Unlocking the Potential of Inter-Regional Cooperation

Event: Seminar on Economic Globalization and Investment Opportunities: The CPLP and Asia-Pacific Region, The Summit of the Community of the Portuguese Speaking Countries (CPLP), 24 July, 2014, Dili


Your Excellency, Mr. Kay Rala Xanana Gusmão, Prime Minster of the Democratic Republic of Timor-Leste

Your Excellency, Dr. Mari Alkatiri, Former Prime Minister of the Democratic Republic of Timor-Leste

Mr. Chairman,

Excellencies,

Ladies and Gentlemen,

It is an honour for me to address the CPLP Summit hosted by Timor-Leste on the topic of Economic Globalization and Investment Opportunities: The CPLP and Asia-Pacific Region. Let me discuss economic opportunities for CPLP engagement with Asia Pacific within the context of inter-regional and South-South cooperation.

Franklin Roosevelt once observed that competition is useful only up to a certain point, and no further, but cooperation, for which we must strive, begins where competition leaves off. South-South cooperation may have begun as solidarity, from positions of shared vulnerability, but it has become one of the most important, powerful, and promising features of the post-financial-crisis world order.   

While the developed economies of the North continue to grapple with fiscal deficits and public debt, in the context of slow growth and unemployment, the global South has emerged from these crises as the growth engine of the world economy, with the countries of Asia-Pacific, Africa and Latin America powering that engine. Rapidly growing inter-regional South-South trade and investment have helped to significantly mitigate the impact of the financial crisis.

It is increasingly clear that developing countries are becoming not only the centre of global production, but of global consumption as well, with their rising middle-class as more people are lifted out of poverty. Asia’s expanding middle class will constitute about 70 per cent of the global middle class by 2030, compared to 30 per cent in 2010. In fact, after the 2008 financial crises, Asia is investing in itself and shifting its export-oriented growth to be also driven by domestic and regional consumption. It is growing its middle class to sustain economic growth by closing its development deficits and increasing household income security. Asia-Pacific alone will consume more than $18 trillion by 2025, with rising consumption also in Latin America and Africa, with their growing middle class.

Unlocking the Potential of Inter-Regional Trade

The changing development landscape with the rising South, especially Asia with its expanding middle class, provides a great opportunity to unlock the potential of inter-regional trade and investment. The complementarities and synergies between the economies of the South have increased tremendously, as have our shared development challenges and experiences.

South-South trade now accounts for nearly one third of world trade – up from about 10 per cent two decades ago. Trade between Asia-Pacific and Latin America for example has grown dramatically – at an average of more than 20 per cent annually since 2000 (more than double the growth rate of world trade) reaching an estimated $537 billion in 2012, and Asia’s share of Latin American trade has more than doubled to 23 per cent. However, the bulk of South-South trade still remains intra-regional. It is time now, to more fully unlock the potential of inter-regional trade and economic cooperation, including with the CPLP.

It will be useful for CPLP countries to analyse where they currently stand in their engagement with Asia and clarify where they would like to be in, for example, 2030. Already, the growing economic relationships between Asia-Pacific, Latin America and Africa have opened new avenues for cooperation, primarily through preferential trade agreements. But this is just the beginning of what is possible. Major opportunities still exist for increased inter-regional economic cooperation in trade, investment, infrastructure, energy, knowledge sharing and the creative economy, tourism and the logistics sectors.

What is clear, however, is that there is a need to strengthen the institutional promotion of inter-regional South-South cooperation. Furthermore, inter-regional trade is characterised by an asymmetry with respect to product composition with exports of Africa and Latin America dominated by primary commodities and those of Asia and the Pacific comprising a whole range of manufactured goods and services. This asymmetry needs to be addressed for long term sustainability and equity.       

Increasing South-South cooperation must be approached covering not only development assistance and trade – but also the totality of economic and social development involving people to people exchanges between our regions – including also cultural exchanges, as well as sharing of technology, skills, development experiences, education and capacity building.

Excellencies, Ladies and Gentlemen,

Agenda for Inter-regional Cooperation: CPLP and Asia-Pacific

I would like to propose a five point agenda, to more fully unlock the potential of inter-regional cooperation, especially in the context of our regions.

First, there is need for greater institutional promotion of trade and investment between our regions. This could include preferential trading arrangements between countries of the regions seeking to better harness their complementarities and synergies.

Second, the trade costs between our regions tend to be high, due to great distance and other non-tariff barriers. We need to pay attention to reducing transportation costs, through development of efficient transport and logistic linkages, by strengthening air and sea, as well as IT connectivity. Development of hubs and common feeders may help to enhance volumes and hence reduce costs.

Third, exploiting the potential of mutual learning, people to people exchanges, and sharing of development experiences for a more inclusive and sustainable future. For example, Latin American countries, like Brazil, have valuable experiences to share with Asia-Pacific in reducing inequalities through social protection, pension system reforms, cash transfers, and also in urban infrastructure development and agricultural modernisation. Africa and Latin America can learn from Asia-Pacific’s experiences in fostering competitive industrialisation through human resource development, investments, prudent macroeconomic management, and public-private partnerships.

Fourth, both CPLP countries and Asia-Pacific countries have stakes in building development-friendly global economic governance. The importance therefore of coordinating positions in global economic forums, such as in the Bretton Woods Institutions, WTO, and global climate change negotiations, cannot be overemphasised.

Recent years have also seen the emergence of inter-regional groupings, like the India-Brazil and South Africa (IBSA) Trilateral Commission, and the BRICS, which are now important platforms of the global South for promoting not only coordination but also promoting South-South cooperation globally.  Let me congratulate Brazil for hosting the BRICS meeting recently. BRICS, for example, is setting up a BRICS Development Bank for financing infrastructure development in the South. This is much needed. Leading emerging countries of CPLP could also set good examples for more equitable inter-regional and South-South cooperation for inclusive and sustainable development, as the world works within the United Nations to shape the post-2015 development agenda and the Sustainable Development Goals (SDGs).

Finally, my fifth proposal relates to the role that Timor-Leste can play as a bridge or hub serving our regions, helping to promote inter-regional cooperation and shaping it in a more equitable and balanced manner, as it takes on the chair of CPLP.

I propose that a Taskforce for promoting inter-regional cooperation between CPLP and Asia Pacific be considered. Working with the member States of the respective regions, the Taskforce can act as a knowledge hub that identifies opportunities for inter-regional cooperation, sharing of development experiences and for growing together towards a sustainable future of shared prosperity.

I thank you.