Tuesday, August 02, 2011

A rising south, led by India and China

As the economies of India and China boomed, so has their investment into other nations. The two emerging powers have kept most of those investments south of the equator to other under-developed nations. That investment is great for moving people out of poverty, and those interested in development applaud it. Still what can be done to make sure it continues to grow, and that it does so fairly?

From the Guardian, this commentary by Thomas Elhaut from the at the International Fund for Agricultural tries to answer the question.

Some have argued that the emerging economies can put the global economy on a higher growth trajectory, but this is over-optimistic. The former have their own domestic challenges and their economic cycles remain vulnerable to, and synchronised with, the north. For example, while China's performance in tackling food insecurity and malnutrition is laudable and sets a good example for other developing countries to emulate, there are still 150 million people living below the poverty line in the country.
A key concern for development agencies and policymakers is how to extend and sustain rapid expansion of south-south trade and investment flows in pursuit of lasting development gains. Tapping the potential of south-south economic relations requires more than passive reliance on market forces and private initiative. Creating policy space for government action and regional policy co-ordination is crucial.

There is a great need for investments to move food from countries rich in arable lands to those with growing numbers of consumers and little food production capacity. For this to happen, agricultural markets and trade policies at the global, regional and sub-regional level need urgent improvement and reform.

Investment and trade among developing countries should set a good example of how to create win-win solutions. But we must take it to the next level by discussing how policies, institutional conditions and the right kinds of environments can further promote successful south-south co-operation. Specifically, as incomes and demand for food have grown, agriculture has begun attracting substantially larger investment flows, but the benefits to smallholders and others in some of the poorest recipient countries in the region (eg Laos and Cambodia) remain uncertain. It is imperative that these investments are geared to serve local needs better and to strengthen production capacity.

Above all, competitive rivalry for scarce resources must turn into co-operative ventures with larger payoffs to both emerging economic powers and those lagging behind. An overemphasis on short-term macro-economic balances must yield to a longer-term vision for shared growth and prosperity. A key lesson learned from China and India's success in poverty reduction is that domestic factors play a crucial role while market integration creates new opportunities for growth. Fiscal decentralisation in China, for example, accelerated growth and poverty reduction.

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