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Developing countries must help each other weather financial crisis, UN official says

Developing countries must help each other weather financial crisis, UN official says

UNCTAD Secretary-General Supachai Panitchpakdi
Trade, investment and other cooperation between developing countries – so called “South-South exchange – could soften the blow of the economic crisis on vulnerable economies, the head of the United Nations agency that promotes commerce to fight poverty said today.

“A global financial crisis has shaken the economic foundations of the North, and is threatening to shatter the growth and development aspirations of the South, Supachai Panitchpakdi, Secretary-General of the UN Conference on Trade and Development (UNCTAD) said as he opened the Multi-Year Expert Meeting on International Cooperation: South-South Cooperation and Regional Integration in Geneva.

“The timing, therefore, is right to explore how greater South-South cooperation can help developing countries to cope with the crisis,” he told experts gathered in Geneva for two days to consider how financial flows and joint efforts to stabilize currency exchange rates and debt could lessen the effect of the downturn.

Mr. Supachai said merchandise trade between developing countries grew at an average of 13 per cent per year from 1995 to 2007, and at the end of that period amounted to $2.4 trillion, or 20 per cent of world trade.

According to UNCTAD, one-third of the exports were high-skill manufactured goods, which yielded high profits and could enable developing nations to diversify their economies.

Such factors could help offset the sharp fall in demand for exports from the North, projected to be as much as 9.2 per cent in 2009 and the near freeze-up of the global banking system, as well as the declines in commodity prices, remittances from migrant workers and international aid.

Mr. Supachai said South-South coping measures can include financing from regional development banks in the South; regional stimulus packages, especially for badly needed economic infrastructure; and diversification of foreign-exchange reserves – in which nations of the South buy other countries' debt.

The UNCTAD head also recommended regional arrangements specifically aimed at mitigating the impact of financial shocks. The Chiang Mai initiative arising out of the Asian financial crisis of 1997-1998 "provided participating countries with international financial liquidity through swap arrangements," he noted.

The conference continued with panel discussions on various aspects of South-South engagement and will conclude Thursday with a session entitled “Regional monetary and financial cooperation -- South-South solutions?” and a debate on the way forward.

Under reforms to UNCTAD meetings made at the UNCTAD XII quadrennial conference last year, the expert session on South-South cooperation will continue next year to allow experts to study the issue as it evolves over time.