Southern economies could provide least developed countries with development opportunities – UNCTAD
A new report produced by the United Nations Conference on Trade and Development (UNCTAD) says the inclusion of South-South cooperation will lead to the development of least developed countries (LDCs).
The report titled “Least Developed Countries Report 2011: The Potential Role of South-South Cooperation for Inclusive and Sustainable Development,” said amid slow recovery in the North, the South could become a game-changer for LDCs.
The report argues that dynamic Southern economies could “provide LDCs with development opportunities, but an adequate policy framework is needed to harness the potential of these emerging partnerships.”
According to the report, in a span of a decade, economic ties with Southern partners have intensified remarkably and have become a crucial dimension of the LDCs´ integration into the world economy.
More specifically, the study indicates that “developing countries contributed to nearly half of the expansion in LDCs´ total merchandise exports over the past decade, and that the importance of Southern markets has been steadily on the rise across the whole spectrum of LDCs.”
In 2009, the report said, developing countries accounted for over half of LDC exports and approximately 60% of their imports. “The composition of these trade flows, however, is radically different in the two directions. LDC exports to the South are dominated by primary commodities, which together account for over 90% of the total, whereas manufactured goods represent approximately two thirds of LDC imports from Southern markets.”
Southern economies have also provided the LDCs with greater access to capital, particularly in the form of FDI. Between 2003 and 2010, when FDI inflows to the LDCs were growing at nearly 20% per year, the share of investment projects from Southern investors climbed from 25% to upwards of 40%, said UNCTAD.
The report stressed that multifaceted economic relations of LDCs with other developing countries encompass not only trade and investment flows, but also migration, knowledge and technology transfers, as well as development cooperation.
Notably, UNCTAD said “two thirds of the nearly $26 billion of remittances inflows to the LDCs in 2010 originated in Southern countries” adding “In spite of being small compared to the traditional North-South aid, Southern official flows play a significant role in development of LDCs, given that they are overwhelmingly directed to productive sectors and used for financing much-needed infrastructure.”
UNCTAD argues that the key for the LDCs is the extent to which the dynamism of South-South economic relations can serve as a springboard for developing their productive capacities. In that respect, the so-called “rise of the South” is creating a broader set of opportunities for the LDCs, but also poses challenges.
However, the report said South-South cooperation should be a complement not a substitute for North-South cooperation.
Nevertheless, the prominence of primary commodities in LDCs´ export structure should not obscure the fact that their manufacturing exports to Southern markets have grown at about 18% per year over the last decade, it continued.
By Ekow Quandzie