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von Hans Dembowski

Taking stock of south-south cooperation

In March, the UN will hold a global conference on south-south cooperation in Buenos Aires. The Geneva-based South Centre has recently published a brief overview which assesses the state of the matter. I like to share some thoughts.

The South Centre is a think tank that belongs to the governments of more than 50 developing countries and emerging markets, including G20 members like China or Brazil as well as least-developed countries like Benin or Sierra Leone. One of its strong points is that it is free to express criticism of the established donor nations more clearly than some of its owner governments, especially the aid-dependent ones. The paper in which Yuefen Li takes stock of south-south cooperation does not really fit that pattern. Its rhetoric reflects an anti-donor stance, but the messages are not especially radical. I found several things noteworthy.

First of all, I absolutely agree with the author on the point that south-south cooperation is a rather vague term. It basically covers any kind of exchange between two or more countries as long as none of them belongs to the established economic powers. South-south cooperation includes forms of assistance that resemble official development assistance (ODA), but it also includes foreign direct investments and even trade in general. It therefore does not make much sense to compare south-south cooperation with north-south cooperation, since the latter term really only applies to ODA.

Second, Yuefen is right to argue that south-south cooperation does not reduce the established donors' ODA responsibilities. They must live up to the commitments they have made, not least because their nations are still more prosperous than the others, and because they have contributed disproportionately to global warming.

Third, there is a great need to clarify what south-south cooperation means. Until that is done, it will be impossible to build the institutions required for making south-south cooperation to work out well. The South Centre paper correctly points out that such institutions are needed. I hope the summit in Buenos Aires will clarify some of these matters.

Fourth, it is equally important to define rules to guide south-south cooperation. The weakest point in Yuefen's essay is the claim that it is a non-hierarchical expression of solidarity among equal partners. This may be politically correct South Centre rhetoric, but it is not the empirical reality. The truth is that major emerging markets' action increasingly resembles the action of long established donor governments.

China, in particular, has become a major lender. Some of the loans for some of the infrastructure projects are quite controversial. In Sri Lanka, China has taken control of the harbour it built after the national government was no longer able to service Chinese credits. China forgave $1 billion worth of loans, and in return got to use a harbour for 100 years. Military use of the port still depends on the consent of Sri Lanka's government - and under financial pressure it may one day grant such consent. Many Sri Lankans are uncomfortable with this state of affairs.

Fifth, the author praises south-south cooperation because it does not go along with conditionalities and thus supposedly does not interfere in the domestic affairs of lenders. Part of Pakistan's current debt troubles, however, are related to Chinese financing for infrastructure programmes, and those problems have a big impact on domestic affairs. Things are similar in Ecuador, where Lenin Moreno, the current president, is struggling to service the debts his predcessor and former ally, Rafael Correa, piled up. Ecuador's government now wants to put Correa on trial for corruption, but the former head of state has fled to Belgium. Correa took loans from China to become independent of IMF and World Bank financing, and now his successor depends on Chinese generosity. 

It is, indeed, extremely simplistic to consider legitimate whatever government another country may have, and accept its policies as the will of the people. Consider Syria, for example: not taking sides in the civil war implicitely means taking the side of whatever armed group is currently prevailing. In my eyes, the international community has failed the Syrian people. Interventions are obviously probelmatitic - but so is non-intervention.

Sixth, I am not sure that it makes sense to simply include the operations of the Beijing-based Asian Infrastructure Investment Bank (AIIB) in south-south cooperation as Yuefen does. After all, many European countries, including Germany, Britain and France, are among the shareholders. I remember, of course, that US President Barack Obama did not want them to join, arguing that the new institution would be a tool of Chinese foreign policymaking. I think the European governments were right, in spite of all the difficulties and challenges, to see the AIIB as an opportunity for cooperation.

I am also aware of the great potential for tensions between the a AIIB and the World Bank and other international finance institutions. A worrisome trend is that the World Bank has become less strict about environmental and social standards. The reason is that it wants to stay in business, and does not want to leave financially rewarding projects to the AIIB. What does this tell us about south-south cooperation and what does it tell us about north-south cooperation? I’d argue that it proves at very least that global cooperation is a very complex matter and that we should not use only black and white, but need many shades in between to adequately assess matters.

Seventh, I'd argue that, in view of strong European participation, the AIIB's operations fall in the category of triangular cooperation, the definition of which basically is that at least one established donor cooperates with at least one emerging market and at least one developing country. Ultimately, the goal must be to join forces and rise to huge global challenges together. By the way, Yuefen appreciates the merits of triangular cooperation and also acknowledges that western governments have modernised ODA in reasonable ways. I think the paper would have been stronger if the author had backed off from the conventional dichotomy of south-south cooperation versus ODA.

I'd like to conclude by stating that south-south cooperation is very important. The international community needs a clear understanding of these things. An embellished vision of solidarity among Asian, African and Latin American countries is not helpful however. No doubt, the big emerging markets can and will make important contributions to solving global problems. I personally think that China's infrastructure spending abroad is mostly useful, for example, because developing countries in Asia and Africa really do need infrastructure. It would be naïve, however, to simply assume that Chinese engagement is by its very nature benign whereas the true motives of established donors must always be checked. China has a rising world power and should be seen accordingly. China's lending is creating dependencies, and the economic interests of a manufacturing hub like the People's Republic differ from those of commodity producers, for example. 

For various reasons, including colonial history, the BRICS (Brazil, Russia, India, China and South Africa) do not want to join the OECD (Organisation for Economic Co-operation and Development), the umbrella organisation of the established donors. Their stance deserves respect. But if they do not want to play by OECD rules, the international community will need to define other rules. A UN conference is the right place for debating these things.

Link: Yuefen Li, 2018: Assessment of south-south cooperation in the global narrative on the eve of BAPA+40, Geneva: South Centre.

Correction, 5 January 2019: In the original version I wrote that China had turned the port in Sri Lanka into a military base.  I should have fact checked, but felt sure that I remembered this well. I did not - and apologise.

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