Brunei’s Economic Challenges and Strategy of Diversification

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Nestled on the island of Borneo, Brunei has long been synonymous with oil wealth, enjoying one of the highest per capita incomes globally due to its substantial reserves of crude oil and natural gas. The oil-rich sultanate of Brunei hosts a population of roughly half million.  Yet, as the global economy evolves and traditional energy resources face decline, Brunei’s aspirations are increasingly centered on exploring economic diversification and pursuing sustainable growth. Crude oil production in the country has experienced a significant decline, plummeting from a peak of 220,000 barrels per day in 2006 to below 90,000 barrels per day by 2023. This trend is mirrored by natural gas production, which has also seen a notable decrease.

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Brunei Economic Blueprint

In early January 2021, Brunei Darussalam’s Ministry of Finance and Economy introduced the Brunei Economic Blueprint, a strategic document aimed at advancing the third objective of the Brunei Vision 2035: the creation of a dynamic and sustainable economy. Vision 2035, inaugurated by the Sultan of Brunei in 2007, outlined a transformative agenda for Brunei with three core goals:

  1. Goal 1: To have a highly educated and skilled population base whose achievements will underscore the nation’s commitment to human capital development.
  2. Goal 2: To deliver one of the highest standards of living globally for its people, ensuring Brunei ranks among the foremost in quality of life.
  3. Goal 3: To cultivate a dynamic and sustainable economy that reduces dependency on hydrocarbon revenues and establishes a diversified and resilient economic structure.

Diversification of Strategy for Revenue

Brunei relies significantly on its hydrocarbon resources, which account for over half of the nation’s income. Brunei’s historical reliance on hydrocarbons has rendered its economy vulnerable to the vicissitudes of global energy markets. Aware of this precariousness, the Sultanate has embraced diversification as a pivotal element of its economic strategy. The goal is to transition from an economy dominated by oil and gas to one that harnesses the potential of multiple sectors.

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Central to this vision is the development of downstream industries. Brunei’s world class Hengyi oil refinery, operational since 2019, marks a significant stride towards this objective. By converting crude oil into refined products and petrochemicals, Brunei seeks to add value to its hydrocarbon resources and stimulate industrial growth. Despite occasional setbacks, such as maintenance-induced production declines, this sector remains integral to Brunei’s diversification strategy.

Equally important is the revitalization of the tourism sector. Although tourism in Brunei has yet to recover to pre-pandemic levels, the government views it as a crucial component of its diversification efforts. With its rich cultural heritage, pristine natural landscapes, and commitment to sustainability, Brunei is well-positioned to attract eco-conscious travelers and cultural tourists. To realize this potential, enhancements in infrastructure, marketing, and international partnerships are essential.

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In addition to the reduction in hydrocarbon output, downstream activities—historically a crucial growth engine for the economy since the inception of the Hengyi oil refinery in 2019—also faced setbacks. The first half of 2023 saw a substantial decline in these activities, primarily due to the scheduled maintenance of a major petrochemical refinery. This maintenance disruption has further exacerbated the challenges facing Brunei’s energy sector.

Sustainability and Innovation for Economy

Sustainability lies at the heart of Brunei’s aspirations for the future. The South East Asian nation has made significant strides in environmental stewardship, investing in green technologies and renewable energy sources. This commitment is reflected in its efforts to conserve rainforests, manage marine resources responsibly, and reduce carbon emissions. By prioritizing sustainability, Brunei aims not only to preserve its natural beauty but also to establish itself as a leader in environmental responsibility.

Innovation is another cornerstone of Brunei’s strategic vision. The government is investing in education and research to foster a knowledge-based economy. Support for entrepreneurship, digital transformation, and technological advancement is intended to cultivate a dynamic and resilient economic environment. By nurturing talent and promoting innovation, Brunei seeks to gain a competitive edge beyond its traditional hydrocarbon sectors.

Challenges and Opportunities

Brunei is an absolute monarch y ruled by Sultan Hassanal Bolkiah. It’s per capita GDP is one of the highests among the world. Despite its fortune, Brunei faces several challenges. The transition away from hydrocarbon dependency demands substantial investment and time. The slow recovery of the tourism sector and temporary disruptions in downstream industries underscore the difficulties in achieving a balanced and resilient economy. Furthermore, global economic uncertainties and regional competition add complexity to Brunei’s diversification efforts.

Nonetheless, these challenges present significant opportunities. Leveraging its financial resources, Brunei can invest in high-value sectors and infrastructure projects that will drive long-term growth. Strategic partnerships with Global South nations and investors can provide the expertise and capital necessary to accelerate diversification. The wealthy nation’s aspirations illustrate a visionary approach to securing its economic future amidst evolving global dynamics. The nation is committed to reducing its reliance on hydrocarbon revenues by prioritizing diversification, sustainability, and innovation. This strategic focus aims to cultivate a resilient and multi-dimensional economy. Although challenges remain, Brunei’s proactive measures lay the foundation for a more sustainable and prosperous future. As it forges ahead, the country’s unwavering commitment to progress and adaptability will be essential in shaping its economic aspirations in the years to come.

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UN South-South Cooperation Day: Why UN Chief Guterres Seeks Triangular Cooperation?

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On the occasion of United Nations Day for South-South Cooperation on September 12, UN Secretary-General António Guterres delivered a significant message highlighting the transformative potential of unity among developing nations. Guterres emphasized that “only together can countries leverage multilateral support and realize shared prosperity,” underscoring the critical role of South-South cooperation in addressing global challenges.

UN Secretary-General António Guterres

What is Day for South-South Cooperation? 

On 12 September 2024, the United Nations Office for South-South Cooperation (UNOSSC) will spearhead the global observance of the United Nations Day for South-South Cooperation, themed “A Better Tomorrow with South-South Cooperation.” This event sets the stage for the Summit of the Future, which will be held at the UN Headquarters in New York from 22 to 23 September 2024. During the Summit, Member States will work towards establishing principles, commitments, and actions to promote a sustainable future.

What UN SG Said on South-South Cooperation Day? 

The Secretary-General acknowledged that while South-South partnerships are crucial, they do not absolve wealthier nations from their responsibilities. Addressing ahead of the South-South cooperation day he stated, “South-South cooperation does not reduce the responsibility of wealthier nations to help tackle global inequalities. It does not replace North-South cooperation.”

Guterres further highlighted that strong South-South partnerships, along with triangular cooperation, are instrumental in building a fairer and more inclusive global financial system. He noted that these collaborations “can advance a fairer, more inclusive global financial system that responds to the challenges faced by developing countries.”

Moreover, he pointed out that such partnerships have the potential to unlock “the power of digitalization, data, and science-backed solutions for sustainable development.” This reflects the importance of leveraging modern technology and innovation to drive progress.

The Secretary-General also emphasized the impact of these collaborations on improving the quality of life and building resilience. He stated that they “can help improve the quality of life today and for future generations, building resilience and empowering women and young people.”

As the Summit of the Future approaches  on 22 and 23 September, Guterres called for a reaffirmation of commitment to South-South and triangular cooperation. He concluded, “by pooling resources, know-how, and experience, we can create a more equitable world for all,” highlighting the importance of solidarity and mutual support in achieving global equity and sustainable development.

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Will Venezuela Overcome Economic Challenges?

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  • Dr. Nahem Reyes, Venezuelan Researcher

Venezuela is basically known for its oil and Miss Universe. However, since the middle of the last decade, a major question has arisen: Why and how did Venezuela’s image shift from being so positive to becoming so negative? While it is true that Venezuela – more specifically an area located in the south of the country called the “Orinoco Belt” – is still by far the country with the largest proven oil reserves on planet Earth, that is, more than 300 billion barrels. Despite this, the country, far from developing its economy, contrary and unfortunately the Venezuelan population experiences 80% of critical poverty and since 2016 the country has experienced a massive migration with figures that reach 8 million.

Dr. Nahem Reyes, Author

The starting point of such a colossal crisis, that is, unprecedented in the Americas and a migratory process superior to that of Syria and the entire Arab Spring at the beginning of the last decade, has its origin for some reductionists by trade, in a crisis international politics, that is, the Washington – Caracas confrontation with the imposition of economic sanctions or trade blockades since the end of President Obama’s second term and deepened during the government of Republican President Donald Trump.

However, the source of such colossal and historic destruction—both of the national economy and society—can be traced back to the government of the well-known President Hugo Chávez, who governed Venezuela in times of full oil boom, a kind of oil boom 2.0, when at the beginning of the 20th century when Venezuelan crude oil was priced at over $100 per barrel. This raises the question: How did a leader in the midst of an economic boom lay the groundwork for such a downfall?

Obviously, this was the product of a tragic chain of events, but all of them associated with political-ideological factors and which we will detail below. Hugo Chávez won the December 1998 elections in a context where the two-party representative democracy was exhausted by corruption, rising poverty, a deficit in public services, increasing living costs, and widespread insecurity and violence. In short, a collective rejection of the system, a situation that the former military coup leader capitalized on for his victory at the polls with his diffuse “constituent” proposal.

Once in power, he advanced his campaign promise of a ‘constituent’ assembly, styled after the French model, which later led to a new Constitution approved by a large majority. The new Constitution of 1999 not only brought a change in the name of the country, which went from “Republic of Venezuela” to “Bolivarian Republic of Venezuela”, but it also came with a very broad load of faculties and powers for the Executive Branch. Amen, everything allowed President Chávez to generate a system of nominally separate and independent Public Powers, but in the end, they were all derived from the direct and personal will of Hugo Chávez and to which was added the effort to transform Venezuela into a Cuban-style socialist society.

These two powerful elements intrinsically associated, that is, on the one hand the breakdown of the liberal democratic model in the strict sense and on the other hand, the gradual but systematic implementation of the socialist model, which implied, a sine qua non, the liquidation of the private property as well as the conditions of the capitalist system. Soon, the entire country was subordinated to the will of the President of the Republic and his political party, first the “V Republic Movement” and later the “United Socialist Party of Venezuela” (PSUV), until today.

The business community, the traditional political sectors, the most prestigious universities in the country and intellectuals, rejected such an arbitrary and unconstitutional imposition of socialism, which unleashed an open and constant clash between these sectors and the national government that still had great popular support.

With the second term of Hugo Chávez, in 2008 the president deepened his socialist model, the word “expropriation” became commonplace in the country’s newspapers, Chávez’s administration became increasingly authoritarian, leading to the expulsion of private companies, which either ceased operations or were expropriated.

Then, the second wave of expropriations fell on large Venezuelan industries, which ended simply due to the reduction of production in multiple sectors simultaneously, which inevitably led to hyper-inflation and generalized shortages. The government was quick to blame Yankee imperialism and its local partners.

Already in the midst of this economic crisis, Chávez died in 2013, being succeeded by his dolphin, Nicolás Maduro, whose first term was characterized by the worsening of the crisis and greater repression. Maduro’s situation reached a critical point after the recent elections on July 28, 2024, when the National Electoral Council proclaimed Nicolás Maduro as the winner with 51.2% of the vote, leaving opposition candidate Edmundo González with 44.2%. But the process has been highly questioned, few countries have recognized these results.

Finally, all indications are that Maduro will be sworn in without major challenges on January 10, 2025, but two big unknowns remain: Will Maduro’s government really manage to survive once he is sworn in on January 10? And for how much longer will Venezuela, with such wealth, remain disconnected from the world economy and its population plunged into poverty by this narco-praetorian-neo-communist model? Only the time will answer these questions.

[ The views expressed in this article are solely those of the author and do not necessarily reflect the official stance or editorial position of COGGS.]

 

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

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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.

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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).

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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?

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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

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[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.

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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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How Rupees & Renminbi Driving a Digital Financial Renaissance in Global South?

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  • Mohammed Saqib

As digitalization and financial inclusion gain momentum in emerging economies, India and China are attracting more attention as two of the largest and fastest-growing economies in the world. This is because they have made remarkable strides in technology and financial services, which render them well-placed to drive change across the Global South. They could transform emerging markets by bridging the digital divide due to a lack of access to finance through cooperation.

Digital Infrastructure

Collaboration between India and China can make a difference in many things, including technological infrastructures, as far as this one aspect is concerned. The Belt and Road Initiative (BRI) has seen large amounts of money being pumped into Asia’s digital infrastructure; similarly, Digital India has shown how nationwide digital strategies can change entire countries. Working together, these two countries could foster quicker access to high-speed broadband networks, 5G systems, etc., for use within the Global South. Consequently, more areas may be linked, breaking down contemporary barriers that impede economic growth from happening faster than it should while ensuring social upliftment. Similarly, other developing countries could emulate such projects if supported by joint ventures between India and China.

 

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Financial Inclusion

India and China developed innovative approaches that can be replicated elsewhere among other developing nations when addressing concerns about financial inclusion. One example is the Unified Payments Interface (UPI) developed by India or Alipay/ WeChat Pay (APWP), two Chinese payment giants that facilitate digital cashless transactions.Also available are Alipay or WeChat Pay-like mobile payments through UPI, allowing over 3 billion monthly bank transfers and a billion users each for Alipay’s and WeChat Pay’s mobile payment platforms.

By creating digital payment systems like India’s UPI or China’s Alipay and WeChat Pay and sharing their fintech innovations and financial education programs, India and China can help third-world countries bypass the usual banking infrastructure process. In such a system, millions of people without bank accounts could participate in the economy. Strong fintech ecosystems like those in India and China can enhance access to finance among developing countries. For instance, with the Jan Dhan Yojana in India, 430 million bank accounts have been opened for poor people who cannot reach banks. Similarly, financial inclusion has improved significantly in Kenya due to the M-Pesa mobile money platform, which serves up to 40 million users. Ant Group of China has developed relevant microcredit solutions, amongst other things, with conditions similar to those in other emerging economies. Therefore, initiatives such as these, supported by collaboration between India and China, should also be adopted by other developing nations.

Digital and Financial Literacy

To make effective use of fintech, digital and financial literacy is important. To develop digital technology and finance skills in the developing economy, India and China could join forces in establishing training programs and educational initiatives. Financial literacy programs launched by the Reserve Bank of India (RBI) and the People’s Bank of China (PBOC) are an experience many countries can learn from. For example, RBI’s centres for financial literacy teach banking services, savings, and credit facilities, among other things. At the same time, India might share her experience with the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), which aims to provide skill training to millions of young persons and engage them in such activities. Furthermore, in China, vocational training programs for different technical specialities exist. An excellent case here is Luban Workshops across Africa.gea05950060195c3de4d67ecb22d62ef96c1fdd535b68e6d9373014ece43525d474e6ef7428fa3d56a79174006909f545fbe098a342db6c487555c48f195ec8f6_1280-2581545.jpg

The cooperation between India and China offers broad opportunities to reshape technological and financial landscapes in many countries across the Global South as the world gets more digitalised daily. Pooling resources in technology and finance will facilitate digital transformation and promote inclusive growth in Global South nations.. Already, China has made huge strides towards setting up new digital infrastructures across Asia & Africa with –the expansive Belt-Road Initiative. On the other hand, the Digital India campaign spearheaded by UPI-based revolutionary financial inclusion initiatives suggests how potent nationwide broad-based digitisation campaigns can be.

This cooperation will bring many advantages through improved digital connectivity, enhancing access to education, healthcare services, and government services, and bridging urban-rural divides. Digital channels for expanding financial inclusion empower unbanked individuals to participate fully in the formal economy while accessing important financial services.

However, despite infrastructure gaps, differences in regulatory environments, and cultural obstacles to technology adoption, fruitful cooperation between India and China in the digital realm could bring huge rewards. This collaboration can be a successful model of south-south cooperation for the 21st century. It exemplifies how emerging economies can use their unique experiences and innovations to aid development in other parts of the Global South, thus possibly redefining typical paradigms on traditional international development assistance.

This partnership may also reshape the geopolitical landscape by fostering greater understanding and collaboration between India and China. Despite having had uneasy relations over the years, productive cooperation within this area is a foundation for future joint initiatives across diverse sectors that promote regional stability and prosperity.

The success of this initiative could set a new standard for international cooperation, showcasing the power of shared expertise and resources in addressing global development challenges. Also, through collaborative efforts between India and China, there is still hope to usher in an era characterised by sustainability, equality and inclusiveness.

[ Mohammed Saqib is convenor, COGGS and Secretary General of  India China Economic & Cultural Council ]

References. 

African Union (2020). Digital Transformation Strategy for Africa (2020-2030).

ADB (2021). Asian Development Bank Annual Report.

China Daily (2021). Luban Workshops in Africa.

Government of India (2021). Pradhan Mantri Jan Dhan Yojana.

GSMA (2021). State of the Industry Report on Mobile Money.

Hillman, J. E. (2020). The Emperor’s New Road: China and the Project of the Century.

India, MEA (2020). India-Kenya Joint Statement.

NPCI (2021). Unified Payments Interface (UPI) Statistics.

RBI (2021). Financial Literacy Initiatives.

Reuters (2020). Ant Financials’ Microcredit Solutions.

TechNode (2021). Alipay and WeChat Pay User Statistics.

UIDAI (2021). Aadhaar Overview.

World Bank (2018). Global Findex Database 2017.

Xinhua (2020). China’s Health Code System During COVID-19 Pandemic.

How Rupees & Renminbi Driving a Digital Financial Renaissance in Global South? Read Post »

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

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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.

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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.

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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.

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

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

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– 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.

 

Dr. Juan Roberto Reyes Solís, Author

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.

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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.

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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 ]

 

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

The Brandt Line and Global South

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The Brandt Line, introduced by former German Chancellor Willy Brandt in the 1980s, remains a significant conceptual framework for understanding global economic disparities. Featured in the Brandt Commission’s seminal 1980 report, North-South: A Programme for Survival, this line visually distinguishes between the economically developed “Global North” and the less developed “Global South.” While the Brandt Line offers a broad depiction of global economic inequalities, it also emphasizes the complex nature of development and wealth distribution across different regions.

The Brandt Line: An Overview

The Brandt Line is not a precise geographical boundary but rather a marker that highlights global economic disparities.  The line runs from the northern part of Mexico, across the top of Africa, the Middle East, and India, before curving around China and descending through East Asia. This line effectively demarcates wealthier regions in the Northern Hemisphere from poorer areas primarily in the Southern Hemisphere. Countries like the United States, Canada, and Western European nations lie north of this line, while much of Africa, parts of Latin America, and several Asian countries fall south of it.

The line was introduced as part of the Brandt Commission’s efforts to address and highlight the economic and developmental gaps between the world’s richer and poorer countries. It sought to draw attention to the urgent need for international cooperation and development aid to address these disparities .

The Global South: Economic and Historical Context

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The Global South concept remains instrumental in identifying and addressing the persistent challenges faced by developing nations. The term “Global South” encompasses countries that are generally less economically developed and often face higher levels of poverty and inequality. This designation includes many nations in Africa, Latin America, and parts of Asia. Historically, these countries have been subject to colonial exploitation and have struggled with political instability and economic challenges that continue to impact their development

Contrastingly, the “Global North” includes countries with advanced economies, higher standards of living, and significant global influence. This region comprises the United States, Canada, Western Europe, Japan, Australia, and New Zealand. Despite being in the southern hemisphere, Australia and New Zealand are part of the Global North due to their high levels of economic development and prosperity.

While the Brandt Line provides a useful historical snapshot of global economic disparities, it has been critiqued for its oversimplification of complex global issues. The line does not account for significant economic changes that have occurred since its introduction.

Contemporary analyses of global development often use more nuanced metrics, such as the Human Development Index (HDI) and varying economic indicators, to assess and understand global inequalities. These modern tools provide a more dynamic view of development that can better capture shifts in economic conditions and growth

The Brandt Line offers a foundational perspective on global economic disparities, effectively highlighting the divide between developed and developing regions. While it remains a significant historical reference, the evolving nature of global economics calls for more refined and dynamic analyses.

 

The Brandt Line and Global South Read Post »

What Heads of State Remarked at India-Africa Business Conclave

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The three-day long 19th CII India-Africa Business Conclave, held on August 19-21 in New Delhi, has set a new standard in the evolving economic ties between India and Africa. At the heart of the discussions was Africa’s rise as one of the world’s most dynamic economic regions, marked by an impressive$ 6.7 trillion in consumer and business spending. As Africa’s third-largest trading partner, India has witnessed its trade with the continent grow from USD 68.5 billion in 2011-12 to USD 83.34 billion in 2023-24, reflecting the deepening and expanding nature of warm relationship.

The 19th CII India-Africa Business Conclave, convened by Confederation of Indian Industry underscored the vital role of the India-Africa growth partnership within the broader context of the Global South alliance. The conclave, a collaboration between the CII, India’s Ministry of External Affairs, and  Ministry of Commerce & Industry, highlighted strategic areas for accelerating economic integration between the two regions.

Prosper Bazombanza, Vice President of  Burundi, emphasized the potential for Indian investors to significantly contribute to Burundi’s economic development. By leveraging Burundi’s rich natural resources, Indian businesses could play a crucial role in enhancing the country’s growth trajectory through creating a more cooperative environment.

In a similar vein, Muhammad B.S. Jallow, Vice President of  Gambia, noted the strategic discussions facilitated by the conclave. Key sectors such as energy, infrastructure development, affordable housing, and healthcare were identified as focal points for collaboration with Indian enterprises.

India’s Minister of Commerce and Industry Piyush Goyal emphasized that the India-Africa partnership should be driven by a clear, actionable agenda with specific, achievable goals across short, medium, and long-term plans, aiming to produce tangible outcomes and measurable results.

While addressing in the business conclave, Jeremiah Kpan Koung, Vice President of Liberia, invited Indian firms to explore investment opportunities within Liberia’s agricultural sector. Liberia’s substantial land resources and favorable climatic conditions present significant opportunities for growth. Additionally, the country is open to various forms of investment, including private-private and public-private partnerships.

Marie Cyril Eddy Boisse´zon, Vice President of  Mauritius, highlighted the deep-seated civilizational ties between India and Africa. He advocated for sustained and focused efforts to extract tangible benefits from the cooperation in sectors such as digitalization, healthcare, space development, pharmaceuticals, infrastructure, and power. This underscores the need for a strategic approach to leveraging shared values and mutual interests.

Dr. C.G.D.N. Chiwenga, Vice President of Zimbabwe, pinpointed agriculture, mining, health, energy, and infrastructure as critical areas for collaborative growth. Zimbabwe’s openness to partnership with India aims to drive progress across these sectors, emphasizing the mutual benefits of such cooperation.

The 19th CII India Africa Business Conclave has thus reinforced the imperative for deepened economic integration between India and Africa. By focusing on sector-specific collaborations and harnessing shared resources and values, both regions stand to gain from enhanced mutual growth and development.

 

Rui Miguens de Oliveira, Minister of Industry & Commerce of Angola invited Indian companies to explore investment opportunities in Angola in agriculture and agro-processing, manufacturing, financial services, healthcare etc. Serge Gnaniodem Poda, Minister of Industrial Development, Commerce, Handicrafts and Small and Medium Enterprises, Burkina Faso, remarked the country seeks major investments from India in sectors such as agriculture, agri-business, IT & ICT services, pharmaceuticals, renewable energy and healthcare.

Chad’s Minister of Trade and Industry, Guibolo Fanga Mathieu, said the country offers significant business opportunities in sectors like agriculture, animal husbandry and crops like cotton. IT and ICT.

Sosten Gwengwe, Minister of Trade and Industry of Malawi, highlighted Malawi’s ATM (Agriculture, Tourism and Mining) strategy that opens us new investment opportunities for Indian companies.

Seydou Asman, Minister of Trade & Industry of Niger, urged Indian companies to increase their involvement in Niger, highlighting the country’s mineral wealth, extensive coastline, efficient transport infrastructure, and potential for renewable energy. Meanwhile, Omar Said Shaaban, Minister for Trade and Industrial Development in Zanzibar, Tanzania, described India as a key, reliable partner and encouraged Indian businesses to explore opportunities in Tanzania’s agri-business, tourism, and blue economy sectors, where the country holds a competitive edge.

What Heads of State Remarked at India-Africa Business Conclave Read Post »

Will India’s Values Illuminate the Path for Global South?

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– Prof. Rajesh Kharat, South Asian Studies, JNU, New Delhi

Although the Indian subcontinent is known for its distinct regional identity, its culture has been intertwined with India’s historical and cultural roots since ancient times. In modern times, the ‘South Asia’ region preserves the legacy of Indian tradition and civilization while maintaining unity through diversity.

Cultural identity, especially in Southeast Asian countries, is often associated with Indian traditions and culture. For example, in Indonesia, people use the term ‘Tathastu’ when greeting each other, and many names for boys and girls are similar to Indian names, such as Bhaskara, Yudhishthira, Shankar, and Hanuman. Despite being a constitutionally Islamic state, Indonesia has been linked to the Buddhist and Hindu traditions of India for hundreds of years. The same is true for the countries bordering India in the subcontinent, including Bhutan, Nepal, Bangladesh, Maldives, Pakistan, and Sri Lanka.

Prof. Rajesh Kharat, South Asian Studies, JNU, New Delhi

August 15, 1947, is an important day not only for India but also for other nations of the Global South, as India’s freedom struggle was central to the independence movements across the region. The influence of the Indian political system is evident in the political cultures of these countries. Some of them have embraced democratic values, written constitutions, and pantheism.

Over time, nations began fighting for democratic principles such as freedom, equality, and fraternity, and after gaining independence, they initially adopted democracy. However, many could not sustain this system, which is unfortunate. Compared to India, democracy has not taken root in several nations. Rulers in many of these countries have abandoned democratic values and principles in their quest to retain power. Consequently, the process of nation-building in these countries has faced setbacks.

India’s policy towards sovereign and independent countries is also appreciated by Global South partners. Although newly independent nations from the Indian subcontinent since 1947 have cited Indian political culture as an inspiration and guide, its influence is not always evident in these countries.

Instability in Afghanistan, Bangladesh, the Maldives, Myanmar, Nepal, and Sri Lanka has been detrimental to economic development and social integration. In these countries, elections have rarely been used to effect a change of power.

In Bangladesh, Bangabandhu Sheikh Mujib-ur Rehman, who founded independent Bangladesh, was assassinated. However, India sheltered ousted Prime Minister Sheikh Hasina, reflecting its political culture of support for neighbors in distress. Since the 1950s, India has maintained a tradition of assisting neighboring countries in difficult situations, including the Dalai Lama and political leaders from Iran, Iraq, and Afghanistan. Political uprisings in the Maldives have been addressed by India several times.

For instance, India intervened to save then-President Abdul Gayoom in 1988 and recently protected former President Mohammad Nasheed from insurgents. The 1987 India-Sri Lanka agreement helped Sri Lanka combat Tamil terrorists. In 1996 and 2006, India was ready to assist Nepal against Maoists. In 2006, when ULFA killed Bhutanese businessmen traveling across the border in Bhutan, India, alongside the Bhutanese army, destroyed the bases of these outfits.

Political assassinations have occurred throughout the Indian subcontinent. The assassinations of Pakistan’s then-President Zia-ul-Haq and former Prime Minister Benazir Bhutto, as well as the plight of Nawaz Sharif and Pervez Musharraf, highlight the political turmoil in Pakistan. Similar attempts to abolish the monarchy occurred in Nepal, and killings have also taken place in Sri Lanka.

Bhutanese Prime Minister Jigme Paldan Dorji was assassinated in 1964. Political assassinations in India, including those of Mahatma Gandhi, Smt. Indira Gandhi, and Rajiv Gandhi, are notorious, but they do not reflect India’s political culture.

The pattern of frequent constitutional changes in South Asian countries, often driven by coups, has eroded their political stability. Countries like Nepal have altered their constitutions multiple times. In contrast, the Indian Constitution remains robust, supported by an aware citizenry. This stability is not viewed with envy but rather with admiration by many countries in the Global South.

Recently, there have been concerns about undesirable changes in the region’s political culture. The symbols and monuments of the freedom struggle and the incidents that shock the values are taking place. If this is to be recovered, all the Global South countries must pay attention to implementing democracy.

Will India’s Values Illuminate the Path for Global South? Read Post »

From Diplomatic Trenches: What Experts Say About Voice of Global South Summit

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[“Realities of the 21st century cannot be confronted by the 20th century Victor and Vanquished mindset”– Amb Anil Trigunayat]

On August 17, 2024, India hosted the third “Voice of the Global South Summit,” which saw participation from 123 nations. The summit concluded with several significant announcements.

In a recent commentary for India News Network,  Ambassador Anil Trigunayat, a member of the Advisory Council of COGGS and Former Indian Envoy, talks about the shifting dynamics of global influence and the significance of collective action. Trigunayat argues that individual voices of the Global South are increasingly ineffectual in the contemporary geopolitics, where collective stances of Global South cannot be dismissed by those who traditionally shape and enforce international order.

Amb Anil Trigunayat. Advisory Council Member, COGGS

Amb Trigunayat emphasizes that the realities of the 21st century require a departure from the outdated “Victor and Vanquished” mentality of the previous century. This antiquated approach, which is rooted in historical conflicts and power imbalances, fails to address the complexities of today’s global challenges. Instead, the emerging global order demands a more nuanced and cooperative approach to international relations.

Referring to the Global South, Amb Husain Haqqani and Aparna Pande of Hudson Institute in their opinion piece, writes,  “In some ways, it is the latest incarnation of India’s leadership role in the Non-Aligned Movement (NAM), which at its height during the Cold War comprised 120 countries.”

Former Indian Ambassador Dr. Mohan Kumar’s observations on the Global South underscore significant themes discussed at the Voice of the Global South Summit, particularly regarding climate change as well as energy transitions. Writing in Financial Express, Dr. Kumar  suggests that the summit’s focus on a sustainable future emphasizes the pressing need for adequate climate finance and accessible technology to ensure that countries in the Global South can effectively address climate challenges.

In his opinion piece, Kumar points out that the Global South faces significant vulnerabilities to climate change, which threatens their development prospects and environmental stability. For these nations, the transition to sustainable energy and the broader fight against climate change are not just environmental issues but existential threats. Without substantial support in the form of climate finance and technology, these countries may struggle to mitigate and adapt to the impacts of climate change.

Looking ahead to the upcoming Conference of Parties (COP) in Azerbaijan this November, Amb Kumar suggests that the nations in the Global South summit might consider presenting a unified position. This joint submission could strengthen their collective voice in advocating for necessary financial and technological support from the global community. He asserts that the responsibility to address climate change extends beyond moral considerations to legal obligations, particularly for the world’s top CO2 emitters.

The Global South, with its diverse and vulnerable human as well as other resources, is becoming a focal point in geopolitical competition. Trigunayat notes that Global South is increasingly central to global power struggles, as various international actors vie for influence and alliances. The vulnerabilities of the Global South are not only a critical concern for these nations but also a key strategic interest for global powers seeking to expand their influence.

From Diplomatic Trenches: What Experts Say About Voice of Global South Summit Read Post »

Global South’s Consumer Surge: Redefining Markets, Attracting Investment

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Investors worldwide are tuning into a new economic symphony: ascending Global South is splurging more than ever. The once-muted hum of emerging markets has crescendoed into a loud roar, drawing the attention of global deep pockets who are eagerly charting this vibrant spending spree. As wallets in the Global South grow heavier and spending soars, the investors from China to Middle East are keenly aware that Global South, the fast rising consumer power is rewriting the rules of global commerce.

Nations in the Global South, including countries from South Asia, South East Asia and Latin America, are undergoing substantial consumer-driven economic changes. With a combined population of over 6 billion and a youthful median age of around 25, the Global South is witnessing a steady rise in middle-class consumers that is transforming local economies. As the middle class base expands, there is a notable surge in consumer demand, which is driving growth across various sectors, including retail, automotive, and e-commerce. This growing consumer base is not only reshaping local markets but also drawing substantial global investment.

 

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Africa is emerging as one of the world’s fastest-growing consumer markets, outpacing even its impressive GDP growth in recent years. Consumer expenditure in Africa is projected to reach $2.1 trillion by 2025 and soar to $2.5 trillion by 2030 (Brookings). This explosive growth will be driven by several key markets. Nigeria, Egypt, and South Africa are expected to become some of the largest consumer markets globally by 2030. However, the potential isn’t limited to these major economies. The other geographies such as Algeria, Angola, Ethiopia, Ghana, Kenya, Morocco, Sudan, Tunisia, and Tanzania also present tremendous opportunities for investors and businesses. Each of these nations is experiencing its own wave of consumer growth, fueled by increasing urbanization, technological advancements, and improving economic conditions.

In Latin America, for example, Mexico’s economic scenario is shifting as its middle class grows. The increase in disposable income is driving demand for a variety of consumer goods, from electronics to healthcare products. This change has attracted international companies like Walmart and Unilever, which are expanding their operations in Mexico to tap into this rising economy.

 

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In Brazil, a significant rise in consumer spending has been observed. The growth of the middle class has bolstered sectors such as retail and automotive, with companies like Fiat and Carrefour enhancing their market presence. The trend towards urbanization in metros like Sao Paulo and Rio de Janeiro has further accelerated consumer demand for modern amenities and services. In Argentina, the expansion of e-commerce has been a notable trend. Companies like Mercado Libre have capitalized on the increasing internet penetration and rising consumer spending, becoming major players in the regional online retail market.

The economic ties between South Asia and Middle Eastern economies is also growing because of the rise of consumer markets in Southeast and South Asia.

Overall, the economic dynamism in these Global South countries highlights how a growing middle class and increasing consumer spending are driving economic transformation and attracting global investment, contributing to a more vibrant and interconnected global economy.

Transnational corporations are increasingly targeting these emerging markets due to their potential for high returns and expanding consumer opportunities. The influx of foreign investment, in turn, enhances economic connectivity and integration with the global economy. The interaction between domestic economic growth and international investment is shaping a more dynamic and interconnected global economic environment. As countries in the Global South experience robust economic growth driven by an expanding middle class and rising consumer spending, they become increasingly attractive to international investors. A massive flow of investment is coming from China and Middle East. This influx of foreign investment helps to further strengthen local economies, create jobs, and improve social infrastructure. At the same time, the integration of these emerging markets into the global economy enhances their economic link as well as influence.

 

Global South’s Consumer Surge: Redefining Markets, Attracting Investment Read Post »

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

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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.

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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).

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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.

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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.

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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

  1. 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

  1. 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

 

  1. 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

  1. 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

  1. 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 »

Finance to Fraternity: Insights from 3rd Voice of Global South Summit

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In the midst of geopolitical turmoil, and prolonged conflicts, India convened the third edition of the Voice of Global South Summit on August 17, 2024, engaging 123 nations from the Global South.  Muhammad Yunus, Chief Advisor to the interim government of Bangladesh advocated for a complete overhaul of the financial system in the Global South to ensure equitable wealth distribution. The nobel laureate Yunus  asserted that integrating entrepreneurship with social business has the potential to transform the Global South.

In his address, Prime Minister Narendra Modi articulated a compelling vision that addresses critical global priorities, including health, food, and energy security, while also emphasizing the need for enhanced global governance and financial inclusion.

3rd Voice of Global South Summit (courtesy: Dr. S Jaishankar on X)

The assembly of 123 nations reflect a strategic framework for channeling cooperation and advancing the collective aspirations of the Global South in these challenging times. The theme of the 3rd edition of the summit was “An Empowered Global South for a Sustainable Future. ” The leaders of Bangladesh, Belarus, Bhutan, Chile, El Salvador, Ethiopia, Fiji, Grenada, Guyana, Lao PDR, Marshall Islands, Mauritius, Mongolia, Nepal, Oman, Sri Lanka, Suriname, Tajikistan, Timor Leste, Uruguay and Vietnam attended the Leaders session. Thirty-four foreign ministers and 118 ministers joined the ministerial sessions of the summit.

 $2.5 million fund for Promotion of Trade

India outlined the objectives of the “Global Development Compact,” emphasizing a multi-faceted approach for development. The initiative, that was announced in the summit will prioritize trade for development, capacity building, technology sharing, and project-specific concessional finance and grants. To enhance trade promotion further among the Global South, India will establish a special $2.5 million fund and separately provide $1 million for training in trade policy and negotiation. The Global Development Compact will promote trade, technology sharing, and concessional financing, drawing on India’s growth experience and aligning with the priorities of developing countries.

Trade and sustainable development were key priorities in the summit, emphasizing the necessity of fair trade practices and sustainable development goals. India highlighted women-led development as a crucial component of this agenda, recognizing the role of women in driving economic growth and innovation.

In the virtual summit, it was announced that India is contributing to the SDG Stimulus leaders group to address financial stress and development needs in the Global South. The initiative is ideated to make affordable generic medicines accessible, supporting the training of drug regulators, and sharing technology and experiences in ‘natural farming’ to advance agricultural practices.

During the leaders’ session of the summit, advancement of digital infrastructure was portrayed as revolutionary, with India championing the Unified Payment Interface (UPI) as a model for financial inclusion. This digital payment not only simplifies transactions but also connects Global South nations in a unified financial network, facilitating easier cross-border transactions and economic integration.

While addressing, Prime Minister Modi emphasized that the upcoming UN Summit of the Future represents a vital platform for Global South nations to present their concerns and influence global governance. The Indian Prime Minister, who anchored the summit, highlighted the summit as a key opportunity for these countries to advocate for a more inclusive system at the global level. UN Summit of the Future is expected to offer the Global South nations ensure their priorities and perspectives are adequately represented in shaping future global policies.

 

Finance to Fraternity: Insights from 3rd Voice of Global South Summit Read Post »

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