Designing South-South trade and investment projects with impact
Development programmes can help spur South-South trade and tackle economic issues that have become more daunting due to the COVID-19 pandemic.
A new International Trade Centre (ITC) report shows governments and donors how to design and execute effective South-South programmes that have a sustainable impact on development.
Drawing from case studies and interviews with ITC staff who have worked on South-South projects, Designing for Impact: South-South Trade and Investment is a guide for good project management for trade and investment promotion. It urges learning from relevant role models to transfer knowledge and technology.
'Designing for Impact speaks to the need to craft South-South trade and investment methodologies, and ensure it works for all actors involved. This demands a closer examination of fair and transparent global supply chains, of transfer of technology, and of creating greater value addition in the countries of the South,' said Pamela Coke-Hamilton, ITC Executive Director.
South-South trade represented 52% of developing country exports in 2018, according to Melissa Leach, director of the Institute of Development Studies, which partnered with ITC on the report. Companies from the South will generate a third of global foreign direct investment outflows by 2025, she said.
The report calls for investment in new regions, such as targeting smaller cities that are regional hubs in sectors like clothing or leather. It recommends investor-specific services and locally tailored information products - for instance, tools and activities to build communication, bridge misconceptions about certain countries or regions, and create awareness.
Addressing perception gaps, generating growth
Case studies on Rwandan chilli and Ethiopian ginger - both part of ITC's Supporting Indian Trade and Investment for Africa (SITA) programme - illustrate the value of such pilot programmes. The Ethiopian case led to support for farmers, including a 30-month, national-funded ginger rehabilitation plan, with workshops to revitalize the sector.
In Rwanda, more than 850 farmers were trained in chilli and ginger cultivation and five new varieties of hybrid chillies were introduced. The country exported 87,559 kilograms of chillies to India in 2019, thanks to buyback arrangements between four Indian companies and 18 Rwandan farmers. Land for chilli cultivation grew from four hectares in 2016 to 198 hectares in 2020, while Indian investors in the sector rose to five from just one.
Under ITC's Partnership for Investment and Growth in Africa, companies and investment promotion agencies from Ethiopia, Kenya, Mozambique and Zambia completed a course on doing business with Chinese firms before matchmaking events with Chinese investors. By addressing cultural gaps, it helped create partnerships. The training helped lead to deals for three African enterprises worth $55 million.
Building visibility in new markets
Business-to-business meetings and trade fairs are key to building visibility in new markets - as well as trust and predictability. For instance, two Indian textile investors began production in Ethiopia following SITA-facilitated exposure visits in 2018, creating more than 1,700 jobs to date. In another example, a Ugandan tannery that received SITA support to attend trade fairs targeting markets in the South achieved silver status Leather Working Group certification in 2019.
Tailored training and learning opportunities are important, too. After training on best agricultural practices that showed Ethiopian spice farmers how to improve the quality of their turmeric, the farmers were able to sell at almost 60% above standard market prices.
Learning is effective because business challenges are often similar among Southern countries, and the technology choices are tailored to meet those challenges.
For example, a woman-owned Kenyan tea company profited from Indian know-how and diversified into rosemary cultivation. African producers of cardamom and sunflower oil have enjoyed similar benefits from knowledge and technology transfers.