United Nations Conferenceon Trade and Development (UNCTAD),for instance, are well known fordocumenting the “ghettoisation”of the export sector—that it has beendisconnected from the real economywithin countries and has not producedthe desired results.

In Pursuit of South-South TradeExports from the South have rocketedin recent years, reaching US$4.5 trillionin 2006, or 37 per cent of world trade.Of this, total South-South exportsamount to US$2.5 trillion (UNCTAD, 2009).

There are several avenues through whichSouth-South trade takes place. First, thereare regional integration efforts, wherebysubregions come together to eliminatetariffs among themselves so that goodsand services can move more freely.

South Africa, for example, exports asizeable amount of its goods and servicesto other southern African countries, aswell as to other countries in Africa.

The ChallengesConfrontingSouth-South Trade

by Aileen Kwa,South Centre, Geneva


Kenya exports agricultural products andsome goods to its African neighbours.Its regional trade is more diversified thanKenyan exports to the European Unionand the United States. What are thebenefits? For fledgling manufacturersand service providers, the regionalmarket is easier to access thaninternational markets.

The latter are strictly governed by stringentstandards that are often beyond themeans of small producers to meet.

Second, there are of course the “normal”trade channels. For most WTO members,these are governed by WTO rules; tariffsare bound, but most developingcountries usually have lowerapplied tariffs.

Together with the WTO are its twinsisters, the International MonetaryFund (IMF) and the World Bank, withtheir infamous loan conditionalities.

Generally, loans are provided if theborrowing country reduces its tariffsbelow the level of its WTO commitments.

An example is chicken from Brazil findingits way to Ghana because the latter haslow applied tariffs as a result of IMFconditions. South-South trade alsoincludes cheap electronic goods, andtextiles and clothing, from China to therest of the developing world.

More recently, there has been a renewedeffort by trade ministers to breathelife into the Global System of TradePreferences (GSTP) among developing

countries. On 2 December 2009 inGeneva, ministers adopted modalitiesfor negotiations to reduce tariffsamong countries of the South.

Benefits and Challenges ofSouth-South TradeThe benefits of South-South trade arewell known—mainly, that markets can bemore accessible. In turn, this can inducethe industrialisation/diversificationprocess, encouraging countries toproduce value-added goods for theirneighbours, even if they cannotsell them on the international markets.

This potential is true for Africa inparticular, where South-South tradeconsists predominantly of primarycommodities. Asian countries alreadyexport manufactured products to othercountries of the South. The picture ismixed for Latin America.

What of the challenges? Not all countrieswithin subregions are comfortable withfreeing trade completely. Regionalintegration, including regional trade,needs to be paced, since countries inmost subregions have developedunevenly. For example, certain countriesin the Southern African DevelopmentCommunity (SADC) are hesitant toremove all trade barriers with themuch more developed South Africauntil they are at a higher level ofdevelopment themselves.

Cooperation can come in myriad ways,including South Africa’s provision ofsupport to others in that region, toenable them to develop theirmanufacturing and services sectors.

Trade flows freely between India andNepal. Indian rice going to Nepal hasdisplaced rice farmers there, plungingthem into poverty.

This is also true for South-South tradeacross subregions. The more cheaplyproduced Brazilian chicken mentionedabove has destroyed the livelihoods ofGhanaian poultry producers.

Thai rice has been seen as the culprit forreducing rice prices in West Africa andputting local farmers out of business.And the list goes on.

Should South-South trade not be moremindful of the negative impacts on theimporting country? Should importingdeveloping countries not be givenmore policy space to defend theirdevelopment concerns? Is thelowering of tariffs by someacross-the-board formula not acrude approach to South-Southtrade, if countries are to be moreresponsive to others’ sensitivities?

The Special Safeguard Mechanism:A Case in PointAt the WTO in the Doha Round, the G-33group of 46 developing countries hasasked for a Special Safeguard Mechanism(SSM)—that is, an increase in tariffs ifimports flood the local market or if theprices of imports are too low.

While the United States and Australiahave been key opponents of thisinstrument, some of its fiercest critics areamong exporting developing countries:Uruguay, Paraguay, Argentina, Thailand,Malaysia and, to a lesser extent, Brazil.

Their complaint is that the SSM wouldaffect South-South trade. They do notwant the mechanism to affect their smallfarmers who export. Hence every effort iscurrently being made to minimise theinstrument so that it could eventuallybe useless as a safeguard.

In worrying about their exporting smallfarmers, these countries have forgottenthe poultry and rice farmers in WestAfrica, the dairy farmers in Jamaica andSri Lanka, and the sugar farmers inKenya, whose livelihoods dependon having access to their local markets,which are most likely the only marketsin which they can sell.

Will South-South trade reproduce thesame mercantilist inclinations as tradebetween the North and South?Or can we imagine trading in a waythat takes into consideration thecomplex development needs of thetrading partners with which we mostwish to collaborate?

United Nations Conference on Trade anddevelopment (2009). ‘Making South-SouthTrade an Engine for Inclusive Growth’,Policy Brief 8. Geneva, UNCTAD.

Certain countriesin the Southern AfricanDevelopment Community(SADC) are hesitantto remove all tradebarriers with themuch more developedSouth Africa untilthey are at a higherlevel of developmentthemselves.

Poverty in Focus 11

South-South cooperationis characterised bythe principle of“non-interference ininternal affairs”.

DAC donors, by contrast,have a tradition of applyingconditionality to loansand grants.

Both approaches have beencriticised from differentperspectives: the former fordisregarding key social andenvironmental standardsand perspectives beyond thegovernmental sphere; andthe latter for overridingnational democraticownership and prioritiesby imposing conditions.

The Emergence of “New DevelopmentAssistance Providers”In recent years there has been anincrease in the funding from andactivities of bilateral developmentassistance providers outside theDevelopment Assistance Committee(DAC). This group is often referred to as“non-DAC donors”, “emerging donors”or “new donors”, for lack of a better term.

In reality, many of them are not new atall but have long historical records ofproviding various types of assistanceand engaging in South-Southcooperation. The term donor is alsoproblematic in the sense that many“non-DAC” sources do not describe theirdevelopment cooperation in terms ofdonor-recipient relationships, butprefer to use the term partnershipin a South-South context. It can also beargued that it is unsatisfactory to definethis group by referring to theirnon-membership of the DAC.

Nonetheless, it is clear thatchanges are taking place in theso-called aid architecture, and thatnon-DAC countries are playing and willcontinue to play an even more centralrole in delivering assistance to andengaging in partnerships withdeveloping countries.

This is not only relevant for thepartner countries in question, butalso for traditional donors, civil societyorganisations and any other actorsengaged in development work.It highlights the need to restructureinternational dialogues on aid anddevelopment effectiveness so that theyfully reflect and incorporate the differentmodalities of non-DAC donors beyondthe “traditional” donor-recipientrelationship. It also underscores the needfor experience-sharing and cooperation

South-SouthCooperation: MovingTowards a New Aid Dynamic

between DAC donors, non-DACdonors and partner countries, so asto maximise benefits and addressthe global challenges of the twenty-firstcentury, including combating poverty.

Is It Different from North-South?Non-DAC donors comprise a veryheterogeneous group of countrieswith diverse experiences of providingdevelopment assistance, ranging fromemerging/richer middle-income countriesto lower-income countries and countriesthat both provide and receive aid(see, for example, Manning, 2006).It is therefore difficult to generaliseand talk about one type of assistance.

South-South cooperation and triangularcooperation are the two overarchingmodalities discussed in the contextof non-DAC donors. While there is noagreed-upon definition, South-Southcooperation often consists of technicalassistance on a project level, and at timesit is implemented in the form ofcost-sharing schemes. South-Southcooperation is not limited to “aid”as classified by the DAC, since itincludes other types of financialflows and cooperation.

Triangular cooperation often consists ofa financial contribution from a “Northerndonor” together with technical skillsprovided by a “Southern donor”, which isthen implemented in a partner country.But South-South-South triangularcooperation is also advancing(UN Economic and Social Council, 2008).

Some common opportunities andchallenges arising from the increasedengagement of non-DAC donors wereidentified by partner countries and non-DAC donors themselves before the ThirdHigh Level Forum on Aid Effectiveness inAccra in 2008 (Davies, 2008).

by Penny Davies,Diakonia, Sundbyberg, Sweden


Opportunities:The increased engagement ofnon-DAC donors means that moreresources are available for partnercountries to pursue their nationaldevelopment plans and to meet theMillennium Development Goals.This is important, not least becausemany DAC donors are failing to meettheir aid commitments and aid levelsare declining because of the financialcrisis. While the crisis may alsoaffect South-South cooperationnegatively, such cooperation couldplay an important role in seekingcommon solutions amongdeveloping countries.

South-South cooperation is valuedby partner countries because manynon-DAC donors face similarchallenges to those of fellowdeveloping countries, and thushave relevant know-how to share.

South-South cooperation is alsoappreciated because it has lowertransaction costs, is less donor-drivenand comes with fewer conditionsthan assistance from many“traditional donors”.

Challenges:Concerns expressed by partnercountries when cooperating withnon-DAC donors include lack ofinformation and transparency on theterms and conditions of agreements.Development assistance agreementsare often concluded at the highestpolitical level, bypassing national aidmanagement systems. This inhibitsa broad-based ownership ofdevelopment policies.

Insufficient adherence to aideffectiveness principles, includingthe untying of aid, as well as lack ofcompliance with various social andenvironmental standards, aresometimes a challenge. This concernis echoed by donors that apply suchstandards. Such underperformance,however, also occurs amongDAC donors.

Some of the challenges are related tocapacity constraints among non-DACdonors themselves, such as lack of

human resources and/or a centralcoordinating agency for developmentassistance. Investments to strengtheninstitutional and human capacitiesare therefore needed.

While the modalities of differentproviders of assistance might differfrom each other, it is important tostress that there is an expressedcommon interest in ensuring thatall assistance is effective and that itcontributes to development objectivesat the global and partner-country levels.

Many non-DAC donors have not takenpart in discussions on the ParisDeclaration on Aid Effectiveness untilrecently, or even at all, but thereis an emerging consensus that itsprinciples are relevant for enhancingaid effectiveness. Many non-DACdonors are already applying themand have adopted similar principlesof their own, including to strengthenpartner-country ownership.

On the other hand, there are alsofundamental differences in approaches.South-South cooperation is characterisedby the principle of “non-interference ininternal affairs”.

DAC donors, by contrast, have a traditionof applying conditionality to loans andgrants. Both approaches have beencriticised from different perspectives:the former for disregarding key socialand environmental standards andperspectives beyond the governmentalsphere; and the latter for overridingnational democratic ownership andpriorities by imposing conditions.

The final version of the Accra Agendafor Action (AAA) recognises the non-interference principle in the context ofSouth-South cooperation. As a follow-up,there is a need to agree on what theprinciple of non-interference meansin practice and how it relates towidely agreed-upon social andenvironmental standards and aideffectiveness principles.

A common understanding shouldgo beyond the limitations of both non-interference and conditionality practicesin aid relationships, with a view to

ensuring broad-based ownershipof policies in developing countries.

Moving towards InclusiveDialogues and Mutual LearningSouth-South cooperation and therole of non-DAC donors are graduallymoving to the centre stage of theaid effectiveness agenda.1

The document produced by the ThirdHigh Level Forum on Aid Effectiveness,the AAA, contains a paragraph thatrecognises “the importance andparticularities of South-Southcooperation” and it states that“we can learn from the experiencesof developing countries”.

Looking ahead, more inclusive dialogueson aid effectiveness are needed on aglobal and country level, so as toincorporate the diverse experiences ofnon-DAC donors and enhance mutuallearning. The AAA should be seen as astep forward in this regard. Willingnessto share information in a transparentmanner is a prerequisite and willenable complementarity.

On a practical level, triangularcooperation between non-DAC, DACand partner countries is a way forwardthat is also recommended in the AAA.It is important that such initiatives arebased on a genuine interest in mutuallearning. At times there has beensuspicion between “old” and “new”actors, and even non-constructivefinger-pointing, evident for example inthe “China in Africa” debate (see, forinstance, Davies, 2007). There is a needto move beyond the “blame game”and to focus on solutions that contributeto fair and sustainable development.Such cooperation should not be aboutone side assimilating the other to itsprinciples and practices. Both non-DACand DAC donors need to be open to newperspectives, building on best practices.

Partner-country leadership in triangularcooperation is key. Partner countriesshould be the ones to define whatassistance is needed, on the basis of theirnational plans. Hence all donors shouldalign their assistance to the prioritiesset by partner countries. Triangularpartnerships, however, should not be

Poverty in Focus 13

There is no shortageof networks to identifybest practices anddevelopment innovationsby developing countries’institutions, but what islacking are the mechanismsthat can effectivelyfacilitate the actualtransfer of knowledgefrom one Southerncountry to another.

Unlocking ingenuity for theachievement of inclusivedevelopment entails creatinga favourable environmentfor the broad adoption ofinnovative best practices.

If this is so, why not learnwith the private sector in thisregard? As Amartya Sen hasput it: “The market is just aform of human exchange.To be generically against themarket would be almost asodd as being genericallyagainst conversationsbetween people”.

limited to government bodies but shouldinclude civil society organisations, whichhave very important roles to play indevelopment: identifying needs,presenting proposals, acting aswhistleblowers when things go wrongand so forth. Including civil society in thetriangle enables a broad-based ownershipof the development processes.

Triangular partnerships could be appliedin various current policy discussions,as well as when concrete projects areimplemented. In the post-Accra contextfor enhancing aid effectiveness,

a triangular approach could be exploredin discussions of policy space versusconditionality versus non-interference,which remain key sources of tensionin aid relationships.

Davies, P. (2007). China and the End ofPoverty in Africa – Towards Mutual Benefit?Sundbyberg, Diakonia and Eurodad.

Davies, P. (2008). Aid Effectiveness andNon-DAC Providers of DevelopmentAssistance. Consultative Findings Documentof the Informal Working Group on Non-DACProviders of Development Assistance,IPC-IG website, <http://www.undp-povertycentre.org/publications/southlearning/penny.pdf>.

Manning, R. (2006). ‘Will “Emerging Donors”Change the Face of InternationalCo-operation?” Development PolicyReview 24 (4), 371–385.

United Nations Economic and SocialCouncil (2008). Background Study forthe Development Cooperation Forum.Trends in South-South and TriangularDevelopment Cooperation.New York, ECOSOC.

1. For example, on 24–26 March 2010, some400 high-level representatives of governments,multilateral organisations and civil society have attendedthe High-Level Event on South-South Cooperation andCapacity Development, hosted by the governmentof Colombia in Bogotá.

Sometimes, the term “best practice”seems to have weakened to mean littlemore than a “good idea”. Initially,however, it stood for the process ofabstracting useful knowledge fromexamples of what had worked in thepast in order to apply the knowledgeto new situations.

In the context of social and economicdevelopment, an emphasis on applyingbest practices would offer a goodway of controlling risks and ofincreasing the chances of achievingpositive outcomes in increasinglycomplex environments.

It would also lessen part of the pain ofexperimentation by trial and error whenthe quality of people’s lives is at stake,simply by using what experience hasshown to work. Hence many initiativesto collect, document and share bestpractices have been undertaken bydevelopment organisations.

But is the focus on best practicesa good strategy? Maybe not, particularlyif this is as far as one goes. A largepart of current efforts focuses onidentifying and documenting bestpractices, which assumes that thenext steps—those related to adoptingthese practices—will be takenby someone else.

Beyond Best Practices

The effort required for the next steps,however, is much greater than thatneeded to identify and document,and this effort has to be madeif best practices are to be adopted.

In this regard, the increased rateof adoption of innovation is justas important as the rate at whichinnovations are created in orderto produce wealth and advancedevelopment. This is true in boththe private sector and insocial development.

For example, microfinance has been oneof the most prominent innovations inthe promotion of inclusive development,but the real revolution was the rate atwhich its principles and methods wereopenly disseminated, adopted andreplicated throughout the world.

However, this example can beconsidered an exception; overall,human-development innovations tendto have a relatively low rate of transferand replication when compared tothose in the marketplace.

One of the reasons for the low rateof adoption of social innovationsis the “inform and educate” approach.This seems to reflect the “build it andthey will come” mentality prevailing

by Francisco Simplicio,UNDP Special Unit for South-SouthCooperation


during the growth of Internet servicesin the late 1990s, the so-called dot-comboom, which was followed by the well-known bursting of the dot-com bubble.

It often seems to be forgottenthat identifying, documenting andcommunicating best practices are justpart of the larger processes of diffusionand adoption of innovations.

Diffusion of an innovation is a typeof a decision-making process comprisingfive steps (Rogers, 1995): acquisition ofknowledge, persuasion, decision,implementation and confirmation.

This process occurs through a seriesof communication channels amongthe members of a social system.It is important to consider thatadopters always have choices amongcompeting alternatives and that theymight reject an innovation at any timeduring or after the adoption process.

The theory of the diffusion ofinnovations indicates that tryingquickly to convince a very large numberof people to adopt a new idea is not agood use of resources. It makes moresense to begin by working with a specialgroup called early adopters.

This group has the proper attitude forhandling exposure to the problems, risksand annoyances common to the earlystage of diffusion, and is normallygiven special assistance and support.

It is often said that all that is needed forbroad adoption to happen is funding, butthis may be an oversimplification of thereal force behind the diffusion process.

In the perspective of classical economics,potential output depends on the amountof labour and capital available, but alsoon the ingenuity with which theseresources are put to use. Many peoplewould say that of these three factors,capital is the most important.

In reality, however, ingenuity can accountfor 88 per cent of the growth in historicaloutput (The Economist, 2009). Of thesefactors, therefore, ingenuity is by far themost important resource on which it iscritical to capitalise. Unlocking ingenuityfor the achievement of inclusivedevelopment entails creating a favourableenvironment for the broad adoptionof innovative best practices.

If this is so, why not learn with theprivate sector in this regard?How does the private sector dealwith such a complex process of adoptingand diffusing innovation? It is supportedby several different strategies, fromventure capital to innovation fairs,including massive investment inentrepreneurship development.

The adoption process can even becomepart of the business itself, via franchisemodels wherein adoption and diffusionrelate not only to innovative practicesbut also go beyond them to includeinnovations in system and processmanagement. As Amartya Sen has put it:“The market is just a form of humanexchange. To be generically against themarket would be almost as odd as beinggenerically against conversationsbetween people.”

Rogers, Everett M. (1995). Diffusion ofInnovations. New York, Free Press.

The Economist (2009). “Industrial Design:Can Governments Help Revive Innovationand Trade?” 1 October.

The Work of the Special Unit for South-South Cooperation

How are current knowledge-management initiatives facilitating the engagement ofthe players who are able to introduce more ingenuity into the process of diffusing andadopting innovative best practices to promote human development process?

In the UNDP’s Special Unit for South-South Cooperation we believe that in order to havean impact on a large scale, we must go beyond making best practices known and mustfocus on the mechanisms that favour the actual transfer of practices, by engaging andsupporting the motivated players who can introduce creativity and ingenuity with aview to scaling up the transfer of social innovations.

For such players, best practices are simply inputs in this process, along with marketing,showcasing, partnership-building, etc.

In a novel approach that seeks to strengthen social and economic ties amongdeveloping countries, and to share knowledge and best practices with the goal of actualtransfers, the Special Unit for South-South Cooperation is committed to transforming,consolidating and institutionalising its current efforts into integrated, mutuallyreinforcing components of an architecture that supports multilateral South-Southcooperation. Through its fourth cooperation framework for South-South cooperation(2009–2011), approved by the UNDP Executive Board, the Special Unit is building thisarchitecture, which has the following three interlinked platforms:

(i) the Global South-South Development Academy (GSSD Academy)—to enabledevelopment partners to systematically identify, document and cataloguedevelopment solutions for validation and mutual learning;

(ii) the Global South-South Development Expo (GSSD Expo)—to enable developmentpartners to showcase successful and scalable development solutions for visibility tothe broader community, so as to obtain peer feedback and build partnerships; and

(iii) the South-South Global Assets and Technology Exchange (SS-GATE)–to enabledevelopment partners to list the most scalable solutions and technologies forpartnership-building, resource-mobilisation and actual transfer.

In the 18 months of pilot operations of track 1 of S-S GATE, more than 800 proposalsoffering or seeking technology solutions were listed, and 22 matches and partnershipsfor actual transfers were facilitated (as of September 2009), demonstrating thetremendous potential of the market-driven approach. With this novel architecture,the Special Unit believes that it is providing a service platform able to strengthensocial and economic ties among developing countries and to capitalise on bestpractices with the goal of actual transfer.

Poverty in Focus 15

IBSA’s functional leadershipin WTO negotiations andthe UN reform debate offersa countervailing force tothe current hierarchy of theglobal order.

In the long term, IBSA’ssoft balancing strategy isgeared to the formation of amultipolar system based onthe rule of international law.

The three countrieswant to become powerpoles of that prospectivemultipolar world.

The India-Brazil-South AfricaDialogue Forum (IBSA) was launchedin June 2003 in Brasilia by the threecountries’ foreign ministers after informaltalks during the G-8 meeting in Evianthat same year. In September 2003, PrimeMinister Atal Bihari Vajpayee andPresidents Luis Inácio Lula da Silva andThabo Mbeki founded the G-3 duringthe Fifty-Eighth UN General Assembly.

They contributed crucially to the upsetat the World Trade Organisation (WTO)ministerial meeting in Cancun bypressing for fundamental changes to thedeveloped world’s agricultural subsidiesregimes. Together, the IBSA countries alsolobbied for reform of the United Nationsto provide a stronger role to developingcountries, which comprise the majorityof UN member states.

IBSA’s functional leadership in WTOnegotiations and the UN reform debateoffers a countervailing force to thecurrent hierarchy of the global order.India, Brazil and South Africa use “voiceopportunities” provided by institutionssuch as the UN, the WTO and G-8Summits to undermine the establishedgreat powers’ policies in the short term.

In the long term, IBSA’s soft balancingstrategy is geared to the formation of amultipolar system based on the ruleof international law. The three countrieswant to become power poles of thatprospective multipolar world.

Generally, the coalition of Southernpowers supports the process ofinternational organisation, a conductthat is usually ascribed to middle powers.But IBSA’s global justice discourse isdoubtful, since Brazil and India havebeen striving (with Germany and Japan)for permanent membership of the UNSecurity Council. India and Brazil invited

IBSA: South-SouthCooperation or TrilateralDiplomacy in World Affairs?

by Daniel Flemes,German Institute of Global and AreaStudies (GIGA), Hamburg

South Africa to join the group but thecountry had to abide by African Unionguidelines, which prevent it from fieldingits candidacy on its own. The UN High-Level Panel had suggested an alternativeand more participatory plan for a regularsystem of rotating members, which wasrejected by India and Brazil.

The expansion of the Security Council,however, would favour only a fewplayers. In order to achieve the lastingdemocratisation of the organisation,the General Assembly would alsohave to be strengthened.

Divergences between the nationalpositions of the three Southern powersbecame clear in the Doha Roundnegotiations. New Delhi’s position ontrade-related aspects of intellectualproperty rights (TRIPS) and non-tariffbarriers separates it from Brasilia andPretoria. In particular, India demandsprotection against agricultural imports,whereas Brazil advocates a broadliberalisation of the globalagricultural market.

In addition, the national interests of theIBSA countries are partly at odds with theinterests of developing countries, whichthey claim to represent. As net foodimporters, most of the least developedcountries (LDCs) cannot be interested inthe reduction of agricultural subsidiesin Europe and the United States thatkeep food prices low.

Moreover, while the WTO negotiationshave hardly progressed in terms ofcontent, Brazil and India have beenable to improve their positions inthe international trade hierarchy.At the 2004 WTO conference in Genevathey were invited to form the G-5preparation group together with theEuropean Union, the United States and


Australia. At the German G-8 Summit in2007, Brazil, India and South Africa (withChina and Mexico) were invited toformalise their dialogue with the eliteclub of the richest industrialisedcountries through the so-calledHeiligendamm or O-5 process.

These invitations, as well as the role ofthe G-20 in the handling of the recentfinancial crisis, reflect increasingacceptance of the IBSA countries’(prospective) major-power statusby the established great powers.

While the IBSA initiative may thusbe seen as an effort to increase itsmembers’ global bargaining power, thecooperation between South Africa, Indiaand Brazil also focuses on concrete areasof collaboration. Trade, health, energysecurity and transport are only themost prominent issues of IBSA’ssectoral collaboration.

IBSA can therefore be characterised asboth a strategic alliance for the pursuitof the common interests of emergingpowers in global institutions, and alsoas a platform for bilateral, trilateral andinterregional South-South cooperation.

The sectoral cooperation is to form asound basis for trilateral diplomacy inworld affairs. But the potential synergiesof IBSA’s sectoral collaboration aredoubtful. In particular, the prospects forbilateral and trilateral trade are limitedby a number of constraints.

The economies’ different sizes anddegrees of global integration lead to

different degrees of trade benefits.But the main obstacle consists of thelimited complementarities between thethree markets, since India, Brazil andSouth Africa produce similar goodsand compete for access to the marketsof the countries of the Organisationfor Economic Cooperation andDevelopment (OECD).

Additionally, the fact that developedcountries have asymmetrical capabilitiesrelative to the IBSA countries allows themto demobilise the South-South alliancethrough cross-bargaining on a tradechessboard of variable geometry.

But trade is merely one of manyundertakings in this multidimensionalinitiative. India, Brazil and South Africaare not natural trading partners, and thelimits to commercial exchanges betweenthem should be recognised.

While a trilateral trade agreement hasbeen alluded to on numerous occasions,such an ambitious undertaking isunlikely to materialise between thesethree countries, which are technicallybound to regional trade blocs. A morerealistic approach could involve tradefacilitation and the improvement oftransport and infrastructure linksbetween them.

Other sectors, such as health and energysecurity, seem to offer more synergies.As regards HIV/AIDS, for instance, theinterests of the three countries are quiteconvergent. India has the second largestnumber of HIV-positive people (2.4 million)and also the largest generic drugs industry.

Brazil has developed role-model publicpolicies in fighting AIDS and exports itsknow-how to several African, Asian andLatin American countries. South Africahas a high demand in this regard, since ithas the largest number of HIV-positivepeople (5.7 million) and faces severeconstraints in democratising publichealth services regarding the epidemic.

In recent years the IBSA countries havebeen prominent in the G-21 lobby thatsucceeded in lessening the negativeeffects of TRIPS with regard to patentsthat impose high costs for HIV/AIDSdrugs in developing countries, especiallyin Africa. An interpretive statement of the2001 Doha Declaration indicated thatTRIPs should not prevent countries fromfighting public health crises. Since then,TRIPs has provided for “compulsorylicensing”, allowing governments to issuelicenses for drug production for thedomestic market without the consentof the patent owner.

A 2003 agreement loosened the domesticmarket requirement, and alloweddeveloping countries to export theirlocally produced generics to othercountries facing epidemics such asHIV/AIDS, malaria and tuberculosis.

The energy sector is another pivotalarea of cooperation, as spelled out ata September 2006 summit in which amemorandum of understanding onbiofuels was signed.

About 62 per cent of Brazil’s energyrequirements are met by renewablesources; of those, 10 per cent come fromethanol from sugarcane. In April 2002,India and Brazil signed a memorandumof understanding on technology-sharingin the blending of petrol and diesel withethanol. India is the world’s largestsugarcane producer.

Solar energy and coal liquefaction areother potential areas of cooperation.India’s capabilities in the solarphotovoltaic field could be of muchinterest to Brazil and South Africa, giventhese countries’ vastness and climate.

South Africa has a highly developedsynthetic fuels industry. That industrytakes advantage of the country’s

While the IBSAinitiative maythus be seen as aneffort to increase itsmembers’ globalbargaining power,the cooperationbetween South Africa,India and Brazil alsofocuses on concreteareas of collaboration.

In recent years the IBSAcountries have beenprominent in the G-21lobby that succeeded inlessening the negativeeffects of TRIPS withregard to patents thatimpose high costs forHIV/AIDS drugs indeveloping countries,especially in Africa.

Poverty in Focus 17

abundant coal resources and hasdeveloped expertise in the technologyof coal liquefaction. With a view tothe growing global energy need, thistechnology may be commerciallyviable and could be explored byIndian companies.

As regards future cooperation in nucleartechnology, the three emerging powershave stated that, under appropriateInternational Atomic Energy Agency(IAEA) safeguards, international civiliannuclear cooperation among countriescommitted to nuclear disarmament andnon-proliferation could be enhancedthrough forward-looking approachesthat are consistent with their respectivenational and international obligations.

Brazil has controlled the full nuclear fuelcycle since March 2006. Brazil and SouthAfrica are among the most influential

members of the Nuclear Suppliers Group(NSG). Shortly after India concluded itsdeal on civilian nuclear cooperation withthe United States in March 2006, PrimeMinister Singh visited Pretoria, wherePresident Mbeki announced that SouthAfrica would back India’s bid in the NSGto be given access to internationaltechnology for a civilian nuclear energyprogramme. Supporting the dealbetween the United States and India,which has not signed the Non-Proliferation Treaty, indicates a major shiftin South Africa’s proliferation policy, froma rule and principle-based approach toone that is more pragmatic. The threeSouthern powers seem determinedto seek large-scale synergies innuclear energy production.

The sustainability and prospects of thetrilateral undertaking are currently hardto estimate, but IBSA’s success will

depend not least on its ability to focuson distinct areas of cooperation, such aspublic health and energy security, andto avoid those areas of controversy thattend to hamper the cooperation process.

IBSA is not yet a formal organisationand it has no headquarters or secretariat.Common institutions would facilitatethe effective coordination and pursuit ofIBSA’s interests. Finally, enlargementof the trilateral coalition would generatemore potential synergies in sectoralcollaboration and even more weight inthe institutions of global governance.

In this regard, IBSA could merge withChina and Russia to form BRICSA, or withthe traditional civilian powers Germanyand Japan to build a G-5, while retainingits characteristics as a small butpotentially effective coalition.

Despite the obviousdifferences betweenSouth-South cooperationand North-South cooperation,both can be explained bythe same theories.

The Rise of South-SouthCooperation in Latin Americaand the Caribbean South-Southcooperation is not a new phenomenonin Latin America and the Caribbean (LAC).

Since the 1970s, several LACcountries have been involved inwhat is known as Technical Cooperationamong Developing Countries (TCDC).From their inception, regional integrationschemes have also provided the rationaleand institutional framework for regionaldevelopment banks in Central Americaand the Andean Group.

In the 1980s, despite the debt crisis,oil-exporting countries such as Mexicoand Venezuela backed the CentralAmerican peace initiatives withsoft financing of oil exports.

In the last decade, however, the amountand scope of activities and the numberof countries involved in South-Southcooperation in LAC grew substantially.

Some interrelated causes can besuggested to explain this increase.1

First, it should be seen as an expressionof the increasing economic and politicalmuscle of emerging countries, thegrowing international scope of theirnational interests, their global or regionalleadership, and their desire to gain moreautonomy in world politics and theinternational political economy.

As Fareed Zakaria has put it,this is “the rise of the rest” againstthe United States and other countriesof the Organisation for EconomicCooperation and Development (OECD).

Post-Liberal Regionalism:S-S Cooperation in Latin Americaand the Caribbean

by José Antonio Sanahuja,Complutense Institute forInternational Studies (ICEI)

1. Though not a detailed reporting system of South-South cooperation, an appraisal of this growth can befound in the 2008 and 2009 reports on Ibero-Americancooperation published by the Ibero-American GeneralSecretariat with information provided by nationalgovernments, at <http://www.segib.org>.


All these factors can be found inLAC, particularly in Brazil, Mexicoand Venezuela, but also in smallercountries that are active in South-Southcooperation, such as Chile, Colombia andCuba. Economic growth, as well as tradeand fiscal surpluses, have also playeda role, and it can be argued thatcompetition, imitation or emulationare also causes of the growth ofSouth-South cooperation inemerging and LAC countries.

Unsurprisingly, South-South cooperationis often framed in more assertive foreignpolicies, whether for power or prestige,ideology or internal legitimacy, tosupport regional stability or to complywith international commitments—asshown by Argentine and Braziliansupport for the civilian componentsof the UN mission in Haiti.

Finally, South-South cooperation shouldalso be seen as an expression of thegrowing capacity of middle-incomecountries to contribute to attainmentof the Millennium Development Goalsas aid donors, not only as recipients.The above reasons are global in scope, butthe growth of South-South cooperationin LAC is related to a distinctivelyregional feature: the emergence of“post-liberal” regionalism from 2004onwards, following the crisis of“open-regionalism” integration strategiesimplemented between 1990 and 2005.

Albeit substantially different, theBolivarian Alliance for the Americas-People’s Trade Treaty (known by itsSpanish acronym ALBA-TCP) and theUnion of South American Nations(UNASUR) reveal that the region isshifting towards an approach that ismore comprehensive than the formerregional integration model, whichcentred on trade liberalisation.Expressions of the competing regionalvisions and leaderships of Venezuela andBrazil, both regional projects are basedon a more “developmental” role for thestate, encompassing greater cooperationin the economic and financial realm,security and crisis management, andregional sectoral policies in fields such asenergy, transport and communicationsinfrastructure, the environment andsocial development, including food

security, health, poverty reduction andthe narrowing of regional asymmetries.

Notwithstanding the endless thoughhelpful controversies about thedefinition and taxonomies of South-South cooperation, flagship initiativesand policies such as the financing ofregional infrastructure by Brazil’sNational Bank for Economic and SocialDevelopment (BNDES), the creation ofthe “Bank of the South” by the UNASURcountries, and the preferential oilfinancing of Petrocaribe with the backingof the Venezuelan government can becategorised as South-South cooperation.

They are “common policies” developedin the framework of “post-liberal”regionalist strategies that seek tofoster development and build strongerSouth American or Latin Americanregional groups in an increasinglymultipolar world.

Another feature of South-Southcooperation in LAC is its diversity,which is too great to be addressedin this article. It exhibits a broad rangeof institutional frameworks, modalitiesand instruments. It is mainly “horizontal”,involving only LAC countries, but thereis also “triangular” cooperation involvinga traditional donor, including themultilaterals. As has been said, thereare regional programmes adoptedwithin regional integration groups,and bilateral South-South cooperationthat usually reflects more clearly theforeign policy priorities and/or specificcapacities of donors.

A major focus for this bilateralcooperation is technical assistance,because of its low cost and immediateeffects, and because it providesopportunities to display the donors’strongest capacities. Technical assistancecovers various fields, such as agricultureand food security, infrastructure, theenvironment, public administration,the fight against HIV/AIDS, basicsocial services, financial assistanceand cooperation on energy issues.

The most active donors are uppermiddle-income countries such asArgentina, Brazil, Chile, Colombia,Cuba, Mexico and Venezuela.

Development cooperationhas been explained bypolitical realism andcritical theories as aninstrument of powerpolitics; by institutionalismand rational-choicetheories as a mean ofachieving nationalinterests; by socialconstructivists as anexpression of valuepreferences and collectiveidentities; and by criticaland post-Marxist theoriesas an expression of globalconflicts between actorspromoting neoliberalglobalisation andactors strugglingfor the regulation oftransnational capitalism.

2. See, for instance, Morgenthau (1962) for a classicalrealist stance; Riddell (1987) for a classical discussionof aid in the fields of international political economyand political philosophy; Lumsdaine (1993) for asocial-constructivist approach; and Kaul et al. (1999)for a review of rational choice, institutionalism andthe global public goods approach.

Poverty in Focus 19

Discourses and Identities in South-SouthCooperation in Latin Americaand the CaribbeanA strong discourse of self-legitimisationis being built around South-Southcooperation in Latin America as a regionalexpression of the global debate aboutthe role of such cooperation in theinternational aid system.

Governments and non-governmentalactors across the region frequently arguethat the nature, aims and instruments ofthis cooperation are better than (and canbe considered as an alternative to)“traditional” North-South cooperation.

Briefly, South-South cooperation isportrayed as more “developmental”—thatis, detached from the selfish political,economic or strategic interests of richcountries; “fair”—rooted in principlessuch as self-determination and solidarity,focused on social justice and free ofhidden governmental agendas;“horizontal”—it takes place betweendeveloping countries in a relationshipof equals, without the powerasymmetries and conditionality usuallyfound in North-South cooperation;and “more effective”—based on morecost-effective instruments and resources,and better adapted to the specificdevelopment needs and localcontexts of recipient countries.

If these arguments were totally true(and they are not), we would need anentirely new analytical framework tounderstand international developmentcooperation, and even the internationalsystem. Indeed, despite the obviousdifferences between South-Southcooperation and North-Southcooperation, both can be explainedby the same theories.

This issue has produced an extensive andfar-reaching literature, firmly rooted inwider theoretical debates about the realnature of the international system andthe behaviour of states and otherinternational actors.2 In this context,it is worth remembering thatdevelopment cooperation has beenexplained by political realism andcritical theories as an instrument ofpower politics; by institutionalismand rational-choice theories as a mean

of achieving national interests, definingcommon interests and providingregional and global public goods in amore legitimate and cost-effective way;by social constructivists as an expressionof value preferences and collectiveidentities, among other factors in therealm of knowledge; and by critical andpost-Marxist theories as an expressionof global conflicts between actorspromoting neoliberal globalisationand social forces struggling forredistribution and the regulationof transnational capitalism.

It can be argued that South-Southcooperation, despite its differences fromNorth-South cooperation, can also beexplained within these alternativetheoretical frameworks of power,interests and ideas. There is certainlyample evidence that South-Southcooperation has many advantages overNorth-South cooperation in matterssuch ownership, legitimacy and cost-effectiveness. It can be based on a betterunderstanding of development problemsin recipient countries, and it can provideideas and resources better adaptedto local contexts.

The developmental impact of someprogrammes—oil-financing for smalleconomies in the Caribbean, Brazil’ssupport for the fight against HIV/AIDS,among others—is beyond question.

Nonetheless, much of the criticism rightlylevelled at North-South cooperationcould also be directed at South-Southcooperation. It would be cynical or naïveto ignore the argument that South-Southcooperation in LAC is also motivatedby foreign policy objectives—in theBrazilian case, for instance, it reflects awider agenda for regional stability,security, trade and investment goals,and is also a means of upholding Brazil’saspirations as a regional leader andglobal actor.

Venezuelan aid through ALBA orPetrocaribe is attached to geopoliticalalignments and highly ideologicalagendas. And Mexican cooperation withCentral America is related to well-knownsecurity concerns on its southern border.For countries like Chile, providing South-South cooperation is also a way of

putting itself in a different status in theregion’s development ranking. It is alsonaïve to ignore the strong asymmetriesof power within the region and toconsider as “horizontal” or “egalitarian”the relationship between, for instance,Brazil and Bolivia or Haiti, or betweenVenezuela and the small open economiesof the Caribbean, which are highlyvulnerable to oil shocks.

Finally, little is known about the realscope and effectiveness of South-Southcooperation in LAC. Only a handful ofcountries provide detailed informationabout funding and resources.

There is a lack of adequate statistics andcommon criteria, and some countriesseem to prefer to keep the informationsecret, even from their own citizens.Evaluations are exotic, and the currentdebates about aid accountability seemto be considered a luxury for the rich.

The region’s ambivalence towardsinternational commitments on aideffectiveness (the 2005 Paris Declarationand the 2008 Accra Agenda for Action)seems to be based on a fair reasoning:it is an agenda mainly controlled byOECD countries, but this also meansthat important issues of coordination,accountability and effectivenessof aid are neglected.

In fact, South-South cooperation mustaddress these issues in order to gainlegitimacy in the broader debate aboutthe need to reform the governance ofthe global aid system, and to rebalancethe highly asymmetrical relationshipbetween developing and OECD countries.

Kaul, Inge, Isabelle Grunberg and MarcStein (eds) (1999). Global Public Goods.International Cooperation in the 21stCentury. Oxford, Oxford UniversityPress/UNDP.

Lumsdaine, David H. (1993). Moral Visionand International Politics: The ForeignAid Regime, 1949–1989. Princeton,Princeton University Press.

Morgenthau, Hans (1962). ‘A Political Theoryof Foreign Aid’, American Political ScienceReview 52 (2), 301–309.

Riddell, Roger (1987). Foreign AidReconsidered. London and Baltimore,Overseas Development Institute/John Hopkins University Press.


China’s increasing demandfor raw materials to fuel itsdomestic growth hasresulted in agreementson access to and extractionof minerals and oilfrom resource-richAfrican countries.

Africa’s imports fromChina have been dominatedby goods such as clothing,machinery and textiles,illustrating the marketopportunities that Africaprovides for Chinesemanufactured goods.

However, skills transferand development in Africahave received furtherimpetus at the 2009 Forumon China-Africa Cooperation(FOCAC) meeting.

This could signal moreopportunities for Africangovernments to pursuegreater socioeconomic gainsbeyond the infrastructuredevelopment emphasisedin the past.

China’s engagement withAfrica has continued to receive greaterworldwide attention in the past severalyears. The Asian giant’s growingactivities have spurred questionsfrom policymakers, civil society and theprivate sector as to what this deepeningrelationship means for Africa’s futuredevelopment, as well as its links withtraditional Western actors.

This engagement has becomeincreasingly structured and hasdeveloped through flows of trade, aidand investment that will undoubtedlycontinue. Nonetheless, as the relationshiphas continued to strengthen and solidify,future engagement will have to move innew directions in order to foster greaterlong-term and sustainable benefitsfor both China and Africa.

China’s relationship with Africa has beendriven by commercial interests. China hasbecome one of Africa’s leading tradingpartners, with trade totalling US$106.8billion in 2008, up 45 per cent from theprevious year. China had a US$5.16 billiontrade deficit with Africa in 2008, althoughexports from Africa have continued toconsist largely of petroleum andminerals (82 per cent).

In contrast, Africa’s imports from Chinahave been dominated by goods suchas clothing, machinery and textiles,illustrating the market opportunities thatAfrica provides for Chinese manufacturedgoods. The diversification of Africa’sexport profile to China will persist inchallenging the trade relationshipas raw materials and mineralscontinue to dominate.

China’s increasing demand for rawmaterials to fuel its domestic growth hasresulted in agreements on access to andextraction of minerals and oil from

South-South Relations:Sino-African Engagementand Cooperation

by Hayley Herman,Emerging Powers in Africa Programme

Fahamu, Cape Town

resource-rich African countries.China’s domestic development has thusincreased demand for Africa’s resources.China has also become an emergingplayer in providing financial assistancefor infrastructure development in Africa.

This has helped African countriesaddress their infrastructure needssuch as railways, hydropower and roads.The World Bank has estimated that Africaneeds US$20 billion in infrastructureinvestments annually, and has a shortfallof about US$10 billion a year. Accordingto the same World Bank study, Chinaprovided financing of about US$1.5billion in 2004 and 2005, rising toUS$7 billion in 2006 and falling to US$4.5billion in 2007 (Foster et al., 2008).China has sought to provide concessionalfinancing for infrastructure andconstruction projects through itsExport-Import Bank. These infrastructureprojects often make use of Chinesecompanies to carry out the projects.

China’s foreign exchange reservessurpassed US$2 trillion in June 2009,according to the Chinese government.This was achieved during a globalfinancial crisis in which aid and projectcommitments to Africa have declined orbeen halted as countries of the Westhave grappled with their economic woes.China’s foreign investments have notceased during this period, and Chinesecompanies are still encouraged toseek opportunities in the continent.

According to China’s Ministry ofCommerce, Chinese investment activitieswere worth US$552 million in the firstquarter of 2009, an increase of 81 percent over the same period of 2008.Given the 30 per cent drop in Sino-African trade in the first half of 2009,China’s activities have increasedthrough investment in Africa.

Poverty in Focus 21

This investment drive has beenparticularly evident in recent yearsas a result of China’s “go global” policy.Through this strategy, introduced in2001, the government has encouragedChinese companies to invest in foreignmarkets. Over 1,000 Chinese firms haveconcluded agreements that expand theiractivities into Africa. South Africa, inparticular, has become an importantstrategic partner for China in its desireto extend its global footprint. Large,multinational South African companieshave been wooed not just by Chinesecompanies but also by Indian firms,seeking access to its established marketsand experience in operating in Africa.

China’s largest commercial and policybanks, such as the Export-Import Bank,the China Construction Bank and theChina-Africa Development Fund, haveestablished offices in South Africa.One of the largest Chinese investmentswas effected through an agreementbetween the Industrial and CommercialBank of China (ICBC) and the SouthAfrican Standard Bank, Africa’s biggestbank. ICBC has a 20 per cent stake inthe deal, allowing it access to StandardBank’s activities in more than 17countries. A substantial increase infinancing for African infrastructureprojects was expected as a result of thisinvestment. This has become evidentas an increasing number of projectsbetween Standard Bank and ICBC areannounced, recently including financingof US$825 million for a coal-fired powerstation in Botswana. This has alsoprovided further opportunities forChinese companies to establishoperations in African countries, in orderto implement the agreements signedby the two financial institutions.

In recent years, China’s foreign policy inthe region has been directed through theForum on China-Africa Cooperation(FOCAC), which was set up in 2000. FOCAChas become the main vehicle for China’sactivities in Africa, providing a multilateralplatform for dialogue with a view toreaching mutually agreeable goals.Chinese investment in Africa hascontinued to grow since FOCAC’s launch.Since the first ministerial meeting, furthersummits have taken place in Addis Ababa(2003), which led to the creation of the

Addis Ababa Action Plan 2004–2006,and Beijing (2006), at which the BeijingAction Plan 2007–2009 was adopted.The various action plans seek to outlinemutual areas of interest for the nextthree years by identifying targets andestablishing commitments. The actionplans have provided a structure on whichto build in subsequent FOCAC summits.The dialogue has continued with themost recent summit in November 2009at Sharm El Sheik in Egypt, where theSharm El Sheik Action Plan 2010–2012was adopted.

Before the Beijing Summit in 2006, theyear often hailed as China’s “Year of Africa”,the country’s Africa policy was furtherunderpinned by a white paper releasedin January of that year. The paperpromotes South-South engagement andoutlines China’s political, economic andsocial activities in Africa. The priorityareas are addressed through the actionplans adopted at the FOCAC summits.These summits have become the mainmechanism driving aid, trade andinvestment flows into Africa. In the 2009Sharm El Sheikh Action Plan, for example,the Chinese government committed itselfover the next three years to:

send 50 agricultural technologyteams to Africa and help train 2,000African agricultural technicians;build and implement 20 agriculturaltechnology demonstrationcentres in Africa;increase the China-AfricaDevelopment Fund to US$3 billionin order to expand investment fromChinese businesses in Africa;promote a special loan of US$1billion from Chinese financialinstitutions to support Africansmall and medium enterprises;provide US$10 billion in preferentialloans to African countries tosupport infrastructure andsocial development projects;grant tariff exemptions on 95 percent of exports from African leastdeveloped countries (LDCs) that havediplomatic relations with China;cancel the debt of interest-freegovernment loans that matured by theend of 2009 owed by all highly indebtedpoor countries and LDCs in Africa thathave diplomatic relations with China;

provide US$1.5 million to supportthe New Partnership for Africa’sDevelopment (NEPAD) in trainingAfrican nurses and maternityassistants;provide African countries with 100small well-digging projects forwater supply, as well as cleanenergy projects;provide RMB500 million in medicalequipment and anti-malaria materialsto 30 hospitals and 30 malariaprevention and treatment centresbuilt by China;implement 100 joint research anddemonstration projects to aidscience and technology transfer;build 50 schools and train 1,500head teachers and other teachersin Africa (Forum on China-AfricaCooperation, 2009).

The commitments for the nextthree years have kept the focus oninfrastructure, construction and aidprovision, as in previous FOCAC summits.However, skills transfer and developmentin Africa received further impetus at therecent meeting. This could signal moreopportunities for African governmentsto pursue greater socioeconomic gainsbeyond the infrastructure developmentemphasised in the past. Sino-Africanrelations have continued to bestrengthened and deepened over time,but the future of the relationship will liein creating practices that can supportsustainable development. Technologytransfer and skills development, such asthose mentioned in the Sharm El SheikhAction Plan, can provide furtheropportunities to advance this strategicengagement. The long-term relationshipbetween China and Africa will onlybecome “win-win” if both sides trulyreceive mutual long-term benefits.

Forum on China-Africa Cooperation (2009).‘Sharm El Sheikh Action Plan (2010–2012)’,FOCAC website, <http://www.fmprc.gov.cn/zflt/eng/zxxx/t626387.htm>(accessed 4 December 2009).

Foster, V. et al. (2008). Building Bridges:China’s Growing Role as InfrastructureFinancier for Sub-Saharan Africa,World Bank website,<http://siteresources.worldbank.org/INTAFRICA/Resources/Building_Bridges_Master_Version_wo-Embg_with_cover.pdf>(accessed 4 December 2009).


It remains to be seenwhether bureaucraticdelays and other negativefactors associated withNorthern aid will be lessevident in the case ofSouth-South cooperation.

So far Sierra Leone’sexperience has been mixed.

In recent years developing countries,particularly in Africa, have turnedincreasingly to the South for developmentcooperation and for cooperation morebroadly. This move is perceived by someas an alternative to traditional North-South cooperation, and by others asmerely complementary to officialdevelopment assistance (ODA).

The debate in development circlesis whether South-South cooperation isindeed different from North-South aid,and whether it offers the expectedbenefits. Understanding South-Southcooperation for what it is will helpbeneficiary countries to secure greaterbenefits from it than has been thecase with traditional aid.

The case under discussion here is that ofSierra Leone, which increasingly seeks topromote South-South cooperation.

In the current aid structure of theOrganisation for Economic Cooperationand Development (OECD), there arelimitations on the fiscal space allowedto recipient countries. Donors providingbudget support generally indicatethe areas to which their budgetarycontributions should go, by emphasisingpro-poor expenditure through the“medium”- term expenditure framework(MTEF) inspired by the BrettonWoods institutions.

That framework defines the orientationand even the limits of the nationalbudget.1 South-South cooperation,on the other hand, rarely has policyconditionalities, and very few Southerndonors engage in macroeconomic orsocial policy dialogue with recipientgovernments. All of this makesSouth-South cooperationmore attractive to recipientsthan ODA.

South-SouthCooperation in Post-Conflict Sierra Leone

by Herbert M’cleodand Fatmata Sesay Kebbay,

Office of the President, Sierra Leone

South-South cooperation is alsopreferred because of the nature of theengagement. While the experience of itstimeliness and predictability is mixed,it is often ad hoc and therefore a usefulbonus to the planning effort. In SierraLeone, for example, the provision of over30 Cuban doctors to be funded by SouthAfrica is a bonus to the health service.

South-South cooperation in its currentform may also be less cumbersome.Procedural and administrative delaysare likely to be limited because suchcooperation is spurred by private sectorinterests rather than by developmentagencies staffed by civil servants,as with traditional ODA.

It remains to be seen whetherbureaucratic delays and other negativefactors associated with Northern aid willbe less evident in the case of South-South cooperation. So far Sierra Leone’sexperience has been mixed.

Most South-South cooperation inSierra Leone, especially during thepre-conflict period (1960s–1980s)and the conflict (1990s), took placein the framework of the regional andsubregional organisations: the ManoRiver Union (MRU), the EconomicCommunity of West African States(ECOWAS), the African Union (AU).

The goals of these organisations havebeen geared mainly to promotingeconomic integration and trade flowsamong member countries. In the caseof Sierra Leone this type of South-Southcooperation cannot be ignored, becausethe country’s size (especially the size of itsmarket) and level of political stability,as well as the potential for reducingtransaction costs (free movementof people and goods, harmonisation oftariffs, regulations and procedures), make

Poverty in Focus 23

cooperation with immediate neighboursa logical step forward.

For South-South cooperation in itsgeneral form, evidence from the Ministryof Foreign Affairs and InternationalCooperation—which attempts tocoordinate South-South cooperationinitiatives in Sierra Leone—confirms thatsuch cooperation is only recently shiftingfrom ad hoc study tours, the training ofnationals abroad and isolated bilateralinfrastructure loans and grants.

According to the head of the ministry’sSouth-South cooperation unit,cooperation has been uncoordinated,piecemeal and based on jointcommissions. It has mostly consistedof grant-based support. Increasingly,many memoranda of understandingthat form the basis of South-Southcooperation initiatives are linkedto large investment projects.

In the 1960s and 1970s, when theconception and practice of South-Southcooperation were only nascent, there wasa prevalence of study tours, training inthe donor country and deploymentof specialists.

The main contributions were from China,and it was then that the national stadiumand buildings to house ministries wereconstructed. Other activities were in theform of missions, the building ofmosques, deployment of medicalpersonnel, military training, andscholarships from Cuba, Libya,Iran and so forth.

During the years of conflict (1990–2000),South-South cooperation took the formof military aid, mainly from within thesubregion.2 In the period followingthe end of hostilities there has beenincreased interest in securingSouth-South cooperation fordevelopment in Sierra Leone.

There are several reasons for the limiteddegree of such cooperation in thecountry. First, until December last yearSierra Leone did not have a coherentstrategy for dealing with aid flows ingeneral, and made only ad hoc efforts toseek cooperation from non-traditionaldonors.3 Second, at the policy level

South-South cooperation has notbeen seen as a realistic alternativeto traditional donors, and thus keygovernment officials have focused onthe Bretton Woods institutions and thefour or five main donors.

The Ministry of Foreign Affairs andInternational Cooperation recentlyset up its South-South cooperationunit, which is understaffed and requirescapacity support.

Third, the institutional framework forreceiving aid is geared towards Westerncountries. Similarly, on the donor side,there are specific development agenciesin donor countries—such as Britain’sDepartment for InternationalDevelopment (DFID), the CanadianInternational Development Agency(CIDA) and others—that have systemsfor disbursing money and formonitoring and evaluating projectsand programmes. This has not beenthe case until recently for programmessupported by China, Malaysia,South Africa, Nigeria and Brazil.

Fourth, the newly emergingindustrialised countries’ efforts aremotivated by economic opportunitiesin more stable countries or countrieswith potentially huge returns, as in theDemocratic Republic of the Congo (DRC).

Finally and most importantly, SierraLeone was at war for a decade and thefocus at that time, when most developingcountries where making good use ofSouth-South cooperation, was morehumanitarian than developmental.

Nevertheless, the current governmenthas made concerted efforts to seekSouth-South cooperation. The presidenthas visited China, Brazil, India and theArab states in an effort to encourageofficial and direct investment in thecountry. The foreign minister isequally active in this regard.

But what can be done to ensure optimalgains from South-South cooperation?The recent announcement of theUS$1 billion infrastructure-for-natural-resources agreement in the DRC hasignited a local debate about the need forSierra Leone to adopt something similar.

With the currentlylow level of financingfrom traditionaldonors, combined withforeign firms’ limitedinterest in fundingand implementinginfrastructure projects,the obvious gains fromSouth-South cooperationto Sierra Leone arein infrastructuredevelopment.

1. This usually focuses on governance and the socialsector, and pays little attention to the growth sectors.It is spending for short-term poverty relief ratherthan a more sustainable wealth-creating and long-termpoverty-reducing expenditure.

2. The UN peacekeeping force is not considered aform of South-South cooperation.

3. A document outlining an aid policy was tabled andadopted at the last Consultative Group meeting inNovember 2009.


With the currently low level of financingfrom traditional donors, combined withforeign firms’ limited interest in fundingand implementing infrastructure projects,the obvious gains from South-Southcooperation to Sierra Leone are ininfrastructure development.

The opportunities in infrastructureencourage foreign direct investment thatis supported by the governments ofemerging industrialised countries.4

To some extent the actions ofmultinationals in the 1970s arebeing repeated now.

The question, therefore, is whether thehost country now has systems to dealwith the setbacks experienced then.For a post-conflict country, the answer isclearly no. Two areas of weaknesses havebeen observed so far.

The first is in negotiations. Sierra Leonehas yet to institute a system to ensurethat bad memoranda of understandingleading to bad agreements are notnegotiated. Recent agreements forthe purchase of public assets, thedevelopment of housing facilities andenergy production illustrate the danger.

The second is the absence of policies todetermine what kind of collaboration issought and how it should be obtained.The current approach is ad hoc, whichcould divert the country from thespecific development goal in thesector involved.

In the Sierra Leone experience, South-South cooperation has now evolved toinclude foreign direct investment fromnewly emerging industrialised countries.In exchange, the beneficiary countryprovides concessions. For Sierra Leoneit is a combination of charity or politicalsolidarity and plain business orcommercial ventures.

South Africa, for example, is fundingdoctors from Cuba for a three-yearperiod. This is a case of South-Southcooperation in its original form: solidarityand charity. When China offers torefurbish a key hotel, however, this is abusiness venture and the terms shouldbe negotiated as such. Unfortunately,this has not been the case to date.

The country will always have tonegotiate hard to preserve its interests.

The phenomenon of state-sponsoredinvestment from the South demonstratessome of the advantages that a projectapproach has over the budget-supportmethod in foreign aid activities.

The implementation of an agricultureproject is not jeopardised by non-compliance with conditionalities(called benchmarks), as was the casefor energy during the previous regime.One disadvantage of this approach isthat the aid is tied, the loan beingdependent on use of a partner-countryfirm for project implementation.The central question is whether thecountry, by failing to undertake duediligence studies, accepts substandardservice because the aid is tied, orwhether it ensures that internationalstandards are met.

There is also the question of efficiency inproduction. A post-conflict country lacksthe systems to check quality or pricing.Chinese firms’ costs are difficult tocompare with international prices, andwhen the host country lacks effectivesystems of quality control the long-termbenefits could be dubious.

Finally, this new form of South-Southcooperation is accompanied byunintended gains to the hostcountry. Once the memorandum ofunderstanding is signed, the next stepis implementation; there are very few(if any) official delegations to be met,or discussions to be held with them, orreports to be given to them—thehallmarks of traditional donor activities.For a post-conflict country these savingsin time and resources should not beunderestimated. For a senior official thiscan amount to several weeks a year.

South-South cooperation is promising,but it should be viewed with care.It has evolved from being technicalcooperation and a form of politicalsolidarity among developingcountries to a system of supportfor private or parastatal companiesfrom emerging industrialisedcountries that are operatingin less developed countries.

The phenomenonof state-sponsoredinvestment from theSouth demonstrates someof the advantages that aproject approach hasover the budget-supportmethod in foreignaid activities.

4. It is difficult to distinguish between foreigndirect investment from the South and ODA from theemerging industrial countries. This is because manyof these investments are parastatal and because theyinitially arrive together with a visiting official delegation.In addition, these firms enter through loans andgrants tied by the donor country to the latter’sdomestic suppliers.

Poverty in Focus 25

It is not yet an alternative totraditional ODA. Both are essentialfor comprehensive development andsustainable growth.

For Sierra Leone, a post-conflict country,South-South cooperation offers hopethat a major contributory factor to theconflict can be addressed: the state’s

inability to provide public goodsand services.

By focusing on energy, agriculture andinfrastructure, South-South cooperationenhances the country’s framework forprivate-sector development. This in turnwill facilitate the delivery of socialservices to the people, both directly and

indirectly. Such cooperation, however,also requires caution and diligentnegotiation on the part of thecountry’s authorities.

Otherwise, the same difficultiesexperienced with the multinationals ofthe 1970s, 1980s and 1990s will resurface.

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International

Centre for Inclusive Growth

International Policy Centre for Inclusive Growth (IPC - IG)Poverty Practice, Bureau for Development Policy, UNDP

Esplanada dos Ministérios, Bloco O, 7º andar

70052-900 Brasilia, DF - Brazil

Telephone: +55 61 2105 5000

E-mail: [email protected] URL: www.ipc-undp.org

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