UNCTAD Secretary-General Supachai Panitchpakdi opened yesterday in Geneva a one-day meeting of the new Global Network of Export-Import Banks and Development Finance Institutions (G-NEXID) - a network that hopes to support rapidly increasing trade between developing countries with expanded financial services that can spur and stabilize economic growth.
"It is heartwarming . . . to see such a gathering, which is aimed at formalizing cooperation among financial intermediaries from developing countries," Dr. Supachai told the meeting.
"In the last two decades, South-South trade has grown dramatically - for most of the time, faster than world trade. At the same time, South-South investment flows have also increased rapidly and now account for more than one-third of the total investment flows to developing countries." That has occurred, Dr. Supachai said, despite the fact that "many countries in the developing world suffer from a serious gap in the financing of commodity trade and investments."
G-NEXID is intended to boost bilateral and multilateral agreements of all kinds among export-import (Exim) banks and development-finance institutions (DFIs) based in developing countries. Such cooperation is expected to reduce the costs of trade between the world´s poorer nations, spurring investment across borders and making financing more readily available to new and innovative businesses and enabling the growth of "niche markets." The newly established network also will allow developing countries to learn from each other and share effective practices for entering new markets, financing non-traditional goods and services, and establishing risk-sharing methods for investments.
"Finding ways to strengthen South-South financing can be a win-win game," Dr. Supachai said.
G-NEXID was initiated in June 2004 in Rio de Janeiro during meetings held in preparation for the UNCTAD XI conference. A one-day brainstorming session followed in March 2005 that ended with the signing of a Memorandum of Understanding by the five Eximbanks and DFIs present (Export-Import Bank of India, African Export-Import Bank, Andean Development Corporation, Export-Import Bank of Malaysia, and Eximbanka SR). At yesterday´s meeting, these institutions were joined by eight more; the assembled institutions served more than 70 countries.
G-NEXID adopted a work programme for 2006 at the meeting and elected the following officers: President, C. Venkat Subramanian, Chairman and Managing Director of Exim Bank of India; Secretary, Michael Gondwe, President of PTA Bank, Kenya; and Treasurer, Iulian Velicu, Vice-President of Eximbank of Romania. The next general assembly meeting will be in February 2007.
Trade within and among all developing country regions has recently grown faster than world trade - on average, three times as fast in the past decade. The share of South-South trade in developing country agricultural commodity exports increased to 40% in 2003. For South-South agricultural imports, the share was 47% - in both cases, up 10% from 1990. Around half of the exports of Brazil, China and India are now to other developing countries. Growth in South-South investments also has been rapid, and such investment now accounts for more than one third of investment flows to developing countries.
This fast growth has occurred despite weak financing support. For years, developing countries and UNCTAD - have sought ways to remedy weaknesses in South-South financial relations. Gaps still exist in the financing system for commodity trade and investments in developing countries, and are even more pronounced for non-traditional transactions. Such shortcomings handicap enterprises from developing countries, keeping them from using the full potential of the international marketplace and hampering developing countries´ economic growth. UNCTAD has for more than a quarter of a century supported innovative thinking on ways to remedy these weaknesses, and G-NEXID´s creation is a reflection of UNCTAD´s continuing work in this area. UNCTAD´s analytical work on issues such as the new Basel 2 Capital Accord - which will take effect in 2007 - and on the growing sophistication of international capital markets is intended to help poorer nations protect and expand commodity and trade-financing activities.
G-NEXID will support the creation of effective policies for the challenges posed by Basel 2, which is expected to make bank lending for "risky" borrowers more expensive and so create additional difficulties for South-South financing. And G-NEXID will strive to take advantage of the new strengths of the international capital market.
G-NEXID also is expected to boost bilateral and multilateral agreements of all kinds among Eximbanks and DFIs, and to act as a vector for further development of South-South economic interrelations - a necessary complement to the new geography of trade.
