CHAPTER I THE IMPORTANCE OF THE SOUTH
B. SOUTH-SOUTH COOPERATION: KEY ARGUMENTS
& & ( ( technological divide so as to promote
in-&' & (' within the developing world as a whole.
B. SOUTH-SOUTH COOPERATION:
KEY ARGUMENTS
A review of the existing literature on
South-& (' shows that from the outset the discourse has been largely centred on South-South trade and investment, and how it could
& &' &-tries involved. In much of the analysis, rising South-South trade and investment trends have been viewed positively as a signal that the developing countries could provide a ( &
the other developing countries. The literature -eration between countries of the South:
i. Such cooperation would help the South to decouple from the global cyclical trends of growth, thereby promoting a new form of stability in the global economic system; and ii. Since the emerging countries are
still in their development phase, they are better placed to understand the problems of development, particular-ly in the current global context, and could provide a new model for coop-eration and technical assistance.
These views are discussed in greater detail here.
1. Growing South-South trade and its implications
# 013@* -mists advocated increased South-South trade as an important means to overcome )
-& ' ' ) ! (9*013`L * 01z1" & &
for many developing countries even today.
South-South cooperation and regional in-tegration were also considered an ( &'
!V>L#* 013@ D * 01{2" M * arguments for greater South-South ) &-ing productive capacities through the 4 ==&&5*
(' &&' productive resources in developing coun-tries, including labour, which could be put to use through increased South-South trade. This view was the basis for a variety of regional trade agreements between de-veloping countries that were concluded in 01`@ 01z@ M * studies showed that these agreements did not succeed in increasing South-South ! * 8 * 9 D-(*011_"3
At the same time, counter perspectives on South-South trade expressed ( ) = 4 8'( 5 induced preferences accorded to trading partners through preferential trading ar-( !D#"7 ar-(&
&D# & & *&) ) =& ( lowest-cost producers of goods, the PTAs may favour higher-cost producers over potential low-cost ones and lead to ( ! * 8 * ZG)*?@@@"9 &
on South-South trade has focused largely on the possibility of decoupling, conver-( 4kconver-( conver-( 5
!8 0?0_"
Rising South-South trade and investment trends have been viewed
positively as a signal that the developing countries could provide
to the development of the other developing
countries.
7
CHAPTER I : THE IMPORTANCE OF THE SOUTH
&=&
=& %& =011@! 0?
?? 77"70113*2?
cent of the trade of developing countries was (& *?@0@
(& 3` 6 *( &=&
is that its importance varies considerably both intra-regionally and inter-regionally. Among country groups, South Asia and South-East
Asia have the highest proportion of intra-South trade, amounting to approximately
`2 #(-dividual countries, India has the highest share =& ! 0_
(-& 0? 0_" >(-& `` * India’s trade with its developing-country part-ners are much greater than those of either G' > ! 0_" 9 * for all the regions and countries included 00* &=&
k(( * )#)&W 01_@* %& (& -comer economies with other already developed ones. It posits that, based on complementarities in production processes, a pro-cess of dynamic comparative advantage would enable a structural transformation of developing countries from being importers of goods to producers and exporters of the goods, thereby causing them to gradually converge or catch up with more advanced
& !#)&*01`?" k(( k 4H5 k((
countries could, through their processes of structural transformation, create opportunities for others to follow.
7 k(( * ( ) =& &( ( -porter of goods in a sector to a local producer and eventually an ex-porter of goods in that sector. This graduation from imports to local
& & 8!) ( 8
&"& &K *( # ( 8 !&( (
& ) "( * ( &&( * &
( & k ( (
& #( & & &( (& (
& Q>#
Box 1.3: Decoupling and reverse coupling
& 013@ )(
( ( & * ( 4& 5 ( 7 * ( (& ) 4 &( 5** (( * ( ) growth from the cyclical patterns of dependence on the developed economies.
M * (( &* &(#
* %&) ) ( (
!K &)*?@@1" 4 &(5* ((&
& =&( ( Z ((&
9 (& & & &( ( ) *& ( on exports from several sectors.
A related issue that has been explored in the literature is that of convergence, which envisages economic convergence between the rising developing countries and the developed countries. Scholars warn that while convergence is a possibility, there is no ) !)*?@00"W& & ((
South have converged towards the developed countries does not mean that other developing countries will or could follow a similar path. At the same time, studies note that a major reason for the better performance and speedy recovery of the larger (& & * ) &( &
of the global economic crisis.
& Q>#
Intra-South trade has increased quite mid-1990s…to reach 56% of total trade
in 2010.
8 TECHNOLOGY AND INNOVATION REPORT 2012
Table 1.2: Evolution of trade by region, 1995 and 2010 a,b (Percentage of total trade)
Table 1.3: Evolution of trade of selected developing countries, 1995 and 2010 a Economy
Developing countries
Developed
countries Others Developing countries
Developed
countries Others 1995 1995 1995 2010 2010 2010
Developing countries 203{ 3z`2 @z{ 33{? 20{{ ?_0
Latin America
and the Caribbean ?{10 z@0@ 0@@ 2@2? 3{23 00_
Southern Africa 31?0 2@`2 @03 3?1_ 2``@ @2{
South Asia 20?? 3`_z ?20 `2z2 _?3_ ?z_
South-East Asia 2210 32`2 @23 `2`_ _22? @13
East Asia 2`@2 3?1@ 0@` 3`__ 20?_ ?22
West Asia _{?@ 31`1 ?00 332{ 20?1 _?2
Developing countries
Developed
countries Others Developing countries
Developed
countries Others 1995 1995 1995 2010 2010 2010
Brazil _zz{ `0_0 @1? 3_0` 2230 ?__
India _1{? 3z1z ??0 `3_0 _?`1 011
China 21@0 21?2 0z2 2110 2z@? _@z
South Africa .. .. .. 3___ 2`0{ @21
& Q >#
a (& &0@@ *0113?@0@
b Also see annex table A.II.8.
& Q >#
a (& &0@@ *0113?@0@
important than South-North trade, except for
L # > (z
This growing South-South trade as a result of the overall growth trends in developing countries is also leading to a larger number of regional trade agreements between de-veloping countries.
2. South-South investment as a driver of development
M* ( !O7"
& ( and capital in developing countries. The importance of developing countries,
par-& #* par-& O7 %& ( past two decades.8 This rise has been all ) ?@@{
The share of developed countries in total (O7&k *12
01{@`{ ?@0@* -as that of developing countries incre-ased
` 01{@?{
?@0@!(& 02">& &>
and India accounted for a large share of this increase.1
The importance of developing countries, particularly those in Asia,
as sources of FDI has increased quite
9
CHAPTER I : THE IMPORTANCE OF THE SOUTH
Figure 1.2: Evolution of trade of different regions with the South as a share of their total trade, 1995–2010 a
Figure 1.3: Evolution of trade of different regions with the North as a share of their total trade, 1995–2010 a (Per cent)
& Q >#
Q O & ((&(* 00
a Figure shows the increase of trade between different regions of the South and developing countries as a whole as a percentage of total trade.
& Q >#
Q O & ((&(* 00
a O(& ( &! (
& " & ( 10
20 30 40 50 60 70
1995 2000 2005 2010
Percentage of global trade
Latin America and the Caribbean
Southern Africa
South Asia
South-East Asia
20 30 40 50 60 70 80
1995 2000 2005 2010
Percentage of global trade
Developing countries
Latin America and the Caribbean
Southern Africa
South Asia
South-East Asia
East Asia
10 TECHNOLOGY AND INNOVATION REPORT 2012
!"#$##%#&'*+/++a
(Per cent)
& Q >#
a O(& O7&k (&
countries and transition economies.
0 20 40 60 80 100
1980 1985 1990 1995 2000 2005 2010
Total outward FDI (per cent)
Transition economies
Developed countries
Developing countries (excl. LDCs) LDCs
O7* *) k &
-& )( ( ( * ) ( &
) ( && V technology transfer through supply chains !>"
&' & V# -omies and more recently also to some of the other emerging countries is well docu-mented in the literature.0@O7&
sectors also has a chain effect resulting in productivity gains in other sectors, as dem-onstrated in Colombian manufacturing or > !X&( * ?@@@ G)
< * ?@@{" M * O7 building productive capacity cannot be ( ' * not go to productive sectors of the econ-omy. This remains a problem in a number ( & * & L>*
O7
& & 8 4
5 00
The rise of emerging countries as a source O7( &
&
Such a choice, if accompanied by
support-ive host-country policies and infrastructure development that promote investment in productive sectors, allows a greater range of foreign investments in a wider variety of industries with positive implications for
ca-=&(O7 ( >( ) of product and process technologies to the host countries.
Although these effects may not be uniform in different contexts, various studies sug-gest that in countries that have a minimum level of domestic capabilities and a policy ) )( * )= %& ) the TNCs can lead to spin-off activities that ( ( !>#*
?@0@"#& &
the tendency of developing-country TNCs J &
other developing countries is greater than that observed among developed-country
>!>#*?@@`"* -hances the potential to foster learning ! 777H 8 "&
attributed to the varying forms of corporate governance in large companies in develop-(& ! 7H"
The attraction of FDI is linked to technology diffusion and knowledge
accumulation.
The rise of emerging countries as a source of
FDI gives host coun-tries a wider choice of partners for alternative
11
CHAPTER I : THE IMPORTANCE OF THE SOUTH