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South-South Cooperation: Shaping a Sustainable Future

South-South CooperationSouth-South cooperation, which offers solutions through solidarity, is key to helping developing countries build collective self-resilience and promote more sustainable and equitable economic growth. In a globalized world, South-South Cooperation tackles the urgent development challenges the Global South faces through cross-country collaboration spanning the economic, social, political, and environmental spheres. Since its establishment, South-South cooperation has flourished over the decades, with trade among the developing countries amounting to $5.3 trillion in 2021.

In fact, trade flows between developing countries have surpassed trade flows between developing and developed economies. While trade between developed countries has decreased by almost 15% since 1995, trade among countries in the Global South has increased by 14.1%. Between 2000 and 2021, the loan portfolios of South-led development banks also rose significantly. It went from $7.2 billion to $73.4 billion, a tenfold increase.

Promoting Clean Energy and Job Creation

India’s demonstration of converting unused cotton plant parts into clean energy and creating employment opportunities for participants from African countries is a notable example of South-South cooperation.

As India strode towards clean energy, entrepreneurs began utilising the unwanted parts of crops for renewable energy. Instead of setting the waste on fire, a practice that has led to pollution, India has set up more than 500 briquetting plants. Briquetting is a process of converting unused plant parts into clean fuel by forming pellets or briquettes as a substitute for coal and wood.

UNCTAD report highlighted the untapped potential of briquetting in Zambia, where farmers could earn an additional $3 million each year by processing cotton waste into briquettes. Not just Zambia, but cotton farmers globally could greatly benefit from the production of this renewable energy.

Therefore, in 2019, UNCTAD offered officials from Tanzania, Uganda and Zimbabwe the opportunity to visit India and develop a better understanding of the technology. UNCTAD chose India because its cotton production resembles that of these countries, making the technology and equipment adaptable.

South-South Cooperation and the Pandemic

Over the past few years, the converging effects of the COVID-19 pandemic, rising global food and energy insecurity, and the climate crisis have had a profound impact on the world. For countries in the Global South that were already vulnerable, the high inflation and slowed economic growth in the post-pandemic period, along with droughts, fires, and floods that the climate emergency has brought about, have made things considerably more difficult. In Southeast Asia, the pandemic pushed 4.7 million people into extreme poverty. It undermined the region’s economic and development progress, leading to millions losing their job during the pandemic’s peak.

While there has been a strong recovery, with a 4.6% increase in GDP growth in 2024, millions still face job insecurity and unemployment. As developing countries grapple with these changes, South-South cooperation fosters more sustainable economic growth by driving collective self-resilience.

Promoting Decent Work

The ILO ProSSCE-ASEAN is a project actively working to counteract the post-COVID economic backsliding in the Global South and to achieve decent work for all, in line with Sustainable Development Goal 8.

The International Labour Organization (ILO) launched the Promoting the Global Development Initiative with a focus on South-South cooperation in Employment in ASEAN project in partnership with the Ministry of Human Resources and Social Security of China. In Cambodia, the project has partnered with the government and local organisations to connect close to 150,000 young people and marginalised groups to high-quality jobs since 2023.

In Indonesia, the project launched a four-tiered training program to improve job matching by training more than 3,000 public employment counsellors across the country and implementing labour market programmes that are inclusive and gender-responsive. Following the success of the programme in Indonesia, the ILO is set to expand the four-tiered training to other countries in Southeast Asia.

Strengthening South-South Health Cooperation

The pandemic disproportionately affected women and children, particularly in the developing world. It led to a reversal of progress in maternal health, which is a key indicator of health.

In response to this, the World Health Organization (WHO) partnered with the Health Development Partnership for Africa and the Caribbean (HeDPAC) to foster South-South health cooperation between the regions. The initiative brought together countries from Africa and the Caribbean to exchange innovative primary health care solutions, with a focus on maternal and child health.

As the world continues to navigate crises, South-South Cooperation provides a strong framework that encourages solidarity, knowledge sharing, and mutual support among developing countries. Its initiatives aim to foster development based on fairness and resilience, creating an inclusive and sustainable world.

– Priya Doshi

Priya is based in Edinburgh, UK and focuses on Good News and Politics for The Borgen Project.

Photo: Flickr

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Brazil Prosperity Fund: Unlocking Brazil’s Trading Power

Brazil Prosperity FundThe Brazil Prosperity Fund was a range of projects designed to use aid from the U.K. to expand Brazil’s trade network and accelerate the country’s development. The scheme invested $40 million of U.K. aid between 2018 and 2023 and focused on four key areas:

  1. Energy
  2. Green Finance
  3. Future Cities
  4. Trade

Funding provided by the Brazil Prosperity Fund helped facilitate the exchange of information between U.K. scientists and the Brazilian Energy Program (BEP) on the most efficient ways to collect and utilize biogas. This led to the passing of Brazil’s Fuel of the Future law in October 2024, which regulates the country’s energy sector. The law was passed to reduce Brazil’s greenhouse gas emissions and establish the country as a market leader in the sale of renewable energy, maximizing its trading power.

São Paulo Metro System Expansion

The Brazil Prosperity Fund provided funding, along with the World Bank, for the Brazilian branch of the Future Cities Programme. The funds from this scheme were used to expand the existing metro system in São Paulo, South America’s largest conurbation, with a population of more than 20 million people.

A key innovation in this scheme was to help expand Brazil’s trading power by connecting the city’s international airport to the Barra Funda area via express trains in 2018. This has allowed easier access to the city center for international travelers and a good entry into the country.

The São Paulo municipal government intends to continue to expand its metro network, with seven new metro lines planned for construction over the next decade.

The Brazil Exportação Platform

Brazil’s trading power had previously been hampered by the lack of access Brazilian businesses had to international markets. The Brazil Prosperity Fund aimed to alter that by establishing the Brazil Exportação (BRAEXP) trading platform.

BRAEXP works by identifying potential international buyers for Brazilian businesses and suggesting methods of payment that are accessible both to the businesses themselves and to consumers based overseas. The platform reported more than 50,000 unique accesses between its foundation in November 2023 and June 2024.

Reforming Brazil’s Transfer Pricing

Economic advisors from the U.K. were also involved in designing reform to Brazil’s transfer pricing system. Brazil’s trading power had previously been limited by its transfer pricing laws. These laws left some goods vulnerable to “double taxation,” where foreign exporters risked paying significantly more than the market rate to sell their products in Brazil.

The Organization for Economic Co-operation and Development (OECD), the global policy forum that sets guidelines for international trade, has established the “arm’s length principle.” Under this agreement, any transaction between two parties must be priced within an appropriate range, as if the transaction were taking place between two entirely unrelated parties.

By enshrining this into Brazilian law in January 2024, the Brazilian government ensured fair competition between domestic and international producers. This makes Brazil a more attractive trading partner to developed nations.

The UK’s Trade With Brazil

The most recently published data shows that the total value of the U.K.’s trade with Brazil stood at approximately $16.6 billion for the year between April 2024 and March 2025. This represents an increase of more than 80% since the launch of the Brazil Prosperity Fund in 2018. The U.K.’s positive trade balance with Brazil increased, reaching more than $12 billion in the four quarters to the end of Q1 2025. This growth occurred despite the U.K.’s overall trade balance remaining negative during this period. These latest figures also show that Brazil is now the U.K.’s 26th largest trading partner globally and the country’s largest in South America.

Brazil’s trading power with the U.K. primarily stems from its exports of food and drink. These make up more than half of the U.K.’s imports from Brazil and utilize the South American country’s unique climate in an economically and environmentally sustainable way. Conversely, the U.K.’s leading exports to Brazil are medicinal and pharmaceutical products (17.4% of exports between April 2024 and March 2025) and mechanical power generators (10.2%). It is hoped that exports in both of these areas will further aid Brazil’s development and ability to produce exportable goods, while also improving the nation’s health care services.

Trade in the service sector, where the U.K. is a traditionally large exporter, between the two countries has been primarily based around financial services. By providing Brazilian businesses with access to London-based financial markets, this financial trade may allow for greater trade between Brazil and the rest of Europe, while also improving Brazil’s economic stability.

What Can We Learn From Brazil?

Brazil’s growing trade relationship with the U.K. is an example of a mutually beneficial arrangement between a developing nation and a developed nation, which overcomes geographic and linguistic barriers. This would not be as profitable for either country, without the recent acceleration of Brazil’s development, which was partially funded by international aid schemes such as the Brazil Prosperity Fund.

– Billy Stack

Billy is based in London, UK and focuses on Business and Politics for The Borgen Project.

Photo: Pixabay

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From Aid Recipient to Trade Partner

foreign aid tradeUnited States (U.S.) foreign assistance is sometimes disparaged as mere charity; nonetheless, its effects convey a contrasting narrative. Strategic investments in development save lives and provide future economic prospects for the U.S.. The trajectory from Seoul to Gaborone illustrates that assistance may convert a recipient aid country into a strong trade partner. Timothy Geithner, the former U.S. Treasury Secretary, argued that reducing foreign assistance would adversely affect the U.S. economy and diminish its competitiveness relative to China. U.S. foreign aid and trade together demonstrate how combating global poverty fosters domestic prosperity.

South Korea: A Model of US Foreign Aid and Trade

In the post-Korean War years, South Korea depended significantly on U.S. foreign assistance to maintain its economy and reconstruct its institutions. From 1946 to 1976, the U.S. gave $12.6 billion in economic assistance, including food aid, grants and infrastructure initiatives, making it one of the greatest per capita beneficiaries during that period.

As South Korea’s acting president Han Duck-soo noted, “After the devastation of the Korean War, the U.S. gave us aid, technology transfer, investments and security assurances,” which he credited with helping make South Korea “a very comfortable investment environment for foreigners.”

The results are clear today. In 2024, commerce between the U.S. and South Korea in goods and services amounted to $239.6 billion, with goods trade constituting $197.1 billion.

The U.S.–Korea Free Trade Agreement (KORUS FTA), enacted in 2012, abolished 95% of tariffs and enhanced U.S. exports by around $11 billion. This change demonstrates how U.S. foreign assistance and commerce foster reciprocal prosperity.

Botswana: How US Foreign Aid and Trade Built Prosperity

Upon attaining independence in 1966, Botswana was among the most impoverished countries globally. The U.S. emerged as a crucial development ally, allocating resources to education, health and governance via USAID and Peace Corps programs.

In the health sector, U.S. aid has been pivotal: via the President’s Emergency Plan for AIDS Relief (PEPFAR), the U.S. has allocated approximately $1 billion in health assistance to the Government of Botswana since the program’s inception, highlighting a sustained and transformative commitment to HIV/AIDS prevention, treatment and care.

Over time, assistance established the groundwork for economic collaboration. In 2024, commerce in products and services between the U.S. and Botswana reached $733.4 million, with U.S. exports increasing by almost 52% within one year.

Botswana also benefits from the African Growth and Opportunity Act (AGOA), which provides duty-free access for more than 6,700 products. These results demonstrate how U.S. foreign aid and trade go hand in hand in creating stable partnerships.

US Foreign Aid and Trade as Economic Diplomacy

Foreign assistance transcends mere humanitarian gestures. It serves as an instrument of economic diplomacy. Initiatives such as AGOA and the U.S. International Development Finance Corporation integrate trade and investment objectives into assistance endeavors. This connection fosters an environment conducive to commercial prosperity while tackling global poverty.

In July 2025, the U.S. entered into a new trade agreement with South Korea, ensuring $350 billion in U.S.-managed investments, $100 billion in energy acquisitions and preferential access for U.S. products such as semiconductors and medicines. Such agreements illustrate how U.S. foreign aid and trade evolve into lasting economic partnerships.

US Foreign Aid and Trade as Investment, Not Charity

U.S. foreign assistance is not a unilateral exchange. It is an investment that cultivates future markets, fortifies relationships and alleviates global poverty. South Korea and Botswana exemplify the transition of nations from being an aid recipient to a trade partner. By seeing assistance as an instrument of diplomacy and economic collaboration, the U.S. demonstrates that U.S. foreign aid and trade are mutually reinforcing policies. Combating poverty internationally eventually fosters collective wealth domestically.

– Ray Bechara

Ray is based in Glasgow, Scotland and focuses on Politics for The Borgen Project.

Photo: Flickr

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AfCFTA: Africa’s Path to Economic Growth and Unity

afcftaFrom Rwandan gold to Ethiopian coffee to Libyan oil, Africa is rich in diverse and abundant resources. But despite this wealth, it remains the world’s poorest continent, a status worsened by its limited participation in the global economy. Home to 18% of the world’s population, Africa accounts for just 2.8% of international trade, as of 2019. The African Continental Free Trade Area (AfCFTA) seeks to change this by creating the world’s largest free trade area, spurring development, and ultimately lifting millions out of poverty.

Breaking the Cycle of Poverty and Dependency

As of 2019, 478 million Africans were living in extreme poverty, with another 58 million just above the poverty line. Many reside in one of the 45 countries whose economies rely heavily on the export of raw materials. Wealthy nations buy these primary goods, use them to manufacture finished products, and then sell those products back to African countries at premium prices. This cycle leaves these countries poor and highly vulnerable to fluctuations in global demand.

Recognizing Africa’s historical disadvantages as well as its immense potential for economic growth, the African Union established AfCFTA in 2018. The agreement aims to unite the 55 member states and the approximately 1.3 billion people living within them into a single market for goods and services. Now, four years after its official launch in 2021, AfCFTA has made considerable progress toward achieving its founding goals of increasing intra-regional trade and making Africa more competitive in the global marketplace.

Progress, Innovation and Real Impact

By 2024, 49 of the 55 signatories had ratified the agreement, and 19 countries had enacted tariff reductions into national law. These actions mark a key step toward facilitating an economically integrated Africa, where intra-continental trade accounts for much more than the current low rate of 14.9%. According to World Bank estimates, full implementation of AfCFTA could increase the total economic output of African countries by $450 billion and add $76 billion to the global income by 2035.

Beyond trade policy, AfCFTA includes initiatives which aim to support its broader economic and social objectives. The Pan-African Payment and Settlement System (PAPSS), launched in 2022, allows for instant and secure payments between African countries, reducing costs and increasing trade efficiency. Meanwhile, the Protocol on Women and Youth in Trade promotes networking, mentorship, and market training, making AfCFTA the first trade agreement to legally protect the interests of these two marginalized groups.

Making a Difference

Although the implementation of AfCFTA has been gradual due to the complexities of coordinating trade policies among 55 distinct states, it has already begun to make a meaningful difference in the lives of Africans. Briggette Harrington, owner of Igire Coffee, was the first to receive an AfCFTA certificate of origin for Rwanda. Benefiting from the agreement’s trade advantages, Harrington increased her exports from 150 bags to 400 bags of coffee. She is just one example of how a unified African market can benefit small businesses across the continent.

The Road to Success

Ultimately, AfCFTA’s path forward is promising but uncertain. Success will require member states to achieve regulatory harmonization, balance their various needs, and ensure that the benefits of trade are equitably distributed. What is unquestionable, however, is what Africa stands to gain. If fully realized, AfCFTA could unlock Africa’s vast economic potential, pulling 30 million people out of extreme poverty, according to the World Bank.

– Caroline Clark

Caroline is based inNeedham, MA, USA and focuses on Global Health and Politics for The Borgen Project.

Photo: Flickr

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How the US-China Trade War Affects Trade in Indonesia

Trade in IndonesiaEarlier this year, the U.S. and China engaged in an all-out trade war as part of President Trump’s efforts to clamp down on what he called unfair trade practices by Chinese corporations. Since then, import tariffs have skyrocketed to a whopping 145%. International trade between the two countries has plummeted. Only recently have they agreed to ease a few of those tariffs.

While these developments hurt both powers, the impact of this tit-for-tat on developing countries and their ability to rely on stable trade with the U.S. and China is often overlooked. Indonesia offers a clear example of how these trade tensions ripple outward.

Indonesia as a Focal Point

Firstly, Indonesia trades with both nations. “Regarding exports, China and the U.S. are the first and third-largest trading partners for [Indonesia], respectively; regarding imports, China is its largest trading partner,” according to a study conducted by Bogor Agricultural University. Secondly, Indonesia is a prime example of how some countries won’t be able to adapt to the trade war while others will.

While some countries would benefit from the trade war due to production and manufacturing moving both outside the U.S. and China to avoid tariff rates, others, like Indonesia, would struggle to adapt to the tariff wars as they occur. This is largely because of low integration with the global value chain and the current trade structure in Indonesia, which heavily serves the Chinese and U.S. domestic markets. Using the country as a case study can show how this trade war can adversely affect developing nations.

Impact on Trade and Poverty

The tariff war between the U.S. and China has opened the door for several developing countries to fill the manufacturing gaps left behind. Countries like Thailand and Vietnam have boosted their exports due to the tariffs. At the same time, however, the trade war is indirectly dampening exports, as seen in Indonesia.

Due to its strong ties to both the Chinese and U.S. markets, Indonesia has experienced a decline in exports to both countries, with rising tariffs and broader economic fallout driving down demand. As a result, Indonesia has been more negatively affected than many other developing nations.

This decline in trade is also likely to affect Indonesia’s poverty rate. As demand continues to fall, the country may struggle to maintain downward progress on poverty. Reduced trade with developed nations like the U.S. and China could lead to job losses in labor- and export-heavy sectors such as textiles and electronics manufacturing.

Solutions

The Indonesian government is making several moves to reduce the impact of the U.S.-China trade war on the nation. One key effort is the government’s “Making Indonesia 4.0” initiative, which aims to harness advanced technologies to boost productivity and performance in the manufacturing sector.

Another potential solution is for the U.S. to sign a bilateral trade agreement with Indonesia. Indonesia has already taken steps toward this by proposing a limited trade deal with the U.S., which is expected to strengthen trade ties between the two countries. The deal aims to raise two-way goods trade from around $30 billion in 2019 to $60 billion in the next few years.

– Caelan Caukin

Caelan is based in Los Angeles, CA, USA and focuses on Global Health and Politics for The Borgen Project.

Photo: Wikimedia Commons

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Impact of Trade on Poverty Reduction in Comoros

poverty reduction in comorosComoros is a country made up of three islands off the southeastern coast of Africa. It grapples with supporting its population, as 45% of people are living in poverty. There are a multitude of factors contributing to the issue, but one of the largest contributors is the state of the country’s economy and its relationship with trade.

The Issue with Trade

The economy of Comoros is dependent on trade and investment. Failing trade practices are then detrimental to the overall functioning of the country. There have been routine trade deficits because “the level of goods exports is lower than that of services exports, while the level of goods imports is higher than that of services imports.” Supporting the overall economy could help poverty reduction in Comoros.

Comoros has a history of an unstable political situation and fluctuating institutions. As a result, “most trade support systems remain fragmented in practice with very limited exchange of information between regional directorates.” The Comorian government must be able to establish a stable system of trade to create cash inflows for the country. A successful economy is necessary to support and provide services to the citizens of Comoros.

The vast majority of Comoros’s exports consist of a few products, which is why “plantations engage a large proportion of the population in producing the islands’ major cash crops for export: vanilla, cloves, perfume essences and copra.” Being dependent on these products makes the country vulnerable to price fluctuations, putting people’s incomes at risk. Expanding their market and sources of income will contribute to poverty reduction in Comoros.

Effects on Poverty

Poverty reduction in Comoros depends on stabilizing prices for people in the country. Comoros’s lack of exports and reliance on imported foods makes recent inflation detrimental, as “ongoing inflation has mostly been driven by food item prices, affecting the poor disproportionally.” The country’s poor are further isolated as they struggle to afford food and are unable to keep up with rising prices. The dangers of ineffective trade practices are evident in the ways they push people further into poverty.

In addition to the struggles of citizens to meet their needs due to financial hardships, the country as a whole has difficulty funding supportive programs. This means that investment and aid are crucial to poverty reduction in Comoros. Water shortages are an issue plaguing the impoverished, but “in 2019, with the backing of the Green Climate Fund (GCF), Comoros launched a $60 million eight-year project to increase reliable and safe water supply.” Until Comoros’s economy can support its population, aid is beneficial to the country’s poor.

Poverty Reduction in Comoros

Organizations are working to combat poverty along with the government of Comoros, one of which is the Comoros Red Crescent. This organization has been working to promote health, risk management, education, and income-generating activities since 1982. One of their courses is focused on “training about water sanitation,” which, as mentioned previously, is an area of need in the country. Comoros Red Crescent is supporting the people of Comoros in ways that the government is currently unable to do.

Comoros ratified the African Continental Free Trade Area (AfCFTA), which hopes to “mobilize the private sector to take full advantage of new trading opportunities on the continent.” The AfCFTA is meant to spearhead the transformation of the Comorian economy and contribute to poverty reduction in Comoros.

The implementation of AfCFTA could lead to economic growth, as “by 2043, GDP per capita in Comoros could increase to $5,581 in the Free Trade scenario, compared to $5,015 in the Current Path forecast.” These steps towards economic growth are promising for the future of poverty reduction in Comoros. Continual efforts for growth, like the beginning of AfCFTA, will provide more assistance to the impoverished in Comoros.

– Sydney Morrow

Sydney is based in London, UK and focuses on Good News and Politics for The Borgen Project.

Photo: Flickr

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How SEWA Aids Self-Employed Women in India

How SEWA Aids Self-Employed Women in IndiaThe vast majority of working women in India are self-employed, operating informally without the social protections and stable incomes that formal employment provides. According to the Ministry of Labour and Employment, 19.7% of employed women in India are self-employed, 6.8% work as casual labor and only 5.3% hold regular wage or salaried positions. Besides their professional obligations, women often undertake extensive unpaid domestic duties such as cooking, cleaning and childcare. Organizations like the Self-Employed Women’s Association (SEWA) play a crucial role in supporting these women by providing resources and advocacy.

SEWA’s Grassroots Support for Self-Employed Women

Founded in 1972 in Ahmedabad, SEWA is one of India’s 12 officially recognized central trade unions. The organization has a membership of 2.9 million. SEWA adopts a grassroots approach, offering microloans, health care, childcare and other benefits to support self-employed women. According to the World Bank, it represents poor women working in India’s informal sector, which constitutes 94% of the Indian workforce.

SEWA’s Philosophy and Operational Strategies

SEWA operates under the Gandhian principles of Ahinsa (nonviolence), Satya (truth), Sarvadharma (inclusivity of all faiths and peoples) and Khadi (promotion of local employment and independence) to achieve its dual goals of full employment and self-reliance. Full employment encompasses complete work, income, food and social security—including health care, insurance, childcare, housing and pensions. SEWA’s 85 composite cooperatives function as localized trade unions empowering women in the informal sector. Additionally, SEWA runs 60 health care centers and a bank with 130,400. Account holders made deposits totaling 454.3 million rupees in 2002. The union also partners with national insurance companies to offer accessible insurance programs, benefitting 11,000 women with 15 million in claims over the decade leading up to 2002.

SEWA’s Response to the COVID-19 Pandemic

SEWA networks have been crucial for supporting informal workers during COVID-19, especially amid harsh lockdowns. Reema Nanavaty, director of SEWA, explained in an interview with the Center for Foreign Relations how SEWA disseminated vital public health information through posters and voice memos to rural communities neglected by government efforts. Leveraging its long-standing initiatives in digital literacy and technology access for impoverished women in urban slums and remote areas, SEWA effectively used digital platforms to spread important health information via social media and WhatsApp. Additionally, SEWA members produced more than 200,000 masks, distributing them to governments, local hospitals and communities.

Despite numerous challenges, self-employed women in India are finding economic empowerment and social uplift through grassroots organizing, collective action and institutionalized labor movements. SEWA exemplifies the significant impact of these ongoing efforts.

Looking Ahead

SEWA’s efforts continue to provide critical support for self-employed women in India, ensuring their access to essential services and resources. By promoting financial inclusion, health care and social security, SEWA empowers these women to achieve greater economic stability and independence. The organization’s proactive response during the COVID-19 pandemic further highlights its vital role. As SEWA expands its initiatives, it remains a beacon of hope for millions of self-employed women across the country.

– Josephine Koch

Josephine is based in New York, NY, USA and focuses on Good News and Technology for The Borgen Project.

Photo: Flickr

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Economic Partnership between the Gulf States and Africa

Economic Partnerships between the Gulf States and AfricaIn the last five years, an economic partnership between the Gulf States and Africa has emerged via the Gulf Cooperation Council (GCC). The GCC is a political and economic alliance between Saudi Arabia, Kuwait, the United Arab Emirates (UAE), Qatar, Bahrain and Oman. It was established in 1981 to promote greater cooperation and achieve shared objectives based on the similar political and cultural identities of Islamic culture.

An example of the growing economic partnership between the Gulf states and Africa is when, in 2023, companies within the GCC announced 73 foreign direct investment projects in various African countries worth more than $53 billion. Businesses and nations in the GCC look to Africa as an economic partnership expected to grow in value, mainly due to the new Africa Continental Free Trade Area signed in 2018.

The African Continental Free Trade Area

The African Continental Free Trade Area (AfCFTA) agreement is one of the largest free trade areas in the world, as measured by the number of participating countries. The pact connects 1.3 billion people across 55 countries, with a combined gross domestic product (GDP) valued at $3.4 trillion.

AfCFTA entices investment from the GCC because its free trade gives greater access to the African market, which has the potential to develop into a more lucrative market. This investment further ties countries in the GCC and Africa to an economic partnership driven by a mutual interest in diversification. For countries in the GCC, diversification is essential as these investments are ways to diversify their economy away from oil and other hydrocarbon exports into something more sustainable.

Examples of Investment Projects

Some of the GCC’s high-profile initiatives involve countries across the continent. One example is ACWA Power, based in Saudi Arabia, which has agreed to develop a green hydrogen project in Egypt’s Suez Canal Economic Zone and committed more than $4 billion. The first phase aims to produce 600,000 tonnes of green ammonia annually.

Similarly, AMEA Power, a different company based in Dubai, is planning to build a hydrogen project in Kenya, along with the Abu Dhabi National Energy Company, which has invested $1.6 billion in renewable energy projects in Morocco. These are not small investments and highlight the importance that companies and countries from the GCC give these projects in Africa.

What Does This Mean for the West?

This increasing investment into Africa from the GCC comes as many countries in the West have fallen behind in their commitment to invest in sustainable projects to help develop the continent. With countries in the West and even China generally decreasing their investment in Africa, countries in the GCC see an opening in the continent to increase their influence in these countries and benefit from any development into a fast-growing economy. An expanding middle class in Africa is desirable for investors and entrepreneurs as it could mean millions of new customers for products and services from the Middle East.

Building economic ties in Africa is easier logistically for countries in the GCC as they can capitalize on their geostrategic location to access Africa through ship and land trade routes. Expanding their economic influence in African states has provided GCC states with an essential source of leverage to advance their regional security and diplomatic goals, increasing their power projection worldwide. This means that countries in the West, especially the U.S. and countries in the GCC will have more significant influence across the continent. They may act more independently in ways that might not align with the interests of the U.S. or other Western countries in the region.

While nothing suggests that countries in the GCC will soon want to adjust the way the U.S. has approached the region or directly challenge U.S. interests, the fact is that the U.S. is currently ceding its influence, positive relations, opportunities for economic investment and diplomatic relationships in Africa to other powers like the countries in the GCC and China.

– Mathieu Pare

Mathieu is based in Toronto, Canada and focuses on Business and New Markets for The Borgen Project.

Photo: Flickr

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Lebanon’s Hash: The $1 Billion Industry to Lift Its Rural Poor

Lebanon’s Hash“Our hash is the best,” said former President of the Lebanese Republic, Michel Sleiman, despite the country’s illegal status on the cultivation, trading and usage of hash. Although meant as a joke, it still points to the popularity of the drug and its transformation into a necessity. In a study done by the European Monitoring Center for Drugs and Drug Addiction (EMCDDA), 53% of cannabis users confessed to an increase in hash consumption following the 2020 Beirut explosion, citing relief from anxiety as one of their primary motivations.

Lebanon’s Hash Industry

Lebanon has been cultivating and exporting hash for 100 years. Despite being the fourth smallest country in the region, Lebanon ranks among the top four largest hash producers in the Middle East, raking in millions of dollars annually. The amount of profit that hashish produces on an annual basis in Lebanon is difficult to pin down since the production of the drug is still illegal and, therefore, remains heavily undocumented.

In 2020, however, following a devastating economic crisis, the Lebanese government and the McKinsey consulting company produced a financial plan titled “Lebanon Economic Vision.” The document proposes that the legalization of hash for medical and recreational use could increase drug exports from $828 million to $1.79 billion by 2025. This revolutionary idea could mean an unprecedented cash flow into Lebanon’s long-neglected agricultural sector.

Where the Money Flows

Most of Lebanon’s illegal hashish farming occurs in the Bekaa Valley, a stretch of farming land that is 70 miles long and 16 miles wide. Many farmers have switched to growing hash after the economic crisis in 2019, which kept Lebanon’s inflation in triple digits for years. Many farmers have switched to growing hashish because it is cheap. Cultivating one-tenth of a hectare of a hash farm costs $150, while other crops, such as wheat, can cost up to $3,000.

Legalizing Lebanon’s Hash

In light of this trend, there has been growing pressure on the Lebanese government to legalize hash for domestic use and export. As of today, 55% of Lebanese youth are for the recreational use of hash and up to 75% of them are for its medical use. The growing popularity of Lebanon’s hash has also been apparent in parliament.

In 2020, the government passed legislation that allows for the farming of local medicinal cannabis (less than 1% tetrahydrocannabinol). However, the methods of injection into the market, the regulation and taxation of the market remain undefined and therefore make the drug illegal still.

Final Remark

With an ongoing war in the South and a financial crisis that a weak central government prolongs, the legalization of hash can be seen either as a temporary impossibility or a possible lifeline for the country.

– Carl Massad

Carl is based in Sarba, Jounieh, Lebanon and focuses on Politics for The Borgen Project.

Photo: Pexels