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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