South-South Idea paper by Ms. Vandana Prakash Nair under the guidance of Govind Venuprasad, Manager, South-South Trade and Investment Programme, International Trade Centre.
South-South trade and investment are recognized as integral to achieving the Sustainable Development Goals. This is partly due to their growing contribution to the global economy. South-South trade almost doubled between 2007 and 2018 (UNCTAD, 2018). According to some estimations, by 2025, one third of global Foreign Direct Investment outflows will be generated by companies from the global South (UNCTAD, 2018).
While the outlook for South-South trade and investment is positive on the macro-level, many firms in the global South are unable to access new market opportunities, whether in Northern or Southern markets, due to a series of challenges. These challenges include limitations in market access, underdeveloped infrastructure, government red tape, inadequate productive capacities and the absence of appropriate technologies in the manufacturing and agri-processing sectors. In general, growth in the global South remains uneven and is primarily led by emerging economies such as Brazil, China and India and Russia. Supply-side constraints impede many small- and medium-sized firms, especially those in smaller economies, from benefiting from global trade and investment.
It has long been suggested that the gains associated with participating in South-South trade and investment include opportunities for firms to progress along the value chain and allows diversification of end-market risks. Most significantly is the opportunity for the transfer of appropriate, affordable and adaptable technologies to Southern countries from emerging markets that have faced similar developmental challenges in the last decade. There are also opportunities for learning about appropriate solutions and approaches from the global South through South-South Cooperation modalities and instruments.
Through an analysis of interventions under the International Trade Centre’s initiative Supporting Indian Trade and Investment for Africa (SITA), this report will show how knowledge and technology transfer through South-South cooperation can build productive capacities and contribute to the economic transformation of specific areas in light-manufacturing and agribusiness sectors. While there is an abundance of literature detailing analysis of policy-level capacity-building initiatives for trade and investment, the scope of this report is limited to lessons learned from capacity-building initiatives undertaken at the institutional and enterprise levels.
In section one, this report examines the latest trends in South-South trade and investment and impediments to it. In section two, the report studies, through a short literature review, the rationale for aid for trade programmes, such as SITA, especially in relation to capacity building for trade and investment. Section three identifies the advantages of South-South trade and investment. Section four examines four capacity-building initiatives undertaken by SITA: 1) training for spice cultivation in Ethiopia and Rwanda; 2) institutional strengthening in the sunflower oil sectors of Tanzania and Uganda; 3) investment promotion among small- and medium-sized enterprises; and 4) support for craftsmen in Ethiopia’s handloom sector.
Each case study outlines lessons learned from these South-South cooperation capacity-building initiatives, with a particular focus on small- and medium-sized enterprises and small-holder farmers. The report highlights the critical role played by development projects in building linkages between institutions and businesses in the global South for the purposes of trade and investment. Ultimately, development projects in this area can only demonstrate the possibilities for learning and adaptation in a South-South context. National ownership and buy-in from key stakeholders are required for the sustainability of initiatives and for progress toward long-term structural transformation.
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