Amid changing world, Global South must chart new development path to navigate rising tensions

Sixty-nine years ago, in 1955, confronted with a Cold War that had divided the world into two major competing blocs, the leaders of a group of mostly newly independent states gathered in Bandung, Indonesia, for the first ever Asian-African Conference.

Going down in history as the Bandung Conference, the legacy of its stirring declaration, which set out the principles of non-alignment, remains relevant to this day.

The conference also inspired the establishment of the United Nations Conference on Trade and Development (Unctad), mandated to promote the interest of developing countries so that they can benefit from the global economy more fairly and effectively.

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Unctad will celebrate its 60th anniversary this year and hold a Global Leaders' Forum with the theme: "Charting A New Development Course in the Changing World". It is thus timely to reflect on the world of today and the development path ahead.

While the world has changed much since then, a lot has stayed the same. Geopolitical rivalry between major powers remains one of the biggest risks to the world's economy.

De-risking and reshoring are reversing the globalisation of past decades and promoting economic fragmentation. Since 2019, the number of trade restrictions has increased almost three-fold, with the latest being the electric vehicle (EV) and other tariffs by the United States against China.

This geopolitical tension, as well as conflicts old and new, has significantly strained the global economic recovery from Covid-19 and the attainment of the Sustainable Development Goals.

Coupled with major disruptions to supply chains, revolutionary new technology and the existential threat of climate change, and we find ourselves in a new world filled with uncertainty.

As with during the Cold War, developing countries stand at a crossroads. There is great pressure to again choose sides in the new rivalries of our age, as well as to abandon the path of economic cooperation for protectionism and populism.

While the international order that is now being shaken is far from perfect, it would be a grave mistake for the developing world to read this as a sign for us to turn inward.

While countries can benefit from the de-risking of supply chains and strengthening of national security, the ultimate cost of poorly managed economic fragmentation will far outweigh the benefits - with developing countries losing out the most.

What is needed, rather, is a new development path for this new world. Five points will be crucial in charting it.

First, we need more, not less, integration and cooperation. Growing trade restrictions will cost the global GDP around 7 per cent. Trade measures imposed unfairly in the guise of environmental concerns with questionable actual impact on climate change must be addressed.

For instance, Unctad estimates that the Carbon Border Adjustment Mechanism at US$44 per tonne of embedded CO2 emissions will reduce greenhouse gas emissions by merely 0.1 per cent, while also cutting global real income by US$3.4 billion, with developing countries losing US$5.9 billion.

Second, developing countries must be supported in transforming their economies, enabling them to produce high value-added output and supporting global supply chains. Critical mineral processing and industrial downstreaming is a good example of how this can be achieved.

The current shift towards sustainable energy spurs the demand for critical minerals. Many developing countries are endowed with such resources. Indonesia, for example, has the world's largest nickel reserve, critical in the production of EV batteries. We have embarked on an ambitious industrial downstreaming strategy, covering 21 commodities.

It is important for developing countries that are experiencing financial constraints to be able to benefit fully from their resources. The UN Secretary General rightfully stressed during his remarks at the 28th UN Climate Change Conference that the international community cannot repeat the mistakes of the past, of the systematic exploitation of developing countries as mere producers of raw materials. The establishment of the Panel on Critical Energy Transition Minerals is hence a welcome step.

Third, there must be more equitable access to finance and technology for sustainable development and a just transition. The cost of the green transition is estimated at around US$100 trillion to US$300 trillion between now and 2050. Significant scale-up in financial flows is needed, from various sources. Development and transfer of technology is also necessary, including for critical mineral processing, renewable energy, and other essential components such as semiconductors. Such enablers must be accessible for developing countries.

Fourth, stronger supply chains are needed. The current situation in the Middle East has significantly affected international trade, creating disruptions in the movement of goods. This will in turn lead to spikes in the prices of energy, food and fertilisers, disproportionately affecting developing countries.

Developing countries need to diversify their supply chains, including by seeking alternative sourcing options for commodities, investing in technology to support domestic production and strengthen resilience and contingency, as well as improving connectivity.

Fifth, development cooperation is key to ensuring the attainment of sustainable development, through finance, capacity building, technology development and transfer, as well as the sharing of best practices. This does not only entail cooperation between developed countries as donors and developing countries as recipients, but also among developing countries or South-South cooperation.

Realising this new development path does not require isolationism or a break from the existing global economic architecture.

Indeed, there is a greater need than ever before for international organisations, particularly Unctad, to support developing countries. Some areas of focus include: addressing discriminatory policies, building stronger supply chains and economic diversification, development of high-value added industry and technology, as well as supporting South-South cooperation.

Nearing its 60th anniversary, Unctad continues to be relevant to support forging the new development path, including via the above-mentioned points. But crucially, developing countries must themselves realise the appropriateness and necessity of a new development path, as well as to ensure that the paradigm of non-alignment is not forgotten or forfeited in the decades ahead.

This is perhaps the most productive way to ensure our continued prosperity in this new world that is being born before our eyes.

Pahala Nugraha Mansury is Vice-Minister of Foreign Affairs of Indonesia.

This article originally appeared on the South China Morning Post (SCMP).

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