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Beyond the Basics and Coffee Beans: Guatemala’s Economic Ascendancy

thegeoeconomics.com | September 4, 2024

Mónica Dalila Pozuelos Arriaza

Guatemala is a country located in Central America with a population of around 17 million. The nation is known for its fertile land, with rivers, volcanoes, mountains, and generally favorable climate. When it comes to development, Guatemala faces significant challenges, with around 56% of the population living in poverty, particularly in rural areas, where one in every two children is malnourished and there are limited social and economic opportunities. Despite this, Guatemala has several industries, including mineral extraction, coffee, sugarcane, and cardamom, with cardamom being a major global supplier.

Minerals, including nickel, have been an important export product, though the focus has shifted to antimony, iron, silver, ore, lead, and gold. The development of open-pit mines for gold and silver has led to protests from indigenous communities and concerns from international human rights organizations. This paper for COGGS will focus on the coffee industry, examining its oligarchic control over decades and exploring potential alternatives for market diversification or changes in the power dynamics of coffee production.

Guatemala’s exports have visibly improved since its entry into the Free Trade Area of the Americas in 2004. The country primarily exports agricultural products, including coffee and sugar (over 37 percent of total exports), and textiles (over 14 percent). Other exports include iron, steel, plastics, and chemical products. The United States is Guatemala’s main export partner, receiving 33 percent of exports (Trading Economics, 2024).

How is the Coffee Industry in Guatemala?

Coffee production in Guatemala has undergone significant transformation over the past twenty years, driven by increasing demand for high-quality coffee and shifts in consumer preferences. To understand the system, it is essential to focus on the actors and how power is distributed. The international coffee industry is structured such that small coffee farmers often have no choice but to accept the prices set by intermediaries, who dictate what they are willing to pay. Typically, coffee farmers earn only a small portion of the money consumers spend on coffee, while wholesalers, roasters, and retailers earn much larger portions (Francis, 2006).

The lack of price control by small coffee growers creates income inequality, with intermediaries benefiting disproportionately from price fluctuations. Actors such as the Cafetaleros, who operate privately on plantations called fincas and rely on temporary migrant labor, exploit the needs of this population by paying the lowest possible wages.

Unfortunately, the coffee sector is dominated by an oligarchy (cafetaleros) that maintains its privileges and contributes minimally to the development of rural areas and the country overall.

Economic Aspirations in the Coffee Industry

What is the Role of the Cooperative Movement?

The cooperative sector offers a significant opportunity to develop the country, particularly within the coffee industry. This movement seeks to ensure equality among its members. However, “there are several intermediaries in the global coffee economy, including exporters, wholesalers, importers, roasters, and retailers, each of which gains increasing profit relative to the farmers. Sometimes, farmer cooperatives are able to eliminate some of these middle stages by taking on additional roles and pooling funds to purchase export licenses and equipment” (Bacon, 33, 2010).

Recent studies indicate that coffee cooperatives help level the playing field by providing high-value services such as credit and agronomic training at equal rates to both women and men. This has led to increased gender equality and greater opportunities for women.

In conclusion, cooperatives offer a viable solution for promoting equality and development in rural areas, which are most affected by poverty. They create opportunities for economic development even in the most impoverished regions. However, the success of cooperatives depends on collaboration with existing power structures (cafetaleros) to ensure broader economic benefits for the entire population. Investments in training and expanding opportunities in rural areas could also help reduce high migration rates in Guatemala.

[Mónica Dalila Pozuelos Arriaza is a Guatemalan academic, and specializing in Guatemalan Foreign Policy]

For submissions to COGGS, we invite experts and specialists from the Global South to send their contributions to ayan@thegeoeconomics.com.

Dr. Mónica Dalila Pozuelos, Author

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Beyond the Washington Consensus: Balancing Supply-Side Reforms with Inclusive Development

thegeoeconomics.com | September 1, 2024

[Synopsis: Supply-side economics has played a significant role in the Global South, contributing to economic growth and uneven benefits. To build on this foundation, a more comprehensive strategy is necessary, one that leverages market dynamics and incentives while prioritising broad-based development, poverty reduction, and long-term productivity growth. By implementing the right balance of policies, countries in the Global South can work towards achieving a more inclusive and sustainable development path.]

Center of Geoeconomics for the Global South (COGGS)

Supply-side economics has been embraced by many countries in the Global South, often as part of structural adjustment programs. Over the past few decades, supply-side economics has played an important role in driving economic policy in the Global South. It prioritises high economic growth rates and increased productivity through policies that encourage production, investment, and innovation. These measures generally involve lowering tax rates, deregulating industries, privatising state-owned concerns, liberalising trade and making economies attractive to foreign investors (Bauer, 2000). The premise is that improving the business environment and incentives on the supply side will enable economies to increase their productive capacity and efficiency, hence leading to sustained growth and development.

Many countries in the Global South have adopted supply-side economics under structural adjustment programs imposed by international finance institutions such as the International Monetary Fund (IMF) and the World Bank. Latin American nations like Chile, Mexico, and Brazil have undertaken extensive market reforms and liberalisation since the 1980s (Williamson, 1990). For example, Chile was famous for its aggressive, free-market policies guided by economists referred to as “Chicago Boys,” which earned it rapid economic growth, averaging seven per cent per annum between 1985 and 1997 (Kurtz, 2001).

In Asia, India underwent significant economic reforms in 1991 that opened up its economy to global trade and investment, deregulated sectors of industry and reduced government intervention. These changes have unleashed entrepreneurial potential, with an average GDP growth rate of around seven per cent since the mid-1990s(Ahluwalia, 2002). Supply-side policies used in China’s economic miracle include the creation of special economic zones (SEZs) and agricultural liberalisation, among other massive infrastructure projects. During this period, China registered an average annual GDP rate of ten per cent (Morrison, 2014).

Nonetheless, the supply-side economics effect has been mixed within Global Southern Countries. Some have experienced significant economic growth and poverty reduction but usually uneven gains. Nonetheless, the benefits of this growth tend to be enjoyed by urban elites and capitalists while large segments of the population remain impoverished. Income inequality has risen in many countries that are implementing supply-side policies. For instance, despite achieving impressive economic growth, China’s income inequality, measured by the Gini coefficient, increased from 0.30 in 1980 to 0.55 in 2012 (World Bank 2014). In 2022, China scored (0.467) points, representing a drop from the previous year’s score (Textor, 2024).

Many stakeholders argue that focusing on foreign investment and export-led growth makes countries more susceptible to global economic shocks. Most economies within Global South were badly affected by the financial crisis experienced between2006-2008; for example, Mexican GDP contracted by 6.5% in 2009 (Villarreal2011). This is because, so far, these strategies have not resulted in enough jobs needed with the increasing working population in the developing world. However, India is an example where sufficient employment opportunities have not been created since its economy took the liberalisation path, with the labour force participation rate declining from 58%in 2004 to53%by2013(Mehrotra et al.,2014). In urban areas, for instance, with respect to India, it was expected that by 2023, the labor force participation rate is expected to increase to 50.4 percent (Rathore M.,2024). Supply-side economics has been criticised for not recognising the significance of internal markets and human capital formation. Stiglitz (2002) noted that wage repression and insufficient investments in health and education could improve immediate competitiveness but hamper long-term productivity and innovation. Barro’s (2001) study showed that human capital, measured by years of schooling and health indicators, is an important determinant of economic growth over a long period.

To achieve more inclusive and sustainable development, countries in the Global South may need to adopt a more balanced approach that combines supply-side reforms with demand-side policies and investment in human capital. Inequalities can be reduced through progressive taxation and social safety nets, thereby expanding domestic markets. Industrial policy, coupled with government support for research and development, facilitates innovations that lead to the upgrading of technological know-how. An effective way would be to invest in a quality education system and good health facilities for a skilled base workforce that would move up the value chain required for the nation to develop further.

References:

Ahluwalia, M. S. (2002). Economic Reforms in India Since 1991: Has Gradualism Worked? Journal of Economic Perspectives, 16(3), 67-88.

Barro, R. J. (2001). Human Capital and Growth. American Economic Review, 91(2), 12–17.

Bauer, P. T. (2000). From Subsistence to Exchange and Other Essays. Princeton University Press.

Kurtz, M. J. (2001). State Developmentalism Without a Developmental State: The Public Foundations of the “Free Market Miracle” in Chile. Latin American Politics and Society, 43(2), 1–25.

Mehrotra, S., Gandhi, A., & Sahoo, B. K. (2014). Is India’s Long-Term Trend of Low-Quality Employment Growth Reversing? Economic & Political Weekly, 49(7), 83-91.

Morrison, W. M. (2014). China’s Economic Rise: History, Trends, Challenges, and Implications for the United States. Congressional Research Service.

Rathore, M. (2024). Rate of labor participation across India 2023

Stiglitz, J. E. (2002). Globalisation and Its Discontents. W. W. Norton & Company.

Textor, C. (2024). Gini index: inequality of income distribution in China 2012-2022

Villarreal, M. A. (2010). The Mexican Economy After the Global Financial Crisis. Congressional Research Service.

Williamson, J. (1990). What Washington Means by Policy Reform. In J. Williamson (Ed.), Latin American Adjustment: How Much Has Happened? (pp. 7–20). Institute for International Economics.

World Bank. (2014). World Development Indicators. Retrieved from http://data.worldbank.org/indicator

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Aligning Power Streams: Southeast Asia’s Ingenious Route to Global South

thegeoeconomics.com | August 31, 2024

Simran Walia

The term “Global South” gained prominence in the 1970s and 1980s as a more neutral alternative to “Third World,” distinguishing non-aligned developing countries from the democracies of the “First World” and the now-defunct communist bloc of the “Second World.” Proponents of the Global South advocate for a multipolar global system that challenges Western liberal norms and privileges. Recent shifts in global power—from the transatlantic to the Indo-Pacific, the rise of non-Western nations like China and India, and the relative decline of the West—have accentuated these differing viewpoints. However, the intrinsic diversity of the concept is underscored by the fact that China and India, the two self-declared leaders of the Global South, struggle to forge Asian unity due to their own territorial disputes and nationalist ambitions.

The Global South is often associated with certain characteristics. Its positioning in the Group of 77 (G77) versus the Organization for Economic Cooperation and Development (OECD), or G7, highlights the economic disparities between developing and industrialized nations. The Global South contends that the inequalities of the post-World War II international order, which favor Western nations, stem from colonial legacies and are perpetuated by global capitalism.

Historically, the normative solidarity of Global South nations has encompassed opposition to colonialism and neocolonialism, resistance to hegemony, and support for a multipolar world. They have persistently advocated for more equitable access to markets, technologies, and financing, underscored the importance of national sovereignty, and challenged Western-centric approaches to human rights and democracy. They have also called for reforms in global governance. The term “Global South” serves not merely as a metaphor for underdevelopment but as a reference to a lengthy history of colonialism, neo-imperialism, and uneven economic and social development, which has perpetuated stark disparities in resource access, life expectancy, and living standards.

The China Factor

China’s strategic objectives are served by its investments in the Global South despite growing isolation from the West and competition with the United States. China may challenge Western supremacy and increase its influence in forming the global order by aligning with the Global South. This makes a lot of economic sense as well, since developing nations are becoming important markets for Chinese investments, products, and financing. China is intensifying its economic shift towards the developing world in response to growing protectionism from the United States and its allies.

Growing geopolitical rivalry between the US and China has brought back bipolar dynamics akin to those of the Cold War, when a large portion of the world was used as pawns in a fight between superpowers. The pressure on developing countries to choose between the democratic West and authoritarian China and Russia has increased as a result of Moscow’s aggression against Ukraine, but many of them are resisting this option. A series of systemic shocks, however, have brought attention to the glaring disparities at the center of the global economy and the susceptibility of lower- and middle-income countries to political, economic, and ecological crises that are not of their own making. These shocks include the COVID pandemic, the economic fallout from Ukraine, and the growing climate emergency.

Simplistic narratives cannot capture the diversity found throughout the Global South. Southeast Asian countries, for example, defy the stereotype of the “developing world” because of their diverse range of development stages, security issues, and economic links. These nations make foreign policy decisions mostly based on their national interests rather than strictly adhering to the rhetoric of the Global South, despite the fact that they face some shared issues.

Is Singapore in Global South?

There are around 670 million people living in the ten ASEAN member nations combined. Singapore, with a per capita GDP of over $73,000, nearly twice that of Japan, and Myanmar, with a per capita GDP of $1,000, are at extreme opposite ends of the ASEAN spectrum. It is difficult to include Singapore in the Global South. Indeed, Singapore has incorporated itself into the economic restrictions imposed on Russia. Despite being largely included in the Global South, Southeast Asia shows a great deal of variation in terms of its degree of development. With gross domestic product per capita levels above the OECD average and human development indices on par with or even higher than those of OECD nations, Singapore and Brunei stand out as anomalies. The per capita GDP of the remaining Southeast Asian countries, on the other hand, ranges from US$1,000 to US$12,000, well below the OECD average.

The ASEAN and Global South

By their UN voting habits, Southeast Asian nations have shown that they share norms with the Global South, which includes China. In opposition to the “hegemony of liberal democracy,” they have argued for “Asian values” and have consistently backed resolutions that reflect the views of the Global South on democracy and human rights. Furthermore, the South China Sea dispute illustrates how countries in Southeast Asia, and the Global South in general, have prioritized their own interests over defending international law against more powerful nations like China.

Malaysia’s Prime Minister Anwar Ibrahim visited New Delhi, following which both Malaysia and India committed to enhancing their ties through a Comprehensive Strategic Partnership. This unprecedented level of collaboration will focus on shared goals such as public goods delivery, green development, sustainable economic growth, connectivity, and technological advancement. Prime Minister Anwar discussed at length the strategic significance of Malaysia-India relations within the framework of the Global South. He emphasized the importance of air connectivity between the two countries and the potential for further integration in the semiconductor industry.

China has demonstrated skill in using terminology from the “Global South” to critique the West and advance its own agenda, arguing that “true multilateralism” and “universally beneficial” globalization are essential. Indian Prime Minister Narendra Modi has urged ASEAN leaders to “elevate the Global South for the common interest of all.” Japan has also made efforts to serve as a bridge between the North and the Global South.

ASEAN as a whole is China’s largest commercial partner, followed by South Korea, Japan, and the EU, with the US and India in fourth place. Southeast Asia’s integration into global supply chains and its production of goods primarily for the Global North’s market have contributed significantly to its wealth. This success is partly due to Southeast Asia’s access to capital and technology from the Global North.

The economic reality of Southeast Asian nations shows that, rather than being mere victims or passive recipients, they have been active participants and beneficiaries of the contemporary economic system. In fact, they have strategically shaped regulations to serve their interests by establishing a network of regional free-trade agreements with key trading partners through ASEAN and other minilateral approaches. Although there are complaints, particularly regarding trade restrictions imposed by wealthy countries for political or environmental reasons, these do not, contrary to the rhetoric from the Global South, reflect a general dissatisfaction with the system.

[Simran Walia is an Associate Fellow at the Centre for Air Power Studies, New Delhi, pursuing a PhD in Japanese Studies from Jawaharlal Nehru University, Delhi. ]

The opinions expressed do not reflect the stance of COGGS.

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Margaritas and Markets: Mexico’s Economic Moves in a Shifting Global Stage

thegeoeconomics.com | August 30, 2024

– Juan Roberto Reyes Solís

The calender year 2024 is marked by significant global political change due to elections in nearly 70 countries. Additionally, political uncertainty and ongoing international conflicts are compelling business leaders to carefully plan their strategies across various economic, commercial, and financial projects. In all these current facts of political continuity and change, Mexico’s productive performance is exposed to a set of challenges and opportunities. According to the International Monetary Fund, Mexico has emerged as the tenth largest recipient of foreign investments globally over the past two years.. Conversely, the World Bank highlights that Mexico has become the twelfth largest economy globally and is also one of the world’s top fifteen exporters.

This achievement is due to the relative strengthening of the U.S. economy, which has sustained demand for Mexican-manufactured products..This is particularly due to the U.S.-China rivalry and other factors that have led to the transfer of industries to Mexico, thereby triggering potential growth in nearshoring. Thus there is much more to report, including the visit of foreign tourists.

As a result of these dynamics, Mexico has recently positioned itself as the main trading partner of the United States after China. At the same time, in the Latin American area it maintains an excellent profile attracting foreign investment and performance in the regional trade. In terms of tourism, Mexico is today the ninth country that generates foreign currency for this activity in the world.

According to the Ministry of Economy, the best sectors for business are energy, general consumer products, technologies, medical services, drones, electrical vehicles, robots, electronic manufacturing and infrastructure.

The current challenge for Mexico must focus on strengthening external perception to improve the image towards international markets and create a scenario that more vigorously promotes the full potential of the nation. In short, the positive reputation must be intensified and the perception of those others that are palpable as unfavorable must be reduced, especially the situation of insecurity.

However, a trend that has favored the economic scenario is found in another very attractive factor. The rising of nearshoring has gained momentum to engage production centers to geographic areas that favor the greatest use of resources and facilitate the operation and efficiency of the distribution chains of goods and services to destination markets. For Mexico, with a strong interaction in market and economy of the United States economy, the need for intermediate goods, as well as the supply of these to different industries, led to considering the vision of rethinking the logistics of numerous companies. This is how the idea of nearshoring was gradually outlined, by reconstituting production networks with resources from the regions, and relocating industries and suppliers of goods and services in the national geography.

Some of the potential benefits could be seen in the possibility of increase in foreign investments, derived from the transfer of production plants to the country and their eventual location in the different industrial parks. This circumstance could strengthen the size of industrial clusters and their business environment, leading to create new infrastructure, connectivity, service offerings and other activities associated with regional economic growth and development. In this regard, various companies located in the national territory have the opportunity to announce their expansion plans, which will trigger new projects that are associated with the relocation of productive activities. In this case, it should be highlighted that the panorama of foreign investments in the state environment is favored by a strategy of attracting and engaging industries that are integrated into the productive chains within the different clusters of the region.

These circumstances stimulate the possibility of having more specialized personnel in different productive branches, that is, a growth in the workforce derived from the location of new industries that require employees for the areas in which they participate in.

There is also a great capacity in the use of regional resources and the territorial advantages as the connection among regions inside the country. By connecting the Pacific and Atlantic Oceans through maritime ports, Mexico facilitates the movement of goods from Eastern countries to various locations within the country. It is the same case for imports and exports that are moved by train and transportation services from Central America to the U.S. market.

Finally, potential growth of exports, especially to the United States market. For numerous industries, the export potential or, where applicable, opens a door that would lead to participation in that market, establishing, in the process, an opportunity for international experience, development and deepening of business for the companies involved in this expectation. While Mexico could leverage these opportunities on a large scale, the upcoming U.S. presidential election will be crucial in determining the future economic conditions and prospects for Mexico. [COGGS]

*Author is Professor and Researcher, Universidad Anáhuac Querétaro, Mexico.

[The views expressed herein are those of the author and do not necessarily reflect the official position or endorsement of COGGS. For submission queries, pls write us to ayan@thegeoeconomics.com ]

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Is Regional Collaboration the Global South’s Secret to Triumph?

thegeoeconomics.com | August 19, 2024

Mohammed Saqib, COGGS

[ Synopsis: The Global South shares common challenges related to economic development, social inequality, and geopolitical positioning. Regional cooperation among the Global South countries has been recognised as a crucial strategy for addressing these shared challenges and promoting sustainable development. However, cooperation among the countries of the Global South faces numerous obstacles.]

Over the years, successful regional initiatives have achieved remarkable gains in economic, political, and sustainable development. Consequently, regional cooperation has emerged as a crucial strategy for the Global South nations to tackle common challenges, harness their collective strengths, and accelerate socio-economic progress. This approach has gained momentum in recent years owing to the growing global realisation that global issues are interconnected and cooperative action can generate mutual benefits. The developing countries are increasingly looking towards regional partnerships to address complex challenges and exploit growth opportunities in the context of rapid globalisation, climate change, and economic interdependence.

It is a departure from traditional development models emphasising North-South cooperation and bilateral aid relationships. Instead, it focuses on South-South cooperation through collective action among nations facing similar developmental obstacles. These could range from formal economic integration/trade agreements to shared infrastructure projects, including joint resource management or harmonised policy responses to transnational issues within a region. These initiatives include agriculture, energy, education, health care, and environmental protection. By combining resources, expertise, and political willpower, countries in the Global South can achieve economies of scale, thus enhancing their bargaining power at the global level and devising more effective ways of dealing with common problems.

In addition to ensuring economic growth and social progress, it also enhances stability and security at regional levels due to increased interdependency or shared prosperity among states involved. It further serves as a platform for knowledge exchange whereby countries learn from each other’s experiences and best practices (Foster et al., 2018). In some cases, solutions that work in developed economies may not be suitable for developing ones directly.

Advantages of Regional Cooperation

The positive outcomes of this form of partnership include enhanced trade conditions between regions, leading to greater economic stability and political sovereignty, as well as improved prospects for achieving ecological sustainability (OAU/AU).

Economic Attractiveness

One key economic advantage of regional cooperation is the possibility of increasing intra-regional trade. According to the United Nations Conference on Trade and Development (UNCTAD), intra-regional exports among developing countries increased from 42% in 2006 to 52% in 2018 (UNCTAD, 2019). This shows that South-South trade is becoming more critical. When ASEAN implemented the ASEAN Free Trade Area (AFTA) in 1992, there has been a remarkable increase in intra-ASEAN trade. Between 1993 and 2020, the ASEAN Secretariat put its total trade at $2.8 trillion, increasing from $123.1 billion in intra-ASEAN trade.

Regional cooperation can also increase the appeal of member states for foreign direct investment (FDI). It is observed that the larger markets and harmonising regulations attract more FDI into regional blocs. In Latin America, for example, ECLAC notes that “regional integration efforts” have influenced FDI inflows, as the region received $160.7 billion in FDI inflows in 2019 (ECLAC, 2020).

Cooperation can also boost the economy to protect it from external shocks. Regional integration is another important factor in helping African economies cope with global financial crises (AfDB, 2019). For example, African countries with closer regional ties had less severe economic contractions during the 2008 global financial crisis (AfDB, 2019).

Political Stability and Security

Regional organisations often provide mechanisms for peaceful conflict resolution among member states. One of these frameworks is the African Peace and Security Architecture (APSA) developed by the African Union (AU), which includes conflict prevention, management, and resolution mechanisms. As a result of APSA’s contribution, there has been a reduction in interstate conflicts across Africa, from 16 armed conflicts in 2002 to only seven in 2019 (SIPRI, 2020).

Democratic norms and good governance are often enforced through regional bodies. For instance, the Organization of American States (OAS) has played a crucial role in supporting democratic processes all over Latin America. In developing countries, participation within such organisations increases the chances of democratic transition and consolidation, according to Pevehouse’s study cited by Brooks et al. (2005:727).

The collective security capabilities are enhanced by regional cooperation. Terrorism and drug trafficking have forced several Central Asian countries’ governments into joint military exercises as well as intelligence sharing through the Shanghai Cooperation Organisation (SIPRI). UNODC (2019) has reported that such collaboration led to a 17% increase in drug seizures between the years 2014-18.

Sustainable Development

Regional cooperation is required to tackle cross-border environmental issues. The Association of Southeast Asian Nations (ASEAN) has implemented the ASEAN Agreement on Transboundary Haze Pollution against forest fires and haze since its establishment in 2003, leading to a 36% decline in hotspots regionally, according to the ASEAN Secretariat (2020).

Climate change responses could be better managed at the regional level. A good example is the Caribbean Community Climate Change Centre (CCCCC), which has played a significant role in devising climate change strategies for the region. In the Caribbean, coordinated regional action can reduce costs of climate adaptation by up to 25% compared to country approaches, according to the World Bank (2018).

Cooperation makes it possible to manage shared natural resources efficiently. This river basin organisation has coordinated sustainable development and management of the Mekong River Basin, including several Southeast Asian countries, such as Lao PDR, Cambodia, Vietnam, and Thailand. As a result of these efforts, fish stocks increased by 12% and water quality improved by about 15% between 2010 and 20 (MRC, 2021).

Regional power pools and energy cooperation can ensure energy security and promote renewable energy uptake. For instance, the Southern African Power Pool (SAPP), which facilitated electricity trading among southern African countries, increased the region’s renewable energy capacity by 22% from 2015 to 2020 (International Renewable Energy Agency, 2021).

Obstacles to Regional Collaboration and Solutions

Economic Inequalities

One of the major hurdles in regional cooperation is economic inequalities among member countries that may stall cooperation. Rich countries might be hesitant to share their resources with others or open up their markets because they fear economic losses. For example, within the East African Community (EAC), Kenya’s GDP per capita is almost twice as much as Tanzania’s and four times higher than it is for Burundi’s (World Bank, 2022), which puts trade discussions into tension.

A possible way to subvert this inequality problem in regional cooperation is to implement asymmetric integration strategies that allow less developed countries more time to adapt to regional policies. The ASEAN-minus-X formula, which gives space for some members to temporarily opt out of certain economic initiatives, has been useful in managing disparities (Asian Development Bank, 2019).

Political Stability and Conflicts

Political instability or conflicts at the country level can derail regional efforts to promote cooperation. An ongoing conflict in South Sudan, for instance, has impeded the progress of the Intergovernmental Authority on Development (IGAD) in eastern Africa.

Strengthening regional capacities for resolving conflicts and their peacekeeping abilities will mean greater gains. Economic Community of West African States (ECOWAS) successfully intervened in several conflicts, such as The Gambia’s 2017 case, thus showcasing how regional bodies can ensure stability (International Crisis Group, 2019).

Weak Organisational Capacity

Numerous organisations in the global south regions lack sufficient institutional frameworks and means to enforce these. South Asian Association for Regional Cooperation (SAARC) has not succeeded due to poor institutions implementing most of its initiatives. Enhancing institutional capacity requires investment in capacity-building activities targeting regional institutions while creating clear rules that can be implemented and enforced at all times. The African Union’s reform process, which commenced in 2016, seeks to increase the organisation’s effectiveness and efficiency (African Union, 2020).

Sovereignty Concerns

Countries might feel challenged to surrender their decision-making powers to regional bodies because of fears about loss of sovereignty. For instance, Mercosur has faced a problem deepening its integration among South American countries due to the member states’ unwillingness to give up their economic policy autonomy.

A practical solution involves adopting a flexible approach to integration that respects national sovereignty while promoting cooperation. The Pacific Alliance has been successfully pragmatic and business-oriented, thus making strides in areas like trade and investment without compromising members’ autonomy (Inter-American Development Bank, 2018).

External Influence

Global South regional cooperation must take into account external influences. For example, individual agreements between China and some ASEAN countries sometimes complicate ASEAN’s collective bargaining position. It is important to formulate joint strategies for dealing with outside powers to solve this. The African Continental Free Trade Area (AfCFTA) is a good step towards strengthening Africa’s collective bargaining power in global trade negotiations (United Nations Economic Commission for Africa, 2021).

Infrastructure and Connectivity Gaps

Poor physical and digital infrastructure can significantly hinder the actualisation of regional cooperation initiatives. For instance, inadequate transport linkages in Central Asia have significantly limited the potential for intra-regional trade within the Central Asia Regional Economic Cooperation (CAREC) Program. Regional infrastructure projects must be prioritised while multilateral development banks’ funding capacities are tapped. To bridge the continent’s infrastructure gap, the African Development Bank supported the Programme for Infrastructure Development in Africa (PIDA) (African Development Bank, 2020).

Public Support Inadequacy

Limited public awareness and support for regional integration sometimes impede the political will to collaborate. For example, the low voter turnout in East African Legislative Assembly elections shows little public engagement with EAC. To address this, it is crucial to increase the level of education and public outreach about the benefits of regional cooperation. This program has helped create a regional identity through student exchanges that could be replicated in other regions (European Commission, 2019).

These challenges underscore how complicated regional cooperation can be in the Global South; however, potential solutions show that these hurdles can be crossed given political willingness, innovative approaches, and sustained efforts. Successful regional cooperation must be multidimensional since it covers economic, political, and social aspects while still being flexible enough to accommodate the specificities of different regions.

Conclusion

Regional cooperation in the Global South has proven to be a powerful catalyst for development, ensuring economic growth, political stability, and sustainable progress. The benefits of this collaborative approach are manifold, including increased intra-regional trade, improved foreign direct investment attractiveness, enhanced conflict resolution mechanisms, and more efficient management of shared natural resources. However, various obstacles persist, such as economic inequalities, political instability, weak institutional capacity, sovereignty concerns, external influence, infrastructure gaps, and insufficient public support.

Several recommendations can be made to overcome these challenges and fully harness the potential of regional cooperation. Firstly, implementing asymmetric integration strategies can help mitigate economic disparities among member countries. Secondly, strengthening regional conflict resolution and peacekeeping capacities is essential for maintaining political stability. Thirdly, investing in the institutional capacity of regional organisations can improve their effectiveness and efficiency. Fourthly, adopting a flexible approach to integration that respects national sovereignty can alleviate concerns about the loss of decision-making power.

Moreover, formulating joint strategies for dealing with external powers can help safeguard the interests of regional blocs. Prioritising regional infrastructure projects and tapping into multilateral development banks’ funding capacities can help bridge infrastructure gaps. Finally, enhancing public education and outreach regarding the benefits of regional cooperation can cultivate stronger public support and greater engagement with these initiatives.

Regional cooperation does not solve all the development challenges. However, in an increasingly interconnected world, regional cooperation is a vital strategy for countries in the Global South to address common challenges and leverage their collective strengths. To more effectively pursue their development objectives and establish their positions within the global economy, countries need to pool resources, harmonize policies, and present united fronts. Therefore, leaders in the Global South should build upon existing achievements, learn from past mistakes, and deepen their commitment to regional integration for the benefit of their people and the global community.

[Annexure]

Successful Regional Cooperation Initiatives

The examples below demonstrate successful regional cooperation in the Global South. They underscore the importance of political will, practical approaches, and institutional frameworks in realising the success of regional cooperation initiatives. Although challenges persist, these initiatives offer valuable insights to advance regional integration efforts worldwide.

1. ASEAN Economic Community (AEC) Launched in 2015, the AEC aims to create a single market and production base within Southeast Asia.

Key Achievements:

Intra-ASEAN trade increased from $498 billion in 2015 to $598 billion in 2019 (ASEAN Secretariat, 2020).
Tariffs on 98.6% of intra-ASEAN trade items have been eliminated (ASEAN Secretariat, 2021).

Success Factors:

a) Gradual, phased approach to integration

b) Flexible consensus-based decision-making (“ASEAN Way”)

c) Strong institutional framework with regular high-level meetings

d) Focus on practical, achievable goals

African Continental Free Trade Area (AfCFTA) Operational since January 2021, AfCFTA aims to create a single continental market for goods and services.

Key Achievements:

Potential to increase intra-African trade by 52.3% (UNECA, 2021).
Expected to lift 30 million people from extreme poverty (World Bank, 2020).

Success Factors:

a) Strong political will and leadership from the African Union

b) Inclusive negotiation process involving all African countries

c) Comprehensive scope covering goods, services, and digital trade

d) Built-in mechanisms for dispute resolution and monitoring

Mercosur (Southern Common Market) Established in 1991, Mercosur is an economic and political bloc in South America.

Key Achievements:

Intra-bloc trade increased from $4 billion in 1990 to $42 billion in 2019 (IADB, 2020).
Successfully negotiated trade agreements with the EU and EFTA.

Success Factors:

a) Shared historical and cultural ties among member states

b) Initial focus on trade liberalisation before expanding to other areas

c) Establishment of dispute resolution mechanisms

d) Creation of Mercosur Parliament to enhance political integration

Caribbean Community (CARICOM) Single Market and Economy: Launched in 2006, CARICOM aims to integrate the economies of its member states.

Key Achievements:

Intra-regional trade in goods increased by 13% between 2006 and 2016 (CARICOM Secretariat, 2018).
Successful implementation of free movement for certain categories of skilled workers.

Success Factors:

a) Strong focus on capacity building for member states

b) Development of regional institutions like the Caribbean Court of Justice

c) Emphasis on functional cooperation in areas like health and education

d) Regular engagement with the Caribbean diaspora

Greater Mekong Subregion (GMS) Economic Cooperation Program

Initiated in 1992 by the Asian Development Bank, the GMS program focuses on infrastructure development and economic corridors.

Key Achievements:

Completion of over 100 infrastructure projects worth $27 billion (ADB, 2021).
Cross-border power trade increased from 2,493 GWh in 2010 to 75,738 GWh in 2020 (ADB, 2021).

Success Factors:

a) Clear focus on infrastructure and connectivity

b) Strong support from multilateral institutions (especially ADB)

c) Pragmatic, project-based approach

d) Regular high-level meetings to maintain political momentum

Pacific Alliance: Formed in 2011, the Pacific Alliance aims to promote free trade and economic integration among its Latin American members.

Key Achievements:

Elimination of 92% of tariffs among member countries (Pacific Alliance, 2020).
Creation of the Integrated Latin American Market (MILA), merging the stock exchanges of member countries.

Success Factors:

a) Shared commitment to open markets and free trade

b) Focus on practical, business-oriented initiatives

c) Outward-looking approach, seeking engagement with Asia-Pacific

d) Streamlined decision-making process

[Mohammed Saqib is an Economist and Convenor, COGGS]

Is Regional Collaboration the Global South’s Secret to Triumph? Read Post »

ASEAN- Africa Pioneering Spirit of Global South

thegeoeconomics.com | August 9, 2024

The Association of Southeast Asian Nations (ASEAN) stands as an economic and political powerhouse within the Global South, comprising Brunei Darussalam, Myanmar, Cambodia, Indonesia, Laos, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Each of these ten member states contributes its unique economic flavor, making ASEAN a melting pot of economic prowess and developmental diversity. From high-flying achievers to rapidly developing nations, ASEAN is keenly interested in engaging with the emerging markets of Africa.

Africa, with a population of 1.5 billion and a GDP of approximately $3 trillion, is a vibrant market. ASEAN’s population is approximately 660 million, where rising income levels are creating a burgeoning consumer market. The continent’s rapid urbanization and economic development are the main reasons of emerging demand across various sectors. The partnership between ASEAN and Africa is marked by mutual benefits; ASEAN countries can tap into Africa’s burgeoning markets, characterized by a growing middle class and increasing purchasing power. Conversely, African nations can leverage ASEAN’s established trade networks and technological advancements to enhance their economic sectors and partnership.

In Africa, the African Continental Free Trade Area (AfCFTA) is initiated to create a single continental market for goods as well as services. The AfCFTA is expected to enhance intra-African trade, facilitate investment flows, and drive economic growth across the continent. As Africa’s consumer market expands, it presents a tremendous business opportunity for trade, including those from ASEAN, to tap into new markets and capitalize on emerging economic trends.

Both ASEAN and Africa are embracing digital transformation for economic progress and prosperity. ASEAN’s advanced technological infrastructure and innovation-driven economy provide a solid foundation for collaboration in areas such as e-commerce, energy, fintech, and digital services. There lies a great scope in collaboration for renewable energy, agritech, and smart cities. Collaborative efforts in research and development can lead to the creation of cutting-edge solutions tailored to both regions’ needs.

As the largest country in Southeast Asia by both area and population, Indonesia commands a prominent position in ASEAN’s economy. The nation is known for its innovation and constant appetite for scaling newer height. For Kenya, Nigeria, South Africa, and other developing African economies, aligning trade policies with ASEAN’s economic strategies can facilitate a more conducive environment for export promotion. By harmonizing trade regulations and reducing tariff barriers, the African can enhance their competitiveness in ASEAN markets.

For instance, Kenya’s impressive horticultural sector could benefit from improved access to ASEAN’s large consumer base, while Nigeria’s oil and gas industry could find new markets for its exports. Collaboration between ASEAN and African nations in transport infrastructure, such as roads, railways, and ports, can significantly reduce the time and cost of moving cargos. For example, the development of improved logistics networks in Kenya can enhance its connectivity with ASEAN markets, making it easier to export goods like coffee.

As global trade increasingly tilts towards Asia, ASEAN is flexing its economic muscles, positioning itself as a major trendsetter in the global marketplace. When coupled with Africa, the partnership empowers Africa’s and ASEAN’s influence, across the Global South. The synergy not only boosts trade between the two regions but also balances and strengthens the global economic stage. By blending their distinct strengths, tackling shared challenges, ASEAN and Africa are charting a bold new path to economic prosperity in the Global South. Their fast-growing partnership is exptected to spark a wave of growth and innovation.

ASEAN- Africa Pioneering Spirit of Global South Read Post »