Closer cooperation among developing countries will not only be a driving force for their own development, but also fuel global growth, international economists told a seminar in Beijing on Wednesday during the ongoing shareholders’ meeting of the African Export-Import Bank.
Richard Kozul-Wright, an economist at the United Nations Conference on Trade and Development, said the outlook for so called south-south cooperation “can be best summed up as cautious optimism”.
“The developing world’s resilience to the recent financial crisis certainly marks an important break with the past,” he said. “The emerging south can bring about a more balanced and stable world economy.
“However, caution is warranted, given that the shift in wealth has been uneven, with differences among regions and countries, and because vulnerabilities remain,” he said.
Due to repeated financial shocks throughout the late 1990s, much of the developing world – with the exception of East Asia – fell further behind, he said.
But since the new millennium, “we have witnessed very strong economic performance across all regions in the south”, with the average growth rate of developing countries exceeding that of developed countries by 5 percentage points from 2003 to 2008, Kozul-Wright said.
Wang Jianye, Chief Economist at China Eximbank, said that in both Asia and Africa “emerging partners are taking larger shares” of export growth.
“And this orientation has brought benefits to Africa, reducing export volatility, fostering higher value trade, facilitating foreign direct investment and encouraging technology transfer,” said Wang. “With developing countries growing at a higher rate, it is natural for these regions to trade more.”
He predicted that Africa will be increasingly seen as a market instead of “primarily an exporter” in a few years.
Two challenges
But Kozul-Wright also noted that developing countries face interdependent challenges “that call for a wide range of rethinking of development policies and strategies”.
“First, in the immediate future, they face the risk of a significant drop in their GDP growth. The slowdown could be quite severe if Europe falls into a deeper recession that brings down US growth.
“Second, over the medium term, developing countries cannot return to the kind of rapid growth they enjoyed during the debt-fueled global expansion of the last decade, even if advanced economies recover fully.”
The economist said that developing countries should build stronger production capacity and expand their domestic markets because growing south-south ties “have often been dependent on the northern markets and firms in the context of global supply chains”.
German Rios, a senior advisor at Andean Development Bank, said Latin America and Africa both “have a promising future” and share similar characteristics.
He said challenges for both regions include adopting more active policies, increasing the quality of human capital and improving their infrastructure.
Frannie Leautier, executive secretary of the African Capacity Building Foundation, said countries that have large, diverse economies such as Cameroon and Ethiopia are likely to become the “new BRICS”.
The developing economies collectively known as BRICS – Brazil, Russia, India, China and South Africa – have been intensively studied in recent years by global economists.
Leautier cited Cameroon as an example. The country’s economy is not only based on natural resources such as timber but has moved up the processing chain to make cheese from milk and finished textiles from cotton.