Tuesday, 26 November 2013

South-South Cooperation in aid, trade and FDI? A closer look at the economic engagement footprint of rising powers in Africa

By Musab Younis 

What do the activities of Chinese businesses in Angola, Brazilian state agencies in Mozambique and Indian exporters in South Africa have in common? For one thing, they all might be seen to represent the trend of (re-)growing linkages between African, Asian and Latin American countries.

As such, they are surrounded by a specific discourse which contains a number of signifiers referring to a particular view of history and economic development. A recurrent phrase within this discourse, ‘South-South Cooperation’, suggests that such linkages represent a kind of post-colonial recovery of extra-European patterns of trade and exchange. And to varying degrees, bureaucrats and businesspeople from the ‘rising powers’ do claim that their modes of interaction with African countries are fundamentally different from those behaviours associated with rich countries in the OECD.

The true picture is complex, of course, and any overview does violence to subtleties. A number of headline stories are well known. There has been a major increase in South-South trade over the past 30 years in both goods and services. Such trade has been dynamic and has grown unusually fast. GDP growth figures appear to have been high in many African countries. Large countries of the South (Brazil, China, India) have expanded their ‘development cooperation’ programmes in poorer countries in a range of areas from agriculture to health policy. But few studies have elaborated on these headlines by looking closely at the nature of these evolving patterns.

Two recent studies take a closer look at South-South economic engagement


One exception was an instructive study published earlier this year by Kathryn Hochstetler, which found that: ‘the most important dimension of the rise of South-South trade is the way it has both followed and reinforced increasing differentiation among the countries of the South.’ Hochstetler observed that developing country exports are dominated by a group of just eight countries (Brazil, China, India, Indonesia, Malaysia, Mexico, Thailand, and Turkey), which alone accounted for almost half of the annual exports of all the developing economies from 2005–2009. The Least Developed Countries (LDCs), she pointed out, actually send larger shares of manufactured goods to higher income than to lower income countries. LDC exports to other Southern countries were dominated by agricultural, fuel, and mining goods.

Another exception can now be added in the form of the work of Xavier Cirera, until recently at IDS, who has just published a careful analysis of the ‘economic engagement footprint’ of the rising powers in Africa. Rising powers – which Cirera defines as the BRICS countries plus the Gulf states and Turkey – are found to be important trade and aid partners for sub-Saharan Africa. Their importance (especially that of China) has increased dramatically over the last decade at the expense, mainly, of the OECD. Analysing such trade flows, Cirera finds that they are largely represented by the export of natural resources from sub-Saharan Africa and products with very little added value.

Given the work of Hochstetler and others, Cirera’s findings are perhaps unsurprising. Using a statistical tool called a similarity index to assess the trade and FDI flows, he finds significant similarities appear between OECD and rising power countries in terms of their interactions with sub-Saharan African countries. By the same token, and contrary to some reports, Cirera does not find a pattern of aid allocation by the rising powers which conforms to political affinity, corruption or trade links any more than the existing pattern of OECD countries. In other words, Chinese aid appears to be statistically linked to China’s interests in African natural resources only as much as British aid is linked to its own interests in African natural resources.

Such findings do not render all talk of ‘South-South Cooperation’ redundant, of course. But they do suggest that some of its rhetoric is (at best) premature, failing to characterise the actual pattern of relationships that is evolving between countries of the South. Such relationships continue to develop, as a range of scholars from Giovanni Arrighi to Susanne Soederberg have reminded us, within the confines of a global capitalist economy in which sclerotic hierarchies of production, labour and value can still be found.

It is precisely in this context that UNCTAD’s recent Trade and Development report (PDF) warned of a race to the bottom amongst Southern countries attempting to develop by supplying cheap manufactured goods to the credit-fuelled markets of the North. “[T]he expansion of the world economy, though favourable for many developing countries, was built on unsustainable global demand and financing patterns,” it observed, adding: “reverting to pre-crisis growth strategies cannot be an option.”

UNCTAD’s report comes at a time when the ‘developmental state’ paradigm is increasingly being questioned by a range of work looking at patterns of labour, dependency and industry. South-South trade and aid flows will, at least in the short term, continue to increase. But, as Cirera’s study suggests, the impact of these flows for the populations of sub-Saharan African countries remains open to question and contestation.

Musab Younis, formerly a Research Officer with the Rising Powers in International Development programme at the Institute of Development Studies, is now a PhD candidate at the University of Oxford.

Previous blogs by the same author: 

4 comments :

Joditi said...

Very insightful piece, thank you. Indeed there are incredible intricacies involved with South-South trade, notably in sub-Saharan Africa where the levels of direct investment and its impact are hard to measure. However, what remains unsaid is the effect on quality of living that the influx of cheap Chinese (and other Asian) manufactured products has had on a large part the sub-Saharan population. Walk through any urban or rural market and the availability of cheap electrical and consumer goods, though not of the most robust quality, is substantial. Many more people are now able to afford cheap products ranging from radios all the way through to Mobile devises primarily manufactured in the global South. These products are generally not accounted for, given their limited 'real economic' value, however their development value is exceptionally high, perhaps more so than Southern FDI which seeks 'extractive' returns. This is a deep footprint not revealed in the figures.

Laurent Arribe said...

Thank you for the interesting piece. While the implications of the emerging paradigm between emerging nations and the traditional OECD nations have yet to be clearly determined, the addition of an alternative to access for aid and capital should not be underestimated. As Joditi mentioned above, the supply of cheaper goods already demonstrates an important implication of south south cooperation that is often overlooked. I believe another often forgotten impact is the competition emerging countries will create by pursuing their interests. Instances such as the BRIC's development bank may offer alternatives to flaws strategies such as requesting good governance prior to providing aid. While undeniably crucial, the Chinese model has shown that poverty alleviation prior to good governance is possible and, ideally, could provide a stepping-stone to good governance. Challenging the World Bank's model which prioritizes donor interests over benefectors', emerging countries' opportunity to shift the status quo must be taken into account when observing the impact on sub-Saharan populations

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