South-South economic relations finally paying off
THE International Monetary Fund (IMF) predicts that by 2017 China will be the largest economy in the world, but it is not yet a developed country. If and when it achieves that status, it will represent a remarkable and unprecedented development in the world economy.
Developing countries are now responsible for over half of global economic growth, according to a report released in October by the United Nations Economic Commission for Latin America and the Caribbean. This is forecasted to be a continuing trend, with Asian developing economies, led by China, contributing 55 per cent of global growth by 2016.
The growing importance of developing countries is evident in international trade and cross-border investment flows. Since the mid-1980s, developing countries' share of global exports has increased from less than 10 per cent to nearly 40 per cent. Correspondingly, developed countries' share has declined from 60 per cent to 40 per cent. This trend is likely to continue, given the changes in world trade over the last 20 years.
Data tabulated by the Organisation for Economic Development (OECD) show that South-South merchandise trade grew on average at the rate of 12.5 per cent per annum compared with seven per cent for North-North trade and 9.8 per cent for North-South trade.
From as far back as 2006, the World Bank's Global Development Finance report pointed out that "South-South flows are now growing more rapidly than those between developed and developing countries, particularly in foreign direct investment. In 2006, only 14 of the 200 largest companies (seven per cent) were headquartered in emerging countries, but this has grown to 40 (20 per cent) in 2012.
Only one firm from a developing country ranked among the world's top 50 companies in 2006 (Samsung, Republic of Korea, in position 49) but by 2012 that number had increased to 12, three of which are among the top 10 companies.
At last the virtues of South-South economic relations are being realised, vindicating the visionaries of the era of the calls for a new international economic order, including our own late Prime Minister Michael Manley.
September 12, 2012 was celebrated as UN Day for South-South co-operation, recognising that an increasing number of developing countries have built up internationally competitive economic and technical capacity. Exchange between the countries of the South has increased in range and values generating a broader foundation for sustainable economic growth.
The implication of the new engine of global economic growth being the developing countries is that nations that want to be pulled along must hitch their economies to the new growth engine. It means that countries that have a concentration of their external economic relations with the developed countries, as is the case with Jamaica, will not be among the "boats" lifted by the rising Asian tide. The imperative for growth-seeking countries is to realign economic interactions towards a balance of trade, investment and finance in which developing countries assume a more prominent role.
It is time for Jamaica to develop a strategy for a fuller engagement with the developing countries in trade and investment, especially the rapidly growing Asian economies. This strategy must plan for increased exports, garnering direct foreign investment and encouraging tourist arrivals.