| United Nations | A/50/340 |
General Assembly
Distr. GENERAL
11 September 1995
ORIGINAL:
ENGLISH
Fiftieth session
Item 99 (b) of the provisional agenda*
OPERATIONAL ACTIVITIES FOR DEVELOPMENT: ECONOMIC AND
TECHNICAL COOPERATION AMONG DEVELOPING COUNTRIES
State of South-South cooperation
Report of the Secretary-General
CONTENTS
Paragraphs Page
Abbreviations ..........................................................3
I. INTRODUCTION AND SUMMARY ............................. 1 - 75
A. Purpose and scope of the report .................. 1 - 35
B. Background to South-South cooperation ............ 4 - 76
II. INSTITUTIONAL STATE OF SOUTH-SOUTH COOPERATION AT THE
SUBREGIONAL, REGIONAL AND GLOBAL LEVELS .............. 8 - 427
A. Africa ........................................... 8 - 137
B. Asia and the Pacific ............................. 14 - 2411
C. Latin America and the Caribbean .................. 25 - 3016
D. South-South cooperation at the global level ...... 31 - 4220
III. OPERATIONAL STATE OF SOUTH-SOUTH COOPERATION IN TRADE
AND MONETARY AND FINANCIAL COOPERATION ............... 43 - 7125
A. Development of trade ............................. 43 - 5325
B. Monetary and financial cooperation ............... 54 - 7131
_________________________
* A/50/150.
95-27774 (E) 201095/...
*9527774*
CONTENTS (continued)
Paragraphs Page
IV. OPERATIONAL STATE OF SOUTH-SOUTH COOPERATION IN OTHER
PRIORITY FUNCTIONAL AREAS .............................72 - 9544
A. Industry and enterprises ..........................72 - 7545
B. Agriculture and food security .....................76 - 7845
C. Transport and communications ......................79 - 8146
D. Natural resources including commodities, energy
and the environment ...............................82 - 8748
E. Education, science and technology .................88 - 9351
F. Social development ................................ 94 - 9554
List of tables
1. Inter-developing country trade by region, 1970-1992 .............26
2. Commodity composition of trade among developing countries by
region, 1970 and 1992 ...........................................29
3. Intraregional and intra-group trade of developing countries,
1986-1992 .......................................................30
4. Performance of multilateral clearing and payments arrangements,
1986-1992 .......................................................32
5. Intra-developing country public and publically guaranteed
financial flows by country and region, 1990 and 1993 ............38
6. Intra-developing country public and publically guaranteed
financial flows by country and region, 1990 and 1993 ............39
List of boxes
1. Programme for the creation of the African Economic Community ....9
2. Labour flows in Western Asia ....................................12
3. Subregional growth zones in Asia ................................14
4. Initiatives for free trade in the Americas ......................19
5. Regional trade financing facilities of developing countries .....36
Notes .................................................................55
ABBREVIATIONS
ACC Arab Cooperation Council
ACS Association of Caribbean States
ACU Asian Clearing Union
AEC African Economic Community
AFTA ASEAN Free Trade Area
ASEAN Association of South-East Asian Nations
ATFP Arab Trade Financing Programme
BLADEX Latin American Export Bank
BPAs bilateral payment arrangements
CACH Central American Clearing House
CACM Central American Common Market
CAF Andean Development Corporation
CARICOM Caribbean Community
CBI Cross-border initiative for eastern and southern African and
Indian Ocean countries
CEAO West African Economic Community
CEMAC Central African Economic and Monetary Community
CEPGL Economic Community of the Great Lakes Countries
CEPT common effective preferential tariff
CFA Franc Communaute financere africaine franc
CHCAS Clearing House of the Economic Community of Central African
States
CMCF Caribbean Multilateral Clearing Facility
COMESA Common Market for Eastern and Southern Africa
EAC East African Community
EAI Enterprise for the Americas Initiative
ECCAS Economic Community of Central African States
ECDC/TCDC economic cooperation among developing countries/technical
cooperation among developing countries
ECO Economic Cooperation Organization
ECO/PTT ECO Protocol on Preferential Trade
ECOWAS Economic Community of West African States
FDI foreign direct investment
FFA Forum Fisheries Agency
GCC Cooperation Council for the Arab States of the Gulf
GSTP Global System of Trade Preferences among Developing Countries
IOC Indian Ocean Commission
IAIGC Inter-Arab Investment Guarantee Corporation
LAIA Latin American Integration Association
LARF Latin American Reserve Fund
LAS League of Arab States
MERCOSUR Southern Common Market
MRU Mano River Union
MSG Melanesian Spearhead Group
NAFTA North American Free Trade Area
NAM Non-Aligned Movement
OAU Organization of African Unity
OECS Organization of Eastern Caribbean States
OIC Organization of the Islamic Conference
PIDP Pacific Islands Development Programme
PTA Preferential Trade Area for Eastern and Southern Africa States
(now COMESA)
PTACH PTA Clearing House
R&D research and development
SDR special drawing rights
SMEs small and medium-size enterprises
SAARC South Asian Association for Regional Cooperation
SADC Southern African Development Community
SADCC Southern African Development Coordination Conference (now SADC)
SAFICOFICO Andean Trade Financing System
SAPTA SAARC Preferential Trading Arrangement
SELA Latin American Economic System
SICA Central American Integration System
SOPAC South Pacific Applied Geoscience Commission
SPC South Pacific Commission
SPF South Pacific Forum
SPREP South Pacific Regional Environment Programme
TCSP Tourism Council of the South Pacific
UDEAC Central African Customs and Economic Union (now CEMAC)
UEMOA West African Economic and Monetary Union
UMA Arab Maghreb Union
USP University of the South Pacific
WACH West African Clearing House
WTO World Trade Organization
I. INTRODUCTION AND SUMMARY
A. Purpose and scope of the report
1. In its resolution 46/155 of 19 December 1991 the General Assembly
requested the Secretary-General to monitor follow-up to the Report of the
South Commission which was released in August 1990 under the title The
Challenge to the South. Accordingly, the Secretary-General presented a
report to the General Assembly at its forty-eighth session. 1/ After
reviewing this report the General Assembly, in resolution 48/164 of 21
December 1993, requested "the Secretary-General to present a comprehensive
report entitled 'State of South-South cooperation', containing quantitative
data and indicators on all aspects of South-South cooperation", to the
fiftieth session of the Assembly, at which time it will decide on the need
for further reports on the matter. At its forty-ninth session the
Assembly, in resolution 49/96 of 19 December 1994, decided that the
Secretary-General's report should also contain an overview and analysis of
South-South cooperation world wide as well as recommendations to strengthen
such cooperation.
2. The present report has been prepared in accordance with the above-
mentioned resolutions of the General Assembly. It assesses in chapters II,
III, and IV respectively the state of institutional arrangements (at the
subregional, regional and global levels), the state of cooperation in trade
and monetary and financial cooperation, and the state of other priority
functional areas. The focus in chapter III on trade and monetary and
financial cooperation should not be taken to imply that South-South
cooperation is limited to these fields. On the contrary, South-South
cooperation is quite intense in non-economic sectors as can be gleaned from
chapter IV and the addendum to this report which discusses the policy
commitment to and activities on South-South cooperation by the United
Nations organizations and agencies which have provided the necessary
information. Measuring progress in terms of "quantitative data" and
against "indicators" calls for caution, however. South-South cooperation
is an evolutionary approach and modality relevant to all sectors of
development which can realize its full potential if it is integrated with
development efforts, nationally and internationally. Some sectors are
susceptible to quantification, others are not. Thus, wherever relevant and
available, quantitative data and indicators are provided in the report.
For an extensive coverage in terms of both South-South cooperation
institutions and statistics, see State of SouthSouth Cooperation:
Statistical Pocket Book and Index of Cooperation Organizations, which will
be issued shortly as a United Nations publication (Sales No. E.95.II.D.18).
This publication should be referred to, as appropriate.
3. Recommendations on expanding South-South cooperation and proposed
practical modalities are delineated in the report of the intergovernmental
group of experts held from 31 July to 4 August 1995 in accordance with
General Assembly resolution 49/96. The report of the intergovernmental
group of experts is available in document A/AC.246/3.
B. Background to South-South cooperation
4. South-South cooperation refers to bilateral and multilateral relations
involving Governments, institutions, corporations, individuals and non-
governmental organizations of two or more developing countries in the same
region or in more than one region. The scope of cooperation extends, in
principle, to all aspects of development activity. 2/ The Afro-Asian
Conference in Bandung (Indonesia) in 1955 introduced onto the world scene
the concept of closer cooperation and linkages among developing countries
(the South). 3/ Since then the process of South-South cooperation has been
a strong recurring theme throughout the South and has matured into an
integral aspect of the historical process of international cooperation for
development. Consonant with this theme the developing countries have set
in place an impressive array of institutional structures for promoting
South-South cooperation. This has resulted in a situation whereby almost
all developing countries belong to one or another cooperation institution,
and most of them are even members of two or more organizations. 4/ It is a
significant indicator of the commitment of these countries to the spirit
and objectives of economic and technical cooperation among developing
countries (ECDC/TCDC).
5. South-South cooperation has tended to be most dynamic during periods of
growth and optimism in developing countries. Most of the South-South
cooperation institutions were created in the 1960s and 1970s against the
backdrop of general enthusiasm for the concept of South-South cooperation
and optimism about the development prospects of the South. During the
"lost decade" of the 1980s, South-South cooperation suffered reversals and
setbacks attendant on the development crisis in most developing countries.
Around the middle of the 1980s, as developing countries started to adjust
and change their policies to manage the macroeconomic imbalances in their
economies and revitalize growth, an adaptation process at the level of
South-South cooperation was also launched. The revival gained added impetus
at the start of the 1990s attendant on major changes in the global scene.
6. Subregional and regional cooperation and integration are emerging as
the central pillar of the present revival in South-South cooperation. New
integration organizations are being created where none existed before while
existing ones are being deepened, strengthened and extended not only
geographically but also in substance. The trend is not limited to official
initiatives at Government-to-Government level but has carried into the
forging of a variety of business/enterprise links. Much of this recent
momentum is motivated by the fact that the vast majority of developing
countries have small economies, and even the biggest among them are
relatively small by world standards. Such economies can be internationally
competitive if they specialize in certain sectors and if they can
participate in intra-industry trade flows which are usually dominated by
transnational firms. The first condition would obtain only for few
countries at a time and the second is not usually the case for developing
country firms. Hence, this option is not realistic for the trading
strategies of the overwhelming majority of developing countries. To attain
viable competitivity in the oligopolistic markets of international trade,
developing countries have to accrue scale economies, acquire and adapt
appropriate technologies, attract necessary foreign investment in non-
debtcreating forms, pool human and physical resources whenever possible,
and harmonize economic policies, regulations and standards. 5/
7. As a mobilizing factor in these areas, ECDC provides a natural bridge
to effective participation in the global economy, and for small developing
countries it might furnish the only means to do so. In addition, existing
models of economic integration are being readjusted to respond to the
changing internal and external situations whereby joint cooperation and
integration has to be seen not merely as a development option but as a real
necessity for economic, political, social and cultural development and for
long-term peace, security and solidarity. It should be added that the
growth of plurilateral free trade areas, prominent in Latin America, has
raised questions about their compatibility with the multilateral trade
liberalization process under the aegis of the World Trade Organization
(WTO). The issue has been analysed in detail in various studies which
generally indicate that as long as multilateral approaches are actively
pursued and effectively applied and the momentum towards multilateral trade
liberalization maintained, regional integration may well serve as a
secondary, but at the same time a complementary element and "building
block" to the international trading system. 6/
II. INSTITUTIONAL STATE OF SOUTH-SOUTH COOPERATION
AT THE SUBREGIONAL, REGIONAL AND GLOBAL LEVELS
A. Africa
8. In Africa new treaties have been adopted and existing treaties and
cooperation programmes revised to form new institutions and/or incorporate
new concepts designed primarily to strengthen cooperation and integration
institutions and enhance their effectiveness. The signing in June 1991 of
the Abuja Treaty establishing the African Economic Community (AEC) and its
entry into force in May 1994 deserve special mentioning. The launching of
AEC embodies a drive towards continental integration in Africa (see box 1).
At the subregional level mention can be made of the creation of the West
African Economic and Monetary Union (UEMOA) in January 1994 followed by the
dissolution of the West African Economic Community (CEAO) in March 1994 as
the two were seen to be overlapping; the creation of the East African
Community (EAC) in November 1993 within the framework of PTA/COMESA; the
adoption in July 1993 of a revised Treaty to the 1975 Treaty creating the
Economic Community of West African States (ECOWAS); the signing in March
1994 of a treaty creating the Central African Economic and Monetary
Community (CEMAC), which is to replace the oldest subregional integration
grouping in Africa, namely the Central African Customs and Economic Union
(UDEAC) founded in December 1964; the transformation by a treaty and
declaration of the Southern African Development Coordination Conference
(SADCC) into the Southern African Development Community (SADC) in August
1992; the transformation of the largest subregional institution (in terms
of membership of 22 countries), namely the Preferential Trade Area for
Eastern and Southern Africa (PTA) into the Common Market for Eastern and
Southern Africa (COMESA) following the signing of its enabling treaty in
November 1993 and entry into force in December 1994.
9. In most cases, some of the politically sensitive and difficult issues
impeding cooperation in the past have been addressed. The new and revised
treaties, for example, endow the new cooperation/integration institutions
with the necessary legal capacity to take decisions which are legally
binding on or have direct applicability in member States and to enforce, if
necessary, the application of decisions; 7/ the necessary financial
resources by equipping the institutions with the facility to secure
autonomous sources of revenue independent of budgetary appropriations from
member States; and by restructuring the policy organs and executive
secretariats of integration organizations. In the Arab Maghreb Union
(UMA), for example, a comprehensive set of institutional regulatory and
policy decisions have been made which constitute the basic framework for
the progressive opening up of the national economies and the integration of
production structures through concerted action at sectoral level. The
revised ECOWAS Treaty confers upon the ECOWAS Authority full power to take
decisions which would be binding on Community institutions as well as
member States; makes provisions for the establishment of an ECOWAS
parliament, an economic and social council, eight specialized technical
commissions to replace the six existing ones; provides for political
cooperation and regional security, for the enactment of a Community levy to
generate financial resources for the Community (the levy will be a
percentage of the total value of import duty derivable from goods imported
from third countries); and maintains that ECOWAS shall be the sole economic
community in West Africa. The COMESA Treaty, inter alia, embraces the
concept of multi-speed development pegging implementation of programmes on
the fastest moving members and provides for both enforceability of common
decisions and sanctions against a member that deliberately and persistently
does not comply with or implement agreed decisions. 8/
10. At the continental level the Abuja Treaty espouses a plan
necessitating a major rationalization of the integration institutions in
Africa under the umbrella of AEC (see box 1), and endows AEC with the
capacity to take decisions which are legally binding on or have direct
applicability in member States (art. 10), the leeway to supplement or,
where necessary, replace the annual regular budget of the Community by the
proper resources of the Community (art. 82), and provides for the creation
of a Pan-African parliament envisaged as part of measures to increase
participation of peoples in the integration process (art. 14).
11. New modalities and instruments are being adopted which require, inter
alia, the formation of full-fledged development communities for the
formation of a viable economic space (for example, AEC envisages the
formation of a continental customs union, UEMOA, an economic and monetary
union and COMESA, a common market); increasing popular participation (SADC,
for instance, emphasizes the involvement of the people and the real
commitment by Governments in the community-building process, and a number
of organizations have proposed the formation of subregional parliaments);
promoting the political dimension of cooperation which provides for the
promotion of good neighbourliness, regional peace and stability, good
governance and respect for human rights for dealing with the unfortunate
occurrence of serious political upheavals and inter-State conflicts which
have vitiated the best of development efforts including intraregional
cooperation (all subregional organizations are addressing this problem
following the example of ECOWAS which is unique among ECDC organization
Box 1. Programme for the creation of the African Economic Community
The Abuja Treaty (art. 6) states that upon its Treaty's definitive
entry into force, the following plan will be set into motion for the
gradual establishment of the African Economic Community (AEC) in six stages
of variable duration spread over a transitional period not exceeding 34
years: First stage, not exceeding five years: strengthening of
existing regional economic communities, and establishing new ones in
regions where they do not exist; Second stage, not exceeding eight
years: (a) at the level of each regional community, stabilizing existing
tariff and non-tariff barriers, customs duties and internal taxes;
preparing and adopting studies to determine the timetable for the removal
of tariff and non-tariff barriers to regional and intra-Community trade and
for the harmonization of customs duties; (b) strengthening of sectoral
integration at the regional and continental levels in all areas of
activity, particularly trade, agriculture, money and finance, transport and
communications, industry and energy; and (c) coordination and harmonization
of activities among the existing and future economic communities; Third
stage, not exceeding ten years: at the level of each regional community,
establishment of a free trade area through the observance of the timetable
for the gradual removal of tariff and non-tariff barriers to intra-
Community trade, and the establishment of a Customs Union by means of
adopting a common external tariff; Fourth stage, not exceeding two
years: coordination and harmonization of tariff and non-tariff systems
among the various regional economic communities with a view to establishing
a Customs Union at the continental level by means of adopting a common
external tariff; Fifth stage, not exceeding four years: establishment
of an African Common Market through: (a) the adoption of common policy in
several areas (agriculture, transport and communications, industry, energy,
scientific research); (b) the harmonization of monetary, financial and
fiscal policies; (c) the application of the principle of free movement of
persons as well as rights of residence and establishment; and (d)
constituting the proper resources of the AEC; and Sixth stage, not
exceeding five years: (a) consolidation and strengthening of the structure
of the African Common Market through the free movement of people (as well
as rights of residence and establishment), goods, capital and services; (b)
integration of economic, political, social and cultural sectors, and
establishment of a single domestic market as well as a Pan-African Economic
and Monetary Union; and (c) implementation of the final stage: (i) for the
setting up of an African Monetary Union, a single African Central Bank and
a single African Currency; (ii) for the setting up of the structure of the
Pan-African Parliament and election of its members by continental universal
suffrage; (iii) for the harmonization and coordination process of the
activities of regional economic communities; (iv) for the setting up of the
structures of Africa multinational enterprises in all sectors; and (v) for
the setting up of the structures of the executive organs of the African
Economic Community. in establishing a regional peace-keeping force, the
ECOWAS Monitoring Group, to handle the Liberian crisis); and increasing the
participation of enterprises and cooperation among them and their
associations (for example, COMESA accords the lead role for the development
of investment and production to the business community).
12. The ECDC institutions also continue to undertake activities for
improving the integration of production systems by developing and widening
the range of tradeable (and consumable) products, and the integration of
infrastructural bases to improve subregional and continental roads,
railways, airlines and communications facilities linking countries. Some
steps, though limited, have been taken in western, eastern and southern
Africa to rationalize the multiplicity of ECDC institutions with
overlapping membership and similar ultimate objectives and so decrease the
duplication, rivalry and conflicts that exist among them. Another problem
which continues to affect the operations of a number of institutions is
regional political instability. The Mano River Union (MRU) in West Africa
and the Economic Community of the Great Lakes Countries (CEPGL) in central
and eastern Africa have been paralysed by the regional instability arising
from continuing civil strife and political instability. The implementation
of preferential trade liberalization programmes of most integration
institutions also suffers from a lack of full and effective implementation
by members as typified by UMA which designed its programme in 1990/91 but
has not yet implemented it.
13. Finally, mention could be made of the cross-border initiative (CBI)
for eastern and southern Africa and Indian Ocean countries. CBI was
launched in 1992 under the co-sponsorship of the African Development Bank,
the Commission of the European Communities, the International Monetary Fund
and the World Bank, in collaboration with the secretariats of the Indian
Ocean Commission (IOC), COMESA and SADC. It comprises an innovative
approach to promoting regional integration encompassing the following
features: (a) adoption and implementation of a common programme of action
with specific measures to be implemented and which are aimed at
liberalizing and facilitating trade, facilitating cross-border investment
and payments, and improving national institutions that support CBI; (b) the
corresponding implementing agencies for these measures are identified and
these involve the national Governments, regional organizations (IOC,
COMESA, SADC) and the private sector; (c) the measures are to be
implemented within a given time-frame consisting of a short term of 12
months or a medium term of up to three years; (d) coupling of the
implementation of the common programme and specific measures with financial
support from the donor agencies; and (e) regular monitoring of progress
attained at the national, subregional and international levels (involving
all relevant actors). At the second ministerial meeting of CBI in March
1994, participating countries reaffirmed their commitment to the initiative
and reported substantial progress with trade reform, particularly the
elimination of trade licensing and other non-tariff barriers,
liberalization of payments on the current account and in designing more
liberal and transparent investment regimes.
B. Asia and the Pacific
14. The Asian and Pacific region encompasses Western Asia, South and East
Asia and Oceania, each having its own distinctive experience. In Western
Asia, the adjustment of oil prices in the 1970s and the subsequent
accumulation of substantial financial resources have helped alter
cooperation possibilities in several significant ways. Increased attention
began to be directed to promoting cooperation in production, the
establishment of necessary key institutions and the enactment of supporting
legislation. This led to the formation of the Cooperation Council for the
Arab States of the Gulf (GCC) in 1981 and the Arab Cooperation Council
(ACC) in February 1989. GCC represented a new and unique experiment in
Arab economic relations, being the first major cooperative arrangement
conceived outside the framework of the League of Arab States. The
formation of GCC appears to have been primarily in response to
preoccupations specific to the GCC countries including political, defence
and economic considerations. ACC aimed at promoting coordination,
cooperation, integration and solidarity among its members by way of
promoting the development of a common market, among other approaches.
However, its activities were frozen as a result of the Gulf crisis/war.
15. Other changes included: (a) the increased acceptance and involvement
of the private sector as an important factor in the cooperative process.
Arguments advocating a more active role for the private sector, reflecting
changed economic realities and disillusionment with government efforts,
steadily gained ground; (b) the emergence of a consensus that joint
ventures represent a promising vehicle for promoting regional cooperation;
(c) the large influx of capital from the surplus to the deficit member
countries and of labour in the opposite direction (see box 2); and (d) the
stepping up of institution building with the establishment of a number of
key institutions such as the Arab Fund for Economic and Social Development,
the Arab Monetary Fund and the Inter-Arab Investment Guarantee Corporation.
The period also witnessed a very strong impact of political factors on
cooperation efforts, positive in some instances but often negative such as
the Gulf crisis and war.
Box 2. Labour flows in Western Asia
Its voluntary nature notwithstanding, the movement of labour between
the countries of the region, and from other developing countries to
countries in the region, has perhaps been the most enduring and rewarding
feature in SouthSouth cooperation involving the countries of Western Asia.
This is because it is essentially based on and motivated by economic
considerations and, hence, is mutually beneficial to the sending and
receiving countries alike. Estimations provided by the Economic and Social
Commission for Western Asia indicate that the total number of foreigners in
the labour force of the six GCC countries increased from 1,125,000 in 1975
to 2,952,000 in 1980, 4,417,000 in 1985, and 5,218,000 in 1990; or from
46.5 per cent of the total labour force to 65.2 per cent, 70.2 per cent and
67.7 per cent, respectively. Virtually the entire expatriate labour force
came from developing countries in the region (Egypt, Jordan, Yemen, Lebanon
and the Syrian Arab Republic) and from developing countries in other
regions (India, Pakistan, Bangladesh, Philippines, Sri Lanka). The
importance of labour exchanges is further underlined by the large volume of
workers' remittances generated. Available information shows that in the
period 1989-1992, the combined recorded value of remittances accruing to
Egypt, Jordan, the Syrian Arab Republic and the Republic of Yemen exceeded
US$ 24 billion, largely derived from employment in the GCC countries.
Similarly, it may be deduced that the balance of remittances, about US$ 29
billion, from Saudi Arabia, Kuwait and Oman has mostly benefited nationals
of other developing countries.
16. In Central and South and East Asia, 9/ the needs of the countries
since 1980 have become very diversified largely due to their varying growth
performances. The growing momentum of economic activities in the region,
in particular those relating to trade, investment and transfer of
technology, and a growing sense of dynamism are creating vast new
opportunities for intraregional cooperation. The institutional structures
for cooperation are being strengthened accordingly. For example, the
geographical scope of the Economic Cooperation Organization (ECO) has been
enlarged with the accession in November 1992 of Afghanistan and the new
Central Asian republics (formerly part of the former USSR) as full-fledged
members; and the policy organs of the Association of South-East Asian
Nations (ASEAN) were streamlined through the institutionalization of the
Senior Economic Officials Meeting as the mechanism to oversee all aspects
of economic cooperation and the secretariat was restructured. Also, Viet
Nam has applied for a full membership in ASEAN, and Cambodia for observer
status (both applications are expected to be endorsed).
17. Cooperation is also being revamped and in this drive trade expansion
continues to be a main focus. Yet trade liberalization within existing
integration organizations has been rather slow and modest up to now. Some
examples could be cited. ECO is presently pursuing cooperation along
various lines, but especially in trade, transport, agriculture and
industry. In respect of trade liberalization the ECO Protocol on
Preferential Trade (ECO/PPT) was signed in May 1991 by Pakistan, the
Islamic Republic of Iran and Turkey to promote the development of trade
among members on an overall reciprocal and mutually advantageous basis,
while keeping in mind, the principle of item-byitem approach. The Protocol
has been ratified by all three countries and became operational. The most
recent initiative of the South Asian Association for Regional Cooperation
(SAARC) was the adoption in 1993 of an agreement to establish the SAARC
Preferential Trading Arrangement (SAPTA). SAPTA, like ECO/PTT, provides
for product-by-product coverage, with the reduction of tariffs in several
successive rounds, and periodic reviews. SAPTA has not yet started its
operations and if it follows the product-by-product approach, it is
unlikely to make any significant difference to trade among SAARC countries
which is fairly low. A bold across-the-board preferential trade
arrangement, with special agreement on transit trade, would have had a much
greater impact. ASEAN States adopted the ASEAN Free Trade Area (AFTA)
scheme in January 1992 whose objective is to reduce tariffs, through the
mechanism of the common effective preferential tariff (CEPT), on all intra-
ASEAN trade in manufactured and processed agricultural goods to between 0
and 5 per cent in 15 years. Also conceived within AFTA is the
harmonization of standards, reciprocal recognition of tests and
certification of products, removal of barriers to foreign investment,
consultations on macroeconomic policies, rules for fair competition and
promotion of venture capital. The overall aim of AFTA is not only to
create a larger consumer market for about 330 million people but also to
promote export generally by increasing ASEAN's competitive edge as a
production base geared towards the world markets.
18. The Bangkok Agreement was established as a preferential regional
trading arrangement under the auspices of the Economic and Social
Commission for Asia and the Pacific (ESCAP) and is consistent with the
General Agreement on Tariffs and Trade (GATT). Under the Agreement, which
has been operational since 1976, a total of 747 items are currently covered
by tariff cuts ranging from 10 to 50 per cent. However, the total trade
value of the conceded items among the members remains very low. The
potential for trade expansion under the Agreement could be improved
considerably through an increase in the number of participating countries
as well as expansion of the product list. In this regard, Papua New Guinea
has joined but is awaiting ratification by its national parliament; and
following the announcement in 1994 by China of its intention to accede to
the Agreement, the necessary procedures for effecting this are presently
being implemented. Along with such efforts, ESCAP, in response to a
request from the member States, is undertaking a review of the Agreement in
its entirety, particularly in the context of the results of the Uruguay
Round.
19. An innovative form of cooperation which seems to have been implemented
most successfully in the Asian and Pacific region is the creation of
"subregional growth zones", where surplus capital from relatively developed
economies in the region complements surplus skilled labour in neighbouring
economies to generate production of exportable products at competitive
prices. It has various permutations: growth triangle, quadrangle and
polygon depending on the number of participating countries. Although only
two subregional growth zones have been implemented in the region, both have
been successful, according to most indicators. These are the ASEAN
southern growth triangle and the southern China growth triangle (see box
3). Their success has encouraged other similar initiatives, one in North-
East Asia and three more in South-East Asia, namely the Tumen River Area
Development Programme, the Mekong River subregional development project,
the ASEAN northern growth triangle and the ASEAN eastern growth triangle.
Whatever its manifestation, the subregional growth zones have major unique
characteristics that distinguish them from other, more formal organizations
for economic cooperation. Moreover, most of the subregional growth zones
have a good chance of being implemented since there is strong and clear
commitment to the concept on the part of the Governments concerned. The
proposed zones have also received strong support from funding agencies, in
particular the United Nations Development Programme and the Asian
Development Bank.
Box 3. Subregional growth zones in Asia
The southern China growth triangle involves Hong Kong, southern China
and Taiwan Province of China. It is the earliest subregional growth zone
implemented in the Asian and Pacific region and is also the largest. It
began to take shape soon after the adoption of the "open door" policies in
the coastal areas of China. However, there was no formal intergovernmental
agreement on the establishment of the southern China growth triangle, which
covers the provinces of Fijian, Guangdong and Taiwan Province of China
together with the territory of Hong Kong. Hong Kong and Taiwan Province of
China, by virtue of their status as newly industrializing economies, form
the base of the southern China growth triangle, providing the major
stimulus for the growth diffusion process within the triangle. The
participating economies have a high degree of complementarity, with the
Chinese coastal provinces having an abundance of land and labour while the
two newly industrialized economies are well endowed with capital,
technology, entrepreneurship and infrastructure. The growth triangle thus
has the advantage of close interaction among some of the most dynamic and
fast-growing economies of the region. The ASEAN southern growth
triangle involving Singapore, the State of Johor in Malaysia and Indonesia
is much smaller and has a greater degree of government involvement. It was
established in 1989 following an agreement between the Governments of
Indonesia, Malaysia and Singapore. Although the triangle includes the
whole of Singapore, only some parts of Indonesia (the island of Batam
initially) and Malaysia (Johor) are involved in the arrangement. It covers
an area of 20,000 square kilometres and has a population of 5 million. As
a newly industrialized economy, Singapore forms the base of the triangle
and acts as the main stimulus for growth diffusion to the hinterland of
Johor and Batam. The scarcity of land and labour in Singapore provides the
"borrowed space" rationale for the establishment of the ASEAN southern
growth triangle. While the growth triangle has been created largely by
market forces, it has required massive public investments in infrastructure
in Batam which have been partly funded by Singapore. These developments
have resulted in massive foreign development investment inflows from
Singapore and other countries and have accelerated the industrial
development of Johor and Batam, along with the development of tourism and
other services. Taken as a whole, the ASEAN southern growth triangle
produces a synergy which exceeds the potential of each participating
economy individually and accelerates the overall development of the region
within the triangle.
20. In Oceania, the island countries and interested development partners
have established a number of regional organizations which allow
opportunities for an exchange of views and the emergence of a "regional
voice" on a wide range of issues of importance to the region. The South
Pacific Commission (SPC) is by far the oldest of these organizations. 10/
Established by the Canberra Agreement of 6 February 1947, the primary
purpose of the Commission is to support the social and economic development
of its client island country members through the provision of technical
assistance. Since the late 1960s and early 1970s, seven other Pacific
island regional organizations have been established. Like the Commission,
they operate in the technical assistance field but with narrower and more
specific mandates. Over the years, the Commission has relinquished and/or
farmed out some of its functions and activities to these latter-day
specialist agencies. The Commission's current portfolio is mainly in human
resource development, including health, community training, development
planning, statistics, demography, rural development, youth, women, as well
as in fisheries research, inshore fisheries development and tropical
agriculture.
21. The South Pacific Forum (SPF), founded in 1971, is an annual meeting
of heads of Government of independent and self-governing territories which
gives its members the opportunity for informal discussions of regional
political issues and ways of strengthening their economic development
through joint cooperation. A number of other regional organizations have
been established, and which report to SPF, to give emphasis to specific
areas of economic development or to advance regional cooperation through
other venues. These are: Forum Fisheries Agency (FFA), South Pacific
Applied Geoscience Commission (SOPAC), University of the South Pacific
(USP), Pacific Islands Development Programme (PIDP), South Pacific Regional
Environment Programme (SPREP), Tourism Council of the South Pacific (TCSP)
and the SPF secretariat.
22. In 1988 Papua New Guinea, the Solomon Islands and Vanuatu founded the
Melanesian Spearhead Group (MSG) primarily to promote Melanesian cultures,
values and exchange and peaceful resolution of disputes. It represents a
new departure from traditional forms of cooperation among Pacific island
countries in that the members intended to undertake "integration"-oriented
activities. Thus, the MSG Trade Agreement was designed and launched on 1
September 1994. Under the Agreement, trade among the three countries is
conducted free of customs duties in respect of tuna from the Solomon
Islands, tea from Papua New Guinea and beef from Vanuatu. 11/ Similar to
the MSG initiative, a summit of the heads of State of Kiribati, the
Marshall Islands, Nauru and Tuvalu (the smaller islands States members of
SPF) in March 1995 entered into a subregional cooperation arrangement to
promote joint development of areas of mutual interest including air
transportation, shipping, trade, immigration (easing of visa requirements)
and protection of their airspace.
23. Given the number of regional organizations, member countries have been
concerned about the possibility of duplication and a need to ensure that
both members' contributions and external donor funding are used
effectively. This led to the South Pacific Organizations Coordination
Committee, for which the SPF secretariat acts as the secretariat. The
Committee comprises eight institutions, namely FFA, the SPF secretariat,
PIDP, SOPAC, SPC, SPREP, USP and TCSP. It meets annually, on the basis of
equality, with the chairmanship rotating among the participating
organizations. For the organizations with overlapping government
membership, the Committee provides an opportunity to become aware of each
others' work programmes and to consider ways and means by which the work
programmes and decisions taken by the respective governing authorities can
be implemented effectively and with minimum duplication. It also helps to
avoid unproductive competition for scarce aid resources.
24. In conclusion, it could be noted that most of the ECDC arrangements in
the Asian and Pacific region have evolved independently of each other, so
inter-subregional cooperation has been limited. To improve such
cooperation, the first consultative meeting of the executive heads of the
subregional organizations was held at Bangkok in February 1994, at the
initiative of ESCAP. That meeting suggested that such interaction should be
institutionalized in the form of annual consultations. The second
consultative meeting was hosted by the ASEAN secretariat in January 1995.
As a result of these consultations the following four areas of cooperation
have been proposed on a priority basis: trade and investment, transport and
communications, human resources development and energy (as well as
promoting awareness of poverty alleviation). A third meeting is
tentatively scheduled for May 1996 in Tehran. Beyond this initiative, an
important but rather rare example of inter-subregional cooperation is the
Colombo Plan for Cooperative Economic and Social Development in Asia and
the Pacific. The Colombo Plan was launched in July 1951 as a cooperative
venture for promoting economic and social development in South and South-
East Asia which also involves the development of human resources. 12/
C. Latin America and the Caribbean
25. In Latin America and the Caribbean, the end of the 1980s and the start
of the 1990s was marked by a substantial renewal of interest and
expectations among countries for subregional and regional integration
which, in turn, has sparked a strong movement to develop fresh approaches
and modalities to update and adapt the cooperation and integration
processes to the new development context. In particular, the concept of
"open regionalism" underpins the large majority of recent integration
efforts in the region. As described by the Executive Secretary of the
Economic Commission for Latin America and the Caribbean (ECLAC) in his
speech to the Rio Group Summit (October 1993), "open regionalism refers to
the increasing economic interdependence, driven by investments and market
forces in a context of openness, deregulation and globalization, as well as
by the preference accords". This means a major change to the present
situation of the region as it implies increased possibilities for foreign
direct investment, and a higher level of intra-industry trade among
countries. As the complementarity of the regional production increases,
production and trade specialization take place. All these processes become
compatible and mutually enhancing as well as being consistent with the
globalization and liberalization of the world economy. 13/
26. In addition to the changing approach, measures have been launched to
address issues obstructing cooperation and integration in the past.
Attention is placed on overcoming the traditional dissociation between
government policy approaches and specific multilateral actions to give
impetus to operational activities which have often been lagging behind
basic political support for integration. This has started with the
expanded and active involvement in the integration process by major
political entities, in particular by heads of States of member countries.
These political leaders have been holding more frequent summit meetings,
often twice or thrice annually, to review integration efforts and outline
specific revitalization measures as in the case of the Rio Group for the
Latin American Integration Association (LAIA), the Andean Presidential
Council and the heads of State of the Southern Common Market (MERCOSUR) and
the Caribbean Community (CARICOM). For example, through a series of
meetings the Andean Presidential Council adopted the "Strategic Design for
the Andean Group", setting out a new framework for cooperation and
integration with the twin objective of consolidating the Andean economic
space and enhancing Andean integration into the world economy. Cooperation
among the political leaders led to the formation of a new grouping, the
Association of Caribbean States (ACS) in July 1994 by 25 countries and
several dependent territories washed by the Caribbean Sea.
27. Guaranteeing a minimum of overall balance in applying integration
mechanisms to ensure that while free trade and common market commitments
are being assumed, joint activities to promote other important sectors such
as industry, technology, transport and environment, to name but a few, are
not ignored is also given prominence. This comes about as countries are
reviving and giving new meaning to the concept of economic integration by
widening its scope to cover the conduct of activities in a wide variety of
fields which contribute to the overall development and to the attainment of
shared objectives of countries of the region. It also flows from the
realization that subregional/regional integration must fit in with broader
national development strategies for enabling countries to achieve
development as well as undertake necessary structural changes for the
modernization and development of their economies. MERCOSUR countries, for
instance, are harmonizing policies with regard to customs, internal and
external trade, agriculture, industry, transport, communications, science
and technology as well as speeding up action to coordinate specific aspects
of their monetary, fiscal, foreign exchange and investment policies through
specific agreements.
28. Of rising importance also is a decisive movement towards guaranteeing,
as an essential element, a minimum of harmonization in macroeconomic
policies to render integration viable in keeping with specific situations
and requirements. This arises because through the application of similar
structural adjustment and stabilization measures, macroeconomic policies
tend to coincide in some fundamental aspects, giving rise to an objective
situation which offers opportunities for coordinating, drawing together and
gradually harmonizing policies. If the harmonization of economic policies,
regulations and standards in addition falls in line with those evolved in
the Uruguay Round, as some organizations are attempting to do, then product
standards, rules governing establishment of businesses and environmental
regulations tend to become building blocks for participation in the global
economy. The MERCOSUR example cited above falls in this sphere. The same
obtains when rules governing dispute settlement, anti-dumping measures and
safeguard provisions are modelled after the WTO standards. This process
ensures both clarity, transparency and international standardization of
rules.
29. Securing the implementation of more decisive and efficient measures to
achieve more effective participation of the relatively less developed
member States and enterprises in integration projects is a traditional
priority area. LAIA, the Andean Group, the Central America Common Market
(CACM), MERCOSUR and CARICOM have approved measures which have included a
slower pace of liberalization in the implementation of subregional trade
liberalization programmes. The MERCOSUR two-track integration programme is
an example; free trade was achieved between Argentina and Brazil by the end
of 1994 and was extended to Paraguay and Uruguay in 1995.
30. Last but not least, there has been an outburst of bilateral,
trilateral and multilateral free trade area initiatives which is creating a
networking of free trade and wider integration arrangements in the
continent. Some examples of this are: continuing trade liberalization
within LAIA and the Andean Group; the creation by MERCOSUR of a customs
union on 1 January 1995; the expected entry into force in 1995 of the free
trade agreement of the Group of Three (Mexico, Colombia, Venezuela); the
1992 free trade agreement of the Northern Trade Triangle (Honduras, El
Salvador, Guatemala), which later became the Central American Group of Four
with the admission into the group of Nicaragua in 1993; and various free
trade accords between Central American countries and the Group of Three
countries such as the Mexico-CACM accord (1991), the Colombia-Venezuela and
CACM accord (1993), the Venezuela-CARICOM non-reciprocal trade accord
(1992) and the Colombia-CARICOM reciprocal trade agreement. These second
generation free trade efforts are being supplemented with initiatives aimed
at evolving free trade in the Americas as a whole (see box 4). Although
this is a positive development it has raised the fear that the
bilateral/trilateral ventures could undermine cooperation within the wider
subregional and regional framework. Thus, initiatives have been taken to
preserve the overall integration framework into which bilateral agreements
are inserted so that the bilateral and multilateral integration processes
are complementary. The Central American Integration System (SICA), for
example, was created in 1991 as the umbrella organization for all
integration efforts in the subregion; all existing organizations would be
rationalized under the relevant SICA subsystem for economic, social,
cultural and political integration. LAIA States adopted resolutions in
1991 urging LAIA to foster and support bilateral and multilateral
integration processes between member countries by developing a standard-
setting framework consistent with open regionalism.
Box 4. Initiatives for free trade in the Americas
Convinced of the need to review positions adopted by the United States
to Latin America and to send a political message to the region, the
President of the United States unveiled the Enterprise for the Americas
Initiative (EAI) in an address given in the White House on 27 June 1990 to
an audience of public figures and ambassadors of the region. The EAI has
three different but interrelated elements, namely international trade,
investment and external debt. Regarding trade, the EAI proposes the
negotiation of a free trade area encompassing the entire Americas.
(Regarding investment, the EAI proposed to set up a Multilateral Investment
Fund to support the process of modernization; 21 member States of the
Inter-American Development Bank signed an agreement in 1992, and which
entered into force in January 1993, creating the Fund. With regard to
debt, it is proposed to reduce the principal, extend the periods and accept
the payment of concessionary interest in local currency to establish
environmental funds. This proposal would apply only to official debts
owing to the Government of the United States and its agencies.) Drawing
inspiration from the EAI, the Canada-United States free trade area that
came into force in January 1989 was extended to include Mexico through a
new agreement entitled the North American Free Trade Area (NAFTA). NAFTA
negotiations started in June 1991 and in December 1993 the three concerned
countries signed the agreement, which then entered into force in January
1994. The goal of NAFTA, as the name suggests, is to establish a free
trade area among the participating countries. NAFTA (in its final
provisions) states that other countries or groups of countries may be
admitted into the Agreement if the NAFTA countries agree, and subject to
terms and conditions that they require and to the completion of domestic
approval procedures in each country. The term "other countries or groups
of countries" is essentially applicable to the region. NAFTA therefore is
another step forward, after the EAI, towards the planned hemispheric
trading area. Indeed, in December 1994 the three NAFTA countries agreed on
widening NAFTA membership to include Chile. In December 1994 also, 34
heads of State and Government attending the Summit of the Americas in Miami
agreed, among other initiatives, to create a free trade area encompassing
the entire hemisphere. The technical negotiations on the free trade area
framework started in January 1995, and the process is expected to culminate
with the signing of the enabling agreement by the year 2005. The
hemispheric free trade area would build upon the existing
subregional/regional free trade agreements like NAFTA and those in Latin
America and the Caribbean. This decision is another step forward in the
preparatory process for the creation of a hemispheric trading area.
While the three initiatives previously mentioned were in the main initiated
by the United States, for the developing countries in the region, the
building of free trade pacts with developed country neighbours is part and
parcel of the emerging process of open regionalism.
D. South-South cooperation at the global level
1. Mobilization of the South
31. Parallel to subregional and regional cooperation efforts, at the
global level the developing countries perceived a need to devote resources
and efforts to developing better organization and coordination of the
countries of the South to advance their common interests within
multilateral negotiating forums, especially the United Nations. This
objective motivated the formation of the Non-Aligned Movement (1961) and
the Group of 77 (1964). NAM and the G-77 are the largest manifestations in
which the South unites to speak with one voice and pursue policies of
solidarity and enhanced bargaining power. The need and demand for South-
South cooperation at the global level is as strong as ever. The mechanisms
and institutional support for such cooperation have become diversified and
improved. There appears to be a heightened commitment to SouthSouth
cooperation and the value of such cooperation is being demonstrated through
practical actions. Thus, for example, several developing countries
established the Summit Level Group of Developing Countries (Group of
Fifteen) in 1989 and the South Centre became an intergovernmental
organization in 1995. Generally speaking, the mobilization of the South
within the framework of these institutions in recent years has been
characterized by continuing efforts to maintain and strengthen coordination
and to bolster joint activities as reviewed below. This is no mean
achievement in a period when doubts are voiced about the continuing
solidarity of the countries of the South. In addition to serving as agents
for international negotiations, which is an important dimension of
cooperation, NAM and G-77 have designed and adopted economic cooperation
programmes which are being implemented with varying degrees of success.
Group of 77
32. Within G-77, coordination has improved among chapters established in
various capitals with a major concentration of United Nations agencies and
organizations (Geneva, New York, Paris, Rome, Vienna, Nairobi), while
collective actions in intergovernmental forums and negotiations have
increased and diversified. 14/ The Group thus not only acted on
traditional items of the North-South economic agenda in the United Nations
and the different organizations of the United Nations system and at various
United Nations conferences, but has also mounted a joint stand in
negotiations relating to the conventions on global climate change and on
biodiversity, and on the Global Environment Facility. While the developing
countries did not negotiate as a group in the Uruguay Round, consultation
and coordination between them increased as the Round progressed, and their
collective voice was often heard. The need for such coordination is bound
to increase as steps are taken to implement the provisions of the Marrakesh
Final Act, within the ambit of the WTO. The G-77 also issued statements on
a variety of matters on the occasion of its ministerial-level meetings.
33. Significantly, the Group of 24 - which is the Washington, D.C. chapter
of G-77 - acted jointly at the annual World Bank/IMF meeting in Madrid and
used its collective weight to bar the proposal by some major industrial
countries of the North to allocate SDRs in a manner which did not take into
account developing country interests. This was an important development in
the context of World Bank/IMF proceedings, in that it signalled a renewed
conviction on the part of developing countries that if they were to have
any incidence in these institutions, they needed to be better prepared
technically, improve their coordination and engage in collective action.
15/
34. Practical steps have also been taken within G-77 to improve
communications, the diffusion of information and coordination between the
various chapters, as well as to organize analytical back-up for the Group's
work and negotiating positions. 16/ During their annual consultations, the
Chairmen of the G-77 chapters adopted joint policy stands, including a
common declaration on "An Agenda for Development", and on the need to
maintain UNCTAD and UNIDO, in response to suggestions in certain circles
that these two institutions, which are of special importance for the South,
should be closed down. In addition, efforts continued with respect to
promoting the implementation of the Caracas Programme of Action for
Economic Cooperation among Developing Countries. The Inter-Governmental
Follow-up and Coordination Committee on ECDC of the G-77 monitors
developments pertaining to the Caracas Programme of Action. During its
eighth meeting in 1993 the Group reviewed the Caracas Programme of Action
and made a number of recommendations in the areas of trade, technology,
food and agriculture, raw materials, industrialization and technical
cooperation. The meeting also agreed that environment and human resource
development be integrated into future programmes. 17/
35. The Global System of Trade Preferences among Developing Countries
(GSTP) is a major scheme for the promotion of South-South trade which was
originally proposed in the Caracas Programme. Presently, 40 members of G-
77 are GSTP participants and trade transactions among them have taken place
in the framework of GSTP since it took effect in 1989. With a view to
expanding GSTP membership and preferential trade, the participants launched
the second round of GSTP negotiations in November 1991. The negotiations
among participating countries have entered into an active phase in the
following areas: facilitation of accession, product-by-product
negotiations, across-the-board tariff negotiations, direct trade measures,
and non-tariff and sectoral agreements. In the process, seven additional
developing countries have applied for accession to the Agreement.
MERCOSUR, as a subregional grouping, has also presented its application for
accession to GSTP.
Non-Aligned Movement
36. In a currently unipolar world rising from the end of the cold war, and
in the face of the massive power of like-minded and well-coordinated
developed countries, the need for a collective stand of the South and joint
articulation of developing countries' views and interests are deemed more
pressing than ever. In this respect NAM, which was created in 1961,
continues to play a vital role in promoting South objectives in the global
political and economic arenas. This was reflected in the proceedings and
outcomes of the 10th NAM Summit (Jakarta, 1992) and was given substance by
the follow-up activities. A diverse range of intensive activities has been
carried out in the period between the Jakarta and Cartagena Summits, based
on a clear set of priorities and a work programme, all derived from the
decisions of the Jakarta Summit and executed under the leadership of the
NAM Chair-country, Indonesia. 18/ Expert groups were organized on such
matters as the external debt, food security and a strategy for self-
propelling growth. In the case of external debt, the expert-level work on
preparing a report was followed up by a Ministerial Meeting of Non-Aligned
Countries on Debt and Development, whose decisions and recommendations were
communicated to the United Nations, to multilateral financial institutions,
to all Governments, and to the annual World Bank/IMF meeting in Madrid. 19/
37. These recommendations were also used as the basis for drafting a major
United Nations General Assembly resolution on external debt, jointly
sponsored by NAM and G-77. 20/ In addition to expert groups, policy papers
were requested from the South Centre on a number of topics, including
international commodity problems, South-South cooperation in trade, science
and technology, the reform of the United Nations system, the Uruguay Round
and the international trading system, in order to help keep the collective
platform of the South up to date. NAM's High-level Committee on the Reform
of the United Nations met regularly and produced a consolidated NAM working
paper on the composition of the Security Council and on measures to enhance
the effective and efficient functioning of the Security Council.
38. The Chairman of NAM, President Suharto, expressed views on behalf of
the Movement to the Group of Seven at three of its summits - Tokyo, Naples
and Halifax - with regard to the resumption of the North-South dialogue,
the external debt issue and on the reform of the Bretton Woods
institutions. 21/ This represented an important step towards establishing
direct and regular exchange of views and communication between NAM and the
Group of Seven.
Joint Coordinating Committee of the Non-Aligned Movement and the Group of
77
39. In view of NAM's continuing strong interest and involvement in the
economic agenda and the importance of maximizing the impact and
effectiveness of the developing countries in international negotiations,
the need has arisen for much closer and effective coordination between NAM
(as a policy mechanism) and the G-77 (as a negotiating arm of the South).
This has led to the establishment of a NAM/G-77 Joint Coordinating
Committee (JCC), which meets regularly in New York and coordinates the
actions of the NAM Coordinating Bureau and the G-77 New York Chapter. This
has also led to the decision by the Jakarta Summit (1992) to harmonize and
possibly integrate the Action Programme for Economic Cooperation of NAM and
the Caracas Programme of Action of the Group of 77. As a consequence of
coordination through the Committee, several resolutions were moved jointly
by NAM and G-77 in the United Nations General Assembly. Besides the
abovementioned resolution on external debt, NAM and G-77 jointly sponsored
resolutions entitled "Renewal of the dialogue on strengthening
international economic cooperation for development through partnership",
"United Nations conference on South-South cooperation", and "Report of the
International Conference on Population and Development". The Chairmen of
G-77 (or their representative) along with the representative of the
Chairman of NAM made a joint demarche at the last two summits of the Group
of Seven in Naples and Halifax, respectively, and presented the views of G-
77 and NAM on many development issues.
Group of Fifteen
40. The Group of Fifteen (G-15) has continued with its regular annual
summits which began in 1990, where North-South issues and South-South
cooperation are reviewed and discussed by the heads of State of the member
countries and relevant decisions are taken. Four summits have been held
and the fifth is scheduled for November 1995 in Buenos Aires, Argentina.
Regular consultations of the G-15 representatives are held and the work of
the Group is supported by a small secretariat, namely the Technical Support
Facility (TSF). The G-15 has also launched a number of South-South
cooperation activities and projects, which span a wide socio-economic
spectrum. Among its activities are those dealing with trade, investment
and technology, information exchange (the creation the South Investment,
Trade and Technological Data Exchange Centre (SITTDEC) which, if fully
operational, could provide services to over 300 users mainly from the
private sector), trade facilitation arrangements (including bilateral
payments agreements; see para. 54), gene banks for medicinal and aromatic
plants, solar and renewable energy, petroleum and petrochemicals, food
production, vocational training and poverty alleviation. It should be
noted that the G-15 provides for an active role of the business sector,
which meets in parallel with the summit meetings to promote cross-country
investment.
South Centre
41. The South Centre was initially set up as a two-year follow-up office
of the South Commission. However, following the wishes of a number of
South Governments, steps were taken to transform the Centre into a
permanent intergovernmental organization. Intensive consultations were
undertaken with South Governments and an "Intergovernmental Agreement to
Establish the South Centre" was prepared. The Agreement was opened for
signature on 1 September 1994, and a special signing ceremony at
ministerial level was held in New York on 30 September 1994. With the
United Nations Secretary-General acting as the depositary, 43 Governments
signed the Agreement during the prescribed period. By 1 June 1995, an
additional two Governments had signalled their intention to accede, making
a total of 45 Governments which, as of that date, had agreed to join the
Centre. 22/ After the required number of ratifications and/or accessions
was deposited, the Agreement came into force on 31 July 1995. The first
session of the Centre's governing body, the Council of Representatives, was
scheduled for September 1995. In the period of transition and
consolidation, the Centre continued with its regular activities and
maintained and strengthened close cooperation with G-77 and NAM, often
assisting, at their request, with the preparation of analytical studies or
holding consultations on topical issues.
2. Other forms of cooperation
42. Besides the mobilization of the South, developing countries have also
been active in strengthening economic and other forms of cooperation at the
interregional level, albeit with generally limited progress. Apart from
the implementation of the G-77 Caracas Programme of Action, the NAM Action
Programme and the G-15 projects referred to above, some other examples
could be cited. More than 10 countries from the Organization of the Islamic
Conference (OIC) have signed a framework agreement on the creation of a
preferential trade system that was drafted in 1991 to promote trade growth.
The League of Arab States (LAS) continues to promote political and economic
cooperation among its members through its numerous subsidiary bodies. An
economic summit in Casablanca (November 1994) attended by political and
business leaders from the Middle East and North Africa ended with the
adoption of a declaration pledging Governments to build the foundations of
an economic community. In addition, the scope of interregional cooperation
has changed in recent years with new initiatives for free trade and
investment involving developed and developing countries. Such initiatives
have emerged in the Americas with the long-term objective of creating a
hemispheric free trade area, as discussed previously. The African,
Caribbean and Pacific group of States are active in the implementation and
mid-term review of the Lome Conventions. The Asia Pacific Economic
Cooperation, launched in 1989, agreed at its summit in November 1994 to
move towards free and open trade and investment by the year 2000 among its
developed and developing economies.
III. OPERATIONAL STATE OF SOUTH-SOUTH COOPERATION IN TRADE
AND MONETARY AND FINANCIAL COOPERATION
A. Development of trade
43. The potential for increased South-South trade is widely accepted and
corroborated by statistical data. In 1992 trade (exports) among the
developed market economy countries, having together less than 16 per cent
of the world's population, accounted for well over three quarters of the
group's total trade (and represented well over 50 per cent of aggregate
world trade). In contrast, trade among developing countries, which
together accounted for more than 70 per cent of the world's population,
accounted only for about two fifths of the group's total trade (and about
10 per cent of aggregate world trade). The weakness of South-South trade
in the international trading system is thus apparent but the gap also
provides a strong basis for expanding trade flows among developing
countries.
44. Table 1 shows that from 1970 up to 1992, trade among developing
countries registered three distinct stages. The first stage covered the
period from 1970 up to 1980 during which South-South trade expanded rapidly
to represent one of the most dynamic components of world trade. Thus,
while world trade expanded sixfold (at an average rate of 19 per cent per
annum), South-South trade expanded twelvefold (at an annual rate of 25 per
cent), all in current dollar terms. Correspondingly, the share of South-
South trade in world trade rose markedly, almost doubling in the course of
the same years (4.1 to 7.8 per cent). In interpreting these data it should
be cautioned that the comparison of growth rates is somewhat distorted
because the 1970s was a period of high world inflation so that in real
terms the growth in South-South trade is probably much lower that the
figures provided; and because the 1970s was also a period in which the
price of fuels rose tremendously relative to other commodities entering
world trade and given that trade in fuels loomed relatively large in South-
South trade (representing about one half of such trade in the decade),
trade values have been inflated.
45. The second stage applies to the period from 1980 to 1986 which, in
contrast to the 1970s, witnessed a reversal in the growth of South-South
trade and it was no longer the dynamic component of world trade it had
been. In fact, this period saw a deceleration in the growth of world trade
as a whole and with this South-South trade largely stagnated or declined,
its share in world trade falling from 7.8 to 6.9 per cent. The major
factor accounting for this downturn in the fortunes of South-South trade
was the stagnation and decline in the economies of the developing countries
following the crises of the 1980s. A positive aspect, however, was that
developing countries were able to maintain their share in the much reduced
import markets of developing countries, suggesting that the underlying
potential for South-South trade was not eroded by the events of the 1980s.
The share of trade among developing countries in the total imports of
developing countries, which rose from 20 to 31 per cent between 1970 and
1980, remained at around 30 per cent in 1986.
Table 1. Inter-developing country trade by region, 1970-1992
(million US dollars)
Destination (importing to)
Developing
Origin
(exporting from)
Developing
Africa
America
Asia
Oceania
Total
World
Africa
1970
672
236
494
2
1 494
12 021
1980
2 978
5 879
3 264
1
12 962
94 942
1986
2 821
1 374
2 598
3
7 356
46 829
1990
3 933
708
3 624
4
8 764
66 698
1991
4 867
1 032
3 768
4
10 145
70 092
1992
5 229
1 211
3 504
7
9 950
70 120
America
1970
119
3 029
303
8
3 519
17 513
1980
2 399
22 985
3 763
108
29 645
107 879
1986
1 706
14 903
5 187
12
22 037
86 045
1990
1 948
18 174
8 145
32
28 566
133 596
1991
1 647
23 139
8 866
54
33 886
136 644
1992
1 907
28 941
9 299
33
40 181
135 429
Asia
1970
895
507
6 115
89
7 735
27 126
1980
8 894
15 764
84 389
682
110 980
372 915
1986
7 232
10 394
94 184
585
113 489
306 246
1990
12 843
9 653
191 008
1 110
215 801
557 249
1991
15 670
12 460
231 037
1 178
261 110
620 861
1992
12 682
16 411
276 616
1 169
306 878
700 240
Oceania
1970
0
0
3
7
10
482
1980
0
6
143
83
232
2 184
1986
1
1
269
102
372
2 121
1990
1
3
330
171
504
2 821
1991
1
3
442
174
620
3 317
1992
0
0
433
93
526
3 240
Total
1970
1 746
3 794
7 022
105
12 948
58 822
1980
15 007
44 698
92 414
876
155 477
586 898
1986
12 340
26 826
103 188
702
144 941
451 538
1990
19 439
28 648
204 161
1 318
255 514
774 756
1991
22 660
36 707
244 811
1 410
307 008
840 463
1992
20 075
46 632
290 445
1 303
358 456
922 981
World
1970
11 836
18 617
28 486
738
62 785
311 905
1980
84 367
126 105
270 078
2 994
504 035
2 000 949
1986
60 525
97 984
298 552
3 147
481 799
2 112 988
1990
81 938
132 109
527 876
5 036
772 724
3 391 906
1991
81 869
150 012
599 071
5 153
850 442
3 438 566
1992
82 803
177 717
689 891
5 371
955 783
3 685 967
Source: UNCTAD secretariat calculations based on data from the United
Nations Statistical Division (UNSD).
46. The above deduction about the underlying potential of South-South
trade was corroborated by the developments in South-South trade since 1986
up to the present, which is the third stage. During this period South-
South trade has been rising (significantly in some cases) and all
indicators suggest that this growth will continue in the 1990s. Thus,
between 1986 and 1992, South-South trade more than doubled in absolute
terms to US$ 358.5 billion, becoming again one of the most dynamic elements
of world trade. Its share of world trade rose from 6.9 to 9.7 per cent.
The growth in South-South trade followed an overall revival in all exports
from and imports to developing countries. World trade also expanded
although at a pace slightly less than that of South-South trade.
47. The overall trade pattern hides notable differences in the performance
of the major geographical regions. Trade within the regions (intraregional
trade) has always played the major role in South-South trade, as against
trade between the regions (interregional trade). It could be determined
from table 1 that during the growth years of the 1970s, interregional trade
was as dynamic as intraregional trade, increasing its share of South-South
trade from 22 per cent in 1970 to 28 per cent in 1980. The stagnation and
decline of South-South trade in the early 1980s has, however, been
accompanied by an interruption in the trend towards a rise in the share of
interregional trade in the total and so this share in 1986 dropped to about
21 per cent (and in value terms from US$ 43.4 billion in 1980 to US$ 31.2
billion in 1986). In contrast, intraregional trade for the same period
increased slightly from US$ 112.1 billion to US$ 113.7 billion. The drop
in South-South trade in the 1980s appears therefore to have affected
particularly the interregional component. An effective implementation and
improvement of South-South trade expansion programmes such as GSTP and the
NAM Programme of Action, among others, can help to reverse the declining
trend in interregional trade.
48. The steady regionalization and expansion of South-South trade is
especially evident in South-East Asia, owing undoubtedly to the superior
economic performance of the newly industrialized economies of South-East
Asia (China, Hong Kong, Malaysia, Singapore, Taiwan Province of China,
Thailand). As a source of exports, Asia accounted for 78 per cent of
South-South trade in 1986 and rising to 86 per cent in 1992 (table 1). As
an importer, Asia accounted for 71 per cent of South-South trade in 1986
and 81 per cent in 1992. Among the other major regions, intraregional
trade is also rising and it is more buoyant in Latin America and the
Caribbean than in Africa. Thus, in 1992, Africa accounted for the smallest
export share in South-South trade, namely 2.8 per cent, against 11 per cent
for developing America; and in terms of import share for the same year,
Africa accounted for 5.6 per cent and developing America, 13 per cent.
Given these data it is not surprising that intraregional trade in the Asian
region is at present the dominant component of South-South trade. It also
means that at present only a few countries are active in SouthSouth trade,
and so more effort is needed to increase the participation of other
developing countries in South-South trade.
49. The concentration in a handful of developing countries of South-South
trade becomes even sharper from the viewpoint of the major developing
country exporters of manufactures, namely Brazil, Hong Kong, Malaysia,
Mexico, the Republic of Korea, Singapore, Taiwan Province of China,
Thailand, Turkey and the countries of former Yugoslavia. Dominated by East
Asian countries, this group of countries accounted for about 30 per cent of
total South-South trade in 1980; the ratio increased considerably to 57 per
cent in 1992. With China, the ratio rises to about 36 per cent in 1980 and
over 70 per cent in 1992. 23/
50. The domination of South-South trade by the major exporters of
manufactures follows from changes in the product structure of this trade.
The change is characterized by a rising trend in the share of manufactures
(chemical products, machinery and transport equipment, other manufactures)
and a corresponding fall in the share of primary products (food products,
agricultural raw materials, ores and metals, fuels) which had accounted for
over two thirds of total trade in 1970 (see table 2). This trend, which
has been in evidence since 1970, has continued up to 1992. Thus,
manufactures now represent over 60 per cent of total South-South trade, as
against 32 per cent in 1970. The manufactured products which feature
prominently in South-South trade of the dynamic East Asian countries
include machinery and transport equipment (ships and boats, electrical
machinery, switchgears and parts), semi-manufactured products (leather,
knitted fabrics), resource-based manufactured products and a number of
capital- and skill-intensive products (office machines, automatic data
processing equipment, television receivers, sound recorders, musical and
optical equipment). The changing product structure of South-South trade
reflects a similar trend in the global exports of developing countries and
indeed of world trade as a whole.
51. The changing pattern of South-South in especially manufactures reveals
certain interesting trends. It would appear that in the early years when
the spread of industrialization in developing countries was only just
getting under way, the efforts to develop an export trade in manufactures
relied heavily on markets in other developing countries. This is reflected
in the much higher share of manufactures in South-South trade (32 per cent)
than in total exports to developed market-economy countries (16 per cent)
in 1970. It is not difficult to see why South-South trade should play an
important role in promoting the emergence of an export trade in
manufactured goods. Efforts to produce such goods in a newly
industrializing country will necessarily result in somewhat crude products
hardly up to the modern standards embodying the latest technology to be
found in developed countries. Such initial efforts could therefore hardly
find markets in the developed countries where there is usually a high
premium on the newest and most advanced technology. Protectionism in
developed countries against processed commodities was another obstacle. In
the developing countries, however, there is usually a market for the
products of such intermediate technology whenever they have a significant
advantage in price. Only later will the stage be reached where these new
exporters can expect to penetrate the markets of the developed countries
for such capitalintensive high technology goods. This has happened only in
the case of some major developing country exporters of manufactures; the
large majority of developing countries are still at an early stage of
industrialization where reliance on South-South trade remains important for
nurturing their exports of this important product group. 24/
Table 2. Commodity composition of trade among developing
countries by region,
1970 and 1992
Total
Food
Agricul-tural raw materials
Ores and metals
Fuels
Chemical
products
Machinery and transport equipment
Other manufacturesFrom/To
Million
US$
Percentage share of the commodity group in exports
Total South, 1992
America
46 632
11.6
2.4
3.2
22.9
7.8
25.1
26.7 Africa
20 075
21.0
3.9
2.7
16.5
5.6
21.9
27.5 West Asia
38 794
16.7
2.0
2.2
18.4
5.4
15.2
39.3 SEA*
257 651
7.0
3.3
3.1
14.4
8.1
27.1
36.1 Oceania
1 303
12.3
0.8
1.5
25.1
3.7
15.3
40.1 Total South
358 465
9.5
3.1
3.0
16.1
7.6
25.2
34.7 DMECs**
535 884
11.3
2.6
3.7
24.1
2.8
20.5
33.9
Total South, 1970
America
3 794
15.3
5.9
4.5
48.3
4.8
5.8
14.9 Africa
1 746
24.1
5.8
2.1
17.8
3.2
7.2
39.6 West Asia
1 413
29.1
5.5
2.3
27.8
2.7
6.4
24.8 SEA*
5 609
23.8
17.5
5.2
22.8
3.9
6.3
19.8 Oceania
105
11.4
1.0
0.0
44.8
1.9
4.8
35.2 Total South
12 948
22.1
11.1
4.4
30.1
3.9
6.2
21.6 DMECs**
41 188
27.1
8.9
15.0
33.1
1.5
2.1
12.0
Source: UNCTAD secretariat computations, based on data from UNSD.
Note: * South and East Asia.
** Developed market-economy countries.
52. Trade within subregional/regional integration institutions constitutes
a component of intraregional trade. It deserves special mention as most of
the integration institutions have established preferential trade
liberalization programmes and other trade promotion measures to encourage
trade expansion among their members (as discussed in chapter II). While
these programmes to some extent have contributed to expanding trade, up to
now intra-group trade has not been a major factor in the expansion of
intraregional trade. One major difficulty was the apparent lack of
implementation of the liberalization programmes for various reasons. The
situation, though, appears to be changing for the better according to data
for the 1990s (see table 3), and it could be facilitated by the
acceleration of trade liberalization efforts. Generally in the 1980s, like
aggregate South-South trade, the intra-trade of most institutions suffered
substantial set-backs, chiefly due to the serious international financial
problems and the recessive adjustments deriving therefrom. And, like
South-South trade as a whole, there has been an improvement in the intra-
trade of integration institutions after 1987 which has picked up speed
since 1990. The expansion has been modest in some cases as
Table 3. Intraregional and intra-group trade of developing
countries, 1990-1992
Country group
Intra-group trade
(million US$)
Intra-trade/world
(percentage share)
1990
1991
1992
1990
1991
1992Africa*
3 933
4 867
5 229
5.9
6.9
7.5UMA
727
772
945
2.3
2.4
3.0UDEAC
139
111
120
2.4
1.9
2.1ECCAS
171
146
158
2.3
1.9
2.1ECOWAS
1 470
1 425
1 567
8.3
9.1
7.8PTA
662
642
707
6.6
6.5
6.7SADC
360
303
333
5.2
4.4
4.4Asia*
191 008
231 037
276 616
21.4
37.2
39.5GCC
7 230
7 031
7 150
8.3
8.5
7.6ECO
1 263
977
1 128
3.6
2.7
3.0ASEAN
26 288
31 387
30 858
18.6
19.3
19.4BA**
1 512
1 761
1 941
2.2
2.3
2.4SAARC
811
974
1 052
8.6
9.1
8.6Latin America and the Caribbean*
18 174
23 139
28 941
13.6
16.9
21.4LAIA
12 336
15 079
18 588
12.1
13.5
16.7Andean Group
1 310
1 770
1 884
4.1
5.9
6.2MERCOSUR
4 127
5 103
7 007
12.1
15.0
18.2CACM
661
761
796
15.3
16.8
13.6CARICOM
396
362
368
10.1
9.3
9.0
Source: Handbook of International Trade and Development Statistics, 1993
(United Nations publication, Sales No. E/F.94.II.D.24), table 1.13.
Note: * UNCTAD secretariat calculations based on data from UNSD.
** Bangkok Agreement.
among African institutions, and substantial in other cases like Latin
American institutions. MERCOSUR countries have seen a notable increase in
intraregional trade, for example.
53. A special subject facing integration organizations is trade in
services, normally included in the legal documents of most organizations
with emphasis on infrastructural services. At present, as a result of the
growing awareness about the increasing importance of trade in services and
their impact on the development process, and as a result of the inclusion
of services in the multilateral trade negotiations under the Uruguay Round,
the integration organizations face the challenge of incorporating services
preferences into their cooperation programmes in order to take advantages
of provisions of article V of the General Agreement on Trade in Services
(GATS) which guarantees the legitimacy of these arrangements. This article
is similar to article XXIV of GATT on free trade agreements and customs
unions; however, it had different criteria and flexibility in the
examination of developing countries' organizations. 25/
B. Monetary and financial cooperation 26/
1. Multilateral clearing and payments arrangements
54. Among the prominent forms of monetary and financial cooperation
designed to support South-South trade are multilateral clearing and
payments arrangements. As of early 1995, developing countries were involved
in seven arrangements, three in Africa (West African Clearing House (WACH),
Clearing House of the Economic Community of Central African States (CHCAS),
PTA Clearing House (PTACH)), one in Asia (Asian Clearing Union (ACU)), and
three in developing America (LAIA Payments and Reciprocal Credit System,
Central American Clearing House (CACH), Caribbean Multilateral Clearing
Facility (CMCF)). Of the seven arrangements, the CARICOM facility ceased
operations in 1984 owing to unsettled balances. 27/
55. The experience gained with multilateral clearing and payments
arrangements of developing countries shows that they have proved a useful
instrument for promoting monetary and financial integration. Since 1990,
the performance of the multilateral clearing and payments arrangements
generally has improved with an expansion in both intra-group trade and
transactions channelled through them (see table 4). A number of the
arrangements also created new instruments to strengthen their operations.
For example, ACU has been successfully implementing a currency swap
arrangement since 1989 and PTACH is unique among clearing houses on account
of the introduction in 1988 of travellers cheques denominated in the PTA
unit of account (UAPTA) and have been in use since then. The improvement,
however, is not shared by all arrangements. The bulk of both intra-group
trade and total transactions is concentrated in two facilities, ACU and the
LAIA arrangement. A number of the arrangements are facing declining
transactions although intra-group trade has been rising. CACH was
resuscitated as the Central American Payments System; however, operations
within the facility have dwindled mainly because of the liberalization of
the exchange rates system
Table 4. Performance of multilateral clearing and payments
arrangements, 1986-1992
(million US dollars)
Year
Intra-group imports
Total transactions channelled through the system
Net settlement in foreign exchange
Ratios (percentages)
(1)
(2)
(3)
(4)=(2/1)
(5)=(3/2)
ACU
1986
1 069.2
690.6
217.0
65
311987
1 105.6
625.3
227.8
57
361988
1 222.7
940.8
242.3
77
261989
1 581.3
1 041.7
208.3
66
201990
1 852.5
1 356.1
482.8
73
361991
2 265.0
1 821.4
420.2
80
231992
2 500.0
1 953.9
765.9
78
39
CACH
1986
466.2
189.3
40.4
41
211987
526.2
29.3
...
6
... 1988
565.4
5.6
...
1
... 1989
599.3
1.6
...
0
... 1990
639.3
0.1
0.0
0
... 1991
675.0
140.7
60.0
21
431992 (JanJuly)
272.1
56.2
45.2
21
80
CHCAS
1986
125.0
1.3
1.2
1
921987
128.0
1.5
1.4
1
911988
193.0
1.1
0.8
1
731989
235.0
1.6
1.6
1
1001990
210.0
1.1
0.9
1
771991
153.0
1.2
1.0
1
81
LAIA
1986
7 674.0
6 672.6
1 066.3
87
161987
8 711.0
7 491.8
1 264.2
86
171988
9 651.0
8 752.6
1 458.0
91
171989
11 147.0
10 136.9
2 512.6
91
251990
12 381.0
10 019.6
3 469.0
81
351991
15 620.0
11 610.0
2 876.4
74
251992
19 960.0
13 772.0
3 845.0
69
28
PTA
1986
482.0
69.7
36.0
14
521987
492.0
113.7
62.3
23
551988
558.0
190.6
95.1
34
501989
579.0
282.6
132.6
49
471990
580.0
263.9
111.6
46
421991
662.0
238.1
80.2
36
341992
...
191.8
59.7
...
31
WACH
1986
970.0
89.6
77.2
9
861987
1 132.0
58.4
55.4
5
951988
1 298.0
32.6
23.3
3
711989
1 503.0
13.9
9.5
1
681990
1 272.0
48.0
10.3
4
211991
1 357.0
17.0
9.2
1
54
Source: "Clearing and payments arrangements among developing countries:
recent developments, long-term policy considerations" (UNCTAD/ECDC/23,
table 1, p. 37).
in participating countries which made the use of the clearing house
unattractive. Similarly, transactions channelled through PTACH and WACH
have been on the decline since 1990.
56. Recent efforts in the multilateral clearing and payments arrangements
have focused on reviewing their role and functions from a long-term
perspective in view of the growing current account convertibility in
developing economies and against the backdrop of major institutional
changes taking place in major subregional and regional integration
organizations. Certain arrangements like ACU and WACH have expressed
interest in transforming their payments schemes into monetary cooperation
zones. Attracting new membership is a recurrent challenge in the promotion
of ACU. Various proposals have been launched to reactivate the CARICOM
facility and to improve the facility in Central America. PTA is
considering the establishment of a reserve fund. Officials of developing
countries also have expressed interest in linking clearing and payments
arrangements across regions.
57. The Group of Fifteen at its first summit in 1990 approved a number of
projects, one of which was the creation of a financial mechanism for the
promotion of trade among member States. This is to be achieved in two
stages, stage one being the formation of bilateral payments arrangements
between interested pairs of countries and stage two consisting of a
multilateral interregional payments system on a pilot basis among selected
countries. Accordingly, several bilateral payments arrangements (BPAs) have
been established. It was reported that by early 1992 Malaysia (coordinator
of BPAs with G-15) had established 11 BPAs with other G-15 countries. 28/
58. It could also be mentioned that in 1978, the Coordination Committee on
Multilateral Payments Arrangements and Monetary Cooperation among
Developing Countries was established to encourage the exchange of
experience, harmonization of strategies, and formulation of individual and
joint projects for expanding and improving activities of its members, which
consist of all clearing and payments arrangements, monetary funds, trade
financing institutions and other bodies of financial cooperation among
developing countries. The central banks of developing countries enjoy
observer status. Meetings of the Committee were held at Buenos Aires
(1978), Dakar (1979), Abu Dhabi (1980), Bridgetown (1981), Las Palmas
(1985), Montevideo (1988), Las Palmas (1990) and Santa Cruz de Tenerife,
Canary Islands (1994). UNCTAD acts as its technical secretariat.
2. Trade financing
59. Export financing has long been considered a key element in determining
the competitiveness of regional suppliers. However, the dearth of trade-
financing facilities is a hallmark of many developing countries and this
has been a major weakness which has adversely affected the development of
South-South trade. According to an UNCTAD survey published in 1991, only 16
countries had fully fledged and specialized trade-finance institutions. 29/
In 56 countries there was a modicum of institutional capacity, usually
lodged at the central banks, which are by their very nature removed from
trade finance and have different, and sometimes even conflicting,
objectives. 30/ The sluggishness in intraregional trade which has
accompanied the drop in overall export earnings in the 1980s contributed to
focusing attention on the importance of providing adequate finance.
60. Efforts in this direction have taken various paths. Some developing
countries and their cooperation institutions have established specialized
lending institutions, namely, export-import banks that provide medium-long-
term loans and may also offer guarantees or insurance. Many have
established a separate export credit guarantee and insurance agency,
typically of an official nature, responsible for credit enhancement.
Financing modes have also experienced some changes by operating a wider
range of facilities (short-term export finance, pre-shipment credit,
investment loans and export marketing finance). Some export credit
programmes use new modalities of export financing such as overseas
investment credits that enable national companies to invest overseas in
equity or to provide loans to such joint ventures, and import credit for
imported machinery and inputs. Some export finance techniques have also
been adopted by developing countries to fulfil requirements of importing
capital goods; examples include factoring and forfeiting. Despite these
innovations, gaps and shortages of trade-finance persist in the vast
majority of developing countries.
61. Parallel to developments in domestic export facilities and credit and
payments facilities, regional financial institutions involved in export
promotion have been strengthened and new institutions and mechanisms of
financing have been adopted. Most of the regional trade financing
institutions of developing countries were designed with the aim of
providing short- and medium-term credits for the financing of their mutual
trade as well as their export trade with developed countries. Their main
objective is to supplement trade finance provided by national and
international financial institutions. These institutions therefore assist
the process of South-South trade expansion and integration. Their
contribution in this regard can only be very modest, however, bearing in
mind that their role is by no means confined to the financing of South-
South trade but covers trade with third countries as well, and that
existing institutions have a lending capacity that is modest compared to
South-South trade volumes. Box 5 shows the existing regional trade
financing facilities, their main features, financing coverage and recent
amounts of lending (wherever available).
Box 5. Regional trade financing facilities of developing
countries
Islamic Development Bank. Established in August 1974 and formally
opened in October 1975, the trade financing window of the Bank supports the
promotion of trade among Islamic countries by way of providing import trade
financing (post-shipment finance, short-term financing), long-term trade
financing (post-shipment, medium- and long-term financing), and portfolio
credits (postshipment finance, short- and medium-term financing). Export
credit loans plus indirect and co-financing by the Bank amounted to over
US$ 250 million in 1993.
Arab Trade Financing Programme (ATFP). Set up in 1989, ATFP promotes
intra-Arab trade through rediscounting of trade financing instruments from
member countries covering pre- and post-shipment finance, loans and lines
of credit, and guarantees accepted if issued by IAIGC (see below). Between
1991 and 1993, ATFP approved 94 applications for lines of credits totalling
US$ 263 million.
Inter-Arab Investment Guarantee Corporation (IAIGC). IAIGC was set up
in 1974 and started activities in 1975. It provides guarantees against
non-commercial risks for Arab investors and Arab loans to promote
investments within Arab countries. In 1993, the value of guarantee
contracts signed by IAIGC amounted to US$ 14.4 million for investment
contracts and US$ 47 million for export credit contracts.
Andean Development Corporation (CAF). CAF was set up in 1970 and
offers trade financing through the Andean Trade Financing System (SAFICO)
and the Mechanism for Confirmation and Financing of Letters of Credit and
Imports (MECOFIN) in the form of pre- and post-shipment short-term credit,
project loans and trade financing. Indirect financing to banks amounted to
US$ 412 million in 1994 and disbursements of short-term operations amounted
to US$ 1,207 million.
Banco Centroamericano de Integracion Economica (BCIE-CABEI).
Established in 1961 and starting operations the same year, the integration
bank (a) supports Central American commercial banks in trade financing
operations; (b) supports development of productive sectors; (c) executes a
special programme of support for exports to Honduras and Nicaragua; and (d)
handles co-financing operations. Modalities of financing covered include
pre- and post-shipment financing and lines of credit. Disbursements in
1993 amounted to US$ 9.6 million under (a); US$ 23.9 million under (b); US$
10.8 million under (c); and US$ 3.4 million under (d).
Inter-American Development Bank. Set up in 1959, one of the major
goals of the Bank is to promote intra- and extra-regional trade of Latin
American countries by way of providing an export financing programme
(medium- and long-term), operating the Venezuelan Trust Fund and co-
financing activities with bilateral and multilateral institutions. In
1993, the volume of refinancing amounted to US$ 30 million, of which 85 per
cent consisted of bank credits to exporters, and the total amount of co-
financing operations in 1994 amounted to US$ 1,376 million.
Banco Latinoamericano de Exportaciones (BLADEX). Established in 1977,
BLADEX provides resources for short-term financing of foreign trade
transactions in the Latin American region. From 1979 to 1993, BLADEX
provided over US$ 3,670 million worth of trade financing.
Latin American Reserve Fund (LARF). Established in 1988. LARF
supports trade finance operations originating in member and non-member
countries through provisions of pre- and post-shipment credit lines.
Between January and June 1994, LARF trade financing through Bankers
Acceptances amounted to US$ 73.5 million, credits to commercial banks
amounted to US$ 1,035 million and advances amounted to US$ 19.6 million.
In Africa the following facilities exist: the PTA Bank which
undertakes some trade finance operations; the PTA Reinsurance Company,
established in 1990 to promote the growth of national, subregional and
regional underwriting and retention capacity; and the African Export-Import
Bank established in 1994 and which, among other operations, will extend
financial facilities to African clients with soft or reduced terms.
3. Financial flows
62. Financial flows among developing countries display varying trends
depending on the character of the flow. Public and publicly guaranteed
flows, consisting mostly of official bilateral credits, have been
declining. Data for recent years show a sharp decrease in disbursements
between 1990 and 1993 (see table 5). Except for commercial bank credits,
the general decline was a reflection of sharp falls in all forms of public
and publicly guaranteed flows (official bilateral, other private credits,
suppliers credit). In addition, repayments (amortization and interest
payments) have exceeded new disbursements. The consequent net outflow of
resources almost reached the level of US$ 1,900 million in 1990 and
declined slightly in 1993. The present trend in South-South public and
publicly guaranteed flows therefore shows repayments by debtors exceeding
new disbursements by creditors. The geographical composition of these
flows differs widely (see table 6). Unlike the general declining trend
described above, a few Asian countries are important sources of
disbursements and are net creditors. Their performance helped improve the
regional picture so that the disbursements of the Asian region increased
between 1990 and 1993; in contrast, that of Africa and Latin America fell
strongly. So the net balance of Asia improved while that of the other two
regions deteriorated. 31/
Table 5. Inter-developing country public and publicly guaranteed
financial flows by type of credit,* 1990 and 1993
(million US dollars)
Official bilateral
Banks
Other private credits
Suppliers credits
Total
Bonds a/Disbursements
1990
1993
2 797
1 553
583
596
640
139
592
431
4 612
2 719
n.a.
n.a.Amortization
1990
1993
2 705
1 978
1 365
741
267
217
589
510
4 926
3 446
47
0Interest payments
1990
1993
810
601
521
183
115
39
159
120
1 605
943
4
0Repayments b/
1990
1993
3 515
2 579
1 886
924
382
256
748
630
6 531
4 389
51
0Balance
1990
1993
-718
-1 026
-1 303
-328
258
-117
-156
-199
-1 919
-1 670
n.a.
n.a.
Source: World Bank, International Economic Department, Debt and Finance
Unit.
* In World Bank categorization, the group of developing countries also
includes Greece, Portugal, Turkey, and Central and Eastern Europe.
a/ Data on bonds only available for repayments.
b/ Repayments - amortization + interest payments.
Table 6. Inter-developing country public and publicly guaranteed
financial flows by country and region, 1990 and 1993
(million US dollars)
Disbursements
Repayments a/
Balance
1990
1993
1990
1993
1990
1993
Developing America
615
283
984
892
-369
-609Chile
0
3
0
1
0
2Panama
55
25
68
37
-13
-12Cuba
91
0
4
18
87
-18Mexico
72
13
101
100
-29
-87Argentina
87
32
168
122
-81
-90Venezuela
118
155
160
259
-42
-104Brazil
186
53
452
334
-266
-281
Africa
219
91
272
241
-53
-150Cote d'Ivoire
0
0
6
4
-6
-4Egypt
0
0
1
4
-1
-4South Africa
12
17
35
22
-23
-5Morocco
5
0
1
6
4
-6Libyan Arab Jamahiriya
54
7
94
15
-40
-8Kenya
0
0
0
12
0
-12Algeria
1
11
41
65
-40
-54Tunisia
143
56
85
113
58
-57
Asia
874
1 405
2 612
1 574
-1 738
-169China
187
294
112
159
75
135Turkey
81
213
168
79
-87
134Republic of Korea
100
184
199
107
-99
77Macau
0
58
7
5
-7
53Malaysia
0
26
0
0
0
26India
5
96
49
79
-44
17Oman
200
0
3
0
197
0Pakistan
18
0
21
2
-3
-2Iraq
2
4
34
7
-32
-3Jordan
0
0
9
7
-9
-7Indonesia
12
29
1
58
11
-29Iran, Islamic Republic of
0
0
102
46
-102
-46Saudi Arabia
240
293
492
343
-252
-50Bahrain
18
201
1 408
681
-1 390
-480
Europe
74
45
176
76
-102
-31The former Yugoslav
Republic of Macedonia b/
0
19
0
2
0
17Yugoslavia
73
26
175
73
-102
-47
Source: World Bank, International Economics Department, Debt and Finance
Unit.
Note: In conformity with the categories used by the World Bank, the
columns on recipient developing countries also include Greece, Portugal,
and Central and Eastern Europe.
a/ Repayments - amortization plus interest payments.
b/ The figure for repayments includes interest payments only.
63. The mobilization of financial resources through the promotion of
regional capital market integration is a new aspect of ECDC. Recent
efforts indicate that regional cooperation offers a way of solving many of
the problems associated with both nascent and emerging national capital
markets. The regional scale may provide the necessary market size for
viability both in costs and volume; it may also strengthen a country's
capacity to resist the adverse effects of changes in international capital
markets; and it may help in the mobilization of resources in countries and
within social groups where such is not otherwise possible. Thus in Africa
proposals for fostering regional capital markets are being considered
within ECOWAS and the African Capital Markets Forum. In Latin America and
the Caribbean more concrete advances have been made such as the formation
of the Caribbean Stock Exchange which started operations in 1991, and
members of the Ibero-American Stock Exchange Federation which created in
1990 the Ibero-American Electronic Stock Exchange with the aim of
processing trade electronically in major regional enterprises. In Asia,
the Union of Arab Stock Exchanges and the East Asian and Oceanian Stock
Exchanges Federation continued their efforts to promote harmonization and
cooperation in securities trading in their respective regions.
64. In contrast to publicly guaranteed flows the conclusion drawn from
scant available data on inter-developing country non-guaranteed private
flows, primarily in Asia, is that such flows have been rising. A recent
UNCTAD report indicates that the intraregional cumulative stock of foreign
direct investment for selected Asian countries (Hong Kong, Republic of
Korea, Taiwan Province of China, Indonesia, Malaysia, Philippines,
Thailand) grew from US$ 10,440 million in 1980 to US$ 131,984 million in
1993. 32/ Moreover, intraregional investment accounted by 1993 for about
45 per cent of the total, as compared with about 27 per cent in 1980.
China received around 78 per cent of the intraregional FDI. This suggests
that investment opportunities are being increasingly seized by
transnational corporations from the region itself. It also implies that
firms from East and South-East Asia are currently the leading outward
investors. An analysis of intraregional FDI flows in Africa and Latin
America and the Caribbean is not possible at present owing to the lack of
data.
4. Development banks and funds
65. Developing countries have established, often within the framework of
ECDC organizations, banks and funds at subregional, regional and
interregional levels to support South-South cooperation. The African
countries in particular have been rather prolific in this regard so by way
of illustration, the African institutions or institutions in which African
countries are involved are cited below.
66. Regarding banks at the regional level, the African Development Bank,
created in 1963, began its operations on 1 July 1966. Its purpose is to
contribute to the economic development and social progress of its regional
members individually and jointly by, inter alia, (a) mobilizing and
increasing, in Africa and outside Africa, resources for financing
investment projects and programmes, and (b) providing technical assistance
as may be needed in Africa for study, preparation, financing and execution
of development programmes and projects. As at the end of 1994 the Bank had
50 regional African countries and 25 non-regional members. The authorized
capital at the end of 1994 was SDR 16.2 billion subscribed by regional
countries at 53.3 per cent and 36.7 per cent by non-regional members. The
Bank's agreement provides that the proportion to total voting power between
the two groups of countries should be 2:1. It could also be noted that the
Bank manages the Nigeria Trust Fund, established by an agreement signed
between the Bank and the Nigerian Government in February 1976. The Fund's
aim is to assist the development efforts of the Bank's members,
particularly those in more needy circumstances, by extending loans on
concessional terms (interest rate of 4 per cent per annum on outstanding
balances and an annual commitment fee of 3/4 per cent on amounts
undisbursed).
67. At the subregional level, various development banks operate including:
(a) The Banque ouest africaine de developpement (BOARD) which comprises
the countries of UEMOA. Its capital was subscribed by Benin, Burkina Faso,
Cote d'Ivoire, Mali, Niger, Senegal, Togo and the Banque centrale des Etats
de l'Afrique de l'ouest (BCEAO). The aim of the Bank is to promote the
development of its member countries and to realize the economic integration
of West Africa. By September 1990 the Bank had approved 128 operations
amounting to CFA francs 117.6 billion. On a sectoral basis, CFA francs
47.8 billion were intended for rural development and basic infrastructure,
CFA francs 41.9 billion for modern infrastructure and energy, CFA francs
15.9 billion for industry and other productive activities, CFA francs 9.1
billion for lines of credit and CFA francs 2.9 billion for acquisition of
share-holdings;
(b) The Central African States Development Bank (Banque de developpement
des Etats d'Afrique central) (BDEAC), created in December 1975 by the
former UDEAC States to promote the economic and social development of
member countries notably by financing multinational projects and projects
of economic integration. The Bank is also called upon by its statutes to
support States and national financing institutions in their efforts to
mobilize financial resources and the financing of projects of major
importance for the economy of member countries. As of June 1994 the
capital of the Bank amounted to CFA francs 41.9 billion. Chad and
Equatorial Guinea later joined the Bank;
(c) The East African Development Bank (EADB), created on 6 June 1967
within the framework of the East African Economic Community formed by
Kenya, Uganda and the United Republic of Tanzania, and which was
subsequently dissolved and then resuscitated in 1993. The authorized
capital stock of the bank amounts to SDR 40 million. As set out in its
charter the main objectives of the Bank are to provide financial assistance
and to promote the development of the member States in such fields as
industry, tourism, agriculture and infrastructure;
(d) The Banque de developpement des Etats des Grands Lacs (BDEGL) set up
by CEPGL. It has been operational since 1980. The objective of the Bank is
to contribute to the economic and social development of member States,
individually or collectively, either by taking part in the financing of
their development projects or by facilitating the achievement of such
projects through measures like guarantees for loans for the financing of
economically and financially viable projects. The current economic crisis
and political instability in the CEPGL countries has not allowed the Bank
to perform its functions;
(e) The COMESA Trade and Development Bank which began operating in early
1986 in the area of pre-shipment finance direct to regional borrowers. In
the three years between August 1989 and July 1992 during which reshipment
loans and confirmations of letters of credit were made by the Bank, it
completed a total of 18 separate transactions with 6 member countries. The
aggregate total of funds is US$ 52 million, representing less than 2 per
cent of the annual value of intra-COMESA trade. The Bank plans to develop
an export credit guarantee fund to support regional exporters who lack the
security to obtain a bank loan.
68. A number of subregional and regional funds have been set up by African
countries. The Nigeria Trust Fund was mentioned above. The Fund for
Cooperation, Compensation and Development was created by a protocol signed
in November 1976 within the framework of ECOWAS. The purposes of the Fund
are: (a) to provide compensation and other forms of assistance to member
States which have suffered losses as a result of the application of the
provisions of the ECOWAS treaty; (b) to provide grants for financing
national or community research and development activities; (c) to grant
loans for feasibility studies and development projects in member States;
(d) to guarantee foreign investments made in member States in respect of
enterprises established in pursuance of the provisions of the treaty on the
harmonization of industrial policies; and (e) to provide means to
facilitate the sustained mobilization of internal and external financial
resources for the member States and the Community. Mention can also be
made of the following in which some African countries participate as
members: the Organization of Petroleum Exporting Countries Fund for
International Development (OPEC Fund), which started operations in August
1967, the Islamic Development Bank and the Arab Fund for Economic and
Social Development, which started operations in January 1974.
5. Regional monetary zones
69. On the subject of monetary zones it is recalled that the developing
countries are seeking some degree of monetary integration, mostly within
the framework of subregional and regional integration organizations. The
most common proposals call for lesser forms of integration than monetary
unions. Hence, the type of cooperation called for will, in the near future,
take the forms of a consultation on monetary matters, coordination of
rules, legislation and operational procedures of banks and financial
policies thereon, as well as policy convergence expressed by certain key
variables. Typical of this gradualist approach is the ECOWAS single
monetary zone proposal entailing the adoption of medium-and long-term
measures in a coordinated manner. MERCOSUR is another as members have
agreed to reach basic convergence in exchange regimes by June 1994.
6. Insurance
70. The South-South modality is increasingly prominent in the field of
insurance. This is because a sufficient number of risks with similar
characteristics and a geographical spread, basis of the insurance
mechanism, often cannot be obtained within the limitations of a company's
business or within the national boundaries of a country. This has lent an
international character to insurance and has prompted the establishment of
wider formal frameworks of cooperation. Thus, subregional and regional
insurance organizations have been established to foster an exchange of
information among members, to define areas for cooperation, to chart common
approaches and to encourage new contacts. The African Insurance
Organisation for Africa, the East Asian Insurance Conference for East Asia,
the Federacion Interamericana de Empresas de Seguros for Latin America and
the General Arab Insurance Federation for Arab countries have launched
numerous initiatives leading to greater cooperation. The most wide-
reaching recent agreement relating specifically to insurance was concluded
among the francophone countries of West Africa with the creation in July
1992 by treaty (Traite instituant une organisation integree de l'industrie
des assurances dans les Etats africains) of the Conference interafricaine
des marches d'assurances (CIMA). Mechanisms on an interregional basis or
involving all developing countries, such as TWIC (Third World Insurance
Congress) and FAIR (Federation of Afro-Asian Insurers and Reinsurers)
further widen the scope of regional consultations. In addition, Latin
America and Africa both have a regional association of insurance
commissioners.
71. The benefits of greater cooperation and exchange of business among
reinsurers have been emphasized and so South-South cooperation has evolved
within reinsurance. Many subregional and regional pools, as well as the
two regional reinsurers, Africa Re and Asian Re, are a practical
illustration of such cooperation. As regards pools, mention may be made of
the Africa Aviation Pool and the Africa Oil and Energy Pool managed by
Africa Re, the Fire Pool of East Africa managed by Kenya Re, the Africa
Fire Pool managed by Conference internationale des controleurs d'assurances
africains Re, the Third World Pool managed by Nigeria Re, the West African
Insurance Companies Association Pool of West Africa, the Pool de Co-
reassurance des pays sans littoral established by the West African
landlocked countries Burkina Faso, Chad, Mali and the Niger, the
Organization of Eastern and Southern Africa Insurers pool, the Arab Fire,
Marine and Aviation Pools managed by Arab Re, and the pool managed by Trin
Re in Port of Spain, Trinidad. The ECO Pool, formed between the Islamic
Republic of Iran, Pakistan and Turkey, is managed by Milli Re. The FAIR
Pool, an important interregional pool, is also managed by Milli Re. ECO
has decided to convert the ECO Pool into ECO Re, a genuine reinsurance
company. A few subregional reinsurance companies have been established.
Mention may be made of CICA Re in the francophone countries of Africa, Zone
d'echange preferentielle Re of COMESA, Arab Re in Arab countries, Arab
Union Re in the Syrian Arab Republic and the Libyan Arab Jamahiriya,
private sector Nuevo Mundo in Panama and Asean Re.
IV. OPERATIONAL STATE OF SOUTH-SOUTH COOPERATION IN OTHER
PRIORITY FUNCTIONAL AREAS
A. Industry and enterprises
72. Cooperation in industry is a central aspect of all ECDC organizations
not only because it is essential for the overall economic development of
member States, but also because industrialization expands the availability
of competitive and sophisticated goods and services which then facilitates
the process of trade and economic integration. In this spirit, most ECDC
organizations have established industrial cooperation policies, strategies
and programmes that give priority to, inter alia, the rehabilitation of
industries (like agro-industries for food processing) and the promotion of
multinational industries which should, inter alia, produce goods and
services to meet the needs of the population, produce intermediary products
and inputs for industries, promote industrial development in less advanced
member countries and create job opportunities and training facilities in
large enough numbers. The measures employed have included the adoption of
charters for multinational enterprises regarding cross-border investment
(through joint ventures), periodic organization of investment and
industrial forums, organization from time to time of general and
specialized trade fairs, the organizations of buyers and sellers meeting,
assistance to chambers of commerce and industry and other business
associations.
73. Some examples can be cited. SADC adopted in 1989 an industry strategy
and programme plan which seeks to increase substantially the share of
manufacturing in member States' gross domestic product by the year 2000
through the identification, formulation and implementation of sectoral and
regional industrial projects. In COMESA a Charter on Multinational
Industrial Enterprise creating a framework for the development of joint
ventures has been in place for some time. In Asia, ASEAN implements
various programmes for joint production of basic industrial goods (the
ASEAN Industrial Project Schemes inaugurated in 1976), industrial
complementation in specific sectors (ASEAN Industrial Complementation
Programme introduced in 1983) and other schemes of joint industrial
ventures. In the Caribbean, regional industrial development is promoted by
CARICOM using the CARICOM Industrial Programming Scheme introduced in 1988
for promoting and integrating industry.
74. Within this portfolio for industrial development, many ECDC
organizations emphasize the lead role of the enterprise community and so
programmes have been developed and activities implemented to support the
development of enterprises and promote cooperation among them. Mention
could be made of the SADC national business councils which organize
businessmen's conferences and provide a forum for consultation between
enterprises and between them and the SADC Governments. The CARICOM
Enterprise Regime took effect in 1988 to facilitate the creation of
regionally owned and controlled companies in certain priority sectors and
promoting small business development, among other things. The SPF
secretariat encourages enterprise sector participation in regional
industrial development activities through various measures such as ongoing
regular and consultation visits to public and private enterprises, liaison
with national chambers of commerce and industry, training seminars and
workshops, and provision of technical assistance facilities (a marketing
support fund scheme was set up to provide assistance to new exporters, for
example). Additionally, several regional business associations have been
established within the framework of integration organizations to promote
cooperation and business among their members. These include the COMESA
Chamber of Commerce and Industry, the ASEAN Chamber of Commerce and
Industry, the Association of Latin American Trading Enterprises and the
Association of African Trading Enterprises. The latter has not been
operational due to financial difficulties.
75. In the new development context of comprehensive opening up and
liberalization of economies, a number of changes have been brought to bear
on regional joint venture and investment regimes. In the Andean Group, for
example, the industrial development programmes were replaced by
arrangements for industrial integration which placed initiatives for
management in business sector hands, and the regime governing foreign
capital was substantially liberalized by doubling the length of time made
available for foreign enterprises to become domestic companies and granting
them in practice full control over their profits as regards repatriation
and reinvestment. This has increased opportunities for the promotion of
multinational enterprises, further strengthened by a number of developments
including: the growing number of export processing zones in developing
countries (currently over 200); the privatization of public enterprises;
competitive advantages gained by some enterprises enabling them to invest
in other developing countries to create joint ventures or set up
subsidiaries; establishment of joint ventures in the service sector.
Technology being important in product processes, joint cooperation among
enterprises in this area is necessary. 33/
B. Agriculture and food security
76. Agriculture development is a priority in the national policies of most
developing countries as this sector constitutes an important part of their
economies in terms of its contribution to GDP, employment and export
earnings. However, in the last two decades agriculture production in most
regions has been weak and has not kept pace with population growth. The
poor agricultural performance has often been further undermined by
unfavourable climatic conditions. In such a situation, the issue of food
security 34/ becomes an especially important priority.
77. The large majority of subregional and regional ECDC organizations have
adopted subregional/regional programmes for agriculture development and
trade, and the implementation of these programmes is ongoing. Elements of
such SouthSouth programmes normally encompass: coordination and
harmonization of agricultural policies, promotion of food security,
agriculture research, extension and technology transfer, promotion of agro-
industries and manpower development. Some organizations are developing
and/or implementing global and regional food security strategies and
policies for emphasizing production complementarities, trade possibilities
and for overcoming resource and institutional constraints. For instance,
OAU, with the assistance of FAO, has been developing a Common African
Agricultural Programme which is to provide the basis for the preparation of
a protocol on food and agriculture for the African Economic Community. In
respect of food security activities, ECDC organizations have tended to
focus attention on food production (crops, livestock production and disease
control, fisheries, etc.), establishment of effective early warning systems
to enhance monitoring of weather and crop forecast (of shortages and
surpluses), and establishment of food security reserves. COMESA and SADC
have established and are implementing subregional food security programmes
and related food information systems; SAARC and ASEAN in Asia have created
food security reserves to ensure a stable supply of food. Under the ASEAN
scheme, an emergency rice reserve was created and a food information and
early warning system set up for rice, maize, soya beans and sugar.
78. Considerable progress has been recorded in agriculture research,
extension and training. Various institutions have been set up to promote
research, training and information exchange and TCDC. Regional
commissions, other regional bodies and technical cooperation networks
promoted by FAO within the fields of its competence have become effective
instruments to promote and implement TCDC/ECDC activities. Mention can be
made for illustrative purposes of the Southern African Centre for
Cooperation in Agricultural Research set up by SADC countries in Africa;
the Regional Network for Agricultural Machinery and the Regional
Coordination Centre for Research and Development of Coarse Grains, Pulses,
Roots and Tuber Crops in Humid Tropics of Asia and the Pacific (CGPRT
Centre) in Asia; 35/ and the Caribbean Agricultural Research Development
Institute created by CARICOM in 1975. In respect of TCDC study tours, an
innovative example in Asia concerned the Grameen Bank project in
Bangladesh. The Grameen Bank started as a small pilot project in the
village of Chittagong in 1976 with the realization that the existing
institutional arrangements bypassed the rural poor. The project was
launched in order to provide credit to the landless poor in rural
Bangladesh. In 1979 the project was institutionalized through the
participation of the National Central Bank and six other commercial banks.
By 1983 the project had developed into a full-fledged bank running a
special credit programme. Since then it has evolved into one of the
world's largest banking institutions for the poor. Its operations extend
through the head office located in Dhaka, 11 zonal offices, 97 area offices
and 886 branches. The experience of the Grameen bank has been successfully
replicated in Malaysia, Nepal, Sri Lanka and Viet Nam.
C. Transport and communications
79. A functioning system of transport and communication is indispensable
for trade and development. The growth in intraregional trade and an ever-
increasing demand for travel for tourism and business purposes foster a
growing need to improve and expand transport and communication links both
within regions and between regions which at present are either obsolete and
dilapidated or are virtually non-existent. Most of the subregional and
regional ECDC organizations have developed and are implementing joint
programmes for developing, extending and interconnecting inter- and intra-
subregional road, rail, air and sea transportation networks as well as
transport facilitation activities. The following are some examples. The
development of transport and communication was the major priority of SADC
during its first 10 years of existence; at the end of June 1993 the
transport sector accounted for 43 per cent of the total projects executed
by SADC. The activities being implemented relate to the rehabilitation of
railways, improvement of port facilities, rehabilitation and upgrading of
roads, improvement of major airports and construction and improvement of
communications links. In terms of telecommunication, links are being
evolved through the development of various programmes such as the Pan
African Telecommunications Network and the Regional African Satellite
Communications System in Africa; the Caribbean Telecommunications Union in
the Caribbean which oversees development in regional telecommunications;
and the South Pacific Telecommunications Development Programme in Oceania,
managed by the SPF secretariat. Developing countries have also continued
cooperation through various subregional and regional transport and
communications organizations dealing with individual modes
(telecommunications, postal services, ports, maritime transport, civil
aviation, railways).
80. In addition to programmes of ECDC organizations, the South-South
modality is often employed in the implementation of activities for the
development and strengthening of intraregional and interregional transport
and communications linkages within the second phase of the United Nations
Transport and Communications Decade (1992-1996). In general the accent of
the programme is on the implementation of subregional and regional
projects. Some examples could be cited. In Asia, the Asian land transport
infrastructure development project, comprising the Asian Highway project
and the Trans-Asian Railway projects, are ongoing priorities in the Decade
programme. The objective of the project is to strengthen/develop land
transport linkages within Asia, as well as between Asia and Europe, in
order to facilitate subregional/regional and international trade and
tourism. The Asian Highway project, initiated by ESCAP in 1959, aims to
promote and coordinate the development of international road transport, and
the Asian Highway consists of a network of international roads
approximately 65,000 kilometres in length extending from Afghanistan and
the Islamic Republic of Iran in the west to Thailand and Viet Nam in the
east, and to Indonesia and the Philippines in South-East Asia. It also
provides a connection to Sri Lanka. In Africa two ongoing Decade regional
projects are the Regional Transport Data Base and Human Resources, and the
Institutional Development in African Transport and Communications.
81. Shipping is a priority sector within the Decade and South-South
cooperation programmes are being pursued at the level of policy formulation
and implementation as well as at the operational level. At the policy
level a number of developing countries are attempting to find cooperative
solutions to shipping problems through subregional and regional
organizations such as COCATRAM in Latin America (Commision Centroamericana
de Transporte Maritimo), MINCONMAR (Ministerial Conference of West and
Central African States on Maritime Transport) in Africa and IOMAC (Indian
Ocean Marine Affairs Cooperation) in the Asian region. At the operational
level, cooperation is taking place at various levels including:
cooperation among shipowners through consortiums, joint ventures and space
chartering arrangements which have gained considerable momentum with the
large-scale introduction of containerization in the 1980s; and the active
participation of national port authorities in regional and international
port associations 36/ which provide a forum for the exchange of information
on institutional, managerial and technical aspects, relations that, in
turn, provide the potential for further cooperation in training, setting up
of a roster of experts that could be utilized on a cost-plus basis by
others, pooling or sharing of port equipment, and joint development of a
container terminal as a hub or transhipment port for the subregion. An
example of a joint venture scheme is the Pacific Forum Line, jointly owned
by the SPF countries and providing vital shipping services for the
subregion since 1987.
D. Natural resources including commodities, energy and
the environment
82. The overriding consideration in the field of natural resources and
environment is conservation of resources for present and future
generations. As regards natural resources, most of the ECDC organizations
have created subregional and/regional programmes with activities directed
at the efficient management, conservation and exploitation of minerals,
forests and marine resources. Often, the activities within this sector are
developed within the framework of agriculture development (discussed
above). In Oceania, for example, the island countries established the
Forum Fisheries Agency which provide a mechanism for subregional
cooperation in coordinating fisheries policies and research, as well as
promoting sustainable fisheries development, management and conservation.
83. Cooperation and development efforts of developing countries in the
area of commodities have been placed under severe strain owing to sustained
pressures of supply to exceed demand, the prevalence of very real depressed
commodity prices, recurrent shortfalls in developing countries' export
earnings and increasing, or at best stagnating dependence on commodity
exports in most commodity-producing countries, as well as the need to
improve the management of natural resources in order to safeguard the
environment. To meet this challenge, some countries have established
commodity arrangements (such as those for coffee, jute, silk and tropical
timber in Asia) to undertake activities relating to production, processing,
quality control, marketing, research and development. They also provide a
forum for the participating countries to coordinate their positions on
matters of common interest. Indeed, most of the existing international
commodity agreements came up for renegotiation since 1991 and that provided
an occasion for a strengthening of cooperation among commodity-producing
developing countries especially in the context of difficulties encountered
in some of the negotiations. Briefly, the following are the results of
some of these renegotiations:
(a) The International Cocoa Agreement, 1993, provisionally entered into
force on 22 February 1994 among the Governments which had deposited
instruments of ratification, acceptance or approval, or had notified the
depositary that they would apply the Agreement provisionally. The 1993
Agreement provides for new economic provisions aimed at achieving
equilibrium between supply and demand through adjustments of production and
promotion of consumption. The Cocoa Producers Alliance is helping
producing countries to contribute to the production management mechanism of
the Cocoa Agreement. As at 31 December 1994 the International Cocoa
Agreement, 1993, had been signed by 37 States and the European Union, 16
States had formally become parties to it, and 17 States and the European
Union had provided notification of provisional application. The United
States has decided not to join the Agreement;
(b) The economic provisions of the International Coffee Agreement, 1983,
were suspended in July 1989. Following intensive negotiations, the
International Coffee Agreement, 1994, without economic provisions was
adopted on 30 March 1994. It entered into force on 1 October 1994. As at
31 December 1994, the Agreement had been signed by 43 States and the
European Union, 11 States had formally become parties to it and 21 States
had provided notification of provisional application. Although the new
Agreement does not include economic provisions, it stipulates the
possibility of the eventual introduction of economic clauses. It further
recognizes the desirability of achieving a balance between production and
consumption so as to avoid excessive fluctuations in prices. In this
connection also the Association of Coffee Producing Countries was
established in September 1993 in Brasilia by 85 of the world's coffee
producing countries. It is chaired by Brazil and has temporary
headquarters in London. Producing countries unilaterally set up a market
intervention mechanism known as the "Retention Plan" to stabilize prices.
In the long term, the Association aims at establishing a production
coordination policy and consumption promotion especially in new markets.
It is not the aim of the Association to act as a "cartel" to raise prices
to consumers artificially. Producers realize that that would be damaging
in the long run by stimulating excess production and undermining
consumption. So far the price targets of the Association have been
"realistic" and market oriented;
(c) The International Tropical Timber Agreement, 1994, was established
on 26 January 1994 by the United Nations Conference for the Negotiation of
a Successor Agreement to the International Tropical Timber Agreement, 1983.
The Agreement was opened for signature at United Nations Headquarters from
1 April 1994 until one month after the date of its entry into force. As at
31 December 1994, 12 States had signed the Agreement and one State had
formally become party to it. The Agreement does not include economic
mechanisms. However, the new Agreement establishes a fund for sustainable
management of tropical timber-producing forests called "The Bali
Partnership Fund". This is designed to assist producing members to make
the investments necessary to achieve the objectives of the Agreement. The
incorporation of this environmental provision is a reflection of a general
perception among countries in respect of all commodities that production,
processing and trade should be consistent with a better management of
natural resources and protection of the environment. With regard to trade
discrimination, it is stipulated that nothing in the Agreement authorizes
the use of measures to restrict or ban international trade in, particularly
as they concern imports and utilization of, timber and timber products;
(d) In respect of the renegotiation of the International Natural Rubber
Agreement, 1987, the International Natural Rubber Council decided to extend
the 1987 Agreement up to 28 December 1995. All of the major natural rubber
exporting and importing countries took part in the negotiations. The
International Natural Rubber Agreement, 1995, will continue international
cooperation on stabilization of prices of natural rubber that was begun
under the 1979 Agreement and maintained under the 1987 Agreement;
(e) As at 31 December 1994, the International Sugar Agreement, 1992,
which entered into force on 20 January 1993, had been signed by 25 States
and the European Union; 26 States and the European Union had formally
become parties to it and 6 States had provided notification of provisional
application.
84. Regarding other commodities such as tea, copper, iron ore, tin,
bauxite, manganese, rice, jute group fibres and cotton, cooperation among
producer developing countries has continued within the wider framework of
international cooperation efforts directed at improving market transparency
and promoting regular dialogue between producers and consumers, among
others.
85. Energy development programmes have been set up within the framework of
ECDC organizations. These tend to deal at the subregional and/or regional
levels with energy policy and planning, development and conservation of
major energy subsectors such as woodfuel, coal, petroleum and electric
power to meet the needs of the region. In addition, some programmes
endeavour to develop indigenous renewable sources of energy (geothermal
power, solar power, hydro-power, natural gas) to reduce dependency on
petroleum as the major energy source and protect the environment. Some
organizations like SPF and CARICOM have been implementing comprehensive
energy programmes that cover all these areas. A number of them are
implementing or considering programmes for the establishment of electricity
grids in, for example, Asia where such networks are almost non-existent and
intraregional trade volumes in energy are consequently generally relatively
low (there are very few electricity interconnections between Singapore,
Malaysia and Thailand, and between Thailand and the Lao People's Democratic
Republic, for example).
86. In respect of environment, many problems transcend national boundaries
especially the pollution of atmosphere, seas, international river basins
and the over-exploitation of migratory fauna. Solutions to these problems
require close cooperation between countries, including the pooling of their
financial resources. Thus, many of the ECDC organizations are implementing
subregional and regional cooperation programmes for environment management.
Some of the programmes aim at preserving ecosystems by executing activities
for preventing, arresting and reversing the effects of environmental
degradation (deforestation, erosion, deterioration of coastal waters) and
industrial pollution of soil, water and air, declining bio-diversity and
loss of genetic diversity. Other programmes are directed at disaster
preparedness and resolution. A few examples are cited for illustrative
purposes. The Oceania region is susceptible to natural disasters so the
SPF secretariat established a regional disaster relief fund to assist
countries struck by hurricanes and other disasters. In Africa the
Permanent Inter-State Committee for Drought Control in the Sahel and the
Intergovernmental Authority on Drought and Development carry out activities
designed to complement member States' efforts to combat the effects of
recurrent drought and its consequences. Due to the problem of drought and
desertification, countries in affected regions have been cooperating in
efforts to develop water resources. ECOWAS countries are implementing a
programme for the period 1992-1996 covering a rural water supply programme
aimed at creating 3,200 water points in order to develop village and
pastoral water resources in States most seriously affected or endangered by
drought and desertification. Another threat to the environment comes in the
form of dumping of toxic wastes, and several countries have attempted to
respond jointly to the threat. The ECOWAS countries thus established a
regional dump-watch mechanism to monitor and prevent the dumping of toxic
wastes in West Africa.
87. A number of intergovernmental institutions have been established on a
subregional basis for cooperation in environmental matters. As an
illustration, some institutions in the Asian and Pacific region are cited
here. These include the ASEAN Senior Officials on the Environment, which
is coordinated by the member countries on a three-year rotation basis, the
South Asia Cooperative Environmental Programme, with headquarters at
Colombo, Sri Lanka, SPREP with headquarters at Apia, Western Samoa, the
Lower Mekong Basin Development Environment Programme, with headquarters at
Bangkok, Thailand, and the Coordinating Body for South-East Asian Seas. 37/
The ASEAN Senior Officials on the Environment is aimed at enhancing
regional planning and decision-making and accelerating the implementation
of regional programmes for environmental protection and management. The
South Asia Cooperative Environmental Programme 38/ covers capacity-building
and awareness raising, systematic information exchange and intraregional
technology transfer, environmental management for training and
institutional development for training, regional cooperation in devising
management plans for mountain ecosystems/watersheds and coastal resources,
and wildlife and wildlife habitat conservation in the region. SPREP assists
member Governments and citizens in the conservation of bio-diversity,
global climate change and sea level rise, environmental planning and
management, management of pollution and pollution emergencies,
environmental information, education and training, and other regional
environmental concerns. The Lower Mekong Basin Development Environment
Programme is a programme of the Mekong River Commission for ensuring a
systematic and consistent approach to environmental issues, providing
information and liaising with national Mekong committees and government
agencies regarding environmental protection and ecological balance. 39/ In
addition, a Typhoon Committee and a Panel on Tropical Cyclones were set up
to coordinate efforts among members in dealing with such natural disasters.
A number of the above-mentioned institutions, including SPREP, assisted in
the participation of member States in the United Nations Conference on
Environment and Development and are also involved in the follow-up.
E. Education, science and technology
88. Improvement of education is a fundamental priority objective of
developing countries and South-South cooperation has been employed to
promote this objective. At the level of subregional and/or regional ECDC
organizations the promotion of education tends to be carried out largely
within the framework of human resources development programmes. In Asia
and Oceania, for example, ECO, SAARC and SPF propose and pursue programmes
for human resources development in member States that involve exchange
programmes which open opportunities for cross-fertilization of ideas
through greater interaction among students, scholars and academics
(university faculty). This includes the SAARC Chairs, Fellowships and
Scholarship Scheme and the Forum Fellowship Scheme. Human resources
development programmes are also being implemented in other regions to
enhance the capacity of human resources and improve utilization of existing
capacity (i.e. to identify what skills are available within a region and to
mobilize them for South-South cooperation). In addition to these,
programmes for basic education, education innovation and higher education
are being implemented by developing countries, often with assistance from
the United Nations Educational, Scientific and Cultural Organization.
89. The development process and its sustainability are in many ways
related to the ability of countries to benefit from scientific and
technological change. Achieving technological dynamism is therefore a major
objective and challenge facing all countries. To this end, parallel to
individual country efforts, inter-country or cross-country initiatives are
taking shape in the interest of efficiency and dynamic complementarities
that achieve economies of scale and broaden the scope of innovative
activities, particularly where the critical level of resources is not
readily available. Moreover, in the light of the challenges faced with
regard to global technological developments, cooperation among developing
countries in science and technology must be given an important place at the
global, regional and subregional levels in respect of, inter alia: (a)
possibilities for the diffusion of technologies within the South,
addressing especially small and medium-size enterprises (SMEs) whose
vulnerabilities are manifold; (b) possibilities of improving interactions
between these enterprises and academic/scientific institutions in promoting
uses of relevant technologies and the application of the research results;
(c) encouraging exchanges of experiences and broadening of training
opportunities; (d) contracting and setting modalities for research and
development (R&D) cooperation and utilization of results; (e) providing
incentives to skilled personnel to encourage them to remain in the region
and thus alleviate the problem of the "brain drain" common in many
developing countries; and (f) promoting TCDC exchanges which involve the
sharing of experiences, expertise or facilities among two or more
developing countries and, in that manner, share the cost burden for
activities aiming at technological capacity-building, for example.
Additionally, a number of initiatives are being discussed in various
regions of the South to foster cooperation at the pre-competitive level,
mainly between R&D institutions, following similar initiatives within the
developed countries where such cooperation was also felt to be
advantageous.
90. The successful development of South-South cooperation in science and
technology depends largely on the existence of a favourable economic,
social, political and legal environment in the developing countries
concerned, as well as on the relevant infrastructural facilities of
partners. In creating an enabling environment, an important role is played
by national Governments individually and through collaborative action, in
particular in the context of activities of regional economic groupings. In
this respect, the example of ASEAN can be cited, within which a special
Committee on Science and Technology has been in operation since 1978. In
1994, a new Science and Technology Plan of Action was introduced which
includes strategies to support regional science and technology programmes,
to provide close coordination and management of science and technology
activities, and to develop human resources and information networking in
the area of science and technology. 40/
91. At the same time, there is a growing realization that technological
cooperation among developing countries cannot be limited to meetings at the
governmental or departmental level and that more effort should be made to
involve individual firms, including SMEs. Firms cooperate when they
perceive a business opportunity and possibilities for technological
empowerment. 41/ Several forms of such inter-firm regional cooperation have
been emerging in different countries. For example, in Asia, the most
common form of vertical regional integration has been through
subcontracting, often combined with the activities of transnational
corporations that rely on a supply of components from other developing
countries in the region. Technology partnerships as new forms of inter-
firm cooperation between small and medium-sized enterprises were recently
discussed by UNCTAD. 42/ Such partnerships between firms from developing
countries at different levels of development has emerged as a promising
tool for technological capacity-building and increased competitiveness. 43/
The technology cooperation programme of ASEAN as well as other initiatives
in the South, like the Bolivar Programme on Regional Technological
Integration and Industrial Innovation and Competitiveness, further
possibilities for the expansion of inter-firm research and development
collaboration at a regional level, and might also serve as a jumping-off
point for entry into the international market. However, the experience in
Asia also demonstrates that, in many cases, SMEs are unable to find
partners because of information gaps, the high cost of acquiring knowledge
about potential foreign partners, difficulties in access to capital markets
and international trade barriers. 44/ Accordingly, supportive actions for
SMEs by Governments as well as by donor agencies and international
organizations could contribute to building the necessary enabling
environment. It can be noted in this respect that positive experiences in
using networking strategies between SMEs have been made by the Asian and
Pacific Centre for Transfer of Technology of ESCAP through the operation of
the UNDP-funded Mechanism for Exchange of Technology Information, as well
as through the International Network for Transfer of Environment Friendly
Technologies, which assists in matching technology suppliers and importers,
particularly within the Asian and Pacific region. The publication by the
Centre of the bulletin Tech Monitor and the organization of TECHMART
exhibitions also serves this purpose. Such activities could serve as
interesting examples for other regions.
92. In recent years, a number of new initiatives have been taken with a
view to improving South-South cooperation in science and technology within
the United Nations development system. Mechanisms exist to promote such
efforts, particularly within the regional commissions. For example, the
activities of the Economic Commission for Africa have recently been focused
on providing professional, technical and other forms of support to key
regional institutions in science and technology. A number of events were
organized by the Commission which provided a medium through which Member
States could work out collaborative measures in the area of science and
technology, using regional institutions such as the African Regional Centre
for Technology. ECLAC has recently formulated guidelines for making
progress in redressing economic deficiencies and social setbacks and
intensifying of intraregional technical cooperation. ESCAP adopted (April
1994) the New Delhi Declaration on strengthening regional economic
cooperation, which identified technology transfer as one of the major areas
of regional cooperation. UNCTAD has contributed to such regional
initiatives. It has organized, in cooperation with regional organizations
and other institutions concerned, a number of international meetings to
foster South-South cooperation in the area of commercialization/application
of research and development results. A Workshop of Experts on the
Commercialization of Research and Development in Latin America, organized
in 1993 in Argentina in cooperation with the University of Buenos Aires,
examined the contribution of universities to the process of innovation.
The Workshop recommended improving the dissemination, at the regional
level, of information on existing research and development capabilities in
order to make use of the appropriate synergies and to establish closer
links to consolidate regional integration. 45/ For example in 1994,
UNCTAD, in cooperation with the Asian and Pacific Centre for Transfer of
Technology of ESCAP, organized in New Delhi the Regional Workshop on
CommunityEnterprise Cooperation in Technological Research and
Commercialization/
Application of Results, which recommended pooling the resources of various
research and development institutions in several countries of the Asian and
Pacific region for a more efficient application of research and development
results. As a follow-up to this an agreement was reached within the
framework of the Asian and Pacific Centre for Transfer of Technology to
establish the Regional Association for the Commercialization of R&D Results
(RACORD).
93. Finally, the United Nations Commission on Science and Technology for
Development, at its second session, recommended highlighting innovative
programme concepts and designs and bringing them to the attention of the
science and technology community. The Commission also called for the
enhancement of linkages between enterprises, universities, foundations,
research institutions, scientific laboratories, trade and professional
associations, and other channels and mechanisms for international
scientific and technological cooperation, in order to strengthen the
efforts of countries undertaking reforms in their research and development
systems and building innovative capacities.
F. Social development
94. Subregional and regional ECDC organizations have created and are
implementing programmes in the area of social development including
education, information, health and nutrition, women, youth, population,
culture and poverty alleviation. A few examples would provide sufficient
illustration. Among the major concerns considered at recent SAARC
conferences have been poverty alleviation, youth, children, disabled
persons, women and population within a regional context. A specific
activity is the SAARC Youth Volunteers Programme, which seeks to harness
the idealism of youth by enabling them to work in other countries in the
field of agriculture and in forestry extension work. The ASEAN Population
Programme covers training for population control, development of population
information networks and studies on relevant issues; the women's programme
addresses common problems such as illiteracy, lack of technical skills,
poor nutrition and ill health, and strenuous workload especially among
rural women. SADC has established a culture and information sector whose
main objective is to ensure the people's involvement in the process of
regional integration and development. COMESA has identified "women in
development" as among its major sectors of cooperation. The sector aims at
improving the economic conditions of women, increasing awareness of women
in development issues at policy level and integrating women into COMESA's
trade and development programmes. Measures are being taken to unite all
women through national associations and a regional federation of women's
associations has been created. In ECOWAS, member States are allocating 20
per cent of official media to news on ECOWAS as part of an information
programme. With a view to increasing involvement of different socio-
professional groups in ECOWAS activities and support social and cultural
programmes, the following professional groups have been established with
ECOWAS support: the Organization of Trade Unions of West Africa, the West
African Youth Association, the West African Universities Association, the
West African Women's Association. In the area of health, the West African
Health Community was created as a specialized agency of ECOWAS; and the
CARICOM States, through the implementation of the Caribbean Cooperation in
Health Programme, have achieved a high degree of cooperation in matters of
public health.
95. Other activities which many ECDC organizations promote include sport
competitions, the presentation of a regional prize for excellence (as in
ECOWAS and CARICOM), the organization of festivals (like CARIFESTA
(Caribbean Festival of Arts) in the Caribbean), promotion of tourism.
Regarding the last, the countries in Oceania are organizing the "Visit the
Pacific Year 1995" through the Tourism Council of the South Pacific, with
European Union support, to encourage tourism in the region. Through this
project, operating from 1995 to 1996, various joint publicity campaigns
have been organized in Europe and North America and, in a unique form of
cooperation, agreement was reached among the major airlines of the region
(Quantas, Air New Zealand, Air Nuigini and others) on a Pacific Pass to be
used for travel in the region during the year at substantially reduced
fares. Similar campaigns have been organized by other organizations such
as ASEAN.
Notes
1/ "Developments pertaining to the implementation of the recommendations
of the report of the South Commission with special emphasis on South-South
economic cooperation" (A/48/350, 14 September 1993).
2/ The term "economic and technical cooperation among developing
countries" (ECDC/TCDC) is used interchangeably with the term "South-South
cooperation" in the report though the latter has a wider connotation
covering also cooperation in fields other than economics. There is also
some distinction between ECDC and TCDC in that one focuses on "economic"
cooperation while the other on "technical" cooperation. The Buenos Aires
Plan of Action defines TCDC activities as those involving the sharing or
exchange of technical resources, skills and capabilities between two or
more developing countries for their individual or mutual development.
3/ Prior to this conference, a number of regional institutions were
created immediately after World War II to support the development efforts
of the individual countries. These included the League of Arab States
(March 1945) and the South Pacific Commission (February 1947).
4/ For a comprehensive coverage and listing of the membership of ECDC
organizations see the publication entitled State of South-South
cooperation: Statistical pocket book and index of cooperation
organizations (United Nations publication, Sales No. E.95.II.D.18).
5/ For more discussion see the UNCTAD report entitled "Review of the
work programme of the Standing Committee on ECDC, with special emphasis on
the preparations for UNCTAD IX" (TD/B/CN.3/15).
6/ For an analysis of the implications of the Uruguay Round on ECDC see
the UNCTAD report entitled "Evaluation of major developments in the area of
economic cooperation among developing countries, including implications of
the Uruguay Round results on ECDC arrangements and regular consultations,
technical support, assistance and skill development" (TD/B/CN.3/14). For
an analysis of the outcome of the Uruguay Round, see, for example, Trade
and Development Report, 1994 (United Nations publication, Sales No.
E.94.II.D.26) and The Outcome of the Uruguay Round: An Initial
Assessment - Supporting Papers to the Trade and Development Report, 1994
(United Nations publication, Sales No. E.94.II.D.28).
7/ Ensuring compliance by member States is one way of addressing the
problem of weak implementation of decisions adopted by the governing bodies
of the integration institutions. A complementary approach is for the
member States to formulate a coherent national policy and strategy on
subregional and regional integration in particular and ECDC in general to
bring about greater coordination and synchronization between national and
subregional/regional/
interregional policies. Parallel to the policy is the enhancement of the
managerial capability within Government to ensure the implementation of
relevant decisions and programmes (by dealing with coordination,
monitoring, following up, evaluating and reporting on decision-making and
on implementation). This could take the form of national focal points,
separate ministries or, where this is not possible, adequately equipped
units and interministerial committees to oversee the integration process at
the national level.
8/ An overview of COMESA presented by its Secretary-General is
reproduced in the UNCTAD document entitled "Review of international support
to ECDC: experiences of developed and developing countries, their problems
and prospects - Presentation submitted by Dr. Bingu Wa Mutharika,
PTA/COMESA Secretary-General" (TD/B/CN.3/GE.1/Misc.2).
9/ For a review and analysis of existing and potential complementarities
in the region, see "Expansion of trade and investment among ESCAP
developing countries within a regional framework" (ST/ESCAP/1185), 1992.
10/ The membership of SPC includes all members of the South Pacific
Forum plus the United Kingdom, the United States of America, France, and
the following nine Pacific island countries and territories: French
Polynesia, Guam, New Caledonia, Northern Mariana Islands, Palau, Pitcairn
Islands, Tokelau, Wallis and Futuna Islands.
11/ The MSG States have agreed to broaden the scope of products included
in the free trade agreement.
12/ It grew from a group of seven Commonwealth nations - Australia,
Canada, India, New Zealand, Pakistan, Sri Lanka and the United Kingdom -
into an international organization of 27 member countries including non-
Commonwealth States. When the Colombo Plan adopted a new constitution in
December 1977, its name was changed to the Colombo Plan for Cooperative
Economic and Social Development in Asia and the Pacific to reflect
adequately the geographical outreach and scope of its activities. The
membership now stands at 24, after the withdrawal of Viet Nam in 1978, and
of Canada and the United Kingdom in 1991.
13/ For details see, for example, the ECLAC report entitled "Open
regionalism in Latin America and the Caribbean: economic integration as a
contribution to changing production patterns with social equity"
(LC/G.1801(SES.25)/4). The process of adaptation of regional integration
to the trend towards globalization and liberalization in the world economy
is also taking place in other regions not only in terms of open regionalism
as perceived in Latin America and the Caribbean, but in a wider context of
open and flexible cooperation and integration. UNCTAD report TD/B/CN.3/15,
referred to in note 5, discusses this phenomenon.
14/ A detailed assessment of G-77 is contained in the Group's
publication entitled Thirty Years of the Group of 77, 1964-1994: United
Nations for a Global Partnership for Development and Peace.
15/ See the report of the Special Working Group of G-24 which met in
Antigua, Guatemala, in August 1994 to consider the effectiveness of the
operative mechanisms of G-24 and to suggest measures to enable the Group to
achieve the objectives for which it was set up. The Group of 24 sponsored
a conference, "The International Monetary and Financial System: Developing
Country Perspectives", held in Cartagena, Colombia, in April 1994. The
Bureau of the Intergovernmental Group of Twenty-Four on International
Monetary Affairs held an extraordinary meeting to analyse the results of
the Cartagena conference.
16/ For an overview of the various activities of the Group see the
report of activities of the Group of 77 for the year 1994, prepared by the
Office of the Chairman of G-77 New York; the report of the Chairman of the
Group of 77 in Geneva to the 18th meeting of the Chairmen/Coordinators of
the Group of 77; and the programme of work of the Group of 77 for the year
1995.
17/ See the final report of the meeting (G-77/IFC-VIII/93/RPT), which is
also available as General Assembly document A/C.2/48/5.
18/ See "Economic agenda for priority action, 1992-1995, of the Non-
Aligned Movement" (A/48/350, annex), and "Report of the Chairman of the
Non-Aligned Movement on the activities of the movement June 1994-April
1995". NAM report NAC 10/MM/CB/03.
19/ See "The continuing debt crisis of the developing countries", report
of the Non-Aligned Movement Ad Hoc Advisory Group of Experts on Debt and
Sharing of Experiences: report of the Chairman of the Ministerial Meeting
of Non-Aligned Countries on Debt and Development" (Jakarta, 13-15 August
1994).
20/ General Assembly resolution 49/94, "Enhanced international
cooperation towards a durable solution to the external debt problem of
developing countries".
21/ For the communications of the NAM Chairman to the Tokyo G-7 Summit
see "An Invitation to Dialogue" and "Memorandum on Urgent Actions on
Bilateral, Multilateral and Commercial Debt of Developing Countries".
22/ The following countries signed the South Centre Agreement, or
signalled their intent to accede: Algeria, Angola, Benin, Bolivia, Brazil,
Burundi, Cambodia, Cape Verde, China, Colombia, Cote d'Ivoire, Cuba,
Democratic People's Republic of Korea, Egypt, Ghana, Guyana, Honduras,
India, Indonesia, Iran (Islamic Republic of), Jamaica, Jordan, Libyan Arab
Jamahiriya, Malawi, Malaysia, Mali, Micronesia (Federated States of),
Morocco, Mozambique, Namibia, Nigeria, Pakistan, Panama, Philippines,
Seychelles, Sierra Leone, South Africa, Sri Lanka, Sudan, Suriname, Uganda,
United Republic of Tanzania, Viet Nam, Yugoslavia, Zimbabwe.
23/ UNCTAD secretariat estimations based on data from the United Nations
Statistical Division.
24/ Most developing countries continue to be strongly dependent on
commodities for their export earnings. While from 1979-1981 and 1988-1990
overall commodity dependency was on average declining in South and South-
East Asia, West Asia and Latin America, it was basically unchanged in
Africa, the Caribbean and developing Oceania. Regarding dependency on
commodity exports distinguished by stages of processing, countries in North
Africa and in South and South-East Asia were especially successful in
reducing the share of their unprocessed commodity exports. Countries in
West Asia, Latin America and the Caribbean also seemed to have made some
progress in this area whereas the situation changed little in sub-Saharan
Africa - about 30 out of 42 countries are still highly dependent on
unprocessed commodity exports. There are several reasons for the overall
relatively poor performance of many developing countries in terms of
diversification and processing of commodity exports but the critical
problems are a lack of human resources development, a lack of access to
external investment flows and problems of penetrating new export markets.
25/ In order to be compatible with GATS, an agreement for trade in
services must fulfil two basic conditions: (a) it has to have "substantial
sectoral coverage" and shall include all the modes of supply of services;
and (b) it has to provide for national treatment for services providers of
the member States in the services covered by the agreement, for example,
elimination of all discrimination between parties, in the sectors covered.
These conditions must be met either at the entry into force of the
agreement, or on the basis of a reasonable time-frame. In order to
evaluate the first condition, the number of sectors covered, the volume of
trade affected and the modes of supply should be considered. In addition,
article V provides for flexibility with respect to the basic compatibility
requirements in two cases: (a) when developing countries are members of a
preferential agreement in services, both between developing countries and
arrangements with developed countries; and (b) when such an agreement is
related to a wider process of economic integration or trade liberalization.
Up to now in the WTO, none of the existing agreements have been notified
and examined in the framework of article IV of GATS; however, they would be
evaluated in the future.
26/ In addition to the discussion in this section, for an analysis of
issues see, for example, the UNCTAD report entitled "Enlarging and
deepening monetary, financial and investment cooperation among developing
countries and promoting cooperation of the enterprise sectors of developing
countries" (TD/B/CN.3/13).
27/ The CARICOM facility suspended operations in 1983. The Central
American Clearing House also suspended operations in 1984, but it was later
revived and transformed into the Central American Payments System in 1990.
28/ Far Eastern Economic Review, 16 April 1992, p. 50.
29/ "Evaluation of performances and issues of trade financing in
developing countries: the case for and the viability of an interregional
facility" (TD/B/1300), and "Trade financing in developing countries: an
assessment and evaluation of existing schemes and future requirements"
(TD/B/1300/Supp.1).
30/ Furthermore, the terms and conditions typically offered by
developing country institutions to their exporters are disadvantageous; the
conditions of lending, in particular the collateral demanded, are onerous;
and the percentages of exports financed are meagre. The credit, when
extended, is short term, and when commercial banks are involved, they
usually extend such trade finance only to big established customers as part
of bank-customer relationships. In most developing countries, the
institutional and financial capacity shortage has a particular impact on
small and medium-sized exporters and on non-traditional exports (defined as
either new exports or those calling for medium-term credit). The UNCTAD
survey mentioned previously highlighted the severe paucity of pre-shipment
credit in foreign exchange. Post-shipment credit, while slightly more
abundant, was also scarce. These problems affect South-South trade in
particular because developing country importers are often unknown to their
exporters, their credit rating is seldom known to the exporter's banking
sector, and the banks which might guarantee and sign their debts are either
unknown in the exporter's banking sector or have no correspondent
relationship with the importing country's banks.
31/ It could be mentioned in the context of public and publicly
guaranteed flows that the GCC countries, especially Saudi Arabia and
Kuwait, have been major donors of financial aid to developing countries,
including other Arab countries, during the last two decades. According to
an appraisal by ESCWA, net disbursements of financial aid by the GCC
countries to developing countries made up around 20 per cent of total
financial aid received by these countries from all sources. Over the
period 1974-1991, total Arab concessional aid to developing countries
amounted to US$ 8,480 million. Of this, US$ 5,250 million went to Arab
countries, while US$ 3,230 million benefited developing countries in other
regions. The level of aid has generally been determined by the level of
oil revenues. Aid disbursements were highest in the mid-1970s and early
1980s - periods characterized by exceptionally large increases in oil
prices and revenues. The proportion of aid disbursed by GCC countries to
gross national product has generally exceeded by far the 0.7 per cent
target set out in the International Development Strategy and the
performance of the countries of the Development Assistance Committee of
OECD. In particular, Saudi Arabia has consistently exceeded that target
and Kuwait until only recently. Financial aid from the Arab region has
been mostly bilateral, averaging around 85 per cent of total aid disbursed
during recent years. Moreover, the bulk of this aid (over 80 per cent) has
been in the form of Government-to-Government flows, with development
finance institutions playing a relatively small role. Financial aid from
these finance institutions, totally or mostly financed by Arab countries
(such as the OPEC Fund for International Development), amounted to US$
3,390 million during the period 1974-1992. In recent years Arab aid flows
to developing countries has fallen sharply - between 1990 and 1991,
aggregate net disbursement of concessional assistance contracted from US$
5,772 to US$ 2,381 million.
32/ "Country and regional experiences in attracting foreign direct
investment for development: foreign direct investment in developing
countries" (TD/B/ITNC/2), table 4.
33/ For more discussion see UNCTAD report TD/B/CN.3/13 referred to in
note 26.
34/ Food security consists of access by all people at all times to
enough food for an active and healthy life. It entails ensuring the
adequacy of food supplies, through domestic production or import, and
access by all households to sufficient food, by either producing it
themselves or buying it.
35/ The Centre was established in 1976 by India, Indonesia, the Islamic
Republic of Iran, Pakistan, the Philippines, the Republic of Korea, Sri
Lanka and Thailand (Bangladesh and Nepal joined in 1981 and China in 1990).
36/ Some of the regional and international associations are the Eastern
Caribbean Ports Association, Gulf Port Management Association, Port
Management Association of Eastern and Southern Africa, Port Management
Association of Western and Southern Africa, South Pacific Ports
Association, Federation of Arab Seaports, Union d'administration portuaires
du Nord de l'Afrique, Associacion Iberoamericana de Puertos y Costas,
International Association of Ports and Harbours and American Association of
Port Authorities.
37/ The participating countries are Brunei Darussalam, Indonesia,
Malaysia, the Philippines, Singapore and Thailand.
38/ Members are Afghanistan, Bangladesh, Bhutan, India, the Islamic
Republic of Iran, the Maldives, Nepal, Pakistan and Sri Lanka.
39/ It should be clarified that the Mekong River Commission was created
on 5 April 1995 on signature of the Agreement on Cooperation for
Sustainable Development of the Mekong River Basin by Cambodia, the Lao
People's Democratic Republic, Thailand and Viet Nam. The Agreement
superseded the 1957 Statute and 1975 Declaration on the Principles of Water
Usage (that established the Committee for the Coordination of
Investigations of the Lower Mekong Basin and
the Interim Committee) and establishes a new principle governing water
usage in the Lower Mekong Basin.
40/ ASEAN Plan of Action on Science and Technology, Jakarta, ASEAN
secretariat, 1994.
41/ The creation of technological links between enterprises in the South
might help to enhance their bargaining position vis-a-vis their
counterparts in the industrialized world when it comes to negotiating
cooperation or transfer of technology agreements. R&D agreements may also
contribute to enhancing efficiency, to improving applications for existing
technologies or to identifying new ones and to solving technical problems,
avoiding duplication of effort and reducing the risks and high costs
associated with research and development activities. Inter-firm
technological cooperation may, in addition, contribute to the technological
upgrading of regions of the South in which integration processes are being
deepened.
42/ See UNCTAD, "Report of the Workshop on Selected Cooperation Aspects
for Technological Capability-building in Developing Countries"
(UNCTAD/DST/7), 1995. The Workshop was held in Geneva, on 10 and 11 April
1995.
43/ See "Technological capacity-building and technology partnership:
field findings, country experiences and programmes" (UNCTAD/DST/6)
(forthcoming).
44/ In connection with existing problems, it could be also mentioned
that legal issues related to inter-firm R&D collaboration are as important
for SouthSouth cooperation as they are for North-South relationships.
Ownership, protection and exploitation of the results of research are
crucial elements of R&D cooperation agreements. A number of countries have
not yet satisfactorily developed their legal regimes to cope with the
issues arising from technological cooperation between firms (co-ownership
of inventions, anti-competitive clauses, for example). Thus, it is
important for the cooperation partners to determine how the results of the
research are to be protected, managed and exploited. Provided that
Governments adopt active technology policies that facilitate the creation
of technological links among their firms at national and regional levels,
R&D cooperation agreements could be an important mechanism to facilitate
the transfer of technology between enterprises, while also contributing to
the technological upgrading of industries in developing countries and the
surmounting of the barriers set up in an increasingly protectionist
technological environment. For a discussion see, for example, "R&D
collaboration agreements among enterprises: a legal and contractual
analysis" (UNCTAD/ITD/TEC/2), 1993.
45/ UNCTAD, "University and enterprise in a new competitive scenario"
(UNCTAD/DST/1/Excerpt), 1995. For the materials presented at the Workshop,
see UNCTAD, "Universidad y empresa en un nuevo escenario competitivo.
Trabajos y recommendaciones del taller de expertos y coordinacion"
(UNCTAD/DST/1), 1994.
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