Kathmandu, February 5:

Developing countries’ financial experts and government officials today began a two-day meeting on how to use the recently much-expanded ‘South-South’ economic cooperation — particularly trade, investment, financial flows, and joint efforts to stabilise currency exchange rates and debt — to soften the blow of the severe financial crisis now spreading to their economies from the industrialised West.

Opening UNCTAD’s ‘Multi-Year Expert Meeting on International Cooperation: South-South Cooperation and Regional Integration,’ organisation Sceretary General Supachai Panitchpakdi said “A global financial crisis has shaken the economic foundations of the North, and it is threatening to shatter the growth and development aspirations of the South.”

He added that the timing, therefore, was right to explore how greater South-South cooperation can help developing countries to cope with the crisis.”

Supachai said merchandise trade between developing countries grew at an average of 13 per cent per year from 1995-2007 and at the end of that period amounted to $2.4 trillion or 20 per cent of world trade.

A statement provided by the UNCTAD Secretariat detailed the promise of these exchanges.

Among other things, one-third of these exports were high-skill manufactured goods, which yielded high profits and were enabling developing nations to diversify their economies.

“The global financial crisis has now put these trends in jeopardy,” the Secretary-General said, “and the picture for the near future is bleak.”

He reported that sharp declines in demand from the North were quickly filtering through the international trading system, and UNCTAD now estimates that exports from the developing world could decline by 9.2 per cent in 2009.

A sharp fall in commodity prices resulting from the slowdown is threatening the well-being of least developed countries, which are heavily dependent on exports of these basic farm products and industrial raw materials that a near freeze-up of the global banking system has made it hard for countries to obtain the credit and other financing needed to carry out trade.

Also, remittances from developing-countries’ workers employed overseas are likely to decline as these economic migrants are increasingly being laid off from their jobs and aid from rich to poor nations could very well decrease by 20 per cent to 40 per cent as donor countries struggle to bail out their own economies.

Supachai said South-South coping measures can include financing from regional development banks in the South to compensate for the loss of some international aid.

Regional stimulus packages, especially for badly needed improvements to infrastructure might help preserve jobs and keep developing country economies viable, and ‘diversification of foreign-exchange reserves’ could enable nations of the South to buy other countries’ debt.

The Secretary-General also recommended regional arrangements ‘specifically aimed at mitigating the impact of financial shocks.’ The Chiang Mai initiative arising out of the Asian financial crisis of 1997-1998 “provided participating countries with international financial liquidity through swap arrangements,” he noted.

Participants said that the Global System of Trade Preferences Among Developing Countries (GSTP), supported by UNCTAD, had the potential to mitigate the looming crisis.

They said while there were some challenges associated with GSTP earlier, if improved it could be a potent mechanism to could stimulate trade and demand when most needed by developing nations.

They added for serious trade-enhancement measures to take effect and for regional arrangements to be established, governments of the South must agree that there is an urgent nee d for unanimity and cooperation.